Tax 2022 – Page 2 – Larson Accounting Group

26 de May de 2022

Taxpayers can now track refunds for past two years

The Internal Revenue Service made an important enhancement to the Where’s My Refund? online tool this week, introducing a new feature that allows taxpayers to check the status of their current tax year and two previous years’ refunds.

Taxpayers can select any of the three most recent tax years to check their refund status. They’ll need their Social Security number or ITIN, filing status and expected refund amount from the original filed tax return for the tax year they’re checking.

Previously, Where’s My Refund? only displayed the status of the most recently filed tax return within the past two tax years. Information available to those calling the refund hotline will be limited to the 2021 tax return.

Using Where’s My Refund?, taxpayers can start checking the status of their refund within:

24 hours after e-filing a tax year 2021 return.
Three or four days after e-filing a tax year 2019 or 2020 return.
Four weeks after mailing a return.

The IRS reminds taxpayers that Online Account continues to be the best option for finding their prior year adjusted gross income, balance due or other type of account information.

“We encourage those who expect a refund, but requested an extension, to file as soon as they’re ready. We process returns on a first-in basis, so the sooner the better,” said IRS Commissioner Chuck Rettig. “There’s really no reason to wait until October 17 if filers have the relevant information to file now. Free File is still available for extension recipients to use to prepare and file their federal tax return for free.”

Electronic filing is open 24/7 and the IRS continues to receive returns and issue refunds. Once taxpayers have filed, they can track their refund with Where’s My Refund?

About the Where’s My Refund? tool

This helpful tool, accessible on IRS.gov or the IRS2Go mobile app, allows taxpayers to track their refund through three stages:

Return received.
Refund approved.
Refund sent.

The tool is updated once a day, usually overnight, and gives taxpayers a projected refund issuance date as soon as it’s approved.

It’s also one of the most popular online features available from IRS. The Where’s My Refund? tool was developed in 2002 and was used by taxpayers more than 776 million times in 2021.

Enhancing taxpayer experience & IT modernization

The IRS continues to enhance the customer experience by enhancing and expanding digital tools that deliver improved services to taxpayers.

“The IRS is committed to identifying opportunities to make improvements in real time for taxpayers and the tax professional community,” said Rettig. “This enhancement to Where’s My Refund? is just one of many.”

Additional refund status information

There’s no need to call the IRS to check on refund status unless it has been more than 21 days since the return was filed or the tool says the IRS can provide more information.

If the IRS needs more information to process the return, the taxpayer will be contacted by mail.

For more information about checking the status of a tax refund, please visit Where’s My Refund?

Source: IRS

by Larson Accounting

18 de May de 2022

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The IRS said Thursday that it destroyed approximately 30 million unprocessed information returns because its “antiquated technology” forced it to dispose of the paper documents and vowed to process all such information returns that it received in 2021 and 2022.

The IRS statement was in response to an audit report by the Treasury Inspector General for Tax Administration (TIGTA) that described the document destruction. In that report released Monday, TIGTA recommended that the IRS develop a systemwide strategy to increase electronic filing of tax returns and forms.

The AICPA in a statement Friday called the document destruction “concerning,” considering the IRS’s struggles to process returns timely for the past two years, and called upon the Service to provide further details. The AICPA also noted it has urged the IRS to implement specific recommendations for reducing its backlog more quickly and to provide relief to taxpayers.

“IRS management’s decision to destroy information return documents due to the processing backlog raised numerous questions regarding IRS’s decision-making and risk assessment process,” Ed Karl, CPA, CGMA, the AICPA’s vice president–Tax Policy & Advocacy, said in the statement.

In its audit report, TIGTA noted that paper filings of the documents, including of many that currently cannot be e-filed, impose higher processing costs for the government and deny taxpayers the benefits of e-filing, including convenience, security, and assured delivery. Processing paper filings also imposes logistical challenges, TIGTA reported, including storage and untimely processing.

The IRS’s inability to process backlogs of paper-filed tax returns that had built up during the COVID-19 pandemic contributed to its decision to destroy about 30 million paper-filed information return documents in March 2021, TIGTA reported.

TIGTA also had reported the forms’ destruction in a September 2021 audit report, Effects of the COVID-19 Pandemic on Business Tax Return Processing Operations. In that report, TIGTA said it learned of the incident in its “walkthroughs” of the Service’s Ogden, Utah, processing center, and related some details of its discussion about it with IRS managers.

Information returns are furnished to taxpayers and filed with the IRS, usually reporting income or another tax item that taxpayers then report on an income tax return or retain in their records to support tax return entries. Examples include Form 1099-MISC, Miscellaneous Information.

However, taxpayers in some cases fail to include the reported income or item or do not report it properly. To enforce the proper inclusion of reported items, the IRS conducts what it calls post-processing compliance matches. First, the information returns are scanned into the IRS’s computer systems and then matched against the returns of taxpayers with respect to whom they were filed. One such IRS matching program is its Automated Underreporter Program.

TIGTA reported that when asked about the destruction of the information returns, IRS managers said that the system used to process the returns had to be taken offline to program updates for the next filing season.

In its statement Thursday, the IRS reiterated that rationale, saying the destroyed returns were a small fraction of the 3.2 billion information returns processed in 2020, and most were in the Form 1099 series. All but 1% of those 3.2 billion forms were “matched to corresponding tax returns and processed,” the IRS stated. The remaining 1% were destroyed “due to a software limitation and to make room for new documents relevant to the pending 2021 filing season.”

