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Apr

13

Non Filers – For Stimulus Payments

By Bill

Please note… if the following applies to you do not follow this link or file a minimal return:

Do NOT continue here if:

  • You receive Social Security, Railroad Retirement, or SSDI benefits. The IRS will automatically send you an Economic Impact Payment.
  • You have already filed a 2019 federal income tax return.
  • Your 2019 gross income exceeded $12,200 ($24,400 for a married couple) or other reasons require you to file a 2019 federal tax return.
  • You were married at the end of 2019 and are not submitting information here with your spouse.
  • You were not a U.S. citizen or U.S. permanent resident in 2019.

Non Filers – Stimulus Payment Info

Economic Impact Payments – Non-Filers: Enter Payme… – Tax Pro Community

The IRS launched a solution that allows taxpayers who don’t normally file a tax return (i.e. income is under the filing threshold) to provide the minimum information required for purposes of receiving Economic Impact Payments (commonly known as stimulus checks).

What action should I take?

Users with clients that are not required to file a full 2019 or 2018 tax return because they don’t meet minimal filing requirements and are eligible to receive Economic Impact Payments, should be directed to the following IRS link:

https://www.irs.gov/coronavirus/non-filers-enter-payment-info-here

Please note:  This process is not for taxpayers that intend to later file a 2019 tax return.  Doing so will result in the 2019 return receiving a duplicate SSN e-file rejection.

Apr

13

2020 Tax Deadline Extended

By Bill

IR-2020-58, March 21, 2020

WASHINGTON — The Treasury Department and Internal Revenue Service announced today that the federal income tax filing due date is automatically extended from April 15, 2020, to July 15, 2020.

Taxpayers can also defer federal income tax payments due on April 15, 2020, to July 15, 2020, without penalties and interest, regardless of the amount owed. This deferment applies to all taxpayers, including individuals, trusts and estates, corporations and other non-corporate tax filers as well as those who pay self-employment tax.

Taxpayers do not need to file any additional forms or call the IRS to qualify for this automatic federal tax filing and payment relief. Individual taxpayers who need additional time to file beyond the July 15 deadline, can request a filing extension by filing Form 4868 through their tax professional, tax software or using the Free File link on IRS.gov. Businesses who need additional time must file Form 7004.

The IRS urges taxpayers who are due a refund to file as soon as possible. Most tax refunds are still being issued within 21 days.

“Even with the filing deadline extended, we urge taxpayers who are owed refunds to file as soon as possible and file electronically,” said IRS Commissioner Chuck Rettig. “Filing electronically with direct deposit is the quickest way to get refunds. Although we are curtailing some operations during this period, the IRS is continuing with mission-critical operations to support the nation, and that includes accepting tax returns and sending refunds. As a federal agency vital to the overall operations of our country, we ask for your personal support, your understanding – and your patience. I’m incredibly proud of our employees as we navigate through numerous different challenges in this very rapidly changing environment.”

The IRS will continue to monitor issues related to the COVID-19 virus, and updated information will be posted on a special coronavirus page on IRS.gov.

This announcement comes following the President’s emergency declaration last week pursuant to the Stafford Act. The Stafford Act is a federal law designed to bring an orderly and systematic means of federal natural disaster and emergency assistance for state and local governments in carrying out their responsibilities to aid citizens. It was enacted in 1988.

Treasury and IRS will issue additional guidance as needed and continue working with Congress, on a bipartisan basis, on legislation to provide further relief to the American people.

Sep

27

Big Changes for Reporting Alimony

By Bill

Tax Treatment of Alimony

Amounts paid to a spouse or a former spouse under a divorce or separation instrument (including a divorce decree, a separate maintenance decree, or a written separation agreement) may be alimony for federal tax purposes. Alimony is deductible by the payer spouse, and the recipient spouse must include it in income.

Note: You can’t deduct alimony or separate maintenance payments made under a divorce or separation agreement (1) executed after 2018, or (2) executed before 2019 but later modified if the modification expressly states the repeal of the deduction for alimony payments applies to the modification. Alimony and separate maintenance payments you receive under such an agreement are not included in your gross income.

Alimony Requirements

A payment is alimony only if all the following requirements are met:

  • The spouses don’t file a joint return with each other;
  • The payment is in cash (including checks or money orders);
  • The payment is to or for a spouse or a former spouse made under a divorce or separation instrument;
  • The divorce or separation instrument doesn’t designate the payment as not alimony;
  • The spouses aren’t members of the same household when the payment is made (This requirement applies only if the spouses are legally separated under a decree of divorce or of separate maintenance.);
  • There’s no liability to make the payment (in cash or property) after the death of the recipient spouse; and
  • The payment isn’t treated as child support or a property settlement.

