News – Page 8 – Larson Accounting Group

29 de January de 2024

The Internal Revenue Service and partners around the nation today launched the annual Earned Income Tax Credit Awareness Day outreach campaign to help millions of low-to-moderate income working Americans that are eligible to claim the Earned Income Tax Credit (EITC).

For the past 18 years, the IRS has invited community organizations, elected officials, state and local governments, schools, employers and other interested parties to join this national grassroots effort.

According to the most recent figures, approximately 23 million workers and families received about $57 billion in EITC for tax year 2022, and the average amount of EITC received was about $2,541. The IRS estimates that about one in five of EITC eligible taxpayers don’t claim this valuable credit, a statistic that stresses the importance of the annual EITC Awareness Day outreach campaign.

“The IRS and our partners across the nation urge people to look into this frequently overlooked tax credit that can help millions of taxpayers,” said IRS Commissioner Danny Werfel. “On EITC Awareness Day and throughout the filing season, the IRS and our partners work hard to reach eligible taxpayers and provide useful information and resources to help people determine their eligibility and how to properly claim this valuable credit. Even people who don’t normally file might still be eligible for the Earned Income Tax Credit, which can be thousands of dollars.”

Werfel attended a special EITC Awareness Day event Friday in Baltimore sponsored by the CASH (Creating Assets, Savings and Hope) Campaign of Maryland. IRS leaders across the nation are also participating in local events this month highlighting the importance of EITC, which helps millions of taxpayers each year.

The IRS administers the EITC, which Congress originally approved in 1975. It was developed in part to offset the burden of Social Security taxes and provide an incentive to work.

Who is eligible to claim the EITC?

Workers must meet certain requirements and file a tax return, even if they are not required to file due to earned income levels. The IRS estimates that a third of those who qualify for EITC became eligible for the first time this year due to changes in their marital, parental or financial status.

The IRS encourages workers to use the EITC Assistant to check for eligibility or visit Child-related tax benefits comparison for basic eligibility rules.

Eligible workers must have valid Social Security numbers for themselves, their spouse if filing a joint return, and for each qualifying child claimed for the EITC. There are special rules for those in the military or those out of the country.

Those with qualifying children can receive a maximum of $7,430 when claiming the EITC, up from $6,935 in 2022.

Eligible workers between the ages of 25 and 64 with no dependents can also receive up to $600 by claiming the EITC. Married but separated spouses who do not file a joint return may qualify to claim EITC if they meet certain requirements.

EITC is for workers whose income does not exceed the following limits in 2023:

$56,838 ($63,398 married filing jointly) with three or more qualifying children who have valid Social Security numbers (SSNs).
$52,918 ($59,478 married filing jointly) with two qualifying children who have valid SSNs.
$46,560 ($53,120 married filing jointly) with one qualifying child who has a valid SSN.
$17,640 ($24,210 married filing jointly) with no qualifying children with valid SSNs.
Investment income must be $11,000 or less.

Filing options to choose from when claiming the EITC

To get the EITC, workers must file a tax return and claim the credit. The IRS also reminds taxpayers that the quickest way to get a tax refund is by filing an accurate tax return electronically and choosing direct deposit for their refund.

Here are some options on how to claim the EITC:

Free File on IRS.gov. Qualified taxpayers can prepare and file federal income tax returns online free of charge using guided tax preparation software. Free File also provides Free File Fillable Forms to help taxpayers regardless of income level who are comfortable preparing their own returns.

Find a reputable tax professional. The IRS offers tips for choosing a return preparer, including certified public accountants, enrolled agents, attorneys and many others who don’t have a professional credential, along with details about national tax professional groups on IRS.gov.

Free tax preparation assistance. There are thousands of Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) sites across the country available to help taxpayers who are eligible to claim the EITC. Visit IRS.gov, the IRS2go smartphone app or call toll-free 800-906-9887. Taxpayers should bring all required documents and information.

When to expect EITC refunds

Most EITC or Additional Child Tax Credit (ACTC) related refunds should be available in bank accounts or on debit cards by Feb. 27 if taxpayers chose direct deposit and there are no other issues with their tax return. Taxpayers can check Where’s My Refund?for their personalized refund date. Where’s My Refund? will be updated with projected deposit dates for most early EITC/ACTC refund filers by February 17.

Take advantage of other valuable tax credits

Taxpayers should make IRS.gov their first stop to find valuable info this filing season. Even if a taxpayer does not qualify for the EITC, they may be eligible for other credits or deductions. The Interactive Tax Assistant is a helpful tool for taxpayers to see if they qualify for the Child Tax Credit, Additional Child Tax Credit or Credit for Other Dependents.

Source: IRS-2024-22, Jan. 26, 2024

by Larson Accounting

29 de January de 2024

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WASHINGTON — The Internal Revenue Service will hold a free webinar, designed primarily for tax professionals whose clients were affected by the delayed notices during the COVID pandemic.

The webinar will take place on Tuesday, Jan. 30, at 2 p.m. ET. It will reflect last month’s announcement that in general, the IRS will restart collection notices reminding taxpayers of their balance due this year and provide penalty relief on millions of tax returns.

During this free webinar the IRS will:

Discuss the restart of collection notices and letters, including:
- Special reminder letter, LT38 – Reminder, Notice Resumption.
- Changes to typical sequence of automated notices.
- Gradual approach to sending notices during filing season.
Explain penalty relief for tax years 2020 and 2021.
Share helpful IRS resources to resolve tax debt.
Plus, the IRS will host a live question and answer session.

Certificates of completion are being offered. Tax professionals earn up to one continuing education (CE) credit in the category federal tax.

Closed captioning will be offered.

To register for the webinar, visit the Internal Revenue Service webinar website.

Questions? Email cl.sl.web.conference.team@irs.gov.

