by | Apr 20, 2023 | Tax Tips and News
After severe thunderstorms and tornadoes raked parts of Tennessee on March 31, many of Volunteer State taxpayers could use a little good news. The Internal Revenue Service is doing its part, announcing tax relief for storm victims.
The agency announced that taxpayers and businesses in the 10 hardest-hit counties have been given until July 31, 2023, to meet a number of filing and payment deadlines, including the following:
- April 18: income tax return filing and payment deadline
- April 18: quarterly estimated tax payment deadline
- April 30: quarterly payroll and excise tax return deadline
- June 15: quarterly estimated tax payment deadline
Further, the IRS says penalties on payroll or excise tax deposits due March 31 – April 18 will be abated as long as tax deposits are made by April 18.
Information on other returns qualifying for relief, payments delayed, and other details can be found on the Disaster Assistance and Emergency Relief for Individuals and Businesses page on the IRS website.
Which Tennessee counties are receiving this tax relief?
The expanded deadlines are available to taxpayers and businesses in the 10 Tennessee counties named in the federal disaster declaration:
- Cannon
- Hardeman
- Hardin
- Haywood
- Lewis
- Macon
- McNairy
- Rutherford
- Tipton
- Wayne
If any other counties are added to the disaster declaration, the IRS will automatically add them to the list of qualifying counties.
There is one caveat for those who want more time beyond the expanded July 31 deadline: extension requests from disaster-area taxpayers after April 18 and before July 31 can only be filed on paper. (See the “Extension of Time To File Your Tax Return” page on IRS.gov for more details.)
Do taxpayers need to do anything to receive this tax relief?
Taxpayers within the disaster area do not have to do anything to receive the IRS relief measures; when they file, IRS electronic systems will apply relief measures according to the address on the return. However, any tax return that claims a loss within the disaster area due to these storms should contain the FEMA declaration number: 4701-DR.
According to the IRS, those living outside the disaster area may still be able to qualify for this tax relief if “records necessary to meet a deadline occurring during the postponement period are located in the affected area,” or they are “workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization.” Unlike residents who automatically receive relief, these taxpayers need to call the IRS: 866-562-5227.
Source: IR-2023-75
– Story provided by TaxingSubjects.com
by | May 10, 2022 | Tax Tips and News
A reworked version of Form W-4 has been released by the IRS and the Treasury Department for the 2020 tax year. A number of changes were made to earlier draft versions of the form in response to complaints from tax professionals.
Accounting Today reports Treasury doesn’t expect to make further changes beyond some small inflation-adjustment updates.
The redesigned Form W-4 uses a building-block approach, replacing complex worksheets with straightforward questions, making it simpler for employees to figure withholding accurately. The new form uses the same basic information as the old design, but employs a more personalized, step-by-step approach to better accommodate taxpayers.
Accounting Today reports the redesign will not force employees to resubmit a Form W-4 simply because of the update. Employers can continue to figure withholding based on information from the most recent W-4 submitted.
Complaints from Tax Pros
The complaints about the draft version of the form, Accounting Today reports, came from accountants and tax practitioners alike, who said the draft version required taxpayers to reveal too much information to their employers about outside sources of income for employees and their spouses.
The tax reform package passed in late 2017 eliminated traditional exemptions for taxpayers and dependents along with a long list of deductions, increasing the standard exemption amounts instead. The IRS urged taxpayers to do a “paycheck checkup” last year to make sure enough was being withheld from the taxpayers’ paychecks, but few taxpayers went through the complicated process. As a result, many taxpayers found themselves owing tax because of inadequate withholding.
The IRS is urging taxpayers to do another withholding checkup this year to make sure the correct amount is withheld from their paychecks. The agency has also come out with a new Tax Withholding Estimator online tool to help.
– Story provided by TaxingSubjects.com
by | May 10, 2022 | Tax Tips and News
With 2020’s extended tax deadlines due to the coronavirus pandemic, it seems like we just wrapped up the previous tax season. But believe it or not, the next filing season kicks off Jan. 1, 2021.
The Internal Revenue Service is encouraging taxpayers to begin organizing their tax-related documents now, to avoid confusion later on. The IRS has even put together a special web page that outlines the steps that taxpayers can take now to prepare for the 2021 filing season.
Make filing easier in ‘21.
The first step toward filing, of course is to gather the necessary paperwork or electronic files that every taxpayer needs to file. Forms W-2, Wage and Tax Statement; Forms 1099-MISC, Miscellaneous Income; and other income documents help determine if the taxpayer is eligible for deductions or credits.
