by | Apr 2, 2022 | Tax Tips and News
The last part of the year is traditionally a good time for taxpayers to check their withholding levels for the upcoming new year. That’s why the Internal Revenue Service recently issued a friendly reminder.
With 2021 going by like a runaway train, it’s easy to just let withholdings slide, thinking what worked this year will work next year.
That, however, may not necessarily be the best strategy. Life is full of unexpected turns; marriage, divorce, a new child or the purchase of a home can all be really good reasons to refigure withholding.
Checking withholding is easy; the IRS has a Tax Withholding Estimator that helps taxpayers decide if they have too much or too little withheld, and how to make a tweak to put more money in their pocket instead of the pockets of the IRS.
The Estimator can also be used to help taxpayers see if they should withhold more or should make an estimated tax payment to avoid a big bill for tax due when they file next year.
The IRS reminds that the Withholding Estimator can also be very helpful to retirees, self-employed taxpayers and others, giving them a step-by-step tool that can tailor the amount of income tax being withheld from wages and pension payments to the actual tax owed.
Points to ponder for 2021
The Internal Revenue Service says there are things to consider when adjusting withholding for 2021:
Income taxes are “pay as you go”
Whether they’re withheld from a paycheck, paid as quarterly estimated tax payments, or a little of both, taxes are generally paid year-round. The IRS, however, figures that about 70% of all taxpayers withhold too much from their income for taxes. This results in a refund at tax time; in 2021, the average refund was more than $2,700.
Taxpayers who need to pay their taxes have some options on just how to send the payment to the Internal Revenue Service. One of the easiest options is to use the IRS2Go app, which allows users to schedule payments for future dates. The feature is handy for payment plan installments, estimated tax payments, or to pay taxes during filing season.
Other options for payment include connecting by phone or going online.
The taxpayer’s online account is a powerful tool that can help keep the taxpayer informed on a number of details surrounding their tax picture:
- The amount of taxes they owe;
- Payment plan details and options;
- The last 5 years of their tax payment history;
- Scheduled or pending tax payments; and
- Key information from their most recent tax return.
Taxpayers can sign into their online account at IRS.gov/account.
More information about taxes, estimated taxes and withholding can be found at Tax Withholding on the IRS website, IRS.gov.
Source: IR-2021-199
– Story provided by TaxingSubjects.com
by | Apr 2, 2022 | Tax Tips and News
Millions of American families have been taking advantage of the advance payments of the Child Tax Credit, but the Internal Revenue Service stresses there’s still time left to sign up for the remaining payments.
The latest batch of the monthly advance payments is now making its way into the bank accounts of some 36 million families. This wave of payments totals around $15 billion and the vast majority of families are getting their payments by direct deposit.
The advance payments of the Child Tax Credit (CTC) were made possible by the American Rescue Plan, passed earlier this year. It allowed qualifying families to get their CTC payments in advance installments, rather than just a refund when they file their income taxes.
Families can qualify for payments of up to $300 per month for every child under the age of 6, and up to $250 per month for each child between the ages of 6 and 17. Advance payments will total half of the overall tax credit due the taxpayer; the balance is paid out as a refund when the taxpayer files.
The IRS offers these details on the payments:
- Families will see the direct deposit payments in their accounts starting October 15. Like the prior payments, the vast majority of families will receive them by direct deposit.
- For those receiving payments by paper check, be sure to allow extra time, through the end of October, for delivery by mail. Those wishing to receive future payments by direct deposit can make this change using the Child Tax Credit Update Portal, available only on IRS.gov. To access the portal or to get a new step-by-step guide for using it, visit gov/childtaxcredit2021.
- Payments went to eligible families who filed a 2019 or 2020 income tax return. Returns processed by October 4 are reflected in these payments. This includes people who don’t typically file a return but during 2020 successfully registered for Economic Impact Payments using the IRS Non-Filers tool on IRS.gov or in 2021 successfully used the Non-filer Sign-up Tool for advance CTC, also available only on IRS.gov.
- Payments are automatic. Aside from filing a tax return, including a simplified return from the Non-filer Sign-up Tool, families don’t have to do anything if they are eligible to receive monthly payments.
- Families who did not get a July, August or September payment and are getting their first monthly payment in October will still receive their total advance payment for the year. This means that the total payment will be spread over three months, rather than six, making each monthly payment larger.
Some American families may get a letter from the IRS, letting them know it’s not too late to sign up for advance CTC payments. The letter spotlights those who haven’t filed a 2020 income tax return with emphasis on those who aren’t normally required to file because their annual incomes are below filing thresholds.
Even these non-filing families may be eligible for the Child Tax Credit advance payments. The IRS says they should visit IRS.gov online for information on how to file a return and get their CTC credit.
September Advance Child Tax Credit payments hit a snag
The Internal Revenue Service says a technical issue led to about 2% of the qualified CTC recipients not getting their monthly advance credit amounts on time in September. The IRS has since sent out the payment to everyone affected.