Source: IRS-2024-23, Jan. 26, 2024

by Larson Accounting

24 de January de 2024

Shorter, clearer letters to reduce taxpayer confusion; about 170 million notices sent to individual taxpayers annually

The Internal Revenue Service today announced work is underway on the Simple Notice Initiative, a sweeping effort to simplify and clarify about 170 million letters sent annually to taxpayers.

Part of the larger transformation work taking place at the IRS with Inflation Reduction Act funding, the Simple Notice Initiative will build off redesigned notice efforts in place for the 2024 tax season and expand on a recent successful pilot involving identity theft letters.

The Simple Notice Initiative will review and redesign hundreds of notices with an immediate focus on the most common notices that individual taxpayers receive. The redesign work will accelerate during the 2025 and 2026 filing seasons, improving common IRS letters going out to individual taxpayers and then expanding into notices going to businesses.

The IRS sends about 170 million notices to individual taxpayers every year, covering a range of issues from claiming the credits and deductions for which they are eligible for as well as meet their tax obligations. These notices are often long and difficult for taxpayers to understand. And they do not always clearly and concisely communicate the next steps a taxpayer must take.

“Simplifying and clarifying these letters will make it easier for taxpayers to understand the tax issues involved,” said IRS Commissioner Danny Werfel. “This will help reduce questions and save headaches for taxpayers, the tax professional community as well as the IRS. Improving these letters is also critical to our internal operations at the IRS, and an important part of our transformation efforts. Clearer letters can create a ripple effect, reducing taxpayer phone calls and visits and freeing up IRS staff to help others.”

This initiative builds on the IRS Paperless Processing initiative announced in August 2023 to advance the goal of providing world-class customer service to taxpayers. With these initiatives, taxpayers have the option to go paperless and conveniently submit necessary responses online, and taxpayers will receive clearer and more concise notices from the IRS, so they better understand the actions they need to take.

Filing season 2024: IRS reviewed, redesigned 31 notices

The Simple Notice Initiative builds on the IRS’s continuous effort to improve notices. During the last year, the IRS reviewed and redesigned 31 notices in time for this year’s tax season. The IRS sent about 20 million of these notices in calendar year 2022.

These include notices to taxpayers who served in combat zones that may be eligible for tax deferment, notices that remind a taxpayer that they may have unfiled returns and notices that remind a taxpayer about their balance due and where they can go for assistance.

Filing season 2025: IRS will review, redesign most common notices sent to individual taxpayers

By filing season 2025, the IRS will review and redesign the most common notices that individual taxpayers receive. The IRS will focus on up to 200 notices that make up about 90% of total notice volume sent to individual taxpayers. This represents about 150 million notices sent to individual taxpayers in 2022.

These include notices to propose adjustments to a taxpayer’s income, payments, credits, and/or deductions, notices to correct mistakes on a taxpayer’s tax return and notices to remind a taxpayer of taxes owed.

The IRS will be actively engaging with taxpayers and the tax professional community to gather feedback on how these notices should be redesigned.

Filing season 2026 and beyond: IRS will review, redesign notices sent to businesses taxpayers as well as less common notices sent to individual taxpayers

The IRS sends over 40 million notices to business taxpayers every year. In future filing seasons, the IRS will review and redesign notices sent to business taxpayers.

The IRS will also review and redesign less common notices sent to individual taxpayers.

Additional detail on the plan to redesign these notices will be shared in future updates.

Recent notice pilot shows how a redesigned notice can improve taxpayer experience while reducing call volume

The IRS is committed to delivering a better taxpayer experience through notices, over the phone, online and in-person. While taxpayers will always have the option to call, the IRS also wants to make it easier for taxpayers to resolve issues without having to pick up the phone. Plain language notices can help the IRS achieve this goal.

For example, the IRS recently conducted a pilot that sent redesigned versions of Notice 5071C to a subset of taxpayers. The Notice 5071C asks taxpayers to verify their identity and tax return online or over the phone to prevent the processing of fraudulent tax returns. As part of the redesign, the IRS shortened the 5071C notice from seven pages to two pages. The IRS also improved readability of the notice by updating the font and adding visual enhancements such as headers, icons and step-by-step instructions.

The IRS also clarified instructions and added a QR code that directs taxpayers to the IRS webpage where they can respond to the notice online instead of responding over the phone. See below for an overview of improvements that were made.

The IRS sent the redesigned Notice 5071C to 60,000 taxpayers. Compared to taxpayers who received the original notice, there was a 16% reduction in taxpayers who called the IRS as their first action, and a 6% increase in taxpayers who used the online option. The IRS will apply lessons learned from this pilot, among others, to the new initiative. These changes to this notice will be put in place during coming months.

Notice 5071C: Before and after redesign shows changes

Source: IRS-2024-19, Jan. 23, 2024

by Larson Accounting

18 de January de 2024

The Treasury Department and Internal Revenue Service today issued an announcement informing businesses that they do not have to report the receipt of digital assets the same way as they must report the receipt of cash until Treasury and IRS issue regulations.

The Infrastructure Investment and Jobs Act revised the rules that require taxpayers that are engaged in a trade or business to report receiving cash of more than $10,000 by considering digital assets to be cash. Announcement 2024-4PDF provides transitional guidance as Treasury and the IRS implement the new provisions. This particular provision requires Treasury and the IRS to issue regulations before it goes into effect.

The announcement does not affect the rules in effect before the Infrastructure Investment and Jobs Act for cash received in the course of a trade or business, which must be reported on Form 8300, Report of Cash Payments over $10,000 Received in a Trade or Business, within 15 days of receiving the cash.

Treasury and the IRS intend to issue proposed regulations to provide additional information and procedures for reporting the receipt of digital assets, giving the public an opportunity to comment both in writing and, if requested, at a public hearing.