The IRS also stated that taxpayers and the payers of income that filed the forms have not been subject to penalties resulting from the destruction, and that there were “no negative taxpayer consequences.”

“Broadly, this situation reflects the significant issues posed by antiquated IRS technology,” the IRS stated, adding that in 2020, the Service placed a higher priority on processing tax returns, also backlogged, to issue taxpayer refunds amid the pandemic.

The AICPA’s Karl noted that the AICPA had urged additional taxpayer relief measures during the pandemic, including from penalties.

“We are encouraged that the IRS statement indicated that taxpayers and payors have and will not be subject to penalties,” Karl stated. “However, the AICPA believes that the IRS should be transparent with their remediation strategy to ensure that taxpayers who attempt to be in compliance, and payors who have been compliant with the information reporting requirements, do not have penalties imposed on them in the future.”

The September 2021 TIGTA report identified the higher-priority returns specifically as those in the Form 941 series, on which employers report payroll taxes. Many such returns in 2021 included claims for the employee retention credit.

TIGTA also identified SCRIPS (Service Center Recognition Image Processing System) as the affected system. SCRIPS, according to Internal Revenue Manual (IRM) Section 3.41.269.1 and IRS News Release 93-20, uses imaging and character recognition and is the IRS’s primary means of converting paper information returns into data in a dedicated database. Paper returns are scanned as they are received, but the IRM describes instances in which they cannot be scanned and must be manually processed.

System constraints require the IRS to process the paper information returns by the end of the calendar year in which they were received, the IRS said Thursday, meaning that those received in 2020 could no longer be processed after the 2021 filing season began. The Service also noted that taxpayers received a copy of the destroyed information returns, which they could have used in filing an accurate return.

The decision involved discussions within the IRS’s Wage and Investment and Small Business/Self-Employed (SB/SE) divisions, according to the earlier TIGTA report. The difficulty of retrieving the paper forms was one factor in deciding to destroy them. SB/SE managers conducted a risk assessment to assess what effect the documents’ destruction would have on its post-processing compliance activities.

But details about that risk assessment have not been divulged, as Karl noted in the statement.

“The IRS’s recent statement provided some of the answers, but American taxpayers deserve to know why this decision was made and how it might impact them,” Karl said. “The IRS should continue to operate with transparency on this issue.”

Despite the reasons the IRS had for destroying the information returns, the Service said Thursday it will not do so again in the foreseeable future.

“The IRS is planning to process all paper information returns received in 2021 and 2022,” the statement said.

It was not clear how that statement could apply to information returns received in 2021, given what the IRS said was its inability due to programming constraints to process information returns received in one year after the next year’s filing season begins.

Nor was it immediately clear how many taxpayers may have failed to properly include the reported tax items on the destroyed information returns, or if the IRS has any means or plan to identify those taxpayers and amounts.

Source: The Tax Adviser

by Larson Accounting

2 de May de 2022

WASHINGTON — During National Small Business Week, May 1 to 7, the IRS is highlighting tax benefits and resources tied to the Small Business Administration theme for this year’s celebration: “Building a Better America through Entrepreneurship.”

During National Small Business Week, the Internal Revenue Service wants taxpayers to know there are free resources on IRS.gov for those that are starting a business. Small businesses play a pivotal role in the nation’s economy. The IRS has a variety of resources available to help employers meet their tax responsibilities as well as help their employees.

Selecting a business structure

When beginning a business, taxpayers must decide what form of business entity to establish. The form of business determines which income tax return form must be filed. The most common business structures are:

Sole proprietorship – When someone owns an unincorporated business by themselves.
Partnerships – The relationship between two or more people to do trade or business.
Corporations – In forming a corporation, prospective shareholders exchange money, property, or both, for the corporation’s capital stock.
S Corporations – Are corporations that elect to pass corporate income, losses, deductions and credits through to their shareholders for federal tax purposes.
Limited Liability Company (LLC) – Are allowed by state statute and may be subject to different regulations. The IRS will treat an LLC as either a corporation, partnership, or as part of the owner’s tax return (e.g., sole proprietorship) depending on elections made by the LLC and its number of members.

Understanding business taxes

The form of business being operated determines what taxes must be paid and how to pay them. The following are the four general types of business taxes:

Income tax – All businesses except partnerships must file an annual income tax return. Partnerships file an information return.
Self-employment tax – Is a social security and Medicare tax primarily for individuals who work for themselves. Payments contribute to the individual’s coverage under the social security system.
Employment tax – When small businesses have employees, the business has certain employment tax responsibilities that it must pay and forms it must file.
Excise tax – Excise taxes are imposed on various goods, services and activities. Such taxes may be imposed on the manufacturer, retailer or consumer, depending on the specific tax.

Note: Generally, business owners must pay taxes on income, including self-employment tax, by making regular payments of estimated tax during the year.

Knowing when to get an Employer Identification Number (EIN)

An Employer Identification Number (EIN) is also known as a Federal Tax Identification Number and is used to identify a business entity. Generally, businesses need an EIN. This is a free service offered by the Internal Revenue Service and business owners can get their EIN immediately.

Keeping good records

Maintaining adequate records will help small businesses monitor their progress, prepare financial statements, identify sources of income, keep track of deductible expenses, keep track of their basis in property, prepare their tax returns and support items reported on their tax returns. Taxpayers should maintain their records for at least 3 years.

