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6 de October de 2022

WASHINGTON – The Internal Revenue Service today reminds U.S. citizens, resident aliens and domestic legal entities that the extension deadline to file their annual Report of Foreign Bank and Financial Accounts (FBAR) is October 15. For additional information about filing deadlines, filers should look to Financial Crimes Enforcement Network’s (FinCEN) websitePDF.

Filers who missed the April 15 annual due date earlier this year received an automatic extension until October 15, 2022, to file the FBAR. They did not need to request the extension.

Who needs to file?

The Bank Secrecy Act requires U.S. persons to file an FBAR if:

They have a financial interest in or signature or other authority over one or more accounts, such as a bank account, brokerage account, mutual fund or other financial account located outside the United States, and

The aggregate value of all foreign financial accounts exceeds $10,000 at any time during the calendar year 2021.

Because of this threshold, the IRS encourages U.S. persons with foreign accounts, even relatively small ones, to check if this filing requirement applies to them. A U.S. person is a citizen or resident of the United States or a domestic legal entity such as a partnership, corporation, limited liability company, estate or trust.

How to file

Filers do not file the FBAR with their federal income tax return. The 2021 FBAR must be filed electronically with FinCEN and is only available through the BSA E-Filing System website. Individuals who are unable to e-file their FBAR must contact FinCEN at 800-949-2732 or FRC@fincen.gov to request an alternative filing method. Callers from outside the U.S. can contact the helpline at 703-905-3975.

Avoid penalties

Those who don’t file an accurate FBAR when required may be subject to significant civil and criminal penalties that can result in a fine and/or imprisonment, depending on the facts and circumstances.

FBAR resources on IRS.gov:

by Larson Accounting

30 de September de 2022

FL-2022-19, September 29, 2022
WASHINGTON — Victims of Hurricane Ian that began September 23 in Florida now have until February 15, 2023, to file various individual and business tax returns and make tax payments, the Internal Revenue Service announced today.

Following the recent disaster declaration issued by the Federal Emergency Management Agency, the IRS announced today that affected taxpayers in certain areas will receive tax relief.

Individuals and households affected by Hurricane Ian that reside or have a business anywhere in the state of Florida qualify for tax relief. The declaration permits the IRS to postpone certain tax-filing and tax-payment deadlines for taxpayers who reside or have a business in the disaster area. For instance, certain deadlines falling on or after September 23, 2022, and before February 15, 2023, are postponed through February 15, 2023.

This means individuals who had a valid extension to file their 2021 return due to run out on October 17, 2022, will now have until February 15, 2023, to file. The IRS noted, however, that because tax payments related to these 2021 returns were due on April 18, 2022, those payments are not eligible for this relief.

The February 15, 2023, deadline applies to the quarterly estimated tax payments, normally due on January 17, 2023 and to the quarterly payroll and excise tax returns normally due on October 31, 2022, and January 31, 2023. Businesses with an original or extended due date also have the additional time, including calendar-year corporations whose 2021 extensions run out on October 17, 2022.

Penalties on payroll and excise tax deposits due on or after September 23, 2022, and before October 10, 2022, will be abated as long as the tax deposits are made by October 10, 2022.

If an affected taxpayer receives a late filing or late payment penalty notice from the IRS that has an original or extended filing, payment or deposit due date that falls within the postponement period, the taxpayer should call the telephone number on the notice to have the IRS abate the penalty. For information on services currently available, visit the IRS operations and servicespage at IRS.gov/coronavirus.

The IRS automatically identifies taxpayers located in the covered disaster area and applies filing and payment relief. But affected taxpayers who reside or have a business located outside the covered disaster area should call the IRS disaster hotline at 866-562-5227 to request this tax relief.

Covered Disaster Area

The localities listed above constitute a covered disaster area for purposes of Treas. Reg. §301.7508A-1(d)(2) and are entitled to the relief detailed below.

