Deadlines and Disaster Extensions
The IRS is reminding people that third quarter estimated tax payments are due on September 15, 2021. This applies primarily to those who don’t have their taxes deducted from their paychecks by their employers. Self-employed, retirees, some investors, landlords, and others not subject to withholding fall into this category. Those impacted by recent disasters, like Hurricane Ida, in areas of New York and New Jersey, and Pennsylvania have until January 3, 2022 to pay their quarterly estimated taxes. Individuals and organizations who had valid extensions on their return will have the same January due date. Those affected by the same storm in Mississippi have until November 1, 2021 as their extension. Up-to-date disaster relief is always available on the IRS’ disaster relief page.
Guidance on Sick and Family Leave Wages
The IRS has issued guidance to employers about reporting the amount of qualified sick and family leave wages paid to employers for leave taken in 2021. Employers are required to report these amounts in Box 14 of Form W-2, or in a separate statement provided with the Form. The self-employed may also determine the amount of any sick and family leave equivalent credits they may claim.
Home COVID-19 Testing Expenses Eligible
The IRS is reminding taxpayers that the cost of home testing for COVID-19 is an eligible medical expense that can be paid for under health flexible spending arrangements (Health FSAs), health savings accounts (HSAs), and other similar arrangements. Other personal protective equipment such as masks and hand sanitizer used to prevent the spread of COVID-19 are also eligible.
Tax Credit for Employers Hiring
The IRS reminds employers that there is a valuable tax credit available to them for hiring certain workers. The Work Opportunity Tax Credit (WOTC) may be available to businesses that hire those who have been employed for at least 27 consecutive weeks – as long as they have received state or federal benefits during that time. Other qualified hires would be those formerly incarcerated, unemployed or disabled veterans, those receiving Temporary Assistance for Needy Families, Supplemental Nutrition Assistance Program, or Supplemental Security Income. A complete list of the designated groups and deadline information is available at the link.
School is here! Halloween, Thanksgiving and Christmas are just around the corner! If you are like many of us, August is a time that you find your budget a little tight. As you go into the coming months, here are a few simple tips to keep your budget healthy.
Envelopes Really Help
Dave Ramsey is well known for talking about envelopes and for many people this is a simple way to set aside essential funds. When you have cash in an envelope marked food, you are both less likely to use it on something else and it won’t be spent on automatic bills or other electronic funds. This is really easy to do if you work in a tipped industry but anyone can take out food budget at the beginning of a pay period. This means that you won’t be pulling out your debit card and overspending your accounts when you go shopping and it will also give you a physical feel for how much money you have left in your food budget.
This works well for things that you pay in person like food, gas, household needs, and some other budget items.
Some stores put Christmas decorations on the shelves right now and mark them off before the season really starts. You can save money by shopping now rather than in the rush of December. Likewise, plan out a sinking fund for other events like Halloween and Thanksgiving. Do you like decorations? Do you want to go all out and get the full sized candy bars for your neighborhood kids? Plan ahead and start putting small amounts of your budget aside each pay period for your desired activities.
As we go through the last half of 2021, there are many things that might give you cause to panic. Stop, breathe, and take stock of the reality around you. If the budget is tight, can you do something to increase income? Can you do something to reduce bills?
A budget is only as useful as we make it, so take time today to write out your bills, your income, your expenses, and plan out how you are going to spend over the next few months.
Vaccination and Recovery Paid Leave Credit
Under the American Rescue Plan Act (ARP), the IRS has updated their paid sick and family leave tax credit information. Employers can claim the credits for providing paid leave to employees who accompany a family or household member to obtain a COVID-19 vaccination or to care for them during their recovery from said vaccination. The credits reimburse employers for the cost of the paid sick and family leave for COVID-19 related reasons through September 30, 2021.
Highway Use Deadline for Heavy Vehicle Owners
The IRS reminds those registering large trucks and buses that the deadline to file Tax Year 2021 Form 2290, Heavy Highway Vehicle Use Tax Return is August 31, 2021 for vehicles used on the road during July of this year. The highway use tax applies to vehicles with a taxable gross weight of 55,000 pounds or more. The IRS has an online tool to help owners determine if they are required to file.
