February 2021 – Larson Accounting Group

19 de February de 2021

IR-2021-42, February 19, 2021

WASHINGTON — The Internal Revenue Service is reminding those with income from a farming or fishing business can avoid making any estimated tax payments by filing and paying their entire tax due on or before March 1.

This rule generally applies if farming or fishing income was at least two-thirds of the taxpayer’s total gross income in either the current or the preceding tax year. Those who choose not to file by March 1 should have made an estimated tax payment by Jan. 15 to avoid an estimated tax penalty. For more information on estimated tax, refer to Publication 505, Tax Withholding and Estimated Tax.

Those in the farming business report income and expenses on Schedule F (Form 1040), Profit or Loss From Farming. They also use Schedule SE (Form 1040), Self-Employment Tax to figure self-employment tax if their net earnings from farming are $400 or more. For more information refer to Topic No. 554, Publication 225, Farmer’s Tax Guide and Agriculture Tax Center.

Those in the fishing business report income and expenses on Schedule C (Form 1040), Profit or Loss From Business (Sole Proprietorship). They also use Schedule SE (Form 1040) to figure self-employment tax if their net earnings from fishing are $400 or more. For general information about the rules applying to individuals, including commercial fishermen who file Schedule C, refer to Publication 334, Tax Guide for Small Business.

Those whose trade or business is a partnership or corporation see Publication 541, Partnerships or Publication 542, Corporations.

by Larson Accounting

15 de February de 2021

IR-2021-36, February 12, 2021

WASHINGTON — The Internal Revenue Service will hold a free webinar, “How to Choose a Tax Pro,” on Thursday, February 18 at 2 p.m. Eastern time.

Participants should register in advance for this hour-long event. The webinar will:

Provide tips for choosing a tax preparer
Explain the types of paid preparers
Describe how to use the IRS Directory of Federal Tax Return Preparers
Discuss how to avoid “ghost” tax return preparers
Review how to make a complaint about a tax return preparer
Explain the third-party authorization process

There will also be a question and answer period where participants can pose questions to the IRS presenters. The event is open to anyone who is interested.

The webinar will be offered with closed captioning for viewers who are deaf or hard of hearing. Questions before the webinar can be sent to: cl.sl.web.conference.team@irs.gov.

More information on choosing a tax professional can be found at IRS.gov, including a directory of tax return preparers with credentials and select qualifications.

by Larson Accounting

10 de February de 2021

the-difference-between-w2-1099-and-corp-to-corp-workers.jpg

IR-2021-33, February 9, 2021

WASHINGTON — With some areas seeing mail delays, the Internal Revenue Service reminds taxpayers to double-check to make sure they have all of their tax documents, including Forms W-2 and 1099, before filing a tax return.

The IRS reminds taxpayers that many of these forms may be available online. When other options aren’t available, taxpayers who haven’t received a W-2 or Form 1099 should contact the employer, payer or issuing agency directly to request the missing documents before filing their 2020 federal tax return. This also applies for those who received an incorrect W-2 or Form 1099.

Those who don’t get a response, are unable to reach the employer/payer/issuing agency or cannot otherwise get copies or corrected copies of their Forms W-2 or 1099 must still file their tax return on time by the April 15 deadline (or October 15 if requesting an automatic extension). They may need to use Form 4852, Substitute for Form W-2, Wage and Tax Statement, or Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. to avoid filing an incomplete or amended return.

If the taxpayer doesn’t receive the missing or corrected form in time to file their tax return by the April deadline, they may estimate the wages or payments made to them, as well as any taxes withheld. Use Form 4852 to report this information on their federal tax return.

If the taxpayer receives the missing or corrected Form W-2 or Form 1099-R after filing their return and the information differs from their previous estimate, they must file Form 1040-X, Amended U.S. Individual Income Tax Return. For additional information on filing an amended return, see Topic No. 308 and Should I File an Amended Return?

