Tag Archives: tax credits

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 Update Jan 19

W-2 Filing Deadline Approaches

The IRS reminds employers and other businesses to file Form W-2 and other wage statements for Tax Year 2022 by January 31, 2023. The deadline also applies to Forms 1099-NEC, Nonemployee Compensation, and Form W-3, Transmittal of Wage and Tax Statements. Extensions are only granted for very specific reasons and penalties may apply if the deadline is missed. E-file is available for these forms. 

January 23 Official Start to Tax Season

Monday, January 23, 2023, will be the beginning of the 2023 tax season when the IRS will begin accepting and processing 2022 tax year returns. With the increase in staffing at the IRS, provided via the Inflation Reduction Act, the agency aims to ensure all systems run smoothly. Filing a complete and accurate return can avoid extensive processing delays, such as were seen during pandemic years. The IRS is still working on reviewing certain 2021 returns, though taxpayers in that situation can and should still file their 2022 return on time. The filing deadline is April 18, 2023.

Relief for California Storm Victims

Storm victims in California now have until May 15, 2023, to file various federal individual and business tax returns and make payments. This relief postpones certain deadlines that occurred starting January 8, 2023. IRA and health savings accounts contributions for 2022, farmers who normally file their returns by March 1, quarterly estimated tax payments normally due January 17 and April 18, payroll and excise tax returns normally due on January 31 and April 30, 2023, all are due May 15, 2023. The Tax Relief in Disaster Situations page has updated information for disaster victims, and a current list of affected counties.

IRS Completes Corrections

The IRS recently completed corrections of tax year 2020 accounts for taxpayers who overpaid their taxes on unemployment compensation received in 2020. The American Rescue Plan Act of 2021 – passed in March 2021 – excluded up to $10,200 in 2020 unemployment compensation from taxable income calculations ($10,200 for each spouse if married filing jointly). Some taxpayers, however, had already filed their return before the Act passed. The IRS determined the correct taxable amount of unemployment compensation for these returns and has issued refunds or applied the overpayment to taxes due or other debts. 

Tax Updates September 15

Deadlines and Disaster Extensions

The IRS is reminding people that third quarter estimated tax payments are due on September 15, 2021. This applies primarily to those who don’t have their taxes deducted from their paychecks by their employers. Self-employed, retirees, some investors, landlords, and others not subject to withholding fall into this category. Those impacted by recent disasters, like Hurricane Ida, in areas of New York and New Jersey, and Pennsylvania have until January 3, 2022 to pay their quarterly estimated taxes. Individuals and organizations who had valid extensions on their return will have the same January due date. Those affected by the same storm in Mississippi have until November 1, 2021 as their extension. Up-to-date disaster relief is always available on the IRS’ disaster relief page.

Guidance on Sick and Family Leave Wages

The IRS has issued guidance to employers about reporting the amount of qualified sick and family leave wages paid to employers for leave taken in 2021. Employers are required to report these amounts in Box 14 of Form W-2, or in a separate statement provided with the Form. The self-employed may also determine the amount of any sick and family leave equivalent credits they may claim. 

Home COVID-19 Testing Expenses Eligible

The IRS is reminding taxpayers that the cost of home testing for COVID-19 is an eligible medical expense that can be paid for under health flexible spending arrangements (Health FSAs), health savings accounts (HSAs), and other similar arrangements. Other personal protective equipment such as masks and hand sanitizer used to prevent the spread of COVID-19 are also eligible. 

Tax Credit for Employers Hiring

The IRS reminds employers that there is a valuable tax credit available to them for hiring certain workers. The Work Opportunity Tax Credit (WOTC) may be available to businesses that hire those who have been employed for at least 27 consecutive weeks – as long as they have received state or federal benefits during that time. Other qualified hires would be those formerly incarcerated, unemployed or disabled veterans, those receiving Temporary Assistance for Needy Families, Supplemental Nutrition Assistance Program, or Supplemental Security Income. A complete list of the designated groups and deadline information is available at the link.

