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IRS Updates September 13

Estimated Taxes Due 15 September

The IRS reminds taxpayers who pay estimated taxes that the deadline for payment of their third quarter estimated taxes is September 15, 2022. Those who typically make quarterly estimated tax payments are the self-employed, investors, retirees, or those receiving income from dividends, interest, rental income, alimony and other sources not subject to withholding. Those who expect to owe at least $1000 in taxes for 2022 (after withholding and tax credits) should make quarterly payments. Special rules apply to some taxpayers, such as those in a federally recognized disaster area, farmers, fishermen, and those who receive income unevenly during the year. Underpaying taxes may result in a penalty.

National Preparedness Month

In recognition of September as National Preparedness Month, the IRS urges individuals, organizations, and businesses to update and secure their records. The ongoing threat of wildfires, as well as that of hurricanes, underscores the importance of having and keeping an updated emergency preparedness plan. 

  • The IRS recommends taxpayers keep critical documents inside waterproof containers in a secure space. This includes tax returns, birth certificates, deeds, titles, insurance policies and other such items. 
  • Copies should be made and given into the keeping of a trusted friend or relative at a distant location. Digital copies can be stored in a cloud-based application. 
  • Document inventory of personal and business property. Photos or videos are helpful, as well as written descriptions including year, make, and model of equipment. The IRS offers workbooks to help individuals and businesses compile inventory lists. 
  • Employers using payroll service providers should ensure their provider has a fiduciary bond in place to protect the employer against a possible default. Using the Electronic Federal Tax Payment System (EFTPS) to make federal tax deposits and business tax payments makes it easy and convenient to pay the government even when disaster displaces employees and businesses. Any business can create an EFTPS account.

Reconstructing records after a disaster may be required for tax or insurance purposes or getting federal assistance. For more information, visit National Preparedness Month.

IRS Updates End of August

Interest Rates to Increase

The IRS has announced that interest rates will increase again, beginning October 1, 2022. Individuals will see an increase of 1% as compared to the quarter that began in July, with 6% as the rate for underpayments (taxes owed but not yet paid) and overpayments (payments made in excess of the amount owed). Other rates are as follows:

  • 6% for overpayments (5% for corporations). 
  • 3.5% for the portion of a corporate overpayment exceeding $10,000.
  • 6% for underpayments.
  • 8% for large corporate underpayments. 

These interest rates are computed from the federal short-term rate determined during July 2022.

Pandemic-Related Penalty Relief

The IRS has issued a notice which provides penalty relief to most people and businesses who file certain 2019 or 2020 returns late. In addition, the IRS will be issuing more than $1.2 billion in refunds and credits to those who already paid these penalties, nearly 1.6 million taxpayers. They say this aims to allow the IRS to focus resources on processing backlogged tax returns and other correspondence before next year’s filing season. The relief will be automatic for those who qualify, so no action is required on the part of businesses or individuals. To qualify for this relief, however, tax returns for those years must be filed on or before September 30, 2022.

Reminder to Extension Filers

The IRS reminds taxpayers who haven’t filed their 2021 tax return to make sure they take advantage of available entitlements and to file electronically as soon as possible. These tax benefits include Earned Income Tax Credit, Child Tax Credit, Child and Dependent Care Credit, Charitable Giving Deduction, and others. Taxpayers will need to have their year-end statements available, as well as the letters issued by the IRS showing advance Child Tax Credit payments and third round Economic Impact Payments.

Input Requested

The IRS is requesting input from both taxpayers and tax professionals regarding its best practices for conducting video conferences with those who have cases pending before Appeals. During the COVID-19 pandemic, video conferences were expanded. These allowed taxpayers to be seen and heard and be able to visually share documents without going in-person to an Appeals office. This garnered positive feedback, so Appeals will continue to offer video conferences as an option. Public input is sought for permanent guidance regarding scheduling and conducting the conferences, procedures for verification, and recommendations for establishing a professional meeting environment. Public comments can be sent to ap.taxpayer.experience@irs.gov by Wednesday, November 16, 2022.

Tax Updates August 11

Five-Year Plan Issued

The IRS has released a new five-year Strategic Plan. This Plan will serve to help guide the agency’s programs and operations, and meet the needs of taxpayers and others in the tax community. Their four goals include providing quality service, fostering a diverse and inclusive workforce, enforcement, and transformation of operations to be more resilient, agile, and responsive.

Flood Victims Eligible for Relief

Storm victims in parts of Kentucky and Missouri now have until November 15, 2022, to file various tax returns and make payments. Those who had extensions to file their returns by October 17, 2022, will now have until November 15 to file. This also applies to quarterly estimated payments due on September 15, and payroll and excise taxes due October 31. More information is available on the Disaster Assistance and Emergency Relief for Individuals and Businesses page, and an updated list of localities eligible for relief is always available on the disaster relief page.

