Tag Archives: taxes

Tax Updates from the IRS

Withholding Rules Updates Proposed

The IRS and Treasury have proposed regulations updating payroll withholding rules to reflect changes in the Tax Cuts and Jobs Act (TCJA) and related legislation. These updates accommodate the redesigned Form W-4, and the adjusted tables and computations for tax withholding. The regulations also address other withholding issues, such as how to treat an employee who hasn’t turned in a completed W-4.

IRS Increases Visits To High-Income Delinquents

In an effort to promote compliance and fairness among taxpayers, the IRS has committed to increasing face-to-face visits with those taxpayers who haven’t filed tax returns in 2018 or previous years. Their goal is to inform taxpayers of their obligations and to bring them into compliance. Revenue officers will not make threats or demand unusual forms of payment, but rather inform and assist. Taxpayers have the right to see credentials and should do so to protect themselves against fraud. Furthermore, getting ahead of the situation is advisable: “Taxpayers having delinquent filing or payment obligations should consult a competent tax advisor before waiting to be contacted by an IRS revenue officer,” according to Paul Mamo, Director of Collection Operations, Small Business/Self Employed Division. 

Meals And Entertainment Deduction Guidance Updated

The IRS has updated its proposed guidance regarding the handling of business meals and entertainment expense deductions. The TCJA eliminated the deduction for activities generally considered entertainment, amusement or recreation. It also limited the deduction for expenses related to food and beverages provided by employers to their employees. The proposed guidelines help determine what qualifies as entertainment and address the meals expense limit. As these are proposed guidelines, the IRS is taking public comment and will hold a public hearing on these proposed regulations on April 7, 2020.

Military Members’ Tax Benefits Explained

A newly-revised publication aims to inform members of the military of their tax benefits under the law. The Armed Forces Tax Guide will help those serving in the military, including National Guard, reservists, and those stationed abroad, understand specific tax issues related to their situation. Moving expenses, treatment of combat pay, IRA contribution limits and extended tax deadlines are included in this helpful guide.

IRS Updates 13 December

National Tax Security Awareness Week

The IRS and Security Summit partners marked National Tax Security Awareness Week earlier this month with a series of tips and reminders for consumers, taxpayers, businesses, and professionals. Advice focused on protecting your personal and financial information while online shopping, guarding against email and phishing scams, creating strong passwords, tips for business owners to avoid identity theft, and encouraging tax professionals to have a data security plan

Foreign Tax Credit Regulations Finalized

The IRS and Treasury issued final regulations regarding the Foreign Tax Credit. This credit generally allows individuals and businesses to claim a US tax credit for income taxes paid to foreign governments. These regulations were updated due to changes the Tax Cuts and Jobs Act (TCJA) made in how taxable income is calculated and how the US taxes international income.

Jan 31 Filing Deadline For Businesses

The IRS reminds employers and other businesses that wage statements and independent contractor forms have a due date of January 31. While businesses used to have more time to file such forms as Form W-2, Form W-3, and 1099-MISC, the 2015 Protecting Americans from Tax Hikes (PATH) Act permanently changed the due date to help protect against fraud. 

Dec 31 Deadline For Minimum Distributions

December 31 is the deadline for retirees to take their required minimum distributions (RMDs) from certain retirement plans. Those who turned 70½ in 2019 are allowed to wait until April 1, 2020, to take their first RMD. This deadline applies to most IRAs, SEP IRAs, SIMPLE IRAs, and workplace plans such as 401(k), 403(b) and 457(b) plans. Roth IRAs don’t require distributions while the original owner is alive.

Interest Rates To Remain the Same

The IRS announced that interest rates will remain the same for the quarter beginning January 1, 2020. 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 computed from the federal short-term rate determined during October 2019.

IRS Tax Updates December 2

IRS Updates Deductible Guidelines

The IRS has issued guidance on some of the changes brought about by the Tax Cuts and Jobs Act (TCJA) regarding certain deductible expenses. The rules for using the optional standard mileage rates in deducting costs of operating an automobile for business, charitable, medical or moving expense purposes have been updated. Taxpayers may opt to substantiate actual allowable expenses with adequate records. Rules vary for members of the Armed Services.