Choosing the business year

Small businesses must figure their taxable income on the basis of a tax year. A “tax year” is an annual accounting period for reporting income and expenses. Tax years small businesses can use are:

Calendar year – 12 consecutive months beginning January 1 and ending December 31.
Fiscal year– 12 consecutive months ending on the last day of any month except December. A 52-53-week tax year is a fiscal tax year that varies from 52 to 53 weeks but does not have to end on the last day of a month.

Source: IRS

by Larson Accounting

27 de April de 2022

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The IRS is returning employees who used to process tax returns and other paperwork back to their old jobs for the next eight months to help the agency cut through its massive backlog, Commissioner Chuck Rettig said in an internal email Wednesday night.

Current resources simply aren’t enough to overcome the challenge, he said, so he’s pulling people out of their new posts to leverage their prior experience.

“This is an all-hands-on-deck situation to help people as quickly as possible and reduce the stress on employees who have been and continue to face unprecedented levels of inventory to be worked,” Rettig wrote in his email to employees.

The plan involves reassigning agency employees who previously worked in the IRS accounts management group but have moved into other jobs at the IRS in the past two fiscal years. An IRS spokesperson said the moves would involve 1,200 workers, though more could be reassigned going forward.

Rettig’s email said the recall includes former customer service representatives, tax examiners, clerks or others who had support experience at IRS offices within the last two fiscal years. Other positions such as managers and analysts who wouldn’t directly deal with case closures were excluded.

The IRS had previously said some employees could be reassigned.

Pandemic starts pileup: The pandemic that began nearly two years ago forced the IRS to temporarily close many facilities nationwide and shift most employees into telework, which meant voluminous amounts of mail the agency receives from taxpayers started piling up.

While workers put a dent into it during the first year of the problem, the mail backlog snowballed last year as the IRS also managed large parts of pandemic relief legislation, including economic impact payments, Child Tax Credit payments for individuals and families, and tax breaks for businesses.

The paper processing problems have delayed tax refunds and also triggered automatic notices to taxpayers that they owe money and may be assessed additional taxes, even though in many cases they’d already replied to previous notices but those replies were sitting in mail piles.

The IRS entered the start of tax filing season this year, which began Jan. 24, with more than 8 million original and amended individual returns unprocessed, another roughly 1.5 million unprocessed original and amended business returns and close to 5 million other letters and documents from taxpayers in response to IRS notices.

Inventory surge team: Rettig said former accounts management employees “are in the best position to provide the much needed skills and support to serve the taxpayers represented in these inventories.” They’re being enlisted as part of what Rettig called “a Servicewide initiative” to quickly establish an inventory surge team.

IRS management has briefed the union that represents most IRS employees, the National Treasury Employees Union, and Rettig said negotiations would begin soon. No workers involved in the reshuffling will receive less pay than they do now or be moved from their current work locations, the IRS spokesperson said.

The union said in a statement that the IRS “has the right to take actions like this in order to accomplish the agency’s mission, and bargaining with the union will not stand in the way. In fact, during bargaining, local NTEU leaders intend to provide several suggestions to the agency for making the surge initiative as effective as possible.”

Chad Hooper, executive director of the Professional Managers Association, which represents IRS managers ineligible for union membership, said the group was “generally supportive of this plan.” But, in a statement, he raised numerous questions about it, including how it would affect customer service and other backlogs at the agency.

Hooper said “there are significant case inventories across the Service, for example in Collections, Examination, the Independent Office of Appeals, and the Taxpayer Advocate Service.”

The IRS expects to return reassigned employees to their current positions at the end of September, when the 2022 federal fiscal year ends.

Source: Politico

by Larson Accounting

25 de April de 2022

The Internal Revenue Service, faced with a backlog of millions of tax returns from last year, is reassigning workers to deal with the stacks of unprocessed paper. But the IRS faces an uphill task, and it seems Congress is unlikely to provide much help in the near future.

National Taxpayer Advocate Erin Collins recently told members of the Senate Finance Committee that the agency needs to get to a “stable and healthy condition so it can perform its core mission.” Collins told panel members on Thursday that as of early February, the tax collection agency had some 23.5 million tax returns and other documents, including correspondence that require manual processing, in its inventory.

She said the IRS reports that “all paper and electronic individual refund returns received prior to April 2021 have been processed if the return had no errors and did not require further review.” But she added, “by implication, that means returns filed as far back as April of last year are still awaiting processing.”

The IRS has taken steps to deal with the backlog and prepare for the current tax filing season, which began late last month and ends on April 18. Steps include assigning some 1,200 employees to help process amended returns and correspondence. The agency is also now establishing a “second surge team to put additional resources on the processing challenges,” she said.

Collins said the IRS has also announced “a welcome suspension” of many automated notices it sends out while it gets caught up on the backlog. But she said paper returns are the IRS’ kryptonite: “The IRS still transcribes paper line by line, number by number.”

The IRS also said it was reversing plans to close a tax processing center in Austin, Texas, in 2024. It shuttered a similar facility in Fresno, Calif., last year.

“We applaud the IRS for finally recognizing that those employees in Austin are essential to the agency’s ability to dig out from the backlog of returns and correspondence, and that there is an ongoing need for the IRS to retain this capacity,” Tony Reardon, president of the National Treasury Employees Union, which represents IRS workers, said in a statement.

The IRS has also been contracting out certain clerical work such as opening envelopes and is requiring mandatory overtime for some employees.

More work with fewer staffers

Adding to the challenge of dealing with individual and business tax returns, the IRS was given the responsibility of sending out three rounds of COVID-19 relief payments in the past two years, as well as distributing the advance earned income tax credits to eligible families.

