August 2022 – Larson Accounting Group

22 de August de 2022

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

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

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

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

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

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

Helpful reminders

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

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

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

Adjust 2022 withholding now to avoid tax surprises next year

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

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

Find a Taxpayer Assistance Center

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

Read information in other languages

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

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

by Larson Accounting

15 de August de 2022

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

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

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

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

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

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

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

Source: WSJ

by Larson Accounting

2 de August de 2022

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

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

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

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

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

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

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

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

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

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

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

Source: IRS

2021 tax extension filers, don’t overlook these important tax benefits

Helpful reminders

Adjust 2022 withholding now to avoid tax surprises next year

Find a Taxpayer Assistance Center

Read information in other languages

The Middle Class Won’t Escape the New IRS Audit Wave

Security Summit: Tell-tale signs of identity theft tax pros should watch for