Tag Archives: irs tax tips

4 Misconceptions About Solar Panel Tax Credits

Solar Tax Panel Credits by Paul Davis

How Much Tax Money Can You Earn from Your Solar Panels?

You may have seen the Tik-Tok videos describing how you can earn money on your taxes if you install solar panels. And now that it is tax season, you want to earn all that money from the Federal Government’s green energy investment incentives.

But what do these tax credits actually offer?

You can read more in detail about the solar tax credits at Energy.Gov. For this article, we are going to look at several frequent misconceptions about these tax credits.

Misconception #1: You can earn more from solar tax credits than you pay in taxes, making a net positive income for installing solar panels.

Truth: These tax credits are non-refundable which reduces the amount you owe and doesn’t give you an income above and beyond what you paid. In this way it is different from  the Earned Income Tax Credit and the Child Tax Credit, where you earn the credit even if you have no tax liability.

Misconception #2: I have to own my home to qualify.

Truth: You have to have some ownership in the solar power system, not necessarily in your house. The Department of Energy article mentions members of cooperative housing or condominiums who can be eligible for their costs associated with community solar. If you have costs associated with a solar installation, come talk to one of our tax preparers to see if your costs will qualify.

Misconception #3: I can add tax credits and rebates to equal 100% of my solar costs.

Truth: Any utility rebates must be subtracted from your total costs before you claim your federal tax credit. However, state tax credits will not be deducted from your federal tax credit but they will increase your claimed income.

Misconception #4: Credits and payments from local utilities will cover the cost of financing.

Truth: If something sounds too good to be true, it is. When someone sells you financing on solar panels saying that they will pay for themselves, you need to talk to an accountant or tax professional who has a fiduciary commitment to you as their customer not to the solar panel manufacturer. There are always costs: do those costs make sense for your situation? Don’t expect a salesperson whose next meal depends on you purchasing to correctly analyze your situation.

Can I Claim Solar Panel Costs From Last Year or a Previous Year?

Each person’s financial situation is unique, and if you are thinking about claiming solar or other green energy costs you should make an appointment to speak with Danielle or Melynda about your unique situation.

Tax Updates Late November

Additional Delay in Form 1099-K Reporting

The IRS will treat 2023 as an additional transition year when it comes to the American Rescue Plan (ARP) provision regarding the $600 reporting threshold for third-party payment processors. Under previous rules, third-party processors and platforms did not have to report the payments on Form 1099-K unless the taxpayer received over $20,000 and had more than 200 transactions in the year. The ARP lowered that threshold to $600. After many months of feedback from taxpayers, tax professionals, payment processors and others, the IRS temporarily delayed the new requirement last year, and is repeating the delay for 2023. A phase-in threshold of $5,000 is planned for the 2024 tax year. 

Saver’s Credit Reminder

The IRS reminds low- and moderate-income taxpayers that the Retirement Savings Contributions Credit (Saver’s Credit) can help them earn a special tax credit in 2024 and beyond. The deadline for contributing to a workplace plan such as a 401(k) is December 31, and savers have until April 15, 2024 to contribute to an IRA or Roth IRA. The credit is available to individuals with adjusted gross incomes (AGIs) up to $36,500; heads of household can earn up to $54,750 AGI, and married couples filing jointly can claim the credit it with AGIs up to $73,000. Use the Interactive Tax Assistant tool for the Saver’s Credit to determine eligibility or visit the Saver’s Credit page for more information.

National Tax Security Awareness Week Commences

Security Summit partners have kicked off the 8th National Tax Security Awareness Week. The focus is on protecting sensitive financial information against identity thieves and other security threats, especially around the holidays and the start of the 2024 tax season. 

Fraud Awareness on Giving Tuesday

The IRS highlights its continued support of efforts to fight charity scams and fraud. Fake charities and scammers taking advantage of natural disasters or other situations are a drain on the resources of generous donors and deprive legitimate organizations of needed funds. Givers can use the Tax Exempt Organization Search tool to verify a charity’s status and review the Dirty Dozen tax scams for 2023.

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.