Tax Updates July 29

Advance Child Tax Payments Begin

The first batch of advance monthly child tax payments, totaling about $15 billion, went out on July 15. The vast majority were sent by direct deposit. Payments will continue monthly through the end of the year, and the IRS continues to “urge people who normally aren’t required to file a tax return” to sign up for these payments as well as Economic Impact Payments and other credits they may be eligible to receive. The IRS is even holding weekend events in cities around the nation to “support eligible families.” The events are hosted by the IRS and partner groups, and employees and volunteers assist individuals and families to file tax returns and register for the advance payments. Additionally, the IRS has launched a new Spanish language version of its online Child Tax Credit Eligibility Assistant tool, and urges community groups to help share this and other benefit information.

Unemployment Tax Refunds Continue

The IRS continues to issue refunds to taxpayers who overpaid their taxes on employment compensation received last year. Up to $10,200 in 2020 unemployment payments were excluded from taxable income calculations, but this exclusion didn’t happen until the American Rescue Plan Act was passed in March, so many taxpayers had already filed and paid taxes under the old rules. Most taxpayers need not take any action, unless they need to amend their 2020 return.

Protect Against Identity Theft

The IRS is spreading the word about their IP PIN Opt-In Program. An Identity Protection PIN is available to anyone who can verify their identity, and prevents someone else from filing a tax return using the taxpayer’s Social Security number. Tax professionals cannot obtain an IP PIN on behalf of clients, but clients should share their IP PIN only with their trusted tax preparer. The program is voluntary and the IRS will never call, email, or text a request for the IP PIN, which can be obtained at the online tool. 

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.

Tax Updates April 30, 2021

Tax Court Cases Resolved

Virtual Settlement Days, first announced in May 2020, help taxpayers resolve their cases and avoid taking their chances in court. Building on that, March was National Virtual Settlement month, which saw Virtual Settlement Days events held in all 50 states and the District of Columbia. Nearly 240 taxpayers met with Chief Council employees and pro bono organizations to help them with free advice and to understand their cases; 148 cases were settled. Taxpayers with cases before the court are encouraged to contact their assigned Chief Counsel attorney or paralegal to inquire about participating in future events. 

Avoid Common Return Errors

The IRS is reminding taxpayers to check their tax returns for common errors that could delay their processing and refunds. As the May 17 due date approaches, taxpayers are encouraged to:

  • Use electronic filing 
  • Report all taxable income
  • Double check names and social security numbers
  • Check filing status accuracy (use the Interactive Tax Assistant)
  • Correctly answer virtual currency question
  • Use correct routing and account numbers if receiving a refund
  • Sign and date your return
  • If mailing a paper return, double check address
  • Keep a copy for your records
  • Request an extension if needed – avoid late filing penalties

American Rescue Plan Tax Credits

A new fact sheet outlines the details of tax credits available to small businesses, including paid leave for employees receiving COVID-19 vaccinations. Eligible employers, which may include businesses and tax-exempt organizations with fewer than 500 employees and certain governmental employers can receive a tax credit for providing paid time off for each employee receiving the vaccine who needs time to recover from the jab. Self-employed individuals may claim comparable credits. 

Economic Impact Payments Continue

The sixth batch of Economic Impact Payments (EIPs) from the American Rescue Plan is disbursing another two million payments, for a total of approximately 161 million payments. This totals $379 billion since payments began rolling out on March 12. More than $1.3 billion went to individuals for whom the IRS previously did not have information to issue an EIP, but who recently filed a tax return. This batch also includes “additional ongoing supplemental payments” for people who received an EIP earlier this year based on their 2019 return, but became eligible for more after their 2020 return was processed. Another 600,000 payments went to Social Security beneficiaries and Supplemental Security Income recipients, including those with foreign addresses. The IRS will continue to make EIPs on a weekly basis.