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Understanding taxpayer rights: Every taxpayer has the right to privacy

Posted by Admin Posted on Sept 19 2022

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The privacy of America's taxpayers is paramount at the IRS. The right to privacy is one of ten rights the Taxpayer Bill of Rights gives all taxpayers.

Taxpayers have the right to expect that any IRS inquiry, examination, or enforcement action will comply with the law and be no more intrusive than necessary. Taxpayers can also expect that the IRS will respect all due process rights, including search and seizure protections and will provide, where applicable, a collection due process hearing.

Here are a few more details about what a taxpayer's right to privacy means:

  • The IRS cannot seize certain personal items, such as schoolbooks, clothing and undelivered mail.
  • The IRS cannot seize a personal residence without first getting court approval, and the agency must show there is no reasonable alternative for collecting the tax debt.
  • Sometimes, taxpayers submit offers to settle their tax debt that relate only to how much they owe. This is formally known as a Doubt as to Liability Offer in Compromise. Taxpayers who make this offer do not need to submit any financial documentation.
  • During an audit, if the IRS finds no reasonable indication that a taxpayer has unreported income, the agency will not seek intrusive and extraneous information about the taxpayer's lifestyle.
  • A taxpayer can expect that the IRS's collection actions are no more intrusive than necessary. During a collection due process hearing, the Office of Appeals must balance that expectation with the IRS's proposed collection action and the overall need for efficient tax collection.

 

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS

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

Posted by Admin Posted on Sept 19 2022

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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.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS

 

COVID tax relief: IRS provides broad-based penalty relief for certain 2019 and 2020 returns due to the pandemic; $1.2 billion in penalties being refunded to 1.6 million taxpayers

Posted by Admin Posted on Sept 19 2022

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WASHINGTON — To help struggling taxpayers affected by the COVID-19 pandemic, the Internal Revenue Service today issued Notice 2022-36PDF, which provides penalty relief to most people and businesses who file certain 2019 or 2020 returns late.

The IRS is also taking an additional step to help those who paid these penalties already. Nearly 1.6 million taxpayers will automatically receive more than $1.2 billion in refunds or credits. Many of these payments will be completed by the end of September.

Besides providing relief to both individuals and businesses impacted by the pandemic, this step is designed to allow the IRS to focus its resources on processing backlogged tax returns and taxpayer correspondence to help return to normal operations for the 2023 filing season.

"Throughout the pandemic, the IRS has worked hard to support the nation and provide relief to people in many different ways," said IRS Commissioner Chuck Rettig. "The penalty relief issued today is yet another way the agency is supporting people during this unprecedented time. This penalty relief will be automatic for people or businesses who qualify; there's no need to call."

The relief applies to the failure to file penalty. The penalty is typically assessed at a rate of 5% per month and up to 25% of the unpaid tax when a federal income tax return is filed late. This relief applies to forms in both the Form 1040 and 1120 series, as well as others listed in Notice 2022-36PDF, posted today on IRS.gov.

To qualify for this relief, any eligible income tax return must be filed on or before September 30, 2022.

In addition, the IRS is providing penalty relief to banks, employers and other businesses required to file various information returns, such as those in the 1099 series. To qualify for relief, the notice states that eligible 2019 returns must have been filed by August 1, 2020, and eligible 2020 returns must have been filed by August 1, 2021.

Because both of these deadlines fell on a weekend, a 2019 return will still be considered timely for purposes of relief provided under the notice if it was filed by August 3, 2020, and a 2020 return will be considered timely for purposes of relief provided under the notice if it was filed by August 2, 2021. The notice provides details on the information returns that are eligible for relief.

The notice also provides details on relief for filers of various international information returns, such as those reporting transactions with foreign trusts, receipt of foreign gifts, and ownership interests in foreign corporations. To qualify for this relief, any eligible tax return must be filed on or before September 30, 2022.

Relief is automatic; most of $1.2 billion in refunds delivered to eligible taxpayers by next month

Penalty relief is automatic. This means that eligible taxpayers need not apply for it. If already assessed, penalties will be abated. If already paid, the taxpayer will receive a credit or refund.

As a result, nearly 1.6 million taxpayers who already paid the penalty are receiving refunds totaling more than $1.2 billion. Most eligible taxpayers will receive their refunds by the end of September.

Penalty relief is not available in some situations, such as where a fraudulent return was filed, where the penalties are part of an accepted offer in compromise or a closing agreement, or where the penalties were finally determined by a court. For details, see Notice 2022-36PDF, available on IRS.gov.

This relief is limited to the penalties that the notice specifically states are eligible for relief. Other penalties, such as the failure to pay penalty, are not eligible. But for these ineligible penalties, taxpayers may use existing penalty relief procedures, such as applying for relief under the reasonable cause criteria or the First Time Abate program. Visit IRS.gov/penaltyrelief for details.

"Penalty relief is a complex issue for the IRS to administer," Rettig said. "We've been working on this initiative for months following concerns we've heard from taxpayers, the tax community and others, including Congress. This is another major step to help taxpayers, and we encourage those affected by this to review the guidelines."

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS

Taxpayers should be sure to have all their info before going to a tax pro

Posted by Admin Posted on Sept 19 2022

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Taxpayers using a professional tax preparer should make sure they have all their information readily available before their appointment. Collecting their information and getting copies of any missing documents before taxpayers sit down to prepare their return is critical to filing an accurate tax return. Having organized records and information in hand helps prevent filing errors and will likely create a smoother filing experience.

Here's a list of information taxpayers may need. Not all information applies to all taxpayers.

  • Social Security numbers of everyone listed on the tax return. 
  • Bank account and routing numbers for direct deposit or information to make a tax payment.
  • Forms W-2 from employer(s).
  • Forms 1099 from banks, issuing agencies and other payers including unemployment compensation, dividends, distributions from a pension, annuity or retirement plan.
  • Form 1099-K, 1099-MISC, W-2 or other income statement for workers in the gig economy.
  • Form 1099-INT for interest received.
  • Other income documents and records of virtual currency transactions.
  • Form 1095-A, Health Insurance Marketplace Statement.
  • Letter 6419, 2021 Total Advance Child Tax Credit Payments, to reconcile advance child tax credit payments.
  • Letter 6475, Your 2021 Economic Impact Payment, to determine eligibility to claim the recovery rebate credit.
  • Information to support claiming other credits or deductions, such as receipts for child or dependent care, college expenses or donations.

Taxpayers can get information about their Economic Impact Payments and advance child tax credit payments through their IRS online account.

Taxpayers who don't have their letters about their Economic Impact Payment to claim missing stimulus payments and advance child tax credit payments to claim their full child tax credit have an online option. They can log in to their IRS online account and get the information from the Tax Records tab.

For taxpayers who are married filing jointly, each spouse will need to have their own Economic Impact Payment and advance child tax credit information.

What taxpayers should do if they're missing other documents

Taxpayers who didn't receive a W-2 or Form 1099 should contact the employer, payer or issuing agency and request the missing documents. This also applies for those who received an incorrect W-2 or Form 1099.

If they still can't get the forms, they can 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. If a taxpayer doesn't receive the missing or corrected form in time to file their tax return, they can estimate the wages or payments made to them, as well as any taxes withheld. They can use Form 4852 to report this information on their federal tax return.

 

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS

Aspiring entrepreneurs: learn the basics of setting up a business

Posted by Admin Posted on Sept 19 2022

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New entrepreneurs can start out on the right foot by making sure they understand the tax responsibilities of running a business. The process can seem daunting, but IRS.gov has resources to help new business owners.

Here are a few things new entrepreneurs need to do when starting their business.

Choose a business structure

The form of business determines which income tax return a business taxpayer needs to file. The most common business structures are:

  • Sole proprietorship: An unincorporated business owned by an individual. There's no distinction between the taxpayer and their business.
  • Partnership: An unincorporated business with ownership shared between two or more people.
  • Corporation: Also known as a C corporation. It's a separate entity owned by shareholders.
  • S Corporation: A corporation that elects to pass corporate income, losses, deductions and credits through to the shareholders.
  • Limited Liability Company: A business structure allowed by state statute.

Choose a tax year

tax year is an annual accounting period for keeping records and reporting income and expenses. A new business owner must choose either:

  • 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.

Apply for an employer identification number

An EIN is also called a federal tax identification number. It's used to identify a business. Most businesses need one of these numbers. It's important for a business with an EIN to keep the business mailing address, location and responsible party up to date. IRS regulations require EIN holders to report changes in the responsible party within 60 days. They do this by completing Form 8822-B, Change of Address or Responsible Party and mailing it to the address on the form.

Have all employees complete these forms

Pay business taxes

The form of business determines what taxes must be paid and how to pay them.

Visit state's website

Prospective business owners should visit their state's website for info about state requirements.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS

From markers to face masks, classroom supplies may be tax deductible

Posted by Admin Posted on Aug 30 2022

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Teachers go above and beyond for their students, often buying classroom supplies needed to make learning successful. The educator expense deduction allows eligible teachers and administrators to deduct part of the cost of technology, supplies and training from their taxes. They can only claim this deduction for expenses that weren't reimbursed by their employer, a grant or other source.

Who is an eligible educator:

The taxpayer must be a kindergarten through grade 12 teacher, instructor, counselor, principal or aide. They must also work at least 900 hours a school year in a school that provides elementary or secondary education as determined under state law.

Things to know about this deduction:

Starting on tax returns for 2022, educators can deduct up to $300 of trade or business expenses that weren't reimbursed. If two married educators are filing a joint return, the limit rises to $600. These taxpayers cannot deduct more than $300 each.

For 2021 returns, the limit is $250, or $500 for married educators filing jointly. As teachers prepare for the school year, they should remember to keep receipts after making any purchase to support claiming this deduction.

Qualified expenses are amounts the taxpayer paid themselves during the tax year.

Here are some of the expenses an educator can deduct:

  • Professional development course fees
  • Books and supplies
  • COVID-19 protective items to stop the spread of the disease in the classroom.
  • Computer equipment, including related software and services
  • Other equipment and materials used in the classroom

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS 

People without a filing requirement may miss out on a refund if they don’t file a 2021 tax return

Posted by Admin Posted on Aug 30 2022

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Some people may choose not to file a tax return because they didn't earn enough money to be required to file but may miss getting a refund if they don't file. While the filing deadline is October 17, 2022 to file 2021 tax returns, the IRS strongly encourages individuals to consider filing electronically sooner, rather than later, especially if they're due a refund.

In most cases, income, filing status and age determine if a taxpayer must file a tax return. Other rules may apply if the taxpayer is self-employed or can be claimed as a dependent of someone else. The Interactive Tax Assistant can help people determine if they need to file a tax return.

Look at tax withheld or paid. Excess tax withholdings are only returned in the form of a refund when someone files a tax return. This can affect students and part-time workers where the tax withheld from their wages is at a rate that is too high. Seniors and retirees who make estimated tax payments or have money withheld from their retirement fund and Social Security disbursements may also be eligible for a refund.

Individuals who answer yes to any of these questions, may be due a refund and must file a tax return to get their money.

  • Did the taxpayer's employer withhold federal income tax from their pay?
  • Did the taxpayer make estimated tax payments during the tax year?
  • Did they overpay last year on their taxes and have it applied to their 2021 tax?

Here are some valuable credits taxpayers may be able to claim. While most tax credits can be used to reduce the tax owed, there are credits that allow individuals to receive money beyond what they owe.

Recovery rebate credit Individuals who didn't qualify for a third Economic Impact Payment or got less than the full amount, may be eligible to claim the 2021 recovery rebate credit and will need to file a 2021 tax return even if they don't usually file a tax return. The credit will reduce any tax owed for 2021 or be included in the tax refund.

Earned income tax credit A working taxpayer who earned $57,414 or less last year could receive the EITC as a tax refund. For the 2021 tax year, the tax return taxpayers file in 2022, the earned income credit ranges from $1,502 to $6,728 depending on their filing status and how many children they claim on their tax return. Taxpayers who did not file a return for tax year 2020 or 2021 or who did not claim the earned income tax credit on their 2020 or 2021 return because they had no earned income in those years may file an original or amended return to claim the credit using their 2019 earned income if they are otherwise eligible to do so.

Taxpayers can also use their 2019 earned income to figure their 2021 earned income credit if their 2019 earned income is more than their 2021 earned income. They can check eligibility by using the EITC Assistant on IRS.gov, which is available in eight different languages.

Child tax credit or credit for other dependents Taxpayers can claim the child tax credit if they have a qualifying child under the age of 18 and meet other qualifications. Other taxpayers may be eligible for the credit for other dependents. This includes people who have:

  • Dependents who are age 17 or older.
  • Dependents who have individual taxpayer identification numbers.
  • Dependent parents or other qualifying relatives supported by the taxpayer.
  • Dependents living with the taxpayer who aren't related to the taxpayer.

This Interactive Tax Assistant tool on IRS.gov can help people determine if they qualify for these two credits.

Education credits There are two higher education credits that can reduce the amount of tax someone owes on their tax return. One is the American opportunity tax credit and the other is the lifetime learning credit. The taxpayer, their spouse or their dependent must have been a student enrolled at least half time for one academic period to qualify. The taxpayer may qualify for one of these credits even if they don't owe any taxes. Form 8863, Education Credits is used to claim the credit when filing the tax return.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source : IRS

New school year reminder to educators; maximum educator expense deduction rises to $300 in 2022

Posted by Admin Posted on Aug 30 2022

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WASHINGTON — As the new school year begins, the Internal Revenue Service reminds teachers and other educators that they'll be able to deduct up to $300 of out-of-pocket classroom expenses for 2022 when they file their federal income tax return next year.

This is the first time the annual limit has increased since the special educator expense deduction was enacted in 2002. For tax years 2002 through 2021, the limit was $250 per year. The limit will rise in $50 increments in future years based on inflation adjustments.

For 2022, an eligible educator can deduct up to $300 of qualifying expenses. If they're married and file a joint return with another eligible educator, the limit rises to $600. But in this situation, not more than $300 for each spouse.

Who qualifies?

Educators can claim this deduction, even if they take the standard deduction. Eligible educators include anyone who is a kindergarten through grade 12 teacher, instructor, counselor, principal or aide in a school for at least 900 hours during the school year. Both public and private school educators qualify.

What's deductible?

Educators can deduct the unreimbursed cost of:

  • Books, supplies and other materials used in the classroom.
  • Equipment, including computer equipment, software and services.
  • COVID-19 protective items to stop the spread of the disease in the classroom. This includes face masks, disinfectant for use against COVID-19, hand soap, hand sanitizer, disposable gloves, tape, paint or chalk to guide social distancing, physical barriers, such as clear plexiglass, air purifiers and other items recommended by the Centers for Disease Control and Prevention.
  • Professional development courses related to the curriculum they teach or the students they teach. But the IRS cautions that, for these expenses, it may be more beneficial to claim another educational tax benefit, especially the lifetime learning credit. For details, see Publication 970, Tax Benefits for Education, particularly Chapter 3.

Qualified expenses don't include the cost of home schooling or for nonathletic supplies for courses in health or physical education. As with all deductions and credits, the IRS reminds educators to keep good records, including receipts, cancelled checks and other documentation.

Reminder for 2021 tax returns being filed now: Deduction limit is $250

For those who received a tax filing extension or still need to file a 2021 tax return, the IRS reminds any educator still working on their 2021 return that the deduction limit is $250. If they are married and file a joint return with another eligible educator, the limit rises to $500. But in this situation, not more than $250 for each spouse.

File electronically when ready. Tax-filing software uses a question-and-answer format that makes doing taxes easier. Whether a return is self-prepared or prepared with the assistance of a tax professional or trained community volunteer, the IRS urges everyone to file electronically and choose direct deposit for refunds. For details, visit Electronic Filing Options for Individuals.

In addition, the IRS urges anyone who owes taxes to choose the speed and convenience of paying electronically, such as with IRS Direct Pay, a free service available only on IRS.gov. For information about this and other payment options, visit Pay Online.

Taxpayers who requested more time to file an accurate return have until October 17, 2022. Those who have what they need to file, however, should file as soon as possible to avoid delays in processing their return. Taxpayers are urged to file electronically when they are ready and avoid the last-minute rush to file at the deadline.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS

TAS Tax Tip: Mid-Year Tax Checkup

Posted by Admin Posted on Aug 30 2022

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Summertime is the perfect time for a mid-year tax checkup. A tax checkup will help you avoid being surprised with a potentially large tax bill and may help uncover ways you can save throughout the rest of the year. Keep in mind that big tax breaks were enacted for the 2021 tax year, but most of those tax law changes expired at the end of 2021. As a result, the child tax credit and credit for other dependentschild and dependent care creditEarned Income Tax Credit (EITC) and other popular tax breaks are different for the 2022 tax year than 2021.

Get organized

Collect and keep your records and receipts. Record keeping can help you identify sources of income, track deductible expenses, and make preparing a complete and accurate tax return easier.

Notify the IRS if your address changes and notify the Social Security Administration of a legal name change.

Create and/or sign into your individual IRS online account to view your federal tax records, manage communication preferences, make payments and more.

Perform a paycheck check-up

Pay close attention to your paystubs to help prevent end-of year surprises. Make sure the earnings are correct and that you have the proper amount of tax withheld. As time passes, life events like marriage, divorce, having a child, buying a home, or a change in income may affect your taxes. The IRS’s Tax Withholding Estimator will help you assess your income tax, credits, adjustments, and deductions, and determine whether you need to change your tax withholding. If a change is recommended, the estimator will provide instructions to update your withholding with your employer either online or by submitting a new Form W-4, Employee’s Withholding Allowance Certificate.

Remember, most income is taxable. This includes the following sources and more:

Consider making estimated tax payments

If you receive a substantial amount of non-wage income like self-employment income, investment income, taxable Social Security benefits, or pension and annuity income, you should make quarterly estimated tax payments. Log in to your online account to make a payment online or go to IRS.gov/payments.

Review your retirement contributions

Review contributions to your retirement plan, such as 401(k) and Individual Retirement Accounts (IRAs). If you want to maximize your contributions, run the numbers to see how much you need to save from your remaining paychecks this year. Increasing pre-tax retirement contributions reduces your taxable income for the year you contribute.

Report changes that may affect your health insurance Marketplace premiums

If you have health insurance through your state’s health insurance marketplace established under the Affordable Care Act, it is important to report changes that may affect your premiums. Changes in circumstances to report to the Marketplace include:

  • Changes in household income (including lump sum distributions from Social Security, retirement accounts, etc.);
  • Birth or adoption;
  • Marriage or divorce;
  • Moving to a different address;
  • Gaining or losing eligibility for other health care coverage; or
  • Other changes affecting income and your family.

If you want to see how a change of circumstance might affect your Premium Tax Credit (PTC), you can use the PTC Change Estimator. Remember to contact your Marketplace to report a change of circumstances.

Plan your health flexible spending arrangements

Check the balance of your flexible spending arrangement (FSA). FSAs allow you to put some of your pre-tax income toward qualifying medical, dental, and vision expenses, along with other health-related products and services. For 2022, workers can contribute up to $2,850.

While there are some provisions that may let your roll over some money into the next year, most FSAs are “use-or-lose.” Start thinking now about how you might use remaining funds in the second half of the year to ensure you don’t lose the money you contributed to your FSA account.

For more updates from the Taxpayer Advocate Service, visit the news and information center to read the latest tax tips, blogs, alerts and more. Also available in Spanish.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: TAS

TAS Tax Tip: What to do if you receive an IRS balance due notice for taxes you have already paid

Posted by Admin Posted on Aug 30 2022

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The IRS issues various balance due notices, including Notice CP14, Notice of Tax Due and Demand for Payment. This information will help you if you receive a CP14 from the IRS despite having already paid your taxes in full.

The CP14 is a balance due notice telling you that you owe money for unpaid taxes. The notice requests that a payment be made within 21 days. If the balance due is not fully paid within 60 days, the IRS can proceed with collection activity.

The first thing to know is don’t panic! Taxpayers typically don’t want to hear from the IRS. Sometimes they don’t even want to open the mail from the IRS and in particular don’t want to see a bill for federal income taxes they already paid. Because of a correspondence backlog at the IRS, many payments have not yet been processed. Until that is done, those taxpayers’ accounts reflect balances due even though the taxes have been paid.

What should I do if I receive a CP14 notice by mistake?

  • Don’t ignore it. Open it, read it, and keep it in a safe place.
  • Verify your taxes were paid. If you have documentation that you have paid the right amount of tax, don’t pay it again.
  • Due to the correspondence backlog, your payment may not have been processed yet, so we recommend that you create an online account to monitor the account for your payment to be applied.
  • Respond to the IRS. You have 60 days from the date of the CP14 notice to respond, so if the payment isn’t applied to your account AT LEAST TEN DAYS PRIOR to the 60-day deadline, have your information ready and either call the number on your notice or submit your information by mail to make sure you are compliant with the terms of the notice.

What should I do if I made a mistake and the CP14 notice is correct?

It’s in your best interest to pay your tax debt as soon as possible to limit the penalties and interest the IRS may charge.

However, if you can’t pay the full amount by the date on the notice, there are several payment options that might work for your situation. Depending on the type and amount of tax you owe, different options are available, ranging from short term extensions, to installment agreements, to an offer in compromise. Each has different requirements and may have a fee.

You must reply by the date required in the notice or you may lose certain appeal rights.

Where to reply

The notice tells you where to call and where to send your payment or response if the notice is incorrect. Follow the instructions.

What if I want to talk with someone?

Each notice or letter from the IRS should include contact information. The telephone number is usually found in the upper right-hand corner. If a specific employee is working your case, it will show a specific phone number for that employee or the department manager. Otherwise, it will show the IRS toll-free number (800-829-1040).

Note: Live phone support often has long wait times or you may have to call more than once. Responses to correspondence may also have long delays. The IRS has expanded voice bot options for faster services that includes assistance for eligible taxpayers in setting up or modifying payment plans.

The best days to call the IRS are Wednesdays, Thursdays, and Fridays. The IRS advises that wait times are the longest on Mondays and Tuesdays.

Have your paperwork (such as cancelled checks, amended return, etc.) ready when you call.

Wait – I still need help

Letters and notices aren’t always easy to understand. Here are three resources we recommend you use if you need more help:

You can generally resolve most notices or letters without help, but you can also get the help of a professional – either the person who prepared your return, or another tax professional.

If you can’t afford to hire a tax professional to assist you, you may be eligible for free or low cost representation from an attorney, certified public accountant, or enrolled agent associated with a Low Income Taxpayer Clinic (LITC). LITCs are independent from the IRS and TAS. LITCs represent individuals whose income is below a certain level and who need to resolve tax problems with the IRS. LITCs can represent taxpayers in audits, appeals, and tax collection disputes before the IRS and in court. In addition, LITCs can provide information about taxpayer rights and responsibilities in different languages for individuals who speak English as a second language. Services are offered for free or a small fee.  For more information or to find an LITC near you, see the LITC page or IRS Publication 4134, Low Income Taxpayer Clinic List.  This publication is also available online at www.irs.gov/forms-pubs or by calling the IRS toll-free at 800-TAX-FORM (800-829-3676).

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: TAS

Basic things all businesses should know about excise tax

Posted by Admin Posted on Aug 30 2022

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Excise tax is an indirect tax on specific goods, services and activities. Federal excise tax is usually imposed on the sale of things like fuel, airline tickets, heavy trucks and highway tractors, indoor tanning, tires, tobacco and other goods and services.

Businesses that are subject to excise tax generally must file a Form 720, Quarterly Federal Excise Tax Return to report the tax to the IRS.

This tax is commonly included in the cost of the product. While the end consumer doesn't usually see the excise tax on their receipt, it may be charged at the time of

  • Import
  • Sale by the manufacturer
  • Sale by the retailer
  • Use by the manufacturer or consumer

Many excise taxes go into trust funds for projects related to the taxed product or service, such as highway and airport improvements. Excise taxes are independent of income taxes. Often, the retailer, manufacturer or importer must pay the excise tax to the IRS and file the Form 720.

Some excise taxes are collected by a third party. The third party then sends the tax to the IRS and files the Form 720. For example, the tax on an airline ticket generally is paid by the purchaser and collected by the airline.

When to file

Businesses must file the form for each quarter of the calendar year. Here are the due dates:

  • Quarter 1 – January, February, March: deadline, April 30
  • Quarter 2 – April, May, June: deadline, July 31
  • Quarter 3 – July, August, September: deadline, October 31
  • Quarter 4 – October, November, December: deadline, January 31

If the deadline for filing a tax return falls on a Saturday, Sunday or legal holiday, the due date is the next business day.

How to file

The IRS does accept paper excise tax returns. However, electronic filing is strongly encouraged, when possible. To make this process easier for taxpayers, the contact information for all approved e-file transmitters of excise forms is listed on IRS.gov. Businesses can submit forms online 24 hours a day.

When businesses e-file, they get confirmation that the IRS received their form. Also, e-filing reduces processing time and errors. To electronically file, business taxpayers will have to pay the provider's fee for online submission.

The excise tax forms available for electronic filing are:

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS

ABLE accounts can help people with disabilities pay for disability-related expenses

Posted by Admin Posted on Aug 30 2022

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People with disabilities can use an Achieving a Better Life Experience or ABLE account to help pay qualified disability-related expenses. This tax-advantaged savings account doesn't affect their eligibility for government assistance programs.

Here are some key things people should know about these accounts.

Annual contribution limit

  • The 2022 limit is $16,000.
  • Certain employed ABLE account beneficiaries may make an additional contribution up to the lesser of these amounts:
    • The designated beneficiary's compensation for the tax year.
    • The poverty line for a one-person household. For 2022, this amount is $12,880 in the continental U.S., $16,090 in Alaska and $14,820 in Hawaii. 

Saver's credit

  • ABLE account designated beneficiaries may be eligible to claim the saver's credit for a percentage of their contributions. 
  • The beneficiary claims the credit on Form 8880, Credit for Qualified Retirement Savings ContributionsPDF. The saver's credit is a non-refundable credit available to individuals who meet these three requirements:
    • Are at least 18 years old at the close of the taxable year
    • Are not a dependent or a full-time student
    • Meet the income requirements

Rollovers and transfers from section 529 plans

  • Families may roll over funds from a 529 plan to another family member's ABLE account. 
  • The ABLE account must be for the same beneficiary as the 529 account or for a member of the same family as the 529 account holder. Rollovers from a section 529 plan count toward the annual contribution limit. For example, the $16,000 annual contribution limit would be met by parents contributing $10,000 to their child's ABLE account and rolling over $6,000 from a 529 plan to the same ABLE account.

Qualified disability expenses

  • States can offer ABLE accounts to help people who become disabled before age 26 or their families pay for disability-related expenses. These expenses include housing, education, transportation, health, prevention and wellness, employment training and support, assistive technology and personal support services.
  • Though contributions aren't deductible for federal tax purposes, distributions, including earnings, are tax-free to the beneficiary, if they are used to pay qualified disability expenses. 

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS 

How extension filers – and everyone else – can get tax help fast

Posted by Admin Posted on Aug 30 2022

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For people who haven't filed their 2021 tax return yet, and for everyone looking for tax assistance, IRS.gov has resources to help people file electronically, get personalized tax account info, and find the status of their refund. These online tools are available any time, so taxpayers can use them at their convenience.

Get tax information 24/7

Taxpayers can use IRS.gov to:

  • View the filing page to get information on most federal income tax topics.
  • Access the Interactive Tax Assistant tool for answers to many tax law questions.
  • Sign into their individual IRS online account to view their balance and tax records, make payments, and manage communication preferences.
  • Find information about their tax refunds using the Where's My Refund? tool.

Taxpayers can also download the official IRS mobile app, IRS2Go, to check their refund status, make payments, find free tax preparation assistance, and sign up for helpful tax tips.

File electronically

Taxpayers who requested an extension to October 17 or missed the April 18 deadline can still prepare and file returns electronically for free with IRS Free File, if they qualify. The IRS accepts electronically filed returns 24/7. There's no reason to wait until October 17 if filers have all the information and documentation, they need to file an accurate return today. They can get their refund faster by choosing direct deposit.

If taxpayers need info about their Economic Impact Payments to determine eligibility for the recovery rebate credit or need to reconcile their advance child tax credit payments, they can go to the Tax Records tab in their IRS online account.

Taxpayers who missed the April 18 deadline and owe should file and pay electronically as soon as possible to reduce penalties and interest. Taxpayers can make payments or set up payment plans online.

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 inputting 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 IRS webpages are now available in Spanish, Vietnamese, Russian, Korean, Haitian Creole and Chinese. Some of the multilingual resources include the Taxpayer Bill of Rightse-file resources and many tax forms and publications.

Access the Alternative Media Center

The online Alternative Media Center has accessible products for use with assistive technology like screen reading software, refreshable Braille displays and screen magnifying software. These products include tax forms, instructions and publications that can be downloaded or viewed online as Section 508 compliant PDFs, HTML, eBraille, text and large print. To request paper copies of tax forms or instructions or publications in Braille or large print, taxpayers can call the tax form telephone number at 800-829-3676. Taxpayers can complete Form 9000, Alternative Media PreferencePDF, to receive their IRS tax notices in Braille, large print, audio or electronic formats.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS

People should donate carefully after a disaster to avoid scams

Posted by Admin Posted on Aug 30 2022

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After an emergency or disaster, people rally to help victims by donating money. Unfortunately, this can give criminals an opportunity to prey on them by soliciting donations for fake charities. Scammers may also pose as federal agencies to dupe disaster victims trying to get disaster relief.

People should always be suspicious of unsolicited contact. Scammers often contact their possible victim by telephone, social media, email or in person.

People donating to charity should make sure their money is going to a reputable organization.

  • Thieves may pose as a representative of a charity to ask for money or private information from well-intentioned taxpayers.
  • Scammers may set up bogus websites using names that sound like real charities. When a taxpayer searches for a charity online, they find the fake website or social media page, instead.
  • Donors can use the Tax Exempt Organization Search to find or verify qualified charities. Donations to these real charities may be tax deductible.
  • Taxpayers should always give by check or credit card to have a record of the donation.
  • Donors shouldn't give out personal financial information to anyone who asks for money. This includes things like Social Security numbers, credit card information, bank account numbers, and passwords.

Disaster victims should know:

  • Scammers may claim to work for the IRS. The thieves say they can help victims file casualty loss claims and get tax refunds.
  • Disaster victims can call the IRS disaster assistance line at 866-562-5227. IRS representatives will answer questions about tax relief or disaster-related tax issues.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS

TAS Tax Tip: Small business tax highlights

Posted by Admin Posted on Aug 29 2022

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The form of business you operate determines what taxes you must pay and how you pay them. There are four general types of business taxes:

  • Income
  • Self-employment
  • Employment
  • Excise

Income Tax

All businesses must file annual income tax returns, except partnerships which file annual information returns. The form you use depends on your business structure; see Publication 583, Starting a Business and Keeping Records, to decide what forms you should file to report your business income. Publication 509, Tax Calendars, explains when to file returns and make tax payments.

Self-Employment Tax

Self-employment (SE) tax is a social security and Medicare tax primarily for individuals who work for themselves. It is like the social security and Medicare taxes withheld from most employees’ wages by their employers. Your SE tax payments contribute to your coverage under the social security system. This coverage provides you with retirement, disability, survivor, and hospital insurance (Medicare) benefits.

You must file Schedule SE, Self-Employment Tax, with your federal income tax return, Form 1040 or Form 1040-SR, and pay SE tax if either of the following applies:

  • Your net self-employment income was $400 or more; or
  • You had church employee income of $108.28 or more.

The instructions for Schedule SE are a good resource to understand who must pay SE Tax.

Self-employed individuals in Puerto Rico use Form 1040-PR to compute self-employment tax.

Note:  Self-employed individuals generally must pay SE tax as well as income tax.

Employment Tax

When you have employees, you have certain employment taxes you must pay and forms you must file. Employment taxes include the following:

  • Social security and Medicare taxes;
  • Federal income tax withholding; and
  • Federal unemployment (FUTA) tax.

You must also withhold Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year.

If you pay wages subject to federal income tax withholding or social security and Medicare taxes, you generally must file Form 941 quarterly; however, some employers use Form 944, Form 1040 (Schedule H), or Form 943 instead of Form 941. Generally you must use Form 940 to report your annual FUTA tax.

For additional information, refer to Employment Taxes for Small Businesses and Publication 15, (Circular E), Employer’s Tax Guide.

Excise Tax

You may be subject to Excise Tax if you do any of the following:

  • Manufacture or sell certain products;
  • Operate certain kinds of businesses;
  • Use various kinds of equipment, facilities, or products; or
  • Receive payment for certain services.

Excise taxes may be imposed on the manufacturer, retailer or consumer, depending on the specific tax.

These are the forms most commonly used to report excise taxes:

Form 720, Quarterly Federal Excise Tax Return, is used to report your liability by IRS Number. and pay the excise taxes listed on the form. If you report a liability on Part I or Part II, you may be eligible to use Schedule C to claim a credit.

Form 2290, Heavy Highway Vehicle Use Tax Return, is used to report federal excise tax on certain trucks, truck tractors, and buses used on public highways. This tax applies to vehicles having a taxable gross weight of 55,000 pounds or more.

Note: The weight declared for registering a vehicle in a state may affect the taxable gross weight used to calculate the tax.

Form 730, Monthly Tax Return for Wagers, is used by taxpayers in the business of accepting wagers, conducting a wagering pool or lottery, or required to be registered and received wagers for on behalf of another person but didn’t report that person’s name and address.

Form 11-C, Occupational Tax and Registration Return for Wagering, is used to register for certain wagering activity with the IRS and to pay the federal occupational tax on wagering.

Form 6627, Environmental Taxes, is used to report the environmental taxes on petroleum and imported petroleum products, and certain chemicals and imported chemical substances. Find the tax rates for 121 taxable substances here.

For additional information, see Publication 510, Excise Taxes.

Estimated Tax

Taxes must be paid as you earn or receive income during the year, either through withholding or estimated tax payments. Estimated taxes are used to pay not only income tax, but other taxes such as self-employment tax.

Individuals, including sole proprietors, partners, and S corporation shareholders, generally must make estimated tax payments if they expect to owe at least $1,000 in tax after subtracting withholding and tax credits. Use the worksheet in Form 1040-ES, Estimated Tax for Individuals, to figure and pay your estimated tax.

Corporations generally must make estimated tax payments if they expect to owe at least $500 in taxes. Use Form 1120-W, Estimated Tax for Corporations, to figure your corporation’s estimated tax. You must deposit the payments using the Electronic Federal Tax Payment System. For additional information, refer to Publication 542, Corporations.

Note: S corporations must also make estimated tax payments for certain taxes, but instead use the instructions for Form 1120-S, U.S. Income Tax return for an S Corporation, to figure their estimated tax.

If you pay too little or pay late, you may have to pay an estimated tax penalty even if you are due a refund when you file your tax return.  For more information, see Publication 505, Tax Withholding and Estimated Tax.

Payment Options

You generally must deposit certain excise taxes, corporate income tax, and S corporation taxes before you file your return. You must use an electronic funds transfer (EFT) to make all federal tax deposits (FTDs). Generally, an EFT is made using the Electronic Federal Tax Payment System (EFTPS). If you don’t want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or trusted third party to make EFT on your behalf.

For estimated tax purposes, the year is divided into four payment periods. It’s important to remember that the payment periods are not spread evenly throughout the year. In general, estimated payments are due on April 15, June 15, September 15, and January 15 of the following year. You can mail your estimated tax payments with Form 1040-ESpay online, or pay by phone or from your mobile device using the IRS2Go app. Visit IRS.gov/payments to view all payment options.

Ten Federal Tax Tips to Help Small Business Owners

April shouldn’t be the only time you’re thinking about taxes. Keep these tax tips in mind throughout the year so you’re prepared to maximize your deductions and credits.

  1. Know your limitations and know when you need to ask a professional for help: There are many Online Learning and Educational Products available to help you learn about taxes. For example, the IRS Tax Calendar has important tax dates for businesses. However, if you choose to hire a professional, it is important to choose carefully because you are trusting them with your personal information and relying on them to have the knowledge to help you file an accurate tax return. You are responsible for all the information on your tax returns, no matter who prepares them. TAS Tax Tip: Choosing the right tax return preparer for you can help.

Note: ALL tax return preparers MUST sign their name and enter a preparer tax identification number on your tax return. For your protection, please check that they do this before submitting any documents.

  1. Keep adequate records: Accurate recordkeeping throughout the year will save you time and help ensure your tax return is correct. Set up a system for receipts. This can be a paper file, or you can use an app to scan and store them; just make sure you are saving them in some way.
  2. Separate your personal and business finances: Set up a separate bank account and credit card for your business and run only business expenses through those accounts. See Publication 583, Starting a Business and Keeping Records.
  3. Correctly classify your business: Some business structures enjoy more tax advantages than others. It’s important to choose the business structure that best suits your business. If you’re not sure which to choose, a tax attorney or certified public accountant can help.
  4. Manage payroll: You can take an online class to learn how to handle payroll. But if you don’t have the time, desire, or knowledge to manage payroll, hire someone to do it for you. To help make sure the company is reputable, see Outsourcing Payroll and Third Party Payers.
  5. Subscribe to e-News for Small Businesses: The IRS e-News for Small Businesses is a free electronic mail service that offers tax information for small business owners and self-employed individuals, including reminders, tips and special announcements.
  6. Research small business tax deductions: There is a long list of tax deductions for small business owners. See Publication 535, Business Expenses. A tax deduction is an item you can subtract from your gross income to lower the amount of taxes you owe.
  7. Self-employment tax deduction: You can deduct one-half (50 percent) of your SE tax as an adjustment to income on your federal income tax return. For tax years after 2017, you will also need to report the amount on Form 1040 Schedule 1, Part II.
  8. Make your tax payments timely: Anyone who files federal income tax returns and expects to owe more than $1,000 needs to pay estimated tax If you don’t pay enough tax through withholding and estimated tax payments, you may be charged a penalty. You also may be charged a penalty if your estimated tax payments are late, even if you are due a refund when you file your tax return.
  9. For faster processing, file your returns electronically: Electronic Filing Options for Business and Self-Employed Taxpayers.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: TAS

Some things to know about crowdfunding and taxes

Posted by Admin Posted on Aug 23 2022

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Crowdfunding is a popular way to raise money online. People often use crowdfunding to fundraise for a business, for charity, or for gifts. It's important to know that money raised through crowdfunding may be taxable.

