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TaxMama’s® TaxQuips December 2023 Roundup

2022-12-22 by Eva Rosenberg

 

It’s TaxQuips time from TaxMama.com® .
Today TaxMama® wants to alert you to some major tax news taking place before the year ends.

 

 

 

 

Dear Family,

As we come to the end of an incredibly busy year, there is still so much going on.

Congress worked through the night to pass a 4,155 page Omnibus Act to get the budget passed. It’s on its way to the President for signature.

They are also on their way to pass a SECURE Act 2.0 – that provides all kinds of tax and retirement-related benefits.

For now, you can find a really good summary on the Kiplinger website.

In addition, the Joint Committee on Taxation just released a summary of President Trump’s tax returns for 2015 – 2020 to the House Ways and Means Committee. These are not the actual returns, just summaries of his personal tax returns and details of some of his businesses. CNBC has some comments about this – and the audit that was started while Trump was a sitting president.

Whew…your tax pros and writers and instructors are going to have a lot of material to dig through. I am hearing of people cutting vacations short to get you the details.  

You will find several benefits in the areas of retirement contributions and distributions, and tax credits.

The really bad news for 2023-2024 EA candidates?
These new laws will be on your exams! So if you can, try to finish passing all parts by February 28, 2023 to avoid all these changes.

We’ll deal with all of this next year.

In the meantime, sit back, relax and enjoy your holidays!

 

And remember, you can find answers to all kinds of questions about taxes and business issues, and EA Education, free. Where? Where else? At http://iTaxMama.com/AskQuestion

To make comments, please drop into the TaxQuips Forum.

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taxmama-Deadline_Coming

2022-10-12 by Eva Rosenberg

It’s TaxQuips time from TaxMama.com® .
Today TaxMama® wants to talk to you about the very last filing deadline for calendar year taxpayers filing 2021 tax returns.

 

Dear Family,

The time has come, the Walrus said, to speak of many things.
Of needless delays, sad tales and ignoring all the nagging pings.

(apologies to Charles Lutwidge Dodgson)

The good news is, you have a couple of extra days to finish filing all your 2021 final returns  - until Monday, October 17, 2022, instead of October 15th.

That includes personal tax returns and calendar-year C corporations returns (among certain others).

The better news (depending on your perspective) for filing deadlines – is the additional time, until February 15, 2023, available to people who were affected by the various, hurricanes, storms and disasters including Alaska, the entire East Cost, and even Puerto Rico. (Yup they file US returns, too.)
https://www.irs.gov/newsroom/tax-relief-in-disaster-situations#collapseCollapsible1665513380562

more->

The bad news

And this is really, really bad. Tax professionals are reporting actual threats and hostile actions from their last minute procrastinating clients. This isn’t just something to brush aside. Tax professionals have actually been shot by angry clients – and the industry is responding.

Many tax professionals have now come to the conclusion that they will be firing uncooperative clients. Some will be fired now – even with just a few days left to go. Others will be given solid deadlines to meet next year – and if not met, those clients will be shown the door. Still other clients who have been bullying and rude will be rejected forevermore.

In fact, to avoid problems, I have always had a policy in place – if you’re rude to my staff, you are never welcome to return. Period. Other firms are now adopting this policy, as well.

The biggest issue – taxpayer procrastination. Before April 15th, tax pros review all the information and look at the data from last year to determine if you will need to make a 2021 payment when they file the extension for you. Around that time, or soon afterwards, they give you a list of “To-Dos” – documents to get in order to complete your tax return.

Then what happens?

The cooperative clients get the materials and give everything to the tax pros – and their tax returns get done quickly.

The procrastinators? The firm has to waste time calling, emailing or mailing requests to them repeatedly. And finally, the (often) very charming client shows up about a week before the final filing deadline all proud, with most, but not all, of the requested documents, expecting you to finish their returns immediately. And when rebuffed in favor of clients who got their materials in before they did – they are suddenly not so charming anymore.

