Tag Archives: business taxes

Tax Updates March 29

Dirty Dozen Tax Scams

The IRS has begun their Dirty Dozen tax scam series, warning individuals and businesses about popular schemes and scams targeting taxpayers. Information to help recognize a scam, and steps to take for those who have been targeted or have fallen prey to such predators. The first six scams to be aware of are:

  • Employee Retention Credit scams, being aggressively promoted by scammers, misleading people and businesses into thinking they can claim these credits, when there are very specific guidelines around these pandemic-era credits.
  • Email and text message scams: Phishing and Smishing, messages from fraudsters claiming to be from the IRS or other legitimate organizations, offering phony tax refunds or making legal threats.
  • “Help” setting up online IRS account, putting taxpayers at risk of identity theft by third party “helpers.”
  • Fuel Tax Credit scams, promoted by scammers promising a large refund, and charging a fee and sometimes committing identity theft. The fuel tax credit is meant for off-highway business and farming use, and not available to most taxpayers.
  • Fake charity scams, where fraudsters impersonate organizations dedicated to providing relief to victims of emergencies or disasters in order to dupe good-hearted donors into giving up cash or personal information. 
  • Unscrupulous tax preparers: The IRS offers important tips to find trustworthy and legitimate tax professionals, and red flags to be aware of.

Answers About Nutrition and Wellness Expenses 

The IRS has posted frequently asked questions (FAQs) regarding whether certain costs related to nutrition, wellness, and general health are medical expenses that can be reimbursed under a health savings account (HSA) or other similar arrangement. Generally, a deduction is allowed for expenses paid for medical care if certain requirements are met. Alternatively, medical expenses are eligible to be paid or reimbursed under an HSA, health flexible spending arrangement (FSA), Archer medical savings account (Archer MSA) or health reimbursement arrangement (HRA). The FAQs address whether the cost of weight-loss programs, gym memberships and other expenses are considered medical expenses that can be paid or reimbursed under any of these arrangements. 

Where’s My Refund? Tool

The IRS reminds taxpayers that the Where’s My Refund? tool on IRS.gov is the most convenient and efficient way to check the status of their refund. IRS2Go, the mobile app, offers another way for users to check their refund status. Taxpayers must enter their Social Security number or Individual Taxpayer Identification number, filing status, and the exact whole dollar amount of their expected refund. The tool is updated once a day, usually overnight.

 

IRS Update Jan 19

W-2 Filing Deadline Approaches

The IRS reminds employers and other businesses to file Form W-2 and other wage statements for Tax Year 2022 by January 31, 2023. The deadline also applies to Forms 1099-NEC, Nonemployee Compensation, and Form W-3, Transmittal of Wage and Tax Statements. Extensions are only granted for very specific reasons and penalties may apply if the deadline is missed. E-file is available for these forms. 

January 23 Official Start to Tax Season

Monday, January 23, 2023, will be the beginning of the 2023 tax season when the IRS will begin accepting and processing 2022 tax year returns. With the increase in staffing at the IRS, provided via the Inflation Reduction Act, the agency aims to ensure all systems run smoothly. Filing a complete and accurate return can avoid extensive processing delays, such as were seen during pandemic years. The IRS is still working on reviewing certain 2021 returns, though taxpayers in that situation can and should still file their 2022 return on time. The filing deadline is April 18, 2023.

Relief for California Storm Victims

Storm victims in California now have until May 15, 2023, to file various federal individual and business tax returns and make payments. This relief postpones certain deadlines that occurred starting January 8, 2023. IRA and health savings accounts contributions for 2022, farmers who normally file their returns by March 1, quarterly estimated tax payments normally due January 17 and April 18, payroll and excise tax returns normally due on January 31 and April 30, 2023, all are due May 15, 2023. The Tax Relief in Disaster Situations page has updated information for disaster victims, and a current list of affected counties.