Payments Not Alimony

Not all payments under a divorce or separation instrument are alimony. Alimony doesn’t include:

  • Child support,
  • Noncash property settlements, whether in a lump-sum or installments,
  • Payments that are your spouse’s part of community property income,
  • Payments to keep up the payer’s property,
  • Use of the payer’s property, or
  • Voluntary payments (that is, payments not required by a divorce or separation instrument).

Child support is never deductible and isn’t considered income. Additionally, if a divorce or separation instrument provides for alimony and child support, and the payer spouse pays less than the total required, the payments apply to child support first. Only the remaining amount is considered alimony.

Reporting Alimony

If you paid amounts that are considered alimony, you may deduct from income the amount of alimony you paid whether or not you itemize your deductions. Deduct alimony payments on Form 1040, U.S. Individual Income Tax Return (PDF) and attach Form 1040, Schedule 1, Additional Income and Adjustments to Income (PDF). You must enter the social security number (SSN) or individual taxpayer identification number (ITIN) of the spouse or former spouse receiving the payments or your deduction may be disallowed and you may have to pay a $50 penalty.

If you received amounts that are considered alimony, you must include the amount of alimony you received as income. Report alimony received on Form 1040 (attach Form 1040, Schedule 1 (PDF)) or on Schedule NEC, Form 1040NR, U.S. Nonresident Alien Income Tax Return (PDF). You must provide your SSN or ITIN to the spouse or former spouse making the payments, otherwise you may have to pay a $50 penalty.

Jun

29

Itemized Deductions

By Bill

Itemized Deductions

IRS Tax Reform Tax Tip 2019-28, March 21, 2019 

Tax law changes in the Tax Cuts and Jobs Act affect almost everyone who itemized deductions on tax returns they filed in previous years..  One of these changes is that TCJA nearly doubled the standard deduction for most taxpayers. This means that many individuals may find it more beneficial to take the standard deduction. However, taxpayers may still consider itemizing if their total deductions exceed the standard deduction amounts

Here are some highlights taxpayers need to know if they plan to itemize deductions:

Medical and dental expenses

Taxpayers can deduct the part of their medical and dental expenses that’s more than 7.5 percent of their adjusted gross income.

State and local taxes

The law limits the deduction of state and local income, sales, and property taxes to a combined, total deduction of $10,000. The amount is $5,000 for married taxpayers filing separate returns. Taxpayers cannot deduct any state and local taxes paid above this amount. 

Miscellaneous deductions

The new law suspends the deduction for job-related expenses or other miscellaneous itemized deductions that exceed 2 percent of adjusted gross income. This includes unreimbursed employee expenses such as uniforms, union dues and the deduction for business-related meals, entertainment and travel. 

Home equity loan interest

Taxpayers can no longer deduct interest paid on most home equity loans unless they used the loan proceeds to buy, build or substantially improve their main home or second home.

Jun

28

Paycheck Checkup

By Bill

Paycheck Checkup

IR-2019-111, June 13, 2019

WASHINGTON — With this year’s average tax refund around $2,700, the Internal Revenue Service reminds taxpayers they have options to control the amount of their take-home pay and the size of their tax refund by adjusting their tax withholding.

Paycheck Checkup using the IRS Withholding Calculator can help taxpayers determine the right amount of tax they should have their employer withhold from their paychecks.

Taxes are pay-as-you-go. This means taxes must be paid as income is earned or received during the year, either through withholding or estimated tax payments. As of May 10, nearly 101.6 million taxpayers received federal tax refunds. With the average refund around $2,700, some taxpayers received a refund that was much larger than they expected, which means they paid too much tax throughout the year and took home less money in their paychecks.

To help taxpayers who want to change this amount, the Withholding Calculator will offer recommendations for adjusting withholding. A taxpayer who wants to increase the amount of their paychecks would pay less tax throughout the year by increasing the number of allowances on Form W-4. A taxpayer who would prefer a larger refund when they file would decrease their withholding allowances on Form W-4. Decreasing the number of allowances means paying more tax throughout the year and receiving a smaller paycheck.

A taxpayer’s unexpected tax surprise or larger-than-usual refund may be due to life changes such as getting married, having or adopting a child, or it may be from changes included in the Tax Cuts and Jobs Act (TCJA). The TCJA made changes to the tax law, including increasing the standard deduction, eliminating personal exemptions, increasing the child tax credit, limiting or discontinuing certain deductions and changing the tax rates and brackets. These changes affected 2018 returns and are also in effect for 2019. It’s important to check withholding every year. Just because these changes didn’t affect a taxpayer last year doesn’t mean they won’t apply this year.