Relief and Guidance for Employers
- Employers claiming the Work Opportunity Tax Credit (WOTC) have longer to certify that an employee hired is a Designated Community Resident or Qualified Summer Youth Employee. The WOTC is a tax credit available to employers who hire certified members of specific groups identified in the code who face barriers to employment.
- Guidance has been issued regarding the Employee Retention Credit (ERC). The ARP has made the credit available to eligible employers that pay qualified wages from July through December 2021, and various questions posed to the IRS and treasury have been addressed.
- Certain items may be excluded from gross receipts when determining eligibility for the ERC. This safe harbor applies to Paycheck Protection Program (PPP) Loan forgiveness amounts, as well as shuttered venue and restaurant grants under the ARP.
Advance Child Tax Payments Begin
The first batch of advance monthly child tax payments, totaling about $15 billion, went out on July 15. The vast majority were sent by direct deposit. Payments will continue monthly through the end of the year, and the IRS continues to “urge people who normally aren’t required to file a tax return” to sign up for these payments as well as Economic Impact Payments and other credits they may be eligible to receive. The IRS is even holding weekend events in cities around the nation to “support eligible families.” The events are hosted by the IRS and partner groups, and employees and volunteers assist individuals and families to file tax returns and register for the advance payments. Additionally, the IRS has launched a new Spanish language version of its online Child Tax Credit Eligibility Assistant tool, and urges community groups to help share this and other benefit information.
Unemployment Tax Refunds Continue
The IRS continues to issue refunds to taxpayers who overpaid their taxes on employment compensation received last year. Up to $10,200 in 2020 unemployment payments were excluded from taxable income calculations, but this exclusion didn’t happen until the American Rescue Plan Act was passed in March, so many taxpayers had already filed and paid taxes under the old rules. Most taxpayers need not take any action, unless they need to amend their 2020 return.
Protect Against Identity Theft
The IRS is spreading the word about their IP PIN Opt-In Program. An Identity Protection PIN is available to anyone who can verify their identity, and prevents someone else from filing a tax return using the taxpayer’s Social Security number. Tax professionals cannot obtain an IP PIN on behalf of clients, but clients should share their IP PIN only with their trusted tax preparer. The program is voluntary and the IRS will never call, email, or text a request for the IP PIN, which can be obtained at the online tool.
“Dirty Dozen” Scams Identified
The IRS is alerting taxpayers to beware of specific tax scams with its ongoing “Dirty Dozen” series. Pandemic-related scams like Economic Impact Payment (EIP) theft (whether fraud or mailbox theft) continue to be an issue. Phishing scams persist, which include fake emails, text messages, websites and social media as tools to steal personal information. Phone calls, or “vishing” (voice-related phishing) are on the rise, many using fake tax lien information. Ransomware is also increasing (malicious software designed to block access to computer systems) with the aim of extorting ransom payments to restore access to the victims. Other schemes involve fraudsters targeting seniors or immigrants by impersonating the IRS and fake charities taking advantage of tragedies and disasters, or unscrupulous tax preparers or scammers offering “settlement” promises to people who have trouble paying their taxes. Unemployment insurance fraud continues to be a problem as well. Lastly, be aware of schemes like syndicated conservation easements, abusive micro-captive insurance arrangements and other abusive arrangements like misuse of the US-Malta tax treaty and monetized installment sales designed to defer paying taxes on the sale of appreciated property. Click the links for tips on protecting yourself and your business, choosing a qualified tax professional, legitimate settlement options from the IRS, and how to identify likely scams.
Safe Harbor Extended for Renewable Energy Projects
The IRS and Treasury have issued guidance for taxpayers involved in developing renewable energy projects, addressing delays related to the COVID-19 pandemic. Certain projects may not be placed in service in time to meet the production and investment tax credits, which may significantly impact project financing and development. The updated guidance allows additional time to satisfy the requirements for the Continuity Safe Harbor, and clarifies that if the Continuity Safe Harbor doesn’t apply, the taxpayer may demonstrate that Continuous Construction or Continuous Efforts Tests have been satisfied instead.
