Filing Season Scams Abound

The IRS has issued an alert warning taxpayers of new scams that urge people to claim false tax credits with inaccurate wage information. One scheme encourages people to use tax software to manually fill out Form W-2, Wage and Tax Statement with false income information. Scam artists instruct people to use the bogus information in their electronically-filed return with the aim of getting a large refund. A variation of the scam involves using Form 7202, Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals to claim a credit based on income earned as an employee. These credits are not available for 2022 tax returns. 

Another warning has been renewed, urging people to carefully review the Employee Retention Credit (ERC) guidelines before trying to claim the credit. Third parties are aggressively pushing ineligible people to use this, misleading people and businesses into thinking they can claim these credits. Penalties are wide-ranging and may include a $5000 fine or criminal prosecution. Those who have participated in such schemes can amend a previous return or consult with a trusted tax professional.

Digital Intake Ramps Up

The IRS has announced an expansion of digital scanning, having already scanned more than 120,000 paper Forms 940 since the beginning of the year. This is a 20-fold increase compared to all of 2022. The effort will expand soon to include scanning of Forms 1040 and Forms 941. The IRS has used various technologies to scan tax returns over the years, but recently took a leap forward thanks to the Inflation Reduction Act. Most tax returns are filed electronically but millions of forms are still filed by paper. With an increased capability to scan and electronically process these paper returns, the IRS will be able to shorten overall processing time.

Retiree Reminder: April 1 Deadline Approaches

The IRS reminds retirees who turned 72 during 2022 that, in most cases, Saturday, April 1, 2023 is the last day to begin receiving payments from Individual Retirement Arrangements (IRAs), 401(k)s and similar workplace retirement plans. These payments, called required minimum distributions (RMDs) are normally made by the end of the year. However, those who reached age 72 during 2022 are covered by a special rule that allows them to wait until as late as April 1, 2023 to take their first RMD. This delayed deadline only applies to the RMD for the first year. In subsequent years the RMD must be made by the year’s end. This means that those who opt for their 2022 RMD by April 1 must still receive their 2023 RMD by December 31, 2023. Both RMDs are taxable and will be reported on the 2023 tax return. Visit the RMD FAQs page for more information.


Business E-File Regulations Finalized

The IRS and Treasury have issued final regulations amending the rules for filing returns and other documents electronically. Filers of partnership returns, corporate income tax returns, unrelated business income tax returns, withholding tax returns, some information returns and other statements, notifications, and reports will be required to e-file beginning in 2024. A new online portal has been created to help businesses file form 1099 returns electronically.

May 15 Disaster Area Deadlines Extended

Disaster area taxpayers in much of California and parts of Alabama and Georgia now have until Oct 16, 2023 to file various federal tax returns and make payments, the IRS has announced. Previously, the deadline had been postponed to May 15 for these areas. This deadline includes individual and business returns normally due on March 15 and April 18; returns of tax-exempt organizations normally due on May 15. Those affected also have until October 16 to make 2022 contributions to IRAs and health savings accounts. The deadline also applies to various tax payments. Current tax-related disaster information can always be found on the IRS Disaster Tax Relief page.

AMT Guidance for Insurance Providers Issued

The Treasury and IRS have issued Notice 2023-20 which provides interim guidance for insurance companies and some other taxpayers for the new corporate alternative minimum tax (CAMT) until proposed regulations are issued. The Inflation Reduction Act of 2022 created the CAMT, imposing a 15% minimum tax on the adjusted financial statement income of large corporations for taxable years beginning in 2023. Large corporations, including insurance companies, with adjusted financial statement income exceeding $1 billion will be those generally affected by the CAMT. Comments on the rules are welcome and must be submitted by April 3, 2023. 

2022 Return Tax Time Guide

The IRS reminds taxpayers to gather their necessary information and visit or their trusted tax preparer for help with their 2022 tax return. Several changes have been implemented due to the Inflation Reduction Act and American Rescue Plan Act, including the reduction in Earned Income Tax Credit, Child Tax Credit, and Child and Dependent Care Credit amounts. Additionally, those that don’t itemize cannot deduct their charitable contributions this year. More in the Tax Time Guide series will be forthcoming.