Sooner is better

Checking and adjusting tax withholding as early as possible is the best way to avoid having too little or too much tax withheld from paychecks. Too little withheld could result in an unexpected tax bill or penalty at tax time next year.

Taxpayers can help manage and adjust their tax withholding by using the IRS Withholding Calculator. It’s helpful if taxpayers have their completed 2018 tax return available when using the Withholding Calculator to estimate the amount of income, deductions, adjustments and credits to enter. Taxpayers also need their most recent pay stubs to compute their withholding so far this year. Based on the Withholding Calculator’s recommendations, taxpayers can then fill out and submit a new Form W-4to their employer.

The Withholding Calculator does not request personally identifiable information, such as name, Social Security number, address or bank account number. The IRS does not save or record the information entered on the calculator.

Estimated taxes

Some workers are considered self-employed and are responsible for paying taxes directly to the IRS. Often, this includes people involved in the sharing economy. One way to pay taxes directly to the IRS is by making estimated tax payments during the year. The next deadline for tax year 2019 estimated taxes is June 17.

TCJA changed the way tax is calculated for most taxpayers, including those with substantial income not subject to withholding. As a result, many taxpayers may need to raise or lower the amount of tax they pay each quarter through the estimated tax system.

The revised estimated tax package, Form 1040-ES, on IRS.gov is designed to help taxpayers figure these payments correctly. The package includes a quick rundown of key tax changes, income tax rate schedules for 2019 and a useful worksheet for figuring the right amount to pay.

Estimated tax penalty

Taxpayers should keep in mind that if not enough tax is paid through withholding and estimated tax payments, a penalty may be charged. A penalty may also be charged if estimated tax payments are late, even if a refund is due at tax time.

Pay electronically anytime

Taxpayers can pay their 2019 estimated tax payments electronically anytime before the final due date for the tax year. Most taxpayers make estimated tax payments in equal amounts by the four established due dates. The three remaining due dates for tax year 2019 estimated taxes are June 17, September 16, and the final payment is due January 15, 2020. Direct Pay and EFTPS are both free payment options, and taxpayers can schedule their payments in advance as well as receive email notifications about the payment. Visit IRS.gov/payments to schedule electronic payments online, by phone or via the IRS2go mobile app.

Mar

22

Underpaid Tax Relief

By Bill

Underpaid Tax Relief

IR-2019-55, March 22, 2019

WASHINGTON — The Internal Revenue Service today provided additional expanded penalty relief to taxpayers whose 2018 federal income tax withholding and estimated tax payments fell short of their total tax liability for the year.

The IRS is lowering to 80 percent the threshold required to qualify for this relief. Under the relief originally announced Jan. 16, the threshold was 85 percent. The usual percentage threshold is 90 percent to avoid a penalty.

“We heard the concerns from taxpayers and others in the tax community, and we made this adjustment in an effort to be responsive to a unique scenario this year,” said IRS Commissioner Chuck Rettig. “The expanded penalty waiver will help many taxpayers who didn’t have enough tax withheld. We continue to urge people to check their withholding again this year to make sure they are having the right amount of tax withheld for 2019.”

This means that the IRS is now waiving the estimated tax penalty for any taxpayer who paid at least 80 percent of their total tax liability during the year through federal income tax withholding, quarterly estimated tax payments or a combination of the two.

Today’s revised waiver computation will be integrated into commercially-available tax software and reflected in the forthcoming revision of the instructions for Form 2210, Underpayment of Estimated Tax by Individuals, Estates, and Trusts.

Taxpayers who have already filed for tax year 2018 but qualify for this expanded relief may claim a refund by filing Form 843, Claim for Refund and Request for Abatement and include the statement “80% Waiver of estimated tax penalty” on Line 7.  This form cannot be filed electronically.

Today’s expanded relief will help many taxpayers who owe tax when they file, including taxpayers who did not properly adjust their withholding and estimated tax payments to reflect an array of changes under the Tax Cuts and Jobs Act (TCJA), the far-reaching tax reform law enacted in December 2017. 

The IRS and partner groups conducted an extensive outreach and education campaign throughout 2018 to encourage taxpayers to do a “Paycheck Checkup” to avoid a situation where some might have had too much or too little tax withheld when they file their tax returns. If a taxpayer did not submit a revised W-4 withholding form to their employer or increase their estimated tax payments, they may have not had enough tax withheld during the tax year.