Some money raised through crowdfunding may be considered a gift.

Under federal tax law, gross income includes all income from any source, unless it's excluded from gross income by law. In most cases, gifts aren't included in the gross income of the person receiving the gift. Here's what people involved in crowdfunding should know:

  • If a crowdfunding organizer is raising money on behalf of others, the money may not be included in the organizer's gross income, as long as the organizer gives the money to the person for whom they organized the crowdfunding campaign.
  • If people donate to a crowdfunding campaign out of generosity and without expecting anything in return, the donations are gifts. Therefore, they will not be included in the gross income of the person for whom the campaign was organized.
  • However, not all contributions to crowdfunding campaigns are gifts and may be taxable.
  • When employers give to crowdfunding campaigns for an employee, those contributions are generally included in the employee's gross income.

Taxpayers may want to consult a trusted tax pro for information and advice regarding how to treat amounts received from crowdfunding campaigns.

People may receive Form 1099-K for money raised through crowdfunding.

The crowdfunding website or its payment processor must file Form 1099-K, Payment Card and Third Party Network Transactions with the IRS if:

  • The amount raised is more than $600
  • Contributors to the crowdfunding campaign receive goods or services for their contributions.

If a Form 1099-K is filed, the crowdfunding organizer or the beneficiary of the fundraiser will receive a copy, depending on who received the funding directly from the crowdfunding website.

Receiving a Form 1099-K doesn't automatically mean the amount shown is taxable. However, if the taxpayer doesn't include the distributions from the form on their tax return, the IRS may contact the recipient for more information. The recipient may need to explain why the crowdfunding distributions weren't reported.

Recordkeeping for money raised through crowdfunding.

People who run crowdfunding campaigns or receive money from one should keep careful records about the campaign and the disposition of funds for at least three years.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS

What business owners need to do when closing their doors for good

Posted by Admin Posted on Aug 23 2022

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There are a few things business owners need to do before they close their business. Of course, they need to fulfill their federal tax responsibilities. It's also important to notify the IRS of their plans.

Business owners must take these steps when closing a business:

  • File a final tax return and related forms. The type of return to file and related forms depends on the type of business.
  • Take care of employees. Business owners with one or more employees must pay any final wages or compensation, make final federal tax deposits and report employment taxes.
  • Pay taxes owed. Even if the business closes now, tax payments may be due next filing season.
  • Report payments to contract workers. Businesses that pay contractors at least $600 for services including parts and materials during the calendar year in which they go out of business, must report those payments.
  • Cancel EIN and close IRS business account. Business owners should notify the IRS so they can close the IRS business account.
  • Keep business records. How long a business needs to keep records depends on what's recorded in each document.

IRS.gov has information to help guide business owners through the process of shutting down. Small businesses and self-employed taxpayers can find information including:

  • What forms to file
  • How to report revenue received in the final year of business
  • How to report expenses incurred before closure

Business owners can also get helpful information on declaring bankruptcy, selling their business and terminating retirement plans.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS

Worker Classification 101: employee or independent contractor

Posted by Admin Posted on Aug 23 2022

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A business might pay an independent contractor and an employee for the same or similar work, but there are key legal differences between the two. It is critical for business owners to correctly determine whether the people providing services are employees or independent contractors.

Here's some information to help business owners avoid problems that can result from misclassifying workers.

An employee is generally considered anyone who performs services, if the business can control what will be done and how it will be done. What matters is that the business has the right to control the details of how the worker's services are performed. Independent contractors are normally people in an independent trade, business or profession in which they offer their services to the public.

Independent contractor vs. employee

Whether a worker is an independent contractor, or an employee depends on the relationship between the worker and the business. Generally, there are three categories to considerPDF.

  • Behavioral control − Does the company control or have the right to control what the worker does and how the worker does the job?
  • Financial control − Does the business direct or control the financial and business aspects of the worker's job. Are the business aspects of the worker's job controlled by the payer? Things like how the worker is paid, are expenses reimbursed, who provides tools/supplies, etc.
  • Relationship of the parties − Are there written contracts or employee type benefits such as pension plan, insurance, vacation pay? Will the relationship continue and is the work performed a key aspect of the business?

Misclassified worker

Misclassifying workers as independent contractors adversely affects employees because the employer's share of taxes is not paid, and the employee's share is not withheld. If a business misclassified an employee, the business can be held liable for employment taxes for that worker. Generally, an employer must withhold and pay income taxes, Social Security and Medicare taxes, as well as unemployment taxes. Workers who believe they have been improperly classified as independent contractors generally must receive a determination of worker status from the IRS. Then they can use Form 8919, Uncollected Social Security and Medicare Tax on WagesPDF to figure and report their share of uncollected social security and Medicare taxes due on their compensation.

Voluntary Classification Settlement Program

The Voluntary Classification Settlement Program is an optional program that provides businesses with an opportunity to reclassify their workers as employees for future employment tax purposes. This program offers partial relief from federal employment taxes for eligible businesses who agree to prospectively treat their workers as employees. Businesses must meet certain eligibility requirements and apply by filing Form 8952, Application for Voluntary Classification Settlement Program (VCSP), and enter into a closing agreement with the IRS.

Who is self-employed?

Generally, someone is self-employed if any of the following apply to them.

Self-employed individuals, including those who earn money from gig economy work, are generally required to file an tax return and make estimated quarterly tax payments. They also generally must pay self-employment tax which is social security and Medicare tax as well as income tax. These taxpayers may qualify for the home office deduction if they use part of a home for business.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS 

2021 tax extension filers don’t need to wait until October 17

Posted by Admin Posted on Aug 03 2022

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WASHINGTON — The Internal Revenue Service is reminding the estimated 19 million taxpayers who requested an extension to file their 2021 tax return that they don't have to wait until mid-October to file. If a taxpayer has all the necessary information to file an accurate return, they can file electronically at any time before the October deadline and avoid a last-minute rush to file.

Taxpayers who requested more time to file an accurate return have until October 17, 2022. Those who have what they need to file, however, should file as soon as possible to avoid delays in processing their return.

Taxpayers who have questions can get help with most tax issues online or by phone. The IRS.gov website has free and easy to use online tools and resources to help taxpayers get answers 24 hours a day. Voice bots help callers navigate interactive voice responses to simple payment or notice questions, and quickly get responses to Frequently Asked Questions.

The Interactive Tax Assistant is a tool that provides answers to several tax law questions specific to individual circumstances based on input. It can determine if an individual must file a tax return, their filing status, if they can claim a dependent, if an income type is taxable, and their eligibility to claim a credit or deduct certain expenses.

Electronic filing options

The IRS advises individuals who still need to file a 2021 tax return to file electronically and, if due a refund, to choose direct deposit.

Filing electronically is fast, accurate and secure, and when an individual chooses direct deposit, their refund goes directly from the IRS into their bank or financial account getting them their refund in the fastest time possible. If they have a prepaid debit card, they may be able to have their refund applied to the card by providing the account and routing number to the IRS. The IRS processes most e-filed returns and issues direct deposit refunds in less than 21 days.

Eligible individuals can use the IRS Free File program to prepare and file their 2021 federal tax return for free. Taxpayers can choose the brand-name tax preparation software company that is best for them. Some even offer free state tax return preparation. Those who earned more than $73,000 have the option to use IRS Free File Fillable Forms.

MilTax online software is also available for members of the military and certain veterans, regardless of income. This software is offered through the Department of Defense. Eligible taxpayers can use MilTax to prepare and electronically file their federal tax returns and up to three state returns for free.

Volunteer Income Tax Assistance

The IRS's Volunteer Income Tax Assistance (VITA) program offers free basic tax return preparation to people who generally make $58,000 or less and people with disabilities or limited English-speaking taxpayers. While the majority of these sites are only open through the end of the filing season, taxpayers can use the VITA Site Locator tool to see if there's a community-based site staffed by IRS-trained and certified volunteers still open near them.

Tax professionals

There are also various types of tax return preparers who can help, including certified public accountants, enrolled agents, attorneys and others who don't have a professional credential.

Taxpayers should choose a tax preparer wisely. For individuals who want help with their taxes, the IRS online directory can assist in finding a tax professional in their area.

Get current on taxes

The IRS sends correspondence to a taxpayer's last known address, usually the address from their most recently filed tax return. If the taxpayer moves and does not send a change of address to the IRS, they may not receive an IRS notice and could miss the deadline to respond.

There's no penalty for not filing a return if due a refund, but there's also no statute of limitations for assessing and collecting taxes due if no return has been filed.

Interest is charged on any tax not paid by the April due date and will accrue until paid in full. Individual taxpayers are charged the federal short-term interest rate plus 3 percentage points, currently 5% per year, compounded daily. Penalties will accrue for each month tax remains unpaid until maxed out at 25% of the unpaid tax.

Submitting a tax return and paying any amount owed as soon as possible can help taxpayers avoid further interest and penalties.

Taxpayers who owe taxes can review all payment options online. These include paying taxes through an Online Account with IRS Direct Pay or paying by debit card, credit card or digital wallet. The IRS has options for people who can't pay their taxes, including applying for a payment plan on IRS.gov.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS

TAS Tax Tip: Adjust Your Withholding to Ensure There’s No Surprises on Tax Day

Posted by Admin Posted on Aug 02 2022

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It is a good practice for everyone to do a paycheck check-up every year. Checking your tax withholding amounts can ensure that you aren’t paying too much or too little in federal income tax.

No one likes surprises come tax time. Checking your tax withholding amounts can ensure that you aren’t paying too much (or too little) in federal income tax. Doing a paycheck check-up is a great way to prepare for Tax Day – even if you just filed your taxes.

What does tax withholding mean?

Federal income tax is a pay-as-you-go tax. That means that throughout the year, you pay or have an employer, or the payer of income, withhold a portion of your taxes as you earn or receive income.

Why should I check my tax withholding?

It is a good practice for everyone to do a paycheck check-up every year.

There are essentially two ways to pay your federal income taxes:

  • Withholding from your paycheck, pension, and other government payments such as Social Security; or
  • If you don’t pay your tax through withholding, or don’t pay enough tax that way, making quarterly estimated tax payments.

If you don’t pay enough taxes during the year, you could be subject to estimated tax penalties. Typically, you can avoid a penalty and any applicable interest by paying at least 90 percent of your taxes during the year.

 

Checking and then adjusting tax withholding can help make sure you:

  • Don’t owe more tax than you are expecting;
  • Don’t get a surprise tax bill, and possibly a penalty, when filing next year; or
  • Don’t receive a refund that is much larger or smaller than anticipated.

To avoid a large or unexpected tax bill it is also a good idea to change your withholding when you experience a big life change such as marriage, divorce, birth of a child, getting a new or second job, starting a side business, or receiving any other income that isn’t subject to withholding.

It’s important to do this as early in the year as possible, so that if a tax withholding adjustment is needed, there is more time to make up the difference during the rest of the year. Waiting means there are fewer pay periods to withhold the necessary federal tax.

How do I calculate the correct amount to withhold?

The IRS Withholding Estimator on IRS.gov is a free tool that can help you calculate the right amount of tax to withhold from your paycheck.

The Estimator works for most taxpayers; however, people with more complex tax situations should use the instructions in Publication 505Tax Withholding and Estimated Tax.

This includes taxpayers who owe:

  • Self-employment tax;
  • Alternative minimum tax;
  • Tax on unearned income of dependents;
  • Tax on long-term capital gains or qualified dividends; and
  • Certain other investment- or household employee-related taxes.

For more on using the IRS Withholding Estimator read our TAS Tax Tip: Use Tax Withholding Estimator and Take Action on Your Tax Withholding Now

How do I adjust my withholding, if I need to?

If you think you need to make changes to your withholding amount, the calculator gives you the information you will need to fill out a new Form W–4, Employee’s Withholding Allowance Certificate. Because this form tells your employer how much you want them to withhold, submit the new W-4 to your employer as soon as possible to make the changes. Some payroll providers allow you to adjust your withholding using an online version of the Form W-4.

What if I don’t have enough taxes withheld?

If after making withholding adjustments, the amount of income tax withheld from your salary or pension is not enough, or if you don’t have any withholdings at all, you may have to make estimated tax payments. This also applies if you receive income such as interest, dividends, alimony, capital gains, prizes and awards, or other sources of income without withholding. You might also need to make estimated tax payments if you are in business for yourself.

Estimated tax payments are due four times each year:

  • January 1 to March 31 – April 15
  • April 1 to May 31 – June 15
  • June 1 to August 31 – September 15
  • September 1 to December 31 – January 15 of the following year

Note: If these due dates fall on a Saturday, Sunday, or legal holiday, the payments are due the next business day.

Your estimated tax payments should correspond to the period that any income is received. If you don’t pay enough tax by the due date of each of the payment periods, you may be charged a penalty even if you are due a refund when you file your income tax return.

You can use the worksheet in Form 1040-ES to figure your estimated tax. Again, it’s a good idea to do this each year, as early in the year as possible.

If you are unemployed and receive unemployment compensation, you may choose to have a flat ten percent withheld from your unemployment benefits to cover all or part of your tax liability.

  • Complete and provide Form W-4V, Voluntary Withholding Request, or another withholding request form, to the agency paying the benefits – don’t send it to the IRS.

Remember, if you need to increase your withholding, even just adding a few dollars more or making a partial estimated tax payment can make a difference in the amount you may owe on your tax return.  For those who cannot afford to pay taxes through their withholding or estimated tax payments, the IRS has payment options available. Each option has different requirements, and some have fees.

Most options for paying off a tax debt work best if you are proactive. More information is available on our I Can’t Pay My Taxes Get Help Page.

Do I have to report gambling winnings?

Yes, all gambling winnings are taxable and must be reported as income on your tax return. This includes cash winnings and fair market value of prizes such as cars and trips from:

  • Lotteries;
  • Raffles;
  • Horse Races;
  • Casinos; and
  • Fantasy Sports Leagues.

You should receive a Form W-2G, Certain Gambling Winnings, from a payer that shows the amount of your winnings and any taxes taken out. You must report all gambling winnings as “Other Income” on Form 1040 or Form 1040-SR , including winnings that aren’t reported on a Form W-2G. Some gambling winnings may require you to pay estimated tax.

Note: There are different rules for professional gamblers. For more information about withholding gambling winnings see Publication 505, Tax Withholding and Estimated Tax.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: TAS

Hiring Your Minor Children For Summer Jobs

Posted by Admin Posted on Aug 02 2022

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If you’re a business owner and you hire your children this summer, you can obtain tax breaks and other nontax benefits. The kids can gain on-the-job experience, save for college and learn how to manage money. And you may be able to:

  • Shift some of your high-taxed income into tax-free or low-taxed income, and
  • Realize payroll tax savings (depending on the child’s age and how your business is organized).

Plus, you can spend more time with your kids.

A legitimate job

If you hire your child, you get a business tax deduction for employee wage expenses. In turn, the deduction reduces your federal income tax bill, your self-employment tax bill (if applicable) and your state income tax bill (if applicable). However, for your business to deduct the wages as a business expense, the work performed by the child must be legitimate and the child’s pay must be reasonable.

Let’s say you operate as a sole proprietor and you’re in the 37% tax bracket. You hire your 16-year-old daughter to help with office work on a full-time basis during the summer and part-time into the fall. Your daughter earns $10,000 during 2022 and doesn’t have any other earnings.

You save $3,700 (37% of $10,000) in income taxes at no income tax cost to your daughter. She can use her standard deduction of $12,950 for 2022 to completely shelter her earnings.

Your family’s taxes are cut even if your daughter’s earnings exceed her standard deduction. Why? The unsheltered earnings will be taxed to your daughter beginning at a rate of 10%, instead of being taxed at your higher rate.

How payroll taxes might be saved

If your business isn’t incorporated and certain other conditions are met, your child’s wages are exempt from Social Security, Medicare and FUTA taxes. Your child must be under age 18 for this to apply (or under age 21 for the FUTA tax exemption). Contact us for how this works.

Be aware that there’s no FICA or FUTA exemption for employing a child if your business is incorporated or a partnership that includes nonparent partners. And payments for the services of your child are subject to income tax withholding, regardless of age, no matter what type of entity you operate.

Keep accurate records

Hiring your child can be a tax-smart idea. Be sure to keep the same records as you would for other employees to substantiate the hours worked and duties performed (such as timesheets and job descriptions). Issue your child a Form W-2. Contact us with questions about how these rules apply to your situation.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Thomson Reuters   

Deducting The Costs Of A Self-managed Portfolio

Posted by Admin Posted on Aug 02 2022

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Do you have significant investment-related expenses, including payment for financial service subscriptions, home office maintenance and clerical support? Under the 2017 Tax Cuts and Jobs Act (TCJA), these expenses aren’t deductible if they’re considered investment expenses to produce income. But they are deductible if they’re considered trade or business expenses.

Changing rules

For years before 2018, production-of-income expenses were deductible as miscellaneous itemized deductions subject to a 2%-of-adjusted-gross-income floor. But the TCJA generally suspended such miscellaneous deductions through 2025.

As a result, only the trade or business expense deduction is currently available for investment-related expenses. If you do a significant amount of trading, you should know which category your investment expenses fall into, because qualifying for trade or business expense treatment is more advantageous now.

A trader vs. an investor

To be able to deduct your investment-related expenses as business expenses, you must be engaged in a trade or business. The U.S. Supreme Court held many years ago that individual taxpayers aren’t engaged in a trade or business merely because they manage their own securities investments, regardless of the amount or the extent of the work required.

However, if you can show that your investment activities rise to the level of carrying on a trade or business, you may be considered a trader, who is engaged in a trade or business, rather than an investor, who isn’t. As a trader, you’re entitled to deduct your investment-related expenses as business expenses.

A trader is also entitled to deduct home office expenses if the home office is used exclusively on a regular basis as the trader’s principal place of business. An investor, on the other hand, isn’t entitled to home office deductions because the investment activities aren’t a trade or business.

A two-part test

Since the Supreme Court decision, there has been extensive litigation on the issue of whether a taxpayer is a trader or investor. The U.S. Tax Court has developed a two-part test, both parts of which must be satisfied for a taxpayer to be considered a trader:

1. The taxpayer’s trading is substantial (in other words, sporadic trading isn’t considered a trade or business), and

2. The taxpayer seeks to profit from short-term market swings, rather than from long-term holding of investments.

A taxpayer’s investment activities may be regular, extensive and continuous. But that itself isn’t sufficient for determining that the taxpayer is a trader. To be considered a trader (and therefore entitled to deduct investment-related business expenses) you must show that you buy and sell securities with reasonable frequency with the goal of making a profit on a short-term basis.

In one U.S. Tax Court case, a taxpayer made more than 1,000 trades a year with trading activities averaging about $16 million annually. Even so, the individual was deemed to be an investor rather than a trader, because the holding periods for stocks sold averaged about one year.

Passing the test

Again, to pass the trader test, both parts one and two must be satisfied. Contact us if you have questions or would like to figure out whether you’re an investor or a trader for tax purposes.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Thomson Reuters             

TAS Tax Tip: How to handle a notification of tax-related identity theft

Posted by Admin Posted on Aug 02 2022

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Did you get a notification from IRS or the Social Security Administration (SSA) advising you that you might be a victim of tax-related identity (ID) theft? If yes, it is important to visit our Identity Theft Get Help page and follow the steps there, as well as in the correspondence you received.

How will you know if you are a victim of tax-related ID theft?

You may find out you’re a victim of tax-related ID theft when you try to file your tax return or start getting IRS notices about your tax account.

The most common indicators are:

  • You try to file your tax return electronically, but the IRS rejects your return because it has already received another return using your Social Security Number (SSN) or ITIN;
  • You receive an IRS notice showing you received wages from somewhere you never worked;
  • You receive an IRS letter indicating one or more tax returns have been filed using your SSN or ITIN that you did not file.

Or you may receive a notice from the SSA stating benefits will be reduced or stopped based on IRS records indicating you received wages or other income from an employer for whom you did not work.

There are several steps you may need to take. The right ones for you are based on what’s happening with your tax account.

TAS’s Identity Theft Get Help page will walk you through the steps you need to take for each of the common indicators above and others too.

The IRS Taxpayer Protection Program identifies potential ID theft tax returns as a precautionary measure to protect you. If you receive a Letter 4883C, 5071C,  5747C6330C or 6331C, respond as soon as possible, following the instructions in the letter. Be aware that not all letters have the same options for verifying your identity, so it is important to follow the instructions given.

Protecting your tax account in future years

When the IRS determines you’re the rightful owner of the SSN (or ITIN) and confirms tax-related ID theft occurred, IRS will assign you an IRS Identity Protection PIN (IP PIN), a six-digit number that prevents someone else from filing a tax return using your information. The IRS assigns you a new IP PIN every year. This is an extra layer of security; a valid IP PIN must be entered on electronic and paper tax returns to avoid rejections or delays.

Anyone who can to verify their identity may now voluntarily opt into the IP PIN program as a proactive way to protect against tax-related ID theft. Even though you may not have a filing requirement, an IP PIN still protects your account. You can also see our NTA Blog: Identity Protection PIN Can Protect You From Tax-Related Identity Theft or IRS’s FAQs about the Identity Protection Personal Identification Number (IP PIN) for more information about this special program.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS

What businesses need to know about reporting nonemployee compensation and backup withholding to the IRS

Posted by Admin Posted on Aug 02 2022

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When a business hires an independent contractor, the employer is generally not responsible for withholding income taxes, Social Security, or Medicare taxes from their compensation. However, by law, business taxpayers who pay nonemployee compensation of $600 or more must report these payments to the IRS. They do this using Form 1099-NEC, Nonemployee Compensation.

Generally, payers must file Form 1099-NEC by January 31. There is no automatic 30-day extension to file Form 1099-NEC. However, an extension to file may be available under certain hardship conditions.

Nonemployee compensation reportable on Form 1099-NEC is subject to backup withholding if a payee has not provided a Taxpayer Identification Number to the payer or the IRS notifies the payer that the payee provided a TIN that does not match their name in IRS records.

A TIN can be one of the following numbers:

  • Social Security
  • Employer identification
  • Individual taxpayer identification
  • Adoption taxpayer identification

What is backup withholding?

Backup withholding can apply to most kinds of payments reported on Forms 1099 and W-2G. The person or business paying the taxpayer doesn't generally withhold taxes from certain payments; however, there are situations when the payer is required to withhold a certain percentage of tax to make sure the IRS receives the tax due on this income. The payer's requirement to withhold taxes from payments not otherwise subject to withholding is known as backup withholding. The current backup withholding tax rate is 24%.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Surce: IRS

OFFER IN COMPROMISE

Posted by Admin Posted on Aug 02 2022

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An offer in compromise allows you to settle your tax debt for less than the full amount you owe. It may be a legitimate option if you can't pay your full tax liability or doing so creates a financial hardship. We consider your unique set of facts and circumstances:

  • Ability to pay
  • Income
  • Expenses
  • Asset equity

We generally approve an offer in compromise when the amount you offer represents the most we can expect to collect within a reasonable period of time. Explore all other payment options before you submit an offer in compromise. The Offer in Compromise program is not for everyone. If you hire a tax professional to help you file an offer, be sure to check his or her qualifications.

Who Is Eligible

Confirm you're eligible and prepare a preliminary proposal with the Offer in Compromise Pre-Qualifier Tool.

You're eligible to apply for an Offer in Compromise if you:

  • Filed all required tax returns and made all required estimated payments
  • Aren't in an open bankruptcy proceeding
  • Have a valid extension for a current year return (if applying for the current year)
  • Are an employer and made tax deposits for the current and past 2 quarters before you apply

If You Apply and Are Not Eligible

If you apply for an Offer in Compromise and we can’t process your offer, we'll:

  • Return your application and offer application fee
  • Apply any offer payment you included to your balance due

Submit Your Application

Find forms to submit an application and step-by-step instructions in Form 656-B, Offer in Compromise BookletPDF.

Complete an application package:

  • Form 433-A (OIC) (individuals) or 433-B (OIC) (businesses) and all required documentation as specified on the forms
  • Form 656(s) – you must submit individual and business tax debt (Corporation/ LLC/ Partnership) on separate Forms 656
  • $205 application fee (non-refundable)
  • Initial payment (non-refundable) for each Form 656.

Select a Payment Option

Your initial payment varies based on your offer and the payment option you choose:

  • Lump Sum Cash: Submit an initial payment of 20% of the total offer amount with your application. If we accept your offer, you'll receive written confirmation. You must pay any remaining balance due on the offer in five or fewer payments.
  • Periodic Payment: Submit your initial payment with your application. Continue to pay the remaining balance in monthly installments while the IRS considers your offer. If IRS accepts your offer, continue to pay monthly until it is paid in full.

If You Meet the Low Income Certification Guidelines

You don't have to:

  • Send the application fee or the initial payment
  • Make monthly installments while we review your offer.

For details, see Form 656-B, Offer in Compromise BookletPDF.

Understand the Process

While IRS evaluates your offer:

  • Your non-refundable payments and fees are applied to the tax liability (you may designate payments to a specific tax year and tax debt)
  • IRS may file a Notice of Federal Tax Lien
  • IRS suspends other collection activities
  • Your legal assessment and collection period is extended
  • You make all required payments per your offer
  • You don't have to make payments on an existing installment agreement
  • Your offer is automatically accepted if the IRS doesn't not make a determination within two years of the IRS receipt date (This does not include any Appeal period.)

If Your Offer Is Accepted

  • You must meet all the Offer Terms listed in Section 7 of Form 656, including filing all required tax returns and making all payments
  • IRS doesn't release federal tax liens until your offer terms are satisfied
  • Certain offer information is available for public review by requesting a copy of a public inspection file.

If Your Offer Is Rejected

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS

A Tax Break For Educators Gets An Update

Posted by Admin Posted on Aug 02 2022

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Teachers who are setting up their classrooms for a new school year often pay for some of their classroom supplies out-of-pocket. They can recoup some of that cost by taking advantage of a special tax break for educators. This deduction gained new importance after the 2017 passage of the Tax Cuts and Jobs Act (TCJA). For 2022, the deduction amount has increased for the first time since it was enacted.

The old-school way

Before 2018, employees who had unreimbursed out-of-pocket expenses could potentially deduct them if they were ordinary and necessary to the “business” of being an employee. A teacher’s out-of-pocket classroom expenses could qualify. Those expenses were claimed as a miscellaneous deduction, subject to a 2% of adjusted gross income (AGI) floor. That meant that only taxpayers who itemized deductions could enjoy a tax benefit, and then only to the extent that their deductions exceeded the 2% floor.

For 2018 through 2025, the TCJA has suspended miscellaneous itemized deductions subject to the 2% of AGI floor. Fortunately, qualifying educators can still deduct some unreimbursed out-of-pocket classroom costs using the educator expense deduction.

The new-school way

Back in 2002, Congress created the above-the-line educator expense deduction. An above-the-line deduction is one that’s subtracted from your gross income to determine your AGI. It can be claimed even by taxpayers who don’t itemize deductions. This is especially significant because, under the TCJA, the standard deduction has nearly doubled, which means that fewer taxpayers now itemize deductions.

For 2022, qualifying elementary and secondary school teachers and other eligible educators (such as counselors and principals) can deduct up to $300 of qualified expenses. This is up from $250 for 2021. Two married educators who file a joint tax return can deduct up to $600 of unreimbursed expenses, limited to $300 each.

Qualified expenses include amounts paid or incurred during the tax year for books, supplies, computer equipment, related software, services, and other equipment and materials used in classrooms. The cost of certain professional development courses may be deductible. Also, protective items to prevent the spread of COVID-19 such as hand sanitizers, disinfectant and other items recommended by the Centers for Disease Control for this purpose are also deductible. However, homeschooling supplies and nonathletic supplies for health or physical education courses aren’t deductible.

More details

Some additional rules apply to the educator expense deduction. If you’re an educator or you know one who might be interested in this tax break, please contact us for more details.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Thomson Reuters            

How Start-up Costs Of A New Business Affect Your Tax Return

Posted by Admin Posted on Aug 02 2022

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Despite the COVID-19 pandemic, there has been a large increase in the number of new businesses being launched. The latest data available from the U.S. Census Bureau shows that, for the period of June 2020 through June 2021, business applications were up 18.6%. The Bureau measures this by the number of businesses applying for an employer identification number.

Entrepreneurs often don’t know that many of the expenses incurred by start-ups can’t be currently deducted. You should be aware that the way you handle some of your initial expenses can make a large difference in your federal tax bill.

How to treat expenses for tax purposes

If you’re starting or planning to launch a new business, keep these three rules in mind:

1. Start-up costs include those incurred or paid while creating an active trade or business. The costs of investigating the creation of a new business or the acquisition of one are also considered start-up costs.

2. Under the tax code, taxpayers can make a special election to deduct up to $5,000 of business start-up and $5,000 of organizational costs in the year the business begins. As you know, $5,000 doesn’t go very far these days! And the $5,000 deduction is reduced dollar-for-dollar by the amount by which your total start-up or organizational costs exceed $50,000. Any remaining costs must be amortized over 180 months on a straight-line basis.

3. No deductions or amortization deductions are allowed until the year when “active conduct” of your new business begins. Generally, that means the year when the business has all the pieces in place to start earning revenue. To determine if a taxpayer meets this test, the IRS and courts generally ask questions such as: Did the taxpayer undertake the activity intending to earn a profit? Was the taxpayer regularly and actively involved? Did the activity commence?

Be sure to keep detailed records and receipts for these costs, so that nothing falls through the cracks.

Eligible expenses

In general, “start-up” expenses that qualify for the special election are those you make to:

  • Investigate the creation or acquisition of a business,
  • Create a business, or
  • Engage in a for-profit activity in anticipation of that activity becoming an active business.

An expense also must be one that would be deductible if it were incurred after a business began. One example is money you spend analyzing potential markets for a new product or service.

To be eligible as an “organization expense” under the special election, an expense must be related to establishing a corporation or partnership. Examples of organization expenses include legal and accounting fees for services related to organizing a new business and filing fees paid to the state of incorporation.

Plan now

If you have start-up expenses that you’d like to deduct this year, you need to decide whether to take the election described above. Recordkeeping is critical. Contact us about your start-up plans. We can help with the tax and other aspects of your new business.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Thomson Reuters             

You’re Never Too Old to File a Return – Taxes and the Elderly

Posted by Admin Posted on Aug 02 2022

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Taxpayers who are winding down full-time work may think that they can also wind down their tax return filing requirements. However, taxpayers are never too old to have a filing requirement. Although age is a consideration, filing requirements are determined by a variety of factors such as filing status, the type and amount of income received, and yes, even age. For 2021, single taxpayers are required to file a tax return if their gross income is $12,550 or more; however, single taxpayers 65 or older are not required to file unless their gross income is $14,250 or more.

Social Security and Railroad Retirement benefits

Many elderly taxpayers receive Social Security or Railroad Retirement benefits, both of which are based on prior earnings. The taxability of these benefits is not determined by age, but rather by filing status and the type and amount of other income received. TAS research shows that 98.4 percent of the 2020 tax returns filed by taxpayers 65 or older reported other income in addition to Social Security and Railroad Retirement benefits.

Even though Social Security and Railroad Retirement benefits are based on a taxpayer’s earned income, these benefits are not considered income for such refundable credits as the Earned Income Tax Credit (EITC). For tax year 2020, about four percent of the returns filed by taxpayers 65 and older reflected at least one exemption for a child – with nearly 97 percent of these taxpayers receiving Child Tax Credit. And for tax year 2020, 45 percent of the returns filed by taxpayers 65 or older reported pension or annuity income but reflected no income from wages. For many older taxpayers now raising their grandchildren, the option to claim EITC based on Social Security or Railroad Retirement benefits, or other retirement income based on a taxpayer’s earnings history, would further the credit’s goal of providing assistance to lower income families. This is especially true in multi-generational households, where raising children two or more generations removed may have been unplanned. In that vein, I have proposed legislative changes for restructuring and modernizing the EITC. Because the EITC is a credit for lower income families, its eligibility should more accurately reflect its target population.

Other credits may be available

Taxpayers 65 or older, and taxpayers under age 65 who receive taxable disability income due to being retired on permanent and total disability, may qualify for the Credit for the Elderly or Disabled. To be eligible for this credit, qualified individuals must also meet two income limitations: both their adjusted gross income and the total of their nontaxable Social Security and other nontaxable pensions, annuities, or disability income, must be below the designated amounts corresponding to the taxpayer’s filing status. If eligible, taxpayers should complete Schedule R, Credit for the Elderly or Disabled, and attach it to their tax return when filing. Taxpayers needing assistance to determine if they are eligible for this credit can use the IRS’s interactive tool, Do I Qualify for the Credit for the Elderly or Disabled?

Taxpayers paying a care provider to care for a spouse (or other qualifying relative) who was physically or mentally incapable of self-care so they could work or look for work should also consider their eligibility for the Child and Dependent Care Tax Credit. In 2021, the American Rescue Plan Act of 2021 (ARPA) temporarily increased this credit to provide additional help to working caregivers during the COVID-19 pandemic. For 2021 only, ARPA increased the limit on expenses that can be claimed to $8,000 for one qualifying person and $16,000 for two or more qualifying persons. The maximum credit amount was raised to 50 percent of employment-related expenses, which equals a maximum credit of $4,000 for one qualifying person or $8,000 for two or more qualifying persons. In addition, in 2021, the credit became potentially refundable for the first time.

Normally, a taxpayer (and spouse, if married filing jointly) must have “earned income” to qualify for the Child and Dependent Care Credit. Special earned income rules apply, however, for taxpayers and their spouses who are disabled. A disabled spouse is considered to have earnings of at least $250 for each month or part of a month they are unable to care for themselves. Therefore, disabled taxpayers, or taxpayers with a disabled spouse, may also benefit from this credit. Taxpayers who are uncertain regarding their eligibility for the Child and Dependent Care Credit may use the Interactive Child and Dependent Care Credit Eligibility Assistant on IRS.gov to determine eligibility.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: TAS      

TAS Tax Tip: Why do I owe a penalty and interest and what can I do about it?

Posted by Admin Posted on Aug 02 2022

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There are many reasons why the IRS may charge penalties on your tax account. The IRS is legally required, under IRC § 6601(a), to charge interest when you fail to pay the full amount you owe on time. Interest may also accrue on penalties. Interest, and any applicable penalties, will continue to accrue until you pay your balance due in full. Here are some of the most common penalties, information on why they may have been charged, and how to request penalty abatement (removal) if applicable.

First let’s talk about some common penalty charges on individual accounts, along with interest, and why the IRS charges them.

Common penalties include:

  • Failure to file – you didn’t file your tax return by the return due date or extended due date if an extension to file is requested and approved.
  • Failure to pay – you didn’t pay the taxes reported on your tax return in full by the due date of the original tax return. An extension to file doesn’t extend the time to pay so you must pay your taxes by the original due date of the tax return even if you have requested an extension of time to file your tax return. In addition, the IRS may charge a failure to pay penalty if the IRS sends a request for payment and you fail to pay on time.
  • Failure to pay proper estimated tax – you didn’t pay enough taxes due for the year with your quarterly estimated tax payments, or through withholding, when required.
  • Bad check – your bank doesn’t honor your check or other form of payment.

Interest

The IRS is required to charge interest on any unpaid balance owed until it is paid in full. See the chart on the IRS’s Interest page for more details.

See Notice 746: Information about Your Notice, Penalty and Interest.

How can I dispute IRS penalties?

If you were affected by the pandemic or other circumstances, the IRS may be able to remove or reduce some penalties due to reasonable cause, but only if you tried to comply with the tax law but were unable to due to facts and circumstances beyond your control. If this applies to you and you have the necessary documentation to support your claim, you can call the toll-free number on your IRS notice or write a letter to request penalty relief due to reasonable cause.

The IRS may also provide administrative relief from a penalty that would otherwise be applicable under its First Time Penalty Abatement policy. In this instance, the IRS may provide relief if:

  • You didn’t previously have to file a tax return or you have no penalties for the 3 tax years prior to the tax year in which you received a penalty;
  • You filed all currently required returns or filed an extension of time to file; and
  • You have paid, or arranged to pay, any tax due.

The IRS may also be able to waive penalties if a Statutory Exception exists. Tax legislation may provide an exception to a penalty. Specific statutory exceptions can be found in the penalty-related Internal Revenue Code (IRC) sections. These would include situations like receiving erroneous written advice from the IRS.

See the Penalty Relief page or the Penalty Relief Due to First Time Penalty Abatement or Other Administrative Waiver page for more details about when penalties can be abated or reversed.

What if the IRS denies my penalty abatement request?

If you received a notice or letter stating the IRS didn’t grant your request for penalty relief, you may be able to request a hearing with the IRS Independent Office of Appeals. Use the Penalty Appeal Online Self-help Tool for more information. You have 30 days from the date of the rejection letter to file your request for an appeal. Refer to your rejection letter for the specific deadline.

Refer to Penalty Appeal Eligibility and Publication 4576, Orientation to the Penalty Appeals Process for more details.

How do I request removal of interest charges?