Source: IRS-2024-12, Jan. 16, 2024

by Larson Accounting

12 de January de 2024

More than $482 million recovered from 1,600 millionaires who have not paid tax debts

The Internal Revenue Service announced today continued progress to expand enforcement efforts related to high-income individuals, large corporations and complex partnerships as part of wider efforts to transform the agency.

IRS Commissioner Danny Werfel noted Inflation Reduction Act resources continue to help in a variety of areas. In addition to earlier announcements focusing on further improving taxpayer service during the upcoming 2024 filing season, the IRS has focused IRA resources on strengthening enforcement to pursue complex partnerships, large corporations and high-income, high-wealth individuals who do not pay overdue tax bills.

The IRS shared today progress in its focus on people using partnerships to avoid paying self-employment taxes as well as new details on current enforcement priorities. The IRS is also continuing to pursue millionaires that have not paid hundreds of millions of dollars in tax debt, with an additional $360 million collected on top of the $122 million reported in late October. The IRS has now collected $482 million in ongoing efforts to recoup taxes owed by 1,600 millionaires with work continuing in this area.

“The IRS continues to increase scrutiny on high-income taxpayers as we work to reverse the historic low audit rates and limited focus that the wealthiest individuals and organizations faced in the years that predated the Inflation Reduction Act. We are adding staff and technology to ensure that the taxpayers with the highest income, including partnerships, large corporations and millionaires and billionaires, pay what is legally owed under federal law,” Werfel said. “At the same time, we are focused on improving our taxpayer service for hard-working taxpayers, offering them more in-person and online resources as part of our effort to deliver another successful tax season in 2024. The additional resources the IRS has received is making a difference for taxpayers, and we plan to build on these improvements in the months ahead.”

Werfel highlighted these as part of a quarterly update on the IRS Strategic Operating Plan, the transformational effort using IRA funding. As these initiatives to improve compliance among high-income individuals, complex partnerships and large corporations increase, the IRS continues its work to improve customer service and modernize core technology infrastructure.

Ensuring complex partnerships, large corporations and high-income, high-wealth individual taxpayers pay taxes owed

The IRS is working to ensure large corporate, large partnership and high-income individual filers pay the taxes they owe. Prior to the Inflation Reduction Act, more than a decade of budget cuts prevented the IRS from keeping pace with the increasingly complicated set of tools that the wealthiest taxpayers use to hide their income and evade paying their share. The IRS is now taking swift and aggressive action to close this gap.

Prioritization of high-income cases: The IRS has ramped up efforts to pursue high-income, high-wealth individuals who have either not filed their taxes or failed to pay recognized tax debt, with dozens of revenue officers focused on these high-end collection cases. These efforts are concentrated among taxpayers with more than $1 million in income and more than $250,000 in recognized tax debt. In an initial success, the IRS collected $38 million from more than 175 high-income earners. The IRS last fall began contacting about 1,600 new taxpayers in this category that owe hundreds of millions of dollars in taxes. The IRS has assigned over 900 of these 1,600 cases to revenue officers, with over $482 million collected so far. This brings the total recovered from millionaires through these new initiatives to $520 million.

Pursuing multi-million-dollar partnership balance sheet discrepancies: The IRS has identified ongoing discrepancies on balance sheets involving partnerships with over $10 million in assets, which is an indicator of potential non-compliance. Taxpayers filing partnership returns are showing millions of dollars in discrepancies between end-of-year balances compared to the beginning balances the following year. The number of these discrepancies has been increasing, with many taxpayers not attaching required statements explaining the difference. The IRS announced an initiative to address the balance sheet discrepancy in September and as of the end of October had sent 480 compliance alerts.

Ramp up of audits of 76 largest partnerships leveraging Artificial Intelligence (AI): The complex structures and tax issues present in large partnerships require a focused approach to best identify the highest risk issues and apply resources accordingly. In 2021, the IRS launched the first stage of its Large Partnership Compliance (LPC) program with examinations of some of the largest and most complex partnership returns in the filing population. The IRS announced in September that it would expand this program to additional large partnerships. With the help of AI, the selection of these returns is the result of groundbreaking collaboration among experts in data science and tax enforcement, who have been working side-by-side to apply cutting-edge machine learning technology to identify potential compliance risk in the areas of partnership tax, general income tax and accounting, and international tax in a taxpayer segment that historically has been subject to limited examination coverage. As of December, the IRS had open examinations of 76 of the largest partnerships in the U.S. that represent a cross section of industries including hedge funds, real estate investment partnerships, publicly traded partnerships, large law firms and other industries. On average, these partnerships each have more than $10 billion in assets.

Large Foreign-Owned Corporations Transfer Pricing Initiative: The IRS is increasing compliance efforts on the U.S. subsidiaries of foreign companies that distribute goods in the U.S. and do not pay their fair share of tax on the profit they earn of their U.S. activity. These foreign companies use transfer pricing rules year after year to report losses that are engineered through the improper use of these rules to avoid reporting an appropriate amount of U.S. profits. To crack down on this strategy, as of mid-November the IRS has sent compliance alerts to more than 180 subsidiaries of large foreign corporations to reiterate their U.S. tax obligations and incentivize self-correction.

Expansion of the Large Corporate Compliance program: The Large Business & International Division’s (LB&I) Large Corporate Compliance (LCC) program focuses on noncompliance by using data analytics to identify large corporate taxpayers for audit. LCC includes the largest and most complex corporate taxpayers with average assets of more than $24 billion and average taxable income of approximately $526 million per year. As new accountants come on board in early 2024, LB&I is expanding the program by starting an additional 60 audits of the largest corporate taxpayers selected using a combination of artificial intelligence and subject matter expertise in areas such as cross-border issues and corporate planning and transactions.