Affected Taxpayers

Taxpayers considered to be affected taxpayers eligible for the postponement of time to file returns, pay taxes and perform other time-sensitive acts are those taxpayers listed in Treas. Reg. § 301.7508A-1(d)(1), and include individuals who live, and businesses (including tax-exempt organizations) whose principal place of business is located, in the covered disaster area. Taxpayers not in the covered disaster area, but whose records necessary to meet a deadline listed in Treas. Reg. § 301.7508A-1(c) are in the covered disaster area, are also entitled to relief. In addition, all relief workers affiliated with a recognized government or philanthropic organization assisting in the relief activities in the covered disaster area and any individual visiting the covered disaster area who was killed or injured as a result of the disaster are entitled to relief.

Under section 7508A, the IRS gives affected taxpayers until February 15, 2023 to file most tax returns (including individual, corporate, and estate and trust income tax returns; partnership returns, S corporation returns, and trust returns; estate, gift, and generation-skipping transfer tax returns; annual information returns of tax-exempt organizations; and employment and certain excise tax returns), that have either an original or extended due date occurring on or after September 23, 2022, and before February 15, 2023, will be abated as long as the tax deposits were made by February 15, 2023.

Affected taxpayers that have an estimated income tax payment originally due on or after September 23, 2022, and before February 15, 2023, will not be subject to penalties for failure to pay estimated tax installments as long as such payments are paid on or before February 15, 2023.

The IRS also gives affected taxpayers until February 15, 2023, to perform other time-sensitive actions described in Treas. Reg. § 301.7508A-1(c)(1) and Rev. Proc. 2018-58, 2018-50 IRB 990 (December 10, 2018), that are due to be performed on or after September 23, 2022, and before February 15, 2023, are postponed through February 15, 2023.

This relief also includes the filing of Form 5500 series returns that were required to be filed on or after September 15, 2022, and before February 15, 2023, are postponed through February 15, 2023, in the manner described in section 8 of Rev. Proc. 2018-58. The relief described in section 17 of Rev. Proc. 2018-58, pertaining to like-kind exchanges of property, also applies to certain taxpayers who are not otherwise affected taxpayers and may include acts required to be performed before or after the period above.

Unless an act is specifically listed in Rev. Proc. 2018-58, the postponement of time to file and pay does not apply to information returns in the W-2, 1094, 1095, 1097, 1098 or 1099 series; to Forms 1042-S, 3921, 3922 or 8027; or to employment and excise tax deposits. However, penalties on deposits due on or after September 23, 2022, and before October 10, 2022, will be abated as long as the tax deposits were made by October 10, 2022.

Casualty Losses

Affected taxpayers in a federally declared disaster area have the option of claiming disaster-related casualty losses on their federal income tax return for either the year in which the event occurred, or the prior year. See Publication 547 for details.

Individuals may deduct personal property losses that are not covered by insurance or other reimbursements. For details, see Form 4684, Casualties and TheftsPDF and its instructions.PDF

Affected taxpayers claiming the disaster loss on their return should put the Disaster Designation, “FL Hurricane Ian” in bold letters at the top of the form. Be sure to include the FEMA disaster declaration number, DR-4673-FL– on any return. See Publication 547 for details.

Other Relief

The IRS will waive the usual fees and requests for copies of previously filed tax returns for affected taxpayers. Taxpayers should put the assigned Disaster Designation “FL Hurricane Ian” in bold letters at the top of Form 4506, Request for Copy of Tax ReturnPDF, or Form 4506-T, Request for Transcript of Tax ReturnPDF, as appropriate, and submit it to the IRS.

Affected taxpayers who are contacted by the IRS on a collection or examination matter should explain how the disaster impacts them so that the IRS can provide appropriate consideration to their case. Taxpayers may download forms and publicationsfrom the official IRS website, IRS.gov.

Source: IRS

by Larson Accounting

28 de September de 2022

The Internal Revenue Service today reminded struggling individuals and businesses, affected by the COVID-19 pandemic, that they may qualify for late-filing penalty relief if they file their 2019 and 2020 returns by September 30, 2022.

Besides providing relief to both individuals and businesses impacted by the pandemic, this step is designed to allow the IRS to focus its resources on processing backlogged tax returns and taxpayer correspondence to help return to normal operations for the 2023 filing season.