So, for now?  What should you do if your tax return is not done yet?

  • If you’re working with a tax professional, get them EVERYTHING they will need in order to complete your tax return by Friday. Leave nothing out.
    • If you are still missing some information – either get off your keister and get the records or WRITE the estimated amounts to be used for this year’s tax return. Don’t expect your tax pro to do the digging this weekend. There just isn’t time.


  • If you have been turned away by your tax pro at this late date, don’t fight them.
    They will return any ORIGINAL documents you gave them. If you gave them only copies or scans of documents, then you should have them. It’s not their responsibility to dig up those records for you.
    • Log into your favorite online tax prep software and start entering all the data TODAY. You can finish it up over the weekend – after you have done your own work to dig up the missing information.


Honestly, these days, practically everything is online. You can log into your various accounts and download year-end statements for mortgages and other loans, credit cards, investment accounts – perhaps even medical expenses.

You don’t have time and just have to estimate amounts? Fine. Do that. But explain how you arrived at those estimates by including a statement with your tax return. And explain that you will file an amended return once you get the actual amounts.

Yes, even if you’re wrong (try not to be too wrong, to avoid penalties), you have 3 years to file an amended return.

But, whatever you do – FILE T TAX RETURN. Not filing, you’re immediately subject to a  late filing penalty of 5% per month. Does that start in April when the tax return was originally due?
Or does it start in October if you filed an extension? I don’t actually know for sure; but think it will start in April – so you’ve instantly incurred a 25% penalty. OUCH!

Sorry to make this such a negative post. But the IRS now requires tax professionals to apply a much higher level of due diligence and verification than ever before. In addition, we have several new tax law changes that took effect this year. And so many of the advance funds or corrected refunds that the IRS issued – that it’s taking longer than ever to prepare tax returns – even for the ideal clients. The IRS has issued so many erroneous collections notices (because payments were not posted) – that we have a lot of other time demands to prevent these collections actions.

People are working longer hours, often through the night. Tempers are flaring – both among clients and tax pros. Expect the industry to change next year. If you want to work with your tax professional next year – treat them with respect and respond timely to all information requests.

For now – don’t call your tax pro about “where is my return?”
When it’s ready, THEY will reach out to you.

And remember, you can find answers to all kinds of questions about taxes and business issues, and EA Education, free. Where? Where else? At http://iTaxMama.com/AskQuestion

To make comments, please drop into the TaxQuips Forum.

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TaxMama’s® TaxQuips An Upcoming Deadline - AND Is it Really the IRS at my Door?

2022-09-09 by Eva Rosenberg

It’s TaxQuips time from TaxMama.com® .
Today TaxMama® wants to talk to you about some imminent deadlines – and about the IRS dropping by your place of business.

 

 

 

Dear Family,

This year has flown by so quickly. I blinked and now it’s almost autumn.

First, the upcoming deadline – September 15th is the final filing deadline for calendar year (December 31st) partnerships and S corporations.

Let me be clear. There are no  more extensions. So if you haven’t gotten all your information together yet – do it NOW. Even if something is missing or incomplete – work out reasonable estimates for the missing information. Include a disclosure statement with your tax return to explain which amounts are estimated, why, and how you arrived at your estimate.

BUT FILE THAT RETURN ON TIME – REGARDLESS!!!!
Not filing generates instant late filing penalties – several actually – because there are penalties for not filing the forms 1065 and 1120S, and separate penalties for not filing the Schedules K-1. This can run into the thousands of dollars.  

Great news: One interesting last-minute tip. Since your 2021 business and personal returns are on extension, you still have time to reduce your 2021 taxes if you open and fund a retirement plan by September 15th (for partnerships and S corporation) and October 15th (for Schedule Cs and C corporations).