IRS Completes Corrections

The IRS recently completed corrections of tax year 2020 accounts for taxpayers who overpaid their taxes on unemployment compensation received in 2020. The American Rescue Plan Act of 2021 – passed in March 2021 – excluded up to $10,200 in 2020 unemployment compensation from taxable income calculations ($10,200 for each spouse if married filing jointly). Some taxpayers, however, had already filed their return before the Act passed. The IRS determined the correct taxable amount of unemployment compensation for these returns and has issued refunds or applied the overpayment to taxes due or other debts. 

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 from the IRS

Withholding Rules Updates Proposed

The IRS and Treasury have proposed regulations updating payroll withholding rules to reflect changes in the Tax Cuts and Jobs Act (TCJA) and related legislation. These updates accommodate the redesigned Form W-4, and the adjusted tables and computations for tax withholding. The regulations also address other withholding issues, such as how to treat an employee who hasn’t turned in a completed W-4.

IRS Increases Visits To High-Income Delinquents

In an effort to promote compliance and fairness among taxpayers, the IRS has committed to increasing face-to-face visits with those taxpayers who haven’t filed tax returns in 2018 or previous years. Their goal is to inform taxpayers of their obligations and to bring them into compliance. Revenue officers will not make threats or demand unusual forms of payment, but rather inform and assist. Taxpayers have the right to see credentials and should do so to protect themselves against fraud. Furthermore, getting ahead of the situation is advisable: “Taxpayers having delinquent filing or payment obligations should consult a competent tax advisor before waiting to be contacted by an IRS revenue officer,” according to Paul Mamo, Director of Collection Operations, Small Business/Self Employed Division. 

Meals And Entertainment Deduction Guidance Updated

The IRS has updated its proposed guidance regarding the handling of business meals and entertainment expense deductions. The TCJA eliminated the deduction for activities generally considered entertainment, amusement or recreation. It also limited the deduction for expenses related to food and beverages provided by employers to their employees. The proposed guidelines help determine what qualifies as entertainment and address the meals expense limit. As these are proposed guidelines, the IRS is taking public comment and will hold a public hearing on these proposed regulations on April 7, 2020.

Military Members’ Tax Benefits Explained

A newly-revised publication aims to inform members of the military of their tax benefits under the law. The Armed Forces Tax Guide will help those serving in the military, including National Guard, reservists, and those stationed abroad, understand specific tax issues related to their situation. Moving expenses, treatment of combat pay, IRA contribution limits and extended tax deadlines are included in this helpful guide.

Tax Updates Late January 2020

Avoid Ghosts

The IRS warns taxpayers to avoid unethical “ghost” tax return preparers. The 2020 filing season is underway and fraudulent predators are taking every advantage. A ghost preparer is someone who prepares a tax return for someone, but does not sign it. They print it out and tell the taxpayer to sign and mail it or, if e-filing, they do not add their digital signature as a paid preparer, as required by law. You can avoid falling prey to a ghost by being aware of their tactics: They may require payment in cash and withhold a receipt; they may invent income or deductions to qualify the taxpayer for credits or refunds; they may direct the tax refund into their own bank account instead of the taxpayer’s. Using a legitimate tax preparer with a valid Preparer Tax Identification Number is a sure way to avoid falling prey to a ghost preparer.

Guidance For Student Borrowers and Creditors

The IRS and Treasury issued guidance that extends the relief for some taxpayers who had student loans discharged. The Revenue Procedure provides relief when the federal loans are discharged by the Department of Education under the Closed School or Defense to Repayment discharge process, or where the private loans are discharged based on certain legal settlements. Taxpayers within the scope of this procedure should not report the amount of discharged loan as gross income, nor should creditors issue a 1099-C to taxpayers or the IRS.

IRS Reconsiders Double Taxation

The IRS is willing to consider requests for relief from double taxation resulting from the repatriation of monies under the Tax Cuts and Jobs Act (TCJA). In a few instances where corporations have paid an unusual dividend, not because of the TCJA, it may be appropriate to provide relief from double taxation. When the same earnings and profits of foreign corporations are taxed both as dividends and under section 965, double taxation could result. Taxpayers who fit these limited circumstances may contact the Office of Associate Chief Counsel (International).