Educator Expense Deduction Increased

The IRS is reminding teachers and other educators that they may be able to deduct up to $300 of out-of-pocket classroom expenses for 2022 when they file their tax return next year. This is the first increase since the deduction was enacted in 2002. The limit will continue to rise in $50 increments in future years based on inflation adjustments. The deduction is available to K-12 educators, instructors, counselors, principals and aides who work at least 900 hours in a public or private school during the school year. Books, supplies, classroom materials, computer equipment, software and services, professional development courses, and COVID-19 protective items all qualify for the deduction. 

Trucker Filing Date Approaches

The IRS is reminding those who register large trucks and buses that it’s time to file Form 2290, Heavy Highway Vehicle Use Tax Return. The IRS encourages using e-file and filing before the deadline of August 31, 2022, for vehicles first used in July of this year. Operators of vehicles with a taxable gross weight of 55,000 pounds or more are subject to paying the tax and filing the form, although those operating vehicles that travel below a certain number of miles are not subject to the tax (they are still required to file the form however). More information is available at the Trucking Tax Center.

Tax Updates Mid July

ETAAC Submits Report to Congress

The Electronic Tax Administration Advisory Committee (ETAAC) has released its annual report to Congress, featuring recommendations focused on budget support for the IRS and e-filing enhancements. Their recommendations include providing the IRS with multi-year funding; removing impediments to e-filing with appropriate security features, consent, and acknowledgements; promoting the use of identity protection PIN through a national campaign; and working with states and software providers to improve Payroll and Information Returns. The full report can be accessed at the link.

IRS Nationwide Tax Forum Impending

The IRS Nationwide Tax Forum begins July 19, and the last day of full-access registration is July 14. The virtual event is being held over a five-week period ending August 18. Webinars will be livestreamed, and exhibitors from the Virtual Expo available for interaction during certain hours, with most content available 24 hours a day. Focus groups on a variety of subjects are available, and Forum attendance qualifies as continuing education credits for qualified professionals.

Time For a Paycheck Checkup?

With half the year behind us, it may be a good time for those earning a paycheck to do a “paycheck checkup” to avoid any disappointing tax-time surprises. Taxes are withheld from each paycheck and sent directly to the IRS, with the goal of having all taxes paid by the end of the year. To make sure your employer is withholding the proper amount of tax from your paycheck, employees may use the IRS’ convenient Withholding Estimator. To use the tool, you will need the most recent paystub from all jobs (and those of your spouse, if you file jointly), other income from side jobs or self-employment, and your most recent tax return. With this information, you may instruct your employer to increase or decrease your tax withholding and hopefully come out even at tax time.

 

 

 

IRS Updates End of June

Expanded Voice Bot Assistance

To help improve taxpayers’ experiences with the department, the IRS has expanded the voice bot capabilities of their customer service phone lines. Now, in addition to general and procedural answers to Economic Impact Payment (EIP) or Advance Child Tax Credit queries and other toll-free lines, voice bots will be able to help eligible taxpayers verify their identity to set up or modify a payment plan – without the long wait times. More functions are planned to be rolled out this year, including the ability to get account and return transcripts, payment history and current balance information. 

Processing Backlog Progresses

The IRS is finally wrapping up the last of the paper individual tax returns (Form 1040, error-free) filed in 2021. Due to the pandemic and staffing limits, there are about twice as many returns awaiting processing at this point compared to a typical year. Steps have been taken to address this backlog and keep up with returns filed this year. Business paper returns filed in 2021 are next, while the IRS continues to work on the remaining individual returns that need corrections or additional information. Taxpayers are encouraged to file their returns electronically to avoid future processing delays.

Electronic Corrections, Amendments Expanded

The IRS has announced that more forms can now be amended electronically, including Form 1040-NR (US Nonresident Alien Income Tax Return), Forms 1040-SS (US Self-Employment Tax Return) and Forms 1040-PR (Self-Employment Tax Return – Puerto Rico). This development will assist the IRS in avoiding continued processing backlogs. Forms 1040-X and other corrected forms have had electronic filing options in place in recent years, and paper versions of the forms may still be submitted.

Reinstated Superfund Chemical Tax FAQ

The IRS issued frequently asked questions (FAQs) regarding the reinstated Superfund chemical excise tax. Thanks to the Infrastructure Investment and Jobs Act (IIJA), beginning July 1, 2022, excise taxes on certain chemicals and imported chemical substances will be reinstated. The FAQs detail what the Superfund chemical excise tax is, how the tax is computed, and who may be liable for the tax. Currently 151 substances are listed as taxable, though that number will likely change.