Partnership Self-Employment Tax Initiative: As part of the agency’s increased focus on the tax issues applicable to partnerships and partners, the IRS has been increasing compliance to ensure that Self-Employment Contributions Act (SECA) taxes are being properly reported and paid by wealthy individual partners who provide services and have inappropriately claimed to qualify as “limited partners” in state law limited partnerships (such as investment partnerships) not subject to SECA tax. In contrast to wage earners whose employment taxes (Federal Insurance Contributions Act/FICA) are deducted from their paychecks, self-employed individuals are required to report and pay their SECA taxes on their federal income returns. The IRS efforts to date include over 80 audits of wealthy individuals. Additionally, in November 2023, the Tax Court issued an opinion in Soroban Capital Partners LP v. Commissioner that agreed with the IRS’s position that the limited partner exception to SECA tax does not apply to a partner who is “limited” in name only. As a result, partners who actively participated in the state law limited partnership must report their partnership share as net earnings from self-employment subject to SECA tax.

New examples of cases closed since the Inflation Reduction Act passed follow:

In January 2024, two individuals were sentenced to 25 years and 23 years respectively in prison for conspiracy to commit wire fraud, aiding and assisting the filing of false tax returns and money laundering for their role in promoting a fraudulent tax shelter scheme involving syndicated conservation easements.

In December, a Swiss Bank entered into a Deferred Prosecution Agreement (DPA) and agreed to pay approximately $122.9 million to the U.S. Treasury for their role in assisting U.S. taxpayer-clients with evading their U.S. taxes by opening and maintaining undeclared accounts. The bank also maintained accounts of certain U.S. taxpayer-clients in a manner that allowed them to further conceal their undeclared accounts from the IRS. In total, from 2008 through 2014, the bank held 1,637 U.S. Penalty Accounts, with aggregate maximum assets under management of approximately $5.6 billion in January 2008, on behalf of clients who collectively evaded approximately $50.6 million in U.S. taxes.

In December, an individual was sentenced to 10 years and 10 months and ordered to pay more than $130,000 in restitution, another was sentenced to 102 months in prison and ordered to pay more than $2.5M in restitution and a third individual was sentenced to four years in prison and ordered to pay more than $2.5M in restitution for their involvement in a RICO Conspiracy for cyber intrusion and tax fraud. These individuals used the dark web to purchase server credentials for the computer servers of Certified Public Accounting and tax preparation firms across the country.

In December, an individual was sentenced to 28 months in federal prison and ordered to pay over $470,000 in restitution to the IRS for filing a false tax return while working as a money mule for romance scams. The individual opened and maintained bank accounts to collect proceeds from the schemes and to send the money to himself and others overseas.

An individual was sentenced to 57 months in prison for their failure to pay more than $1.35 million of taxes arising from their operation of several restaurants in the Washington, D.C. area. The individual evaded taxes by concealing assets and obscuring the large sums of money they took from the businesses by purchasing property in the name of a nominee entity and causing false entries in the businesses’ books and records to hide personal purchases using business bank accounts.

Hiring additional top talent to pursue high-income individuals, complex partnerships and large corporations

The IRS offered positions to more than 560 new skilled accountants in November and December, key positions in ramping up work to pursue high-wealth individuals, complex partnerships and large corporations that do not pay taxes owed. Importantly, the IRS has been modernizing its hiring processes and holding more direct hiring events to better compete with the private sector and quickly bring top talent on board.

For example, at a December hiring event in Houston, the IRS hired 160 skilled accountants in two days, compressing the typical three to six month hiring process into one day. These events are marketed in advance, and onsite Human Capital Office staff review all applicants’ credentials and ensure they are qualified for the position. Following this initial screening, applicants are interviewed by hiring managers and passed to selecting officials for a final decision. Successful applicants are given tentative offers, sponsored and fingerprinted on site, leaving only background and tax checks to be completed.

Improving taxpayer service

The IRS is focused on helping taxpayers get it right the first time — claiming the credits and deductions they are eligible for and avoiding back-and-forth with the agency when errors arise. To help taxpayers get it right, the IRS is working toward taxpayers being able to seamlessly interact with the agency in the ways that work best for them on the phone, in-person and online. The IRS is expanding in-person service and meeting taxpayers where they are, particularly those in underserved and rural communities. The IRS is continuing to expand Taxpayer Assistance Centers across the country.

Opening Taxpayer Assistance Centers: Currently, the IRS has opened or reopened 54 Taxpayer Assistance Centers since the passage of the Inflation Reduction Act, including four since November:
- Bellingham, Washington
- Eau Claire, Wisconsin
- Washington, Pennsylvania
- Media, Pennsylvania

Taxpayer Assistance Centers, which provide in-person support to local communities across the country, will collectively offer over 8,000 more hours of in-person assistance than they did last filing season.

Taxpayer Assistance Center hiring update: As of the end of December, the IRS has hired 858 employees to staff Taxpayer Assistance Centers. This represents a 410 net increase in Taxpayer Assistance Center staffing compared to Fiscal Year 2022, and IRS continues to hire to replace departing staff.

Taxpayers deserve the same functionality in their online accounts that they experience with their bank or other financial institutions. As detailed in the Strategic Operating Plan, in the next five years, taxpayers will be able to securely file all documents and respond to all notices online and securely access and download their data and account history. The IRS has hit or has in progress several milestones toward this goal, including the launch of Business Tax Account, the expansion of the Document Upload Tool to accept responses to nearly all notices and letters, and the launch of digital mobile-adaptive forms.

Respond to notices online: Taxpayers are now able to respond to notices online. Until Filing Season 2023, when taxpayers received notices for things like document verification, they had to respond through the mail. During Filing Season 2023, taxpayers were able to respond to 10 of the most common notices for credits like the Earned Income and Health Insurance Tax Credits online, saving them time and money. By July 2023, taxpayers had the option to respond to 61 IRS notices and letters, and by October 2023, taxpayers could respond to all notices and letters that do not have a filing or payment action. As of December, the IRS has received more than 45,000 responses to notices via the online tool.