If any of your tax and/or penalties are reduced, the IRS will also automatically reduce the related interest. Interest is charged by law and will accrue until your tax account is fully paid. Interest can only be reduced or removed under certain circumstances due to unreasonable IRS error or IRS delay, not because of reasonable cause nor because it’s the first time you have accrued interest on your account.

To dispute interest due to an unreasonable IRS error or IRS delay, submit Form 843, Claim for Refund and Request for Abatement or send the IRS a signed letter requesting that the IRS reduce or adjust the overcharged interest. For more information, see Instructions for Form 843, and IRC § 6404(e)(1).

What else do I need to know?

The IRS will continue to charge the failure-to-pay penalty up to 25% of the unpaid taxes or until the tax is paid in full, whichever comes first. In general, the IRS won’t abate the failure-to-pay penalty until the underlying tax has been paid in full. Be aware that if there is still a balance due, even after the penalty is removed, interest will continue to accrue until the account is paid in full, so the sooner you pay the balance, the less you will have to pay in penalties and interest.

There are several ways you can send a payment, including payment options if you cannot full pay right now. See the IRS Pay webpage or our Paying Taxes Get Help pages and TAS Tax Tip: Need help resolving a tax amount owed or finding the right payment option?

As of this date, the IRS response times for calls and written submissions is still being affected by the ongoing COVID-19 situation, so see the IRS Operational status page, including the section on Answered a Letter or Notice, for more details. However, even if the IRS takes a bit longer to address your request, if granted, all abated penalties (and associated interest) will be removed as appropriate.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: TAS

Tax benefits and resources for people experiencing homelessness

Posted by Admin Posted on Aug 02 2022

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As of January 2020, EndHomelessness.org reports that there were over 580,000 homeless people in the United States. This includes individuals who have no housing or shelter, working taxpayers who are unable to secure housing due to costs, and those who live in shelters. If someone you know is experiencing homelessness, the Taxpayer Advocate Service (TAS) asks you to share this important information with them about tax benefits and other helpful resources.

Many people in the homeless community have taxable income sources that may qualify them for various benefits, including:

  • Earned Income Tax Credit, available to taxpayers with low to moderate earned income, with or without a qualifying child.
  • Education Credits, available to taxpayers who incurred qualified education expenses. Some education credits are refundable.
  • Health Care Premium Tax Credit, available to eligible individuals and families afford premiums for health insurance purchased through the Health Insurance Marketplace.
  • Child Tax Credit, available to individuals with qualifying children. Portions of this credit are available even those who do not have income.
  • Recovery Rebate Credit, potentially available to individuals who did not receive an economic impact payment.

The Volunteer Income Tax Assistance and Tax Counseling for the Elderly programs offer free basic tax return preparation to qualified individuals.

Low Income Taxpayer Clinics (LITCs) are also available to assist low-income individuals who have a tax dispute with the IRS. LITCs also provide education and outreach to individuals who speak English as a second language.

Some people in the homeless community are also victims of identity theft. Sometimes family members or others inappropriately claim homeless individuals as dependents. Others file tax returns using a homeless person’s identity. It can be difficult for homeless individuals to resolve identity theft issues. Read more about identity theft here.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: TAS

After Filing Your Taxes, What Records Can You Toss?

Posted by Admin Posted on Aug 02 2022

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If you’ve filed your 2021 tax return, you may want to do some spring cleaning, starting with tax-related paper clutter. Paring down is good. Just be careful to hold on to essential records that may be needed in the event of an IRS audit. Some documents may be needed to help you collect a future refund or assist with filing your return next year. Before you start tossing or shredding documents, read the rules to learn what must be kept (and for how long) and what can be safely discarded.

The general rules

At a minimum, you should keep tax records for as long as the IRS can audit your tax return or assess additional taxes. That’s usually three years after you file your return. This means you potentially can get rid of most records related to tax returns for 2018 and earlier years.

However, the statute of limitations extends to six years for taxpayers who understate their adjusted gross income by more than 25%. What constitutes an understatement may go beyond simply not reporting items of income. So, to be safe, a general rule of thumb is to save tax records for six years from filing.

Keep some records longer

You need to hang on to some tax-related records beyond the statute of limitations. For example:

  • Keep the tax returns themselves indefinitely, so you can prove to the IRS that you did file a legitimate return. (If you didn’t file a return or if you filed a fraudulent return, there’s no statute of limitations.)
  • Retain W-2 forms until you begin receiving Social Security benefits. That may seem long, but if questions arise regarding your work record or earnings for a particular year, you’ll need your W-2 forms to help provide the documentation needed.
  • Keep records related to real estate or investments for as long as you own the assets, plus at least three years after you sell them and report the sales on your tax return (or six years if you want extra protection).
  • Hang on to records associated with retirement accounts until you’ve depleted the accounts and reported the last withdrawal on your tax return, plus three (or six) years.

If you’re still not sure about a specific document, feel free to ask us.

Other reasons to retain records

Keep in mind that these are the federal tax record retention guidelines. Your state and local tax record requirements may differ. In addition, lenders, co-op boards and other private parties may require you to produce copies of your tax returns as a condition of lending money, approving a purchase or otherwise doing business with you. Contact us with questions or concerns about recordkeeping.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Thomson Reuters     

Spear phishing targets tax pros and other businesses

Posted by Admin Posted on Aug 02 2022

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Tax pros take their responsibilities to protect client data seriously. Knowing common identity theft scams, like spear phishing, is one way they can do that. Spear phishing scams can target specific individuals or specific groups. Spear phishing scams affect all types of businesses and organizations, including small businesses with a client database, like tax pros' firms.

Thieves use spear phishing to steal computer system credentials.

Spear phishing scams target tax pros to steal their account credentials or install malicious software. Thieves can then steal client data and the tax preparer's identity to file fraudulent tax returns for refunds.

Some common types of spear phishing emails include emails that claim to be from a tax preparation application provider that have the IRS logo, reference legitimate IRS programs or e-services, and use subject lines like, "Action Required: Your account has now been put on hold."

Once someone has clicked the malicious link, the scam email will send them to a fake website, which prompts the victim to enter their credentials. If they do so, thieves can use this information to file fraudulent returns by using the stolen credentials. Other spear phishing emails may pose as potential new clients use malicious links or attachments that will download malware onto the victim's computer to steal information.

If someone suspects an email is a phishing attempt, they shouldn't respond, clink any links in the email or open any attachments.

Tax pros can use these tips to help protect client data:

  • Use separate personal and business email accounts
  • Protect email accounts with strong passwords and two-factor authentication
  • Install an anti-phishing toolbar to help identify known phishing sites
  • Use security software products with anti-phishing tools
  • Use security software to help protect systems from malware and scan emails for viruses
  • Never open or download attachments from unknown senders, including potential clients, request additional information to help verify their identity or call them to confirm the email is from them
  • Send password-protected and encrypted documents only
  • Don't respond to suspicious or unknown emails; if the phishing email is IRS-related, save the email as a file, attach that file to an email, and send to phishing@irs.gov

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS

Using Alternative Energy For Business Can Bring Tax Benefits

Posted by Admin Posted on Aug 02 2022

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If you’re a business owner, you might be wondering if using alternative energy technologies in your company can help you manage energy costs and improve your bottom line. If this sounds interesting, you should know there’s also a valuable federal income tax benefit that applies to the acquisition of many types of alternative energy property: the business energy credit.

The credit is intended primarily for business users. But be aware that other energy tax breaks apply if you use alternative energy in your home or if you produce energy for sale.

What property is eligible?

The business energy credit is equal to a portion of the cost of the following types of property (with the caveat that construction must begin before 2024):

  • Equipment that uses solar energy to generate electricity for heating and cooling structures, for hot water, or for heat used in industrial or commercial processes (except for swimming pools),
  • Equipment that uses solar energy to illuminate a structure inside using fiber-optic-distributed sunlight,
  • Specific fuel-cell property,
  • Certain small wind energy property,
  • Specific waste energy property, and
  • Certain offshore wind facilities with construction beginning before 2026.

If construction of equipment that uses solar energy to generate electricity for heating and cooling structures, for hot water, or for heat used in industrial or commercial processes begins this year, the credit rate is 26%. It’s reduced to 22% for construction beginning in calendar year 2023. And if the property isn’t placed in service before 2026, the credit is 10%.

For the other types of property mentioned above, if construction begins this year, the credit is also 26%. It’s also reduced to 22% for construction beginning in 2023. But if the property isn’t placed in service before 2026, the credit is 0%.

The only exception is the final type of property mentioned above, certain offshore wind facilities. This type of property isn’t subject to a phaseout.

The business energy credit is equal to 10% of the following types of property with construction beginning before 2024:

  • Specific equipment that is used to produce, distribute, or use energy derived from a geothermal deposit,
  • Certain cogeneration property,
  • Some microturbine property, and
  • Certain equipment that uses the ground, or ground water, to heat or cool a structure.

The downside and the upside

There are several restrictions related to the credit. For example, it isn't available for property acquired with certain nonrecourse financing. Additionally, if the credit is allowable for property, the “basis” of that property is reduced by 50% of the allowable credit.

On the other hand, a favorable aspect is that, for the same property, the credit can sometimes be used in combination with other benefits. Examples include federal income tax expensing, state tax credits and utility rebates.

There are business considerations unrelated to the tax and nontax benefits that may influence your decision to use alternative energy. And even if you choose to use it, you might do so without owning the equipment, which would mean forgoing the business energy credit.

Still wondering?

As you can see, there are many issues to consider and you may have questions. We can help you work through the tax and other financial aspects of these alternative energy tax considerations.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Thomson Reuters              

TAS Tax Tip: What to do if you receive notification your tax return is being examined or audited

Posted by Admin Posted on July 15 2022

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If the IRS selects your tax return for audit (also called examination), it doesn’t automatically mean something is wrong.

The IRS performs audits by mail or in person. The notice you receive will have specific information about why your return is being examined, what documents if any they need from you, and how you should proceed.

Once the IRS completes the examination, it may accept your return as filed or propose changes. These changes may affect the amount of tax you owe or the amount of your refund.

Got an IRS notice saying they are auditing your tax return?

If you are unable to understand the notice, you can use our Did you get a notice from the IRS? section on our Home page that allows you to enter the notice or letter number to find out more about it, what action you may need to take, and where in the IRS process it falls. Or you can go to our Taxpayer Roadmap directly to see where your tax return is within the IRS process, how the return got there, and what’s next. Once in the Roadmap, you can still look up a specific notice if it isn’t already listed to find out what to do next.

Type of audit/examination and what to do for each type

The IRS notice should confirm whether the audit is being conducted by correspondence (by mail) or in person. The actions you need to take will depend on how the audit is being conducted.

  • For correspondence audits, see our Audits by Mail Get Help page for a summary of how the process works and what actions you should take.
  • For in person audits, see our Audits in Person Get Help page for a summary of how the process works and what actions you should take.

You can also visit the IRS Audits page for more information about why your return may have been selected and more details on how far back IRS can go to examine a return, how long it may take, and more. You can also read Publication 3468, IRS Examination Process.

Be aware that IRS audits are still being affected by COVID-19. See the exam guidance memoranda in IRS Operations During COVID-19: Compliance for the most up-to-date information on IRS actions. You should also see the sections for Answered a Notice or letter and Sent a missing form or document for updated information related to expected timing for an IRS reply.

Sometimes IRS offers alternative methods to reply or submit documentation

When you review the IRS notice, there may be special circumstances in which the IRS may offer digital alternatives for submitting documentation or working with the IRS examiner. See our NTA Blog: Lifecycle of a Tax Return: Correspondence Audits: Increased Communication Alternatives Are in Progress for more information on two available alternatives. The IRS article, Accelerating Digital Communications to Solve Pandemic Challenges and Improve the Taxpayer Experience, also discusses digital options.

However, taxpayers must be invited to participate in these digital options, Secure Messaging and the Document Upload Tool (DUT). So, again, review your notice carefully to see if one or both of these options are available in your case and for information on how to use them.

What if you find out the IRS already closed their initial audit?

If you receive a tax bill for an additional tax amount the IRS assessed (added to your account) or a change in a credit you claimed and you disagree with the subsequent amount the IRS says you owe, see our Audit Reconsideration Get Help page for next steps you can take.

You may request audit reconsideration if you:

  • Did not respond to or appear for your original audit,
  • Moved and did not receive correspondence from the IRS,
  • Have additional information to present that you did not provide during your original audit, or
  • Disagree with the assessment from the audit.

You can also see Publication 3598, What You Should Know About the Audit Reconsideration Process, for more details on what you need to do to resolve the issue.

What can I do if I need further help dealing with the IRS audit process?

If you need or want assistance in dealing with an IRS audit or reconsideration, you have the right to representation. This means you can hire an attorney, certified public accountant (CPA), or enrolled agent to represent you before the IRS. Know that:

  • Taxpayers have the right to retain an authorized representative of their choice to represent them in their dealings with the IRS.
  • Taxpayers who are heading to an interview with the IRS may select someone to represent them. Taxpayers who retain representation don’t have to attend with their representative unless the IRS formally summons them to appear.
  • In most situations, the IRS must suspend an interview if a taxpayer requests to consult with a representative, such as an attorney, certified public accountant or enrolled agent.
  • Any attorney, CPA, enrolled agent, enrolled actuary, or other person permitted to represent a taxpayer before the IRS, who’s not disbarred or suspended from practice before the IRS, will need to submit a signed written Power of Attorney to represent a taxpayer before the IRS before the IRS can discuss your case with them.

We recommend that you learn about the credentials and qualifications of tax representatives before choosing one. You can also use the IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications to help you find tax professionals in your area who currently hold professional credentials recognized by the IRS.

You may be eligible for free representation (or representation for a nominal fee) through a Low Income Taxpayer Clinic. In order to qualify for assistance from an LITC, generally a taxpayer’s income must be below a certain threshold (the income ceilings for the 2022 calendar year can be found on the page link above), and the amount in dispute with the IRS is usually less than $50,000. Each clinic will determine if you meet the income ceilings and other criteria before it agrees to represent you. See Publication 4134, Low Income Taxpayer Clinic List, to find a LITC near you or by calling the IRS toll-free at 800-829-3676.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: TAS

Home Credits

Posted by Admin Posted on July 15 2022

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If you own a home or are planning to buy one, you may have tax credits available. There are two common home credits:

Mortgage Interest Credit: helps lower-income individuals afford home ownership.

Residential Energy Credits: helps recover some of the cost of improving the energy efficiency of your home.

If you are planning to buy a home

The Mortgage Interest Credit helps certain individuals afford home ownership. If you qualify, you can claim the credit each year for part of the mortgage interest you pay.

You’ll need a qualified Mortgage Credit Certificate (MCC) from your state or local government. See recommended actions below.

If you’ve made your home energy efficient

You may be able to take Residential Energy Credits, if you made energy-saving improvements to your home and it’s in the United States. For example:  You may qualify if you install exterior windows that meet or exceed the Energy Star Program requirements to reduce heat loss. See recommended action below.

What should I do?

If you are planning to buy a home

The Mortgage Interest Credit helps certain individuals afford home ownership. If you qualify, you can claim the credit each year for part of the mortgage interest you pay.

You’ll need a qualified Mortgage Credit Certificate (MCC) from your state or local government.

Generally, an MCC is issued only with a new mortgage for the purchase of your main home. The MCC will contain important information for calculating the credit, including the certificate credit rate (the percentage of the interest you can claim), and the “certified indebtedness amount” (only the interest on that amount qualifies for the credit).

You must ask the appropriate government agency for an MCC before you get a mortgage and buy your home. Contact your state or local housing finance agency for information about the availability of MCCs in your area.

To claim the credit, complete IRS Form 8396, Mortgage Interest Credit, and attach it to your income tax return.

If you itemize your deductions on IRS Schedule A (Form 1040), Itemized Deductions, you must reduce your home mortgage interest deduction by the amount of the mortgage interest credit allowable for the tax year.

If you paid the mortgage interest to a related person, you can’t claim the credit.

If you’ve made your home energy efficient

You may be able to take Residential Energy Credits, if you made energy-saving improvements to your home and it’s in the United States. For example:  You may qualify if you install exterior windows that meet or exceed the Energy Star Program requirements to reduce heat loss.

Residential Energy Credits

The residential energy efficient property credit, which you can claim for property that’s placed in service between January 1, 2016 and December 31, 2023.

The nonbusiness energy property credit, which applies to property you placed in service (installed and ready to use) by December 31, 2021. The lifetime limitation aggregate credit for all tax years after 2005 is $500.

You can claim both credits by completing IRS Form 5695, Residential Energy Credits, and attaching it to your tax return. This form explains what property qualifies for each credit and how to calculate each one. If you owned your home jointly with someone other than your spouse, each homeowner must complete his or her own IRS Form 5695.

Keeping good records

Keep full and accurate records to support your credits. Know the cost of your home, or the cost of major improvements to it, or the amounts you’ve taken as deductions on your tax return for use of your home. You’ll also need to use these documents to determine the basis (your original cost/purchase price) or adjusted basis (your cost, plus adjustments such as improvement costs) of your home.

Keep records that include your purchase contract and settlement papers if you bought the property, or other information that shows you acquired it by gift or inheritance.

Keep any receipts, canceled checks, and similar records for improvements or other additions to the basis of your home.

“Additions to basis” are items that go beyond minor repairs, and add to the value or extend the life of the property.

Examples include putting an addition on your home, replacing a roof, repaving a driveway, or rewiring.

You should also keep track of any decreases to the basis.

This includes residential energy credits, D.C. first-time homebuyer credit, allowed or allowable depreciation if you use your home for rental or business activities, payments received for property easements or right-of-way, and insurance reimbursements or tax deductions for casualty losses (fire, flood, etc.).

How will this affect me?

 

If you sell your home within nine years, you may have to repay all or part of the benefit you received from the Mortgage Interest Credit program.

You must keep your records for as long as they’re important for meeting any federal tax law requirement. For things like home basis information, this may mean keeping records for as long as you own the property and for a time after it’s sold.

If you refinance your original mortgage loan on which you received an MCC, you must get a new MCC to claim the credit on the new loan. The amount you can claim on the new loan may change.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: TAS

IRS online account makes it easy for taxpayers to view their tax info anytime

Posted by Admin Posted on July 15 2022

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Taxpayers who want to check their account information including balance, payments, tax records and more, can log into their IRS online account. It's a simple and secure way to get information fast.

Taxpayers can view:

  • Their payoff amount, which is updated for the current day
  • The balance for each tax year for which they owe taxes
  • Their payment history
  • Key information from their most current tax return as originally filed
  • Payment plan details if they have one
  • Digital copies of select IRS notices
  • Economic Impact Payments if they received any
  • Their address on file

Taxpayers can also use their online account to:

  • Select an electronic payment option.
  • Set up an online payment agreement.
  • Access tax records and transcripts.
  • Approve and electronically sign Power of Attorney and Tax Information Authorization requests from their tax professional.

Taxpayer's balance will update no more than once every 24 hours, usually overnight. Taxpayers should also allow 1 to 3 weeks for payments to show up in the payment history.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS

Here’s what taxpayers need to know about business related travel deductions

Posted by Admin Posted on July 15 2022

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Business travel can be costly. Hotel bills, airfare or train tickets, cab fare, public transportation – it can all add up fast. The good news is business travelers may be able off-set some of those cost by claiming business travel deductions when they file their taxes.

Here are some details about these valuable deductions that all business travels should know.

Business travel deductions are available when employees must travel away from their tax home or main place of work for business reasons. The travel period must be substantially longer than an ordinary day's work and a need for sleep or rest to meet the demands the work while away.

Travel expenses must be ordinary and necessary. They can't be lavish, extravagant or for personal purposes.

Employers can deduct travel expenses paid or incurred during a temporary work assignment if the assignment length does not exceed one year.

Travel expenses for conventions are deductible if attendance benefits the business and there are special rules for conventions held outside North America.

Deductible travel expenses while away from home include the costs of:

  • Travel by airplane, train, bus or car between your home and your business destination.
  • Fares for taxis or other types of transportation between an airport or train station to a hotel, from a hotel to a work location.
  • Shipping of baggage and sample or display material between regular and temporary work locations.
  • Using a personally owned car for business which can include an increase in mileage rates.
  • Lodging and non-entertainment-related meals.
  • Dry cleaning and laundry.
  • Business calls and communication.
  • Tips paid for services related to any of these expenses.
  • Other similar ordinary and necessary expenses related to the business travel.

Self-employed or farmers with travel deductions

Travel deductions for the National Guard or military reserves

National Guard or military reserve servicemembers can claim a deduction for unreimbursed travel expenses paid during the performance of their duty.

Recordkeeping

Well-organized records make it easier to prepare a tax return. Keep records, such as receipts, canceled checks, and other documents that support a deduction.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS

An overview of the IRS’s 2022 Dirty Dozen tax scams

Posted by Admin Posted on July 15 2022

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Compiled annually, the Dirty Dozen lists a variety of common scams that taxpayers can encounter anytime. The IRS warns taxpayers, tax professionals and financial institutions to beware of these scams. This year's list is divided into five groups. Here's an overview of the top twelve tax scams of 2022.

Potentially abusive arrangements

The 2022 Dirty Dozen begins with four transactions that are wrongfully promoted and will likely attract additional agency compliance efforts in the future. Those four abusive transactions involve charitable remainder annuity trusts, Maltese individual retirement arrangements, foreign captive insurance, and monetized installment sales.

Pandemic-related scams

This IRS reminds taxpayers that criminals still use the COVID-19 pandemic to steal people's money and identity with phishing emails, social media posts, phone calls, and text messages.

All these efforts can lead to sensitive personal information being stolen, and scammers using this to try filing a fraudulent tax return as well as harming victims in other ways. Some of the scams people should continue to be on the lookout for include Economic Impact Payment and tax refund scams, unemployment fraud leading to inaccurate taxpayer 1099-Gs, fake employment offers on social media, and fake charities that steal taxpayers' money.

Offer in Compromise "mills"

Offer in Compromise or OIC "mills," make outlandish claims, usually in local advertising, about how they can settle a person's tax debt for pennies on the dollar. Often, the reality is that taxpayers pay the OIC mill a fee to get the same deal they could have gotten on their own by working directly with the IRS. These "mills" are a problem all year long, but they tend to be more visible right after the filing season ends and taxpayers are trying to resolve their tax issues perhaps after receiving a balance due notice in the mail.

Suspicious communications

Every form of suspicious communication is designed to trick, surprise, or scare someone into responding before thinking. Criminals use a variety of communications to lure potential victims. The IRS warns taxpayers to be on the lookout for suspicious activity across four common forms of communication: email, social media, telephone, and text messages. Victims are tricked into providing sensitive personal financial information, money, or other information. This information can be used to file false tax returns and tap into financial accounts, among other schemes.

Spear phishing attacks

Spear phishing scams target individuals or groups. Criminals try to steal client data and tax preparers' identities to file fraudulent tax returns for refunds. Spear phishing can be tailored to attack any type of business or organization, so everyone needs to be skeptical of emails requesting financial or personal information.

A recent spear phishing email used the IRS logo and a variety of subject lines such as "Action Required: Your account has now been put on hold" to steal tax professionals' software preparation credentials. The scam email contains a link that if clicked will send users to a website that shows the logos of several popular tax software preparation providers. Clicking on one of these logos will prompt a request for tax preparer account credentials. The IRS warns tax pros not to respond or take any of the steps outlined in the email. The IRS has observed similar spear phishing emails claiming to be from "tax preparation application providers."

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS

See How Low Income Taxpayer Clinics Help Taxpayers Get Results

Posted by Admin Posted on July 15 2022

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What is a Low Income Taxpayer Clinic (LITC)?

Low Income Taxpayer Clinics (LITCs) assist low-income individuals who have a tax dispute with the IRS and provide education and outreach to individuals who speak English as a second language. Services are offered for free or a small fee. Clinics participating in the LITC Program ensure the fairness and integrity of the tax system for low-income taxpayers.

How do LITCs help taxpayers?

Have you ever wondered exactly what LITCs do? Here are just a few examples of LITC’s recent successes:

  • A single mother was out of work and needed surgery. She withdrew funds from her retirement account to pay bills. Unable to make ends meet, with her house in foreclosure and her car needing major repairs, she was referred her to an LITC attorney, who discovered that she had not filed tax returns from 2017 through 2019. The LITC helped her complete the past-due returns, generating refunds of over $21,000. She also received much-needed Economic Impact Payments, resulting in over $2,000 in additional funds. The taxpayer was able to pay off her outstanding debts, with enough left to buy her family a reliable car so she could get back and forth to work after recovering from surgery.
  • A low-income veteran with substantial health problems who worked as a truck driver didn’t keep records of his business expenses. He owed over $100,000 in federal taxes. The taxpayer reached out to an LITC for help when the IRS threatened to seize his home. He had enough equity in his house to pay the liability, but the LITC demonstrated that the taxpayer could not rent a home for less than his low mortgage payment and successfully advocated to have the taxpayer’s liability be placed in currently-not-collectible status, allowing him to keep his home.
  • A taxpayer was referred to an LITC after the IRS held 2019 tax refund of over $6,000 because she had not yet filed a 2017 tax return. The taxpayer hadn’t filed because she thought she had been misclassified as an independent contractor. The LITC attorney worked with the taxpayer to file a Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding, to challenge her employment status. The LITC also helped the taxpayer file her 2017 tax return and gather proof of her financial hardship. The LITC worked with the Taxpayer Advocate Service to have only part of the taxpayer’s 2019 refund applied to the 2017 tax liability, resulting in nearly $5,000 being refunded to the taxpayer to relieve her hardship.

How you can help

The LITC grant application period is open until June 16. More information about LITCs and the work they do to represent, educate and advocate on behalf of low-income and ESL taxpayers is available in IRS Publication 5066, LITC 2021 Program Report. A complete overview of the requirements to be an LITC can be found in Publication 3319, LITC Grant Application Package and Guidelines. A short video about the LITC program is also available.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: TAS

Extension filers: IRS.gov is the source for summertime tax help; agency encourages people to file soon

Posted by Admin Posted on July 15 2022

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WASHINGTON — With millions of people still waiting to file their tax returns, the IRS reminds them to file as soon as possible and take advantage of special tools available on IRS.gov that can help them file.

Summer may be a busy time for many, but it's a great time to start tax planning - whether you still need to file a 2021 tax return or start planning for next year's tax season. The IRS website is the fastest and most convenient way to get tax-related information and help. The online tools are available any time, so taxpayers can use them at their convenience.

Here are some important reasons for taxpayers to visit IRS.gov this summer.

Get tax information 24/7

Taxpayers can use IRS.gov to:

  • View the filing page to get information on most federal income tax topics.
  • Access the Interactive Tax Assistant tool for answers to many tax law questions.
  • Sign into their individual IRS online account to view their balance an tax records, manage communication preferences, make payments and more.
  • Find the most up-to-date information about their tax refunds using the Where's My Refund? tool. Taxpayers can check the status of their refund 24 hours after the IRS acknowledges receipt of an e-filed return.

Taxpayers can also download the official IRS mobile app, IRS2Go, to check their refund status, make payments, find free tax preparation assistance, sign up for helpful tax tips and more.

Adjust withholding now to avoid tax surprises next year

Summer is a great time for taxpayers to check their withholding to avoid a tax surprise next filing season. Life events like marriage, divorce, having a child or a change in income can affect taxes.

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.

File electronically

Taxpayers who requested an extension to October 17 or missed the April 18 deadline can still prepare and e-file returns for free with IRS Free File, if they qualify. The IRS accepts electronically filed returns 24/7. There's no reason to wait until October 17 if filers have all the information and documentation they need to file an accurate return today. They can get their refund faster by choosing direct deposit.

Taxpayers who missed the April 18 deadline and owe should file and pay electronically as soon as possible to reduce penalties and interest. Taxpayers can make payments or set up payment plans online.

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 inputting search criteria. It's important to remember that Taxpayer Assistance Centers operate by appointment only. Taxpayers can make an appointment by calling the number for the office they want to visit.

Read information in other languages

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

Access the Alternative Media Center

At the online Alternative Media Center (AMC), taxpayers will find a variety of accessible products to help with the use of assistive technology such as screen reading software, refreshable Braille displays and screen magnifying software. These products include tax forms, instructions and publications that can be downloaded or viewed online as Section 508 compliant PDFs, HTML, eBraille, text and large print.

Please note that every product is not available in all formats. For example, tax forms are not available as HTML. To request paper copies of tax forms or instructions or publications in Braille or large print, taxpayers can call the tax form telephone number at 800-829-3676. Taxpayers can complete Form 9000, Alternative Media PreferencePDF, to choose to receive their IRS tax notices in Braille, large print, audio or electronic formats. This includes notices about additional taxes or penalties owed. Taxpayers can include the completed form with their tax return, mail it as a standalone form to the IRS or they can call 800-829-1040.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS
 

IRAs are one tool in the retirement planning toolbox

Posted by Admin Posted on July 15 2022

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There are many ways people plan for retirement. Individual Retirement Arrangements, or IRAs, are a common one. IRAs provide tax incentives for people to make investments that can provide financial security when they retire. These accounts can be with a bank or other financial institution, a life insurance company, mutual fund, or stockbroker.

Here are some things to know about a traditional IRA.

  • traditional IRA is a tax-advantaged personal savings plan where contributions may be tax deductible.
  • Generally, the money in a traditional IRA isn't taxed until it's withdrawn.
  • There are annual limits to contributions depending on the person's age and the type of IRA.
  • When planning when to withdraw money from an IRA, taxpayers should know that:
    • They may face a 10% penalty and a tax bill if they withdraw money before age 59½, unless they qualify for an exception.
    • Usually, they must start taking withdrawals from their IRA when they reach age 72. For tax years 2019 and earlier, that age was 70½.
    • Special distribution rules apply for IRA beneficiaries.

Roth IRAs are like traditional IRAs, but there are some important differences.

A Roth IRA is another tax-advantaged personal savings plan with many of the same rules as a traditional IRA but there are exceptions:

  • A taxpayer can't deduct contributions to a Roth IRA.
  • Qualified distributions are tax-free.
  • Roth IRAs don't require withdrawals until after the death of the owner.

Here are a few other types of IRAs:

  • Savings Incentive Match Plan for Employees. A SIMPLE IRA allows employees and employers to contribute to traditional IRAs set up for employees. It is suited as a start-up retirement savings plan for small employers not currently sponsoring a retirement plan.
  • Simplified Employee Pension. A SEP IRA is set up by an employer. The employer makes contributions directly to an IRA set up for each employee.
  • Rollover IRA. This is when the IRA owner receives a payment from their retirement plan and deposits it into a different IRA within 60 days.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS

People should know if their pastime is a hobby or a business

Posted by Admin Posted on July 15 2022

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From collecting stamps and woodworking to crafting and quilting, people have all kinds of hobbies – and most of these hobbies will never turn a profit. For hobbies that do earn income, people should know that they must report it on their tax return. They should also be mindful that their hobby might be a business.

Determining whether they should classify the activity as a hobby or a business can be confusing, but the bottom line is that a business operates to make a profit. People pursue hobbies for sport or recreation, not profit. There are a few other things people should consider when determining if their project is a hobby or business. No single consideration is the deciding factor, but taxpayers should review all of them when determining whether their activities are a business.

Here are the things taxpayers should evaluate to decide whether they have a hobby or a business:

  • Whether the taxpayer carries out the activity in a businesslike manner and maintains complete and accurate books and records.
     
  • Whether the time and effort the taxpayer puts into the activity show they intend to make it profitable.
     
  • Whether they depend on income from the activity for their livelihood.
     
  • Whether any losses are due to circumstances beyond the taxpayer's control or are normal for the startup phase of their type of business.
     
  • Whether they change methods of operation to improve profitability.
     
  • Whether the taxpayer and their advisors have the knowledge needed to carry out the activity as a successful business.
     
  • Whether the taxpayer was successful in making a profit in similar activities in the past.
     
  • Whether the activity makes a profit in some years and how much profit it makes.
     
  • Whether the taxpayers can expect to make a future profit from the appreciation of the assets used in the activity.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS

Spear phishing targets tax pros and other businesses

Posted by Admin Posted on July 13 2022

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Tax pros take their responsibilities to protect client data seriously. Knowing common identity theft scams, like spear phishing, is one way they can do that. Spear phishing scams can target specific individuals or specific groups. Spear phishing scams affect all types of businesses and organizations, including small businesses with a client database, like tax pros' firms.

Thieves use spear phishing to steal computer system credentials.

Spear phishing scams target tax pros to steal their account credentials or install malicious software. Thieves can then steal client data and the tax preparer's identity to file fraudulent tax returns for refunds.

Some common types of spear phishing emails include emails that claim to be from a tax preparation application provider that have the IRS logo, reference legitimate IRS programs or e-services, and use subject lines like, "Action Required: Your account has now been put on hold."

Once someone has clicked the malicious link, the scam email will send them to a fake website, which prompts the victim to enter their credentials. If they do so, thieves can use this information to file fraudulent returns by using the stolen credentials. Other spear phishing emails may pose as potential new clients use malicious links or attachments that will download malware onto the victim's computer to steal information.

If someone suspects an email is a phishing attempt, they shouldn't respond, clink any links in the email or open any attachments.

Tax pros can use these tips to help protect client data:

  • Use separate personal and business email accounts
  • Protect email accounts with strong passwords and two-factor authentication
  • Install an anti-phishing toolbar to help identify known phishing sites
  • Use security software products with anti-phishing tools
  • Use security software to help protect systems from malware and scan emails for viruses
  • Never open or download attachments from unknown senders, including potential clients, request additional information to help verify their identity or call them to confirm the email is from them
  • Send password-protected and encrypted documents only
  • Don't respond to suspicious or unknown emails; if the phishing email is IRS-related, save the email as a file, attach that file to an email, and send to phishing@irs.gov

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS

Companies who promise to eliminate tax debt sometimes leave taxpayers high and dry

Posted by Admin Posted on July 13 2022

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As the old saying goes: When something sounds too good to be true, it probably is. Taxpayers with outstanding tax bills might be tempted by businesses who advertise and offer to help them reduce their tax debt. These businesses, often called Offer in Compromise mills, make huge claims about reducing unpaid taxes for pennies on the dollar. Unfortunately, these companies sometimes don't deliver and charge large fees.

An Offer in Compromise with the IRS can help some taxpayers who can't pay their tax bill.

An Offer in Compromise is an agreement between a taxpayer and the IRS that settles a tax debt for less than the full amount owed. The offer program gives eligible taxpayers a path toward paying off their debt when they otherwise couldn't or would face financial hardship.

The OIC mills that are dishonest take advantage of taxpayers' lack of knowledge to make a quick buck.

These OIC mills urge people to hire their company to file an OIC application, even though the taxpayer won't qualify. They often charge big fees to prepare applications that they know the IRS will deny. This unfair practice wastes taxpayers' time and money.

Taxpayers who do qualify for an OIC can get the same deal working directly with the IRS, without the extra fees.

The OIC mills that are dishonest are a problem all year long, but they step up their advertising after the filing season ends, when taxpayers are trying to resolve their tax issues.

Here's what taxpayers considering an OIC should know:

  • Individual taxpayers can use the IRS's Offer in Compromise Pre-Qualifier tool to see if they're eligible.
  • When a taxpayer is ready to apply, they can watch an OIC video playlist that will lead them through the steps and forms to calculate an appropriate offer based on their assets, income, expenses and future earning potential.
  • Taxpayers must make an offer based on their true ability to pay.
  • Applying does not guarantee that the IRS will accept the taxpayer's offer.

Finding reputable tax help

People who want help from a reputable tax profession can review Choosing a Tax Professional page on IRS.gov to find information about tax preparer credentials and qualifications. They can then use IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications to find a preparer by type of credential or qualification.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS

All taxpayers should familiarize themselves with the Taxpayer Bill of Rights

Posted by Admin Posted on July 13 2022

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By law, all taxpayers have fundamental rights when they're interacting with the IRS. It's important that all taxpayers know and understand their rights. The Taxpayer Bill of Rights presents these rights in 10 categories.

Here's an overview of these rights. For full official details about each right, visit the links below. 

Taxpayers have the right to know what they need to do to comply with the tax laws.
 

Taxpayers have the right to receive prompt, courteous and professional assistance when working with the IRS and the freedom to speak to a supervisor about inadequate service.
 

Taxpayers have the right to pay only the amount of tax legally due, including interest and penalties, and to have the IRS apply all tax payments properly.
 

Taxpayers have the right to object to formal IRS actions or proposed actions and provide justification with additional documentation.
 

Taxpayers are entitled to a fair and impartial administrative appeal of most IRS decisions, including certain penalties.
 

Taxpayers have the right to know the maximum amount of time they have to challenge an IRS position and the maximum amount of time the IRS must audit a particular tax year or collect a tax debt.
 

Taxpayers have the right to expect that any IRS inquiry, examination or enforcement action will comply with the law and be no more intrusive than necessary.
 

Taxpayers have the right to expect that their tax information will remain confidential.
 

Taxpayers have the right to retain an authorized representative of their choice to represent them in their interactions with the IRS.
 

Taxpayers have the right to expect fairness from the tax system. This includes considering all facts and circumstances that might affect their liabilities, ability to pay or provide information timely.

 

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Sourced: IRS

An overview of the IRS’s 2022 Dirty Dozen tax scams

Posted by Admin Posted on July 13 2022

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Compiled annually, the Dirty Dozen lists a variety of common scams that taxpayers can encounter anytime. The IRS warns taxpayers, tax professionals and financial institutions to beware of these scams. This year's list is divided into five groups. Here's an overview of the top twelve tax scams of 2022.

Potentially abusive arrangements

The 2022 Dirty Dozen begins with four transactions that are wrongfully promoted and will likely attract additional agency compliance efforts in the future. Those four abusive transactions involve charitable remainder annuity trusts, Maltese individual retirement arrangements, foreign captive insurance, and monetized installment sales.