“We thought carefully about the type of penalties, the period covered and the duration before granting this penalty relief. We understand the concerns being raised by the tax community and others about the September 30 penalty relief deadline,” said IRS Commissioner Chuck Rettig. “Given planning for the upcoming tax season and ongoing work on the inventory of tax returns filed earlier this year, this penalty relief deadline of September 30 strikes a balance. It is critical to us to not only provide important relief to those affected by the pandemic, but this deadline also allows adequate time to prepare our systems and our workstreams to serve taxpayers and the tax community during the 2023 filing season.”

The relief, announced last month, applies to the failure-to-file penalty. The penalty is typically assessed at a rate of 5% per month, up to 25% of the unpaid tax, when a federal income tax return is filed late. This relief applies to forms in both the Form 1040 and 1120 series, as well as others listed in Notice 2022-36, posted on IRS.gov.

For anyone who has gotten behind on their taxes during the pandemic, this is a great opportunity to get caught up. To qualify for relief, any eligible income tax return must be filed on or before September 30, 2022.

Those who file during the first few months after the September 30 cutoff will still qualify for partial penalty relief. That’s because, for eligible returns filed after that date, the penalty starts accruing on October 1, 2022, rather than the return’s original due date. Because the penalty accrues, based on each month or part of a month that a return is late, filing sooner will limit any charges that apply.

Unlike the failure-to-file penalty, the failure-to-pay penalty and interest will still apply to unpaid tax, based on the return’s original due date. The failure-to-pay penalty is normally 0.5% (one-half-of-one percent) per month. The interest rate is currently 5% per year, compounded daily, but that rate is due to rise to 6% on October 1, 2022.

Taxpayers can limit these charges by paying promptly. For more information, including details on fast and convenient electronic payment options, visit IRS.gov/payments. Penalty and interest charges generally don’t apply to refunds.

The notice also provides details on relief for filers of certain international information returns when a penalty is assessed at the time of filing. No relief is available for applicable international information returns when the penalty is part of an examination. To qualify for this relief, any eligible tax return must be filed on or before September 30, 2022.

Penalty relief is automatic. This means that eligible taxpayers who have already filed their return do not need to apply for it, and those filing now do not need to attach a statement or other documents to their return. Generally, those who have already paid the penalty are getting refunds, most by the end of September.

Penalty relief is not available in some situations, such as where a fraudulent return was filed, where the penalties are part of an accepted offer in compromise or a closing agreement, or where the penalties were finally determined by a court.

This relief is limited to the penalties that the notice specifically states are eligible for relief. For ineligible penalties, such as the failure-to-pay penalty, taxpayers may use existing penalty relief procedures, such as applying for relief under the reasonable cause criteria or the First-Time Abate program. Visit IRS.gov/penaltyrelief for details.

This relief doesn’t apply to 2021 returns. Whether or not they have a tax-filing extension, the IRS urges everyone to file their 2021 return soon to avoid processing delays. For filing tips, visit IRS.gov.

by Larson Accounting

20 de September de 2022

The IRS updated information on the Work Opportunity Tax Credit (WOTC), available to employers that hire designated categories of workers who face significant barriers to employment. For employers facing a tight job market, the WOTC may be able to help.

Today’s updates include information on the pre-screening and certification process. To satisfy the requirement to pre-screen a job applicant, on or before the day a job offer is made, a pre-screening notice (Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit) must be completed by the job applicant and the employer.

The Targeted Jobs Tax Credit (TJTC), which preceded WOTC, did not contain a pre-screening requirement. In enacting WOTC to replace the TJTC in 1996, Congress included the requirement that employers pre-screen job applicants before or on the same day the job offer is made. In doing so, Congress emphasized that the WOTC is designed to incentivize the hiring and employment of certain categories of workers.

After pre-screening a job applicant, the employer must then request certification by submitting Form 8850 to the appropriate state workforce agency no later than 28 days after the employee begins work. Other requirements and further details can be found in the instructionsPDF to Form 8850.