Taxpayers should allow enough time for tax records to arrive in the mail before filing their 2020 tax return. In a normal year, most taxpayers should have received income documents near the end of January, including:

Forms W-2, Wage and Tax Statement
Form 1099-MISC, Miscellaneous Income
Form 1099-INT, Interest Income
Form 1099-NEC, Nonemployee Compensation
Form 1099-G, Certain Government Payments; like unemployment compensation or state tax refund
Incorrect Form 1099-G for unemployment benefits
Millions of Americans received unemployment compensation in 2020, many of them for the first time. This compensation is taxable and must be included as gross income on their tax return.

Taxpayers who receive an incorrect Form 1099-G for unemployment benefits they did not receive should contact the issuing state agency to request a revised Form 1099-G showing they did not receive these benefits. Taxpayers who are unable to obtain a timely, corrected form from states should still file an accurate tax return, reporting only the income they received.

Use IRS.gov
IRS tax help is available 24 hours a day on IRS.gov, the official IRS website, where people can find answers to tax questions and resolve tax issues online. The Let Us Help You page helps answer most tax questions, and the IRS Services Guide PDFlinks to other important IRS services.

Source: IRS feb/2021

by Larson Accounting

7 de February de 2021

IR-2021-16, January 15, 2021

WASHINGTON ― The Internal Revenue Service announced that the nation’s tax season will start on Friday, February 12, 2021, when the tax agency will begin accepting and processing 2020 tax year returns.

The February 12 start date for individual tax return filers allows the IRS time to do additional programming and testing of IRS systems following the December 27 tax law changes that provided a second round of Economic Impact Payments and other benefits.

This programming work is critical to ensuring IRS systems run smoothly. If filing season were opened without the correct programming in place, then there could be a delay in issuing refunds to taxpayers. These changes ensure that eligible people will receive any remaining stimulus money as a Recovery Rebate Credit when they file their 2020 tax return.

To speed refunds during the pandemic, the IRS urges taxpayers to file electronically with direct deposit as soon as they have the information they need. People can begin filing their tax returns immediately with tax software companies, including IRS Free File partners. These groups are starting to accept tax returns now, and the returns will be transmitted to the IRS starting February 12.

“Planning for the nation’s filing season process is a massive undertaking, and IRS teams have been working non-stop to prepare for this as well as delivering Economic Impact Payments in record time,” said IRS Commissioner Chuck Rettig. “Given the pandemic, this is one of the nation’s most important filing seasons ever. This start date will ensure that people get their needed tax refunds quickly while also making sure they receive any remaining stimulus payments they are eligible for as quickly as possible.”

Last year’s average tax refund was more than $2,500. More than 150 million tax returns are expected to be filed this year, with the vast majority before the Thursday, April 15 deadline.

Under the PATH Act, the IRS cannot issue a refund involving the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) before mid-February. The law provides this additional time to help the IRS stop fraudulent refunds and claims from being issued, including to identity thieves.

The IRS anticipates a first week of March refund for many EITC and ACTC taxpayers if they file electronically with direct deposit and there are no issues with their tax returns. This would be the same experience for taxpayers if the filing season opened in late January. Taxpayers will need to check Where’s My Refund for their personalized refund date.

Overall, the IRS anticipates nine out of 10 taxpayers will receive their refund within 21 days of when they file electronically with direct deposit if there are no issues with their tax return. The IRS urges taxpayers and tax professionals to file electronically. To avoid delays in processing, people should avoid filing paper returns wherever possible.

Tips for taxpayers to make filing easier

To speed refunds and help with their tax filing, the IRS urges people to follow these simple steps:

File electronically and use direct deposit for the quickest refunds.
Check IRS.gov for the latest tax information, including the latest on Economic Impact Payments. There is no need to call.
For those who may be eligible for stimulus payments, they should carefully review the guidelines for the Recovery Rebate Credit. Most people received Economic Impact Payments automatically, and anyone who received the maximum amount does not need to include any information about their payments when they file. However, those who didn’t receive a payment or only received a partial payment may be eligible to claim the Recovery Rebate Credit when they file their 2020 tax return. Tax preparation software, including IRS Free File, will help taxpayers figure the amount.
Remember, advance stimulus payments received separately are not taxable, and they do not reduce the taxpayer’s refund when they file in 2021.