Pandemic-related scams

This IRS reminds taxpayers that criminals still use the COVID-19 pandemic to steal people's money and identity with phishing emails, social media posts, phone calls, and text messages.

All these efforts can lead to sensitive personal information being stolen, and scammers using this to try filing a fraudulent tax return as well as harming victims in other ways. Some of the scams people should continue to be on the lookout for include Economic Impact Payment and tax refund scams, unemployment fraud leading to inaccurate taxpayer 1099-Gs, fake employment offers on social media, and fake charities that steal taxpayers' money.

Offer in Compromise "mills"

Offer in Compromise or OIC "mills," make outlandish claims, usually in local advertising, about how they can settle a person's tax debt for pennies on the dollar. Often, the reality is that taxpayers pay the OIC mill a fee to get the same deal they could have gotten on their own by working directly with the IRS. These "mills" are a problem all year long, but they tend to be more visible right after the filing season ends and taxpayers are trying to resolve their tax issues perhaps after receiving a balance due notice in the mail.

Suspicious communications

Every form of suspicious communication is designed to trick, surprise, or scare someone into responding before thinking. Criminals use a variety of communications to lure potential victims. The IRS warns taxpayers to be on the lookout for suspicious activity across four common forms of communication: email, social media, telephone, and text messages. Victims are tricked into providing sensitive personal financial information, money, or other information. This information can be used to file false tax returns and tap into financial accounts, among other schemes.

Spear phishing attacks

Spear phishing scams target individuals or groups. Criminals try to steal client data and tax preparers' identities to file fraudulent tax returns for refunds. Spear phishing can be tailored to attack any type of business or organization, so everyone needs to be skeptical of emails requesting financial or personal information.

A recent spear phishing email used the IRS logo and a variety of subject lines such as "Action Required: Your account has now been put on hold" to steal tax professionals' software preparation credentials. The scam email contains a link that if clicked will send users to a website that shows the logos of several popular tax software preparation providers. Clicking on one of these logos will prompt a request for tax preparer account credentials. The IRS warns tax pros not to respond or take any of the steps outlined in the email. The IRS has observed similar spear phishing emails claiming to be from "tax preparation application providers."

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS

How to file a final tax return for someone who has passed away

Posted by Admin Posted on June 30 2022

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When someone dies, their surviving spouse or representative files the deceased person's final tax return. On the final tax return, the surviving spouse or representative will note that the person has died. The IRS doesn't need any other notification of the death.

Usually, the representative filing the final tax return is named in the person's will or appointed by a court. Sometimes when there isn't a surviving spouse or appointed representative, a personal representative will file the final return.

Here are some things to know about filing the final return

  • The IRS considers someone married for the entire year that their husband or wife died if they don't remarry during that year.
  • The surviving spouse is eligible to use filing status married filing jointly or married filing separately.
  • The final return is due by the regular April tax date unless the surviving spouse or representative has an extension to file.

Who should sign the return

When e-filing, the surviving spouse or representative should follow the directions provided by the software for the correct signature and notation requirements. For paper returns, the filer should write the word deceased, the deceased person's name and the date of death across the top. Here's who should sign the return:

  • Any appointed representative must sign the return. If it's a joint return, the surviving spouse must also sign it.
  • If there isn't an appointed representative, the surviving spouse filing a joint return should sign the return and write in the signature area labeled, filing as surviving spouse.
  • If there's no appointed representative and no surviving spouse, the person in charge of the deceased person's property must file and sign the return as "personal representative."

Other documents to include

  • Court-appointed representatives should attach a copy of the court document showing their appointment.
  • Representatives who aren't court-appointed must include Form 1310, Statement of Person Claiming Refund Due a Deceased Taxpayer to claim any refund. Surviving spouses and court-appointed representatives don't need to complete this form.
  • The IRS doesn't need a copy of the death certificate or other proof of death.

If tax is due, the filer should submit payment with the return or visit the payments page of IRS.gov for other payment options. If they can't pay the amount due immediately, they may qualify for a payment plan or installment agreement.

Qualifying widow or widower

Surviving spouses with dependent children may be able to file as a Qualifying Widow(er) for two years after their spouse's death. This filing status allows them to use joint return tax rates and the highest standard deduction amount if they don't itemize deductions.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS

IRS continues work on inventory of tax returns; original tax returns filed in 2021 to be completed this week

Posted by Admin Posted on June 30 2022

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WASHINGTON — Following intensive work during the past several months, the Internal Revenue Service announced today that processing on a key group of individual tax returns filed during 2021 will be completed by the end of this week.

Due to issues related to the pandemic and staffing limitations, the IRS began 2022 with a larger than usual inventory of paper tax returns and correspondence filed during 2021. The IRS took a number of steps to address this, and the agency is on track to complete processing of originally filed Form 1040 (individual tax returns without errors) received in 2021 this week.

Business paper returns filed in 2021 will follow shortly after. The IRS continues to work on the few remaining 2021 individual tax returns that have processing issues or require additional information from the taxpayer.

As of June 10, the IRS had processed more than 4.5 million of the more than 4.7 million individual paper tax returns received in 2021. The IRS has also successfully processed the vast majority of tax returns filed this year: More than 143 million returns have been processed overall, with almost 98 million refunds worth more than $298 billion being issued.

IRS employees continue working hard to process these and other tax returns filed in the order received. The IRS continues to receive current and prior-year individual returns and related correspondence as people file extensions, amended returns and a variety of business tax returns.

To date, more than twice as many returns await processing compared to a typical year at this point in the calendar year, although the IRS has worked through almost a million more returns to date than it had at this time last year. And a greater percentage of this year's inventory awaiting processing is comprised of original returns which, generally, take less time to process than amended returns.

To work to address the unprocessed inventory by the end of this year, the IRS has taken aggressive, unprecedented steps to accelerate this important processing work while maintaining accuracy. This effort included significant, ongoing overtime for staff throughout 2022, creating special teams of employees focused solely on processing aged inventory, and expediting hiring of thousands of new workers and contractors to help with this ongoing effort.

Additionally, the IRS has greatly improved the process for taxpayers whose paper and electronically filed returns were suspended during processing for manual review and correction – referred to as error resolution. Last filing season, an IRS tax examiner could correct an average of 70 tax returns with errors per hour. Thanks to new technology implemented this filing season, 180 to 240 returns can now be corrected per hour. As of June 12, 2021, there were 8.9 million tax returns in error resolution. As of June 10, 2022, there were just 360,000 returns awaiting correction.

The IRS will continue its intense effort to make progress on processing these paper returns in the months ahead.

"IRS employees have been working tirelessly to process these tax returns as quickly as possible and help people who are waiting on refunds or resolution of an account issue," said IRS Commissioner Chuck Rettig. "Completing the individual returns filed last year with no errors is a major milestone, but there is still work to do. We remain focused on doing everything possible to expedite processing of these tax returns, and we continue to add more people to this effort as our hiring efforts continue this summer."

Rettig emphasized that adding sustained funding increases for the IRS will help the agency add more employees to process tax returns and answer phones as well as help improve technology and ensure fair enforcement of the tax laws.

"Taxpayers and tax professionals deserve the absolute highest-quality service from the nation's tax system," Rettig said. "Long-term and consistent funding for the agency is critical to ensuring the IRS is prepared for future tax seasons. It's also critical for the IRS to be ready to answer the call for the nation during the next crisis, just as the agency did delivering three rounds of historic stimulus payments and advance Child Tax Credit payments during the pandemic."

The IRS reminds millions of taxpayers who have not yet filed their 2021 tax returns this year – including those who requested an extension until October 17 – to make sure they file their returns electronically with direct deposit to avoid delays. People who use e-file avoid the delays facing those who file paper returns; e-filed returns with no errors are typically processed in 21 days.

The IRS also urges people to file as soon as they are ready. There is no need to wait until the last minute before the October 17 extension deadline. Filing sooner avoids potential delays for taxpayers, and it also assists the larger ongoing IRS efforts to complete processing tax returns this year.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS 

Year-round tax planning: All taxpayers should understand eligibility for credits and deductions

Posted by Admin Posted on June 30 2022

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Tax credits and deductions can help lower the amount of tax owed. All taxpayers should begin planning now to take advantage of the credits and deductions they are eligible for when they file their 2022 federal income tax return next year.

Here are a few facts that can help taxpayers with their year-round tax planning:

  • Adjusted Gross Income, or AGI, is a taxpayer's total gross income minus specific deductions that can reduce the taxpayer's income before calculating tax owed. AGI is the starting point for calculating taxes and determining a taxpayer's eligibility for certain tax credits and deductions that can help lower their tax bill.
  • Taxable income is a taxpayer's AGI minus the standard deduction or itemized deductions, whichever is greater.
  • The standard deduction is a set dollar amount that reduces taxable income. Most taxpayers have a choice of either taking a standard deduction or itemizing their deductions and using the option that lowers their tax the most.
  • Properly claiming tax credits can reduce taxes owed or boost refunds.
  • Some tax credits, like the earned income tax credit, are refundable, which means an eligible taxpayer can get money refunded to them even if they don't owe any taxes.
  • To claim a deduction or credit, taxpayers should keep records that show their eligibility for it.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS

Claiming a child as a dependent when parents are divorced, separated or live apart

Posted by Admin Posted on June 30 2022

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Parents who are divorced, separated, never married or live apart and who share custody of a child with an ex-spouse or ex-partner need to understand the specific rules about who may be eligible to claim the child for tax purposes. This can make filing taxes easier for both parents and avoid errors that may lead to processing delays or costly tax mistakes.

Only one person may be eligible to claim the qualifying child as a dependent.

Only one person can claim the tax benefits related to a dependent child who meets the qualifying child rulesPDF. Parents can't share or split up the tax benefits for their child on their respective tax returns.

It's important that each parent understands who will claim their child on their tax return. If two people claim the same child on different tax returns, it will slow down processing time while the IRS determines which parent's claim takes priority.

 Custodial parents generally claim the qualifying child as a dependent on their return.

  • The custodial parent is the parent with whom the child lived for the greater number of nights during the year. The other parent is the noncustodial parent.
  • In most cases, because of the residency test, the custodial parent claims the child on their tax return.
  • If the child lived with each parent for an equal number of nights during the year, the custodial parent is the parent with the higher adjusted gross income.

Tie-breaker rules may apply if the child is a qualifying child of more than one person.

  • Although the child may meet the conditions to be a qualifying child of either parent, only one person can actually claim the child as a qualifying child, provided the taxpayer is eligible.
  • People should carefully read Publication 504, Divorced or Separated Individuals to understand who is eligible to claim a qualifying child.

Noncustodial parents may be eligible to claim a qualifying child.

Special rules apply for a child to be treated as a qualifying child of the noncustodial parent.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS

IRS provides guidance for residents of Puerto Rico to claim the Child Tax Credit

Posted by Admin Posted on June 30 2022

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WASHINGTON — The Internal Revenue Service today issued guidance for certain individuals in Puerto Rico on how to file and claim the Child Tax Credit payments that they are entitled to receive under the American Rescue Plan Act.

"It's important for residents of Puerto Rico to know that starting with Tax Year 2021, having only one child qualifies you for the Child Tax Credit," said IRS Commissioner Chuck Rettig. "We want everyone in Puerto Rico who's entitled to this benefit to file to receive the Child Tax Credit."

Residents of Puerto Rico must file a federal tax return with the IRS to claim the Child Tax Credit. The credit can be claimed on Form 1040-PR, Planilla para la Declaración de la Contribución Federal sobre el Trabajo por Cuenta PropiaForm 1040-SS, U.S. Self-Employment Tax ReturnForm 1040, U.S. Individual Income Tax Return, or Form 1040-SR, U.S. Tax Return for Seniors. Form 1040-PR is a Spanish-language form. Form 1040 and Form 1040-SR have Spanish-language versions. One of these tax returns can be filed to claim the Child Tax Credit even after last month's filing deadline. In fact, families who don't owe taxes to the IRS can file their 2021 tax return and claim the Child Tax Credit for the 2021 tax year at any point until April 15, 2025, without any penalty.

Revenue Procedure 2022-22PDF provides details for bona fide residents of Puerto Rico who have children but do not have a 2021 federal tax filing requirement, providing them with a simplified way to file one of these tax returns with the IRS to claim the Child Tax Credit. They may follow one of the simplified procedures announced today if:

·  Their income for taxable year 2021 is completely exempt from taxation because it is from sources within Puerto Rico,

·  Their modified adjusted gross income for purposes of the Child Tax Credit is less than or equal to (i) $150,000, if married and filing jointly or filing as a surviving spouse; (ii) $112,500, if filing as head of household; and (iii) $75,000, if the filer is a single filer or is married and filing a separate return,

·  They are eligible to claim the Child Tax Credit in an amount greater than zero,

·  They are a U.S. citizen or resident alien (or are treated as a United States resident),

·  They are not required to file a Form 1040-PR, Form 1040-SS, Form 1040, or Form 1040-SR for taxable year 2021, such as to report tax on self-employment income, and

·  They have not already filed a paper or electronic Form 1040-PR, Form 1040-SS, Form 1040, or Form 1040-SR for taxable year 2021.

The simplified filing procedures direct eligible Form 1040-PR and Form 1040-SS filers to follow the instructions for those forms except that they are not required to report their modified adjusted gross income on line 1 of Part I of the tax return. Eligible Form 1040 and Form 1040-SR filers are directed to follow the instructions for those forms except that they are not required to report their modified adjusted gross income on lines 1 through 3 of Schedule 8812 (Form 1040), Credits for Qualifying Children and Other Dependents.

For 2021, the American Rescue Plan increased the Child Tax Credit from $2,000 per qualifying child to:

·  $3,600 for children ages 5 and under at the end of 2021; and

·  $3,000 for children ages 6 through 17 at the end of 2021.

The American Rescue Plan also made the credit fully refundable. This means that bona fide residents of Puerto Rico can claim the full amount of the credit for taxable year 2021 even if they had no income and paid no U.S. Social Security taxes.

All filers may file a Schedule LEP (Form 1040), Request for Change in Language Preference (also available as Anexo LEP (Formulario 1040(SP))Solicitud para Cambiar la Preferencia de Idioma), with their tax return to request a change in language preference for further communications from the IRS.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS

What people new to the workforce need to know about income tax withholding

Posted by Admin Posted on June 30 2022

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For many new grads and other people entering the workforce for the first time, filling out new hire paperwork can be confusing — what's a W-4, anyway? New employees should ensure they understand their tax situation and do some planning now, so they're in good shape at tax time next year. It's important to know the correct amount of tax to withhold.

Get tax withholding right.

Federal income tax is a pay-as-you-go tax. This means, taxpayers pay the tax as they earn or receive income during the year. Employers take out – or withhold – income tax from employee paychecks and pay it to the IRS in the taxpayer's name.

If an employee doesn't have enough tax withheld, they may face an unexpected tax bill and a possible penalty when they file a tax return next year. If they overpay or have too much tax withheld during the year, the employee will likely get a tax refund next year. Adjusting the tax withheld up front may mean a bigger paycheck throughout the year.

Form W-4, Employee's Withholding Certificate.

New employees must complete Form W-4 so that their employer can withhold the correct amount of federal income tax from their pay. Read the instructions carefully. The employer will base the amount of withholding on the information the employee provides on their W-4 and how much the employee earns.

In addition to when they start a new job, people can also submit a new W-4 when their personal or financial situation changes, and they want to update their withholding.

Taxpayers can use the Tax Withholding Estimator.

If a taxpayer isn't sure how much tax they should have withheld, they can use the Tax Withholding Estimator tool on IRS.gov to:

  • Estimate their federal income tax withholding.
  • See how their refund, take-home pay, or tax due is affected by their withholding amount.
  • Choose an estimated withholding amount that works for them.

To use the tool, taxpayers need their most recent pay statements or estimated salary, other income totals and their most recent income tax return. The tool doesn't ask for sensitive information such as name, Social Security number, address, or bank account numbers.

Not all workers are employees.

Workers are classified as either contractors or employees, according to certain rules regarding the financial and behavior control the business has over the worker and the type of relationship they have. Workers who are independent contractors need to pay their taxes directly since they won't have an employer withholding money from their paycheck. Depending on how much they earn, they may need to pay estimated tax on a quarterly basis.

Keeping tax forms in a safe place.

Employers typically send Forms W-2 end-of-year tax documents in January. This is a taxpayer's record of the income they received throughout the year and the amount of money withheld for federal, state, local and other taxes. Taxpayers should be sure to hold on to all the tax documents received in the year and store them in a safe place to help ensure they can file an accurate 2022 tax return.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS

What taxpayers need to know about making 2022 estimated tax payments

Posted by Admin Posted on June 21 2022

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By law, everyone must pay tax as they earn income. Generally taxpayers must pay at least 90 percent of their taxes throughout the year through withholding, estimated or additional tax payments or a combination of the two. If they don't, they may owe an estimated tax penalty when they file. Some taxpayers earn income not subject to withholding. For small business owners and self-employed people, that usually means making quarterly estimated tax payments.

Here are some key things to help taxpayers determine if they need to make estimated tax payments:

  • Generally, taxpayers need to make estimated tax payments if they expect to owe $1,000 or more when they file their 2022 tax return, after adjusting for any withholding.
  • The IRS urges anyone in this situation to check their withholding using the Tax Withholding Estimator on IRS.gov. If the estimator suggests a change, the taxpayer can submit a new Form W-4 PDF to their employer.
  • Aside from business owners and self-employed individuals, people who need to make estimated payments also include sole proprietors, partners and S corporation shareholders. It also often includes people involved in the sharing economy.
  • Corporations generally must make these payments if they expect to owe $500 or more on their 2022 tax return.
  • Aside from income tax, taxpayers can pay other taxes through estimated tax payments. This includes self-employment tax and the alternative minimum tax.
  • The remaining deadlines for paying 2022 quarterly estimated tax are: June 15, September 15, and January 17, 2023.
  • Taxpayers can check out these forms for details on how to figure their payments:
  • Taxpayers can visit IRS.gov to find options for paying estimated taxes. These include:
  • Anyone who pays too little tax PDFthrough withholding, estimated tax payments, or a combination of the two may owe a penalty. In some cases, the penalty may apply if their estimated tax payments are late. The penalty may apply even if the taxpayer is due a refund.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS

Here’s what businesses need to know about the enhanced business meal deduction

Posted by Admin Posted on June 21 2022

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The IRS encourages businesses to begin planning now to take advantage of tax benefits available to them when they file their 2022 federal income tax return. This includes the enhanced business meal deduction.

For 2021 and 2022 only, businesses can generally deduct the full cost of business-related food and beverages purchased from a restaurant. Otherwise, the limit is usually 50% of the cost of the meal.

To qualify for the enhanced deduction:

  • The business owner or an employee of the business must be present when food or beverages are provided.
  • Meals must be from restaurants, which includes businesses that prepare and sell food or beverages to retail customers for immediate on-premises or off-premises consumption.
  • Payment or billing for the food and beverages occurs after December 31, 2020, and before January 1, 2023.
  • The expense cannot be lavish or extravagant.

Grocery stores, convenience stores and other businesses that mostly sell pre-packaged goods not for immediate consumption, do not qualify as restaurants. ­

Employers may not treat certain employer-operated eating facilities as restaurants, even if they operate under contract by a third party.

Here's what business owners need to know about certain costs:

  • The cost of the meal can include taxes and tips.
  • The cost of transportation to and from the meal isn't part of the cost of a business meal.

Entertainment events

Business owners may be able to deduct the costs of meals and beverages provided during an entertainment event if either of these apply:

  • the purchase of the food and beverages occurs separately from the entertainment
  • the cost of the food and beverages is separate from the cost of the entertainment on one or more bills, invoices, or receipts.

Businesses should review the special recordkeeping rules that apply to business meals.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS

Some tax considerations for people who are separating or divorcing

Posted by Admin Posted on June 21 2022

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When people go through a legal separation or divorce, the change in their relationship status also affects their tax situation. The IRS considers a couple married for filing purposes until they get a final decree of divorce or separate maintenance.

Update withholding

When someone becomes divorced or separated, they usually need to file a new Form W-4 with their employer to claim the proper withholding. If they receive alimony, they may have to make estimated tax payments. The Tax Withholding Estimator tool on IRS.gov can help people figure out if they're withholding the correct amount.

Understand the tax treatment of alimony and separate maintenance

Amounts paid to a spouse or a former spouse under a divorce decree, a separate maintenance decree, or a written separation agreement may be alimony or separate maintenance payments for federal tax purposes. Certain alimony or separate maintenance payments are deductible by the payer spouse, and the recipient spouse must include it in income.

However, individuals can't deduct alimony or separate maintenance payments made under a divorce or separation agreement executed after 2018 or executed before 2019 but later modified if the modification expressly states the repeal of the deduction for alimony payments applies to the modification. Alimony and separate maintenance payments received under such an agreement are not included in the income the recipient spouse.

Determine who will claim a dependent child if filing separate returns

Generally, the parent with custody of a child can claim that child on their tax return. If parents split custody fifty-fifty and aren't filing a joint return, they'll have to decide which parent gets to claim the child. There are tie-breaker rules if the parents can't agree. Child support payments aren't deductible by the payer and aren't taxable to the payee.

Report property transfers, if needed

Usually, there is no recognized gain or loss on the transfer of property between spouses, or between former spouses if the transfer is because of a divorce. People may have to report the transaction on a gift tax return.

Consider filing status

Divorcing couples who are still married as of the end of the year are treated as married for the year and must determine their filing status. The What Is My Filing Status tool on IRS.gov can help people figure out what status makes sense for their situation.

Here the statuses separating or recently divorced people should consider:

  • Married filing jointly. On a joint return, married people report their combined income and deduct their combined allowable expenses. For many couples, filing jointly results in a lower tax than filing separately.
  • Married filing separately. If spouses file separate tax returns, they each report only their own income, deductions, and credits on their individual return. Each spouse is responsible only for the tax due on their own return. People should consider whether filing separately or jointly is better for them.
  • Head of household. Some separated people may be eligible to file as head of household if all of these apply:
    • Their spouse didn't live in their home for the last six months of the year.
    • They paid more than half the cost of keeping up their home for the year.
    • Their home was the main home of their dependent child for more than half the year.
  • Single. Once the final decree of divorce or separate maintenance is issued, a taxpayer will file as single starting for the year it was issued, unless they are eligible to file as head of household or they remarry by the end of the year.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS

Fast facts to help taxpayers understand backup withholding

Posted by Admin Posted on June 21 2022

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Under the tax law, payers responsible for knowing who they are paying. To accomplish this, payers are required to collect the legal name and taxpayer identification number, or TIN, from vendors they pay. Generally, backup withholding is required when a service vendor does not provide the payer their TIN timely or accurately. This type of withholding can apply to most payments reported on certain Forms 1099 and W-2G.

Here's what taxpayers need to know about backup withholding.

Backup withholding is required on certain non-payroll amounts when certain conditions apply.

The payer making such payments to the payee doesn't generally withhold taxes, and the payees report and pay taxes on this income when they file their federal tax returns. There are, however, situations when the payer is required to withhold a certain percentage of tax to make sure the IRS receives the tax due on this income.

Backup withholding is set at a specific percentage.

The current rate is 24 percent.

Payments subject to backup withholding include:

  • Interest payments
  • Dividends
  • Payment card and third-party network transactions
  • Patronage dividends, but only if at least half the payment is in money
  • Rents, profits, or other gains
  • Commissions, fees, or other payments for work done as an independent contractor
  • Payments by brokers
  • Barter exchanges
  • Payments by fishing boat operators, but only the part that is paid in actual money and that represents a share of the proceeds of the catch
  • Royalty payments
  • Gambling winnings, if not subject to gambling withholding
  • Taxable grants
  • Agriculture payments

Examples when the payer must deduct backup withholding:

  • If a payee has not provided the payer a Taxpayer Identification Number.
    • A TIN specifically identifies the payee.
    • TINs include Social Security numbers, Employer Identification Numbers, Individual Taxpayer Identification Numbers and Adoption Taxpayer Identification Numbers.
  • If the IRS notified the payer that the payee provided an incorrect TIN; that is the TIN does not match the name in IRS records. Payees should make sure that the payer has their correct name and TIN to avoid backup withholding.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS

When the lemonade stand makes bank: Young entrepreneurs and taxes

Posted by Admin Posted on June 16 2022

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Teens and young adults often go into business for themselves over the summer or after school. This work can include babysitting, lawn mowing, dog walking or other part-time or temporary work. When a teen or young adult is an employee of a business, their employer withholds taxes from their paycheck. However, when they are classified as an independent contractor or are self-employed, they're responsible for paying taxes themselves.

Things to keep in mind:

  • Everyone, including minors, must file a tax return if they had net earnings from self-employment of at least $400.
  • If they owe taxes, teens and young adults should file their own tax return, even if their parent or guardian claims them as a dependent.
  • Teens and young adults can prepare and sign their own tax return. There is no minimum age to sign a tax return.
  • Parents can't claim a dependent's earned income on their own tax return.
  • In addition to income tax, people who are self-employed are generally responsible for self-employment tax as well. It's like the Social Security and Medicare taxes withheld from the pay of most wage earners.
  • Teens and young adults can lower the amount of tax they owe by deducting certain expenses.

Here's what young entrepreneurs can do to keep on top of their tax responsibilities:

Keep records. It's good to make and keep financial records and receipts during the year. Recordkeeping can help track income and deductible expenses and provide the information needed for a tax return.

Pay estimated tax, if required. If a teen or young adult being claimed as a dependent expect to owe at least $1,000 in tax for 2022, they must make estimated payments on a quarterly basis. They should be sure to pay enough tax on time to avoid a penalty. They can use one of these forms to calculate their estimated taxes:

If a taxpayer also has a job where tax is withheld by their employer, they can request that their withholding be increased to cover their estimated taxes from their self-employed income. That way, they don't have pay estimated tax separately. The Tax Withholding Estimator is a great tool to help wage earners figure out how much they should be withholding.

File a tax return. When tax season rolls around, young taxpayers can review the information and forms, gather their records and e-file their tax return. When preparing to file a tax return, they should make sure to review all their records, including estimated tax they've already paid.

If people owe taxes, they can pay electronically through Online Account and IRS Direct Pay. Visit the Payments page of IRS.gov for the full list of payment options.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS

IRS increases mileage rate for remainder of 2022

Posted by Admin Posted on June 16 2022

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WASHINGTON — The Internal Revenue Service today announced an increase in the optional standard mileage rate for the final 6 months of 2022. Taxpayers may use the optional standard mileage rates to calculate the deductible costs of operating an automobile for business and certain other purposes.

For the final 6 months of 2022, the standard mileage rate for business travel will be 62.5 cents per mile, up 4 cents from the rate effective at the start of the year. The new rate for deductible medical or moving expenses (available for active-duty members of the military) will be 22 cents for the remainder of 2022, up 4 cents from the rate effective at the start of 2022. These new rates become effective July 1, 2022. The IRS provided legal guidance on the new rates in Announcement 2022-13PDF, issued today.

In recognition of recent gasoline price increases, the IRS made this special adjustment for the final months of 2022. The IRS normally updates the mileage rates once a year in the fall for the next calendar year. For travel from Jan. 1 through June 30, 2022, taxpayers should use the rates set forth in Notice 2022-03PDF.

"The IRS is adjusting the standard mileage rates to better reflect the recent increase in fuel prices," 
said IRS Commissioner Chuck Rettig. "We are aware a number of unusual factors have come into play involving fuel costs, and we are taking this special step to help taxpayers, businesses and others who use this rate.” 

While fuel costs are a significant factor in the mileage figure, other items enter into the calculation of mileage rates, such as depreciation and insurance and other fixed and variable costs. 

The optional business standard mileage rate is used to compute the deductible costs of operating an automobile for business use in lieu of tracking actual costs. This rate is also used as a benchmark by the federal government and many businesses to reimburse their employees for mileage. 

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

 

The 14 cents per mile rate for charitable organizations remains unchanged as it is set by statute.

Midyear increases in the optional mileage rates are rare, the last time the IRS made such an increase was in 2011.

 

MILEAGE RATE CHANGES

 

Purpose

Rates 1/1 through 6/30/2022

Rates 7/1 through 12/31/2022

Business

58.5

62.5

Medical/Moving

18

22

Charitable

14

14

 

 

 

 

 

 

 

 

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS

Dirty Dozen: Scammers use every trick in their communication arsenal to steal your identity, personal financial information, money and more

Posted by Admin Posted on June 16 2022

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WASHINGTON — Suspicious communications in all its forms designed to either trick, surprise or scare someone into responding before thinking is No. 7 on the 2022 "Dirty Dozen" scams warning list, the Internal Revenue Service announced today, warning everyone to be on the lookout for bogus calls, texts, emails and posts online to gain trust or steal.

Criminals have used these methods for years and they persist because these tricks work enough times to keep the scammers at it. Victims are tricked into providing sensitive personal financial information, money or other information. This can be used to file false tax returns and tap into financial accounts, among other schemes.

"If you are surprised or scared by a call or text, it's likely a scam so proceed with extreme caution," said IRS Commissioner Chuck Rettig. "I urge everyone to verify a suspicious email or other communication independently of the message in question."

The IRS has compiled the annual Dirty Dozen list for more than 20 years as a way of alerting taxpayers and the tax professional community about scams and schemes. The list is not a legal document or a literal listing of agency enforcement priorities. It is designed to raise awareness among a variety of audiences that may not always be aware of developments involving tax administration.

As part of the Security Summit effort with the states and the nation's tax industry, the IRS has made great strides in preventing and reducing tax-related identity theft. But it remains a serious threat to taxpayers and tax professionals who don't adequately protect Social Security numbers (SSN) and other personal information.

For example, criminals can quickly file a fake tax return using a stolen SSN in the hope that it has not already appeared on another filed return. People frequently don't know they are a victim of identity theft until they are notified by the IRS of a possible issue with their tax return or their return is rejected because the SSN appears on a return already filed.

Here are some common scams the IRS continues to see. Taxpayers should take extra caution with these schemes, which continue to evolve and change:

Text message scams: These scams are sent to taxpayers' smartphones and can reference things like COVID-19 and/or "stimulus payments." These messages often contain bogus links claiming to be IRS websites or other online tools. Other than IRS Secure Access, the IRS does not use text messages to discuss personal tax issues, such as those involving bills or refunds. The IRS also will not send taxpayers messages via social media platforms.

If a taxpayer receives an unsolicited SMS/text that appears to be from either the IRS or a program closely linked to the IRS, the taxpayer should take a screenshot of the text message and include the screenshot in an email to phishing@irs.gov with the following information:

  • Date, time and time zone they received the text message
  • Phone number that received the text message
  • The IRS reminds everyone NOT to click links or open attachments in unsolicited, suspicious or unexpected text messages whether from the IRS, state tax agencies or others in the tax community.

Email phishing scams: The IRS does not initiate contact with taxpayers by email to request personal or financial information. The IRS initiates most contacts through regular mail. If a taxpayer receives an unsolicited fraudulent email that appears to be from either the IRS or a program closely linked to the IRS, report it by sending the email as an attachment to phishing@irs.gov. The Report Phishing and Online Scams page at IRS.gov provides complete details.

Phone scams: The IRS does not leave pre-recorded, urgent or threatening messages. In many variations of the phone scam, victims are told if they do not call back, a warrant will be issued for their arrest. Other verbal threats include law-enforcement agency intervention, deportation or revocation of licenses.

Criminals can fake or "spoof" caller ID numbers to appear to be anywhere in the country, including from an IRS office. This prevents taxpayers from being able to verify the caller's true number. Fraudsters also have spoofed local sheriff's offices, state departments of motor vehicles, federal agencies and others, to convince taxpayers the call is legitimate.

The IRS (and its authorized private collection agencies) will never:

  • Call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer. The IRS does not use these methods for tax payments.
  • Threaten to immediately bring in local police or other law-enforcement groups to have the taxpayer arrested for not paying.
  • Demand that taxes be paid without giving the taxpayer the opportunity to question or appeal the amount owed.
  • Ask for credit or debit card numbers over the phone.

Generally, the IRS will first mail a bill to any taxpayer who owes taxes. All tax payments should only be made payable to the U.S. Treasury and checks should never be made payable to third parties. For anyone who doesn't owe taxes and has no reason to think they do: Do not give out any information. Hang up immediately. For more information, see IRS warning: Scammers work year-round; stay vigilant.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS

Understanding taxpayer rights: Everyone has the right to finality

Posted by Admin Posted on June 16 2022

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Taxpayers interacting with the IRS have the right to finality. This right comes into play for taxpayers who are going through an audit. These taxpayers have the right to know when the IRS has finished the audit. This is one of ten basic rights — known collectively as the Taxpayer Bill of Rights.

Here's what taxpayers in the process of an audit, should know about their right to finality:

  • Taxpayers have the right to know:
    • The maximum amount of time they have to challenge the IRS's position.
    • The maximum amount of time the IRS has to audit a particular tax year or collect a tax debt. 
    • When the IRS has finished an audit.
       
  • The IRS generally has three years from the date taxpayers file their returns to assess any additional tax for that tax year.
     
  • There are some limited exceptions to the three-year rule, including when taxpayers fail to file returns for specific years or file false or fraudulent returns. In these cases, the IRS has an unlimited amount of time to assess tax for that tax year.
     
  • The IRS generally has 10 years from the assessment date to collect unpaid taxes. This 10-year period cannot be extended, except for taxpayers who enter into installment agreements or the IRS obtains court judgments.
     
  • There are circumstances when the 10-year collection period may be suspended. This can happen when the IRS cannot collect money due to the taxpayer's bankruptcy or there's an ongoing collection due process proceeding involving the taxpayer.
     
  • A statutory notice of deficiency is a letter proposing additional tax the taxpayer owes. This notice must include the deadline for filing a petition with the tax court to challenge the amount proposed.
     
  • Generally, a taxpayer will only be subject to one audit per tax year. However, the IRS may reopen an audit for a previous tax year, if the IRS finds it necessary. This could happen, for example, if a taxpayer files a fraudulent return.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS

People can protect themselves from tax-related identity theft with an Identity Protection PIN

Posted by Admin Posted on June 16 2022

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Identity Protection PINs stop identity thieves from filing fraudulent tax returns. When a taxpayer chooses to participate in this program, the IRS assigns them a six-digit number which the taxpayer uses to prove their identity when they file their tax return. This extra layer of protection provides peace of mind, especially for people who have already been a victim of identity theft.

How to get an IP PIN

The Get An IP PIN tool lets people with an SSN or ITIN request an IP PIN online after they verify their identity. Taxpayers should review the Secure Access requirements before they try to use the Get An IP PIN tool.

Tax pros can help clients affected by identity theft by urging them to get an IP PIN quickly. Even if a thief has already filed a fraudulent tax return, an IP PIN would prevent the taxpayer from being a repeat victim of tax-related identity theft in the future.

Important information about IP PINs

  • For security reasons, enrolled participants get a new IP PIN each year. That IP PIN is valid for one year.
  • Enrolled taxpayers can log back into the Get An IP PIN tool to see their current IP PIN.
  • People with an IP PIN must use it when filing any federal tax returns during the year, including prior year tax returns. 
  • IP PIN users should only share their number with the IRS and their trusted tax preparation provider. The IRS will never call, email or text a request for the IP PIN.
  • Currently, taxpayers can get an IP PIN for 2022. The IRS will issue new IP PINs starting in January 2023.

Taxpayers who can't validate their identity online can still get an IP PIN

Taxpayers who can't validate their identity online, and whose income is below a certain threshold, can file Form 15227, Application for an Identity Protection Personal Identification NumberPDF. The 2022 threshold is $73,000 for individuals or $146,000 for married filing jointly.

Once an IRS receives the form, a representative will call the phone number the taxpayer provided to validate the taxpayer's identity. However, for security reasons, the IRS will assign an IP PIN for the next filing season, and the taxpayer can't use the IP PIN for the current filing season.

Taxpayers who can't validate their identity online or by phone, and who are ineligible to file a Form 15227 can make an appointment at a Taxpayer Assistance Center. They will need to bring one current government-issued picture ID and another identification document to prove their identity. Once verified, the taxpayer will get an IP PIN in the mail, usually within three weeks.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS

The Where’s My Refund tool is now better than ever

Posted by Admin Posted on June 16 2022

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The IRS recently rolled out a new and improved Where's My Refund tool. This updated tool allows taxpayers to check the status of their refunds for the 2021, 2020, and 2019 tax years.

To use the tool, taxpayers will need their Social Security number or ITIN, filing status and expected refund amount from their original tax return for the year they're checking.

About the tool

Available on IRS.gov or the IRS2Go mobile app, Where's My Refund allows taxpayers to track their refund through three stages:

1.   Return received.

2.   Refund approved.

3.   Refund sent.

Using this tool, 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.

Eligible people who haven't filed a 2021 tax return yet, including those who requested an extension to file, can use IRS Free File to prepare and file their federal tax return for free. Filing electronically is fast, accurate and secure. When an individual chooses direct deposit their refund goes directly from the IRS into their bank or financial account getting them their refund in the fastest time possible. When the IRS accepts the electronically filed return, taxpayers can track their refund with the Where's My Refund tool.

Additional refund status information

The Where's My Refund tool should be the first place people go for more information about checking the status of a tax refund. There's no need to call the IRS to check on refund status unless it's been more than 21 days since they filed the return, or the tool says the IRS can provide more information.

Where taxpayers can find other information about their account

Taxpayers can log in to their Online Account to find their prior year adjusted gross income, balance due and other account information. They can also see their payment history or other tax records.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS

For those who pay estimated taxes, second quarter June 15 deadline approaches

Posted by Admin Posted on June 14 2022

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The Internal Revenue Service reminds taxpayers who pay estimated taxes that the deadline to pay their second quarter tax liability is June 15.