Join me for a free webinar on Monday September 12th at 3:00 pm Pacific
to learn how to open and use a Solo401k before your filing deadlines.
https://iTaxMama.com/Special-Webinar-Solo-401k

Sad news: Incidentally, if you are  working with a tax professional and haven’t given them your information yet – but they have been requesting documents for months…don’t expect them to finish your tax return by the deadline. And, potentially, expect to be fired. There’s a lot of talk in the industry among tax practitioners who are exhausted and resent having to baby-sit procrastinating clients.

Moving on to more cheerful matters – the IRS is coming. The IRS is coming!

Yup. Even before Congress passed the Inflation Bill providing additional funding to the IRS for new hires and operations – the IRS has upped their field operations.
https://www.irs.gov/newsroom/understanding-how-the-irs-contacts-taxpayers-avoiding-scams-and-how-to-know-its-really-the-irs-reaching-out

Revenue Officers (collections) have started to go out into the field. They have three purposes:

  • Naturally, to collect past due taxes – especially where the taxpayer has been unresponsive. In which case, the visit might be unannounced.
  • A regular, scheduled visit to structure a payment plan to settle their business or payroll tax debt.
  • To educate employers who are starting to fall behind on their payroll tax deposits – before they get too far behind.


Revenue Agents (auditors) are also heading out into the field – to conduct audits.

In most cases, there will be mailed correspondence before they show up. If you didn’t get any correspondence, it could be one of these reasons:

  • You moved and didn’t file a change of address with the IRS.
  • You haven’t had the courage to open your IRS mail and you’re waiting to show it to your tax professional.
  • It could be someone from the IRS Criminal Investigation division
    But if you’ve never done anything shady, I wouldn’t worry about that.
  • The visitor is not really from the IRS.


 

It’s the unannounced (or unexpected) visits that I want to talk to you about – to help you verify if they are really from the IRS. There are a lot of scam artists out there – and they are worse than the IRS.

So let’s start with what a real IRS agent will have:

  • They have “pocket commission” – their official card and badge.
    • Problem: Do you know what a REAL “pocket commission” looks like?
      I don’t. And neither did most of the tax professionals in our Stakeholder Liaison discussion group dealing with IRS Systemic Issues.


  • They have an HSPD12 card – that describes the agent’s height, appearance, etc.
    • Problem: Again, easy to create a phony document with the scammer’s description, since most people don’t really know what that card looks like.
    • Yes – it has an IRS contact number you can call to verify them. But if they are con artists, the phone number on their card will go to a friend or colleague.




With the potential to create fake ID’s how can you be SURE the person at your door really is from the IRS?

A real IRS agent will generally have information taken directly from your personal, business and or payroll tax return that you have recently filed.
No one else should have that.

There are some more specifics here
https://www.irs.gov/newsroom/how-to-know-if-its-really-the-irs-calling-or-knocking-on-your-door

If you are still uncomfortable (or start out that way), here are your options when the IRS shows up unannounced – we were assured by the IRS managers at the Stakeholder Liaison meeting that this is acceptable:

  • For taxpayers – Ask them for their business card. Then, politely refuse to let them in until they first contact your tax professional – and provide your tax pro’s contact information.
    • Call your tax pro immediately and sign a power of attorney so they can handle the contacts.
    • Or if you want to handle it yourself, arrange to schedule a meeting at an IRS office facility. You can verify all IRS campus addresses online.


  • For tax professionals – Ask them for their business card.
    • Reschedule the appointment either at an IRS campus – or later, after you have had time to verify their identity objectively.
    • Verify their identity. Verify that such a person really works for the IRS and ask for a description. Do this by contacting one of these IRS groups:





We have been assured that, when handled politely, the IRS agent will be gracious about this delay on their visit.

But remember, if you did get advance notice and you don’t want to be facing that person alone – contact your tax practitioner immediately. That would be an Enrolled Agent, a CPA or an attorney.

The IRS does have a verification phone number – on the real HSPD12 cards. But they don’t want to make it public, for security reasons.

And remember, you can find answers to all kinds of questions about taxes and business issues, and EA Education, free. Where? Where else? At http://iTaxMama.com/AskQuestion

To make comments, please drop into the TaxQuips Forum.