WOTC has 10 designated categories of workers. The 10 categories are:

Qualified IV-A Temporary Assistance for Needy Families (TANF) recipients
Certain veterans, including unemployed or disabled veterans
The formerly incarcerated or those previously convicted of a felony
Designated community residents living in Empowerment Zones or Rural Renewal Counties
Vocational rehabilitation referrals
Summer youth employees living in Empowerment Zones
Food stamp (SNAP) recipients
Supplemental Security Income (SSI) recipients
Long-term family assistance recipients
Qualified long-term unemployment recipients.

Although the credit generally is not available to tax-exempt organizations, a special provision allows them to claim the WOTC against the employer’s share of Social Security tax for hiring qualified veterans. These organizations claim the credit on Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans. Visit the WOTC page for more information.

Source: IRS

by Larson Accounting

8 de September de 2022

For the first time in two decades, the U.S. dollar is equal to the euro in value as Europe grapples with growing recession fears and the fallout from Russia’s war in Ukraine.
The euro matching or dipping below the dollar presents a mostly psychological milestone, some experts say, but central banks and policymakers across the euro zone are likely to face pressure to address depreciation concerns.

“It’s becoming increasingly clear that the Euro zone is heading into recession, even as financial conditions have tightened more than in the US or Japan,” tweeted Robin Brooks

The two currencies reached parity Wednesday morning, according to Bloomberg, after the euro abruptly lost value following the release of worrisome U.S. inflation data.

The euro has been losing ground against the dollar since the start of the year, when it hovered near $1.13, well off its peak of nearly $1.60 in 2008. Live currency data reported by MarketWatch shows the euro slipping just a few hundredths of a cent above the dollar, while Bloomberg and Reuters reported that the euro briefly slipped below a dollar in value.

Analysts say the sinking value of the euro reflects growing risk aversion on the part of investors, who are pouring into dollars ― considered a “safe haven” asset compared with other currencies ― amid concerns about inflation, the war in Ukraine, and recession fears in numerous countries.

Currency markets got a jolt Wednesday morning when the U.S. Bureau of Labor Statistics reported that U.S. prices soared by 9.1 percent in June compared with a year ago, a new peak with inflation running at 40-year highs.

The common currency in 19 European Union member countries has weakened during the months-long war in Ukraine, which has sent shock waves through global food and energy markets. The European Central Bank also lags behind peer institutions such as the Federal Reserve in tackling rising inflation, which swelled to 8.6 percent last month — the highest level since the euro was created in 1999.

The Fed has been aggressively raising interest rates to stem inflation woes, having announced three rounds of increases this year alone, and has signaled that four more scheduled rate hikes are in the works. Although the European Central Bank is also expected to raise rates to bring inflation back to a 2 percent target, it is likely to move at a slower pace: It has penciled in a 0.25 percentage point rate hike for July, while the Fed is widely expected go with a 0.75 percentage point increase, as it did in June.

The stronger dollar is good news for Americans considering a European vacation or buying goods abroad. Conversely, traveling and spending with U.S. dollars have now become pricier for those who earn wages in euros.

European businesses that sell their wares abroad might find that the weaker currency makes their exports more appealing, because the buyer’s currency will be more valuable by comparison. American companies, on the other hand, could face a tougher time exporting their goods abroad.

But more important, some experts argue that a less potent euro portends slower economic growth for Europe. “It’s becoming increasingly clear that the Euro zone is heading into recession, even as financial conditions have tightened more than in the US or Japan,” tweeted Robin Brooks, chief economist at the Institute of International Finance.

After the war in Ukraine began, the Economist Intelligence Unit revised its 2022 euro-zone growth forecast downward from 4 percent to 2 percent. It predicts a 1.6 percent growth rate for 2023. And the euro’s weakness “reflects fears from investors of an impending recession in the euro zone,” said EIU global forecasting director Agathe Demarais.

Stocks were choppy Wednesday after the inflation report. The Dow Jones industrial average plunged nearly 450 points after the data was released, then cut its losses. By late morning, the blue-chip index was down 115 points, or 0.4 percent. The broader S&P 500 index was off 0.1 percent, while the tech-heavy Nasdaq pushed 0.3 percent higher. France’s CAC 40 lost 1.2 percent, while Germany’s DAX index lost 1.7 percent and the pan-European Stoxx 50 lost 1.5 percent.