Taxes are pay-as-you-go

This means taxpayers need to pay most of the tax they expect to owe during the year, as income is received. There are two ways to do that:

1.   Withholding from pay, pension or certain government payments such, as Social Security.

2.   Making quarterly estimated tax payments during the year.

Estimated tax is the method used to pay tax on income that isn't subject to withholding. This includes income from self-employment, interest, dividends, rent, gains from the sale of assets, prizes and awards.

Taxpayers may also have to pay estimated tax if the amount of income tax being withheld from their salary, pension or other income isn't enough. If necessary, those who receive a salary or wages can avoid having to pay estimated taxes by asking their employer to withhold more tax from their earnings. To do this, taxpayers should submit a new Form W-4 to their employer. There is a special line on Form W-4 for them to enter the additional amount they want their employer to withhold.

Who must pay estimated tax?

Individuals, including sole proprietors, partners and S corporation shareholders, generally have to make estimated tax payments if they expect to have a tax liability of $1,000 or more when they file their return.

Individual taxpayers can use the IRS Interactive Tax Assistant online to see if they are required to pay estimated taxes. They can also see the worksheet in Form 1040-ES, Estimated Tax for Individuals, for more details on who must pay estimated tax.

Corporations generally have to make estimated tax payments if they expect to owe tax of $500 or more when they file their return. Corporations can see Form 1120-W, Estimated Tax for Corporations, for more information.

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.

How to avoid an underpayment penalty

Taxpayers can avoid an underpayment penalty by owing less than $1,000 at tax time or by paying most of their taxes during the year. Generally, for 2022 that means making payments of at least 90% of the tax expected on their 2022 return, or taxpayers who pay at least 100 percent of the tax shown on their return for tax year 2021.

Special rules apply to some groups of taxpayers, such as farmers, fishers, certain higher income taxpayers, casualty and disaster victims, those who recently became disabled, recent retirees and those who receive income unevenly during the year. For more information, refer to Form 1040-ES.

Generally, taxpayers should make estimated tax payments in four equal amounts to avoid a penalty. However, if they receive income unevenly during the year, they may be able to vary the amounts of the payments to avoid or lower the penalty by using the annualized installment method. Taxpayers can use Form 2210, Underpayment of Estimated Tax by Individuals, Estates, and Trusts, to see if they owe a penalty for underpaying their estimated tax.

Third quarter payments are due September 15 and the final estimated tax payment for tax year 2022 is due on January 17, 2023.

Tax Withholding Estimator

The Tax Withholding Estimator offers a step-by-step method for effectively ensuring taxpayers have the right amount of tax withheld from their paychecks or other income that is subject to withholding.

Using the Tax Withholding Estimator can help taxpayers prevent having too little tax withheld and facing an unexpected tax bill or penalty at tax time next year.

How to pay estimated taxes

An electronic payment is the fastest, easiest and most secure way for individuals to make an estimated tax payment. Taxpayers can securely log into their IRS Online Account or use IRS Direct Pay to submit a payment from their checking or savings account. Taxpayers can also pay using a debit, credit card or digital wallet. Taxpayers should note that the payment processor, not the IRS, charges a fee for debit and credit card payments. Both Direct Pay and the pay by debit, credit card or digital wallet options are available online at IRS.gov/payments and through the IRS2Go app.

Taxpayers can also use the Electronic Federal Tax Payment System (EFTPS) to make an estimated tax payment.

Corporations must use electronic funds transfer to make all federal tax deposits (such as deposits of employment, excise and corporate income tax). This includes installment payments of estimated tax. Generally, an electronic funds transfer is made using the Electronic Federal Tax Payment System (EFTPS). However, if the corporation does not want to use EFTPS, it can arrange for its tax professional, financial institution, payroll service, or other trusted third party to make electronic deposits on its behalf.

If taxpayers opt to mail a check or money order, they should make them payable to the "United States Treasury."

Form 1040-ES, Estimated Tax for Individuals, includes instructions to help taxpayers figure their estimated taxes. For information on all payment options, visit Pay Online.

IRS.gov assistance 24/7

Tax help is available 24/7 on IRS.gov. The IRS website offers a variety of online tools to help taxpayers find answers to common tax questions. For example, taxpayers can search the Interactive Tax AssistantTax Topics and Frequently Asked Questions to get answers to common questions.

The IRS is continuing to expand ways to communicate to taxpayers who prefer to get tax information in other languages. The IRS has posted translated tax resources in 20 other languages on IRS.gov. For more information, see We Speak Your Language.

 

If you have any questions regarding Essential Business Accounting, Domestic Taxation, International Taxation, IRS Representation, U.S. Tax Implications of Real Estate Transactions or Financial Statements, please give us a call at 305-274-5811.

 

Source: IRS

PLANNING FOR THE NET INVESTMENT INCOME TAX

Posted by Admin Posted on June 01 2022

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Despite its name, the Tax Cuts and Jobs Act (TCJA) didn’t cut all types of taxes. It left several taxes unchanged, including the 3.8% tax on net investment income (NII) of high-income taxpayers.

You’re potentially liable for the NII tax if your modified adjusted gross income (MAGI) exceeds $200,000 ($250,000 for joint filers and qualifying widows or widowers; $125,000 for married taxpayers filing separately). Generally, MAGI is the same as adjusted gross income. However, it may be higher if you have foreign earned income and certain foreign investments.

To calculate the tax, multiply 3.8% by the lesser of 1) your NII, or 2) the amount by which your MAGI exceeds the threshold. For example, if you’re single with $250,000 in MAGI and $75,000 in NII, your tax would be 3.8% × $50,000 ($250,000 - $200,000), or $1,900.

NII generally includes net income from, among others, taxable interest, dividends, capital gains, rents, royalties and passive business activities. Several types of income are excluded from NII, such as wages, most nonpassive business income, retirement plan distributions and Social Security benefits. Also excluded is the nontaxable gain on the sale of a personal residence.

Given the way the NII tax is calculated, you can reduce the tax either by reducing your MAGI or reducing your NII. To accomplish the former, you could maximize contributions to IRAs and qualified retirement plans. To do the latter, you might invest in tax-exempt municipal bonds or in growth stocks that pay little or no dividends.

There are many strategies for reducing the NII tax. Consult with one of our tax advisors before implementing any of them. And remember that, while tax reduction is important, it’s not the only factor in prudent investment decision-making.

If you have any questions regarding Essential Business Accounting, Domestic Taxation, International Taxation, IRS Representation, U.S. Tax Implications of Real Estate Transactions or Financial Statements, please give us a call at 305-274-5811.                                   

Source: Thomson Reuters

I got a notice or letter from the IRS – now what do I do?

Posted by Admin Posted on June 01 2022

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The IRS will send a notice or a letter for any number of reasons, including:

 

  • Identifying a specific issue on your federal tax return or account that needs action;
  • Explaining changes to your return or account;
  • Asking for missing or more information; or
  • Requesting a payment.

 

You can handle most of this correspondence without calling, visiting an IRS office, or involving the Taxpayer Advocate Service (TAS) by following the instructions in the notice or letter.

However, sometimes these letters or notices can be confusing and hard to understand. Here are some tips to help you when you receive a notice or letter from the IRS.

1. Determine the reason the notice or letter was sent

Your notice or letter will explain the reason for the contact and give you instructions on how to handle the issue. If you need help understanding the information provided, the IRS has a Search Notice and Letters feature on the Understanding Your IRS Notice or Letter page. TAS also has a tool called the Taxpayer Roadmap, which includes copies of common letters and notices that you can use.

You can find the notice (CP) or letter (LTR) number on either the top or the bottom right-hand corner of your correspondence. Once you find it, you can enter that number in the search feature and you will be taken to a corresponding page that has more general information that may help.

The Taxpayer Advocate Service has a GET HELP section on various topics that can lead you through important information and steps and actions necessary to help you resolve many common tax issues.

2. Do I need to reply?

Whether you need to reply or not will depend on the issue.

If you agree with the information or change listed on the notice or letter, generally there is no need to reply. If the action causes a balance due, then you should take action immediately. Other times, even if you do agree, you may need to provide specific information to resolve the issue, particularly if you need to verify your identity.

If you disagree, you will need to act as soon as possible, as penalties and interest may be accruing, depending on the circumstances. The letter should outline what that action is and include a due date for your response.

Whether you agree or not, if it requires a reply – do not delay! Delaying can create more issues. See more on this below.

3. When to respond

If your notice or letter requires a response by a specific date, there are many reasons you’ll want to comply. Here are just a few:

  • minimize additional interest and penalty charges;
  • prevent further action from being taken on the account or against you; and
  • preserve your appeal rights if you don’t agree.

If you need more time to respond than the notice or letter indicates, contact the IRS using the contact information included on the notice or letter or call the general number, shown below, but only if a specific contact is not indicated.

4. How and where to reply

All notices and letters should tell you where to send your response, whether it’s to a mailing address or fax number. (Note: The IRS generally does not allow communication via email yet, although they are currently working on developing some alternative digital communication options.)

Follow the instructions in your notice or letter. See the IRS Operational status page for IRS customer service timeframes and updates as there are still some delays due to the ongoing pandemic.

5. What if I want to talk to someone?

Each notice or letter should include contact information. Some phone numbers on notices or letters are general IRS toll-free numbers, but if a specific employee is working your case, it will show a specific phone number to reach that employee or the department manager. The telephone number is usually found in the upper right-hand corner of your notice or letter.

As a last resort, you can use the IRS toll-free number at 800-829-1040. Have a copy of your tax return and the correspondence available when you call. But your best option is to use the specific number or address provided.

6. Wait – I still need help

You can resolve most notices or letters without help, but you can also get the help of a professional – either the person who prepared your return, or another tax professional.

If you can’t afford to hire a tax professional to assist you, you may be eligible for free or low cost representation from an attorney, certified public accountant, or enrolled agent associated with a Low Income Taxpayer Clinic (LITC). In addition, LITCs can help if you speak English as a second language and need help understanding the notice or letter. For more information or to find an LITC near you, see the LITC page at www.taxpayeradvocate.irs.gov/litcmap or IRS Publication 4134, Low Income Taxpayer Clinic List.

If you have any questions regarding Essential Business Accounting, Domestic Taxation, International Taxation, IRS Representation, U.S. Tax Implications of Real Estate Transactions or Financial Statements, please give us a call at 305-274-5811.

Source: TAS      

SHOULD I TAKE ANY PARTICULAR STEPS WITH REGARD TO THE ASSETS OF THE DECEASED?

Posted by Admin Posted on June 01 2022

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To learn how to handle the following assets of the deceased, speak with your financial advisor.

General rules are as follows:

  • Automobiles. Find out if the title of the car of the deceased needs to be modified by checking with the State DMV.
  • Insurance Policies. The beneficiaries of policies held by the deceased's spouse may need to be modified. It might be smart to lessen the amount of life insurance coverage if the spouse doesn't have any dependents. Revision of home and auto insurance may also need to be done.
  • Bank Accounts. The title of a joint bank account will automatically pass to the surviving spouse. Advise the bank to change the ownership records. If the name of the deceased was the only name on the bank account, the asset will go through probate unless it is a trust account.
  • Safe Deposit Box. A court order is necessary, in most states, to open a safe deposit box that is only in the deceased's name.
  • Stocks and Bonds. Verify with the broker of the deceased to change title of stocks and bonds.
  • Credit Cards. If the credit cards are only in the deceased's name, they should be cancelled and the estate should pay outstanding payments. If the cards are in both names, the surviving spouse should inform the credit card companies of the death and ask for cards only in the survivor's name to be reissued.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Thomson Reuters

WHAT CAN I DO TO GET A GOOD PRICE ON MY HOMEOWNER'S INSURANCE?

Posted by Admin Posted on June 01 2022

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Clearly you should always perform a good amount of due diligence when searching for any policy. Be sure to compare the differences in services offered and prices quoted. There are many discounts available for different things, don't forget to ask if you qualify for any of them.

Remember that the deductible will largely affect the price of the premium. It is a good idea to keep the deductible as high as you feel comfortable with to keep the premium down.

You can generally get a better deal when you purchase your auto and house policies from the same company and you can also get a better rate by not insuring the land.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Thomson Reuters 

WHAT DO BANKS LOOK FOR IN A LOAN REQUEST?

Posted by Admin Posted on May 25 2022

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The bank official who reviews the loan request is focused on repayment. Most loan officers request a copy of your business credit report to determine your ability to repay.

The lending officer will consider the following issues while using the information you provided and the credit report:

  • Have you invested at least 25% or 50% of savings or personal equity into the business for the loan you are requesting? (Keep in mind that 100% of your business will not be financed by an investor.)
  • Do your work history, your credit report and letters of recommendation show a healthy record of credit worthiness? This is a key factor.
  • Do you have the training and experience necessary to operate a successful business?
  • Do your loan proposal and business plan document your knowledge of and dedication to the success of the business?
  • Is the cash flow of the business sufficient to make the monthly payments on the requested loan?

If you have any questions regarding Essential Business Accounting, Domestic Taxation, International Taxation, IRS Representation, U.S. Tax Implications of Real Estate Transactions or Financial Statements, please give us a call at 305-274-5811.

Source: Thomson Reuters

Información y recursos gratis para empezar un negocio

Posted by Admin Posted on May 05 2022

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El Servicio de Impuestos Internos quiere que los contribuyentes sepan que hay recursos gratuitos en IRS.gov para aquellos que están empezando un negocio. Las pequeñas empresas juegan un papel fundamental en la economía de la nación. El IRS tiene una variedad de recursos disponibles para ayudar a los empresarios a cumplir con sus responsabilidades tributarias, así como para ayudar a sus empleados.

Selección de la estructura empresarial

Al iniciar un negocio, los contribuyentes deben decidir qué estructura de entidad empresarial establecer. La estructura de la empresa determina el formulario de declaración de impuestos que se debe presentar. Las estructuras empresariales más comunes son:

  • Empresario por cuenta propia - Cuando alguien es dueño de un negocio no incorporado por sí mismo.
  • Sociedad - La relación entre dos o más personas para hacer comercio o negocios.
  • Corporaciones - Al formar una corporación, los posibles accionistas intercambian dinero, propiedades, o ambos, por el capital en acciones de la corporación.
  • Corporaciones S - Son corporaciones que eligen pasar los ingresos corporativos, las pérdidas, las deducciones y los créditos a través de sus accionistas a efectos del impuesto federal.
  • Compañía de Responsabilidad Limitada (LLC por sus siglas en inglés) - Están permitidas por la ley estatal y pueden estar sujetas a diferentes regulaciones. El IRS tratará una LLC como una corporación, sociedad, o como parte de la declaración de impuestos del propietario (por ejemplo, empresario por cuenta propia) dependiendo de las elecciones hechas por la LLC y su número de miembros.

Entendiendo los impuestos de negocios

La estructura del negocio que se opera determina qué impuestos hay que pagar y cómo hacerlo. A continuación, están los cuatro tipos generales de impuestos empresariales:

  • Impuesto sobre los ingresos - Todas las empresas, excepto las sociedades, deben presentar una declaración anual del impuesto sobre los ingresos. Las sociedades colectivas presentan una declaración informativa.
  • Impuesto sobre el trabajo por cuenta propia - Es un impuesto de seguro social y Medicare que se aplica principalmente a las personas que trabajan por cuenta propia. Los pagos contribuyen a la cobertura de la persona bajo el sistema del seguro social.
  • Impuesto sobre el empleo - Cuando las pequeñas empresas tienen empleados, la empresa tiene ciertas responsabilidades tributarias sobre el empleo que debe pagar y formularios que debe presentar.
  • Impuestos especiales - Los impuestos especiales se aplican a diversos bienes, servicios y actividades. Estos impuestos pueden recaer sobre el fabricante, el minorista o el consumidor, dependiendo del impuesto específico.

Nota: Por lo general, los propietarios de empresas deben pagar los impuestos sobre los ingresos, incluyendo el impuesto sobre el trabajo por cuenta propia, realizando pagos regulares de impuestos estimados durante el año.

Saber cuándo hay que obtener un número de identificación del empleador (EIN por sus siglas en inglés)

El número de identificación del empleador (EIN) también se conoce como el Número Federal de Identificación de Impuestos y es usado para identificar a una entidad de negocios. Generalmente, las empresas necesitan un EIN. Este es un servicio gratuito ofrecido por el Servicio de Impuestos Internos y los propietarios de empresas pueden obtener su EIN inmediatamente.

Manteniendo buenos registros

El mantenimiento de registros adecuados ayudará a las pequeñas empresas a monitorear su progreso, a preparar estados financieros, a identificar las fuentes de ingresos, a hacer un seguimiento de los gastos deducibles, a hacer un seguimiento de su base en la propiedad, a preparar sus declaraciones de impuestos y a respaldar los elementos declarados en sus declaraciones de impuestos. Los contribuyentes deben mantener sus registros durante al menos 3 años.

Escogiendo un año comercial

Los pequeños negocios deben calcular sus ingresos tributables sobre la base de un año tributario. Un "año tributario" es un período de contabilidad anual para declarar los ingresos y los gastos. Los años tributarios que pueden utilizar las pequeñas empresas son

  • Año natural – 12 meses consecutivos que comienzan el 1 de enero y terminan el 31 de diciembre.
  • Año tributario – 12 meses consecutivos que terminan en el último día de cualquier mes excepto diciembre. Un año tributario de 52-53 semanas es un año tributario que varía de 52 a 53 semanas pero que no tiene que terminar en el último día de un mes.

Si tiene alguna pregunta sobre la contabilidad comercial esencial, los impuestos nacionales, los impuestos internacionales, la representación del IRS, las implicaciones fiscales de los Estados Unidos de las transacciones de bienes inmuebles o los estados financieros, llámenos al 305-274-5811.

Fuente: IRS        

Understanding taxpayer rights: The right to challenge the IRS's position and be heard

Posted by Admin Posted on May 05 2022

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Every taxpayer has a set of fundamental rights when working with the IRS which are known collectively as the Taxpayer Bill of Rights. One of these is the right to challenge the IRS's position and be heard.

Here are some details about what this right means for taxpayers.

Taxpayers have the right to:

  • Raise objections.
  • Provide additional documentation in response to formal or proposed IRS actions.
  • Expect the IRS to consider their timely objections.
  • Have the IRS consider any supporting documentation promptly and fairly.
  • Receive a response if the IRS does not agree with their position.

Here are some specific things this right provides taxpayers.

  • In some cases, the IRS will notify a taxpayer that their tax return has a math or clerical error. If this happens, the taxpayer:
    • Has 60 days to tell the IRS that they disagree.
    • Should provide copies of any records that may help correct the error.
    • May call the number listed on the letter or bill for assistance.
    • Can expect the agency to make the necessary adjustment to their account and send a correction if the IRS upholds the taxpayer's position.
  • Here's what will happen if the IRS does not agree with the taxpayer's position:
    • The agency will issue a notice proposing a tax adjustment. This is a letter that comes in the mail.
    • This notice provides the taxpayer with a right to challenge the proposed adjustment.
    • The taxpayer makes this challenge by filing a petition in U.S. Tax Court. The taxpayer must generally file the petition within 90 days of the date of the notice, or 150 days if it is addressed outside the United States.
       
  • Taxpayers can submit documentation and raise objections during an audit. If the IRS does not agree with the taxpayer's position, the agency issues a notice explaining why it is increasing the tax. Prior to paying the tax, the taxpayer has the right to petition the U.S. Tax Court and challenge the agency's decision.
     
  • In some circumstances, the IRS must provide a taxpayer with an opportunity for a hearing before an independent Office of Appeals. The agency must do this:
    • Before taking enforcement actions to collect a tax debt. These actions include levying the taxpayer's bank account. Immediately after filing a notice of federal tax lien in the appropriate state filing location. If the taxpayer disagrees with the decision of the Appeals Office, they can petition the U.S. Tax Court.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS       

Entender los derechos de los contribuyentes: El derecho de cuestionar la posición del IRS y de ser escuchado

Posted by Admin Posted on May 05 2022

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Cada uno de los contribuyentes tiene una serie de derechos fundamentales al tratar con el IRS que se conocen colectivamente como la Carta de Derechos del Contribuyente. Uno de ellos es el de cuestionar la posición del IRS y de ser escuchado.

Aquí hay algunos detalles acerca de lo que significa este derecho para los contribuyentes.

Los contribuyentes tienen derecho a:

  • Presentar objeciones.
  • Proveer documentación adicional como respuesta a acciones propuestas o acciones finales llevadas acabo por el IRS.
  • Esperar a que el IRS considere sus objeciones de manera oportuna.
  • Esperara que el IRS considere cualquier documentación de respaldo de manera oportuna y justa.
  • Recibir una respuesta si el IRS no está de acuerdo con su posición.

Aquí hay algunas cosas específicas que este derecho proporciona a los contribuyentes.

  • En algunos casos, el IRS notificará al contribuyente que su declaración de impuestos tiene un error matemático o administrativo. Si esto sucede, el contribuyente: 
    • Tiene 60 días para decirle al IRS que no está de acuerdo.
    • Debe proporcionar copias de cualquier documento que pueda ayudar a corregir el error.
    • Puede llamar al número que figura en la carta o factura para obtener ayuda.
    • Puede esperar que la agencia haga los ajustes necesarios a su cuenta y envíe una corrección si el IRS está de acuerdo con la posición del contribuyente.
       
  • Esto es lo que sucederá si el IRS no está de acuerdo con la posición del contribuyente:
    • La agencia emitirá un aviso proponiendo un ajuste de impuestos. Esta es una carta que viene en el correo.
    • Este aviso proporciona al contribuyente el derecho a impugnar el ajuste propuesto.
    • El contribuyente hace esta impugnación mediante la presentación de una petición en el Tribunal de Impuestos del los Estados Unidos. El contribuyente generalmente debe presentar la petición dentro de los 90 días a partir de la fecha del aviso, o 150 días si se dirige fuera de los Estados Unidos.
       
  • Los contribuyentes pueden presentar documentación y presentar objeciones durante una auditoría. Si el IRS no está de acuerdo con la posición del contribuyente, la agencia emite un aviso explicando por qué está aumentando el impuesto. Antes de pagar el impuesto, el contribuyente tiene derecho a presentar una petición ante el Tribunal de Impuestos del los Estados Unidos e impugnar la decisión de la agencia.
     
  • En algunas circunstancias, el IRS debe proveer al contribuyente la oportunidad de una audiencia ante una Oficina de Apelaciones independiente. La agencia debe hacer esto:
    • Antes de tomar medidas de cumplimiento para cobrar una deuda tributaria. Estas acciones incluyen el embargo de la cuenta bancaria del contribuyente. Inmediatamente después de presentar un aviso de gravamen por impuesto federal en el lugar de presentación estatal correspondiente. Si el contribuyente no está de acuerdo con la decisión de la Oficina de Apelaciones, puede presentar una petición ante el Tribunal de Impuestos del los Estados Unidos.

Si tiene alguna pregunta sobre la contabilidad comercial esencial, los impuestos nacionales, los impuestos internacionales, la representación del IRS, las implicaciones fiscales de los Estados Unidos de las transacciones de bienes inmuebles o los estados financieros, llámenos al 305-274-5811.

Fuente: IRS  

Here’s how taxpayers can resolve common after-tax-day issues

Posted by Admin Posted on May 04 2022

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This year’s deadline to file and pay federal income taxes has passed for most people. If a taxpayer is due a refund, there is no penalty for filing late. However, those who owe and missed the deadline without requesting an extension should file quickly to limit penalties and interest.

Here are some tips for taxpayers handling some of the most common after-tax-day issues.

Check refund status
Taxpayers can check on their refund using the Where's My Refund? tool. It is available on IRS.gov and the IRS2Go app. To use this tool, taxpayers need their Social Security number or ITIN, tax filing status and the exact amount of the refund claimed on their tax return. The tool updates once daily, so there's no need to check more often. Taxpayers without access to a computer can call 800-829-1954.

Check withholding
All taxpayers are encouraged to check their withholding using the Tax Withholding Estimator on IRS.gov. This will help them make sure their employers are withholding the right amount of tax from their paychecks. Doing this now will help avoid an unexpected amount due and possibly a penalty when they prepare and file their taxes next year.

Taxpayers can use the results from the Estimator to help complete a new Form W-4 and adjust their income tax withholding with their employer. Taxpayers who receive pension income can use the results to complete a Form W-4P and submit to their payer.

Review payment options
Taxpayers who owe taxes can review all payment options online. These include:

Carefully consider if they need to amend a tax return
After filing their tax return, taxpayers may find they made an error or forgot to enter something on it. The IRS strongly recommends taxpayers use the Interactive Tax Assistant, Should I File an Amended Return? to help determine if they should correct an error or make other changes to the tax return they already filed.

Common errors taxpayers should fix are those made about filing status, income, deductions, and credits. Taxpayers usually do not need to file an amended return to fix a math error or if they forgot to attach a form or schedule. Normally, the IRS will correct the math error and notify the taxpayer by mail. Similarly, the agency will send a letter requesting any missing forms or schedules.

Taxpayers expecting a refund should not file an amended return before their original return has been processed

The IRS issues most refunds in fewer than 21 days for taxpayers who filed electronically and chose direct deposit. However, some returns have errors or need more review and may take longer to process.

Things that can delay a refund:

The IRS will contact taxpayers by mail if it needs more information to process their return.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS

Contribuyentes con deuda tributaria que no cumplieron con plazo del 18 de abril deben presentar ahora para reducir multas e intereses; no es muy tarde para reclamar Crédito tributario por hijos

Posted by Admin Posted on May 04 2022

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WASHINGTON — El Servicio de Impuestos Internos, IRS, anima a los contribuyentes que no cumplieron con la fecha límite del lunes, 18 de abril para presentar su declaración de impuestos, a que presenten lo más pronto posible. Aunque los contribuyentes que esperan un reembolso no reciben multas por presentar después de la fecha límite, aquellos que deben impuestos y no cumplen con la fecha límite sin pedir una prórroga deben presentar rápidamente para reducir las multas e intereses.

Las familias que no deben impuestos al IRS aún pueden presentar su declaración de impuestos de 2021 y reclamar el Crédito tributario por hijos para el año tributario 2021 en cualquier momento hasta el 15 de abril de 2025, sin ninguna multa. Este año también marca la primera vez en la historia que muchas familias con niños en Puerto Rico serán elegibles para reclamar el Crédito tributario por hijos, que se ha ampliado para proporcionar hasta $3,600 por niño.

Algunos contribuyentes califican automáticamente para obtener tiempo adicional para presentar y pagar sus impuestos sin multas e intereses, e incluyen:

Presente sin multas para recibir un reembolso de impuestos

Algunas personas eligen no presentar una declaración de impuestos porque no ganaron lo suficiente para tener que presentar. Pero pueden pasar la oportunidad de recibir un reembolso de impuestos. La única manera de recibir un reembolso es al presentar una declaración de impuestos. No hay multas por presentar después de la fecha límite si se le debe un reembolso. Se anima a contribuyentes a que usen opciones para presentar electrónicamente, que incluyen Free File del IRS, disponible en IRS.gov hasta el 17 de octubre para preparar y presentar declaraciones electrónicamente.

Aunque la mayoría de los créditos tributarios pueden usarse para reducir la cantidad de impuestos adeudados, existen varios créditos que permiten a los contribuyentes recibir dinero después de pagar lo que deben. Ejemplos más comunes de estos créditos reembolsables son el Crédito tributario por ingreso del trabajoCrédito por gastos de cuidado de niños y dependientes (en inglés) y el Crédito tributario por hijos (en inglés). Aquellos que usualmente no presentan una declaración y no fueron elegibles para la tercera ronda de Pagos de impacto económico o que recibieron menos de la cantidad total pueden ser elegibles para reclamar el Crédito de recuperación de reembolso de 2021 al presentar su declaración de impuestos de 2021. Muchas veces los contribuyentes no presentan una declaración de impuestos para reclamar estos u otros créditos para los que pueden ser elegibles.

Generalmente, el IRS emite nueve de cada 10 reembolsos en menos de 21 días a contribuyentes que presentan electrónicamente y escogen depósito directo. Sin embargo, es posible que una declaración de impuestos requiera una revisión adicional o se demore. El IRS procesa declaraciones de impuestos de papel en el orden en el que se reciben.

Contribuyentes pueden verificar el estado de su reembolso a través de la herramienta ¿Dónde está mi reembolso? en IRS.gov, IRS2Go o al llamar a la línea automática de reembolsos al 800-829-1954. Contribuyentes necesitan el número de Seguro Social principal en la declaración de impuestos, el estado civil tributario y el monto de reembolso esperado. La herramienta se actualiza una vez al día, generalmente durante la noche, así que no hay necesidad de verificar con más frecuencia.

Presente para reducir multas e intereses

Contribuyentes deben presentar su declaración de impuestos, pedir una prórroga y pagar cualquier deuda lo más pronto posible para reducir multas e intereses. Una prórroga para presentar no es una prórroga para pagar deudas. Una prórroga le otorga seis meses adicionales con una nueva fecha límite del 17 de octubre. Multas e intereses aplican para impuestos adeudados después del 18 de abril y se cobra interés por impuestos y multas hasta que el monto se pague en su totalidad.

Presentar y pagar lo más que se pueda es clave ya que la multa por no presentar una declaración y la multa por pago tardío se suman rápidamente.

Aunque un contribuyente no pueda pagar de inmediato los impuestos adeudados, todavía debe presentar una declaración de impuestos lo antes posible para reducir posibles multas. El IRS tiene más información para los contribuyentes que adeudan al IRS, pero no pueden pagar.

Por lo general, la multa por no presentar una declaración es del 5 por ciento del impuesto adeudado por cada mes o parte de un mes en que una declaración de impuestos llega tarde. Pero si se presenta una declaración más de 60 días después de la fecha límite, la multa mínima es de $435 o 100 por ciento del impuesto no pagado, lo que sea menor.

La tasa básica de multa por incumplimiento de pago es generalmente del 0.5 por ciento del impuesto no pagado adeudado por cada mes o parte de un mes hasta que los impuestos se paguen en su totalidad o hasta que alcance el 25 por ciento. Para más información, vea la página de multas en IRS.gov.

Para obtener más información, consulte la página de reducción de multas por primera vez en IRS.gov.

Pague impuestos adeudados electrónicamente en IRS.gov/pagos

Aquellos que deben impuestos pueden pagar rápido y seguramente a través de su Cuenta en líneaPago Directo del IRS, con tarjeta de débito, crédito o billetera digital, o solicitando un plan de pago en línea (que incluye un acuerdo de pago a plazos). Contribuyentes que pagan electrónicamente reciben confirmación inmediata cuando envían su pago. Con Pago Directo y el Sistema Electrónico de Pago de Impuestos Federales (EFTPS), contribuyentes pueden optar por recibir notificaciones por correo electrónico sobre sus pagos.

Seleccionar un profesional de impuestos

El IRS ofrece consejos para ayudar a los contribuyentes a elegir un preparador de declaraciones de impuestos.

El Directorio de preparadores de impuestos federales con credenciales y calificaciones selectas (en inglés) puede ayudar a contribuyentes a encontrar preparadores de declaraciones de impuestos que poseen una credencial profesional reconocida por el IRS o que han completado los requisitos para el Programa anual de temporada de presentación del IRS.

Carta de Derechos del Contribuyente

Contribuyentes tienen derechos fundamentales bajo la ley que los protegen cuando interactúan con el IRS. La Carta de Derechos del Contribuyente presenta estos derechos en 10 categorías. La Publicación 1 del IRS, Derechos del Contribuyente, destaca estos derechos y la obligación de la agencia de protegerlos.

Si tiene alguna pregunta sobre la contabilidad comercial esencial, los impuestos nacionales, los impuestos internacionales, la representación del IRS, las implicaciones fiscales de los Estados Unidos de las transacciones de bienes inmuebles o los estados financieros, llámenos al 305-274-5811.

Fuente: IRS

IRS Tax Withholding Estimator helps taxpayers get their federal withholding right

Posted by Admin Posted on May 04 2022

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All taxpayers should review their federal withholding each year to make sure they're not having too little or too much tax withheld. Doing this now can help protect against facing an unexpected tax bill or penalty in 2023.The sooner taxpayers check their withholding, the easier it is to get the right amount of tax withheld.

Taxpayers whose employers withhold federal income tax from their paycheck can use the IRS Tax Withholding Estimator to help decide if they should make a change to their withholding. This online tool guides users through the process of checking their withholding to help determine the right amount to withhold for their personal situation. Taxpayers can check with their employer to update their withholding or submit a new Form W-4, Employee's Withholding Certificate.

Adjustments to withholding
Individuals should generally increase withholding if they hold more than one job at a time or have income from sources not subject to withholding. If they don't make any changes, they may owe additional tax and possibly penalties when filing their tax return.

Individuals should generally decrease their withholding if they qualify for income tax credits or deductions other than the basic standard deduction.

Either way, those who need to adjust their withholding must prepare a new Form W-4, Employee's Withholding Certificate. They need to submit the new Form W-4 to their employer as soon as possible since withholding occurs throughout the year.

Individuals who should check their withholding include those:

  • who experienced a marriage, divorce, birth or adoption of child, purchase of a new home or retirement
  • who are working two or more jobs at the same time or who only work for part of the year
  • who claim credits such as the child tax credit
  • with dependents age 17 or older
  • who itemized deductions on prior year returns
  • with other personal and financial changes

Tax Withholding Estimator benefits
The IRS Tax Withholding Estimator can help taxpayers:

  • determine if they should complete a new Form W-4.
  • know what information to put on a new Form W-4.
  • save time because the tool completes the form worksheets.

Taxpayers should prepare before using the Tax Withholding Estimator by having their most recent pay statements, information for other income sources and their most recent income tax return. The tool does not ask for sensitive information such as name, Social Security number, address, or bank account numbers.

Taxpayers shouldn't use the Tax Withholding Estimator if:

  • They have a pension but not a job. They should estimate their tax withholding with the new Form W-4P.
  • They have nonresident alien status. They should use Notice 1392, Supplement Form W-4 Instructions for Nonresident Aliens.
  • Their tax situation is complex. This includes alternative minimum tax, long-term capital gains or qualified dividends. See Publication 505, Tax Withholding and Estimated Tax.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS

Qué debe hacer si no cumplió con la fecha límite de abril para presentar y pagar impuestos

Posted by Admin Posted on May 04 2022

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La fecha límite del impuesto federal sobre los ingresos ya pasó para la mayoría de los contribuyentes individuales. Sin embargo, algunos no han presentado sus declaraciones de impuestos de 2021 ni han pagado los impuestos adeudados.

Algunas personas pueden optar por no presentar una declaración de impuestos porque no ganaron suficiente dinero para que se les exigiera presentar (en inglés). En general, no recibirán una multa si se les debe un reembolso. Sin embargo, pueden perder la oportunidad de recibir un reembolso.

Por otro lado, los impuestos adeudados y no pagados antes del 18 de abril de 2022 están sujetos a multas e intereses. Los contribuyentes en Maine y Massachusetts tenían hasta el 19 de abril para presentar y pagar debido al feriado del Día de los Patriotas en esos estados.

La persona que no haya presentado y adeuda impuestos debe presentar una declaración tan pronto como pueda y pagar todo lo que pueda para reducir las multas e intereses. Las opciones de presentación electrónica, incluido Free File del IRS, aún están disponibles en IRS.gov hasta el 17 de octubre de 2022.

La comunidad militar también puede presentar sus impuestos a través de MilTax (en inglés), un recurso tributario gratuito que se ofrece a través del Departamento de la Defensa. Los contribuyentes elegibles (en inglés) pueden usar MilTax para presentar electrónicamente una declaración de impuestos federales y hasta tres declaraciones estatales de forma gratuita.

Los contribuyentes deben revisar sus opciones de pago. El IRS brinda información para los contribuyentes que no pueden pagar los impuestos que adeudan.

Algunos contribuyentes pueden tener tiempo adicional para presentar sus declaraciones de impuestos y pagar los impuestos adeudados. Esto incluye algunas víctimas de desastres (en inglés)contribuyentes que viven en el extranjero (en inglés), ciertos miembros del servicio militar y personal de apoyo elegible en zonas de combate (en inglés).

Es muy importante que presenten sus impuestos pronto porque las multas e intereses por presentación tardía y pago fuera del plazo de impuestos no pagados se acumulan rápidamente. Sin embargo, en algunos casos, un contribuyente que presenta la declaración después de la fecha límite puede calificar para un alivio de la multa. Para aquellos que se les cobre una multa, pueden comunicarse con el IRS llamando al número que figura en su aviso y explicar por qué no pudieron presentar y pagar a tiempo.

Los contribuyentes que tienen un historial de presentación y pago oportuno a menudo califican para el alivio de sanciones administrativas. Un contribuyente generalmente califica si ha presentado y pagado a tiempo durante los últimos tres años y cumple con otros requisitos. Para obtener más detalles, los contribuyentes deben visitar la página de reducción de multa incurrida por primera vez en IRS.gov.

Si tiene alguna pregunta sobre la contabilidad comercial esencial, los impuestos nacionales, los impuestos internacionales, la representación del IRS, las implicaciones fiscales de los Estados Unidos de las transacciones de bienes inmuebles o los estados financieros, llámenos al 305-274-5811.

Fuente: IRS

Taxpayers should open and carefully read any mail from the IRS

Posted by Admin Posted on May 04 2022

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The IRS mails letters or notices to taxpayers for a variety of reasons including:

• They have a balance due.
• They are due a larger or smaller refund.
• The agency has a question about their tax return.
• They need to verify identity.
• The agency needs additional information.
• The agency changed their tax return.

If a taxpayer receives an IRS letter or notice, they should:

• Not ignore it. Most IRS letters and notices are about federal tax returns or tax accounts. The notice or letter will explain the reason for the contact and gives instructions on what to do.

