Tag Archives: tax updates

IRS Updates Mid-December 2023

2024 FSA Limit Increase

Flexible Spending Arrangements (FSAs) can be used to pay medical expenses throughout the year, and the contribution limit for 2024 is increased by $150 to $3200. Employees who participate in an FSA can contribute through payroll deductions, and the amount is not subject to federal income tax, Social Security tax, or Medicare tax. Depending on the FSA plan, qualified medical expenses can include those not covered by a health plan, such as copays and deductibles, as well as services such as dental or vision care, and over-the-counter medicines. More information is available in Publication 969.

2024 Filing: Get Ready

The IRS urges taxpayers to ready themselves for filing their 2023 federal income tax return by being prepared. Important things to be aware of include:

  • Enhancements to online taxpayer accounts, including access to data and information
  • 1099-K reporting threshold delay
  • Energy related credits, for electric vehicles (purchased in 2022 or before, or in 2023), or home improvements
  • Timing of refunds, avoiding delays, and using direct deposit
  • Important documents needed for filing

Find more information at the Get Ready page.

National Tax Security Awareness Week Concludes

Security Summit partners have wrapped up 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. 

ERC Disallowance Work Expanded

The IRS continues its efforts to combat dubious Employee Retention Credit (ERC) claims. More than 20,000 letters have been sent to taxpayers notifying them of disallowed ERC claims, including to entities that did not exist or did not have employees during the eligible ERC period. The special withdrawal program is still available to those with pending claims who realize their claims were inaccurate, and there will be a voluntary disclosure program unveiled soon to allow those who already received improper payments to avoid future IRS action. 

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.