It’s TaxQuips time from TaxMama.com® –
Today TaxMama® wants to remind you about tomorrow’s due date – June 15th.

 

 

 

 

 

 

 

Dear Family,

With two topsy turvy tax years due to COVID19, it’s harder to keep track of deadlines.

But, for the rest of this year, all deadlines are the same as they have been historically, unless you live in a federally declared disaster area.  https://www.irs.gov/newsroom/tax-relief-presidentially-declared-disaster-areas

So, let’s review what’s due tomorrow
https://taxmama.com/tax-calendar/   :

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• Federal and state estimated tax payments for the second quarter.
  This applies to individuals and to corporations, estates and trusts.
  
  • Although you can use Form 1040-ES to send in a check, please do NOT!
  • Pay the IRS electronically to ensure they get your payment.
    Be sure to select 2021 and Form 1040
    https://www.irs.gov/payments
  • Your state probably has a similar option – look up your state’s tax agency website here – https://www.taxadmin.org/state-tax-agencies
  • Remember, if you took COVID19-qualified distributions from retirement accounts and are spreading the taxes over 3 years – you need to include those amounts in this year’s estimated tax payments.
  
  
  
  
• Form 1040 is due for Americans living outside the US. If you’re not ready, you can still file an extension using Form 4868 – see if you can file this electronically through your software. https://www.irs.gov/pub/irs-pdf/f4868.pdf
• Gift Tax returns for Americans abroad – your Form 4868 will automatically also extend your gift tax filing. But if you expect to take advantage of the Foreign Earned Income Exclusion (Form 2555) when you file your tax return, you will need to file a separate extension for your gift tax return, using Form 2350
  https://www.irs.gov/pub/irs-pdf/f2350.pdf

The IRS will be releasing 3 interfaces (links) relating to the new advance Child Tax Credit.  Keep an eye on this page for updates and details.
https://www.irs.gov/credits-deductions/advance-child-tax-credit-payments-in-2021

• One for people who want to opt out.
• Another for people who aren’t already in the database as having children (either due to new births or getting custody or foster custody of children) – and who want to receive the advance funds.
• And another option to update your banking and/or mailing data.

In the meantime, we are nearly halfway through the year.

Perhaps it’s time to review your projected income and tax breaks for 2021?
Maybe you need to change your withholding – or increase/reduce your estimated tax payments for the year.

Those folks who have found yourselves in a position where you owe a tax balance and don’t really know how to pay it, the IRS has a lot of options to help. So don’t just ignore the balance due. https://www.irs.gov/about-irs/irs-offers-new-relief-options-to-help-taxpayers-affected-by-covid-19

Consider scheduling an appointment with your tax professional to help you.
https://www.irs.gov/tax-professionals/choosing-a-tax-professional

 

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

 

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It’s TaxQuips time from TaxMama.com® – today TaxMama® wants to give you some strategies or recommendations about how to deal with the retroactive changes from the American Rescue Act.

 

 

 

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Dear Family,

When Congress passed the American Rescue Act, they included some tax provisions that affected tax returns that had already been filed by millions of people. At the time, there was a great deal of confusion on what to do for those who had already filed; and how to handle these benefits for those who had not yet filed.

• Making $10,200 of 2020 unemployment income tax-free
• Waiving the 2020 repayment penalty/tax for those with Marketplace insurance coverage, whose incomes rose dramatically due to IRA and retirement plan distributions, additional unemployment benefits, etc.

What should you do?

The IRS says, about both of these retroactive provisions to DO NOTHING.
They have started to issue refunds to anyone who has already filed tax returns.

These changes may affect many other areas of the tax return when adjusted gross income drops and tax liability drops.

Is that a good idea – to just sit and wait?

Actually yes.

Wait for the IRS to finish processing all those refunds, since they are going to be doing this anyway. Give them a couple of months for their computers to spew out their version of the recalculations on these retroactive revisions.