 Not panic. The IRS and its authorized private collection agencies generally contact taxpayers by mail. Most of the time, all the taxpayer needs to do is read the letter carefully and take the appropriate action.

• Read the notice carefully and completely. If the IRS changed the tax return, the taxpayer should compare the information provided in the notice or letter with the information in their original return. In general, there is no need to contact the IRS if the taxpayer agrees with the notice.

• Respond timely. If the notice or letter requires a response by a specific date, taxpayers should reply in a timely manner to:

o avoid delays in processing their tax return
o minimize additional interest and penalty charges
o preserve their appeal rights if they don't agree

• Pay amount due. Taxpayers should pay as much as they can, even if they can't pay the full amount. People can pay online or apply online for a payment agreement, including installment agreements, or an Offer in Compromise. The agency offers several payment options.

• Keep a copy of the notice or letter. It's important that taxpayers keep a copy of all notices or letters with other tax records. They may need these documents later.

• Remember there is usually no need to call the IRS. If a taxpayer must contact the IRS by phone, they should use the number in the upper right-hand corner of the notice. The taxpayer should have a copy of their tax return and letter when calling. Typically, taxpayers only need to contact the agency if they don't agree with the information, if the IRS requests additional information, or if the taxpayer has a balance due. Taxpayers can also write to the agency at the address on the notice or letter. Taxpayer replies are worked on a first-come, first-served basis and will be processed based the date the IRS receives it.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS       

Así es como los contribuyentes pueden resolver problemas comunes después del día de impuestos

Posted by Admin Posted on May 04 2022

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La fecha límite de este año para presentar y pagar los impuestos federales sobre los ingresos ya pasó para la mayoría de las personas. Si a un contribuyente se le debe un reembolso, no hay multa por presentar la declaración tarde. Sin embargo, quienes deban y no hayan cumplido el plazo sin solicitar una prórroga deben presentarla rápidamente para limitar las multas y los intereses.

A continuación, se ofrecen algunos consejos para que los contribuyentes resuelvan algunos de los problemas más comunes después de la fecha límite para presentar la declaración de impuestos.

Verificar el estado del reembolso

Los contribuyentes pueden verificar el estado de su reembolso a través de la herramienta ¿Dónde está mi reembolso? Está disponible en IRS.gov y en la aplicación IRS2Go. Para usar esta herramienta, los contribuyentes necesitan su número de Seguro Social o ITIN, el estado de la declaración de impuestos y la cantidad exacta del reembolso reclamado en su declaración de impuestos. La herramienta se actualiza una vez al día, por lo que no es necesario verificar más a menudo. Los contribuyentes sin acceso a una computadora pueden llamar al 800-829-1954.

Verificar las retenciones

Se anima a todos los contribuyentes a que verifiquen sus retenciones a través del Estimador de Retención de Impuestos en IRS.gov. Esto les ayudará a asegurarse de que sus empleadores les retienen la cantidad correcta de impuestos de sus cheques de pago. Hacer esto ahora ayudará a evitar una cantidad inesperada a pagar y posiblemente una multa cuando preparen y presenten sus impuestos el próximo año.

Los contribuyentes pueden usar los resultados del Estimador para ayudar a completar un nuevo Formulario W-4 y ajustar su retención de impuestos con su empleador. Los contribuyentes que reciben ingresos por pensiones pueden usar los resultados para completar un Formulario W-4P y presentarlo a su pagador.

Revisar las opciones de pago

Los contribuyentes que deben impuestos pueden revisar todas las opciones de pago en línea que incluyen:

Considerar cuidadosamente si necesitan enmendar una declaración de impuestos

Después de presentar su declaración de impuestos, los contribuyentes pueden descubrir que cometieron un error u olvidaron ingresar alguna información. El IRS les recomienda encarecidamente a los contribuyentes que usen el Asistente Interactivo de Impuestos, ¿Debo presentar una declaración enmendada? (en inglés) para ayudar a determinar si deben corregir un error o hacer otros cambios en la declaración de impuestos que ya presentaron.

Los errores más comunes que los contribuyentes deben corregir son el estado civil, los ingresos, las deducciones y los créditos. Por lo general, los contribuyentes no necesitan presentar una declaración enmendada para corregir un error matemático o si se olvidaron de adjuntar un formulario o un anexo. Normalmente, el IRS corregirá el error matemático y notificará al contribuyente por correo. Asimismo, la agencia enviará una carta solicitando los formularios o anexos que falten.

Los contribuyentes que esperan un reembolso no deben presentar una declaración enmendada antes de que su declaración original haya sido procesada

El IRS emite la mayoría de los reembolsos en menos de 21 días para los contribuyentes que presentaron la declaración electrónicamente y eligieron el depósito directo. Sin embargo, algunas declaraciones tienen errores o necesitan más revisión y pueden tardar más tiempo en procesarse.

Cosas que pueden retrasar un reembolso:

El IRS se pondrá en contacto con los contribuyentes por correo si necesita más información para procesar su declaración.

Si tiene alguna pregunta sobre la contabilidad comercial esencial, los impuestos nacionales, los impuestos internacionales, la representación del IRS, las implicaciones fiscales de los Estados Unidos de las transacciones de bienes inmuebles o los estados financieros, llámenos al 305-274-5811.

Fuente: IRS   

Contribuyentes deben abrir y leer carta o aviso del IRS cuidadosamente

Posted by Admin Posted on May 04 2022

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El IRS envía cartas o avisos a los contribuyentes por diferentes razones que incluyen:

  • Tienen un saldo adeudado.
  • Se les debe un reembolso mayor o menor.
  • La agencia tiene una pregunta acerca de su declaración de impuestos.
  • Necesitan verificar la identidad.
  • La agencia necesita información adicional.
  • La agencia cambió su declaración de impuestos.

Lo que los contribuyentes deben hacer si reciben una carta o aviso del IRS:

  • No la ignore. La mayoría de las cartas y avisos del IRS son acerca de las declaraciones de impuestos federales o cuentas tributarias. El aviso o carta explicará el motivo del contacto y dará instrucciones acerca de qué hacer.
     
  • No se asuste. El IRS y sus agencias privadas de recaudación autorizadas generalmente se comunican con los contribuyentes por correo. La mayoría de las veces todo lo que el contribuyente necesita hacer es leer la carta cuidadosamente y tomar la acción apropiada.
     
  • Lea el aviso con cuidado y por completo. Si el IRS cambió la declaración de impuestos, el contribuyente debe comparar la información proporcionada en el aviso o carta con la información en su declaración original. En general, no es necesario comunicarse con el IRS si el contribuyente está de acuerdo con el aviso.
     
  • Tome medidas oportunas. Si el aviso o carta requiere una respuesta antes de una fecha específica, los contribuyentes deben responder oportunamente para:
    • evitar retrasos en el procesamiento de su declaración de impuestos
    • minimizar los intereses adicionales y cargos de multas
    • preservar sus derechos de apelación si no están de acuerdo
       
  • Pague la cantidad adeudada. Los contribuyentes deben pagar todo lo que puedan, incluso si no pueden pagar el monto total. Las personas pueden pagar en línea o solicitar un acuerdo de pago en línea, incluidos los planes de pagos a plazos, o un ofrecimiento de transacción. La agencia ofrece varias opciones de pago.
     
  • Guarde una copia del aviso o carta. Es importante que los contribuyentes mantengan una copia de todos los avisos o cartas con otros archivos tributarios. Es posible que necesiten estos documentos más adelante.
     
  • Recuerde que generalmente no hay necesidad de llamar al IRS. Si un contribuyente tiene que comunicarse con el IRS por teléfono, debe usar el número que aparece en la esquina superior derecha del aviso. El contribuyente debe tener una copia de su declaración de impuestos y la carta al llamar. Por lo general, los contribuyentes solo necesitan comunicarse con la agencia si no están de acuerdo con la información, si el IRS solicita información adicional o si el contribuyente tiene un saldo adeudado. Los contribuyentes también pueden escribir a la agencia a la dirección en el aviso o carta. Las respuestas de los contribuyentes se procesan por orden de llegada y procesaremos su repuesta a partir de la fecha en que el IRS lo reciba. 

Si tiene alguna pregunta sobre la contabilidad comercial esencial, los impuestos nacionales, los impuestos internacionales, la representación del IRS, las implicaciones fiscales de los Estados Unidos de las transacciones de bienes inmuebles o los estados financieros, llámenos al 305-274-5811.

Fuente: IRS

What someone should do if they missed the April deadline to file and pay taxes

Posted by Admin Posted on May 04 2022

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The federal income tax deadline has passed for most individual taxpayers. However, some haven't filed their 2021 tax returns or paid their tax due.

Some people may choose not to file a tax return because they didn't earn enough money to be required to file. Generally, they won't receive a penalty if they are owed a refund. However, they may miss out on receiving a refund.

On the other hand, tax owed and not paid by April 18, 2022, is subject to penalties and interest. Taxpayers in Maine and Massachusetts had until April 19 to file and pay due to the Patriots' Day holiday in those states.

Anyone who didn't file and owes tax should file a return as soon as they can and pay as much as they can to reduce penalties and interest. Electronic filing options, including IRS Free File, are still available on IRS.gov through October 17, 2022, to prepare and file returns electronically.

The military community can also file their taxes using MilTax, a free tax resource offered through the Department of Defense. Eligible taxpayers can use MilTax to electronically file a federal tax return and up to three state returns for free.

If taxpayers find that they owe taxes, they can review their available payment options. The IRS has information for taxpayers who can't pay taxes they owe.

Some taxpayers may have extra time to file their tax returns and pay any taxes due. This includes some disaster victims, taxpayers living overseas, certain military service members and eligible support personnel in combat zones.

Filing soon is very important because the late-filing and late-payment penalties and interest on unpaid taxes add up quickly. However, in some cases, a taxpayer filing after the deadline may qualify for penalty relief. For those charged a penalty, they may contact the IRS by calling the number on their notice and explain why they couldn't file and pay on time.

Taxpayers who have a history of filing and paying on time often qualify for administrative penalty relief. A taxpayer usually qualifies if they have filed and paid timely for the past three years and meet other requirements. For details, taxpayers should visit the first-time penalty abatement page on IRS.gov.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS       

Estimador de Retención de Impuestos del IRS ayuda a contribuyentes a obtener retención federal correcta

Posted by Admin Posted on May 04 2022

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Todos los contribuyentes deben revisar su retención federal cada año para asegurarse de que no se les retengan muy pocos o demasiados impuestos. Hacer esto ahora puede ayudar a evitar una cuenta o multa tributaria inesperada en el 2023. Cuanto antes los contribuyentes verifiquen su retención, más fácil será obtener la cantidad de retención de impuestos correcta.

Los contribuyentes que tienen empleadores que les retienen el impuesto federal de su cheque de pago pueden usar el Estimador de Retención de Impuestos del IRS para ayudar a decidir si deben hacer un cambio en su retención. Esta herramienta en línea orienta a los usuarios a través del proceso de verificación de su retención para ayudar a determinar la cantidad correcta de retención para su situación personal. Los contribuyentes pueden consultar con su empleador para actualizar su retención o enviar un nuevo Formulario W-4 (SP), Certificado de retenciones del empleado.

Ajustes a la retención

Generalmente, las personas deben aumentar la retención si tienen más de un trabajo a la vez o si tienen ingresos de fuentes no sujetas a retención. Si no hacen ningún cambio, es probable que deban impuestos adicionales y, posiblemente multas al presentar su declaración de impuestos.

Por lo general, las personas deben reducir su retención si califican para créditos o deducciones de impuestos sobre los ingresos que no sea la deducción estándar básica.

De cualquier manera, aquellos que necesitan ajustar su retención deben preparar un nuevo Formulario W-4 y enviarlo a su empleador lo antes posible, ya que la retención se realiza durante todo el año.

Las personas que deben verificar su retención incluyen aquellas:

  • que experimentaron matrimonio, divorcio, nacimiento o adopción de un hijo, compra de una nueva casa o jubilación
  • que tienen dos o más trabajos al mismo tiempo o que solo trabajan una parte del año
  • que reclaman créditos como el Crédito tributario por hijos
  • que tienen dependientes de 17 años o más
  • que realizaron deducciones detalladas en las declaraciones de años anteriores
  • que tienen otros cambios personales y financieros

Beneficios del Estimador de Retención de Impuestos

El Estimador de Retención de Impuestos del IRS puede ayudar a los contribuyentes a:

  • determinar si deben completar un nuevo Formulario W-4.
  • saber qué información incluir en un nuevo Formulario W-4.
  • ahorrar tiempo ya que la herramienta completa las hojas de trabajo del formulario

Los contribuyentes deben prepararse antes de usar el Estimador de Retención de Impuestos al tener sus comprobantes de pago más recientes, información de otras fuentes de ingresos y su declaración de impuestos más reciente. La herramienta no solicita información confidencial como nombre, número de Seguro Social, dirección o números de cuenta bancaria.

Los contribuyentes no deben usar el Estimador de Retención de Impuestos si:

Si tiene alguna pregunta sobre la contabilidad comercial esencial, los impuestos nacionales, los impuestos internacionales, la representación del IRS, las implicaciones fiscales de los Estados Unidos de las transacciones de bienes inmuebles o los estados financieros, llámenos al 305-274-5811.

Fuente: IRS  

TAX SAVING TECHNIQUE

Posted by Admin Posted on Apr 28 2022

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Charitable Giving - Instead of selling your appreciated long-term securities, donate the stock instead and avoid paying tax on the unrealized gain while still getting a charitable tax deduction for the full fair market value.

Health Savings Accounts (HSAs) - If you have a high deductible medical plan you can open an HSA and make tax deductible contributions to your account to pay for medical expenses. Unlike flexible spending arrangements (FSAs), the contributions can carry over for medical expenses in future years.

ROTH IRAs - Contributions to a ROTH IRA are not tax deductible but the qualified distributions, including earnings are tax-free.

Municipal Bonds - Interest earned on these types of investments is tax-exempt.

Own a home - most of the cost of this type of investment is financed and the interest (on mortgages up to $750,000) is tax deductible. When the property is sold, individuals may exclude up to $250,000 ($500,000 if married jointly) of the gain.

Retirement Plans - Participate in your employer sponsored retirement plan, especially if there is a matching component. You will receive a current tax deduction and the tax-deferred compounding can add up to a large retirement savings.

If you have any questions regarding Essential Business Accounting, Domestic Taxation, International Taxation, IRS Representation, U.S. Tax Implications of Real Estate Transactions or Financial Statements, please give us a call at 305-274-5811.

Source: Thomson Reuters

Revisiting Worker Classification Rules

Posted by Admin Posted on Apr 28 2022

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Over the last year, many companies have experienced workforce fluctuations and have engaged independent contractors to address staffing needs. In May, the U.S. Department of Labor (DOL) announced that it had withdrawn the previous administration’s independent contractor rule that had been scheduled to go into effect earlier this year. That rule generally would have made it easier to classify certain workers as independent contractors for the purposes of the Fair Labor Standards Act (FLSA), and thus make them ineligible for minimum wage and other FLSA protections.

While worker classification for DOL purposes isn’t necessarily the same for IRS purposes, now is a good time to revisit the federal tax implications of worker classification.

Tax obligations

The question of whether a worker is an independent contractor or an employee for federal income and employment tax purposes is a complex one. If a worker is an employee, the company must withhold federal income and payroll taxes, and pay the employer’s share of FICA taxes on the wages, plus FUTA tax. And there may be state tax obligations as well.

These obligations don’t apply if a worker is an independent contractor. In that case, the business simply sends the contractor a Form 1099-NEC for the year showing the amount paid (if the amount is $600 or more).

No uniform definition

The IRS and courts have generally ruled that individuals are employees if the organization they work for has the right to control and direct them in the jobs they’re performing. Otherwise, the individuals are generally independent contractors, though other factors are considered.

Some employers that have misclassified workers as independent contractors may get some relief from employment tax liabilities under Internal Revenue Code Section 530. In general, this protection applies only if an employer filed all federal returns consistent with its treatment of a worker as a contractor and treated all similarly situated workers as contractors.

The employer must also have a “reasonable basis” for not treating the worker as an employee. For example, a “reasonable basis” exists if a significant segment of the employer’s industry traditionally treats similar workers as contractors. (Note: Sec. 530 doesn't apply to certain types of technical services workers. And some categories of individuals are subject to special rules because of their occupations or identities.)

Asking for a determination

Under certain circumstances, you may want to ask the IRS (on Form SS-8) to rule on whether a worker is an independent contractor or employee. However, be aware that the IRS has a history of classifying workers as employees rather than independent contractors.

Consult a CPA before filing Form SS-8 because doing so may alert the IRS that your company has worker classification issues — and inadvertently trigger an employment tax audit. It may be better to ensure you are properly treating a worker as an independent contractor so that the relationship complies with the tax rules.

Latest developments

With growth in the “gig” economy and other changes to the ways Americans are working, the question of who is an independent contractor and who is an employee will likely continue to evolve. Stay tuned for the latest developments and contact us for any help you may need with worker classification.

If you have any questions regarding Essential Business Accounting, Domestic Taxation, International Taxation, IRS Representation, U.S. Tax Implications of Real Estate Transactions or Financial Statements, please give us a call at 305-274-5811.                                   

Source: Thomson Reuters  

REPORT YOUR VIRTUAL CURRENCY TRANSACTIONS.

Posted by Admin Posted on Apr 28 2022

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Virtual currency is a digital representation of value other than a representation of the U.S. dollar or a foreign currency (“real currency”). Virtual currency is used as a unit of account, a store of value, or a medium of exchange. TAS wants to help you understand the tax treatment of virtual currency that can be converted into, or exchanged for, real currency.

Bitcoin is one example of a convertible virtual currency. Bitcoin is a cryptocurrency, which is a specific type of virtual currency that uses cryptography to secure transactions that are digitally recorded on a distributed ledger, such as a blockchain. A transaction involving cryptocurrency that is recorded on a distributed ledger is referred to as an “on-chain” transaction. A transaction that is not recorded on the distributed ledger is referred to as an “off-chain” transaction, where individuals can engage directly with each other without necessarily using a trusted third party like a cryptocurrency exchange.

Why are virtual currency transactions taxable?

Income is generally taxable regardless of the source it comes from. As such, virtual currency transactions are taxable just like ‘traditional’ transactions involving money for goods or services, or an exchange of property for other property or services. Virtual currency is treated as property by the IRS and general tax principles that apply to property transactions apply if you sell, exchange, or otherwise transact using virtual currency.

How are virtual currency transactions taxed?

In general, individuals who transact with virtual currency, including buying and selling virtual currency or exchanging virtual currency, hold the virtual currency as a capital asset and the transactions result in capital gain or capital loss. Since virtual currency is considered property, the same general principles apply. However, virtual currency received as compensation for services is treated the same as wages and results in ordinary income to the recipient who then holds the virtual currency as a capital asset.

The following examples illustrate several common transactions involving virtual currency:

  • Sales: When you sell virtual currency, it is generally a capital asset and you must report the transaction along with any capital gain or loss on the sale.
    • Example: If Mary purchased 5 Bitcoins for $50,000 in April and sold all of her Bitcoins in July for $52,000, she would have short-term capital gain of $2,000 (the sales price less the purchase price). If Mary sold the Bitcoins for $48,000, she would have a short-term capital loss on the sale, that must be reported too, but it would be subject to any limitations on capital loss deductions.
  • Exchanges: If you exchange virtual currency held as a capital asset for services or other property, including goods or another virtual currency, you must report the transaction and any capital gain or loss resulting from the exchange.
    • Example: If Bill buys 5 Bitcoins for $50,000 in April and exchanges them for another virtual currency in June worth $40,000 at the date and time of the exchange, Bill would report a $10,000 short-term capital loss on the transaction. In this case, Bill would have to look at his other capital losses and could potentially be limited in how much he could deduct in the current year. Likewise, if the exchanged virtual currency was worth $60,000 instead of $40,000, Bill would report a $10,000 short-term capital gain on the transaction.
  • Earnings: When you receive property, including virtual currency, in exchange for performing services, whether or not you perform the services as an employee, you must report the earnings as ordinary income. Compensation for services are reported and taxed the same regardless of how the compensation is received (dollars, virtual currencies, property, or other services).If you receive virtual currency in return for providing services as an employee, it’s considered wages and is subject to Federal income tax withholding, Federal Insurance Contributions Act (FICA) tax, and Federal Unemployment Tax Act (FUTA) tax and must be reported by your employer on Form W-2, Wage and Tax Statement, like traditional wages paid in U.S. dollars. If you receive virtual currency in return for providing services and are not an employee of the payor, you are self-employed, and may be considered an independent contractor. Income from self-employment is often reported on Form 1099-MISC, Miscellaneous Income.
    • Example: If Deng receives $100,000 for providing services as an employee, he should report this as “wages” on his income tax return. If Deng is not an employee, the compensation is reported on Schedule 1 or Schedule C. Deng must report this income on his income tax return regardless of whether he receives a W-2, 1099-MISC, or other information return.
  • Hard forks: A hard fork occurs when a cryptocurrency undergoes a protocol change resulting in a permanent diversion from the legacy distributed ledger. This may result in the creation of a new cryptocurrency in addition to the legacy cryptocurrency. If your cryptocurrency went through a hard fork, but you did not receive any new cryptocurrency you don’t have taxable income.
    • Example: Maria holds 10 units of cryptocurrency A that has a hard fork after which she also has 10 units of cryptocurrency B. Regardless of how she receives the new cryptocurrency B, she has income. If the 10 units of cryptocurrency B are worth $50 at the date and time she receives them, Maria will have taxable income of $50 that she must report in the year she receives the cryptocurrency B.
  • Unreported transactions: You must report income, gain, or loss from all taxable transactions involving virtual currency on your Federal income tax return for the year of the transaction, regardless of the amount or whether you receive a payee statement (like a Form W-2) or information return (like a Form 1099-MISC).

For more information on the tax treatment of property transactions, see Publication 544, Sales and Other Dispositions of Assets.

What virtual currency transactions are not taxable?

Generally, the same rules that apply to other property apply to virtual currency. Not all property transactions are taxable. For example, the following transactions are not taxable:

  • Transactions with yourself. If you transfer virtual currency from a wallet, address, or account belonging to you, to another wallet, address, or account that also belongs to you, the transfer is a non-taxable event, even if you receive an information return reporting the transfer.
  • Bona fide gifts. If you receive virtual currency as a bona fide gift, the gift is not taxable. You will report any income or loss when you sell, exchange, or otherwise dispose of the virtual currency.
  • Charitable donations. If you donate virtual currency to a charitable organization described in Internal Revenue Code Section 170(c), you will not report income, gain, or loss from the donation.
  • Soft forks. A soft fork occurs when a distributed ledger undergoes a protocol change that does not result in a diversion of the ledger and thus does not result in the creation of a new cryptocurrency. Because soft forks do not result in you receiving new cryptocurrency, you will be in the same position you were in prior to the soft fork, meaning that the soft fork will not result in any income to you.

Where Are Virtual Currency Transactions Reported?

Transactions conducted in virtual currency are generally reported on the same tax forms as transactions in other property. They are also reported on a new checkbox on Form 1040. Virtual currency transactions must be reported on:

What records do I need to maintain regarding my transactions using virtual currency?

The Internal Revenue Code and regulations require taxpayers to maintain records that are sufficient to establish the positions taken on tax returns. You should therefore maintain records documenting receipts, sales, exchanges, or other dispositions of virtual currency and the fair market value of the virtual currency for at least three years after reporting any taxable event or have other reporting requirements even if they’re not immediately taxable.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: TAS      

PLANNING FOR THE NET INVESTMENT INCOME TAX

Posted by Admin Posted on Apr 28 2022

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Despite its name, the Tax Cuts and Jobs Act (TCJA) didn’t cut all types of taxes. It left several taxes unchanged, including the 3.8% tax on net investment income (NII) of high-income taxpayers.

You’re potentially liable for the NII tax if your modified adjusted gross income (MAGI) exceeds $200,000 ($250,000 for joint filers and qualifying widows or widowers; $125,000 for married taxpayers filing separately). Generally, MAGI is the same as adjusted gross income. However, it may be higher if you have foreign earned income and certain foreign investments.

To calculate the tax, multiply 3.8% by the lesser of 1) your NII, or 2) the amount by which your MAGI exceeds the threshold. For example, if you’re single with $250,000 in MAGI and $75,000 in NII, your tax would be 3.8% × $50,000 ($250,000 - $200,000), or $1,900.

NII generally includes net income from, among others, taxable interest, dividends, capital gains, rents, royalties and passive business activities. Several types of income are excluded from NII, such as wages, most nonpassive business income, retirement plan distributions and Social Security benefits. Also excluded is the nontaxable gain on the sale of a personal residence.

Given the way the NII tax is calculated, you can reduce the tax either by reducing your MAGI or reducing your NII. To accomplish the former, you could maximize contributions to IRAs and qualified retirement plans. To do the latter, you might invest in tax-exempt municipal bonds or in growth stocks that pay little or no dividends.

There are many strategies for reducing the NII tax. Consult with one of our tax advisors before implementing any of them. And remember that, while tax reduction is important, it’s not the only factor in prudent investment decision-making.

If you have any questions regarding Essential Business Accounting, Domestic Taxation, International Taxation, IRS Representation, U.S. Tax Implications of Real Estate Transactions or Financial Statements, please give us a call at 305-274-5811.                                   

 

WHAT LEVEL OF HOME INSURANCE SHOULD I BUY?

Posted by Admin Posted on Apr 21 2022

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Make sure that you are insured against whatever natural disasters are common in your area, because insurance against these differs. If you don't specifically ask, you may not be covered.

Be sure to insure for 100% of rebuilding costs. The price of rebuilding your home could differ greatly from the amount that your home is valued at today.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Thomson Reuters

MULTISTATE RESIDENT? WATCH OUT FOR DOUBLE TAXATION

Posted by Admin Posted on Apr 21 2022

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Contrary to popular belief, there’s nothing in the U.S. Constitution or federal law that prohibits multiple states from collecting tax on the same income. Although many states provide tax credits to prevent double taxation, those credits are sometimes unavailable. If you maintain residences in more than one state, here are some points to keep in mind.

Domicile vs. residence

Generally, if you’re “domiciled” in a state, you’re subject to that state’s income tax on your worldwide income. Your domicile isn’t necessarily where you spend most of your time. Rather, it’s the location of your “true, fixed, permanent home” or the place “to which you intend to return whenever absent.” Your domicile doesn’t change — even if you spend little or no time there — until you establish domicile elsewhere.

Residence, on the other hand, is based on the amount of time you spend in a state. You’re a resident if you have a “permanent place of abode” in a state and spend a minimum amount of time there — for example, at least 183 days per year. Many states impose their income taxes on residents’ worldwide income even if they’re domiciled in another state.

Potential solution

Suppose you live in State A and work in State B. Given the length of your commute, you keep an apartment in State B near your office and return to your home in State A only on weekends. State A taxes you as a domiciliary, while State B taxes you as a resident. Neither state offers a credit for taxes paid to another state, so your income is taxed twice.

One possible solution to such double taxation is to avoid maintaining a permanent place of abode in State B. However, State B may still have the power to tax your income from the job in State B because it’s derived from a source within the state. Yet State B wouldn’t be able to tax your income from other sources, such as investments you made in State A.

Minimize unnecessary taxes

This example illustrates just one way double taxation can arise when you divide your time between two or more states. Our firm can research applicable state law and identify ways to minimize exposure to unnecessary taxes.

Sidebar: How to establish domicile

Under the law of each state, tax credits are available only with respect to income taxes that are “properly due” to another state. But, when two states each claim you as a domiciliary, neither believes that taxes are properly due to the other. To avoid double taxation in this situation, you’ll need to demonstrate your intent to abandon your domicile in one state and establish it in the other.

There are various ways to do so. For example, you might obtain a driver’s license and register your car in the new state. You could also open bank accounts in the new state and use your new address for important financially related documents (such as insurance policies, tax returns, passports and wills). Other effective measures may include registering to vote in the new jurisdiction, subscribing to local newspapers and seeing local health care providers. Bear in mind, of course, that laws regarding domicile vary from state to state.

If you have any questions regarding accounting, domestic taxation, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Thomson Reuters

REFUND, WHERE'S MY REFUND?

Posted by Admin Posted on Apr 21 2022

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Are you expecting a tax refund from the Internal Revenue Service this year? If you file a complete and accurate paper tax return, your refund should be issued in about six to eight weeks from the date IRS receives your return. If you file your return electronically, your refund should be issued in about half the time it would take if you filed a paper return — even faster when you choose direct deposit.

You can have a refund check mailed to you, buy up to $5,000 in U.S. Series I Savings Bonds with your refund, or you may be able to have your refund electronically deposited directly into your bank account (either in one account, or in multiple accounts). Direct deposit into a bank account is more secure because there is no check to get lost. And it takes the U.S. Treasury less time than issuing a paper check. If you prepare a paper return, fill in the direct deposit information in the “Refund” section of the tax form, making sure that the routing and account numbers are accurate. Incorrect numbers can cause your refund to be misdirected or delayed. Direct deposit is also available if you electronically file your return.

A few words of caution — some financial institutions do not allow a joint refund to be deposited into an individual account. Check with your bank or other financial institution to make sure your direct deposit will be accepted.

You may not receive your refund as quickly as you expected. A refund can be delayed for a variety of reasons. For example, a name and Social Security number listed on the tax return may not match the IRS records. You may have failed to sign the return or to include a necessary attachment, such as Form W-2, Wage and Tax Statement. Or you may have made math errors that require extra time for the IRS to correct.

To check the status of an expected refund, use "Check your Federal Refund" an interactive tool available on our Links page. Simple online instructions guide you through a process that checks the status of your refund after you provide identifying information from your tax return. Once the information is processed, results could be one of several responses.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Thomson Reuters

ARPA Provides More Than Just Direct Payments to Taxpayers

Posted by Admin Posted on Apr 11 2022

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On March 11, another round of COVID-19 relief legislation was signed into law. The American Rescue Plan Act (ARPA) includes funding for individuals, businesses, and state and local governments, but also some significant tax-related provisions.

ARPA extends and expands some tax provisions in the CARES Act and the Consolidated Appropriations Act (CAA) and also includes some new tax-related provisions.

A quick look

Here’s a quick look at some of the tax provisions that may affect you:

Individuals

Recovery rebates of up to $1,400 for singles and heads of households and $2,800 for married couples filing jointly — plus $1,400 per qualifying dependent (including adult dependents) — subject to adjusted gross income (AGI) phaseouts starting at $75,000 for singles, $112,500 for heads of households and $150,000 for joint filers and ending at $80,000, $120,000 and $160,000, respectively

Increased Child credit, including advance payments of part of the credit later this year

Expanded child and dependent care tax credit

Tax-free treatment of forgiven student loan debt

Exclusion from gross income of the first $10,200 in unemployment benefits received

Businesses and other employers

Extended and expanded tax credits for retaining employees, through Dec. 31, 2021

Extended and modified payroll tax credits for paid sick and family leave, through Sept. 30, 2021

Extended excess business loss limitation, through Dec. 31, 2026

Expansion of the Section 162(m) limits on the tax deduction public companies can take for executive compensation to cover the CEO, the CFO and the five next highest paid employees, beginning in 2027

How will you benefit?

This is just a brief overview of the tax-related provisions of ARPA. Additional rules and limits apply. Contact your tax advisor for more details on these provisions and how you might benefit.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Thomson Reuters        

For the first time, maximum educator expense deduction rises to $300 in 2022; limit $250 for those filing 2021 tax returns

Posted by Admin Posted on Mar 30 2022

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WASHINGTON — The Internal Revenue Service today reminded teachers and other educators planning ahead for 2022 that they'll be able to deduct up to $300 of out-of-pocket classroom expenses when they file their federal income tax return next year.

This is the first time the annual limit has increased since the special educator expense deduction was enacted in 2002. For tax-years 2002 through 2021, the limit was $250 per year. This means for people currently filing their 2021 tax returns due in April, the deduction is limited to $250. The limit will rise in $50 increments in future years based on inflation adjustments.

For 2022, an eligible educator can deduct up to $300 of qualifying expenses. If they are married and file a joint return with another eligible educator, the limit rises to $600. But in this situation, not more than $300 for each spouse.

Who qualifies?

Educators can claim this deduction, even if they take the standard deduction. Eligible educators include anyone who is a kindergarten through grade 12 teacher, instructor, counselor, principal or aide in a school for at least 900 hours during the school year. Both public- and private-school educators qualify.

What's deductible?

Educators can deduct the unreimbursed cost of:

  • Books, supplies and other materials used in the classroom.
  • Equipment, including computer equipment, software and services.
  • COVID-19 protective items to stop the spread of the disease in the classroom. This includes face masks, disinfectant for use against COVID-19, hand soap, hand sanitizer, disposable gloves, tape, paint or chalk to guide social distancing, physical barriers, such as clear plexiglass, air purifiers and other items recommended by the Centers for Disease Control and Prevention (CDC).
  • Professional development courses related to the curriculum they teach or the students they teach. For these expenses, it may be more beneficial to claim another educational tax benefit, especially the lifetime learning credit. For details, see Publication 970, Tax Benefits for Education, particularly Chapter 3.

Qualified expenses don't include expenses for home schooling or for nonathletic supplies for courses in health or physical education. As with all deductions and credits, the IRS reminds educators to keep good records, including receipts, cancelled checks and other documentation.

Reminder for 2021 tax returns being filed now: Deduction limit is $250

With the tax deadline just around the corner, the IRS reminds any educator still working on their 2021 return that they can claim any qualifying expenses on Schedule 1, Line 11. For 2021, the deduction limit is $250. If they are married and file a joint return with another eligible educator, the limit rises to $500. But in this situation, not more than $250 for each spouse.

Whether a return is self-prepared or prepared with the assistance of a tax professional or trained community volunteer, the IRS urges everyone to file electronically and choose direct deposit for any refund. For details, visit IRS.gov/efile.

In addition, the IRS urges anyone with tax due to choose the speed and convenience of paying electronically, such as with IRS Direct Pay, a free service available only on IRS.gov. For information about this and other payment options, visit IRS.gov/payments.

This year, the tax-filing deadline is:

  • Monday, April 18 for most taxpayers.
  • Tuesday, April 19 for residents of Maine and Massachusetts.
  • Wednesday, June 15 for most Americans who live abroad.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811

Source: IRS

 

Taxpayers should file their tax return on time to avoid costly interest and penalty fees

Posted by Admin Posted on Mar 30 2022

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Taxpayers should file their tax return by the deadline even if they cannot pay their full tax bill. Taxpayers who owe tax and don't file on time, may be charged a failure-to-file penalty. This penalty is usually five percent of the tax owed for each month, or part of a month that the tax return is late, up to 25%.

If an individual taxpayer owes taxes, but can't pay in full by the April 18, 2022, deadline, they should:

File their tax return or request an extension of time to file by the April 18 deadline.

  • People who owe tax and do not file their return on time or request an extension may face a failure-to-file penalty for not filing on time.
  • Taxpayers should remember that an extension of time to file is not an extension of time to pay. An extension gives taxpayers until October 17, 2022, to file their 2021 tax return, but taxes owed are still due April 18, 2022.

To get an extension to file, taxpayers must do one of the following:

Pay as much as possible by the April 18 due date.

Set up a payment plan as soon as possible.

Interest is based on the amount of tax owed and for each day it's not paid in full. Interest rates are determined every three months and can vary, based on type of tax; for example, individual or business-tax liabilities. More information is available on the Interest on Underpayments and Overpayments page of IRS.gov.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811

Source: IRS

Valuable tax benefits for members of the military

Posted by Admin Posted on Mar 30 2022

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Members of the military may qualify for tax benefits not available to civilians. For example, they don't have to pay taxes on some types of income. Special rules may lower the tax they owe or allow them more time to file and pay their federal taxes.

Here are some of these special tax benefits:

  • Combat pay exclusion: If someone serves in a combat zonepart or all of their pay is tax-free. This also applies to people working in an area outside a combat zone when the Department of Defense certifies that area is in direct support of military operations in a combat zone. There are limits to this exclusion for commissioned officers.
     
  • Other nontaxable benefits: Base allowance for housing, base allowance for subsistence and uniform allowances are among several government pay items excluded from gross income, which means they are not taxed.
     
  • Moving expenses: Some non-reimbursed moving expenses may be tax deductible. To deduct these expenses, the taxpayer must be a member of the Armed Forces on active duty and their move must be due to a military order or result of a permanent change of station.
     
  • Deadline extensions: Some members of the military – such as those who serve overseas – can postpone most tax deadlines. Those who qualify can get automatic extensions of time to file and pay their taxes. 
     
  • Earned income tax credit: Special rules allow military members who get nontaxable combat pay to choose to include it in their taxable income. One reason they might do this is to increase the amount of their earned income tax credit. People who qualify for this credit could owe less tax or even get a larger refund. Also, taxpayers can use their 2019 earned income to figure their 2021 earned income credit if their 2019 earned income is more than their 2021 earned income.
     
  • Joint return signatures: Both spouses must normally sign a joint income tax return. However, if military service prevents that from happening, one spouse may be able to sign for the other or get a power of attorney. Service members may want to consult with their installation's legal office to see if a power of attorney is right for them.
     
  • Reserve and National Guard travel: Members of a reserve component of the Armed Forces may be able to deduct their unreimbursed travel expenses on their return. To do so, they must travel more than 100 miles away from home in connection with their performance of services as a member of the reserves.
     
  • ROTC allowances: Some amounts paid to ROTC students in advanced training are not taxable. However, active-duty ROTC pay is taxable. This includes things like pay for summer advanced camp.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811

Source: IRS

Get an automatic six more months to file; all taxpayers can use IRS Free File to request an extension

Posted by Admin Posted on Mar 30 2022

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WASHINGTON — The Internal Revenue Service reminds taxpayers that if they're unable to file their tax return by this year's April 18 deadline, there's an easy, online option to get more time to complete their return.