Medical Expenses May Be Tax Free Via FSA

The IRS today reminded eligible employees (self-employed are not eligible) that they may still have time to set up a health flexible spending arrangement (FSA) if their employer offers one. Employees may contribute up to $2,750 during the 2020 plan year not subject to federal income tax, Social Security tax or Medicare tax. Allowable expenses are those not covered by one’s health plan, and may include co-pays, deductibles, dental and vision care, eyeglasses and hearing aids. Unspent amounts may be forfeit. Talk to your employer for details. 

National Tax Security Awareness Week Announced 

Next week kicks off the fourth National Tax Security Awareness Week, in time for holiday shopping season. Security Summit partners continue to urge taxpayers, businesses and tax professionals to maintain their online security as identity thieves step up their efforts to steal personal and financial data. The Week will feature a series of educational materials to help protect individuals and businesses against identity theft. The effort will include a special social media effort on Twitter and Instagram with @IRSnews and #TaxSecurity.

Large Gifts Won’t Harm Estates After 2025

The Treasury Department and IRS today issued final regulations confirming that individuals taking advantage of the increased gift and estate tax exclusion amounts in effect from 2018 to 2025 will not be adversely impacted after 2025 when the exclusion amount drops to pre-2018 levels. The TCJA temporarily increased the basic exclusion amount (BEA) from $5 million to $10 million for tax years 2018 through 2025 (adjusted for inflation). In 2026, the BEA will revert to the 2017 level of $5 million as adjusted for inflation. Final regulations provide a special rule that allows an estate to compute its estate tax credit using the higher of the BEA applicable to gifts made during life or the BEA applicable on the date of death.

Are Your Donations Tax Deductible?

The year is wrapping up and tax time is on the horizon. Taxpayers have hopefully been proactive throughout the year in preparing for filing the year’s taxes, and perhaps they are considering ways they might lighten their tax burden. It’s also the holiday season and giving is on our minds. Making donations to tax-exempt charities can be a win-win: It certainly benefits the charitable organization (and those whom they help) and can be helpful to the taxpayer in the coming year.

Qualified Charities

It’s important to make sure your donations accomplish those things, especially in this era of fraudulent charities and financial scams. Is your preferred charity tax-exempt and eligible to receive tax-deductible charitable contributions? Has it had its tax-exempt status revoked? What is its federal tax filing status? Perhaps you’re looking for a charity to give to and would like to see who is operating in your state. The IRS has a tool that can help.

Tax Exempt Organization Search

The Tax Exempt Organization Search (TEOS) on IRS.gov can assist in answering these questions, and more. It’s mobile device friendly, and you can sort results by various criteria. The Interactive Tax Assistant can also help you determine if a charitable contribution you’d like to make is deductible. So before you make your year-end giving decisions, double-check to ensure your donations will be doing the most good, for everyone involved.

How to Track Your Expenses

Expense Tracking

One of the most important tenets of a stable financial life is to spend less than you make. That may sound pretty basic, and it is, but it’s also easier said than done in some cases. It’s surprising how quickly a few extra purchases here and there can add up to totally derail your financial health. The key to staying on top of that is to track your expenses. Know how much you need for your bills, know how much leeway you have, and keep things in the black. It makes tax time easier too.

Paper and Pencil

Certainly not the most glamorous technique, but also not prone to internet outages or software glitches, a basic paper budget can do the job (you can even print out blank budget pages from the internet). When you pay a bill, write a check, shop online or bring home a receipt, jot down what you spent and subtract it from your income for that period. A page taped inside a kitchen cupboard works, or in your planner. If you want to track budget categories, like groceries, utilities, or gas, make a list for each.

Excel or Spreadsheet

A more detailed, if complicated, option is to use a spreadsheet. If you have some familiarity with spreadsheets (or can learn), this can be a good choice. The spreadsheet can be set up to do the math for you; enter your income and expenses and keep a running tally. One advantage is that categories can be easily separated (even color coded), a total budget set for each, and you can see at a glance how much you have left for dinner out or supporting a worthy cause.