 

Download the MP3 (0:00min, 0MB) or listen now...

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Where you can you can read the full post


TaxMama’s® TaxQuips Inflation Bill Highlights and More

2022-08-18 by Eva Rosenberg

 


It’s TaxQuips time from TaxMama.com® .
Today TaxMama® wants talk to give you some basics about the new Inflation Reduction Act. And some observations.

 

Dear Family,

By now, you are aware that President Biden has signed the Inflation Reduction Act into law. Although there are 273 pages to this Bill, only a few issues may affect you directly. I will give you more details about this Bill in the next couple of weeks. Meanwhile, here are the highlights:

  • Extending the Premium Tax Credits (buying insurance through the Marketplace and having the government pay part of your premiums) for another 3 years
  • Increased tax credits for alternative fuel vehicles
  • Increased tax credits for more energy efficient homes and commercial properties
  • For those small businesses involved in qualified research activities, the research credit has doubled, and can be used to reduce payroll taxes.


The Bill also adds a corporate Alternative Minimum Tax of 15%. But that only applies to corporations with a BILLION DOLLARS of book income, or more.

more->
Please excuse this editorial comment about all the screaming I have heard about how this tax will be passed on to consumers in higher prices:

A corporation with a BILLION DOLLARS of profits, that has to pay out $150 million dollars, still gets to keep $850 MILLION dollars of profits. Isn’t that enough? Why do they need to pass on the cost of the additional taxes to consumers?

Are you worried about the $80 billion going to the IRS and the 87,000 new IRS agents being hired?

Please don’t. Let’s face it, right now, it’s practically impossible to reach someone at the IRS on the phone. The fact is, the IRS provided only a 19.5% level of service, according to TIGTA (the agency that audits the IRS). Paper mail and tax filings of any kind are delayed for months because the IRS doesn’t have the staff to process all that input.

And did you see this Washington Post article (with pictures) about just how handicapped the IRS paper processing is? So, a lot of the new hires will be for areas like this – they won’t be field operatives. Many will be providing customer service and answering phones calls. This is for our benefit.

Sure, there will be more audits coming up. But the IRS cannot afford to initiate audits that don’t generate revenue. They just don’t have the staff. So expect the audits to focus on taxpayers that are likely to have under-reported their income, or inflated expenses or the basis for their sales. They simply don’t have the staff.

Unfortunately, the IRS must still some statistical audits as part of their National Research Program. I say unfortunately because those are line-by-line audits of people who were randomly selected. There is no way out of this one. (Although the Taxpayer Advocate did once suggest that some of these people get paid for this hardship.)

And the fact is, even if they agree to hire 1,000 people each day – it will take about 6 months for the federal background check by the Office of Personnel Management (OPM); then several more months for training. New hires are not likely to be effective this year.

But even before those hires, using current staff, the IRS is going back out into the field to collect unpaid taxes from business that are behind on payroll and business taxes. And Revenue Agents (field auditors) are heading out to hold examinations at the taxpayers’ places of business. Ideally, they will have notified the taxpayer or the representative of the impending visit. If they have not, and you are not absolutely certain that the person at your door IS from the IRS, you have the right to ask that the meeting be moved to an IRS office, so you can make sure they are not scammers. (More about this in next week’s post)

Incidentally, there are no new taxes on taxpayers – not even those earning $400,000 or more. Even so, with the marriage penalties in the current law, some couples might want to think about getting a divorce for tax reasons. Read this article in Think Outside the Tax Box. (Only partially tongue-in-cheek.)

And remember, you can find answers to all kinds of questions about taxes and business issues, and EA Education, free. Where? Where else? At http://iTaxMama.com/AskQuestion

To make comments, please drop into the TaxQuips Forum.

 

Download the MP3 (0:00min, 0MB) or listen now...

Ask TaxMama
Where Taxes are Fun
TaxQuips
The best Free Tax Podcast Online
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Where you can you ask your tax questions
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Where you can you can read the full post



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