Tag Archives: irs tax tips

IRS Updates Aug 31

Security Summit Wraps Up

The IRS has finished its annual education effort regarding online security for tax professionals and taxpayers. This year includes a five-part “Protect Your Clients; Protect Yourself” series to help tax pros, especially smaller practices, protect against tax-related identity theft and fraud. The final installment of the series urges tax professionals to take critical steps to protect data and security:

  • Use caution around email attachments: Do not open links that arrive unexpectedly.
  • Do not commingle business and personal devices: do not conduct business on personal devices and do not web surf or download videos on business devices.
  • Do not share USB drives or external hard drives between personal and business devices.
  • Be careful with downloads.
  • Use strong passwords, always change default passwords, and change passwords often.

Educator Expense Deduction

The IRS reminds teachers and other educators that they’ll be able to deduct up to $300 of out-of-pocket classroom expenses for 2023 when they file their tax return next year. Even educators who take the standard deduction may claim this deduction, and if married to another educator, filing jointly, up to $600 may be claimed. Qualified costs include those incurred in the purchase of books, supplies, classroom materials, computer and software equipment and services, and COVID-19 protective items. Qualified expenses do not include costs associated with home education or nonathletic supplies for health or physical education. The IRS urges educators to keep good records and documentation.

Hawaii Wildfire Victim Tax Relief

The IRS has announced expansive tax relief for victims of Hawaii wildfires in Maui and Hawaii counties. These taxpayers now have until February 15, 2024 to file various federal individual and business tax returns and make tax payments. Any households or businesses located in Federal Emergency Management Agency (FEMA)-designated disaster areas qualify for this relief. This relief postpones various filing and payment deadlines that occur from August 8, 2023 through February 15, 2024. Any returns and taxes originally due during this period have until the February deadline. This is automatically provided, and taxpayers do not have to take action to get this relief. However, if a taxpayer does receive a late filing or payment penalty notice, they should call the number on the notice to have it abated. More information is always available at the IRS’ disaster relief page. 

Educational Assistance Reminder

The IRS reminds employers and employees that under federal law, employers who provide educational assistance programs can use them to help pay student loan obligations for their employees. In an effort to promote this benefit, the IRS has a free webinar on September 14 to help people better understand this provision. Traditionally such programs have been used to pay for books, equipment, supplies, fees, and tuition; under current law, this feature will be available until December 31, 2025. 

Tax Updates August 13

Security Summit Continues

The IRS is continuing its annual education effort regarding online security for tax professionals and taxpayers. This year includes a five-part “Protect Your Clients; Protect Yourself” series to help tax pros, especially smaller practices, protect against tax-related identity theft and fraud. The next two parts of the series are below:

Inflation Reduction = Energy Efficiency Credits

The IRS has issued Notice 2023-59 regarding the requirements for home energy audits for taxpayers that want to claim the Energy Efficient Home Improvement Credit. As one of several clean energy credits created by the Inflation Reduction Act of 2022, the non-refundable Energy Efficient Home Improvement Credit is equal to 30 percent of the total amount paid during the year for home energy audits, as well as other expenditures or improvements. To qualify, the audit must identify the most significant and cost-effective energy efficiency improvements to the residence, including an estimate of energy and cost savings to each improvement. The maximum credit for such audits is $150.

Tax Credits for Energy-Efficient Builders

The IRS reminds contractors who build or reconstruct qualified new energy efficient homes that they might qualify for a tax credit of up to $5000 per home. This Section 45L credit was expanded as part of the Inflation Reduction Act of 2022. Builders must own the home and have a basis in it during the construction, and the home must be sold or leased to a person for use as a residence. The credit amount varies depending on standards met, including Energy Star program requirements, prevailing wage requirements, and others. 