Source: WP
By: Aaron Gregg, Ellen Francis, Bryan Pietsch and Amy Cheng
Photo: (Dado Ruvic/Reuters)

by Larson Accounting

8 de September de 2022

The Internal Revenue Service reminds taxpayers who pay estimated taxes that the deadline to submit their third quarter payment is September 15, 2022.

Taxpayers not subject to withholding, such as those who are self-employed, investors or retirees, may need to make quarterly estimated tax payments. Taxpayers with other income not subject to withholding, including interest, dividends, capital gains, alimony, cryptocurrency and rental income, also normally make estimated tax payments.

In most cases, taxpayers should make estimated tax payments if they expect:

To owe at least $1,000 in taxes for 2022 after subtracting their withholding and tax credits.
Their withholding and tax credits to be less than the smaller of:
- 90% of the tax to be shown on their 2022 tax return or
- 100% of the tax shown on their 2021 tax return. Their 2021 tax return must cover all 12 months.

Special rules apply to some groups of taxpayers, such as farmers, fishermen, casualty and disaster victims, those who recently became disabled, recent retirees and those who receive income unevenly during the year. Publication 505, Tax Withholding and Estimated Tax, provides more information on estimated tax rules. The worksheet in Form 1040-ES, Estimated Tax for Individuals, or Form 1120-W, Estimated Tax for Corporations, has details on who must pay estimated tax.

How to figure estimated tax

To figure estimated tax, individuals must figure their expected Adjusted Gross Income (AGI), taxable income, taxes, deductions and credits for the year.

When figuring 2022 estimated tax, it may be helpful to use income, deductions and credits for 2021 as a starting point. Use the 2021 federal tax return as a guide. Taxpayers can use Form 1040-ES to figure their estimated tax.

The Tax Withholding Estimator on IRS.gov offers taxpayers a clear, step-by-step method to have their employers withhold the right amount of tax from their paycheck. It also has instructions to file a new Form W-4 to give to their employer to adjust the amount withheld each payday.

How to avoid an underpayment penalty

Taxpayers who underpaid their taxes may have to pay a penalty. This applies whether they paid through withholding or through estimated tax payments. A penalty may also apply for late estimated tax payments even if someone is due a refund when they file their tax return.

To see if they owe a penalty, taxpayers should use Form 2210, Underpayment of Estimated Tax by Individuals, Estates, and Trusts. Taxpayers can also see the Form 2210 instructions under the “Waiver of Penalty” section. The IRS may waive the penalty if someone underpaid because of unusual circumstances and not willful neglect. Examples include:

Casualty, disaster or another unusual situation.
An individual retired after reaching age 62 during a tax year when estimated tax payments applied.
An individual became disabled during a tax year when estimated tax payments applied.
Specific written advice from an IRS agent given in response to a specific written request. The taxpayer must provide copies of both.

The fourth and final 2022 estimated tax payment is due January 17, 2023.

Source: IRS

by Larson Accounting

22 de August de 2022

WASHINGTON — The Internal Revenue Service reminds taxpayers who’ve yet to file their 2021 federal income tax return to make sure they take advantage of the deductions and credits for which they’re entitled and to file electronically as soon as possible.

“Each year, eligible taxpayers overlook money saving deductions and credits that can help them with the cost of raising a family, daycare, paying for college, saving for retirement or making a donation to charity,” said IRS Commissioner Chuck Rettig. “We want to ensure they’re aware of all the tax benefits for which they may qualify.”

This year, the IRS received about 19 million requests for extensions to file until October 17. Those who qualify can prepare and file their return for free with IRS Free File. Electronically filing and choosing direct deposit can help taxpayers get their refund faster. If they owe, sending the tax return with full payment prevents additional interest and penalties. There’s no penalty for failure to file if the taxpayer is due a refund.

Filing tips for taxpayers who haven’t filed their 2021 tax return are available on IRS.gov.