The extra work comes at a time when the IRS’ staff is down 22% from 2010 levels, according to an analysis by the left-leaning Center on Budget and Policy Priorities, with funding down 20%.

Senate Finance Committee Chairman Ron Wyden, D-Ore., places the blame for that on Republicans, who cut the IRS’ budget while they controlled Congress. “Republicans could have changed course and corrected these issues in their big 2017 tax law,” Wyden said. “They did not. In fact, the budget cuts continued while the tax code got more complicated.”

The top Republican on the panel, Sen. Mike Crapo, R-Idaho, insisted that “over the years, I think that the IRS budget has pretty much kept up with inflation.”

The Biden administration has proposed a 14% funding increase in the IRS budget for the current fiscal year and sought an additional $80 billion increase over 10 years as part of its now-stalled Build Back Better plan.

But Congress has yet to act on the fiscal year 2022 budget, passing a series of temporary spending measures that have effectively frozen IRS funding at 2021 levels. And although there have been signs that a longer-term deal is in the works, Republicans have warned that any significant IRS spending increase would be a “poison pill” that they would oppose.

Source: NPR

by Larson Accounting

20 de April de 2022

The IRS lost my 2020 tax return. Well, according to the notice I got yesterday, the IRS says it “never received” the return. But I’m sticking with “lost.”

Let me explain:
As TaxVox readers may remember, I—and at least 3.4 million other tax filers—got caught in an IRS security trap last year. In a well-intended but remarkably badly designed effort to protect against identity theft, the IRS requires e-filers to report their prior year adjusted gross income (AGI) on their current year return.

In theory, this match would prove that you are you. Or, least, the IRS would know that whoever e-filed this year had access to your last year’s return information.
Sadly, the AGI on my 2019 return didn’t match the number I gave the IRS in 2020. Actually, it did match but the IRS insisted it didn’t.

Beaten by the system
I did not know then, though lots of others did, that there was an easy way to fool the system: just plug in zero for that prior year AGI. Wild guess here, but I imagine identity thieves figured this out too, thus entirely defeating the purpose of the AGI check.

There are two lessons here: 1) I am a really bad hacker and 2) The IRS’s ID protection system only catches computer idiots or honest folks.
I spent days trying to fix this. TurboTax, the software program I used to create my return, was no help. I tried calling the IRS. You know how that turned out.

Next, I tried to sort out the mess by creating an online account at IRS.gov. No luck. The service would not let me set up an account because it could not confirm that my mobile phone number is my mobile phone number. Note to IRS: It is. Really.

Failing all this, I had no choice but to mail my return. This was the last thing I wanted. And the last thing the IRS says it wanted. But it gave me no other options. Since I had a balance due, I also sent a check.

The IRS got the check. In fact, it cashed the check just six days after I mailed it. Very impressive.

The lost tax return
So imagine my surprise when I got a notice eight months later that the IRS “never received” my 2020 Form 1040.

It most likely did receive it, but somehow lost it in the piles of paper returns and other mail that have been waiting to be processed, in some cases for more than a year. Unlike many filers, at least I wasn’t expecting a refund.

Much of this was beyond the agency’s control. It already was short-staffed due to budget cuts. Like almost every employer, it got hammered by pandemic-related absences. And Congress saddled the agency with distributing multiple Economic Impact Payments (aka stimulus checks) and, later, monthly Child Tax Credit payments.

But some of this mess was directly due to bungled systems and poor management. The agency has known for at least five years that its AGI identity check did not work. It knew it was unable to answer phone calls. And it knew its system for confirming identities through mobile phone numbers was a mess. Yet it fixed none of this. And all of these failures drove me and others to do the one thing the IRS was trying to avoid: Stick a return in an envelope and mail it.

What now?
What do I do now? The IRS, as only it can, gave me two choices: Either mail a return to the IRS or mail a copy of the return I already filed. Second note to the IRS: These are sort of the same thing.

Either way, I’m about to add to the agency’s deepening pile of unread mail. For the second time.

Keep in mind that the IRS is starting the current tax season with 9 million unprocessed individual and business returns, another 3 million unprocessed amended returns, and nearly 5 million pieces of correspondence from prior tax years it has not yet addressed. The agency calls this “substantially elevated inventory.” This is something like describing Mt. Everest as a substantially elevated hill.

The IRS is warning taxpayers and Congress that the new filing season is going to be painfully slow. And it is practically begging taxpayers to e-file. Yet it continues to make it unnecessarily difficult to do so. Third note to IRS: If you want people to do something, stop making it hard.

In November, the IRS announced it will try to fix the identification verification problem by requiring online users to sign up with a new system called ID.me. Forgive me if I am skeptical.

Meanwhile, I will trundle off to the post office with yet another copy of my 2020 return. Then I’ll get to work on my tax year 2021 return. And await this year’s Adventures in Tax Filing.

Source: Forbes

by Larson Accounting

18 de April de 2022

WASHINGTON — The Internal Revenue Service is reminding taxpayers the deadline to file and pay tax owed for most individual income tax returns is Monday, April 18. The agency wants last-minute filers to know tax help is available to file a tax return, request an extension or make a payment, 24 hours a day on IRS.gov.

The IRS encourages taxpayers to file electronically because tax software does the calculations, flags common errors and reduces tax return errors by prompting taxpayers for missing information. The fastest way to receive a refund is to file electronically and use direct deposit.