THEN…consider amending. Why?

The unemployment issue: There are a few considerations that might increase the refund, beyond what the IRS sent to you.

a) Married couples, living in community property states who filed jointly are entitled to take 2 of those $10,200 reductions (up to the amount of total unemployment benefits received), even if only one of them received the unemployment income.

Again, why? Because in a community property state, each person owns one-half of all the income of the other spouse. This is one of those times when this rule really works in favor of the couple.

200. b) The law limits this $10,200 tax-free benefit to tax returns with less than $150,000 of adjusted gross income. So couples whose joint income was higher than that? No refund being issued. BUT, if the couple filed an extension (even after filing their tax return), they are now permitted to file a set of “superseded returns,” where each person files as married filing separately. This way, perhaps one or both spouses can bring their incomes below the $150,000 threshold to qualify to exclude the $10,200.

Oh…you know that you cannot go from MFJ to MFS? That’s very true. The only way to do that is by filing a superseded return. A superseded return totally replaces the original tax return as if it had never been filed at all. (But it will take a long time to process and to replace the original return, since it has to be filed on paper.)  The superseded return must be filed by the due date (including extensions) of that year’s tax return. That’s why this will only work for someone who put their return on extension, even after filing.

 

The Excess Premium Tax Credit that doesn’t need to be repaid:  Many taxpayers filed tax returns showing this balance due on their Schedule 2, line 2. If they paid the tax, the IRS is sending them refunds. If they didn’t pay the tax, but this is the only reason they have a balance due, the IRS is sending them letters reversing that balance due.

Does filing an amended return change any of this? Not really. Since the penalty (or fee) is being waived entirely, it makes no difference how low you bring your adjusted gross income. Or does it?

Yes, it does. Because when you file your superseded return to adjust for the unemployment issues, you might bring your adjusted gross income down low enough to end up with a refund on Form 8962. In that case, including this form in your superseded return is well worth while, isn’t it?

These strategies won’t necessarily work for everyone. You’re probably going to need the help of an experienced tax professional to handle this. If they apply to you, the tax savings could be enormous.

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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  An Ode to April 15!

Why is every year the same
When we play this taxing game?

“May 17th” turns out to be,
something we couldn’t really foresee!

With estimates still due on April 15.
Folks do think the IRS is mean!

Costs us more than just one night
Making sure that all is right!

Until at the latest day,
We finally know what we get or pay!

Why these taxes have to be
Like a nasty little flea?

Once they bite you, that’s for sure -
Your life will never be like before!

Love or hate them,
Up to you…
but don’t forget: Tax returns are due!

And if you don’t know what to do,
Ask TaxMama® – she’ll tell you true !

 
by Sandra Lin and TaxMama®  2021

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It’s TaxQuips time from TaxMama.com® – today TaxMama® wants to talk to you about the upcoming April 15th deadline – sort of…

 

 

 

Dear Family,

Well, we are one week away from the traditional filing deadline of April 15^th. Do we still care? After all, the IRS moved the filing deadline to May 17^th – so can we totally ignore April 15^th ?

Not really. Some things are still due on April 15^th:

• 2021 first quarter estimated tax payments
• Your state tax return – if they haven’t complied with the IRS changed date
  https://www.getcanopy.com/blog/state-tax-deadlines-2021
• Payroll tax (and sales tax) returns are still due on April 30^th, in case you were wondering (sales taxes are state forms, not IRS).
• Various other things that the IRS gave us additional time to handle – which are….

Which things ARE extended by the IRS?

• Personal tax returns (Form 1040) and C corporation returns (Form 1120) and any other filings that were otherwise due on April 15^th
• IRAs, HSAs, etc. (Note: If the state didn’t comply with the extended filing deadline, you MUST fund these accounts by April 15^th)
  
  • Individual retirement arrangements (IRAs)
  
  
  
  

• 
  
  • Health savings accounts
  • Archer medical savings accounts
  • Coverdell education savings accounts
  
  
  
  

• Extra time to pay the balance on 2020 tax returns without penalties.
• Filing your 2017 tax returns – and get your refund.
  
