Tag Archives: IRS

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 August 11

Five-Year Plan Issued

The IRS has released a new five-year Strategic Plan. This Plan will serve to help guide the agency’s programs and operations, and meet the needs of taxpayers and others in the tax community. Their four goals include providing quality service, fostering a diverse and inclusive workforce, enforcement, and transformation of operations to be more resilient, agile, and responsive.

Flood Victims Eligible for Relief

Storm victims in parts of Kentucky and Missouri now have until November 15, 2022, to file various tax returns and make payments. Those who had extensions to file their returns by October 17, 2022, will now have until November 15 to file. This also applies to quarterly estimated payments due on September 15, and payroll and excise taxes due October 31. More information is available on the Disaster Assistance and Emergency Relief for Individuals and Businesses page, and an updated list of localities eligible for relief is always available on the disaster relief page.

Educator Expense Deduction Increased

The IRS is reminding teachers and other educators that they may be able to deduct up to $300 of out-of-pocket classroom expenses for 2022 when they file their tax return next year. This is the first increase since the deduction was enacted in 2002. The limit will continue to rise in $50 increments in future years based on inflation adjustments. The deduction is available to K-12 educators, instructors, counselors, principals and aides who work at least 900 hours in a public or private school during the school year. Books, supplies, classroom materials, computer equipment, software and services, professional development courses, and COVID-19 protective items all qualify for the deduction. 

Trucker Filing Date Approaches

The IRS is reminding those who register large trucks and buses that it’s time to file Form 2290, Heavy Highway Vehicle Use Tax Return. The IRS encourages using e-file and filing before the deadline of August 31, 2022, for vehicles first used in July of this year. Operators of vehicles with a taxable gross weight of 55,000 pounds or more are subject to paying the tax and filing the form, although those operating vehicles that travel below a certain number of miles are not subject to the tax (they are still required to file the form however). More information is available at the Trucking Tax Center.

IRS Updates End of June

Expanded Voice Bot Assistance

To help improve taxpayers’ experiences with the department, the IRS has expanded the voice bot capabilities of their customer service phone lines. Now, in addition to general and procedural answers to Economic Impact Payment (EIP) or Advance Child Tax Credit queries and other toll-free lines, voice bots will be able to help eligible taxpayers verify their identity to set up or modify a payment plan – without the long wait times. More functions are planned to be rolled out this year, including the ability to get account and return transcripts, payment history and current balance information. 

Processing Backlog Progresses

The IRS is finally wrapping up the last of the paper individual tax returns (Form 1040, error-free) filed in 2021. Due to the pandemic and staffing limits, there are about twice as many returns awaiting processing at this point compared to a typical year. Steps have been taken to address this backlog and keep up with returns filed this year. Business paper returns filed in 2021 are next, while the IRS continues to work on the remaining individual returns that need corrections or additional information. Taxpayers are encouraged to file their returns electronically to avoid future processing delays.

Electronic Corrections, Amendments Expanded

The IRS has announced that more forms can now be amended electronically, including Form 1040-NR (US Nonresident Alien Income Tax Return), Forms 1040-SS (US Self-Employment Tax Return) and Forms 1040-PR (Self-Employment Tax Return – Puerto Rico). This development will assist the IRS in avoiding continued processing backlogs. Forms 1040-X and other corrected forms have had electronic filing options in place in recent years, and paper versions of the forms may still be submitted.

Reinstated Superfund Chemical Tax FAQ

The IRS issued frequently asked questions (FAQs) regarding the reinstated Superfund chemical excise tax. Thanks to the Infrastructure Investment and Jobs Act (IIJA), beginning July 1, 2022, excise taxes on certain chemicals and imported chemical substances will be reinstated. The FAQs detail what the Superfund chemical excise tax is, how the tax is computed, and who may be liable for the tax. Currently 151 substances are listed as taxable, though that number will likely change.

 

Tax Updates End of May 2022

Interest Rates Increase

The IRS has announced that interest rates will increase for the third calendar quarter of the year, beginning July 1, 2022. The rates will be:

  • 5% for overpayments (4% in the case of a corporation).
  • 2.5% for the portion of a corporate overpayment exceeding $10,000.
  • 5% for underpayments.
  • 7% for large corporate underpayments. 

These rates are calculated by the federal short-term rate determined during April 2022, based on daily compounding.

Child Tax Credit FAQs Revised

The IRS has revised a set of frequently asked questions (FAQs) for the 2021 Child Tax Credit and Advance Child Tax Credit. Updates have been made to several topics, including general information, receiving advance child tax credit payments, updating your information, reconciling your payments, unenrolling from advance payments, shared custody questions and more. 