Employer Leave-Based Donation Relief
The IRS has extended tax relief for employers whose employees donate their sick, vacation, or personal leave because of the COVID-19 pandemic. The relief, which includes cash payments employers make to charitable organizations that provide relief to victims of the pandemic in exchange for untaken leave, will be extended through the end of the calendar year. Employees will not be treated as receiving the value of the leave as income and cannot claim a deduction for the donated leave.
Advance Child Tax Credit Payment Tools
The IRS and Treasury have unveiled an online Non-filer Sign-up tool to assist eligible families who don’t normally file tax returns to register for the monthly Child Tax Credit payments scheduled to begin July 15. The tool is an update of last year’s Non-filers tool which helped individuals claim Economic Impact Payments (EIPs). The tool will continue this work as well. Additionally, the IRS has also released a Child Tax Credit Eligibility Assistant tool to help families determine if they qualify for the payments and an Update Portal for monitoring and managing the payments. Finally, the IRS is also partnering with groups such as non-profit organizations, churches, and community groups in 12 cities to help identify any families who may have missed the many previous requests to register for EIPs or the Advance Child Tax Credit. Outreach events were held this past weekend and will be held next weekend in Atlanta; New York; Detroit; Houston; Los Angeles; Las Vegas; Miami; Milwaukee; Philadelphia; Phoenix; St. Louis; and Washington, DC.
IRS Data Book Released
The IRS has issued the Data Book for fiscal year 2020 (October 1, 2019 through September 30, 2020), detailing the agency’s activities and “important work that IRS employees accomplish on behalf of the public,” according to IRS Commissioner Chuck Rettig. The 2020 Data Book also describes the measures taken to protect the health and safety of taxpayers and IRS employees during the COVID-19 pandemic while implementing legislation such as the Coronavirus Aid, Relief, and Economic Security (CARES) Act, as well as carrying on their typical work of processing returns and making online tools to assist taxpayers.
ETAAC Annual Report
The Electronic Tax Administration Advisory Committee (ETAAC) has released its annual report (PDF) to Congress, featuring recommendations focused on preventing identity theft and refund fraud. Recommendations were made to Congress regarding the IRS budget, filing information returns, and federal data-sharing, while those made to the IRS dealt with electronic filing and cybersecurity. ETAAC members represent various segments of the tax community, from taxpayers to tax professionals, software developers, the financial industry and state and local governments.
New FAQs For Families And Small Businesses
The IRS has posted two new frequently asked questions (FAQs) to help families and small- and mid-sized employers in claiming credits under the American Rescue Plan (ARP) Act. For families, the child and dependent care credit was increased and expanded under the ARP, and made fully refundable. The paid sick and family leave credits reimburse eligible employers for the paid sick leave provided to employees for COVID-19 related reasons.
Economic Impact Payments Continue
The IRS and Treasury continue to disburse millions of Economic Impact Payments (EIPs). As of June 9, the value of the payments was approximately $395 billion since payments began in March. More than 169 million payments have been made thus far, with plans to continue payments on a weekly basis to those who were previously unknown to the IRS but who have recently filed a tax return.
Letters Begin Re: Advance Child Tax Credits
Letters have been sent to more than 36 million American families who may be eligible to receive monthly Child Tax Credit payments. Families have been identified based on information they included in their recent tax return, or who registered for an Economic Impact Payment. The credit was increased and expanded under the ARP, and eligible families can expect monthly direct deposits or paper checks around the 15th of each month from July through December. A tool will be provided soon which will enable families to unenroll from receiving the advance payments and instead receive the full credit amount when they file their 2021 return next year.
Tax Court Cases Resolved
Virtual Settlement Days, first announced in May 2020, help taxpayers resolve their cases and avoid taking their chances in court. Building on that, March was National Virtual Settlement month, which saw Virtual Settlement Days events held in all 50 states and the District of Columbia. Nearly 240 taxpayers met with Chief Council employees and pro bono organizations to help them with free advice and to understand their cases; 148 cases were settled. Taxpayers with cases before the court are encouraged to contact their assigned Chief Counsel attorney or paralegal to inquire about participating in future events.
