The IRS has completed 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 final scams to be aware of are:
The IRS reminds taxpayers that Tax Day, April 18, is also the deadline for first quarter estimated tax payments for tax year 2023. These payments are usually due from those who do not have taxes withheld from their paychecks throughout the year, such as the self-employed, retirees, investors, businesses and corporations. Income not subject to withholding includes interest, dividends, capital gains, alimony and rental income. Paying estimated taxes in a timely fashion will lessen and even eliminate any penalties. Eligible taxpayers in recent disaster areas in California, Alabama, Georgia and now Tennessee have several deadlines extended to make their estimated payments. A current list of areas qualifying for disaster relief can be found at Tax Relief in Disaster Situations.
“I don’t need to report income since I didn’t receive a Form 1099-K.” “If I file an extension, I don’t have to pay anything until October.” Find the truth about these and other myths before Tax Day.
The IRS and Security Summit partners spent a week sharing information with taxpayers and tax professionals about security risks and how to minimize them.
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.
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 These are generally minimum amounts that must be withdrawn annually, depending on age or date of retirement.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.
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.
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.
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.
We are very busy with the tax season, but life continues. Here are the most recent updates from the IRS’s website.
Employers were given the option last year of deferring employees’ Social Security tax withholdings from September through the end of 2020. Those who elected to do so were originally obligated to begin withholding the deferred tax to be paid back over the first four months of 2021. However, as part of the Consolidated Appropriations Act, 2021, signed into law December 27, employers now have the entire year, from January 1, 2021 until December 31, 2021, to withhold and pay the deferred tax. Penalties, interest and additions to tax will now start to apply on January 1, 2022, for any unpaid balances.
The Taxpayer Certainty and Disaster Tax Relief Act of 2020, enacted December 27, 2020, made a number of changes to the employee retention tax credits, modifying and extending the Employee Retention Credit (ERC) fr six months, through June 30, 2021. Eligible employers can now claim a refundable tax credit against the employer share of Social Security tax equal to 70% of wages paid to employees in the first half of 2021.
Qualified wages are limited to $10,000 per employee per calendar quarter, making a maximum ERC of $7,000 per employee per quarter.
The IRS has announced that the tax filing season will begin Friday, February 12. After the December 27 changes to tax law, including a second round of Economic Impact Payments (EIPs), further programming was required. Proper programming is critical to ensure refunds are not delayed, and that eligible people will receive any remaining EIP monies as a credit when they file their 2020 return. The IRS urges individuals and tax professionals to file electronically for the speediest processing. Note: Free File is open and returns can be filed. Software companies and Free File partners will begin transmitting returns to the IRS beginning February 12.
The IRS is warning taxpayers who receive Forms 1099-G for unemployment benefits they did NOT actually get, to contact their state agency for a corrected form.
Unemployment benefits are taxable income, but receiving a 1099-G in error suggests identity theft. Scammers took advantage of the pandemic by filing fraudulent claims using stolen personal information from individuals who had not filed claims. See Identity Theft Central for more information about identity theft and steps to be taken if one believes they’ve been a victim of fraud in this way.