Key filing season dates

There are several important dates taxpayers should keep in mind for this year’s filing season:

January 15. IRS Free File opens. Taxpayers can begin filing returns through Free File partners; tax returns will be transmitted to the IRS starting Feb. 12. Tax software companies also are accepting tax filings in advance.
January 29. Earned Income Tax Credit Awareness Day to raise awareness of valuable tax credits available to many people – including the option to use prior-year income to qualify.
February 12. IRS begins 2021 tax season. Individual tax returns begin being accepted and processing begins.
February 22. Projected date for the IRS.gov Where’s My Refund tool being updated for those claiming EITC and ACTC, also referred to as PATH Act returns.
First week of March. Tax refunds begin reaching those claiming EITC and ACTC (PATH Act returns) for those who file electronically with direct deposit and there are no issues with their tax returns.
April 15. Deadline for filing 2020 tax returns.
October 15. Deadline to file for those requesting an extension on their 2020 tax returns

Filing season opening

The filing season open follows IRS work to update its programming and test its systems to factor in the second Economic Impact Payments and other tax law changes. These changes are complex and take time to help ensure proper processing of tax returns and refunds as well as coordination with tax software industry, resulting in the February 12 start date.

The IRS must ensure systems are prepared to properly process and check tax returns to verify the proper amount of EIP’s are credited on taxpayer accounts – and provide remaining funds to eligible taxpayers.

Although tax seasons frequently begin in late January, there have been five instances since 2007 when filing seasons did not start for some taxpayers until February due to tax law changes made just before the start of tax time.

Source: IRS Jan,15-21

by Larson Accounting

6 de February de 2021

IR-2021-30, February 5, 2021

WASHINGTON — The Internal Revenue Service reminds taxpayers to avoid “ghost” tax return preparers whose refusal to sign returns can cause a frightening array of problems. It is important to file a valid, accurate tax return because the taxpayer is ultimately responsible for it.

Ghost preparers get their scary name because they don’t sign tax returns they prepare. Like a ghost, they try to be invisible to the fact they’ve prepared the return and will print the return and get the taxpayer to sign and mail it. For e-filed returns, the ghost preparer will prepare but refuse to digitally sign it as the paid preparer.

By law, anyone who is paid to prepare or assists in preparing federal tax returns must have a valid Preparer Tax Identification Number, or PTIN. Paid preparers must sign and include their PTIN on the return. Not signing a return is a red flag that the paid preparer may be looking to make a fast buck by promising a big refund or charging fees based on the size of the refund.

Unscrupulous tax return preparers may also:

Require payment in cash only and not provide a receipt.
Invent income to qualify their clients for tax credits.
Claim fake deductions to boost the size of the refund.
Direct refunds into their bank account, not the taxpayer’s account.

The IRS urges taxpayers to choose a tax return preparer wisely. The Choosing a Tax Professional page on IRS.gov has information about tax preparer credentials and qualifications. The IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications can help identify many preparers by type of credential or qualification.

No matter who prepares the return, the IRS urges taxpayers to review it carefully and ask questions about anything not clear before signing. Taxpayers should verify both their routing and bank account number on the completed tax return for any direct deposit refund. And taxpayers should watch out for preparers putting their bank account information onto the returns.

Taxpayers can report preparer misconduct to the IRS using IRS Form 14157. If a taxpayer suspects a tax preparer filed or changed their tax return without their consent, they should file Form 14157-A.

Source: https://www.irs.gov/newsroom/beware-of-ghost-preparers-who-dont-sign-tax-returns