Those affected included taxpayers who recently updated their bank account or address information using the IRS Child Tax Credit Update Portal.
The glitch mainly affected payments to married taxpayers filing jointly where only one spouse made a bank account or address change; this usually means payments are split into two – between the existing account or address and the new one.
Some recipients saw their payments delayed. Some saw a larger payment amount than normal, which led the IRS to adjust their three remaining monthly payments down by $10-$13 per child to compensate.
The IRS says it will send letters to all the taxpayers affected by the glitch and appreciates the patience of everyone.
For more information, check out the IRS website. Links to online tools, a guide to the Non-filer Sign-up Tool, answers to frequently asked questions and other resources are all available at IRS.gov/childtaxcredit2021, the IRS’ special advance CTC page.
Source: IR-2021-201
– Story provided by TaxingSubjects.com
by | Apr 2, 2022 | Tax Tips and News
Criminals pushing phishing scams impersonate a wide range of people and organizations to trick victims out of their private information and money. The seemingly endless flood of charity scams perhaps best demonstrates that there truly is no honor among thieves. Luckily, we don’t have to face identity thieves alone.
The Internal Revenue Service announced that they are taking part in Charity Fraud Awareness Week to help spread the word about this persistent threat to individuals and charitable organizations. The agency says they are “joining international organizations and other regulators in highlighting Charity Fraud Awareness Week,” which runs from October 18 to October 22 this year.
What is Charity Fraud Awareness Week?
According to the IRS, Charity Fraud Awareness Week is a campaign “run by a partnership of charities, regulators, law enforcers, and other not-for-profit stakeholders from across the world … [that] raise awareness of fraud and cybercrime affecting organizations and to create a safe space for charities and their supporters to talk about fraud and share good practice.”
How is the IRS participating in Charity Fraud Awareness Week?
The IRS is highlighting helpful resources that have been created by organizations participating in Charity Fraud Awareness Week. Specifically, the press release includes a link to a UK-based website designed to aggregate helpful information related to the campaign: PreventCharityFraud.org.uk.
According to the IRS, this site is designed to help “[Charity Fraud Awareness Week] partners, charities, and other tax-exempt organizations and non-profits find” the following information:
- Details about the awareness week
- Free resources
- A fraud pledge for organizations
- A listing of webinars and other events held as part of the week
Data-security-awareness campaigns aren’t new to the IRS. As part of the Security Summit, the agency works year round to provide taxpayers the resources they need to avoid falling victim to myriad phishing scams. Part of that effort includes publishing their annual Dirty Dozen list of tax scams and providing online resources, like the Tax Exempt Organization Search tool.
The Tax Exempt Organization Search tool is useful in avoiding fake charity scams listing legitimate charities that are currently eligible “to receive tax-deductible charitable contributions.” The tool’s page on IRS.gov notes the types of information that can be searched for any given charity:
- Form 990 Series Returns
- Form 990-N (e-Postcard)
- Pub. 78 Data
- Automatic Revocation of Exemption List
- Determination Letters
As for avoiding scams impersonating legitimate charities, taxpayers should stay up to date on the latest phishing scams highlighted by the IRS, Security Summit, and Charity Fraud Awareness Week partners.
Sources: IR-2021-205; “Tax Exempt Organization Search,” IRS.gov
– Story provided by TaxingSubjects.com
by | Jan 7, 2020 | Tax Tips and News
The Internal Revenue Service has confirmed that it will begin accepting and processing 2019 returns on January 27, opening the gates for millions of individual tax return filers. The deadline for filing and paying any tax due remains Wednesday, April 15.
More than 150 million individual tax returns are expected to be filed for the 2019 tax year, the vast majority of those coming before the April deadline.
“As we enter the filing season, taxpayers should know that the dedicated workforce of the IRS stands ready to help,” said IRS Commissioner Chuck Rettig. “We encourage taxpayers to plan ahead and use the tools and information available on IRS.gov. The IRS and the nation’s tax community are committed to making this another smooth filing season.”
The IRS says it set the opening date on January 27 so the agency could better ensure the security and readiness of its key tax processing computer systems while checking that IRS automated procedures are set to implement recent tax legislation for 2019 returns.
Commissioner Rettig says for best service, the taxpayer has a couple of important choices to make. “The IRS encourages everyone to consider filing electronically and choosing direct deposit,” Rettig said. “It’s fast, accurate and the best way to get your refund as quickly as possible.”
IRS reminds taxpayers that they don’t have to wait until January 27 to start their tax return or contact a reputable tax preparer.
In addition, IRS tax help is available 24 hours a day on IRS.gov, the official IRS website, where people can find answers to tax questions and resolve tax issues online. The Let Us Help You page helps answer most tax questions, and the IRS Services Guide (PDF) links to these and other IRS services.