They’ll also need their Notice 1444, Economic Impact Payment, to calculate any Recovery Rebate Credit they may be eligible for on their 2020 federal income tax return.
The best rule of thumb is that most income is taxable, including unemployment compensation, refund interest and income from the gig economy and virtual currencies.
Taxpayers with an Individual Taxpayer Identification Number (ITIN) should ensure it hasn’t expired before they file their 2020 tax return. If it has expired, the IRS recommends they submit a Form W-7, Application for IRS Individual Identification Number, now to renew their ITIN.
Taxpayers who fail to renew an ITIN before filing a tax return next year could face a delayed refund and could even be ineligible for certain tax credits.
Also on the income side, taxpayers can use the Tax Withholding Estimator on IRS.gov to help calculate the right amount of tax to have withheld from their paychecks. If they need to adjust withholding for the remainder of the year, time is running out. It’s best to submit a new Form W-4, Employee’s Withholding Certificate, to their employer as soon as possible.
Those who received non-wage income like self-employment income, investment income, taxable Social Security benefits, and in some instances, pension and annuity income, may have to make estimated tax payments.
Payment options can be found at IRS.gov/payments.
No EIP? Check into the Recovery Rebate Credit!
Taxpayers may be able to claim the Recovery Rebate Credit if they met the eligibility criteria in 2020 and:
- They didn’t receive an Economic Impact Payment this year, or
- Their Economic Impact Payment was less than $1,200 ($2,400 if married filing jointly for 2019 or 2018) plus $500 for each qualifying child.
- For additional information about the Economic Impact Payment, taxpayers can visit the Economic Impact Payment Information Center.
Interest on a refund is taxable.
Taxpayers who got a federal tax refund in 2020 may have been paid interest. The IRS sent interest payments to individual taxpayers who timely filed their 2019 federal income tax returns and received refunds. Most interest payments were received separately from tax refunds.
Interest payments are taxable and must be reported on 2020 federal income tax returns. In January 2021, the IRS will send a Form 1099-INT, Interest Income, to anyone who received interest totaling at least $10.
Although the IRS issues most refunds in less than 21 days, the IRS cautions taxpayers not to rely on receiving a 2020 federal tax refund by a certain date, especially when making major purchases or paying bills. Some returns may require additional review and may take longer.
Some Refunds Not Available Until March
By law, the IRS can’t issue refunds for people claiming the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) before the middle of February. The law requires the IRS to hold the entire refund – even the portion not associated with either the EITC or ACTC.
The IRS expects most refunds related to these two credits to be available in taxpayer bank accounts or on debit cards by the first week of March if they chose direct deposit and there aren’t any other issues with their tax return.
Taxpayers should use the Where’s My Refund? online tool to track their refund payment.
Stay home and stay safe with IRS online tools.
Taxpayers can find online tools and resources to help get the information they need. These IRS.gov tools are easy-to-use and available 24 hours a day. Millions of people use them to find information about their accounts, get answers to tax questions or file and pay their taxes.
Taxpayers also have several options to find a tax preparer. One resource is Choosing a Tax Professional, which offers a wealth of information for selecting a tax professional.
The Directory of Federal Tax Return Preparers with Credentials and Select Qualifications can help taxpayers find preparers in their area who currently hold professional credentials recognized by the IRS, or who hold an Annual Filing Season Program Record of Completion.
Source: IR-2020-256
– Story provided by TaxingSubjects.com
by | May 10, 2022 | Tax Tips and News
We’ve all been there before: We got a new job, and on the first day, our new boss puts a Form W-4 on our desk and tells us to fill it out for withholding.
It takes a bit of math and what feels like a good helping of guesswork to figure out just how much tax we need to withhold from a paycheck. Too little, and we could owe a hefty sum when we file; too much, and the IRS hangs onto it until we get a tax refund. Luckily, the Internal Revenue Service has an online tool that can help taxpayers determine how much they need to withhold.
The Tax Withholding Estimator on IRS.gov does just what it says: help taxpayers determine whether their employer is withholding enough tax or if they need to fill out a new Form W-4. The tool is available for regular employees, but also for retirees, self-employed taxpayers and others—virtually anyone who gets a regular paycheck.
With just three easy steps, the clouds of uncertainty can begin to clear.
Step One: Gather Documents
This first step should be completed before taxpayers bring up the Estimator. Users will need a copy of their most-recent pay stub and tax return. Once those items are in hand, the user can go online and use the Tax Withholding Estimator on IRS.gov.
Users should read all the information and directions presented there. To move on, click the blue Tax Withholding Estimator button.