Additional information

Because the U.S. tax system is pay-as-you-go, taxpayers are required, by law, to pay most of their tax obligation during the year, rather than at the end of the year. This can be done by either having tax withheld from paychecks or pension payments, or by making estimated tax payments.

Usually, a penalty applies at tax filing if too little is paid during the year. This penalty is an interest based amount approximately equivalent to the federal interest on the amount not paid in a timely manner. Normally, the penalty would not apply for 2018 if tax payments during the year met one of the following tests: 

  • The person’s tax payments were at least 90 percent of the tax liability for 2018 or
  • The person’s tax payments were at least 100 percent of the prior year’s tax liability, in this case from 2017. However, the 100 percent threshold is increased to 110 percent if a taxpayer’s adjusted gross income is more than $150,000, or $75,000 if married and filing a separate return. 

For waiver purposes only, today’s relief lowers the 90 percent threshold to 80 percent. This means that a taxpayer will not owe a penalty if they paid at least 80 percent of their total 2018 tax liability. If the taxpayer paid less than 80 percent, then they are not eligible for the waiver and the penalty will be calculated as it normally would be, using the 90 percent threshold. For further details, see Notice 2019-25, posted today on IRS.gov.

Like last year, the IRS urges everyone to take a Paycheck Checkup and review their withholding for 2019. This is especially important for anyone now facing an unexpected tax bill when they file. This is also an important step for those who made withholding adjustments in 2018 or had a major life change to ensure the right tax is still being withheld. Those most at risk of having too little tax withheld from their pay include taxpayers who itemized in the past but now take the increased standard deduction, as well as two-wage-earner households, employees with nonwage sources of income and those with complex tax situations.

To help taxpayers get their withholding right in 2019, the updated Withholding Calculator is now available on IRS.gov.

Jan

16

Filing Season Opens

By Bill

Filing Season Opens Jan 28, 2019

IR-2019-01, January 7, 2019

WASHINGTON ― Despite the government shutdown, the Internal Revenue Service today confirmed that it will process tax returns beginning January 28, 2019 and provide refunds to taxpayers as scheduled.

“We are committed to ensuring that taxpayers receive their refunds notwithstanding the government shutdown. I appreciate the hard work of the employees and their commitment to the taxpayers during this period,” said IRS Commissioner Chuck Rettig.

Congress directed the payment of all tax refunds through a permanent, indefinite appropriation (31 U.S.C. 1324), and the IRS has consistently been of the view that it has authority to pay refunds despite a lapse in annual appropriations. Although in 2011 the Office of Management and Budget (OMB) directed the IRS not to pay refunds during a lapse, OMB has reviewed the relevant law at Treasury’s request and concluded that IRS may pay tax refunds during a lapse.

The IRS will be recalling a significant portion of its workforce, currently furloughed as part of the government shutdown, to work. Additional details for the IRS filing season will be included in an updated FY2019 Lapsed Appropriations Contingency Plan to be released publicly in the coming days.

“IRS employees have been hard at work over the past year to implement the biggest tax law changes the nation has seen in more than 30 years,” said Rettig.

As in past years, the IRS will begin accepting and processing individual tax returns once the filing season begins. For taxpayers who usually file early in the year and have all of the needed documentation, there is no need to wait to file. They should file when they are ready to submit a complete and accurate tax return.

The filing deadline to submit 2018 tax returns is Monday, April 15, 2019 for most taxpayers. Because of the Patriots’ Day holiday on April 15 in Maine and Massachusetts and the Emancipation Day holiday on April 16 in the District of Columbia, taxpayers who live in Maine or Massachusetts have until April 17, 2019 to file their returns.

Software companies and tax professionals will be accepting and preparing tax returns before Jan. 28 and then will submit the returns when the IRS systems open later this month. The IRS strongly encourages people to file their tax returns electronically to minimize errors and for faster refunds.

Jan

15

2019 Mileage Rates

By Bill

2019 Mileage Rates

IR-2018-251, December 14, 2018

WASHINGTON — The Internal Revenue Service today issued the 2019 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2019, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

  • 58 cents per mile driven for business use, up 3.5 cents from the rate for 2018,
     
  • 20 cents per mile driven for medical or moving purposes, up 2 cents from the rate for 2018, and
     
  • 14 cents per mile driven in service of charitable organizations.

The business mileage rate increased 3.5 cents for business travel driven and 2 cents for medical and certain moving expense from the rates for 2018. The charitable rate is set by statute and remains unchanged.

It is important to note that under the Tax Cuts and Jobs Act, taxpayers cannot claim a miscellaneous itemized deduction for unreimbursed employee travel expenses. Taxpayers also cannot claim a deduction for moving expenses, except members of the Armed Forces on active duty moving under orders to a permanent change of station. For more details see Notice-2019-02.