Processing Status for Tax Forms dashboard: The IRS has launched a public facing Processing Status for Tax Formsdashboard listing current processing status for key forms (e.g., 1040, 941) and general correspondence. The IRS operations: Status of mission-critical functions webpage has also been updated to link to the new dashboard. For electronically filed forms, processing status is the typical number of days it currently takes to process a form after receipt from the taxpayer. For paper forms, processing status reflects which month of receipt is currently being processed. The IRS included forms that had significant volumes of submission in paper format and lead to a follow-on action for the taxpayer after submissions are processed. For example, forms that trigger refunds or the receipt of an Individual Taxpayer Identification Number (ITIN). The page is updated weekly to reflect current processing status.

Voice bots on Where’s My Refund? and Where’s My Amended Return?: IRS launched natural voice language voice bots for taxpayers calling about refunds and amended returns. These voice bots allow callers to ask questions using natural language instead of following menu-driven prompts.

In addition, the IRS continues to expand the functionality of several online platforms:

With the latest updates to Individual Online Account, individuals can now save multiple bank accounts, validate bank account information and display their bank name. Individuals can also schedule and cancel payments and expand and revise payment plans.

The IRS launched the second phase of Business Tax Account that expands its capabilities and eligible entity types. As a result, individual partners of partnerships and individual shareholders of S corporation businesses are now eligible for a business tax account, in addition to sole proprietors with an employer identification number (EIN). Eligible entities can now access business tax transcripts and view digital notices and letters.

Enhancements to Tax Pro Account include the ability to manage active client authorizations with the Centralized Authorization File (CAF) database, view and manage active authorizations, and view their individual and business clients’ tax information including business balance due and canceled and returned checks for individuals.

Modernizing technology

On the technology side, the IRS is modernizing decades-old technology to drive the agency’s efforts to provide world-class customer service and protect taxpayers’ data.

Digitalization: The IRS also continues to make significant progress scanning and e-filing paper returns. By the end of February, the IRS will have replaced scanning equipment that is older than five years and the automated mail-sorter machines in the six highest-volume locations, streamlining the process of mail sorting, opening and scanning. As of the end of December, the IRS had scanned more than 1.5 million forms during the 2023 calendar year — more than 484,000 Forms 940, 907,000 Forms 941 and more than 111,000 Forms 1040. Digitization has far-reaching implications for how the IRS can improve service.

Source: IRS-2024-09, Jan. 12, 2024

by Larson Accounting

26 de December de 2023

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As people get ready for tax filing season, it’s important that they select tax return preparers with the skills, education and expertise to prepare tax forms properly. Taxpayers are ultimately responsible for all the information on their tax return, regardless of who prepares it.

There are many types of tax preparers, including certified public accountants (CPAs), enrolled agents, attorneys and others. A taxpayer should choose a tax preparer that works best for their needs.

Here are some tips to help people choose a preparer.

Checklist for choosing a tax pro

Before hiring a tax preparer:

Check the preparer’s history with the Better Business Bureau. Taxpayers can also verify an enrolled agent’s status on IRS.gov.
Ask about fees. Taxpayers should avoid tax return preparers who base their fees on a percentage of the refund or who offer to deposit all or part of their refund into their financial accounts. Taxpayers should be suspicious of preparers claiming they can get larger refunds than other tax preparers.
Ask if the preparer plans to use e-file. The fastest way to get a tax refund is by e-filing and choosing direct deposit.
Choose a firm or individual with a track record. Preparers may need to answer questions about the tax return months or even years later.
Ensure the preparer signs the tax return and includes their Preparer Tax Identification Number. Paid tax return preparers must have a PTIN and include it on any tax return they prepare.
Consider the person’s credentials. Only attorneys, CPAs and enrolled agents can represent taxpayers before the IRS in tax matters. Other tax return preparers who participate in the IRS Annual Filing Season Program have limited practice rights to represent taxpayers during audits of returns they prepared.

Watch out for tax preparer scams

Tax return preparer fraud is a common tax scam. Here are tips on avoiding unscrupulous tax preparers.

The IRS is committed to investigating paid tax return preparers who act improperly. Taxpayers can file a complaint if they have been financially impacted by a tax return preparer’s misconduct or improper tax preparation practices.

Source: IRS Dec. 2023

by Larson Accounting

11 de December de 2023

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The Internal Revenue Service today urged taxpayers to take important actions now to help them file their 2023 federal income tax return next year.
This is the second in a series of reminders to help taxpayers get ready for the upcoming filing season. The Get ready page on IRS.gov outlines steps taxpayers can take now to make filing easier in 2024.

Here’s what’s new and what to consider before filing next year.

IRS Online Account enhancements

Taxpayers and Individual Taxpayer Identification Number (ITIN) holders can now access their Online Account and view, approve and electronically sign power of attorney and tax information authorizations from their tax professional.

With an Online Account, individuals can also:

View their tax owed and payment history and schedule payments.
Request tax transcripts.

View or apply for payment plans.
See digital copies of some IRS notices.
View key data from their most recently filed tax return, including adjusted gross income.
Validate bank accounts and save multiple accounts, eliminating the need to re-enter bank account information every time they make a payment.

Avoid refund delays and understand refund timing

Many different factors can affect the timing of a refund after the IRS receives a tax return. Although the IRS issues most refunds in less than 21 days, the IRS cautions taxpayers not to rely on receiving a 2023 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 to process if IRS systems detect a possible error, the return is missing information or there is suspected identity theft or fraud.

Also, the IRS cannot issue refunds for people claiming the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) before mid-February. The law requires the IRS to hold the entire refund – not just the portion associated with the EITC or ACTC. The IRS expects most EITC and ACTC related refunds to be available in taxpayer bank accounts or on debit cards by Feb. 27, 2024, if the taxpayer chose direct deposit and there are no other issues with the tax return.

