Tax Relief For Disaster Victims
The IRS has provided tax relief to victims of the Oregon wildfires that began on September 7, as well as those affected by Hurricane Sally on September 14. Taxpayers in these FEMA-designated areas now have until January 15, 2021 to file returns and make any payments that were due after the September 7 or 14 date. This means those who filed extensions to file their 2019 taxes by October 15 now have until the January deadline to file. Updated relief information can always be found at the IRS’ disaster relief page.
100% Depreciation Rules Finalized
The IRS has issued final guidelines regarding the implementation of the 100% additional first year depreciation deduction that allows businesses to write off the cost of most depreciable business assets in the year they are placed in service. This deduction was created by the Tax Cuts and Jobs Act (TCJA) in 2017 and applies to depreciable business assets with an expected recovery of 20 years or less, such as computers, machinery, furniture, and appliances. Rules for used equipment and self-constructed components were also included.
Non-Filers: Do You Qualify For Economic Impact Payments?
The IRS has released a state-by-state breakdown of the number of people they’re attempting to contact this month, to encourage them to see if they’re eligible to receive an Economic Impact Payment (EIP) , including more than 350,000 in the Carolinas. Those who do not usually have to file a tax return and haven’t received an EIP can check their eligibility and register to receive the payment. The due date for registration is October 15, 2020. The IRS is attempting to send letters to over 8 million potentially eligible individuals.
IRS Reminds Extension Filers: Due Date Approaches
Taxpayers who were granted an extension on filing their 2019 taxes have until October 15, 2020, to file their tax return. There are convenient electronic filing options available, as well as direct deposit for refunds and multiple options for scheduling and making electronic tax payments.
Interest Rates Remain The Same
The IRS has made the decision to keep the same interest rate for the fourth quarter of 2020. Each quarter, the IRS sets the interest rates charged or paid on over- and underpayment. For taxpayers (other than corporations), the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points. Other rates are as follows:
- 3% for overpayments (2% in the case of a corporation)
- 5% for the portion of a corporate overpayment exceeding $10,000
- 3% percent for underpayments
- 5% percent for large corporate underpayments
Final BEAT Regulations Issued
The Tax Cuts and Jobs Act (TCJA) added a new tax on large U.S. corporations that make deductible payments to related foreign parties, called the base erosion and anti-abuse tax (BEAT). The IRS has issued final regulations providing detailed guidance regarding how to compute certain BEAT calculations. They also contain rules permitting taxpayers to waive deductions for purposes of the BEAT, and additional guidance regarding partnerships and anti-abuse rules.
Temporary Digital Signatures Allowed
The IRS has released a list of tax forms on which they are allowing digital signatures. This is a temporary measure, in place until December 31, 2020, intended to help protect the health of taxpayers and tax professionals. These forms have to be printed and mailed, but the digital signatures will enable the forms to be filled and filed without contact between taxpayer and tax preparer, and in a timely manner. The IRS will continue to monitor this temporary option and determine if further measures are necessary.
Third Quarter Tax Payments Due September 15
The IRS reminds taxpayers that third quarter tax payments are due September 15. This applies to anyone not subject to payroll tax withholding like self-employed or gig workers, investors, recipients of alimony, retirees, and others. Taxes are “pay as you go,” and there are penalties for late payment or underpayment of taxes. Due dates for disaster victims have been delayed.
Simplified Small Business Accounting Regulations Proposed
The IRS has released proposed regulations to adopt the simplified tax accounting rules for small businesses under the Tax Cuts and Jobs Act (TCJA). For tax years beginning in 2019 and 2020, these simplified tax accounting rules apply to taxpayers having average annual gross receipts of $26 million or less (known as the gross receipts test), and exempted these taxpayers from the uniform capitalization rules. Accounting and inventory methods are addressed, as well as long-term construction contracts. Taxpayers classified as tax shelters may not use the simplified rules.
Rehabilitation Credit Deadlines Extended
Additional pandemic relief has been provided by the IRS for rehabilitation credits. These are projects that satisfy the “substantial rehabilitation test” within a 24- or 60-month period. Any qualified project whose deadline was on or after April 1, 2020 but before March 31, 2021, now has until March 31, 2021 to satisfy the test. Projects usually have to claim the credit over five years, but under a transition rule, some projects may be able to claim the credit in a single year.