Source: IR-2020-02
– Story provided by TaxingSubjects.com
by | Dec 10, 2019 | Tax Tips and News
The Internal Revenue Service has announced that the final regulations have been issued on the revamped Foreign Tax Credit, which was modified as a result of tax reform in 2017. The credit generally allows taxpayers and businesses to claim a credit for income taxes paid or accrued to foreign governments.
So What’s Different?
The tax reform legislation, termed the Tax Cuts and Jobs Act (TCJA), made major changes to the international tax system in the U.S.
Several Foreign Tax Credit provisions were changed. One was the repeal of section 902, which allowed deemed-paid credits in connection with dividend distributions based on foreign subsidiaries’ cumulative pools of earnings and foreign taxes.
The legislation also added two limitation categories for foreign branch income and amounts that are includible under the Global Intangible Low-Taxed Income (GILTI) provisions.
How taxable income is calculated when figuring the Foreign Tax Credit limitation was also changed by the tax reform package. Certain expenses have now been disregarded and the use of the fair market value for allocating interest expense has been repealed.
The IRS says the TJCA made “systemic” changes to taxation of international income that impact the Foreign Tax Credit calculation. These include the introduction of a participation exemption through a dividends-received deduction for certain section 245A dividends.
IRS changes also introduced the GILTI provisions which subjects certain foreign earnings to current U.S. taxation. Previously, these earnings would have been deferred – at a lower tax rate – and subject to extra Foreign Tax Credit restrictions.
Other Regulations Issued
Proposed regulations have also been issued that apply to the allocation and apportionment of deductions and creditable foreign taxes, foreign tax redeterminations, availability of Foreign Tax Credits under the Transition Tax, and the application of the Foreign Tax Credit limitation to consolidated groups.
For more information on the implementation of the Tax Cuts and Jobs Act, check out the Tax Reform Page of IRS.gov.
– Story provided by TaxingSubjects.com
by | Dec 6, 2019 | Tax Tips and News
Main Street businesses might consider themselves too small to be the target of a business identity theft scam, but the Security Summit says that identity thieves are more than happy to steal their personally identifiable information (PII) in today’s National Tax Security Awareness Week topic.
Just like individual identity theft, criminals use stolen PII to fraudulently apply for business-related financial services and file business tax returns. The latter has become increasingly frequent, leading the Security Summit to increase its educational outreach efforts to business-owning taxpayers.
What businesses are targeted by identity thieves?
Reports of international retail chains suffering data theft incidents might give the impression that large brands with millions of customers are the only targets that interest cybercriminals, but the Security Summit says that simply isn’t the case.
The reality is that all businesses are a ripe target for identity thieves. Despite not having as much customer information as an international corporation, a smaller business is unlikely to have robust data security systems in place.
Another thing to consider is that an identity theft incident might be part of a full-blown data breach. Any business that maintains customer information—like a retailer with an online storefront—is a ripe target for identity theft scams.
Tax practices in particular can be home to thousands of taxpayers’ PII. Making matters worse, that data is formatted in such a way that successfully impersonating victims on credit card applications is much easier.
What are the signs that my business has been a victim of identity theft?
The first step in mitigating the damage caused by identity theft is confirming that your company’s identity has been stolen.
As the IRS notes in today’s press release, the signs of business identity theft are similar to individual identity theft. Unfortunately, they only tend to pop up when victims try to file a tax return.
The Summit urges businesses that experience any of the following issues to immediately reach out to the IRS:
- Extension to file requests are rejected because a tax return with the Employer Identification Number (EIN) or Social Security number (SSN) is already on file.
- An e-filed return is rejected because of a duplicate EIN or SSN is already on file with the IRS.
- An unexpected receipt of a tax transcript or IRS notice that doesn’t correspond to anything submitted by the filer.
- Failure to receive expected and routine correspondence from the IRS because the thief has changed the address.
Business identity theft victims will also want to take the same steps as individuals whose identity has been stolen: contact credit bureaus and apply for credit-monitoring services.
How do tax professionals spot business identity theft?
Tax professionals will immediately spot the reject codes outlined above, but the Security Summit stresses that they should also “step up the ‘trusted customer’ procedures” by asking the following questions:
- Is this person authorized to sign the return?
- Were estimated tax payments made?
- [What is the] total income amount from prior-year filings?
- Is there a parent company? If yes, the name?
- [Is there any] additional information based on deductions claimed?
- [What is your] filing history?
According to the release, the programs tax professionals use to file returns also helps in the fight against identity thieves: “Tax software products now share many data elements with the IRS and state tax agencies. These data elements assist the IRS and states to identify suspicious tax returns and to reduce the impact to legitimate filers … [and] allow legitimate returns to be processed as usual.”
What is the final National Tax Security Awareness Week topic?
On Friday, the Security Summit will address data security plans for financial institutions. As every tax professional knows, having a written data security plan in place is required by law. Tomorrow’s blog will include resources to help tax professionals create and improve those plans.
Source: IR-2019-198
– Story provided by TaxingSubjects.com
A-1 Accounting & Tax Service