Last quarterly payment for 2023 is due on Jan. 16, 2024

Taxpayers may need to consider estimated or additional tax payments due to non-wage income from unemployment, self-employment, annuity income or even digital assets. The Tax Withholding Estimator on IRS.gov can help wage earners determine if there’s a need to consider an additional tax payment to avoid an unexpected tax bill when they file.

Gather 2023 tax documents

Taxpayers should develop a record keeping system − electronic or paper − that keeps important information in one place. This includes year-end income documents like Forms W-2 from employers, Forms 1099 from banks or other payers, Forms 1099-K from third party payment networks, Forms 1099-NEC for nonemployee compensation, Forms 1099-MISC for miscellaneous income or Forms 1099-INT for interest paid, as well as records documenting all digital asset transactions.

When they have all their documentation, taxpayers are in the best position to file an accurate return and avoid processing or refund delays.

1099-K reporting threshold delayed

Following feedback from taxpayers, tax professionals and payment processors and to reduce taxpayer confusion, the IRS delayed the new $600 Form 1099-K reporting threshold for third party settlement organizations for calendar year 2023.

As the IRS continues to work to implement the new law, the agency will treat 2023 as an additional transition year. This will reduce the potential confusion caused by the distribution of Forms 1099-K sent to many taxpayers who wouldn’t expect one and may not have a tax obligation. As a result, reporting will not be required unless the taxpayer receives over $20,000 and has more than 200 transactions in 2023.

Given the complexity of the new provision and the large number of individual taxpayers affected, the IRS is planning for a threshold of $5,000 for tax year 2024 as part of a phase-in to implement the $600 reporting threshold enacted under the American Rescue Plan (ARP).

It is important for taxpayers to understand why they received a Form 1099-K, then use the form and their other records to help figure and report their correct income on their tax return. It is also important for taxpayers to know what to do if they received a Form 1099-K but shouldn’t have.

There’s no change to the taxability of income. All income, including from part-time work, side jobs or the sale of goods is still taxable. Taxpayers must report all income on their tax return unless it’s excluded by law, whether they receive a Form 1099-K, a Form 1099-NEC, Form 1099-MISC or any other information return.

Understand energy related credits

Taxpayers who bought a vehicle in 2023 should review the changes under the Inflation Reduction Act of 2022 to see if they qualify for the credits for new electric vehicles purchased in 2022 or before or the new clean vehicles purchased in 2023 or after. To claim either credit, taxpayers will need to provide the vehicle’s VIN and file Form 8936, Qualified Plug-in Electric Drive Motor Vehicle Credit, with their tax return.

If taxpayers made energy improvements to their home, tax credits are available for a portion of qualifying expenses. The Inflation Reduction Act of 2022 expanded the credit amounts and types of qualifying expenses. To claim the credit, taxpayers need to file Form 5695, Residential Energy Credits, Part II, with their tax return.

Speed tax refunds with direct deposit

Filing electronically and choosing direct deposit is the fastest way for taxpayers to get their tax refund. Direct deposit gives individuals access to their refund faster than a paper check.

Those without a bank account can learn how to open an account at an FDIC insured bank or through the national Credit Union Locator tool. Veterans should see the Veterans Benefits Banking Program for access to financial services at participating banks.

Prepaid debit cards or mobile apps may allow direct deposit of tax refunds. The prepaid debit cards or mobile apps must have routing and account numbers associated with them to enter on the tax return. Check with the mobile app provider or financial institution to confirm which numbers to use.

Source: IRS-2023-235, Dec. 11, 2023

by Larson Accounting

7 de December de 2023

As part of continuing efforts to combat dubious Employee Retention Credit (ERC) claims, the Internal Revenue Service is sending an initial round of more than 20,000 letters to taxpayers notifying them of disallowed ERC claims. IRS is disallowing claims to entities that did not exist or did not have paid employees during the period of eligibility to prevent improper ERC payments from being made to ineligible entities.

The letters are being sent as the IRS continues increased scrutiny of ERC claims in response to misleading marketing campaigns that have targeted small businesses and other organizations. The IRS mailing is the latest in an expanded compliance effort that includes a special withdrawal program for those with pending claims who realize they may have filed an inaccurate tax return. Later this month, a separate voluntary disclosure program will be unveiled allowing those who received questionable payments to come in and avoid future IRS action.

After an initial review this fall, the IRS determined that a large block of taxpayers did not meet basic criteria for the credit. Starting this week, taxpayers who are ineligible for the credit will begin receiving copies of Letter 105 C, Claim Disallowed.

This group of letters will cover taxpayers ineligible for the ERC either because their entity did not exist or did not have employees for the time period when the credit was claimed.

“With the aggressive marketing we saw with this credit, it’s not surprising that we’re seeing claims that clearly fall outside of the legal requirements,” said IRS Commissioner Danny Werfel. “The action we are taking today is part of an initial set of steps in our compliance work in this area, and more letters will be going out in the near future, including both disallowance letters and letters seeking the return of funds erroneously claimed and received.”

“As we continue our audit and criminal investigation work involving the Employee Retention Credits, we continue to urge people who submitted a claim to review the rules with a trusted tax professional. If they filed an inaccurate claim, we urge them to consider withdrawing their pending claim or use the upcoming disclosure program to repay improper refunds to avoid future action.”

Following concerns about aggressive ERC marketing from tax professionals and others, the IRS announced Sept. 14 a moratorium on processing new ERC claims through at least the end of 2023. The IRS noted that enhanced compliance reviews of existing claims submitted before the moratorium is critical to protect against fraud and also to protect businesses and organizations from facing penalties or interest payments stemming from bad claims pushed by promoters.