Avoid Common Return Errors
The IRS is reminding taxpayers to check their tax returns for common errors that could delay their processing and refunds. As the May 17 due date approaches, taxpayers are encouraged to:
- Use electronic filing
- Report all taxable income
- Double check names and social security numbers
- Check filing status accuracy (use the Interactive Tax Assistant)
- Correctly answer virtual currency question
- Use correct routing and account numbers if receiving a refund
- Sign and date your return
- If mailing a paper return, double check address
- Keep a copy for your records
- Request an extension if needed – avoid late filing penalties
American Rescue Plan Tax Credits
A new fact sheet outlines the details of tax credits available to small businesses, including paid leave for employees receiving COVID-19 vaccinations. Eligible employers, which may include businesses and tax-exempt organizations with fewer than 500 employees and certain governmental employers can receive a tax credit for providing paid time off for each employee receiving the vaccine who needs time to recover from the jab. Self-employed individuals may claim comparable credits.
Economic Impact Payments Continue
The sixth batch of Economic Impact Payments (EIPs) from the American Rescue Plan is disbursing another two million payments, for a total of approximately 161 million payments. This totals $379 billion since payments began rolling out on March 12. More than $1.3 billion went to individuals for whom the IRS previously did not have information to issue an EIP, but who recently filed a tax return. This batch also includes “additional ongoing supplemental payments” for people who received an EIP earlier this year based on their 2019 return, but became eligible for more after their 2020 return was processed. Another 600,000 payments went to Social Security beneficiaries and Supplemental Security Income recipients, including those with foreign addresses. The IRS will continue to make EIPs on a weekly basis.
Student COVID Emergency Aid Not Taxed
Students who received emergency financial aid grants from a federal agency, state, tribe, higher education institution or scholarship-granting organization because of the COVID-19 pandemic do not have to include these funds in their gross income. They also do not have to reduce their amount of qualified tuition and expenses by the amount of the grant, but may be eligible to claim a tuition and fees deduction or other credit on their 2020 tax return.
Unemployment Taxes To Be Recalculated
The March 11 American Rescue Plan legislation made changes to how 2020 unemployment benefits are taxed for certain taxpayers. Those who filed their tax return before this date and figured their tax based on the full amount of unemployment compensation will have their return adjusted and their tax recalculated by the IRS. For those who overpaid under the new law, refunds are expected to begin in May and will continue into the summer.
Guidance On Food & Beverage Deduction
The Taxpayer Certainty and Disaster Relief Act of 2020 (Relief Act) added a temporary exception to the 50% limit on the amount that businesses may deduct for restaurant food and beverages. The exception allows a 100% deduction beginning January 1, 2021 through December 31, 2022. During this time businesses can claim 100% of their food and beverage expenses paid to a restaurant as long as the business owner or an employee is present, and the expense is not lavish or extravagant.
Guidance On Employee Retention Credit
The IRS has issued guidance for employers claiming the Employe Retention Credit under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and Relief Act for the first two quarters of 2021. The guidance explains the changes, and eligible employers can now claim a refundable tax credit against the employer share of Social Security tax equal to 70% of the qualified wages they pay to employees after December 31, 2020, through June 30, 2021. The American Rescue Plan Act expands this credit through the third and fourth quarters of 2021, with further guidance to become available.
The IRS extended the tax filing deadline to May 17th, but they did not extend the estimated tax filing deadline.
What does this mean for our customers?
If your taxes are taken out of every paycheck and you receive a W-2, you do not have to make the quarterly estimated tax payments.
If you are an individual who expects to owe more than $1,000 in income taxes at your tax filing or a corporation which expects to owe more than $500 in income taxes, then you have to pay estimated taxes. For these tax filers, the IRS has not extended tax filings like they did in 2020.
For many of our customers, your tax filing deadline is May 17th, but if you fall into one of the estimated tax categories you still need to make that estimated tax payment on time.
2017 Returns Extended
US tax law gives taxpayers 3 years to file a return and receive a refund. After that, the money goes into the US Treasury and is no longer available to individuals.
We had posted on Facebook that this due date was still on April 15th. According to the IRS’s announcement, the tax extension is for the 2017 taxes as well. Also according to that announcement, there are over 16,000 taxpayers in South Carolina who have not yet filed their 2017 returns and are owed a total of over 15 million dollars.
If you need to file your 2017 tax return, please come see us! We can help you navigate the complexities of old documents and you might actually come out with more money than you owe.