IRS Free File is available to any person or family with an adjusted gross income (AGI) of $73,000 or less in 2021. Leading tax software providers make their online products available for free. Taxpayers can use IRS Free File to claim the remaining amount of their Child Tax Credit, the Earned Income Tax Credit and other important credits. IRS Free File Fillable Forms is available to anyone who is comfortable preparing their own tax return – so there is a free option for everyone.

Online Account provides information to help file an accurate return, including Advance Child Tax Credit and Economic Impact Payment amounts, Adjusted Gross Income amounts from last year’s tax return, estimated tax payment amounts and refunds applied as a credit.

Get a 6-month extension to file

The IRS estimates 15 million taxpayers will request an extension of time to file and the easiest way to request an extension to file is using IRS Free File. In a matter of minutes, anyone can request an extension until October 17, using Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. An extension of time to file is not an extension of time to pay, however, and taxpayers must estimate their tax liability on this form and pay any amount due by the April 18 filing deadline to avoid penalties and interest.

Taxpayers can also request more time by paying all or part of their estimated income tax due and indicate that the payment is for an extension. They can do this using Direct Pay, the Electronic Federal Tax Payment System (EFTPS), or a debit, credit card or digital wallet. This way they don’t have to file a separate extension form and will receive a confirmation number for their records.

IRS Form 4868 can also be downloaded from Forms, Instructions & Publications, completed and addressed to the correct IRS office, and must be postmarked by the filing deadline.

Who automatically has more time to file?

The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in areas covered by Federal Emergency Management Agency disaster declarations. Deadlines to file tax returns and make tax payments are extended for affected taxpayers in certain areas of Arkansas, Colorado, Kentucky and Tennessee until May 16, 2022, and for Puerto Rico until June 15, 2022. For details on all available relief, visit the Around the Nation page on IRS.gov.

Special rules may apply for some military personnel serving in a combat zone or a qualified hazardous duty area. This also applies to individuals serving in the combat zone in support of the U.S. Armed Forces. A complete list of designated combat zone localities can be found in Publication 3, Armed Forces’ Tax Guide, available on IRS.gov. U.S. citizens and resident aliens living outside the United States have until June 15, 2022, to file their 2021 tax returns and pay any tax due.

$1.5 billion in unclaimed 2018 refunds

The IRS estimates 1.5 million taxpayers did not file a 2018 tax return to claim tax refunds worth more than $1.5 billion. The three-year window of opportunity to claim a 2018 tax refund closes April 18, 2022, for most taxpayers. If they do not file a 2018 tax return by April 18, 2022, the money becomes the property of the U.S. Treasury. The law requires taxpayers to properly address, mail and ensure the 2018 tax return is postmarked by that date.

Other April 18 deadlines

April 18 is also the deadline to make 2021 contributions to Individual Retirement Arrangements (IRAs). Contributions can be made to a traditional or Roth IRA until the filing due date, April 18, but must be designated for 2021 to the financial institution. For more information, see Retirement Plans FAQs Regarding IRAs or Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs).

Employment taxes are due April 18 for household employees including housekeepers, maids, babysitters, gardeners and others who work in or around a private residence as an employee if they were paid $2,300. For more information, see Publication 926, Household Employer’s Tax Guide.

The deadline to submit 2021 tax returns or an extension to file and pay tax owed this year falls on April 18, instead of April 15, because of the Emancipation Day holiday in the District of Columbia. Taxpayers in Maine or Massachusetts have until April 19, 2022, to file their returns due to the Patriots’ Day holiday in those states.

The first quarter estimated tax payment for 2022 is also due on April 18. Taxpayers are encouraged to check their withholding for 2022 after they’ve filed their 2021 tax return. It can protect against having too little tax withheld and facing an unexpected tax bill or penalty at tax time next year. It can also help taxpayers adjust their tax withheld up front, so taxpayers receive a bigger paycheck and smaller refund at tax time.

Source: IRS

by Larson Accounting

15 de April de 2022

Deputy Secretary of the Treasury Wally Adeyemo and IRS Commissioner Charles P. Rettig traveled to the IRS Campus in Philadelphia where they thanked employees for their tireless efforts and outlined an aggressive plan that will end the pandemic backlog this year.

“Since the pandemic began, IRS employees have been called on to go above and beyond for the American people, and they have met the moment. But they’ve had to do so without adequate resources and funding, which is why the agency faces the challenges that it does today. The Biden Administration is committed to getting the IRS the stable, long-term funding it needs to be able to serve the American people,” said Deputy Secretary Adeyemo.

This year, millions of taxpayers are awaiting the processing of their tax returns and receipt of their refunds. The backlog—unprocessed returns and correspondence sent to the IRS but yet unanswered—has created one of the most challenging tax filing seasons in our nation’s history.

“IRS employees have been working tirelessly to process backlogged returns and taxpayer correspondence. To ensure inventory is back to a healthy level for next filing season, we are leaving no stone unturned—taking an all- hands-on-deck approach to ensure as many employees as possible are dedicating time to return processing,” said Commissioner Rettig. “This includes bringing on new employees and reassigning current IRS employees to process inventory.”

The IRS’s backlog challenges today stem from two key sources.

First, the agency has been chronically underfunded for more than a decade, with its budget cut by nearly 20% since 2010. Today’s historically low level of funding means that the IRS isn’t equipped to provide the American people the service they deserve. This is all a result of resource constraints: The IRS workforce is the same size it was in 1970, though the U.S. population has grown by 60 percent and the complexity of the economy has increased exponentially. In the first half of 2021, fewer than 15,000 workers handled nearly 200 million calls received, which translates to one person for every 13,000 calls.