Paperless Initiative Launched

Thanks again to the Inflation Reduction Act, the IRS is launching a paperless processing initiative. Taxpayers will have the option to go paperless for IRS correspondence (not just filing their tax return) by 2024 filing season, and by filing season 2025, an additional 150 of the most used non-tax forms will be available in digital, mobile-friendly formats. This will eliminate up to 200 million pieces of paper annually, cut processing times in half, and expedite refunds by several weeks. More information from IRS Commissioner Danny Werfel on the subject.

IRS Updates Early August

IRS Updates August 1 by Paul Davis

Security Summit Commences

The IRS has begun its annual education effort regarding online security for tax professionals and taxpayers. This year includes a five-part “Protect Your Clients; Protect Yourself series to help tax pros, especially smaller practices, protect against tax-related identity theft and fraud.

New Employee Retention Credit Procedures

Having cleared the backlog of valid Employee Retention Credit (ERC) claims, the IRS has entered a new phase of “increasing scrutiny on dubious submissions” while continuing warnings against aggressive ERC marketing. The IRS has increased audit and criminal investigation work on the remaining ERC claims, both on the promoters as well as those filing questionable claims. The misleading marketing creates an array of problems for tax professionals and the IRS, and anyone improperly claiming the ERC must pay it back, possibly with substantial penalties and interest. Phone calls, text messages, direct mail, radio, tv, and online ads are luring businesses and tax-exempt groups into applying for the credit. They often leave out key details about the very limited scope of the credit. The best way to avoid these risks is to work with a trusted tax professional.

No More Unannounced Visits

The IRS has announced a major policy change that will end most unannounced visits to taxpayers by revenue officers. This aims to reduce public confusion and enhance safety measures for both taxpayers and IRS employees. This is a reversal of a decades-long practice by IRS officers and will be replaced in most cases by mailed letters to schedule meetings. The National Treasury Employees Union (NTEU) praises the change, as such jobs “have only grown more dangerous in recent years because of false, inflammatory rhetoric about the agency and its workforce.” Additionally, scammers have tried to impersonate revenue officers. There will still be very limited situations where unannounced visits will occur, but these will mostly be for serving summonses and subpoenas, or for sensitive enforcement activities.

 

 

 

IRS Updates June 29 2023

IRS Updates June 29 2023 by Paul Davis

Guidance Released on Credits, Elective Payments

The IRS has issued proposed regulations and FAQs (frequently asked questions) on rules for entities that earn certain clean energy credits and choose to make an elective payment election, and rules for those that elect to transfer certain credits to unrelated parties. As part of the Inflation Reduction Act, applicable entities (generally tax-exempt organizations, state, local, or tribal governments) can choose to make an elective payment election, which will treat certain credits as a payment against their federal tax due, with any excess refunded. Certain eligible taxpayers (generally not the applicable entities above) can opt to transfer all or a portion of an eligible credit to unrelated taxpayers for cash payments. The unrelated taxpayers may then claim the credits on their tax return. The cash payments are not counted as gross income of the taxpayer and are not deductible by the unrelated taxpayers.

Guidance for Manufacturing Credit

The IRS has issued proposed regulations providing guidance regarding the implementation of the elective payment provisions of the Advanced Manufacturing Investment Credit, established by the Creating Helpful Incentives to Produce Semiconductors Act of 2022 (CHIPS Act). This credit will incentivize the manufacture of semiconductors and manufacturing equipment within the US. The proposed regulations describe how an entity can receive the credit as an elective payment, offsetting their tax liability. Special rules apply to partnerships and S corporations, basis reduction and recapture. Public comments are being sought.

Energy Community Credits, Updated

The IRS has issued Notice 2023-45, updating Notice 2023-29, describing forthcoming proposed regulations for determining what constitutes an energy community for the production and investment tax credits. FAQs have been posted relating to the credit increase, qualifications, how to determine whether a project is in an energy community, and more. Notice 2023-47 has been released, publishing information that may be used to determine whether taxpayers meet certain requirements under the Statistical Area Category or the Coal Closure Category in Notice 2023-29 for purposes of qualifying for energy community bonus credit. More information can be found on the Inflation Reduction Act of 2022 page.