When properly claimed, the ERC is a refundable tax credit designed for businesses that continued paying employees during the COVID-19 pandemic while their business operations were either fully or partially suspended due to a government order or had a significant decline in gross receipts during the eligibility periods.

In July, the IRS said it was shifting its focus to review ERC claims for compliance concerns, including intensifying audit work and criminal investigations on promoters and businesses filing dubious claims. The IRS has hundreds of criminal cases being worked, and thousands of ERC claims have been referred for audit.

20,000 letters focus on two ERC problem areas

The mailing reflects just part of the ongoing IRS review of these claims. In this group, two categories of claims have been identified and are being disallowed:

Entity not in existence during period of eligibility: The ERC applies to qualified wages for periods between March 13, 2020, and Dec. 31, 2021. Entities established after Dec. 31, 2021, are not entitled to the ERC under the law passed by Congress.

There are no paid employees during the period of eligibility: The ERC is intended as a credit against qualified wages paid. Entities that did not pay any wages are not eligible for ERC.

The IRS respects taxpayer rights, and the disallowance letter will explain that a taxpayer that disagrees with the disallowance can respond with documentation that supports their eligibility or claim amount, or they can file an administrative appeal.

The disallowance letters that identify ineligible claims before they’re paid serve several purposes that help taxpayers and tax administration. They:

Help ineligible taxpayers avoid audits, repayment, penalties and interest,
Protect taxpayers by preventing an incorrect refund from going to an ERC promoter, and
Save IRS resources by disallowing incorrect credits before they enter the audit process.

The IRS plans additional letters beyond the disallowance letters. Plans are also being finalized for a special voluntary disclosure program involving ERC claims that will be announced later this month.

The IRS is also continuing to review ERC claims and may request more information from taxpayers to support their ERC claim.

Source: IRS-2023-230, Dec. 6, 2023

by Larson Accounting

5 de December de 2023

To wrap up National Tax Security Awareness Week, the Internal Revenue Service and the Security Summit partners today reminded taxpayers and tax professionals to stay alert against emerging scams during the upcoming filing season and throughout the year.

With identity thieves constantly changing tactics to try to steal information from taxpayers and businesses, the Security Summit partners remind people to watch out for a variety of aggressive schemes that can surface on email, by text, over the phone or through the mail.

These threats are present year-round, but the approach of tax season means that identity thieves will intensify efforts trying to impersonate the IRS and others involved in tax and financial work to get sensitive information.

Identity thieves also use recent news events, including tragedies, to try tricking taxpayers. And in another common tax season scam, identity thieves will pose as new, potential clients to tax professionals by email or over the phone in hopes of obtaining access to company systems. Ultimately, successful attempts to get this information means fraudsters can try filing fake tax returns with a goal of getting a refund.

“Identity thieves are relentless and use a variety of techniques. As Tax Security Awareness Week concludes, we urge people to be careful with their personal information and be wary of email and text scams,” said IRS Commissioner Danny Werfel. “With people anxious to receive the latest information about a refund or other issues during tax season, scammers will regularly pose as the IRS, a state tax agency or others in the tax industry. People should be incredibly wary about unexpected messages that can be an elaborate trap by scam artists, especially during filing season.”

During National Tax Security Awareness Week, now in its eighth year, the Security Summit partnership of the IRS, state tax agencies and the nation’s tax community work to raise awareness among taxpayers, tax professionals and the business community about the importance of safeguarding information to protect against identity theft. The Security Summit formed in 2015 to combat tax-related identity theft through better public-private sector coordination as well as strengthening internal protections in the tax community and raising public awareness about security threats.

With the tax season fast approaching, the Security Summit partners remind taxpayers and others to take extra steps to protect their financial and tax information. As the IRS and the Summit partners have strengthened their internal defenses in recent years to protect against fraud, identity thieves have increasingly focused on more elaborate ways to obtain sensitive taxpayer information in hopes of evading systemic defenses by the IRS and the Summit partners in tax community.

In this final installment of the National Tax Security Week Awareness series, the Summit partners urged taxpayers and tax professionals to be alert to fake communications posing as legitimate organizations in the tax and financial community, including the IRS and states. These messages can arrive in many ways, including an unsolicited text or email to lure unsuspecting victims to provide valuable personal and financial information that can lead to identity theft. These include:

Phishing is an email sent by fraudsters claiming to come from the IRS or another legitimate organization, including state tax organizations or a financial firm. The email lures the victims into the scam by a variety of ruses such as enticing victims with a phony tax refund or frightening them with false legal/criminal charges for tax fraud.
Smishing is a text or smartphone SMS message that uses the same technique as phishing. Scammers often use alarming language like, “Your account has now been put on hold,” or “Unusual Activity Report” with a bogus “Solutions” link to restore the recipient’s account. Unexpected tax refunds are another potential target for scam artists.

The IRS initiates most contacts through regular mail, which means taxpayers shouldn’t be getting an unexpected message by email, text or social media regarding a bill or tax refund.

The Summit partners remind taxpayers and others never to click on any unsolicited communication claiming to be the IRS or others because it may surreptitiously load malware. It may also be a way for malicious hackers to load ransomware that keeps the legitimate user from accessing their system and files.

Individuals should never respond to tax-related phishing or smishing or click on the URL link. Instead, the scams should be reported by sending the email or a copy of the text/SMS as an attachment to phishing@irs.gov.

Taxpayers can also report scams to the Treasury Inspector General for Tax Administration or the Internet Crime Complaint Center. The Report Phishing and Online Scams page at IRS.gov provides complete details. The Federal Communications Commission’s Smartphone Security Checker is a useful tool against mobile security threats.