Taxpayers who need more time to complete their return can request an automatic six-month extension to file. An extension allows for extra time to gather, prepare and file paperwork with the IRS; however, taxpayers should be aware that:

  • An extension to file their return doesn't grant them an extension to pay their taxes,
  • They should estimate and pay any owed taxes by their regular deadline to help avoid possible penalties and
  • They must file their extension no later than the regular due date of their return.

E-file an extension form for free

Individual tax filers, regardless of income, can use IRS Free File to electronically request an automatic tax-filing extension. The fastest and easiest way to get an extension is through IRS Free File on IRS.gov. Taxpayers can electronically request an extension on Form 4868 PDF. Filing this form gives taxpayers until October 17 to file their tax return. To get the extension, taxpayers must estimate their tax liability on this form and should timely pay any amount due.

Get an extension when making a payment

Other fast, free and easy ways to get an extension include using IRS Direct Pay, the Electronic Federal Tax Payment System or by paying with a credit or debit card or digital wallet. There's no need to file a separate Form 4868 extension request when making an electronic payment and indicating it's for an extension. The IRS will automatically count it as an extension.

Important reminders on extensions

The IRS reminds taxpayers that a request for an extension provides extra time to file a tax return, but not extra time to pay any taxes owed. Payments are still due by the original deadline. Taxpayers should file even if they can't pay the full amount. By filing either a return on time or requesting an extension by the April 18 filing deadline, they'll avoid the late-filing penalty, which can be 10 times as costly as the penalty for not paying.

Taxpayers who pay as much as they can by the due date, reduce the overall amount subject to penalty and interest charges. The interest rate is currently four percent per year, compounded daily. The late-filing penalty is generally five percent per month and the late-payment penalty is normally 0.5 percent per month.

The IRS will work with taxpayers who cannot pay the full amount of tax they owe. Other options to pay, such as getting a loan or paying by credit card, may help resolve a tax debt. Most people can set up a payment plan on IRS.gov to pay off their balance over time.

Other automatic extensions

Certain eligible taxpayers get more time to file without having to ask for extensions. These include:

  • U.S. citizens and resident aliens who live and work outside of the United States and Puerto Rico get an automatic 2-month extension to file their tax returns. They have until June 15 to file. However, tax payments are still due April 18 or interest will be charged.
  • Members of the military on duty outside the United States and Puerto Rico also receive an automatic two-month extension to file. Those serving in combat zones have up to 180 days after they leave the combat zone to file returns and pay any taxes due. Details are available in Publication 3, Armed Forces' Tax Guide PDF.
  • When the President makes a disaster area declaration, the IRS can postpone certain taxpayer deadlines for residents and businesses in the affected area. People can find information on the most recent tax relief for disaster situations on the IRS website.

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.

 

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811

Source: IRS

WHAT CAN I DO TO ENSURE THAT I AM INSURED ADEQUATELY?

Posted by Admin Posted on Mar 22 2022

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Make a list of your possessions in your household. The better documented this is the more likely you will be to be able to replace them.

Make sure that you inform your agents of any changes that you make to the home so that if anything happens to the structure, the recent changes will be reflected in the payout.

Check to see if there are any specific limits to what is insured by your company. Sometimes a person may think they are covered for certain things, but the limits negate that.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Thomson Reuters  

Deductible taxes

Posted by Admin Posted on Mar 22 2022

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Did you know that you may be able to deduct certain taxes on your federal income tax return? The IRS says you can if you file Form 1040 and itemize deductions on Schedule A. Deductions decrease the amount of income subject to taxation. There are four types of deductible non-business taxes:

1. State and local income taxes, or general sales taxes;

2. Real estate taxes; and

3. Personal property taxes

The Tax Cuts and Jobs Act (TCJA) limit the cumulative amount of the above taxes an individual can deduct in a calendar year to $10,000.

You can deduct estimated taxes paid to state or local governments and prior year's state or local income tax as long as they were paid during the tax year. If deducting sales taxes instead, you may deduct actual expenses or use optional tables provided by the IRS to determine your deduction amount, relieving you of the need to save receipts. Sales taxes paid on motor vehicles and boats may be added to the table amount, but only up to the amount paid at the general sales tax rate. Taxpayers will check a box on Schedule A, Itemized Deductions, to indicate whether their deduction is for income or sales tax.

Deductible real estate taxes are usually any state, local, or foreign taxes on real property. If a portion of your monthly mortgage payment goes into an escrow account and your lender periodically pays your real estate taxes to local governments out of this account, you can deduct only the amount actually paid during the year to the taxing authorities. Your lender will normally send you a Form 1098, Mortgage Interest Statement, at the end of the tax year with this information.

To claim a deduction for personal property tax you paid, the tax must be based on value alone and imposed on a yearly basis. For example, the annual fee for the registration of your car would be a deductible tax, but only the portion of the fee that was based on the car's value.

Call us or contact us today to find out how we can save you money!

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Reuters

Car donation to charity organizations

Posted by Admin Posted on Mar 22 2022

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The IRS reminds taxpayers that specific rules apply for taking a tax deduction for donating cars to charities. If the claimed value of the donated motor vehicle, boat or plane exceeds $500, you can deduct the smaller of the vehicle's FMV on the date of the contribution or the gross proceeds received from the sale of the vehicle.

People who want to take a deduction for the donation of their vehicle on their tax return should take quite a few steps, but here is the most obvious:

Check that the Organization is Qualified.

Taxpayers must make certain that they contribute their car to an eligible organization; otherwise, their donation will not be tax deductible. Taxpayers can search Tax Exempt Organization Search to check that an organization is qualified. In addition, taxpayers can call IRS Tax Exempt/Government Entities Customer Service at 1-877-829-5500. Be sure to have the organization's correct name and its headquarters location, if possible. Churches, synagogues, temples, mosques and governments are not required to apply for this exemption in order to be qualified.  Please contact us if you're considering a car donation for your tax return!

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Reuters          

Taxpayers must report tip money as income on their tax return

Posted by Admin Posted on Mar 22 2022

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For those working in the service industry, tips are often a vital part of their income. Like most forms of income, tips are taxable. Therefore, it's also vital that people understand the tax obligations that come with tip income. Here's some information to help taxpayers report tip income so they don't receive a surprise tax bill.

Taxpayers must include all tips they receive in their gross income. This includes:

Tips directly from customers.

Tips added using credit, debit or gift cards.

Tips from a tip-splitting arrangement with other employees.

The value of non-cash tips, such as tickets, passes or other items of value is also income and subject to tax.

Three things can help taxpayers to correctly report their tip income.

Keep a daily tip record.

Report tips to their employer.

Report all tips on their income tax return.

Use the Interactive Tax Assistant

This online tool provides answers to tax law questions. Taxpayers can use the Interactive Tax Assistant on IRS.gov to find out if their tip income is taxable.

What employers need to know

If an employee receives $20 or more in any month, they must report their tips for that month to their employer by the 10th day of the next month. The employer must withhold federal income, Social Security and Medicare taxes on the reported tips.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS       

Selling your home

Posted by Admin Posted on Mar 16 2022

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If you sold your main home, you may be able to exclude up to $250,000 of gain ($500,000 for married taxpayers filing jointly) from your federal tax return. This exclusion is allowed each time that you sell your main home, but generally no more frequently than once every two years.

To be eligible for this exclusion, your home must have been owned by you and used as your main home for a period of at least two out of the five years prior to its sale. You also must not have excluded gain on another home sold during the two years before the current sale.

If you and your spouse file a joint return for the year of the sale, you can exclude the gain if either of you qualify for the exclusion. But both of you would have to meet the use test to claim the $500,000 maximum amount.

To exclude gain, a taxpayer must both own and use the home as a principal residence for two of the five years before the sale. The two years may consist of 24 full months or 730 days. Short absences, such as for a summer vacation, count as periods of use. Longer breaks, such as a one-year sabbatical, do not.

If you do not meet the ownership and use tests, you may be allowed to exclude a reduced maximum amount of the gain realized on the sale of your home if you sold your home due to health, a change in place of employment, or certain unforeseen circumstances. Unforeseen circumstances include, for example, divorce or legal separation, natural or man-made disaster resulting in a casualty to your home, or an involuntary conversion of your home.  Send us a message for more!

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Reuters

How to keep your personal and tax information safe

Posted by Admin Posted on Mar 16 2022

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Here are some tips to follow to keep you and your private information safe in various situations.

Staying safe on social media

Don’t post or send private or tax related information anywhere on these types of platforms. Even if you have your social media accounts set to a limited audience under privacy settings, if you are using an open wi-fi network, like at the local coffee shop or in a hotel room, your information can be captured as it goes over that connection.

Don’t open or respond to direct messages coming from social media platforms. For example, anybody that can see your public profile on Facebook, can generate a direct message to you, even when they are not listed in your ‘friends’ categories. Opening these messages can often then let this sender begin a conversation with you. Fraudsters can use this new access to try to obtain information from you, which they can use to steal your identity.

See our TAS Tax Tips: Keep safe on social media at tax time – Don’t post or message tax info article for more information.

Staying safe while using email, phone or on a website

Don’t click links or open attachments in unsolicited emails or text messages about your tax return or those claiming to be from the IRS. These messages are fraudulent and could contain malware that could compromise your personal information.

Don’t provide personal information or send a payment to anyone claiming to be a government official before verifying their identity.

It’s important to remember that the IRS will never:

Call to demand immediate payment using a specific payment method such as a prepaid debit card, iTunes gift card, or wire transfer.

Ask a taxpayer to make a payment to a person or organization other than the U.S. Treasury.

Threaten to immediately bring in local police or other law-enforcement groups saying they can have the taxpayer arrested for not paying.

Demand taxes be paid without giving the taxpayer the opportunity to question or appeal the amount owed.

Don’t visit or click on website addresses that doesn’t end in ‘.gov’. There are lots of times where websites are built to look like official government sites but are not the real thing. So, be wary if the link doesn’t use “https” at the beginning (which means it is secure) or ‘.gov’ at the end (.gov is the extension all official offices use.).

See Here’s how taxpayers can avoid the hooks of phishing scams for more information.

Staying safe by choosing a credible tax professional

Don’t use a ghost preparer. A ghost preparer won’t sign a tax return they prepare for you. Always check credentials before working with any tax return preparer. (See our Tax Tip Choosing the right tax return preparer for you for more on this topic.)

Don’t sign a blank tax return, even if it is a family member helping you. Wait to sign until after you have reviewed the completed information. You are responsible for what appears on tax returns filed with the IRS. Signing a blank tax return allows someone else the opportunity to potentially report incorrect information, which you may be held liable for later.

Don’t fall for false claims by preparers. If an individual or company offers to ‘save you thousands on taxes’ or ‘get you the biggest refund you’ve ever had’ be very cautious. Generally, if it sounds too good to be true, it probably is (video). Everyone pays a set amount of taxes, per the tax laws, and legally must follow those rules.

Visit the Abusive Tax Schemes and Abusive Tax Return Preparers – IRS Lead Development Center for more information on this topic.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: TAS

Plug-In Electric Vehicles (PEVs)

Posted by Admin Posted on Mar 16 2022

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For vehicles acquired after December 31, 2009, the credit is equal to $2,500 plus, for a vehicle which draws propulsion energy from a battery with at least 5 kilowatt hours of capacity, $417, plus an additional $417 for each kilowatt hour of battery capacity in excess of 5 kilowatt hours. The total amount of the credit allowed for a vehicle is limited to $7,500.

The credit is available only to the original purchaser of a new qualifying vehicle, and the vehicle must be placed in service in the same year the credit is being claimed on the return. If the qualifying vehicle is leased the credit is available only to the leasing company. Also, the vehicle must be used primarily in the United States.

Additional conditions regarding qualified manufacturers and phase out rules may also apply in determining credit eligibility. To find out whether your car qualifies for the Qualified Plug-in Electric Drive Motor Vehicle tax credit, you can go to the IRS.gov website and search for "plug-in vehicles" or contact us for more information.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Reuters

Charitable contributions

Posted by Admin Posted on Mar 16 2022

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When preparing to file your federal tax return, don't forget your contributions to charitable organizations. Your donations can add up to a nice tax deduction for your corporation (if you are a member of a flow-through business entity) or your personal taxes if you itemize deductions on IRS Form 1040, Schedule A.

Here are a few tips to help make sure your contributions pay off on your tax return:

You cannot deduct contributions made to specific individuals, political organizations and candidates, the value of your time or services and the cost of raffles, bingo, or other games of chance.

To be deductible, contributions must be made to qualified organizations.

Organizations can tell you if they are qualified and if donations to them are deductible.Taxpayers can also search the Tax Exempt Organization Search (TEOS) online tool, to check that an organization is qualified. In addition, taxpayers can call IRS Tax Exempt/Government Entities Customer Service at 1-877-829-5500. Be sure to have the organization's correct name and its headquarters location, if possible. Churches, synagogues, temples, mosques and governments are not required to apply for this exemption in order to be qualified. Alternatively, contact us for more!

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Reuters          

Amended Tax Returns

Posted by Admin Posted on Mar 10 2022

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When preparing to file your federal tax return, don't forget your contributions to charitable organizations. Your donations can add up to a nice tax deduction for your corporation (if you are a member of a flow-through business entity) or your personal taxes if you itemize deductions on IRS Form 1040, Schedule A.

Here are a few tips to help make sure your contributions pay off on your tax return:

You cannot deduct contributions made to specific individuals, political organizations and candidates, the value of your time or services and the cost of raffles, bingo, or other games of chance.

To be deductible, contributions must be made to qualified organizations.

Organizations can tell you if they are qualified and if donations to them are deductible.Taxpayers can also search the Tax Exempt Organization Search (TEOS) online tool, to check that an organization is qualified. In addition, taxpayers can call IRS Tax Exempt/Government Entities Customer Service at 1-877-829-5500. Be sure to have the organization's correct name and its headquarters location, if possible. Churches, synagogues, temples, mosques and governments are not required to apply for this exemption in order to be qualified. Alternatively, contact us for more!

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Reuters 

Earned Income Tax Credit for Certain Workers

Posted by Admin Posted on Mar 10 2022

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Millions of Americans forgo critical tax relief each year by failing to claim the Earned Income Tax Credit (EITC), a federal tax credit for individuals who work but do not earn high incomes. Taxpayers who qualify and claim the credit could pay less federal tax, pay no tax or even get a tax refund.

The IRS estimates that 25 percent of people who qualify don't claim the credit and at the same time, there are millions of Americans who have claimed the credit in error, many of whom simply don't understand the criteria.

EITC is based on the amount of your earned income and the number of qualifying children in your household. If you have children, they must meet the relationship, age and residency requirements. And, you must file a tax return to claim the credit.

Its easier than ever to find out if you qualify for EITC using the online tool, EITC Assistant. Please contact us for more information!

Are you eligible for any of these tax credits?

Taxpayers should consider claiming tax credits for which they might be eligible when completing their federal income tax returns, advises the IRS. A tax credit is a dollar-for-dollar reduction of taxes owed. Some credits are refundable – taxes could be reduced to the point that a taxpayer would receive a refund rather than owing any taxes. Below are some of the credits taxpayers could be eligible to claim:

Earned Income Tax Credit This is a refundable credit for low-income working individuals and families. Income and family size determine the amount of the EITC. When the EITC exceeds the amount of taxes owed, it results in a tax refund to those who claim and qualify for the credit. For more information, see IRS Publication 596, Earned Income Credit (EIC).

Child Tax Credit This credit is for people who have a qualifying child under age 17. The maximum amount of the credit is $1,400 for each qualifying child. This credit can be claimed in addition to the credit for child and dependent care expenses. For more information on the Child Tax Credit, see Pub. 972, Child Tax Credit.

Child and Dependent Care Credit This is for expenses paid for the care of children under age 13, or for a disabled spouse or dependent, to enable the taxpayer to work. There is a limit to the amount of qualifying expenses. The credit is a percentage of those qualifying expenses. For more information, see Pub. 503, Child and Dependent Care Expenses.

Adoption Credit Adoptive parents can take a tax credit of up to $13,570 for 2017 and $13,810 for 2018 for qualifying expenses paid to adopt an eligible child. For more information, see Form 8839, Qualified Adoption Expenses.

Credit for the Elderly and Disabled This credit is available to individuals who are either age 65 or older or are under age 65 and retired on permanent and total disability, and who are U.S. citizens or residents. There are income limitations. For more information, see Pub.524, Credit for the Elderly or the Disabled.

Education Credits There are two credits available, the American Opportunity Credit (formerly called the Hope Credit) and the Lifetime Learning Credit, for people who pay higher education costs. The American Opportunity Credit is for the payment of the first four years of tuition and related expenses for an eligible student for whom the taxpayer claims as a dependent on the tax return. The Lifetime Learning Credit is available for all post-secondary education for an unlimited number of years. A taxpayer cannot claim both credits for the same student in one year. For more information, see Publication 970, Tax Benefits for Education.

Retirement Savings Contribution Credit Eligible individuals may be able to claim a credit for a percentage of their qualified retirement savings contributions, such as contributions SIMPLE plan. To be eligible, you must be at least age 18 at the end of the year and not a full-time student or an individual for whom someone else claims a personal exemption. Also, your adjusted gross income (AGI) must be below a certain amount. For more information, see chapter three in Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs).

There are other credits available to eligible taxpayers.  Please contact us so we may analyze your specific situation, and offer advice.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Reuters

Foreign Income

Posted by Admin Posted on Mar 10 2022

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With more and more United States citizens earning money from foreign sources, the IRS reminds people that they must report all such income on their tax return, unless it is exempt under federal law. U.S. citizens are taxed on their worldwide income.

This applies whether a person lives inside or outside the United States. The foreign income rule also applies regardless of whether or not the person receives a Form W-2, Wage and Tax Statement, or a Form 1099 (information return).

Foreign source income includes earned income, such as wages and tips, and unearned income, such as interest, dividends, capital gains, pensions, rents and royalties.

An important point to remember is that citizens living outside the U.S. may be able to exclude up to $102,100 for 2017 and $103,900 for 2018, of their foreign source income if they meet certain requirements. However, the exclusion does not apply to payments made by the U.S. government to its civilian or military employees living outside the U.S. Please contact us if you feel you may have earned foreign income to learn more!

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Reuters

Credit for the elderly or disabled

Posted by Admin Posted on Mar 10 2022

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You may be able to take the Credit for the Elderly or the Disabled if you were age 65 or older at the end of last year, or if you are retired on permanent and total disability, according to the IRS. Like any other tax credit, it's a dollar-for-dollar reduction of your tax bill. The maximum amount of this credit is constantly changing.

You can take the credit for the elderly or the disabled if:

You are a qualified individual,

Your nontaxable income from Social Security or other nontaxable pension is less than $3,750 to $7,500 (also depending on your filing status).

Generally, you are a qualified individual for this credit if you are a U.S. citizen or resident at the end of the tax year and you are age 65 or older, or you are under 65, retired on permanent and total disability, received taxable disability income, and did not reach mandatory retirement age before the beginning of the tax year.

If you are under age 65, you can qualify for the credit only if you are retired on permanent and total disability. This means that:

You were permanently and totally disabled when you retired, and

You retired on disability before the end of the tax year.

Even if you do not retire formally, you are considered retired on disability when you have stopped working because of your disability. If you feel you might be eligible for this credit, please contact us for assistance.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Reuters

Steps for tracking your 2021 federal income tax refund

Posted by Admin Posted on Mar 02 2022

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If you filed a 2021 federal income tax return and are expecting a refund from the IRS, you may want to find out the status of the refund or at least get an idea of when you might receive it. You can start checking on the status of your refund within 24 hours after the IRS has received your electronically filed return, or 4 weeks after you mailed a paper return. Currently you might be waiting a bit longer to receive a refund due to the effects of COVID-19, new tax law changes, and possible errors made on the tax return.

Follow these steps for tracking your 2021 federal income tax refund:

Gather the following information and have it handy:

Social security number (SSN) or Individual Taxpayer Identification Number (ITIN)

Your filing status

Your exact refund amount

You will need this information to use the first two refund status tools below.

Use one of these IRS refund status tools to check on the status of your return and refund:

Where’s My Refund?

IRS2Go mobile app

Also see “Tax Season Refund Frequently Asked Questions” for what these tools can tell you and what they can’t.

Or you can view your online account.

However, when accessing your online account, you will need to verify your identity through an online security process. If you are signing in for the first time, see our TAS Tax Tip: Verifying your identity to access certain IRS systems article for what information you will need to provide and how to finish the security process. You should also review the frequently asked questions listed on the sign-in page and these Online Account Frequently Asked Questions for more information.

Do not call the IRS unless instructed to by the application to call.

These online tools are updated every 24 hours and truly are the best way to get your refund status.

Be aware of processing delays

Again, this year some tax returns with errors or items on the return that need an IRS correction due to a tax law change will take longer than the normal timeframes to process, so expect delays. It may take the IRS more than the normal 21 days (for electronically filed returns) to issue refunds for some 2021 tax returns that require review, including but not limited to, ones that claim the Recovery Rebate Credit, the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC). Note: For all tax returns that claim EITC and/or CTC, those refunds must be held, by law, until after mid-February and cannot be released before then.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: TAS 

SHOULD I KEEP COLLISION COVERAGE ON MY OLD CAR?

Posted by Admin Posted on Mar 02 2022

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Collision coverage ensures the repair of your car whether you were at fault or not, even if your car is damaged by fire, flood, wind or hail. Depending on the value of your car, this coverage may not be cost effective.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Thomson Reuters

Refinancing your home

Posted by Admin Posted on Mar 02 2022

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Taxpayers who refinanced their homes may be eligible to deduct some costs associated with their loans.

Generally, for taxpayers who itemize, the “points” paid to obtain a home mortgage may be deductible as mortgage interest. Points paid to obtain an original home mortgage can be, depending on circumstances, fully deductible in the year paid. However, points paid solely to refinance a home mortgage usually must be deducted over the life of the loan.

For a refinanced mortgage, the interest deduction for points is determined by dividing the points paid by the number of payments to be made over the life of the loan. This information is usually available from lenders. Taxpayers may deduct points only for those payments made in the tax year. For example, a homeowner who paid $2,000 in points and who would make 360 payments on a 30-year mortgage could deduct $5.56 per monthly payment, or a total of $66.72 if he or she made 12 payments in one year.

However, if part of the refinanced mortgage money was used to finance improvements to the home and if the taxpayer meets certain other requirements, the points associated with the home improvements may be fully deductible in the year the points were paid. Also, if a homeowner is refinancing a mortgage for a second time, the balance of points paid for the first refinanced mortgage may be fully deductible at pay off.

Other closing costs — such as appraisal fees and other non-interest fees — generally are not deductible. Additionally, the amount of Adjusted Gross Income can affect the amount of deductions that can be taken.  Please contact us if you've recently refinanced, and we can be a big help!

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Reuters

Amended Tax Returns

Posted by Admin Posted on Feb 21 2022

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Oops! You've discovered an error after your tax return has been filed. What should you do? You may need to amend your return.

The IRS usually corrects math errors or requests missing forms (such as W-2s) or schedules. In these instances, do not amend your return. However, do file an amended return if any of the following were reported incorrectly:

Your filing status

Your total income

Your deductions or credits

Use Form 1040X, Amended U.S. Individual Income Tax Return, to correct a previously filed paper or electronically-filed Form 1040 return. Be sure to enter the year of the return you are amending at the top of Form 1040X. If you are amending more than one tax return, use a separate 1040X for each year and mail each in a separate envelope to the IRS processing center for your state. The 1040X instructions list the addresses for the centers.

Form 1040X has three columns. Column A is used to show original or adjusted figures from the original return. Column C is used to show the corrected figures. The difference between the figures in Columns A and C is shown in Column B. You should explain the items you are changing and the reason for each change on the back of the form.

If the changes involve another schedule or form, attach it to the 1040X. For example, if you are filing a 1040X because you have a qualifying child and now want to claim the Earned Income Tax Credit, you must complete and attach a Schedule EIC to the amended return.

If you are filing to claim an additional refund, wait until you have received your original refund before filing Form 1040X. You may cash that check while waiting for any additional refund. If you owe additional tax for the prior year, Form 1040X must be filed and the tax paid by April 15 of this year, to avoid any penalty and interest.

You generally must file Form 1040X to claim a refund within three years from the date you filed your original return, or within two years from the date you paid the tax, whichever is later. Please contact us for more!

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Reuters           

Check Withholding to Avoid a Tax Surprise

Posted by Admin Posted on Feb 21 2022

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Whether or not you owed taxes or received a refund last year, check your tax withholding to avoid not having too little tax withheld and facing an unexpected tax bill or penalty at tax time next year. This is even more important due to the recent changes to the tax law for 2018 and beyond. On the other end, if you had a large refund you lost out on having the money in your pocket throughout the year. Changing jobs, getting married or divorced, buying a home or having children can all result in changes in your tax calculations.

The IRS withholding calculator on IRS.gov can help compute the proper tax withholding. The worksheets in Publication 505, Tax Withholding and Estimated Tax can also be used to do the calculation. If the result suggests an adjustment is necessary, you can submit a new W-4, Withholding Allowance Certificate, to your employer.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Reuters  

Tax Incentives for Higher Education

Posted by Admin Posted on Feb 21 2022

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The tax code provides a variety of tax incentives for families who are paying higher education costs or are repaying student loans. You may be able to claim an American Opportunity Credit (formerly called the Hope Credit) or Lifetime Learning Credit for the qualified tuition and related expenses of the students in your family (i.e. you, your spouse, or dependent) who are enrolled in eligible educational institutions. Different rules apply to each credit and the ability to claim the credit phases out at higher income levels.

You may be able to deduct interest you pay on a qualified student loan. The deduction is claimed as an adjustment to income so you do not have to itemize your deductions on Schedule A Form 1040. However, this deduction is also phased out at higher income levels.

If your student loan was canceled, you may not have to include any amount in income.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Reuters

5 Tips For Early Tax Preparation

Posted by Admin Posted on Feb 21 2022

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Earlier is better when it comes to working on your taxes. The IRS encourages everyone to get a head start on tax preparation. Not only do you avoid the last-minute rush, early filers also get a faster refund.

There are five easy ways to get a good jump on your taxes long before the April 15 deadline rolls around:

  • Gather your records in advance. Make sure you have all the records you need, including W-2s and 1099s. Don't forget to save a copy for your files.
  • Get the right forms. They're available around the clock on IRS.gov in the Forms and Publications section.
  • Take your time. Don't forget to leave room for a coffee break when filling out your tax return. Rushing can mean making a mistake — and that can be expensive!
  • Double-check your math and Social Security number. These are among the most common errors on tax returns. Taking care on these reduces your chances of hearing from the IRS.
  • Get the fastest refund. When you file early, you get your refund faster. Using e-filing with direct deposit gets you a refund in half the time as paper filing.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Reuters 

Filing a Tax Extension

Posted by Admin Posted on Feb 21 2022

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If you can't meet the 2022 April 18 deadline to file your tax return, you can get an automatic six-month extension of time to file from the IRS. The extension will give you extra time to get the paperwork into the IRS, but it does not extend the time you have to pay any tax due. You will owe interest on any amounts not paid by the April deadline, plus a late payment penalty if you have paid less than 90 percent of your total tax by that date.

You must make an accurate estimate of any tax due when you request an extension. You may also send a payment for the expected balance due, but this is not required to obtain the extension.

To get the automatic extension, file Form 4868, Application for Extension of Time to File U.S. Individual Income Tax Return, with the IRS by the April 18 deadline, or make an extension-related electronic payment. You can file your extension request by computer or mail the paper Form 4868 to the IRS.

The system will give you a confirmation number to verify that the extension request has been accepted. Put this confirmation number on your copy of Form 4868 and keep it for your records. Do not send the form to the IRS.  As this is the area of our expertise, please contact us for more detailed information on how to file an extension properly!

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Reuters           

WITH A DIVORCE, WHAT ARE THE TAX IMPLICATIONS?

Posted by Admin Posted on Feb 15 2022

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Upon completion of a divorce, individual tax returns will be filed. There are a few areas that may result in tax consequences. The following are the most common:

  • Child Support
    It is not taxable to the recipient and is not deductible by the payer. If it is specially designated as child support in a divorce agreement or lessened by the occurrence of a contingency relative to the child, meaning a child reaches a specified age, it is considered as a payment.
  • Alimony
    It is taxable to the recipient and deductible by the payers. It is known as a payment in accordance with a divorce agreement other than child support or when allocated in the decree as something other than alimony. In a separation agreement, similar treatment is in accordance with separate maintenance payments. Payments may not end upon death of the recipient and may not be front-loaded.
  • Property Settlements
    When in accordance with the divorce or separation, they are not taxable. In the event of transfers of assets amongst spouses, they do not become taxable income, gains, loses, or deductions. The recipient spouse gets the cost basis of the property. Your spouse may provide you with an equal share of the property based on a fair market value, but be careful with the lower basis. In the end, it can produce a taxable gain at the asset's sale.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Thomson Reuters

INNOCENT SPOUSE RULES: PROTECTION UNDER SOME CIRCUMSTANCES

Posted by Admin Posted on Feb 15 2022

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Must one spouse pay the tax resulting from a fabrication or omission by another spouse on a jointly filed tax return? It depends. If the spouse qualifies, he or she may be able to avoid personal tax liability under the “innocent spouse” rules.

Joint filing status

Generally, married taxpayers benefit overall by filing a joint tax return on the federal level. This is particularly the case when one spouse earns significantly more than the other. Filing jointly may also help the couple maximize certain income tax deductions and credits.

But joint filing status comes with a catch. Each spouse is “jointly and severally” responsible for any tax, interest and penalties attributable to the return. And this liability continues to apply even if the couple gets a divorce or one spouse dies. In other words, the IRS may try to collect the full amount due from one spouse, even if all the income reported on the joint return was earned by the other spouse.

Basic rules

However, the tax law provides tax relief for an “innocent spouse.” Under these rules, one spouse may not be liable for any unpaid tax and penalties, despite having signed the joint return.

To determine eligibility for relief, the IRS imposes a set of common requirements. The spouses must have filed a joint return that has an understatement of tax, and that understatement must be attributable to one spouse’s erroneous items. For this purpose, “erroneous items” are defined as any deduction, credit or tax basis incorrectly stated on the return, as well as any income not reported.

From there, the other (“innocent”) spouse must establish that, at the time the joint return was signed, he or she didn’t know — or have reason to know — there was an understatement of tax. Finally, to qualify, the IRS needs to find that it would be unfair to hold one spouse liable for the understatement after considering all the facts and circumstances.

Additional notes

For many years, innocent spouse relief had to be requested within two years after the IRS first began its collection activity against a taxpayer. But, in 2011, the IRS announced that it would no longer apply the two-year limit on collection activities.

In addition, by law, when one spouse applies for innocent spouse relief, the IRS must contact the other spouse or former spouse. There are no exceptions even for victims of spousal abuse or domestic violence.

Help available

Historically, courts haven’t been particularly generous about upholding claims under the innocent spouse rules. State laws can also complicate matters. If you’re wondering whether you’d qualify for relief, please contact us for help.

Sidebar: What does the IRS consider?

The IRS considers “all facts and circumstances” in determining whether it would be inequitable to hold an “innocent” spouse liable for taxes due on a jointly filed tax return. One factor that may increase the likelihood of relief is that the taxes owed are clearly attributable to one spouse or an ex-spouse who filled out the errant return.

If one spouse was deserted during the marriage, or suffered abuse, it may also improve the chances that innocent spouse relief will be granted. In some cases, the IRS may examine the couple’s situation to determine whether the spouse applying for relief knew about the erroneous items.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Thomson Reuters      

Beware of “wash sales” when selling securities

Posted by Admin Posted on Feb 15 2022

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If you’re planning to sell capital assets at a loss to offset gains that have been realized during the year, it’s important to beware of the “wash sale” rule. Under this tax rule, if you sell stock or securities for a loss and buy substantially identical stock shares or securities back within the 30-day period before or after the sale date, the loss can’t be claimed for tax purposes.

The rule

The wash sale rule is designed to prevent taxpayers from benefiting from a loss without parting with ownership in any significant way. Note that the rule applies to a 30-day period before or after the sale date to prevent “buying the stock back” before it’s even sold. (If you participate in any dividend reinvestment plans, the wash sale rule may be inadvertently triggered when dividends are reinvested under the plan, if you’ve separately sold some of the same stock at a loss within the 30-day period.)

Although the loss can’t be claimed on a wash sale, the disallowed amount is added to the cost of the new stock. So, the disallowed amount can be claimed when the new stock is finally disposed of (other than in a wash sale).

An example

Assume you buy 500 shares of XYZ Inc. for $10,000 and sell them on November 5 for $3,000. On November 30, you buy 500 shares of XYZ again for $3,200. Since the shares were “bought back” within 30 days of the sale, the wash sale rule applies. Therefore, you can’t claim a $7,000 loss. Your basis in the new 500 shares is $10,200: the actual cost plus the $7,000 disallowed loss.

If only a portion of the stock sold is bought back, only that portion of the loss is disallowed. So, in the above example, if you’d only bought back 300 of the 500 shares (60%), you would be able to claim 40% of the loss on the sale ($2,800). The remaining $4,200 loss that is disallowed under the wash sale rule would be added to your cost of the 300 shares.

No surprises

The wash sale rule can come as a nasty surprise at tax time. Contact us for assistance.

If you have any questions regarding Essential Business Accounting, Domestic Taxation, International Taxation, IRS Representation, U.S. Tax Implications of Real Estate Transactions or Financial  tatements, please give us a call at 305-274-5811.                                   

Source: Thomson Reuters   

WHAT AMOUNT OF LIFE INSURANCE SHOULD I HAVE?

Posted by Admin Posted on Feb 15 2022

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In order to figure out how much insurance you need, you will need to explore your current household expenses, debts, assets, and streams of income. If you need assistance in this, consult either your accountant or financial advisor.

The amount of money that you want to leave behind for your dependents should allow them to use some of the money to maintain their current standard of living, then reinvest another lump sum to ensure that they will be well off in the future.

When attempting to calculate the amount of money that you need to leave behind, be extremely meticulous. If you err low, your family may not receive the help that they need from the insurance company, and if you err the other way, you will be spending more than necessary in insurance premiums.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

 Source: Thomson Reuters

Tracking down donation substantiation

Posted by Admin Posted on Feb 02 2022

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If you’re like many Americans, letters from your favorite charities may be appearing in your mailbox acknowledging your 2021 donations. But what happens if you haven’t received such a letter? Can you still claim a deduction for the gift on your 2021 income tax return? It depends.

What’s required

To support a charitable deduction, you need to comply with IRS substantiation requirements. This generally includes obtaining a contemporaneous written acknowledgment from the charity stating the amount of the donation if it’s cash. If the donation is property, the acknowledgment must describe the property, but the charity isn’t required to provide a value. The donor must determine the property’s value.

“Contemporaneous” means the earlier of the date you file your tax return or the extended due date of your return. So, if you donated in 2021 but haven’t yet received substantiation from the charity, it’s not too late (as long as you haven’t filed your 2021 return). Contact the charity and request a written acknowledgment.

Keep in mind that, if you made a cash gift of under $250 with a check or credit card, generally a canceled check, bank statement or credit card statement is sufficient. However, if you received something in return for the donation, you generally must reduce your deduction by its value and the charity is required to provide you a written acknowledgment as described earlier.

Deduction for nonitemizers

Generally, taxpayers who don’t itemize their deductions (and instead claim the standard deduction) can’t claim a charitable deduction. But, under the CARES Act, individuals who didn’t itemize deductions could claim a federal income tax write-off for up to $300 of cash contributions to IRS-approved charities for the 2020 tax year.

Fortunately, the Consolidated Appropriations Act extended this tax break to cover $300 of cash contributions made in 2021. The law also doubled the deduction limit to $600 for married, joint-filing couples for cash contributions made in 2021.

Let us assist you

Additional substantiation requirements apply to some types of donations. We can help you determine whether you have sufficient substantiation for the donations you hope to deduct on your 2021 income tax return. We also can guide you on the substantiation you’ll need for gifts you’re planning this year to ensure you can enjoy the desired deductions on your 2022 return.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Thomson Reuters

Businesses can still deduct 100% of restaurant meals

Posted by Admin Posted on Feb 02 2022

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Business owners, 2022 is well underway. So, don’t forget that a provision tucked inside 2020’s Consolidated Appropriations Act suspended the 50% deduction limit for certain business meals for calendar years 2021 and 2022. That means your business can deduct 100% of the cost of business-related meals provided by a restaurant.

A closer look

As you may recall, previously you could generally deduct only 50% of the “ordinary and necessary” food and beverage costs you incurred while operating your business. Now you can deduct your full eligible costs.

What’s more, the legislation refers to food and beverages provided “by” a restaurant rather than “in” a restaurant. So, takeout and delivery restaurant meals also are fully deductible.

Remember the rules

Some familiar IRS requirements still apply:

  • The food and beverages can’t be lavish or extravagant under the circumstances.
  • The meal must involve a current or prospective customer, client, supplier, employee, agent, partner or professional advisor with whom you could reasonably expect to engage in the due course of business.
  • You or one of your employees must be present when the food or beverages are served.

Entertainment expenses still aren’t deductible, but meals served during entertainment events can be deductible if charged separately. If food or beverages are provided at an entertainment activity, further rules apply.

More information

Also be aware that, in November of last year, the IRS issued guidance on per diems related to the temporary 100% deduction for restaurant food and beverages. Contact us for further details about when you can deduct meal expenses.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Reuters

Could your company reap tax benefits from a heavy SUV purchase?