Guidance For Business Interest Expense Deduction Limitation
The IRS has issued final regulations regarding TCJA provisions that limit the deduction for business interest expense, including the changes made by basic statutory amendments to the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). In addition to these final regulations, proposed regulations have been issued for other situations not addressed, including more complex issues related to CARES Act amendments. Written and electronic comments in response to the proposed regulations are encouraged.
Retirement Account Rules Loosened
The IRS reminds taxpayers that CARES Act provisions allow for easier access to retirement funds, for those who qualify. Early distribution of some retirement funds may be made without the usual penalties. Those eligible for coronavirus-related relief may be able to withdraw up to $100,000 before December 31, 2020, from IRAs, 401(k) plans, 403(b) plans, profit-sharing plans and others. Relief includes delayed loan repayments, an increase in loan limits, a waiver of the 10% tax on early distributions, and more.
Refund Myths Addressed
The IRS is debunking some common refund myths circulating among taxpayers.
- The IRS wants taxpayers to know that calling them or a tax professional cannot expedite your refund, nor do they have access to any special information regarding your refund date.
- Ordering a tax transcript doesn’t provide that either.
- A smaller refund doesn’t mean the IRS has a problem: outstanding child support, federal or state taxes, student loans or other debts can cause your refund to be less than expected.
Retirement Distributions Waived For 2020
Seniors and retirees do not have to take their usual required minimum distribution (RMD) from their IRA or workplace retirement accounts in 2020, thanks to coronavirus relief measures passed this year. The waiver includes RMDs for individuals who turned 70 ½ in 2019 and took their first RMD in 2020. Those who have already taken their RMD have the option of returning it to their qualified plan. These provisions apply to most retirement plans, including traditional IRAs, SEP IRAs, SIMPLE IRAs, 401(k) plans, 403(b) plans, and others.
Annual “Dirty Dozen” Unveiled
The IRS has published its list of the 12 most common tax scams perpetrated by criminals this year. Taxpayers should be aware and vigilant in regards to spotting and avoiding these scams, especially the ones on the rise in the wake of the pandemic and economic impact payments (EIPs). Scams on the list include phishing emails, fake charities, threatening phone calls, EIP or refund theft, organizations “overselling” Offer In Compromise assistance, payroll scams, ransomware, and more.
Foreign-Taxed Income Guidelines
The IRS has published final regulations on how income from foreign corporations subject to a high rate of foreign tax shall be treated. The final regulations allow taxpayers to exclude certain high-taxed income of a controlled foreign corporation from their Global Intangible Low Taxed Income (GILTI) computation on an elective basis. The IRS also released proposed regulations regarding that high-tax exception with the GILTI exclusion, and welcomes public comments on the subject.
SSI And VA Recipients To Receive Automatic Payments
The IRS and Treasury, in partnership with the Social Security Administration and Department of Veterans Affairs have announced that recipients of Supplemental Security Income and VA benefits will automatically receive Economic Impact Payments. Most recipients need to take no action to receive payment, however, for those who have dependents age 16 or younger and did not file a tax return for 2018 or 2019, a special tool has been set up to register for the additional dependent payment. May 5 is the deadline to register for the additional payment.
Guidance For Cross-Border Travel Disruptions
The Treasury Department and IRS have issued guidance for individuals and businesses who have been impacted by travel disruptions caused by COVID-19 and the response. The guidance addresses situations where 60 consecutive days of residence would generally indicate tax residency, and explains certain income exclusions which will not be impacted as a result of days spent away from a foreign country.
Guidance For UBTI “Silo” Rules
Guidance has been issued for tax-exempt organizations that are subject to the unrelated business income tax with more than one unrelated trade or business on how to calculate their unrelated business taxable income (UBTI). The Tax Cuts and Jobs Act (TCJA) requires tax-exempt organizations subject to the UBTI tax to compute UBTI separately for each trade or business (referred to as a “silo”).