Taxpayers should consider the following tax benefits when filing their tax return:

Earned Income Tax Credit: Qualified low- to moderate-income workers and families may get a tax break.
Child Tax Credit: Families can claim this credit, even if they received monthly advance payments during the last half of 2021.
Child and Dependent Care Credit: Families who pay expenses for the care of a qualifying individual so they can work, or look for work, can get a tax credit worth up to $4,000 for one qualifying person and $8,000 for two or more qualifying persons.
Recovery Rebate Credit (RRC): Those who missed out on last year’s third round of Economic Impact Payments (EIP3), also known as stimulus payments, may be eligible to claim the RRC. This credit can also help eligible people whose EIP3 was less than the full amount, including those who welcomed a child in 2021.
Deduction for gifts to charity: The majority of taxpayers who take the standard deduction can deduct eligible cash contributions they made to charity during 2021. Married couples filing jointly can deduct up to $600 in cash donations and individual taxpayers can deduct up to $300 in donations. In addition, itemizers who make large cash donations often qualify to deduct the full amount in 2021.
American Opportunity Tax Credit and the Lifetime Learning Credit: Tax credits for higher education can help offset taxpayers’ tuition and other costs by reducing the amount of tax owed on their tax return.
Retirement Savings Contributions Credit (Saver’s Credit): A tax credit is available for making eligible contributions to an individual retirement account or employer-sponsored retirement plan.

Helpful reminders

The IRS urges taxpayers to ensure they have all their year-end statements in hand before filing their 2021 return. Besides W-2s and 1099s, this includes two statements issued by the IRS – Letter 6419, showing their total advance Child Tax Credit payments, and Letter 6475, showing their total EIP3 payments.

Individuals can also use their IRS Online Account to see the total amounts of their third round of Economic Impact Payments or advance Child Tax Credit payments. Married spouses who received joint payments will each need to sign into their own account to retrieve their separate amounts.

Taxpayers can find answers to questions, forms and instructions, and easy-to-use tools online at IRS.gov. They can use these resources to get help when it’s needed at home, at work or on the go.

Adjust 2022 withholding now to avoid tax surprises next year

Summer is a great time for taxpayers to check their 2022 withholding to avoid a tax surprise when they file next year. Life events like marriage, divorce, having a child or a change in income can affect taxes. Too little tax withheld can lead to a tax bill or penalty. Too much can mean the taxpayer won’t have use of the money until they get their tax refund in 2023.

The IRS Tax Withholding Estimator on IRS.gov helps employees assess their income tax, credits, adjustments and deductions, and determine whether they need to change their withholding. If a change is recommended, the estimator will provide instructions to update their withholding with their employer, either online or by submitting a new Form W-4, Employee’s Withholding Allowance Certificate.

Find a Taxpayer Assistance Center

The Taxpayer Assistance Center Locator tool has a new look and feel, featuring a dynamic map, a directions button and two tabs for entering search criteria. It’s important to remember that Taxpayer Assistance Centers operate by appointment only. Taxpayers must make an appointment by calling the number for the office they want to visit.

Read information in other languages

Many pages on IRS.gov are now available in Spanish, Vietnamese, Russian, Korean, Haitian Creole and Chinese. Some of the multilingual resources include the Taxpayer Bill of Rights, e-file resources and many tax forms and publications.

Source: IRS – IR-2022-153, August 18, 2022

by Larson Accounting

15 de August de 2022

Democrats spent last week swearing that only high earners would be squeezed under their plan to beef up the Internal Revenue Service. It only took a few days for the Congressional Budget Office to put that narrative to rest. A quick analysis from the budget scorer confirms that the audit expansion will ensnare the middle class.

The CBO made the point in an Aug. 12 letters two Sen. Mike Crapo, who had sought to bind Democrats to their promise to limit audits to high earners. If the IRS expansion plan “is not about folks who make less than $400,000,” as White House press secretary Karine Jean-Pierre claimed, why not make that clear in the bill? Mr. Crapo proposed an amendment to ensure new audits would exclude taxpayers earning less than $400,000, but Democrats voted it down 51 to 50.