 

Tax Updates End of May 2022

Interest Rates Increase

The IRS has announced that interest rates will increase for the third calendar quarter of the year, beginning July 1, 2022. The rates will be:

  • 5% for overpayments (4% in the case of a corporation).
  • 2.5% for the portion of a corporate overpayment exceeding $10,000.
  • 5% for underpayments.
  • 7% for large corporate underpayments. 

These rates are calculated by the federal short-term rate determined during April 2022, based on daily compounding.

Child Tax Credit FAQs Revised

The IRS has revised a set of frequently asked questions (FAQs) for the 2021 Child Tax Credit and Advance Child Tax Credit. Updates have been made to several topics, including general information, receiving advance child tax credit payments, updating your information, reconciling your payments, unenrolling from advance payments, shared custody questions and more. 

Where’s My Refund? Updated

The IRS has made a helpful improvement to the Where’s My Refund? online tool that now allows taxpayers to check the status of their current tax year and two previous years’ refunds. Taxpayers will need their Social Security number or ITIN, as well as filing status and expected refund amount for the tax year they’re checking. Previously the tool only displayed the status of the most recent tax return. The tool is usually updated overnight and gives a projected refund date as soon as it’s approved. 

Earned Income Tax Credit FAQs Revised

The IRS has revised the FAQs for the Earned Income Tax Credit (EITC). The EITC helps low- to moderate-income workers and their families either reduce their taxes owed or increase their refund (if no taxes are owed). The credit varies depending on whether the taxpayer has children, dependents, a disability or other eligible status. The FAQs explain the EITC, how it was expanded in 2021, which taxpayers are eligible, and how to claim it.

Tax Updates Mid May

Be Prepared For Disaster

Ahead of hurricane season, the IRS is reminding taxpayers to create or review their emergency preparedness plans, including protecting important tax-related information. The following tips are advised:

  • Protect documents – original tax returns, birth certificates, titles and insurance policies should be kept in waterproof containers in a secure place. Duplicates or digital copies should be made and deposited with a trusted person outside the area.
  • Document property – home or business photos, including contents, can help if insurance claims must be made.
  • Check fiduciary bonds – employers should ensure that their payroll provider has a fiduciary bond in place, which would protect the employer in the event of default by the provider.
  • Reconstructing documents – the IRS has a webpage to help.

National Small Business Week

In honor of National Small Business Week, the IRS is highlighting many tax benefits and resources for entrepreneurs:

IRS Reaches Out To Puerto Rico

The IRS is encouraging residents of Puerto Rico with even one child to file a federal tax return to claim the Child Tax Credit. Beginning with Tax Year 2021, the Credit is available, even if they had no income, only tax-exempt income, or paid no US Social Security taxes. If the April 18 filing deadline was missed, returns can still be filed without penalty to claim the Credit through April 15, 2025. Additionally, the IRS is expanding outreach to serve Puerto Rico residents who may have little or no experience filing a federal tax return. “Not only do we want them to know about the credit, but we also want them to know there is help – some of it free – for getting it.”

Tax Updates April 27

Properly Withhold for 2022

The IRS is urging taxpayers to use the Tax Withholding Estimator to ensure they’re having the right amount of tax taken out of their earnings. Now that 2021 returns have been completed, workers can use that information to adjust their withholding to more accurately reflect their tax burden. A large refund or surprise tax bill suggest that withholding needs to change. Those who have recently experienced a major life change such as marriage, divorce, birth of a child, or purchase of a home should also use the Estimator.

Nationwide Tax Forum In July

The IRS has announced that the 2022 IRS Nationwide Tax Forum will be held virtually over five weeks starting July 19. Live-streamed webinars will occur every Tuesday, Wednesday, and Thursday over the weeks. This summer event, held for more than 30 years, is an outreach to the tax professional community, and while many other events and organizations are meeting in person this year, the Nationwide Tax Forum will be online. Early bird registration is available, and tax professionals are encouraged to register soon. Topics will include tax law, ethics, virtual currency, and more, and will confer up to 28 continuing education credits upon attendees.

Missed April 18 Filing Deadline?

The IRS is encouraging taxpayers who missed the April 18 deadline to file as soon as possible. Taxpayers who are owed refunds will not be penalized for filing late, but those who owe taxes should file quickly to limit penalties and interest. Additionally, families can still claim the Child Tax Credit for 2021 if they have not received it. This year also marks the first time that families in Puerto Rico can claim the Credit, up to $3600 for each child.