Where’s My Refund? Updated

The IRS has made a helpful improvement to the Where’s My Refund? online tool that now allows taxpayers to check the status of their current tax year and two previous years’ refunds. Taxpayers will need their Social Security number or ITIN, as well as filing status and expected refund amount for the tax year they’re checking. Previously the tool only displayed the status of the most recent tax return. The tool is usually updated overnight and gives a projected refund date as soon as it’s approved. 

Earned Income Tax Credit FAQs Revised

The IRS has revised the FAQs for the Earned Income Tax Credit (EITC). The EITC helps low- to moderate-income workers and their families either reduce their taxes owed or increase their refund (if no taxes are owed). The credit varies depending on whether the taxpayer has children, dependents, a disability or other eligible status. The FAQs explain the EITC, how it was expanded in 2021, which taxpayers are eligible, and how to claim it.

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 December 17

National Tax Security Awareness Week

The IRS and Security Summit partners spent a week sharing information with taxpayers and tax professionals about security risks and how to minimize them. 

  • Day 1: Tax scams and identity theft – identifying phishing and tax scams, protecting devices with security software and protecting your sensitive information.
  • Day 2: Fake charity scams – verifying a charity before you give, and tips on keeping your financial and personal information safe.
  • Day 3: Identity Protection PINs – participating in the IP PIN program helps individual taxpayers protect against identity theft. The IP PIN tool is scheduled to launch January 10, 2022.
  • Day 4: Tax Pros – pandemic circumstances have added to the security risks from cybercriminals. Using the “Security Six” measures helps protect client data.
  • Day 5: Businesses – cyberattacks and theft of customer and business information remain serious problems. Follow the Federal Trade Commission’s best practices to maintain cybersecurity.

New in 2022

The IRS is encouraging taxpayers to ready themselves for filing their 2021 federal tax return. Key changes affect millions of taxpayers, and special steps regarding Economic Impact Payments (EIPs) and advance Child Tax Credit payments must be taken. For instance, those who received less than the Child Tax Credit amount for which they were eligible may claim the remainder on their return, while those who received more will have to repay the excess payment when they file. Letters regarding these amounts, as well as EIP amounts paid, will begin arriving in January. There is also a charitable deduction which may be claimed by taxpayers who take the standard deduction.

Required Minimum Distributions for Retirees

The IRS reminds retirement plan participants and individual retirement account owners that required minimum distributions (RMDs) must usually be taken by December 31. These are generally minimum amounts that must be withdrawn annually, depending on age or date of retirement. Owners of traditional IRAs, traditional SEP IRAs, SIMPLE IRAs, and workplace retirement plans are subject to RMDs. Roth IRAs do not require distributions while the original owner is still alive. 

Tax Updates November 30

New Tool for U.S. Withholding Agents

The IRS has launched a new online tool designed to help withholding agents comply with their responsibilities with respect to Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding. Agents such as insurance companies, universities, entertainment venues, and banks and other financial institutions must file an information return on Form 1042-S to report payments made from U.S. sources to foreign persons. A tutorial is also available. 

Per Diem Rates Guidance Provided

The IRS has issued guidance to make clear how the temporary 100% business deduction for food and beverages from restaurants applies to taxpayers who follow Revenue Procedure 2019-48 for using per diem rates. The temporary exception to the 50% limit was provided by the Taxpayer Certainty and Disaster Relief Act of 2020. The exception allows the taxpayer to treat the full meal portion of a per diem allowance as being attributable to food or beverages from a restaurant beginning January 1, 2021, through December 31, 2022.

New Online Identity Verification

The IRS has announced the launch of an improved online identity verification and sign-in process for those using online tools and applications. Using the new mobile-friendly verification procedure allows access to The Child Tax Credit Update Portal, Identity Protection PIN, Online Payment Agreement, and other services. The IRS is using ID.me to provide verification services. 

SLFR Funds Answers

The IRS has provided a FAQ regarding Coronavirus State and Local Fiscal Recovery (SLFR) Funds. These funds give eligible state and local governments substantial resources to meet pandemic response needs, and the answers (in FS-2021-16) detail the tax consequences for individual recipients and reporting requirements for employers and state and local governments. Some recipients may have to report payments as income and may owe tax. 

Tax Updates August 17

Vaccination and Recovery Paid Leave Credit 

Under the American Rescue Plan Act (ARP), the IRS has updated their paid sick and family leave tax credit information. Employers can claim the credits for providing paid leave to employees who accompany a family or household member to obtain a COVID-19 vaccination or to care for them during their recovery from said vaccination. The credits reimburse employers for the cost of the paid sick and family leave for COVID-19 related reasons through September 30, 2021.