Mr. Crapo then asked the CBO to calculate the effect his amendment would have had. The agency found that increased scrutiny on filers earning less than $400,000 would account for $20 billion over 10 years, out of a total of about $204 billion that Democrats hope to collect through a bigger, worse IRS. In other words, the IRS expansion as it’s currently designed could collect billions in revenue from new middle-class audits.

The problem is that for every tax cheat the IRS identifies, several more compliant tax filers will be subjected to unnecessary scrutiny. Many of the hundreds of thousands of people audited each year are chosen at random, and most taxpayers cannot afford a lawyer to go to Tax Court to contest IRS claims of tax liability. They write the check to end the relentless IRS pursuit, whether or not they think it’s fair.

Cracks had already emerged in the White House narrative before CBO weighed in. Treasury Secretary Janet Yellen, who oversees the IRS, wrote to the agency’s commissioner last week to clarify the funding plan.

The additional $80 billion, she wrote, “shall not be used to increase the share of small business or households below the $400,000 threshold that are audited.” [Emphasis added.] Contrary to the White House, Ms. Yellen promised only that new audits wouldn’t be directed disproportionately at the middle class. She didn’t dispute that thousands more middle and low earners will face scrutiny.

On Friday House Democrats passed the tax-and-spending bill that includes the supersize IRS on a party-line vote, and President Biden will sign it this week. Good luck to readers as the taxman comes.

Source: WSJ

by Larson Accounting

2 de August de 2022

WASHINGTON — With identity thieves continuing to target the tax community, Internal Revenue Service Security Summit partners today urged tax professionals to learn the signs of data theft so they can react quickly to protect clients.

The IRS, state tax agencies and the tax industry – working together as the Security Summit – reminded tax professionals that they should contact the IRS immediately when there’s an identity theft issue while also contacting insurance or cybersecurity experts to assist them with determining the cause and extent of the loss.

“Tax pros must be vigilant to protect their systems from identity thieves who continue to look for ways to steal data,” said IRS Commissioner Chuck Rettig. “Practitioners can take simple steps to remain on the lookout for signs of data and identity theft. It’s critical for tax pros to watch out for these details and to quickly take action when tell-tale signs emerge. This can be critical to protect their business as well as their clients against identity theft.”

This is the third in a summer series of five Security Summit news releases aimed at raising awareness among tax professionals about data security. The special Protect Your Client; Protect Yourself campaign is designed to help protect against tax-related identity theft by increasing attention on basic security steps that tax professionals and others should take to protect sensitive information.

One common concern the IRS hears from tax professionals is that they did not immediately recognize the signs of data theft.

Summit partners are urging tax professionals to watch out for these critical signs:

Client e-filed returns rejected because client’s Social Security number was already used on another return.
More e-file acknowledgements received than returns the tax pro filed.
Clients responded to emails the tax pro didn’t send.
Slow or unexpected computer or network responsiveness such as:
Software or actions take longer to process than usual,
Computer cursor moves or changes numbers without touching the mouse or keyboard,
Unexpectedly locked out of a network or computer.
Tax professionals should also watch for warning signs when clients report they’ve received:

IRS Authentication letters (5071C, 6331C, 4883C, 5747C) even though they haven’t filed a return.
A refund even though they haven’t filed a return.
A tax transcript they didn’t request.
Emails or calls from the tax pro that they didn’t initiate.
A notice that someone created an IRS online account for the taxpayer without their consent.
A notice the taxpayer wasn’t expecting that:
Someone accessed their IRS online account,
The IRS disabled their online account,
Balance due or other notices from the IRS that are not correct based on return filed or if a return had not been filed.
These are just a few examples. Tax pros should ensure they have the highest security possible and react quickly if they sense or see something amiss.

If the tax pro or their firm are the victim of data theft, immediately:

Report it to the local IRS Stakeholder Liaison
Liaisons will notify IRS Criminal Investigation and others within the agency on the practitioner’s behalf. Speed is critical. If reported quickly, the IRS can take steps to block fraudulent returns in the clients’ names and will assist tax pros through the process.
Email the Federation of Tax Administrators at StateAlert@taxadmin.org
Get information on how to report victim information to the states. Most states require that the state attorney general be notified of data breaches. This notification process may involve multiple offices.
Be pro-active with clients that could have been impacted and suggest appropriate actions, such as obtaining an IP PIN or completing a Form 14039, Identity Theft Affidavit if applicable. See the early Security Summit reminder about the importance of IP PINs.
Find more information at Data Theft Information for Tax Professionals.