2020 Unemployment Exclusion FAQ Update

The IRS has updated the frequently asked questions (FAQs) for the 2020 unemployment compensation exclusion. The updates can be found in Fact Sheet 2022-39, and include questions regarding Form 1040-X; Impact to Income, Credits, and Deductions; Receiving a Refund, Letter, or Notice; and Finding the Unemployment Compensation Amount. 

New for 2023 Filing

Taxpayers are urged to note important changes to tax laws to be better prepared for filing their 2022 federal tax returns. Key changes include:

  • The reporting rules for Form 1099-K. Taxpayers should receive the form if they received third party payments (via Paypal, Venmo, CashApp, for instance) for goods and services that exceeded $600. Taxability of income has not changed, but while the Form was issued only for accounts that had a total of 200 transactions and totaled $20,000 or more for the year, the American Rescue Plan Act has significantly lowered that reporting threshold
  • Several Tax Credits return to 2019 levels. The Child Tax Credit of $3000 and $3600 per dependent in 2021 will be $2000; the Earned Income Tax Credit for eligible taxpayers with no children returns to $500 from $1500; the Child and Dependent Care Credit returns to a maximum of $2100 from $8000. 
  • No above-the-line charitable deductions. During COOVID, taxpayers could take up to a $600 charitable donation tax deduction, but for 2022 that is not available.
  • Eligibility rules for the clean vehicle tax credit have changed, thanks to the Inflation Reduction Act

More on the “Get Ready” page.

IRA, Retirement Withdrawals for Those Age 72+

The IRS reminds those born in 1950 or earlier that funds in their retirement plans and individual retirement arrangements (IRAs) have upcoming deadlines for required minimum distributions (RMDs) to avoid penalties. RMDs are minimum amounts that many plans and IRA account owners must generally withdraw after age 72. Account holders reaching age 72 in 2022 must take their first RMD by April 1, 2023 (and the second by December 31, 2023, and each year thereafter). In many workplace retirement plans the first RMD is due by April 1 of the year after they turn 72, or the participant is no longer employed. RMDs are taxable and may be subject to penalties if not taken on time. Not taking a required distribution, or not withdrawing enough, could mean a 50% excise tax on the amount not distributed.

2021 Recovery Rebate Credit FAQ

The IRS has issued frequently asked questions (FAQs) for the 2021 Recovery Rebate Credit. This credit may apply to those who didn’t receive the full amount of their third Economic Impact Payment. To claim the credit, which can reduce taxes owed or provide a refund, eligible people must file a 2021 tax return. The FAQ covers eligibility, claiming the credit, calculating the credit, and finding the relevant information in order to claim the credit.

January 31 Wage Statement Deadline

The IRS is reminding employers to be aware of the January 31 deadline to file Forms W-2 and other wage statements. Filing accurate forms by this date helps the IRS more easily detect refund fraud and helps employers avoid penalties. Applications for extension may also be submitted to provide more time to file with the IRS. A separate extension application may extend the due date for furnishing wage statements to employees. 

Some Filing Reminders

The IRS reminds taxpayers to keep a few things in mind when filing federal income tax returns this year. Their checklist encourages individuals to:

  • Use e-file and direct deposit, even if using a trusted tax professional
  • Collect all documents, including letters regarding the Advance Child Tax Credit and third Economic Impact Payment
  • Use online tools and resources to save time over calling the IRS

2022 Tax Season Begins

The IRS has kicked off the 2022 tax filing season admonishing taxpayers to take extra precautions when filing. Electronic filing, with direct deposit, is the fastest way to avoid any refund delay. Tax software, a trusted tax professional, or Free File for those who qualify, is recommended. Recipients of the advance Child Tax Credit payments or Economic Impact Payments should ensure those amounts are entered correctly as inaccuracies in this area will result in extensive delays. Most taxpayers have a filing due date of April 18, thanks to the Washington, DC Emancipation Day holiday observance. Those in Massachusetts and Maine have until April 19 due to Patriots Day, and as always, some disaster victims have later filing deadlines