Posted by Admin Posted on Feb 02 2022

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Many businesses need to invest in heavy sport utility vehicles (SUVs) to transport equipment and provide timely services. Fortunately, they may be able to claim valuable tax deductions for the purchases. If you’re thinking about buying one (or if your bought one in 2021), be sure to brush up on the tax rules.

Bonus depreciation

Under current law, first-year bonus depreciation is available for qualified new and used property that’s acquired and placed in service during the tax year. New and pre-owned heavy SUVs, pickups and vans acquired and put to business use in 2021 or 2022 are potentially eligible for 100% first-year bonus depreciation.

Be aware that this generous tax break is scheduled to begin to be reduced for vehicles that are acquired and placed in service after December 31, 2022. That’s added incentive to invest in a heavy SUV this year.

The 100% first-year bonus depreciation write-off will reduce your federal income tax bill and self-employment tax bill, if applicable. You might get a state income tax deduction, too.

Weight and use requirements

100% bonus depreciation is available only if the manufacturer’s gross vehicle weight rating (GVWR) is above 6,000 pounds. You can verify a vehicle’s GVWR by looking at the manufacturer’s label, usually found on the inside edge of the driver’s side door where the door hinges meet the frame.

Another requirement is that you must use the vehicle more than 50% for business. If your business use is between 51% and 99%, you can deduct that percentage of the cost in the first year the vehicle is placed in service.

Detailed, contemporaneous expense records are essential in case the IRS challenges your business-use percentage. So, keep track of the miles you’re driving for business purposes, compared to the vehicle’s total mileage for the year. Recordkeeping is easier today because of the many mobile apps designed for this purpose.

You could also simply keep a handwritten calendar or mileage log in your vehicle and record details as business trips occur. Maintaining contemporaneous records is critical; calendars or logs compiled after the fact may not withstand IRS scrutiny.

The right moves

Did you purchase an eligible vehicle and place it in service in 2021? Or are you considering doing so in 2022? Consult with us to help evaluate the right business tax moves.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Reuters          

Get more worms by filing your tax return early

Posted by Admin Posted on Feb 02 2022

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They say the early bird gets the worm. Early federal income tax filers may get a couple worms, which is a good thing in this metaphor.

Although it may seem like a quaint tradition to wait until the deadline (usually April 15, but actually April 18 in 2022), there’s more than one valid reason for getting your return completed and submitted well before this date. But you have to have the necessary documents to do so.

Prevent identity theft

In one tax identity theft scheme, a thief uses another individual’s personal information to file a fraudulent tax return early in the filing season and claim a bogus refund. The real taxpayer discovers the fraud when he or she files a return and is told by the IRS that the return is being rejected because one with the same Social Security number has already been filed for the tax year.

While the taxpayer should ultimately be able to prove that his or her return is the legitimate one, tax identity theft can be a hassle to straighten out and significantly delay a refund. Filing early may be your best defense: If you file first, it will be the tax return filed by a potential thief that will be rejected, not yours.

Get a potentially earlier refund

Another reason to file early is you may put yourself closer to the front of the line to receive your tax refund (if you’re owed one). The IRS website still indicates that it expects to issue most refunds for the 2021 tax year within the usual 21 days, despite the massive pandemic-related delays that affected millions of 2020 tax returns.

The time is typically shorter if you file electronically and receive a refund by direct deposit into a bank account. Direct deposit also avoids the possibility that a refund check could be lost, stolen, returned to the IRS as undeliverable or caught in mail delays.

Look for your documents

To file your tax return, you need your Form W-2s (if you’re an employee) and Form 1099s (if you’ve worked as an independent contractor or “gig worker”). January 31 is the deadline for employers to issue 2021 Form W-2s to employees and, generally, for businesses to issue Form 1099s to recipients of any 2021 interest, dividend or reportable miscellaneous income payments (including those made to independent contractors).

If you haven’t received a W-2 or 1099 by February 1, first contact the entity that should have issued it. If that doesn’t work, you can contact the IRS for assistance.

Don’t wait!

As of this writing, some taxpayers may still be waiting to receive their 2020 federal income tax refunds. A few people (mostly on social media) have floated the idea of refusing to file their 2021 income tax returns until they receive their refund. Is this a good idea?

No, it’s not. Failing to file your return will only lead to bigger headaches later, possibly even penalties and criminal prosecution. Plus, if you’re owed a 2021 refund, you may receive that money before your 2020 refund. But the only way to get it is to file!

If you have questions or would like an appointment to prepare your return, please contact us. We can help you ensure you file an accurate return that takes advantage of all the breaks available to you.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Reuters

AFTER MARRIAGE, WHAT ARE THE TAX IMPLICATIONS?

Posted by Admin Posted on Jan 26 2022

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You are entitled to file a joint income tax return upon marriage. Although this simplifies the filing process, you will more than likely discover that your tax bill is either higher or lower than when you were single. It's higher when you file together, as more of your income is taxed in the higher tax brackets. This is commonly known as the marriage tax penalty. In 2003, a tax law that intended to reduce the marriage penalty went into effect, but this law didn't get rid of the penalty for higher bracket taxpayers.

Once married, you may not file separately in an attempt to avoid the marriage penalty. Actually, filing as married filing separately can raise your taxes. For the optimal filing status for your situation you should speak with your tax advisor.

If you have any questions regarding accounting, domestic taxation, essential business accounting, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: Thomson Reuters

PERSONAL DOCUMENTS

Posted by Admin Posted on Jan 26 2022

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Federal law requires you to maintain copies of your tax returns and supporting documents for three years. This is called the "three-year law" and leads many people to believe they're safe provided they retain their documents for this period of time.

However, if the IRS believes you have significantly underreported your income (by 25 percent or more), it may go back six years in an audit. If there is any indication of fraud, or you do not file a return, no period of limitation exists. To be safe, use the following guidelines.

April 15 has come and gone and another year of tax forms and shoeboxes full of receipts is behind us. But what should be done with those documents after your check or refund request is in the mail?

Please be aware that if the IRS believes you have significantly underreported your income (by 25 percent or more), it may go back six years in an audit. If there is any indication of fraud, or you do not file a return, no period of limitation exists. To be safe, use the following guidelines.

Personal Documents To Keep For One Year

While it's important to keep year-end mutual fund and IRA contribution statements forever, you don't have to save monthly and quarterly statements once the year-end statement has arrived.

Personal Documents To Keep For Three Years

  • Credit Card Statements
  • Medical Bills (in case of insurance disputes)
  • Utility Records
  • Expired Insurance Policies

Personal Documents To Keep For Six Years

  • Supporting Documents For Tax Returns
  • Accident Reports and Claims
  • Medical Bills (if tax-related)
  • Sales Receipts
  • Wage Garnishments
  • Other Tax-Related Bills

Personal Records To Keep Forever

  • CPA Audit Reports
  • Legal Records
  • Important Correspondence
  • Income Tax Returns
  • Income Tax Payment Checks
  • Property Records / Improvement Receipts (or six years after property sold)
  • Investment Trade Confirmations
  • Retirement and Pension Records (Forms 5448, 1099-R and 8606 until all distributions are made from your IRA or other qualified plan)

If you have any questions regarding Essential Business Accounting, Domestic Taxation, International Taxation, IRS Representation, U.S. Tax Implications of Real Estate Transactions or Financial Statements, please give us a call at 305-274-5811

Source: Thomson Reuters

The Right to Quality Service

Posted by Admin Posted on Jan 26 2022

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Taxpayers have the right to receive prompt, courteous, and professional assistance in their dealings with the IRS, to be spoken to in a way they can easily understand, to receive clear and easily understandable communications from the IRS, and to have a way to file complaints about inadequate service.

What This Means for You

  • The IRS must include information about your right to Taxpayer Advocate Service (TAS) assistance, and how to contact TAS, in all notices of deficiency. IRC § 6212(a)
  • When collecting tax, the IRS should treat you with courtesy. Generally, the IRS should only contact you between 8 a.m. and 9 p.m. The IRS should not contact you at your place of employment if the IRS knows or has reason to know that your employer does not allow such contacts. IRC § 6304
  • If you are an individual taxpayer eligible for Low Income Taxpayer Clinic (LITC) assistance (generally your income is at or below 250% of the federal poverty level), the IRS may provide information to you about your eligibility for assistance from an LITC. IRC § 7526

For more information, see IRS Publication 4134, Low Income Taxpayer Clinic List. Or find an LITC near you.

  • Certain notices written by the IRS must contain the name, phone number, and identifying number of the IRS employee, and all notices must include a telephone number that the taxpayer may contact. During a phone call or in-person interview, the IRS employee must provide you with his or her name and ID number. RRA 98 § 3705(a)
  • The IRS is required to publish the local address and phone number of the IRS in local phone books. RRA 98 § 3709

If you have any questions regarding Essential Business Accounting, Domestic Taxation, International Taxation, IRS Representation, U.S. Tax Implications of Real Estate Transactions or Financial Statements, please give us a call at 305-274-5811.                                   

Source: TAS 

TAXABLE VS. TAX-ADVANTAGED: WHERE TO HOLD INVESTMENTS

Posted by Admin Posted on Jan 26 2022

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When investing for retirement or other long-term goals, people usually prefer tax-advantaged accounts, such as IRAs, 401(k)s or 403(b)s. Certain assets are well suited to these accounts, but it may make more sense to hold other investments in traditional taxable accounts.

Know the rules

Some investments, such as fast-growing stocks, can generate substantial capital gains, which may occur when you sell a security for more than you paid for it.

If you’ve owned that position for over a year, you face long-term gains, taxed at a maximum rate of 20%. In contrast, short-term gains, assessed on holding periods of a year or less, are taxed at your ordinary-income tax rate — maxing out at 37%. (Note: These rates don’t account for the possibility of the 3.8% net investment income tax.)

Choose tax efficiency

Generally, the more tax efficient an investment, the more benefit you’ll get from owning it in a taxable account. Conversely, investments that lack tax efficiency normally are best suited to tax-advantaged vehicles.

Consider municipal bonds (“munis”), either held individually or through mutual funds. Munis are attractive to tax-sensitive investors because their income is exempt from federal income taxes and sometimes state and local income taxes. Because you don’t get a double benefit when you own an already tax-advantaged security in a tax-advantaged account, holding munis in your 401(k) or IRA would result in a lost opportunity.

Similarly, tax-efficient investments such as passively managed index mutual funds or exchange-traded funds, or long-term stock holdings, are generally appropriate for taxable accounts. These securities are more likely to generate long-term capital gains, which have more favorable tax treatment. Securities that generate more of their total return via capital appreciation or that pay qualified dividends are also better taxable account options.

Take advantage of income

What investments work best for tax-advantaged accounts? Taxable investments that tend to produce much of their return in income. This category includes corporate bonds, especially high-yield bonds, as well as real estate investment trusts (REITs), which are required to pass through most of their earnings as shareholder income. Most REIT dividends are nonqualified and therefore taxed at your ordinary-income rate.

Another tax-advantaged-appropriate investment may be an actively managed mutual fund. Funds with significant turnover — meaning their portfolio managers are actively buying and selling securities — have increased potential to generate short-term gains that ultimately get passed through to you. Because short-term gains are taxed at a higher rate than long-term gains, these funds would be less desirable in a taxable account.

Get specific advice

The above concepts are only general suggestions. Please contact our firm for specific advice on what may be best for you.

Sidebar: Doing due diligence on dividends

If you own a lot of income-generating investments, you’ll need to pay attention to the tax rules for dividends, which belong to one of two categories:

  • Qualified. These dividends are paid by U.S. corporations or qualified foreign corporations. Qualified dividends are, like long-term gains, subject to a maximum tax rate of 20%, though many people are eligible for a 15% rate. (Note: These rates don’t account for the possibility of the 3.8% net investment income tax.)
  • Nonqualified. These dividends — which include most distributions from real estate investment trusts and master limited partnerships — receive a less favorable tax treatment. Like short-term gains, nonqualified dividends are taxed at your ordinary-income tax rate.

If you have any questions regarding Essential Business Accounting, Domestic Taxation, International Taxation, IRS Representation, U.S. Tax Implications of Real Estate Transactions or Financial Statements, please give us a call at 305-274-5811.

Source: Thomson Reuters

 

IRS updates FAQs for 2021 Child Tax Credit and Advance Child Tax Credit Payments

Posted by Admin Posted on Jan 21 2022

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WASHINGTON — The Internal Revenue Service today updated frequently asked questions (FAQs) for the 2021 Child Tax Credit and Advance Child Tax Credit to help eligible families properly claim the credit when they prepare and file their 2021 tax return.

This extensive FAQ update PDF includes multiple streamlined questions for use by taxpayers and tax professionals and is being issued as expeditiously as possible.

The updates can be found in:

Recipients of advance Child Tax Credit payments will need to compare the amount of payments received during 2021 with the amount of the Child Tax Credit that can be claimed on their 2021 tax return.

Those that received less than the amount they are eligible for can claim a credit for the remaining amount. Those that received more than they are eligible for may need to repay some or all of the excess amount.

The IRS will send Letter 6419 in January of 2022 to provide the total amount of advance Child Tax Credit payments that were received in 2021. The IRS urges taxpayers receiving these letters to make sure they hold onto them to assist them in preparing their 2021 federal tax returns in 2022.

More information about reliance is available.

IRS-FAQ

If you have any questions regarding Essential Business Accounting, Domestic Taxation, International Taxation, IRS Representation, U.S. Tax Implications of Real Estate Transactions or Financial Statements, please give us a call at 305-274-5811.

Source: IRS

2022 tax filing season begins Jan. 24; IRS outlines refund timing and what to expect in advance of April 18 tax deadline

Posted by Admin Posted on Jan 21 2022

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The Internal Revenue Service announced that the nation's tax season will start on Monday, January 24, 2022, when the tax agency will begin accepting and processing 2021 tax year returns.

The January 24 start date for individual tax return filers allows the IRS time to perform programming and testing that is critical to ensuring IRS systems run smoothly. Updated programming helps ensure that eligible people can claim the proper amount of the Child Tax Credit after comparing their 2021 advance credits and claim any remaining stimulus money as a Recovery Rebate Credit when they file their 2021 tax return.

"Planning for the nation's filing season process is a massive undertaking, and IRS teams have been working non-stop these past several months to prepare," said IRS Commissioner Chuck Rettig. "The pandemic continues to create challenges, but the IRS reminds people there are important steps they can take to help ensure their tax return and refund don't face processing delays. Filing electronically with direct deposit and avoiding a paper tax return is more important than ever this year. And we urge extra attention to those who received an Economic Impact Payment or an advance Child Tax Credit last year. People should make sure they report the correct amount on their tax return to avoid delays."

The IRS encourages everyone to have all the information they need in hand to make sure they file a complete and accurate return. Having an accurate tax return can avoid processing delays, refund delays and later IRS notices. This is especially important for people who received advance Child Tax Credit payments or Economic Impact Payments (American Rescue Plan stimulus payments) in 2021; they will need the amounts of these payments when preparing their tax return. The IRS is mailing special letters to recipients, and they can also check amounts received on IRS.gov.

Like last year, there will be individuals filing tax returns who, even though they are not required to file, need to file a 2021 return to claim a Recovery Rebate Credit to receive the tax credit from the 2021 stimulus payments or reconcile advance payments of the Child Tax Credit. People who don't normally file also could receive other credits.

April 18 tax filing deadline for most

The filing deadline to submit 2021 tax returns or an extension to file and pay tax owed is Monday, April 18, 2022, for most taxpayers. By law, Washington, D.C., holidays impact tax deadlines for everyone in the same way federal holidays do. The due date is April 18, instead of April 15, because of the Emancipation Day holiday in the District of Columbia for everyone except taxpayers who live in Maine or Massachusetts. Taxpayers in Maine or Massachusetts have until April 19, 2022, to file their returns due to the Patriots' Day holiday in those states. Taxpayers requesting an extension will have until Monday, October 17, 2022, to file.

Awaiting processing of previous tax returns? People can still file 2021 returns

Rettig noted that IRS employees continue to work hard on critical areas affected by the pandemic, including processing of tax returns from last year and record levels of phone calls coming in.

"In many areas, we are unable to deliver the amount of service and enforcement that our taxpayers and tax system deserves and needs. This is frustrating for taxpayers, for IRS employees and for me," Rettig said. "IRS employees want to do more, and we will continue in 2022 to do everything possible with the resources available to us. And we will continue to look for ways to improve. We want to deliver as much as possible while also protecting the health and safety of our employees and taxpayers. Additional resources are essential to helping our employees do more in 2022 – and beyond."

The IRS continues to reduce the inventory of prior-year individual tax returns that have not been fully processed. As of December 3, 2021, the IRS has processed nearly 169 million tax returns. All paper and electronic individual 2020 refund returns received prior to April 2021 have been processed if the return had no errors or did not require further review.

Taxpayers generally will not need to wait for their 2020 return to be fully processed to file their 2021 tax returns and can file when they are ready.

Key information to help taxpayers

The IRS encourages people to use online resources before calling. Last filing season, as a result of COVID-era tax changes and broader pandemic challenges, the IRS phone systems received more than 145 million calls from January 1 – May 17, more than four times more calls than in an average year. In addition to IRS.gov, the IRS has a variety of other free options available to help taxpayers, ranging from free assistance at Volunteer Income Tax Assistance and Tax Counseling for the Elderly locations across the country to the availability of the IRS Free File program.

"Our phone volumes continue to remain at record-setting levels," Rettig said. "We urge people to check IRS.gov and establish an online account to help them access information more quickly. We have invested in developing new online capacities to make this a quick and easy way for taxpayers to get the information they need."

Last year's average tax refund was more than $2,800. More than 160 million individual tax returns for the 2021 tax year are expected to be filed, with the vast majority of those coming before the traditional April tax deadline.

Overall, the IRS anticipates most taxpayers will receive their refund within 21 days of when they file electronically if they choose direct deposit and 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.

By law, the IRS cannot issue a refund involving the Earned Income Tax Credit or Additional Child Tax Credit before mid-February, though eligible people may file their returns beginning on January 24. The law provides this additional time to help the IRS stop fraudulent refunds from being issued.

Some returns, filed electronically or on paper, may need manual review, which delays the processing, if our systems detect a possible error or missing information, or there is suspected identity theft or fraud. Some of these situations require us to correspond with taxpayers, but some do not. This work does require special handling by an IRS employee so, in these instances, it may take the IRS more than the normal 21 days to issue any related refund. In those cases where IRS is able to correct the return without corresponding, the IRS will send an explanation to the taxpayer.

File electronically and choose direct deposit

To speed refunds, the IRS urges taxpayers to file electronically with direct deposit information as soon as they have everything they need to file an accurate return. If the return includes errors or is incomplete, it may require further review that may slow the tax refund. Having all information available when preparing the 2021 tax return can reduce errors and avoid delays in processing.

Most individual taxpayers file IRS Form 1040 or Form 1040-SR once they receive Forms W-2 and other earnings information from their employers, issuers like state agencies and payers. The IRS has incorporated recent changes to the tax laws into the forms and instructions and shared the updates with its partners who develop the software used by individuals and tax professionals to prepare and file their returns. Forms 1040 and 1040-SR and the associated instructions are available now on IRS.gov. For the latest IRS forms and instructions, visit the IRS website at IRS.gov/forms.

Free File available January 14

IRS Free File will open January 14 when participating providers will accept completed returns and hold them until they can be filed electronically with the IRS. Many commercial tax preparation software companies and tax professionals will also be accepting and preparing tax returns before January 24 to submit the returns when the IRS systems open.

The IRS strongly encourages people to file their tax returns electronically to minimize errors and for faster refunds – as well having all the information they need to file an accurate return to avoid delays. The IRS's Free File program allows taxpayers who made $73,000 or less in 2021 to file their taxes electronically for free using software provided by commercial tax filing companies. More information will be available on Free File later this week.

In addition to IRS Free File, the IRS's Volunteer Income Tax Assistance and Tax Counseling for the Elderly programs free basic tax return preparation to qualified individuals. 

Watch for IRS letters about advance Child Tax Credit payments and third Economic Impact Payments

The IRS started sending Letter 6419, 2021 advance Child Tax Credit, in late December 2021 and continues to do so into January. The letter contains important information that can help ensure the return is accurate. People who received the advance CTC payments can also check the amount of the payments they received by using the CTC Update Portal available on IRS.gov.

Eligible taxpayers who received advance Child Tax Credit payments should file a 2021 tax return to receive the second half of the credit. Eligible taxpayers who did not receive advance Child Tax Credit payments can claim the full credit by filing a tax return.

The IRS will begin issuing Letter 6475, Your Third Economic Impact Payment, to individuals who received a third payment in 2021 in late January. While most eligible people already received their stimulus payments, this letter will help individuals determine if they are eligible to claim the Recovery Rebate Credit for missing stimulus payments. If so, they must file a 2021 tax return to claim their remaining stimulus amount. People can also use IRS online account to view their Economic Impact Payment amounts.

Both letters include important information that can help people file an accurate 2021 tax return. If the return includes errors or is incomplete, it may require further review while the IRS corrects the error, which may slow the tax refund. Using this information when preparing a tax return electronically can reduce errors and avoid delays in processing.

The fastest way for eligible individuals to get their 2021 tax refund that will include their allowable Child Tax Credit and Recovery Rebate Credit is by filing electronically and choosing direct deposit.

Tips to make filing easier

To avoid processing delays and speed refunds, the IRS urges people to follow these steps:

Organize and gather 2021 tax records including Social Security numbers, Individual Taxpayer Identification Numbers, Adoption Taxpayer Identification Numbers, and this year's Identity Protection Personal Identification Numbers valid for calendar year 2022.

Check IRS.gov for the latest tax information, including the latest on reconciling advance payments of the Child Tax Credit or claiming a Recovery Rebate Credit for missing stimulus payments. There is no need to call.

Set up or log in securely at IRS.gov/account to access personal tax account information including balance, payments, and tax records including adjusted gross income.

Make final estimated tax payments for 2021 by Tuesday, January 18, 2022, to help avoid a tax-time bill and possible penalties.

Individuals can use a bank account, prepaid debit card or mobile app to use direct deposit and will need to provide routing and account numbers. Learn how to open an account at an FDIC-Insured bank or through the National Credit Union Locator Tool.

File a complete and accurate return electronically when ready and choose direct deposit for the quickest refund.

Key filing season dates

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

  • January 14: IRS Free File opens. Taxpayers can begin filing returns through IRS Free File partners; tax returns will be transmitted to the IRS starting January 24. Tax software companies also are accepting tax filings in advance.
     
  • January 18: Due date for tax year 2021 fourth quarter estimated tax payment.
     
  • January 24: IRS begins 2022 tax season. Individual 2021 tax returns begin being accepted and processing begins
     
  • January 28: 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.
     
  • April 18: Due date to file 2021 tax return or request extension and pay tax owed due to Emancipation Day holiday in Washington, D.C., even for those who live outside the area.
     
  • April 19: Due date to file 2021 tax return or request extension and pay tax owed for those who live in MA or ME due to Patriots' Day holiday
     
  • October 17: Due date to file for those requesting an extension on their 2021 tax returns

Planning ahead

It's never too early to get ready for the tax-filing season ahead. For more tips and resources, check out the Get Ready page on IRS.gov.

If you have any questions regarding Essential Business Accounting, Domestic Taxation, International Taxation, IRS Representation, U.S. Tax Implications of Real Estate Transactions or Financial Statements, please give us a call at 305-274-5811.

Source: IRS

Tax filing step 1: Gather all year-end income documents

Posted by Admin Posted on Jan 13 2022

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As taxpayers are getting ready to file their taxes, the first thing they should do is gather their records. To avoid processing delays that may slow their refund, taxpayers should gather all year-end income documents before filing a 2021 tax return.

It's important for people to have all the necessary documents before starting to prepare their return. This helps them file a complete and accurate tax return. Here are some things taxpayers need to have before they begin doing their taxes.

  • Social Security numbers of everyone listed on the tax return. Many taxpayers have these numbers memorized. Still, it's a good idea to have them on hand to double check that the numbers on the tax return are correct. An SSN with one number wrong or two numbers switched will cause processing delays.
  • Bank account and routing numbers. People will need these for direct deposit refunds. Direct deposit is the fastest way for taxpayers to get their money and avoids a check getting lost, stolen or returned to IRS as undeliverable.
  • Don't have a bank account? Learn how to open an account at an FDIC-insured bank or through the National Credit Union Locator Tool. Veterans can access the Veterans Benefits Banking Program.
  • Forms W-2 from employer(s).
  • Forms 1099 from banks, issuing agencies and other payers including unemployment compensation, dividends, distributions from a pension, annuity or retirement plan.
  • Form 1099-K, 1099-MISC, W-2 or other income statement for workers in the gig economy.
  • Form 1099-INT for interest received.
  • Other income documents and records of virtual currency transactions.
  • Form 1095-A, Health Insurance Marketplace Statement. Taxpayers will need this form to reconcile advance payments or claim the premium tax credit.
  • Letter 6419, 2021 Total Advance Child Tax Credit Payments, to reconcile advance child tax credit payments.
  • Letter 6475, Your 2021 Economic Impact Payment, to determine eligibility to claim the Recovery Rebate Credit.

Forms usually start arriving by mail or are available online from employers and financial institutions in January. Taxpayers should review them carefully. If any information shown on the forms is inaccurate, the taxpayer should contact the payer ASAP for a correction.

If you have any questions regarding Essential Business Accounting, Domestic Taxation, International Taxation, IRS Representation, U.S. Tax Implications of Real Estate Transactions or Financial Statements, please give us a call at 305-274-5811.

 Source: IRS

Create an Online Account to view your balances, make payments, get transcripts, and more.

Posted by Admin Posted on Jan 13 2022

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The IRS offers an online account application for individual taxpayers. With online account access, you can view:

  • The total amount you owe, including balance details by year;
  • Your payment history and any scheduled or pending payments
  • Key information from your most recent tax return;
  • Payment plan details, if you have one;
  • Digital copies of select notices from the IRS;
  • Your Economic Impact Payments, if any;
  • Your address on file; and
  • Authorization requests from tax professionals.

You can also:

  • Make a payment online;
  • See payment plan options and request a plan via Online Payment Agreement;
  • Access your tax records via Get Transcript; and
  • Approve or reject authorization requests from tax professionals.

However, some taxpayers have difficulty satisfying the Identification (ID) authentication requirements of the application. These requirements are necessary to screen out unauthorized access and to prevent potential hacks of taxpayer information. Read on to learn how to pass these ID requirements and enroll.

To register for an online services account, you will need the following:

  • Email address;
  • Social Security Number (SSN) or Individual Tax Identification Number (ITIN);
  • Tax filing status and mailing address;
  • One financial account number linked to your name:
    • Last 8 digits of a credit card number (other than American Express, debit or corporate cards);
    • Student loan account number, unless issued by Nelnet;
    • Mortgage or home equity loan number;
    • Home equity line of credit (HELOC) account number; or
    • Auto loan number; and
  • Mobile phone linked to your name (for faster registration) or ability to receive an activation code by mail.

Please note that your account balance will update only once every 24 hours, usually overnight, and check/money order payments may take up to three weeks to appear on your account.

If you have any questions regarding Essential Business Accounting, Domestic Taxation, International Taxation, IRS Representation, U.S. Tax Implications of Real Estate Transactions or Financial Statements, please give us a call at 305-274-5811.

Source: TAS

I got a notice or letter from the IRS – now what do I do?

Posted by Admin Posted on Jan 13 2022

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The IRS will send a notice or a letter for any number of reasons, including:

  • Identifying a specific issue on your federal tax return or account that needs action;
  • Explaining changes to your return or account;
  • Asking for missing or more information; or
  • Requesting a payment.

You can handle most of this correspondence without calling, visiting an IRS office, or involving the Taxpayer Advocate Service (TAS) by following the instructions in the notice or letter.

However, sometimes these letters or notices can be confusing and hard to understand. Here are some tips to help you when you receive a notice or letter from the IRS.

1. Determine the reason the notice or letter was sent

Your notice or letter will explain the reason for the contact and give you instructions on how to handle the issue. If you need help understanding the information provided, the IRS has a Search Notice and Letters feature on the Understanding Your IRS Notice or Letter page. TAS also has a tool called the Taxpayer Roadmap, which includes copies of common letters and notices that you can use.

You can find the notice (CP) or letter (LTR) number on either the top or the bottom right-hand corner of your correspondence. Once you find it, you can enter that number in the search feature and you will be taken to a corresponding page that has more general information that may help.

The Taxpayer Advocate Service has a GET HELP section on various topics that can lead you through important information and steps and actions necessary to help you resolve many common tax issues.

2. Do I need to reply?

Whether you need to reply or not will depend on the issue.

If you agree with the information or change listed on the notice or letter, generally there is no need to reply. If the action causes a balance due, then you should take action immediately. Other times, even if you do agree, you may need to provide specific information to resolve the issue, particularly if you need to verify your identity.

If you disagree, you will need to act as soon as possible, as penalties and interest may be accruing, depending on the circumstances. The letter should outline what that action is and include a due date for your response.

Whether you agree or not, if it requires a reply – do not delay! Delaying can create more issues. See more on this below.

3. When to respond

If your notice or letter requires a response by a specific date, there are many reasons you’ll want to comply. Here are just a few:

  • minimize additional interest and penalty charges;
  • prevent further action from being taken on the account or against you; and
  • preserve your appeal rights if you don’t agree.

If you need more time to respond than the notice or letter indicates, contact the IRS using the contact information included on the notice or letter or call the general number, shown below, but only if a specific contact is not indicated.

4. How and where to reply

All notices and letters should tell you where to send your response, whether it’s to a mailing address or fax number. (Note: The IRS generally does not allow communication via email yet, although they are currently working on developing some alternative digital communication options.)

Follow the instructions in your notice or letter. See the IRS Operational status page for IRS customer service timeframes and updates as there are still some delays due to the ongoing pandemic.

5. What if I want to talk to someone?

Each notice or letter should include contact information. Some phone numbers on notices or letters are general IRS toll-free numbers, but if a specific employee is working your case, it will show a specific phone number to reach that employee or the department manager. The telephone number is usually found in the upper right-hand corner of your notice or letter.

As a last resort, you can use the IRS toll-free number at 800-829-1040. Have a copy of your tax return and the correspondence available when you call. But your best option is to use the specific number or address provided.

6. Wait – I still need help

You can resolve most notices or letters without help, but you can also get the help of a professional – either the person who prepared your return, or another tax professional.

If you can’t afford to hire a tax professional to assist you, you may be eligible for free or low cost representation from an attorney, certified public accountant, or enrolled agent associated with a Low Income Taxpayer Clinic (LITC). In addition, LITCs can help if you speak English as a second language and need help understanding the notice or letter. For more information or to find an LITC near you, see the LITC page at www.taxpayeradvocate.irs.gov/litcmap or IRS Publication 4134, Low Income Taxpayer Clinic List.

If you have any questions regarding Essential Business Accounting, Domestic Taxation, International Taxation, IRS Representation, U.S. Tax Implications of Real Estate Transactions or Financial Statements, please give us a call at 305-274-5811.

Source: TAS                                   

Decoding IRS Transcripts and the New Transcript Format: Part II

Posted by Admin Posted on Jan 13 2022

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While IRS transcripts can be helpful, reading and understanding them can be complicated. The IRS’s processing system, the Integrated Data Retrieval System (IDRS), uses a system of codes to identify a transaction the IRS is processing and to maintain a history of actions posted to a taxpayer’s account. These Transaction Codes (TCs) basically provide processing instructions to the IRS’s system. To make IRS transcripts user-friendly for the public, the IRS provides a literal description of each TC shown on a taxpayer’s IRS transcript. Although helpful, sometimes these descriptions don’t adequately explain the account transaction.  Document 11734, Transaction Code Pocket Guide, is a summarized list of TCs taken from section 8A of the IRS’s Document 6209, ADP and IDRS Information Reference Guide, both of which may be helpful when reviewing an IRS transcript.

A Closer Look at the IRS Record of Account Transcript

As shown in the fictitious example below, the Record of Account Transcript will summarize any balance due or overpayment on a taxpayer’s account for the specified year at the top of the form. If the account reflects a balance due, the transcript provides the date to which any accrued penalty and interest were calculated. Next, the transcript will show specific information from the taxpayer’s return – or the corrected amounts resulting from any changes to the return caused by either a request from the taxpayer or an IRS determination. This is noteworthy should a taxpayer find it necessary to file an amended return. The correct figures must be used as the starting point on Form 1040X, Amended US Individual Income Tax Return, when requesting any subsequent account adjustments – otherwise, processing problems may occur.

Figure 1

IRS Record of Account Transcript example

The Tax Account Portion of the Record of Accounts

This section of the Record of Accounts Transcript provides details regarding the taxpayer’s account activity, as shown in Figure 2.

Figure 2


Tax Account Portion of the Record of Accounts Transcript example

Some of the common TCs on the tax account portion of a transcript are:

  • TC 150 – Date of filing and the amount of tax shown on the taxpayer’s return when filed – or as corrected by the IRS when processed;
  • TC 196 – Interest Assessed;
  • TC 276 – Failure to Pay Tax Penalty;
  • TC 291 – Abatement Prior Tax Assessment;
  • TC 300 – Additional Tax or Deficiency Assessment by Examination Division or Collection Division;
  • TC 420 – Examination Indicator reflects that a return is under examination consideration though the return may or may not ultimately be audited;
  • TC 428 – Examination or Appeals Case Transfer;
  • TC 460 – Extension of Time for Filing;
  • TC 480 – Offer in Compromise Pending;
  • TC 494 – Notice of Deficiency;
  • TC 520 – IRS Litigation Instituted;
  • TC 530 – Indicates that an account is currently not collectible;
  • TC 582 – Lien Indicator;
  • TC 768 – Earned Income Credit;
  • TC 806 – Reflects any credit the taxpayer is given for tax withheld, as shown on the tax return and the taxpayer’s information statements such as Forms W-2 and 1099 attached to the taxpayer’s tax return; and
  • TC 846 – Represents the issuance of a taxpayer’s refund if the credits and withholding exceed the amount of tax due, and there are no issues with the return, the system will automatically generate a refund.

In the above example, tax credits, withholding credits, credits for interest the IRS owes to a taxpayer, and tax adjustments that reduce the amount of tax owed, are shown as negative amounts on the tax account transcript. In other words, negative amounts on an IRS transcript can be considered amounts “in the taxpayer’s favor.”

Because TCs on a taxpayer’s account are essentially instructions to the IRS system, it is important to note that some TCs are input for informational reasons not directly associated with an accounting-related dollar amount.

I hope we have not confused you. Using the IRS’s Pocket Guide should help you understand the transcript and provide you with the key information you are seeking.

The Tax Return Portion of the Record of Accounts

The tax return portion of the Record of Accounts depicts most of the line entries on the taxpayer’s tax return when it was filed. Figure 3 provides only the income section of our fictitious example; however, the actual Record of Accounts will depict all the sections of a taxpayer’s filed tax return and can be useful when the taxpayer has not maintained a copy of his or her return and needs to know what was reported to the IRS on his or her return. 

Figure 3


Tax Return Portion of the Record of Accounts transcript example

New Tax Transcript Format and Utilizing a Customer File Number

In July 2021, IRS updated a webpage on IRS.gov to educate taxpayers regarding the new transcript format and use of the “customer file number,” which was designed to better protect taxpayer data. This new format partially masks personally identifiable information. However, financial data will remain visible to allow for tax return preparation, tax representation, or income verification. These changes apply to transcripts for both individual and business taxpayers.

Here’s what is visible on the new tax transcript format:

  • Last four digits of any Social Security number on the transcript: XXX-XX-1234;
  • Last four digits of any Employer Identification Number on the transcript: XX-XXX1234;
  • Last four digits of any account or telephone number;
  • First four characters of first name and first four characters of the last name for any individual (first three characters if the name has only four letters);
  • First four characters of any name on the business name line (first three characters if the name has only four letters);
  • First six characters of the street address, including spaces; and
  • All money amounts, including wage and income, balance due, interest, and penalties.

For security reasons, the IRS no longer offers fax service for most transcript types to both taxpayers and third parties and has stopped its third-party mailing service via Forms 4506, 4506-T, and 4506T-EZ.

Lenders and others who use the Forms 4506 series to obtain transcripts for income verification purposes should consider other options such as participating in the Income Verification Express Service or having the customer provide the transcript.

Only individual taxpayers may use Get Transcript Online or Get Transcript by Mail.  Because the full Taxpayer Identification Number is no longer visible, the IRS created an entry for a Customer File Number. The Customer File Number is a ten-digit number assigned by the third-party, for example, a loan number that can be manually entered when the taxpayer completes his or her Get Transcript Online or Get Transcript by Mail request. This Customer File Number will then display on the transcript when it is downloaded or mailed to the taxpayer. The transcript’s Customer File Number serves as a tracking number that enables a lender or other third party to match the transcript to the taxpayer making the transcript request.      

Conclusion

Taxpayers needing tax return, tax account, or information return information may quickly find what they need through the IRS’s Get Transcript Online portal or their online account. I continue to urge the IRS to expand the Online Account functionality and increase its availability to practitioners and businesses. The current functionalities provide many basic and helpful information, and I look forward to continued expansion of functionality. Transcripts are free and provide a wealth of information. I encourage taxpayers to explore this option. If an IRS transcript can meet a taxpayer’s needs, it may be preferable to trying to contact the IRS or other more time-consuming methods of requesting tax account information.

If you have any questions regarding Essential Business Accounting, Domestic Taxation, International Taxation, IRS Representation, U.S. Tax Implications of Real Estate Transactions or Financial Statements, please give us a call at 305-274-5811.

Source: TAS         

Decoding IRS Transcripts and the New Transcript Format: Part I

Posted by Admin Posted on Jan 13 2022