Tag Archives: deductions

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 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 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.

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.