Budget Apps

Apps vary in cost and features, but they can be very convenient. Some let you snap photos of your receipts, link with your bank account, or connect with a partner so everyone is on the same page. You can set goals and watch your progress, and get reminders when bills are due. Digital privacy is a reasonable concern, so make sure you choose a trustworthy platform or service before you share bank or financial data.

Choose and Use

Whether it’s simple and old-school, or a high-tech monthly service, the key is to make use of it. The one that works is the one you use.

Tax Updates September 1

IRS Waives Penalty Automatically

More than 400,000 eligible taxpayers who were subject to a penalty for underestimated
tax payments for the 2018 tax year will automatically receive the waiver, the IRS has
announced . No action is required for eligible taxpayers to receive this waiver.
Additionally, taxpayers who already paid the penalty will receive refunds.

New Associate Chief Counsel Selected

The Income Tax and Accounting (ITA) Division has a new associate chief counsel in the
person of John Moriarty . This division provides legal advisory services regarding
fundamental rules of the federal tax system, including many income tax and tax
accounting issues. IRS Chief Counsel Mike Desmond calls him “an outstanding choice
for this important assignment.”

Tax Security Remains a Priority

The IRS continues to help tax professionals secure client data and reduce tax fraud.
“Taxes-Security-Together” – Step 5 reminds tax professionals to report data breaches
and thefts immediately, and to create a data recovery plan. If the IRS is notified quickly,
they can help stop fraudulent returns from being filed. The data recovery plan should
include the steps of notifying the IRS and law enforcement, other experts and officials,
and clients. This is the final step in the Taxes-Security-Together Checklist.

IRS Warns of New Email Scam

The IRS is warning taxpayers to be aware of a new email phishing/malware scam which
attempts to impersonate the IRS. Subject lines may include “Automatic Income Tax
Reminder” or “Electronic Tax Return Reminder.” The IRS reiterates that they DO NOT
contact taxpayers over email (or text message, social media, etc), and anything
purporting to be the IRS via email is not to be trusted. Malware can give imposters
access to taxpayer’s computer, files, even keystroke history, eventually giving them PIN
numbers and passwords to sensitive accounts. More information can be found at the
IRS’ Phishing and Online Scams page.

IRS Updates Mid July

IRS Updates, July 16

Data Security and Tax Professionals

The IRS and Security Summit partners have issued a checklist to help tax professionals stay ahead of scams and fraud risks. Cybercriminals continue to evolve tactics, but reported identity theft is down significantly since 2015. Tax professionals are urged to deploy the “Security Six” measures (anti-virus software, firewall, two-factor authentication, backup services, drive encryption, and VPNs), create a data security plan, be aware of the latest email phishing scams, recognize the signs of client data theft, and create a data recovery plan. More resources are available.

EITC Report and “Subway Map” Released

National Taxpayer Advocate Nina E. Olson has released a special report on the Earned Income Tax Credit (EITC), which makes recommendations aimed at increasing the participation rate of eligible taxpayers and reduce overclaims by ineligible taxpayers. Additionally, the Taxpayer Advocate Service (TAS) has published a subway map that illustrates a taxpayer’s “journey” through the tax system to help individuals better understand the tax process. Among the EITC recommendations is that the IRS acknowledge its role as an administrator of benefits programs, and that Congress hold regular oversight hearings of the IRS. 

Summertime Tax Tips

Many common summertime activities can have an impact on next year’s taxes or deductions. Getting married? That has tax implications. Summer day camp (not overnight camp) can often qualify for the Child and Dependent Care Credit. Part time and seasonal workers should use the Withholding Calculator to make sure their withholding is appropriate. If you plan to itemize deductions next year, buying or refinancing a home, donating cash or time, and paying state and local taxes are things to keep track of to make filing easier. A tax professional can help you be ready for tax season.

Refunds For Combat-Injured Veterans

Time is running out for some combat-injured veterans to claim a tax refund. Those who received disability severance payments after 1991 and claimed it as income may be eligible for a refund of up to $3200. Eligible veterans should have received a mailed notice from the Department of Defense in July of 2018 explaining how to claim their tax refunds. The IRS has instructions for claiming the refund, or what to do if you are eligible for the refund but received no mailed notice.