“Get My Payment” Program Enhanced
The IRS has significantly enhanced the “Get My Payment” online application this weekend. The changes are designed to help taxpayers have an improved and smoother experience, including access to adding direct deposit information. Taxpayers can check the status of their payment and if necessary, can add direct deposit information. Further improvements and enhancements will be ongoing.
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.
Our early advance program through Republic Bank means that you can have access to some of your tax credits today.
If you want to find out how much you qualify for, stop by our office, open 9-5 until the 20th, then 9:00 Am to 8:00 PM.
The IRS has warned about a recent gift card scams, one of the many scams that people need to be aware of.
IRS GIft Card Scams
These scams follow many of the traits of a typical phone scam: someone calls you from a source that you wouldn’t question. They tell you that something bad has happened (in recent cases, your identity is stolen). Then, they get you to do something that gives them access to your income. In this case, they attempt to convince you that you need to buy different gift cards and give them the card numbers in order to prove that you are who you say you are.
If you think this sounds silly, remember that aware and alert people don’t fall to scammers, but anyone can fall to this type of scam when tired, scared about an actual IRS issue, or too nervous or hopeful from some other issue.
Avoid IRS Scams
If someone contacts you and asks for immediate payment, purchasing gift cards, giving your info, or some other time sensitive activity, remember these principles:
- Call Them – If you are dealing with financial or tax issues, you will get many calls from creditors, collectors, and so on. Look up the organization you are dealing with and call them on an official number. If they demand you do something now, thank them for the information and inform them you will call them back. Then, find the official customer service number and call them.
- Get it in writing – Official correspondence in the United States is in writing. If the IRS is dealing with you in an official manner, they will send you paperwork.
- If It’s too good (or bad) to be true, it’s not true – not to sound too pessimistic, but scammers always attempt to appeal to our hopes by giving us limited time offers to something that has the potential to completely change our lives. Demand double verification and time if something seems to be life changing, either good or bad.
What to Do if You are Contacted By Scammers
If you happen to be targeted by a scammer, you have several options to notify governmental enforcement:
- Report IRS scams at the IRS Impersonation Scam Reporting website or call 800-366-4484.
- Report phone scams to the Federal Trade Commission through the FTC Complaint Assistant
Don’t get scammed by fraudsters pretending to be with the IRS. If you are worried about IRS collections or other issues, come by our office for an appointment and we will discuss your tax needs.
IRS Waives Penalty Automatically
More than 400,000 eligible taxpayers who were subject to a penalty for underestimated
tax payments for the 2018 tax year will automatically receive the waiver, the IRS has
announced . No action is required for eligible taxpayers to receive this waiver.
Additionally, taxpayers who already paid the penalty will receive refunds.
New Associate Chief Counsel Selected
The Income Tax and Accounting (ITA) Division has a new associate chief counsel in the
person of John Moriarty . This division provides legal advisory services regarding
fundamental rules of the federal tax system, including many income tax and tax
accounting issues. IRS Chief Counsel Mike Desmond calls him “an outstanding choice
for this important assignment.”
Tax Security Remains a Priority
The IRS continues to help tax professionals secure client data and reduce tax fraud.
“Taxes-Security-Together” – Step 5 reminds tax professionals to report data breaches
and thefts immediately, and to create a data recovery plan. If the IRS is notified quickly,
they can help stop fraudulent returns from being filed. The data recovery plan should
include the steps of notifying the IRS and law enforcement, other experts and officials,
and clients. This is the final step in the Taxes-Security-Together Checklist.
IRS Warns of New Email Scam
The IRS is warning taxpayers to be aware of a new email phishing/malware scam which
attempts to impersonate the IRS. Subject lines may include “Automatic Income Tax
Reminder” or “Electronic Tax Return Reminder.” The IRS reiterates that they DO NOT
contact taxpayers over email (or text message, social media, etc), and anything
purporting to be the IRS via email is not to be trusted. Malware can give imposters
access to taxpayer’s computer, files, even keystroke history, eventually giving them PIN
numbers and passwords to sensitive accounts. More information can be found at the
IRS’ Phishing and Online Scams page.