May 2022 – Larson Accounting Group

31 de May de 2022

WASHINGTON — The Internal Revenue Service today issued the Data Book detailing the agency’s activities during fiscal year 2021 (October 1, 2020 – September 30, 2021).

“During Fiscal Year 2021, the COVID-19 pandemic continued to present the IRS with some of the greatest challenges in our agency’s history, and the way our employees responded illustrates the significant role that the IRS plays in the overall health of our country,” said IRS Commissioner Chuck Rettig.

“The IRS was called on to provide economic relief during this national crisis while also fulfilling our agency’s core responsibilities of tax administration; IRS employees answered Congress’ call to deliver two more rounds of Economic Impact Payments and also implemented changes to the Earned Income Tax Credit, the Child Tax Credit and other refundable credits as part of the American Rescue Plan. The breadth of these missions has strengthened my belief that a fully functioning IRS is critical to the success of our nation.”

In addition to describing work performed during the pandemic, the IRS Data Book for fiscal year 2021 comprises 33 tables describing a wide variety of IRS activities from returns processed, revenue collected, and refunds issued to the number of examinations conducted and the amount of additional tax recommended, as well as budget and personnel information. The Data Book provides point-in-time estimates of IRS activities as of September 2021. A lengthier discussion of recent data was also released todayPDF.

As the pandemic continued into 2021, the IRS delivered tax administration relief to millions of taxpayers, providing financial assistance for Americans.

The American Rescue Plan Act of 2021 authorized additional rounds of stimulus payments (EIP 3), which was signed into law on March 11, 2021. The IRS started issuing checks the very next day — March 12, 2021 — providing immediate help to people across the country. The 2020 Recovery Rebate Credits allowed individuals who did not receive their first- or second-round EIPs, or who received less than the amounts they were eligible for, to claim the credits when they filed their 2020 tax return.

Advance Child Tax Credit and online support

The American Rescue Plan contained the important change allowing up to half of the tax year 2021 Child Tax Credits to be disbursed as advance payments to eligible families from July through

December. As a result, during the second half of 2021, more than 37 million families—covering more than 61 million qualifying children—received more than $93 billion in advance CTC payments.

In addition to COVID-19-related tax relief, the IRS implemented vital online tools to support the 2021 advance CTC payments and reduce child poverty. These online tools included:

The Child Tax Credit Non-filer Sign-up Tool, which helped eligible families who were not required to file tax returns register for the monthly payments.
The Advance Child Tax Credit Eligibility Assistant, which helped families verify whether they qualified for advance CTC payments.
The Child Tax Credit Update Portal, to enable families to verify their eligibility, update their bank account information and mailing address and provide other information to the IRS.

Tax administration during COVID-19

At the same time as providing various pandemic-related tax relief measures to Americans, the agency continued its everyday operations, processing more than 261 million tax returns, and collecting more than $4.1 trillion in federal taxes during the fiscal year — about 96% of federal revenue from all sources.

Collection revenue

Overall, net revenue through enforcement by the collection function equaled almost $60 billion, an increase of 54% over the prior year. As part of its collection activities, the IRS saw an increase in the use of Payment Plans. Almost 2.4 million taxpayers established new payment plans (Installment Agreements) with the IRS during FY 2021, an increase of 29% compared to FY 2020. Furthermore, IRS collected nearly $13.7 billion through installment agreements in 2021, up 9% from the prior fiscal year.

Other IRS activities

Under the IRS’s Comprehensive Taxpayer Attitude Survey, the most recent findings were that most taxpayers still agree that cheating on their income taxes is not at all acceptable.

You’ll find many fascinating statistics within the Data Book,” said Rettig. “But there’s more to the IRS than numbers and graphs. IRS employees are dedicated to the mission, and our agency is made up of people who give back to their communities and help one another. Our employees provide significant support for those devastated by hurricanes, wildfires and other natural disasters. Across the nation, they did amazing work in their communities to help those impacted by COVID-19.”

Source: IRS

by Larson Accounting

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

16 de May de 2022

Tax professionals who want to keep up with changing trends and tax law should register for the 2022 IRS Nationwide Tax Forum. This annual event is a great opportunity to hear the latest news and industry information from IRS representatives and other tax experts. Not to mention, participants can earn up to 28 continuing education credits.

Seminar dates and agenda

This year’s forum starts on July 19, 2022, with sessions livestreamed over five weeks on Tuesdays, Wednesdays, and Thursdays.

Commissioner Charles P. Rettig will give a keynote address. IRS and partner association representatives will present on topics like:

Tax law
Publication updates
Professional ethics
Virtual currency
Collection issues

Registration includes access to the Virtual Expo. At the Virtual Expo, participants can speak with exhibitors from dozens of commercial leaders in tax software and financial services, as well as leading national associations.

In addition to 28 English-language seminars, the IRS is offering four seminars in Spanish.

The full list of webinar topics will be available on the registration website later in May.

2022 registration and fees

Tax pros should register by 5 p.m. ET on June 15, to get the $240 early bird rate. Starting June 16, the rate increases to $289.

Discounts for national association members

Members of the IRS national partner associations listed below qualify for a discount of $10 off the early bird rate, but only if they register by June 15. Members should contact their association for more information:

American Bar Association Section of Taxation
American Institute of Certified Public Accountants
National Association of Enrolled Agents
National Association of Tax Professionals
National Society of Accountants
National Society of Tax Professionals
Low Income Taxpayer Clinics
Volunteer Income Tax Assistance Program

Source: IRS

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