Taxpayer Advocate Report Issued

The mandated National Taxpayer Advocate midyear report to congress has been released. The report states that this year’s filing season generally ran smoothly but urges the IRS to prioritize a broad array of technology upgrades. The backlog of paper-filed returns was reduced, refunds issued quickly, and phone call wait times were shorter. Key objectives set forth for the future include protecting taxpayer rights, improving correspondence audit processes, and providing first-time penalty abatement to more qualified taxpayers. 

Tax Updates End of June

IRS Updates June 2023 by Paul Davis
July 17 Deadline for 2019 Refunds

The IRS estimates that nearly 1.5 million people in the nation could be due refunds for tax year 2019, if they submit a tax return by the July 17 deadline. The usual deadline for submitting a tax return and getting a refund is 3 years from the initial deadline, but under the COVID-19 emergency, the deadline for 2019 was postponed. Taxpayers can still request key documents from their employers or banks, or request a wage and income transcript from the IRS, online or by filing Form 4506-T, Request for Transcript of Tax Return. 

Advance Energy Project Guidance

The IRS has issued Notice 2023-44, providing further details for applicants seeking section 48C credit allocations in the qualifying advanced energy project credit allocation program under the Inflation Reduction Act. Notice 2023-18 earlier this year established the section 48C(3) program to allocate $10 billion in credits, at least $4 billion of which will be allocated to projects located in certain energy communities census tracts. This guidance is mainly of interest to owners of clean energy manufacturing and recycling projects, greenhouse gas emission reduction projects, and critical material projects. Notice 2023-44 updates the earlier guidance, defining qualifying advance energy projects and the Department of Energy (DOE) application process, in Appendices A and B, respectively. Appendix C has also been added, containing a list of the energy communities census tracts.

Penalty Relief for Corporations

The IRS and Treasury have issued Notice 2023-42, which will grant penalty relief for corporations that did not pay estimated tax in connection with the new corporate alternative minimum tax (CAMT). The Inflation Reduction Act created the CAMT, which imposes a 25% minimum tax on the adjusted financial statement income of large corporations for taxable years beginning after December 31, 2022. Due to the challenges associated with determining the amount of a corporation’s CAMT liability and whether a corporation is subject to the CAMT, the IRS will waive the penalty for failure to pay estimated income tax with respect to its CAMT for a taxable year that falls within specific dates. 

Tax Updates Early May

IRS Updates May 2023 by Paul Davis

Better Late Than Later

The IRS is urging taxpayers who missed the April 18 tax-filing deadline to file as soon as possible. Those who owe taxes should file quickly to minimize penalties and interest, which can accrue over time. For those who should receive a refund, there is no late-filing penalty. Some taxpayers automatically qualify for extra time to file and pay, including disaster victims, military members serving in a combat zone and support personnel, and taxpayers outside the United States. There are options for taxpayers struggling to pay their tax bill. 

May 15 Deadline for Tax-Exempt

The IRS reminds tax-exempt organizations that their filing deadline is May 15, 2023. Those operating on a calendar-year basis must file a return by this date. Form 990-series (information returns such as Form 990, 990-EZ, 990-PF), Forms 990-N, 990-T, and Form 4720 must be e-filed. Those requiring additional time to file beyond the May 15 deadline can request a six-month automatic extension, however this does not extend the time for paying any taxes due. Online Workshops are also available to help exempt organizations comply with their filing requirements. 

Tax Relief for Indiana Victims

Storm victims in Indiana now have until July 31, 2023, to file various federal individual and business tax returns and make tax payments. This relief applies to any area designated by the Federal Emergency Management Agency (FEMA) as a result of tornadoes, severe storms, and wind that occurred on March 31 and April 1. Taxpayers and businesses in Allen, Benton, Clinton, Grant, Howard, Johnson, Lake, Monroe, Morgan, Owen, Sullivan, and White counties qualify, in addition to any other areas later designated. This relief is automatic, and there is no need to contact the IRS unless an affected taxpayer incorrectly receives a late filing or late payment penalty notice. As always, an updated list of eligible localities is available.