Second, the pandemic created a unique set of new operational challenges for the IRS. The agency was called upon to support emergency relief for taxpayers, like distributing an unprecedented three rounds of Economic Impact Payments, totaling over $830 billion, to 85% of American households. Including individual refunds, the IRS has distributed over $1.5 trillion to Americans since the pandemic began. This was all done at a time when the IRS budget was at historic lows, and while adjusting operating protocols to ensure the IRS workforce was safe and healthy in the midst of the pandemic.

These circumstances have created significant challenges. Entering a normal filing season, the IRS typically has well under one million pieces of inventory. This year, the IRS entered the filing season with a backlog that is more than 15 times as large. This has a huge impact on people, and Commissioner Rettig has committed to addressing the backlog and returning to normal, healthy levels by the end of this year.

To meet this commitment, the IRS has laid out an ‘all-hands-on-deck’ approach:

HIRING AND SURGING THOUSANDS OF EMPLOYEES TO TACKLE THE BACKLOG

Hiring 10,000 new employees: The IRS today announced plans to hold job fairs across the country in March in Kansas City (March 18-19), Austin (March 24-25) and Ogden (March 31-April 1) with the aim of filling 5,000 open positions in the coming months. Working with Treasury, the Office of Personnel Management, and the National Treasury Employees Union, the IRS recently secured direct hiring authority for these employees, as well as an additional 5,000 new hires to be made over the course of the next year. Congress also helpfully provided hiring flexibilities in the House-passed omnibus to further expedite hiring in critical positions. This will allow for onboarding and training new emergency teams which will begin working on inventory within just a few weeks.

Creating new 700-person surge team to process new returns: The IRS is in the process of shifting approximately 700 employees at the Austin, Ogden, and Kansas City campuses to process original returns. These efforts will address the historically high inventories of paper tax returns. At full capacity, this surge will close millions of cases each month.
Maintaining initial surge team to process amended returns and taxpayer correspondence: The second surge effort builds on efforts earlier in filing season, when the IRS moved hundreds of existing employees with previous experience to address the backlog. The IRS currently has approximately 800 people on this team, which started in February.
Paying overtime to thousands of IRS employees: The IRS has required mandatory overtime for the over 6,000 employees processing original returns. Overtime is also available for approximately 10,000 employees processing amended returns and taxpayer correspondence. In all three submission processing centers, employees are working night shifts to work on return and correspondence processing.
Supporting additional contractor support for inventory: The IRS is quickly pursuing additional contracting options to help with original return processing, including mailroom operations, transcription, and input of paper returns into IRS systems.

INCREASED TAXPAYER ASSISTANCE TO REDUCE PROCESSING DELAYS

Communicating directly with taxpayers to ensure accurate returns: A large share of the backlog stems from small errors by millions of taxpayers on their tax returns, which then require manual review by IRS employees before they can be processed. By helping taxpayers file accurately, the IRS can ensure that refunds are issued quickly (an error-free electronic return is processed within 21 days). Accurate individual filings also proactively reduce inventory by decreasing the share of returns that require time- intensive manual attention by employees. Efforts help taxpayers file accurately include:
- Sending taxpayers more information than ever to prevent processing delays. The IRS has sent more than 100 million letters to taxpayers to prevent delays in processing. In the letters, the IRS proactively calculates the amounts received by individual taxpayers in both third Economic Impact Payments and the advance Child Tax Credit to ensure more accurate returns.
- Providing online help. The IRS created and expanded self-service portals for taxpayers, including for online payment agreements, requesting payment transcripts, requesting Identity Protection PINs, and updating personal information. In just the last year, 9.4 million taxpayers have accessed their online accounts, allowing for important information—on benefits received, notices, and taxpayer payment history—to be easily and securely accessed.
- Providing in-person help. The IRS has increased the availability of in-person support for taxpayers through extra hours (including weekends) at Taxpayer Assistance Centers throughout the filing season. It also awarded $41 million of support to over 330 organizations across the United States, including Tax Counseling for the Elderly and Volunteer Income Tax Assistance organizations which provide free federal tax return preparation for the underserved.
- Providing help on the phones. The IRS has expanded customer callbacks to 70% of its toll-free lines. Already this fiscal year, an callback option has been offered to more than three million taxpayers, saving those preparing their taxes almost one million hours of wait time. Additionally, the IRS has deployed 2,000 contractors to respond to taxpayer questions about Economic Impact Payments and the advance Child Tax Credit. Since the summer of 2021, these contractors have answered over 40 million calls.

DEVELOPING AND DEPLOYING UPDATED TECHNOLOGY TO AUTOMATE FUNCTIONS

New automated tool to correct return errors: Last filing season, any error on a tax return required manual review by an IRS processing employee, meaning that just a few dozen such returns could be processed each hour. For this filing season, the IRS developed an automated tool that dramatically expands efficiencies and has helped the IRS close 1.5 million error resolution cases in a single week.
Suspension of dozens of common notices to prevent inventory increases: To provide relief for taxpayers, the IRS reconfigured its systems to temporarily halt sending approximately 40 form notices to taxpayers, including mailing automated collection notices that are normally issued when a taxpayer owes additional tax, and the IRS has no record of a taxpayer filing a return. This action provides important relief for taxpayers who otherwise could have received a notice for taxes already paid, but not processed due to the backlog. Importantly, this also results in less inventory since taxpayers won’t contact the IRS to inquire about the notices received.
Improving automated tools for taxpayer assistance: The IRS developed new automated support technology to help taxpayers, including online live assistance and new voice and chat bots (in English and Spanish) to quickly answer taxpayer queries. Taxpayers’ use of automated services more than doubled in the last year. The improvement of automated phone assistance and other tools has allowed the IRS to move many phone service representatives to work inventory given the exigencies of this filing season.