US Tackles International Tax Evasion

The Joint Chiefs of Global Tax Enforcement, known as the J5, brings together leaders of tax enforcement authorities from Australia, Canada, the UK, US and the Netherlands to lead the fight against international tax crime and money laundering. Specifically, it is believed that clients of a financial institution located in Central America may be using a sophisticated system to conceal and transfer wealth anonymously to evade their tax obligations and launder their criminal proceeds. Though this was the first meeting of its kind, the J5 plan to continue coordinating such global enforcement.

IRS Tax Updates December 2

IRS Updates Deductible Guidelines

The IRS has issued guidance on some of the changes brought about by the Tax Cuts and Jobs Act (TCJA) regarding certain deductible expenses. The rules for using the optional standard mileage rates in deducting costs of operating an automobile for business, charitable, medical or moving expense purposes have been updated. Taxpayers may opt to substantiate actual allowable expenses with adequate records. Rules vary for members of the Armed Services.

Medical Expenses May Be Tax Free Via FSA

The IRS today reminded eligible employees (self-employed are not eligible) that they may still have time to set up a health flexible spending arrangement (FSA) if their employer offers one. Employees may contribute up to $2,750 during the 2020 plan year not subject to federal income tax, Social Security tax or Medicare tax. Allowable expenses are those not covered by one’s health plan, and may include co-pays, deductibles, dental and vision care, eyeglasses and hearing aids. Unspent amounts may be forfeit. Talk to your employer for details. 

National Tax Security Awareness Week Announced 

Next week kicks off the fourth National Tax Security Awareness Week, in time for holiday shopping season. Security Summit partners continue to urge taxpayers, businesses and tax professionals to maintain their online security as identity thieves step up their efforts to steal personal and financial data. The Week will feature a series of educational materials to help protect individuals and businesses against identity theft. The effort will include a special social media effort on Twitter and Instagram with @IRSnews and #TaxSecurity.

Large Gifts Won’t Harm Estates After 2025

The Treasury Department and IRS today issued final regulations confirming that individuals taking advantage of the increased gift and estate tax exclusion amounts in effect from 2018 to 2025 will not be adversely impacted after 2025 when the exclusion amount drops to pre-2018 levels. The TCJA temporarily increased the basic exclusion amount (BEA) from $5 million to $10 million for tax years 2018 through 2025 (adjusted for inflation). In 2026, the BEA will revert to the 2017 level of $5 million as adjusted for inflation. Final regulations provide a special rule that allows an estate to compute its estate tax credit using the higher of the BEA applicable to gifts made during life or the BEA applicable on the date of death.

York County Considers Business Tax Breaks

York County Councillors will meet in coming months to determine how and whether the county will offer incentives for businesses relocating to the area.
Financial breaks to spur economic development are common, including fees in lieu of tax (FILOT) agreements, Bailey Bill which freezes taxable value on redevelopment properties, and federal Opportunity Zones (of which parts of Rock Hill, Chester, and Lancaster are designated). In March, legislation for tax and development credits were introduced by state legislators in hopes of bringing the Carolina Panthers training site and headquarters to South Carolina.

However, not everyone is in favor of such tax breaks. Citizens are not privy to any such deals, and the county can’t afford to give these incentives to all businesses.

Councilwoman Christi Cox has asked to schedule a discussion on the impact and value of such incentives. Usually, the economic development committee sees potential FILOT agreements before they’re presented before the whole council, but a workshop is planned to address issues before the entire council. Some of those issues include whether a business seeking a fee agreement is offering livable wages, and that the promised investments are being realized.

Sometimes incentives and fee agreements are worked out behind closed doors, using code names (“Project Combat," for instance). Cox affirms that the county and council members can be pro-business without approving FILOTs for every business and that the county should be selective when it comes to who gets these deals. “ Every business is welcome here in York County — period. The question is, at what point and when do
we extend tax breaks?”