Put Withholding Estimator to Work

The IRS suggests taxpayers get a head start on the 2024 filing season by using the Tax Withholding Estimator to help update the amount of tax to have taken out of their 2023 pay. It is especially useful after a major life change such as marriage, divorce, birth or adoption of a child, a home purchase, or a significant change in income. Those who received a large refund or owed a lot of tax this year would also benefit from using the estimator. To receive the most accurate estimate, have on hand recent pay statements (for both spouses if married), other income sources, and the most recent income tax return.

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.

 

Tax Updates Beginning March

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 IRS.gov 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.

5 Scams to Avoid

5 Scams to Avoid by Paul Davis

Financial scammers are always attempting to find new and interesting ways to get access to your money. While scammers often make little mistakes that show their hands to their targets, you might find yourself already in communication or even scammed before you catch on.

To help you stay safe and anticipate possible scams, here is a list of five that we have heard about from different banks, government agencies, and more that you should be aware of.

1. The “Pay Yourself Scam”

This was brought to our attention by Bank of America but it is a variation on a common theme. In this scam, someone will spoof your bank via text and send you a fraudulent security alert.

The text could look like this:

Bank of America: Did you pay $100 to Alibaba Travel in Cairo, Egypt? Click Link to resolve this issue.

Of course you did not pay money to whatever store the text is asking you about so you click the link. At this point, the scammer asks you to prove your identity by sending money through Zelle, Paypal or another app. The apps may vary but the end goal is the same: getting access to some or all of your finances.

Once you enter the information into their app, they get either access to your bank or a large amount of money.

Resolution Tip

Never click links in texts from official sources like banks, the IRS, Social Security, or the Sheriff’s Office. These links can look official but be used to gain important personal information the scammers can use against you or sell to other scammers.

Always find a number or email address independently of any information that was sent to you. For example, if you think your bank has sent you a text, go to their website, find their customer contact information and call them to ask if they have reached out to you.

This helps verify whether something is legitimate and does not expose you to data harvesting by interacting with a spammer’s text or email.

2. The Tax Preparer Scam

In 28 years of business, we have seen many people come to us for help after messing up on taxes. It gets worse when the taxpayer has been scammed by either well-meaning and underqualified tax preparers or by a thief posing as a tax preparer.

This scam can result in your tax refund being deposited into someone else’s account, it can result in someone falsely claiming certain deductions in order to increase their percentage-based fees, or it can result in your identity being completely stolen.

Resolution Tip

The IRS has a list of items to check when you are looking for a tax preparer. These include looking up your tax preparer’s certification and a number of other tips.

Obligatory self-mention: Danielle Hoyles and Melynda Rushing both meet all the IRS’s recommended tips for picking a tax preparer.

3. The Get Out of Jail Scam

You receive a phone call or text:

Los Angeles County Sheriff is trying to find you to enact an arrest warrent against you for failure to apear at a recent court case. Please text or call this number to resolve this urgent issue.

The urgency of having some law enforcement agency like a Sherrif’s Department or the IRS coming after you is used to convince you to give the scammer important information, access to your bank accounts, or just $500 in Walmart cards.

Resolution Tip

If you have ever dealt with legal issues, you will remember that requests like this (warrants, restraining orders, etc.) have to be delivered by certified mail. In addition, the same tips apply from the pay yourself scam. If you have any questions, find a contact number from a different source and reach out to the named agency directly.

Finally, if something sounds too good (or too bad) to be true, it usually is not true. If you receive a phone call saying you just won $1,000,000 and you have not entered Publisher’s Clearinghouse or bought and registered a winning lotto ticket, the phone call is a scam. Likewise, if you receive an arrest warrant text from a locality you have never been in, it is probably a scam.