Ultimately, these approaches are short-term salves for 2022’s tax season but don’t address the much deeper structural problem at the IRS. Had Congress funded the IRS adequately for the past decade, it would have entered the pandemic with the resources it needed – and would not have millions of tax returns waiting to be processed. The IRS and Treasury have worked closely with legislators to highlight these needs, and this year’s House-passed omnibus represents the largest funding increase for the agency in the last two decades. This is a meaningful step that will help the IRS hire thousands of new employees and secure contractor support that will expedite the processing of returns and correspondence.

But it is far from sufficient. The agency needs stable, long-term funding to be able to modernize outdated technological infrastructure and transition much of its manual work into automated processes that will be more efficient. IRS employees should not be hand-transcribing paper returns. Taxpayers should interact with the agency using state-of-the-art online tools. And every taxpayer who wants to call the IRS with a question should have their call and questions answered promptly. Providing the IRS the resources it needs to rebuild and modernize into the 21st century is critical to ensuring that the agency is able to serve the American people and the nation.

Source: U.S. DEPARTMENT OF THE TREASURY

by Larson Accounting

14 de April de 2022

The Internal Revenue Service plans to hire 10,000 employees in a push to cut into its backlog of tens of millions of tax returns by recruiting for jobs across the agency that have gone unfilled for years, according to four people familiar with the plan.

The agency will accelerate recruiting in the coming weeks for 80 distinct positions, from entry-level clerical workers to advanced engineers and tax attorneys, one person familiar with the plan said. Among the recruiting targets are high-skill technology professionals to modernize its outdated infrastructure, according to those familiar with the plan, who spoke on the condition of anonymity because the details have not been publicly released.

The agency plans to use money from its existing budget, a large share of it from coronavirus stimulus funding, to pay for the new hires, to be made over the next two years. The number of new jobs would represent a 14 percent increase in the IRS workforce. It remains unclear how much the agency will spend on the hiring plan, officials said, but it will be significantly smaller than President Biden’s proposed IRS investment of $80 billion over the next decade.

The IRS entered the tax season this year with 24 million unprocessed paper returns and correspondence, almost all dating back to the 2020 filing season. Taxpayer advocates and members of Congress have been calling on the agency to tackle the backlog, citing potentially dire financial consequences for Americans who rely on their tax credits and refunds for basic living expenses.

A government official said the IRS does not expect to resolve the backlog until the end of 2022. But it hopes the hiring surge, the largest at the IRS in decades, will galvanize a strong response to the mountain of unprocessed paperwork at the agency. It also hopes to restore public confidence in the tax collector after the coronavirus pandemic sidelined much of its staff, hobbled customer service and led to a rash of unexpected retirements.

The IRS staffing demands have been compounded by recruiting challenges and low pay across its operations. Vacancies range from entry-level jobs crucial to a smooth filing season to more specialized roles for technology experts who can upgrade computer systems and tax attorneys to lead complex audits of wealthy taxpayers and businesses.

The IRS won approval from federal personnel officials this week to accelerate the hiring process by bypassing the time-consuming recruiting and vetting procedures common to federal hiring, the people said. Officials will also be able to offer competitive salaries to lure experts from the private sector.

Hiring managers across the government have chafed for years at the logjams they confront when seeking new talent along with the salary limits in many roles that pay higher at private companies. By gaining what is known as direct hiring authority, the IRS will be able to expedite hiring with a less complicated process, eliminating some selection requirements.

The agency also will be able to get around a salary cap that for years restricted the pay of many workers, although it is unclear how many jobs that would cover. But experts warn that the reinforcements may come too late to spare taxpayers from mounting delays during the 2022 filing season.

Commissioner Charles Rettig announced in February that he was temporarily reassigning 1,200 employees as part of a “surge team” to help. But those workers only began their new details this week, a person familiar with the hiring plans said. A second “surge team,” the person said, is now being formed with staff to be pulled from departments around the agency.

Meanwhile, thousands of employees are working overtime to plow through the accumulation of paper and amended returns and correspondence leftover from last year’s filing season, and are bringing in outside contractors to help with processing.

The internal staff shuffling came after the IRS advertised for 5,000 new positions in the division that answers phones and handles correspondence, in hopes of laying the groundwork for a smooth tax season this year. But fewer than 200 new employees were hired due to the challenging labor market.

Many of the positions included in the new hiring authority require months of training. For instance, tax examiners in the wage and investment division, the agency’s largest taxpayer services section, need between eight and 18 weeks of training before they can begin work. Contact service representatives, the workers who answer phones, respond to mail and log data from paper returns, need more than 37 weeks of training.

The fresh recruitment efforts for IT professionals could take even longer to pay off. The IRS is in the midst of revamping the backbone of the tax administration infrastructure, a program called the “individual master file,” that was built in the 1960s using a coding language that has largely gone extinct.

The most ambitious estimate for the project’s completion is 2030, according to the Government Accountability Office, but developments have been slowed each time Congress passes new tax laws, which mandate the already limited IRS staff to reprogram parts of the software.