Highway Use Deadline for Heavy Vehicle Owners

The IRS reminds those registering large trucks and buses that the deadline to file Tax Year 2021 Form 2290, Heavy Highway Vehicle Use Tax Return is August 31, 2021 for vehicles used on the road during July of this year. The highway use tax applies to vehicles with a taxable gross weight of 55,000 pounds or more. The IRS has an online tool to help owners determine if they are required to file. 

Relief and Guidance for Employers

  • Employers claiming the Work Opportunity Tax Credit (WOTC) have longer to certify that an employee hired is a Designated Community Resident or Qualified Summer Youth Employee. The WOTC is a tax credit available to employers who hire certified members of specific groups identified in the code who face barriers to employment.
  • Guidance has been issued regarding the Employee Retention Credit (ERC). The ARP has made the credit available to eligible employers that pay qualified wages from July through December 2021, and various questions posed to the IRS and treasury have been addressed.
  • Certain items may be excluded from gross receipts when determining eligibility for the ERC. This safe harbor applies to Paycheck Protection Program (PPP) Loan forgiveness amounts, as well as shuttered venue and restaurant grants under the ARP.

Tax Updates July 12, 2021

“Dirty Dozen” Scams Identified

The IRS is alerting taxpayers to beware of specific tax scams with its ongoing “Dirty Dozen” series. Pandemic-related scams like Economic Impact Payment (EIP) theft (whether fraud or mailbox theft) continue to be an issue. Phishing scams persist, which include fake emails, text messages, websites and social media as tools to steal personal information. Phone calls, or “vishing” (voice-related phishing) are on the rise, many using fake tax lien information. Ransomware is also increasing (malicious software designed to block access to computer systems) with the aim of extorting ransom payments to restore access to the victims. Other schemes involve fraudsters targeting seniors or immigrants by impersonating the IRS and fake charities taking advantage of tragedies and disasters, or unscrupulous tax preparers or scammers offering “settlement” promises to people who have trouble paying their taxes. Unemployment insurance fraud continues to be a problem as well. Lastly, be aware of schemes like syndicated conservation easements, abusive micro-captive insurance arrangements and other abusive arrangements like misuse of the US-Malta tax treaty and monetized installment sales designed to defer paying taxes on the sale of appreciated property. Click the links for tips on protecting yourself and your business, choosing a qualified tax professional, legitimate settlement options from the IRS, and how to identify likely scams.

Safe Harbor Extended for Renewable Energy Projects

The IRS and Treasury have issued guidance for taxpayers involved in developing renewable energy projects, addressing delays related to the COVID-19 pandemic. Certain projects may not be placed in service in time to meet the production and investment tax credits, which may significantly impact project financing and development. The updated guidance allows additional time to satisfy the requirements for the Continuity Safe Harbor, and clarifies that if the Continuity Safe Harbor doesn’t apply, the taxpayer may demonstrate that Continuous Construction or Continuous Efforts Tests have been satisfied instead.

Employer Leave-Based Donation Relief 

The IRS has extended tax relief for employers whose employees donate their sick, vacation, or personal leave because of the COVID-19 pandemic. The relief, which includes cash payments employers make to charitable organizations that provide relief to victims of the pandemic in exchange for untaken leave, will be extended through the end of the calendar year. Employees will not be treated as receiving the value of the leave as income and cannot claim a deduction for the donated leave.

IRS Tax Updates

New FAQs For Families And Small Businesses

The IRS has posted two new frequently asked questions (FAQs) to help families and small- and mid-sized employers in claiming credits under the American Rescue Plan (ARP) Act. For families, the child and dependent care credit was increased and expanded under the ARP, and made fully refundable. The paid sick and family leave credits reimburse eligible employers for the paid sick leave provided to employees for COVID-19 related reasons. 

Economic Impact Payments Continue

The IRS and Treasury continue to disburse millions of Economic Impact Payments (EIPs). As of June 9, the value of the payments was approximately $395 billion since payments began in March. More than 169 million payments have been made thus far, with plans to continue payments on a weekly basis to those who were previously unknown to the IRS but who have recently filed a tax return.

Letters Begin Re: Advance Child Tax Credits

Letters have been sent to more than 36 million American families who may be eligible to receive monthly Child Tax Credit payments. Families have been identified based on information they included in their recent tax return, or who registered for an Economic Impact Payment. The credit was increased and expanded under the ARP, and eligible families can expect monthly direct deposits or paper checks around the 15th of each month from July through December. A tool will be provided soon which will enable families to unenroll from receiving the advance payments and instead receive the full credit amount when they file their 2021 return next year.