4. The Forward Some Money Scam

This is another scam that can be enacted by a friend or by a thief. Either way, the basic principle is asking you to send them money that they will pay off via some means. This can be a payday scam (please send me $100 that I will pay you tomorrow on payday), a starting business scam (I am sending you a $2000 check, $1000 for you and $1000 for another contractor. Can you send him the $1000 so we can get started?).

The basic principle is that the well-meaning or nefarious scammer is using interpersonal issues to drive urgency while not having the means or intention to pay you back.

Resolution Tip

If it’s a friend, realize that “you’re never really helping someone who’s incompetent with money by simply handing them cash.” ~Dave Ramsey

If it’s a customer or other stranger, don’t do any financial or labor commitments until you have cleared the payment in question.

5. The Classic Pyramid Scheme

Is your distant relative who is selling the newest at home opportunity working on starting a small business or a victim of a pyramid scam?

These have varied from annoying chain letter scams to Wolf of Wall Street levels of corruption, but all true pyramid schemes have one thing in common.

The only thing they sell is the money-making opportunity.

Resolution Tip

A salesperson sells something more than the opportunity to sell the opportunity to sell. A multi-level marketing business opportunity has to have something that it is selling in order to be a legitimate business: cosmetics, health-food, and more are all common legitimate industries that use peer-to-peer and multi-level marketing to grow.

But if all that your cousin’s niece’s best friend is selling is the opportunity to make a lot of money by signing up a lot of people, you are most likely looking at a scam.

Stay Focused to Avoid Them All

Scammers use our fears, anxieties, and sometimes greed to distract us from living our normal lives. Don’t lose focus on living your life by people interrupting you with urgent-sounding but improbable information.

Take time to research and choose your tax preparers. Reach out to your bank if you are worried about account security.

Stay safe, and remember that we are open all year round to help you deal with taxes no matter the time!

Late September IRS Updates

Improperly Forgiven PPP Loans are Taxable

The IRS has released guidance addressing improper forgiveness of Paycheck Protection Program (PPP) loans. When a PPP loan is forgiven based upon misrepresentations or omissions, the taxpayer is not eligible to exclude the forgiven loan proceeds from taxable income. Taxpayers who inappropriately received PPP loan forgiveness are encouraged to file amended returns and come into compliance. 

September 30 Deadline for COVID Penalty Relief

The IRS reminds struggling individuals and businesses affected by the pandemic that they may qualify for late-filing penalty relief if they file their 2019 and 2020 returns by September 30, 2022. This aims to help not only taxpayers but to allow the IRS to focus resources on processing backlogged tax returns in an effort to return to normal operations for the 2023 filing season. The relief applies to the failure-to-file penalty, usually assessed at a rate of 5% per month, up to 25% of the unpaid tax, when a return is filed late.

Victim Relief Abounds

  • Victims of storms and flooding that began on September 15 in parts of Alaska now have until February 15, 2023, to file various individual and business tax returns and make tax payments. This applies to those in FEMA-designated areas, currently the Regional Education Attendance Areas of Bering Strait, Kashunamiut, Lower Kuskokwim and Lower Yukon. 
  • Hurricane Fiona victims in all 78 Puerto Rican municipalities also have until February 15, 2023, to file various returns and make payments. 
  • Farmers and ranchers in applicable regions forced to sell livestock because of drought conditions have more time to replace their livestock and defer tax on any gains from the forced sales. This includes parts of 44 states, and generally applies to gains realized on the sales of draft, dairy, or breeding livestock. Sales of other livestock held for slaughter or sport, or poultry, are not eligible. More information is available in Notice 2022-43.
  • Look for much of Florida to be offered relief shortly. Updated localities are always available on the disaster relief page of IRS.gov.
  • 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.