The IRS also warns taxpayers to be wary of messages that appear to be from friends or family but are possibly stolen or compromised email or text accounts from someone they know. This remains a popular way to target individuals and tax preparers for a variety of scams. Individuals should verify the identity of the sender by using another communication method; for instance, calling a number they independently know to be accurate, not the number provided in the email or text.

Signs that a scam may be underway

Taxpayers should watch for a number of tell-tale signs that could be an indication that they have been a victim of identity theft or a tax scam. Among some of the signs are:

Taxpayers receiving a tax transcript in the mail from the IRS that was not ordered.
Taxpayers receiving an unrequested Employer Identification Number.
Taxpayers receiving W-2’s from an unknown employer.
Taxpayers unexpectedly getting a notice or an email from a tax preparation company that is:
- Confirming access to an existing online account.
- Disabling an existing online account.
- Confirming a new online account.
Getting a letter from the IRS during a year that the taxpayer didn’t earn income or a tax return hadn’t been filed. In this situation, it’s possible an identity thief has submitted a tax return in the honest taxpayer’s name. In this situation, where the taxpayer didn’t earn money or file a return, the warning sign is a letter showing:
- Additional tax is owed.
- A refund was offset because of a balance due.
- Collection actions have been taken.

Generally, the IRS starts with a mailed paper bill to a person who owes taxes. If a taxpayer wants to verify what taxes they owe the IRS, they should view tax account information. But they should not click on links in email or texts saying they owe a bill.

Protect against becoming a victim, again

Taxpayers who believe they’re victims of tax-related identity theft – and who have not received an IRS letter alerting them to ID theft – should complete Form 14039, Identity Theft AffidavitPDF.

The IRS will work to verify the legitimate taxpayer, clear the fraudulent return from their account and generally place a special marker on the account that will generate an IP PIN each year for the taxpayer who is a confirmed identity theft victim. This ensures that the criminal does not come back in the future claiming to be the victim and trying to commit the fraud yet again.

In most tax-related identity theft cases, there is no need for taxpayers to file Form 14039, Identity Theft AffidavitPDF. That’s because the IRS identifies a suspicious tax return based on hundreds of processing filters and pulls the suspicious return for review. The IRS will send a letter to the taxpayer and will not process the tax return until hearing back from the taxpayer.

Help for taxpayers: Get an IRS Identity Protection PIN

An IP PIN protects a taxpayer’s account, even if they don’t need to file a tax return, by rejecting any e-filed tax return filed not using the unique PIN. New IP PINs are sent automatically from the IRS every year for added security. Once an individual enrolls in the IP PIN program, there is no way to opt-out. To obtain an IP PIN, taxpayers can visit the IRS online tool Get an IP PIN.

Create a personal IRS account online directly with the IRS

Taxpayers can create an IRS Online Account before scammers can use their stolen personal information to create one first. An IRS Online Account usually only takes five to 10 minutes to set up. Once an account is created, scammers can’t create a fraudulent one for the same person.

Reporting scams and tax fraud

Taxpayers should report suspicious IRS, Treasury or tax-related online or email phishing scams to phishing@irs.gov. They should not click on any links, open attachments or reply to the sender.

If taxpayers receive an IRS-related phone call, but do not owe taxes, they should hang up immediately and contact the Treasury Inspector General for Tax Administration to report the IRS impersonation scam call. The caller ID and callback number can be reported to phishing@irs.gov with the subject line of “IRS Phone Scam.”

Source: IRS-2023-229, Dec. 1, 2023

by Larson Accounting

5 de December de 2023

The Department of the Treasury and the Internal Revenue Service today issued two items of guidance on the excluded entity restriction of the section 30D clean vehicle credit, as amended by the Inflation Reduction Act. Under the excluded entity restriction, vehicles are not eligible for the clean vehicle credit if the battery contains battery components manufactured or assembled or applicable critical minerals extracted, processed or recycled by a foreign entity of concern (FEOC).

The proposed regulations provide definitions and proposed rules for qualified manufacturers of vehicles to determine eligibility for the clean vehicle credit regarding the excluded entity restrictions. In particular, the proposed regulations provide rules for determining whether applicable critical minerals (and their associated constituent materials) and battery components are FEOC compliant, meaning such materials do not violate the excluded entity provision.

Revenue Procedure 2023-38PDF provides procedural rules for qualified manufacturers of new clean vehicles to comply with the reporting, certification, and attestation requirements regarding the excluded entity restriction, under which the IRS, with analytical assistance from the Department of Energy, will review compliance with the excluded entity restrictions. In addition, this revenue procedure updates and consolidates the procedural rules for qualified manufacturers with respect to the clean vehicle credit, the previously-owned clean vehicle credit, and the qualified commercial clean vehicle credit.

Excluded Entity Restrictions

Section 30D provides a credit for new clean vehicles that are placed in service by the taxpayer during the taxable year, worth a maximum credit of $7,500 per vehicle, consisting of $3,750 if certain critical minerals requirements are met and $3,750 if certain battery components requirements are met.

Under the excluded entity restriction, in order to be eligible for the section 30D credit, vehicles placed in service beginning in 2024 must not have batteries containing battery components manufactured or assembled by a FEOC. In addition, vehicles placed in service beginning in 2025 must have not batteries containing applicable critical minerals extracted, processed, or recycled by a FEOC.

The proposed regulations regarding the section 30D credit incorporate the statutory definition of FEOC from the IIJA, which is administered by the Department of Energy (DOE), as well as implementing guidance promulgated by the DOE. In addition, the proposed regulations provide due diligence requirements for qualified manufacturers; specific rules for the determination of when applicable critical minerals (and associated constituent materials), battery components, battery cells, and batteries are compliant with the FEOC rules; a regime for review of FEOC-compliance determinations; and penalty rules.

For more information about tax benefits from the Inflation Reduction Act, go to Inflation Reduction Act of 2022.

Source: IRS-2023-228, Dec. 1, 2023

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