Tag Archives: tax season

Tax Updates Mid April

Dirty Dozen Tax Scams, Part 2

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:

  • Tax advice on social media can lure otherwise honest taxpayers into compromising tax situations. Two recent schemes currently circulating involve filing fraudulent Form 8944 and Form W-2. 
  • Spearfishing emails, where fraudsters attempt to steal client data or professional credentials from tax preparers. These can look like potential new clients or a request targeting payroll or human resource departments asking for Form W-2 information.
  • Offer in Compromise “mills” claiming they can help settle IRS debts for pennies on the dollar. Taxpayers who don’t meet the technical requirements for an offer often face excessive fees from promoters for information easily obtained themselves. Taxpayers should know they can check their eligibility using the IRS’s Offer in Compromise Pre-Qualifier tool.
  • Abusive tax arrangements targeting wealthy taxpayers may involve things like Charitable Remainder Annuity Trusts and monetized installment sales. The promoters often misapply the rules, leaving filers vulnerable. “People should seek out trusted, reputable tax advice and not be fooled by aggressive advertising,” says IRS commissioner Danny Werfel.
  • Bogus schemes to reduce or avoid taxes may involve syndicated conservation easements, micro-captive insurance arrangements. They can also involve international methods; hiding cash and digital assets offshore or using Maltese foreign individual retirement accounts or foreign captive insurance. 
  • A summary of the scams may be found here.

April 18 Deadline Reminder

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.

Debunking Tax Myths

“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.

 

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.

 

IRS Tax Updates

Filing Season Scams Abound

The IRS has issued an alert warning taxpayers of new scams that urge people to claim false tax credits with inaccurate wage information. One scheme encourages people to use tax software to manually fill out Form W-2, Wage and Tax Statement with false income information. Scam artists instruct people to use the bogus information in their electronically-filed return with the aim of getting a large refund. A variation of the scam involves using Form 7202, Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals to claim a credit based on income earned as an employee. These credits are not available for 2022 tax returns. 

Another warning has been renewed, urging people to carefully review the Employee Retention Credit (ERC) guidelines before trying to claim the credit. Third parties are aggressively pushing ineligible people to use this, misleading people and businesses into thinking they can claim these credits. Penalties are wide-ranging and may include a $5000 fine or criminal prosecution. Those who have participated in such schemes can amend a previous return or consult with a trusted tax professional.

Digital Intake Ramps Up

The IRS has announced an expansion of digital scanning, having already scanned more than 120,000 paper Forms 940 since the beginning of the year. This is a 20-fold increase compared to all of 2022. The effort will expand soon to include scanning of Forms 1040 and Forms 941. The IRS has used various technologies to scan tax returns over the years, but recently took a leap forward thanks to the Inflation Reduction Act. Most tax returns are filed electronically but millions of forms are still filed by paper. With an increased capability to scan and electronically process these paper returns, the IRS will be able to shorten overall processing time.

Retiree Reminder: April 1 Deadline Approaches

The IRS reminds retirees who turned 72 during 2022 that, in most cases, Saturday, April 1, 2023 is the last day to begin receiving payments from Individual Retirement Arrangements (IRAs), 401(k)s and similar workplace retirement plans. These payments, called required minimum distributions (RMDs) are normally made by the end of the year. However, those who reached age 72 during 2022 are covered by a special rule that allows them to wait until as late as April 1, 2023 to take their first RMD. This delayed deadline only applies to the RMD for the first year. In subsequent years the RMD must be made by the year’s end. This means that those who opt for their 2022 RMD by April 1 must still receive their 2023 RMD by December 31, 2023. Both RMDs are taxable and will be reported on the 2023 tax return. Visit the RMD FAQs page for more information.

 

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.

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. 

IRS Updates February 28

Here are your updates from the IRS this week.

Second Quarter Interest Rates Increase  

For the first time in more than three years, interest rates are being increased. For the quarter beginning April 1, 2022, the rates will be:

  • 4% for overpayments (3% for corporations)
  • 1.5% for the portion of a corporate overpayment exceeding $10,000
  • 4% for underpayments
  • 6% for large corporate underpayments

Rates are determined for each category based on the federal short-term rate, and adjusted (or not) on a quarterly basis. 

Checking Refund Status

The IRS wants those expecting refunds to know that the fastest and easiest way to check on their refund status is by using the “Where’s my Refund” tool on IRS.gov. The mobile app, IRS2Go is also an efficient option. Filing electronically and using direct deposit is the fastest way to file and receive a refund, often within 21 days, though some situations may require more time. These situations include claiming the Earned Income Tax Credit or Additional Child Tax Credit, returns that need additional review or have errors, or those affected by identity theft or fraud. The IRS urges recipients to ignore refund myths; refunds cannot be expedited by ordering a tax transcript, calling the IRS, or calling their tax preparer. 

Resource Page Launched

The IRS has launched a special new page to provide the most updated details and information affecting the 2022 tax filing season. The “special tax season alerts” page will address critical tax law changes related to the pandemic, as well as provide quick information regarding filing returns. Information affecting those whose previous year returns are backlogged and awaiting processing will also be provided. 

Want to Improve the IRS?

The IRS is seeking “civic minded volunteers” to serve on the Taxpayer Advisory Panel (TAP). The TAP submits dozens of recommendations to the IRS each year; 193 were made in 2021 alone. Many recent suggestions have already been implemented. Applicants must be US citizens current with federal tax obligations who are able commit to the expected volunteer hours. They must also pass a background check and not be registered lobbyists or Treasury or IRS employees. Applications are due April 8.

Tax Updates January 29

We are very busy with the tax season, but life continues. Here are the most recent updates from the IRS’s website.

Deferred Social Security Taxes Coming Due

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.

COVID Employee Retention Tax Credit Extended

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.

Filing Season – Agency Preparing

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.

Beware Unemployment Fraud

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.

Tax Filing Start Date at IRS!

We are one week away from the start of tax filing at the IRS.

Tax Filing To Begin Despite Shutdown
Tax filing season will begin January 28, 2019, despite government shutdown, IRS confirms. IRS
employees, furloughed during the shutdown, will be recalled. Tax returns will be processed and
refunds paid in a timely manner, so for those taxpayers ready to file early, there is no need to
wait. Tax professionals will be working on preparing returns before January 28 for those clients
who have their documentation in order. The last day to submit tax returns for most taxpayers is
April 15, 2019.

So, if you want a tax refund (the IRS does not process EIC until mid-February) or just an early start on your return, we are currently open 7 days a week to serve your needs!