Additional resources
Publication 5293, Data Security Resource Guide for Tax ProfessionalsPDF, provides an overview resources about how to avoid data theft.
Tax professionals can also get help with security recommendations by reviewing IRS Publication 4557, Safeguarding Taxpayer DataPDF, and the IRS Identity Theft Central pages for tax pros.
Tax pros should also review Small Business Information Security: The FundamentalsPDF by the National Institute of Standards and Technology
Also, tax professionals should stay connected to the IRS through subscriptions to e-News for Tax Professionals and Social Media.
For more information, see Boost Security Immunity: Fight Against Identity Theft.

Source: IRS

by Larson Accounting

18 de July de 2022

The IRS is underfunded and understaffed, and had to deal with new pandemic responsibilities.
The result has been a massive backlog of unprocessed tax returns, many of them on paper.
A photo from the agency’s Austin facility shows just how much paper the IRS is dealing with.

The IRS is still full of paper.

The agency has been contending with a historic backlog of unprocessed tax returns amidst new pandemic responsibilities, understaffing, and underfunding. The result: A massive build-up of unprocessed tax returns, many of which belong to Americans who have been waiting on refund checks.

Natasha Sarin, a tax policy and implementation counselor at the Treasury Department, shared a photo on Twitter of the cafeteria at the IRS’s Austin site. In it, the room is “overrun” with paper returns awaiting employees.

“There’s no question that strategically starving the IRS of resources shortchanges American taxpayers,” Sarin said in a comment to Insider. “Dedicated IRS employees working through the enormous paper backlog are doing so with near-obsolete technology, and 1970s level staffing. It’s time to deliver the sustainable resources for a modernized IRS every American can depend on.”

According to a 2021 report from national taxpayer advocate Erin Collins, the IRS’s watchdog, the agency’s workers have to manually transcribe the data from paper returns — meaning that IRS workers have to type in all of the information contained in those stacks of returns.

“Manually entering data from so many paper returns is an enormous task, and transcription errors are common, particularly on longer returns,” Collins wrote in her report.

IRS workers are also working on dated technology. Some of the systems they use for processing returns date back to the 1960’s. Shawn Gunn, a tax examiner at the IRS’s Kansas City facility, previously told Insider that computers are “just old” and, with their dark green screens and white text, reminiscent of those from the movie “Hackers.” Gunn had also experienced the huge volume of paper firsthand, describing hallways and walkways full of carts filled with paper.

The backlog and outdated technology are both side effects of the IRS’s shrinking funding and staffing. In the last decade, the agency’s budget has shrunk by over 20%, according to the Tax Policy Center. At the same time, the workforce has shrunk by 17%. Collins, the taxpayer advocate, estimates that the workload — measured by the number of returns — has grown by 19% during the same period.

The Treasury Inspector General for Tax Administration estimates that, as of the week of March 12, 2022, the IRS had about 4.5 million paper tax returns awaiting processing.

Delays in processing returns have meant that some taxpayers have waited months to get their refund checks. Without those checks, some Americans are struggling to afford childcare, groceries, and even their homes.

“Without long-term, predictable funding, the IRS will continue to face severe limitations, unable to provide the service taxpayers deserve and need,” IRS commissioner Charles Rettig wrote in an op-ed for Yahoo! Money, saying that refund and customer service delays are “frustrating” for both taxpayers and the IRS.

Increased funding for the IRS could make filing a lot more efficient, according to the Treasury Department. In a blog post, Sarin looked at what an “adequately funded tax administrator” might mean for filers, noting that in other countries it’s free and easy to file your taxes. In Sweden, for instance, many taxpayers just have to reply “yes” to a text to confirm their filing.

Source: Business Insider

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