May 16 Deadline For the Tax-Exempt

The IRS reminds tax-exempt organizations that May 16 is the deadline for filing certain returns, including Forms 990, 990-EZ, 990-PF, 990-N, 990-T, and Form 4720. Electronic filing is mandatory, and there are pre-recorded online workshops to help exempt organizations comply with filing requirements, if needed.

Tax Updates Mid April

Educator Expense Deduction to Increase

For the first time since it was enacted in 2002, the special educator expense deduction limit has increased from $250 per year to $300 per year. The increase begins in 2022, so out-of-pocket classroom expenses for the current year can be claimed in the deduction when filing 2022 federal income tax return next year. Those filing for 2021 are still subject to the $250 limit. Deductible expenses include books, supplies, other classroom materials, professional development courses, computer equipment and software, and COVID-19 protective items such as face masks, hand sanitizer, disposal gloves, tape, paint or chalk to guide social distancing, and other CDC recommended items.

Foreign Account Report Deadline Approaches

The IRS reminds citizens and other entities that the deadline for filing their annual Report of Foreign Bank and Financial Accounts (FBAR) is April 15. However, those who miss the deadline will receive an automatic extension until October 15, 2022. An FBAR is required for those who have: (1) Financial interest in, signature authority or other authority over one or more accounts, such as a bank account, brokerage account, mutual fund or other financial account in a foreign country, and (2) The aggregate value of all foreign financial accounts exceeds $10,000 at any time during the calendar year. Civil and criminal penalties may apply for those who fail to report accurately.

First Quarter Deadline Approaches

The IRS reminds taxpayers that Monday, April 18 is the deadline to make estimated tax payments. This applies to the self-employed, retirees, investors, businesses and corporations. Taxes are “pay as you go” and for those who aren’t subject to payroll withholding, estimated taxes are paid quarterly. There is assistance for figuring one’s estimated taxes, as well as streamlined methods for making payments online.

EIP Letters, Corrections

The IRS has completed mailing Letters 6475 to recipients of the third round of Economic Impact Payments (EIPs) and reminds filers to double-check records when filing their 2021 tax return. Most people received the full amount in advance, but for those who didn’t, the 2021 Recovery Rebate Credit may be claimed. If a mistake was made regarding this credit on a 2021 return which has already been filed, an amended return is not necessary. The IRS will make the correction and, if the filer agrees with the correction, no action on their part is required. There may be a delay in processing a return that requires correction. 

Tax Updates End of March

Protect Personal Information

The IRS is urging people to stay vigilant in securing their online devices against online scams. Taxpayers and tax professionals can help protect against identity theft and other fraud by safeguarding personal data, keeping personal information private, using strong passwords and secured wireless networks, recognizing phishing emails, and using security software. It is also important to educate household members who may not be aware of the risks, such as children and other less-experienced online users. As a reminder, the IRS will not contact taxpayers by email, text message, or social media platforms.

Reportable Virtual Currency Transactions

The IRS reminds taxpayers to check the box on the top of Form 1040 (or Form 1040-SR or Form 1040-NR) about virtual currency. It asks, “At any time during 2021, did you receive, sell, exchange, or otherwise dispose of any financial interest in any virtual currency?” All filers must check either “yes” or “no.” Taxpayers may check “no” if they purchased (with real currency) virtual currency or held it in their own wallet or account. They must check “yes” if they received or exchanged virtual currency for property, goods and services, as a result of hard fork, as a result of mining and staking activities, in trade for other virtual currency, or any disposal of a financial interest in virtual currency. Any capital gain or loss must be reported on Schedule D (Form 1040), and virtual currency income must be reported as they would report any other income.

Retirees: April 1 Deadline for RMDs

The IRS reminds retirees who turned 72 during the last half of 2021 that Friday, April 1, 2022 is the last day to begin receiving payments from Individual Retirement Arrangements (IRAs), 401(k)s, and other workplace retirement plans.  The required minimum distributions (RMDs) are normally made by the end of the year, but those who reached age 72 after June 30, 2021 are covered by a special rule allowing this later RMD date. As this RMD counts for 2021, an additional RMD is required by December 31, 2022. Both RMDs are taxable in 2022 and must be reported on the 2022 tax return.

Delayed Refund? Some Are Taking Longer

Though the IRS issues most refunds within 21 days for tax filers who file electronically and choose direct deposit, some are taking longer. Some factors that can affect the timing of a refund are errors, identity theft, or fraud. If a return requires a correction to the Child Tax Credit or Recovery Rebate Credit amount, includes the Earned Income Tax Credit or Additional Child Tax Credit, the refund may take additional time. The Where’s My Refund tool can help filers to know when to expect their refund or if there is a problem.