Step Two: Answer Questions
Once they’re done with the opening information, users get down to giving the tool with the information needed to come up with the correct withholding amount. This is done by merely answering the questions posed on-screen about the user’s tax situation.
As the user completes a section, clicking the blue Next button sends them to the next step.
Step Three: Review Results
The Estimator helps users aim for a tax-due amount that’s close to zero—or a refund.
Depending on the information given by the user, the tool may deliver a recommendation to submit a new Form W-4, Employee’s Withholding Allowance Certificate. The W-4 goes to the employer, not the IRS, and is used to change the amount withheld each pay period.
Many times, employers use an online method for making changes in withholding, so workers should check with their employers before filling out a paper form.
Taxpayers who get a pension can use their results to fill in a Form W-4P, which goes to the payer.
Source: What taxpayers need know about using the IRS Tax Withholding Estimator.
– Story provided by TaxingSubjects.com
by | Apr 2, 2022 | Tax Tips and News
Taxpayers with foreign bank or financial accounts are being reminded that time is running out to file the yearly report of their holdings.
The annual Report of Foreign Bank and Financial Accounts (FBAR) is due on Oct. 15.
The deadline applies to any U.S. citizens, resident aliens or any domestic legal entity holding bank or other financial accounts outside the country.
Originally, the deadline for filing the FBAR was April 15 of this year, but late filers got an automatic extension to file until Oct. 15.
Taxpayers did not have to request the extension.
However, those taxpayers who live in a federally designated disaster area—such as a location hit by a hurricane or tornado—may have their FBAR filing date delayed even further, but should consult the latest FBAR Relief Notices for information specific to their area.
Who should file?
Taxpayers are required by the Bank Secrecy Act to file an FBAR if:
- The taxpayer has a financial interest in, signature authority or other authority over one or more accounts, such as a bank or brokerage account, mutual fund or other financial account located outside the United States, and
- The aggregate value of all their foreign financial accounts exceeds $10,000 at any time during the calendar year.
The Internal Revenue Service wants all U.S. persons or entities who have foreign accounts—even relatively small ones—to see if the filing requirements apply to them.
The IRS defines a “U.S. person” as a citizen or resident of the U.S. This definition also encompasses domestic legal entities, including partnerships, corporations, limited liability companies, estates and trusts.
Filing the FBAR has to be done electronically with the Financial Crimes Enforcement Network, known as FinCEN. Taxpayers are required to use the BSA E-Filing System website to file their FBAR. The report should not be filed with a federal income tax return.
If taxpayers cannot e-file their FBAR, they should call FinCEN at 800-949-2732; taxpayers calling from outside the U.S. should call 703-905-3975.
Simply not filing an FBAR should not be considered an option when the report is required. Those who attempt to avoid filing could face considerable civil and criminal penalties – including fines and prison time.
However, the IRS says it will not penalize a taxpayer who reported an account properly on a late-filed FBAR, if the agency finds a reasonable cause for the missed deadline.
For more information on the FBAR and filing the report, see these resources:
Source: IR-2021-196
– Story provided by TaxingSubjects.com
by | Apr 2, 2022 | Tax Tips and News
Millions of families have been receiving monthly advance payments of the Child Tax Credit. Provided by the American Rescue Plan that was passed earlier this year, these payments have been going to eligible households since July.
As with any tax-related change, taxpayers have understandably had questions. While the “Advance Child Tax Credit Payments in 2021” page on IRS.gov aggregates answers to many frequently asked questions, the Internal Revenue Service this week clarified how child custody can affect the payments—from shared custody to alternating custody arrangements.
How does custody affect eligibility for the Advance Child Tax Credit?
The IRS based eligibility for the Advance Child Tax Credit on the most recently filed tax return. That’s because these advance payments are for tax year 2021, and—obviously—taxpayers won’t file this year’s return until 2022.
Whichever parent claimed the qualifying child (or children) on the most recently filed return has, in all likelihood, already been receiving payments for the past few months. While that seems cut and dry, the situation gets tricky when parents alternate custody for the purposes of claiming the Child Tax Credit. This can result in the parent who claimed a child for TY2020 receiving payments that should—according to their arrangement—go to the other parent.
Taxpayers who receive payments but are ineligible could be on the hook for a pretty big tax bill in 2022. The IRS says the first step these parents should take is unenrolling for payments on the Child Tax Credit Update Portal. However, the IRS notes that “if their custody situation changes and they are entitled to the child tax credit for 2021, they can claim the full amount when they file their tax return next year.”
To read the full press release, check out the source link below.
Source: COVID Tax Tip 2021-147
– Story provided by TaxingSubjects.com
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