The IRS administration of stimulus payments and the child care tax credit forced the agency to divert staff from modernization efforts to plugging programming holes. Experts say that has given the IRS a poor reputation among IT professionals who believe the agency is not committed to modernization, and that top talent can be reassigned at the whim of Congress.

“The IRS entered the filing season so far behind on processing that it’s going to take until December to sort through all this paperwork,” said Nina Olson, executive director of the Center for Taxpayer Rights, and the former national taxpayer advocate. “If they get authority to hire people, even if they’re only bringing in 100 people at a time here and there but on a regular basis over the next months, that will help. But what it will do is allow the IRS to enter the 2023 filing season not in a hole. I don’t want people to get their hopes up about 2022.”

The IRS applied for direct hiring authority from the Office of Personnel Management, the federal government’s human resources department, in the spring of 2021, but OPM rejected the request, saying it was too broad, according to an official with knowledge of that effort.

Staffing has long been one of the IRS’s most pressing obstacles. The agency has lost nearly 20,000 employees since 2010. The division responsible for opening paper returns and manually transcribing them into a computer file lost about 20 percent of its staff last year to retirements and departures, two agency officials familiar with the situation said.

Chronic underfunding from Republican-mandated budget cuts over a decade, with its annual legislative appropriation adjusted for inflation falling by about $2.5 billion in that span, has meant the IRS often cannot replace employees who retire or leave for other jobs.

Another wave could hit the agency soon. Leaders predict another 5,590 workers will retire this year. Close to a quarter of the workforce of 74,000 is eligible for retirement.

“For so many years, they were underfunded and they had a steady workforce, so they weren’t focused on recruiting,” said Rebecca Thompson, vice president at the civil rights group Prosperity Now and a member of the Internal Revenue Service Advisory Council. “Now the rubber is about to hit the road.”

Complicating the ambitious expansion is the intense competition for workers trained in the complexities of the U.S. tax code and the IRS internal processes. The agency has long paid well below the private sector for comparable positions. Employees who answer taxpayer questions on the phone and handle correspondence make between $24,000 and $41,000 annually, depending on seniority.

“It just sets up a situation where the IRS will continue to be completely outgunned by the professional wealth-defense industry that obviously compensates their professional wealth-hiders at much higher levels,” said Chuck Collins, a senior scholar at the Institute for Policy Studies think tank and author of “The Wealth Hoarders.”

Besides allowing its workforce to shrink, those critical of the IRS say it has not invested in new technologies for those who remain, in recent years because it has been focused on beefing up electronic processing of returns.

At the agency’s Kansas City, Mo., tax processing center, employees are working six-day weeks with mandatory overtime, said Shannon Ellis, president of the local chapter of the National Treasury Employees Union, which represents IRS employees.

For years, the IRS has struggled to attract local job applicants, as nearby employers boost their own wages. A local Amazon facility is offering $19 an hour, she said. A nearby Target just began advertising $24 an hour wages. Entry level IRS employees in Kansas City make $15 an hour. The staffing crunch in Kansas City could worsen, she said. Nearly half of the campus’s 5,000 workers will be eligible for retirement in the next two years.

Plans to hire more employees could improve morale and productivity, Ellis said, but she and her colleagues remain skeptical. They’ve seen the IRS advertise for job openings previously, only for the agency to fall well short of its recruitment goals or for newly hired colleagues to leave their jobs within months because of frustrating working conditions.

“Expediting the hiring process is one thing and that can help, but you’ve still got to get the people interested,” she said. “You’ve got to increase the wages to entice people to come.”

Source: Washington Post

by Larson Accounting

8 de April de 2022

The Internal Revenue Service today reminds those who make estimated tax payments such as self-employed individuals, retirees, investors, businesses, corporations and others that the payment for the first quarter of 2022 is due Monday, April 18. The 2022 Form 1040-ES, Estimated Tax for Individuals, can help taxpayers estimate their first quarterly tax payment.

Income taxes are a pay-as-you-go process. This means, by law, taxes must be paid as income is earned or received during the year. Most people pay their taxes through withholding from paychecks, pension payments, Social Security benefits or certain other government payments including unemployment compensation.

Most often, those who are self-employed or in the gig economy need to make estimated tax payments. Similarly, investors, retirees and others often need to make these payments because a substantial portion of their income is not subject to withholding. Other income generally not subject to withholding includes interest, dividends, capital gains, alimony and rental income. Paying quarterly estimated taxes will usually lessen and may even eliminate any penalties.

Exceptions to the penalty and special rules apply to some groups of taxpayers, such as farmers and fishers, casualty and disaster victims, those who recently became disabled, recent retirees and those who receive income unevenly during the year. See Form 2210, Underpayment of Estimated Tax by Individuals, Estates and Trusts, and its instructions for more information.

How to pay estimated taxes

Form 1040-ES, Estimated Tax for Individuals, includes instructions to help taxpayers figure their estimated taxes. They can also visit IRS.gov/payments to pay electronically. The best way to make a payment is through IRS Online Account. There taxpayers can see their payment history, any pending payments and other useful tax information. Taxpayers can make an estimated tax payment by using IRS Direct Pay; Debit Card, Credit Card or Digital Wallet; or the Treasury Department’s Electronic Federal Tax Payment System (EFTPS). If paying by check, taxpayers should be sure to make the check payable to the “United States Treasury.”

Publication 505, Tax Withholding and Estimated Tax, has additional details, including worksheets and examples, that can be especially helpful to those who have dividend or capital gain income, owe alternative minimum tax or self-employment tax, or have other special situations.

Source: IRS-2022-77, April 6, 2022