The standard mileage rate for business use is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously. These and other limitations are described in section 4.05 of Rev. Proc. 2010-51.

Notice 2019-02, posted today on IRS.gov, contains the standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan.

Jan

26

Scams Targeting Taxpayers

By Bill

Scams Targeting Taxpayers

IRS-Impersonation Telephone Scams

A sophisticated phone scam targeting taxpayers, including recent immigrants, has been making the rounds throughout the country. Callers claim to be IRS employees, using fake names and bogus IRS identification badge numbers. They may know a lot about their targets, and they usually alter the caller ID to make it look like the IRS is calling.

Victims are told they owe money to the IRS and it must be paid promptly through a gift card or wire transfer. Victims may be threatened with arrest, deportation or suspension of a business or driver’s license. In many cases, the caller becomes hostile and insulting. Victims may be told they have a refund due to try to trick them into sharing private information. If the phone isn’t answered, the scammers often leave an “urgent” callback request.

Some thieves have used video relay services (VRS) to try to scam deaf and hard of hearing individuals. Taxpayers are urged not trust calls just because they are made through VRS, as interpreters don’t screen calls for validity. For details see the IRS video: Tax Scams via Video Relay Service.

Limited English Proficiency victims are often approached in their native language, threatened with deportation, police arrest and license revocation, among other things. IRS urges all taxpayers caution before paying unexpected tax bills. Please see: IRS Alerts Taxpayers with Limited English Proficiency of Ongoing Phone ScamsNote that the IRS doesn’t:

  • Call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer. Generally, the IRS will first mail you a bill if you owe any taxes.
  • Threaten to bring in local police or other law-enforcement groups to have you arrested for not paying.
  • Demand payment without giving you the opportunity to question or appeal the amount they say you owe.
  • Ask for credit or debit card numbers over the phone.

Jan

11

2017 Tax Filing Season Starts January 29, 2018

By Bill

2017 Tax Filing Season Starts January 29, 2018

IR-2018-01, Jan. 04, 2018

WASHINGTON ― The Internal Revenue Service announced today that the nation’s tax season will begin Monday, Jan. 29, 2018 and reminded taxpayers claiming certain tax credits that refunds won’t be available before late February.

The IRS will begin accepting tax returns on Jan. 29, with nearly 155 million individual tax returns expected to be filed in 2018. The nation’s tax deadline will be April 17 this year – so taxpayers will have two additional days to file beyond April 15.

Many software companies and tax professionals will be accepting tax returns before Jan. 29 and then will submit the returns when IRS systems open. Although the IRS will begin accepting both electronic and paper tax returns Jan. 29, paper returns will begin processing later in mid-February as system updates continue. The IRS strongly encourages people to file their tax returns electronically for faster refunds.

The IRS set the Jan. 29 opening date to ensure the security and readiness of key tax processing systems in advance of the opening and to assess the potential impact of tax legislation on 2017 tax returns.

The IRS reminds taxpayers that, by law, the IRS cannot issue refunds claiming the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC) before mid-February. While the IRS will process those returns when received, it cannot issue related refunds before mid-February. The IRS expects the earliest EITC/ACTC related refunds to be available in taxpayer bank accounts or on debit cards starting on Feb. 27, 2018, if they chose direct deposit and there are no other issues with the tax return.

The IRS also reminds taxpayers that they should keep copies of their prior-year tax returns for at least three years. Taxpayers who are using a tax software product for the first time will need their adjusted gross income from their 2016 tax return to file electronically. Taxpayers who are using the same tax software they used last year will not need to enter prior-year information to electronically sign their 2017 tax return. Using an electronic filing PIN is no longer an option. Taxpayers can visit IRS.gov/GetReady for more tips on preparing to file their 2017 tax return.

April 17 Filing Deadline

The filing deadline to submit 2017 tax returns is Tuesday, April 17, 2018, rather than the traditional April 15 date. In 2018, April 15 falls on a Sunday, and this would usually move the filing deadline to the following Monday – April 16. However, Emancipation Day – a legal holiday in the District of Columbia – will be observed on that Monday, which pushes the nation’s filing deadline to Tuesday, April 17, 2018. Under the tax law, legal holidays in the District of Columbia affect the filing deadline across the nation.

The IRS also has been working with the tax industry and state revenue departments as part of the Security Summit initiative to continue strengthening processing systems to protect taxpayers from identity theft and refund fraud. The IRS and Summit partners continued to improve these safeguards to further protect taxpayers filing in 2018.