  • You get the extra month this year – miss that May 17^th date and lose your 2017 refund forever.
  • The IRS says they have $1.3 BILLION in unclaimed refunds for 2017!
    https://www.irs.gov/newsroom/irs-has-refunds-totaling-1-point-3-billion-for-people-who-have-not-filed-a-2017-federal-income-tax-return
  
  
  
  

Even with the additional time until mid-May, here are three major issues that may convince you to just go ahead and put your tax return on extension anyway.

1) Ensure that your state complies with the IRS’ Paycheck Protection Plan rules – and consider testing out some alternate computations.

• For IRS, getting the loan forgiven is not a taxable event – https://taxfoundation.org/small-business-loan-forgiveness-sba-ppp-loan-taxed/
• For the IRS you are able to deduct expenses paid with forgiven funds – https://taxfoundation.org/state-tax-forgiven-ppp-loans/
• Determine IF you want to accept the forgiveness at all?
  
  • By getting the loans forgiven, you cannot use those funds towards any of the employer tax credits for things like the Employer Retention Credit, Family Leave Credit, etc. The credits may be worth a lot to you!
  
  
  
  

2) The IRS has just released new guidance on the $10,200 non-deductible part of the unemployment benefits  and what to do if you have already filed your tax return and paid tax on this, now, non-taxable income. Some people won’t have to amend – the IRS will fix it automatically and issue a refund. Others, who have more complex issues (like our #3) may want to amend.
https://www.irs.gov/newsroom/irs-to-recalculate-taxes-on-unemployment-benefits-refunds-to-start-in-may

• And there is a lot of discussion about filing married filing separately in order to reduce one (or both) spouse’s income below $150,000 to get this benefit. It will save some couples thousands of dollars – others will lose money. Test the numbers!

3) The American Rescue Act also waived your extra taxes if you got your health insurance through the Marketplace, but have to pay back the government-paid premiums when your income suddenly exceeded 400% of the poverty level (due to unemployment or IRA or retirement plan withdrawals)

• We’re still waiting for specific procedures on how to eliminate that extra tax.
  
  • With this reduction in cost, what part of the health insurance expense is deductible as self-employed health insurance?
  • What are the mechanics (procedure) to get the tax/penalty waived because the adjusted gross income is too high?
  
  
  
  

So, now do you understand why you just might want to go ahead and get an extension anyway – and give yourself and your tax professional time to test different computations to see which ones get you the lowest taxes, legally?

There’s more you need to know, and your tax pros and I are rapidly learning everything we can to get you the most tax credits and refunds, legally possible.

For those folks planning to study for the EA Exam this year,  it’s going to be a really tough exam! Good news. THIS new law won’t be on the exam.
Join me our annual free webinar (a bribe is included for those who attend):
Everything You Wanted to Know About the 2021-2022 Enrolled Agent Exam.

Sign up for the last date.

April 19 – 10:05 am Pacific
http://iTaxMama.com/Everything_EA_April

Meanwhile, I will be posting various updates and webinars that I am teaching, on this Events page – https://irsexams.school/events-and-webinars/

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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It’s TaxQuips time from TaxMama.com®.
Today TaxMama® wants to talk to you about the nervous breakdown your tax professional is about to have.
And why.

 

 

 

 

 

 

Dear Family,

I am extremely alarmed by what I am reading and seeing from the tax professional community – at all levels. From the basic unlicensed tax preparer to Enrolled Agents, to Certified Public Accountants. People are stressed, overwhelmed, anxious and ready to jump down the throats of their clients, families and friends.

Why? There are three reasons for this.

1) Congress keeps passing laws designed to try to help people who have lost so much during this COVID19 shutdown period. Unfortunately, our legislators don’t understand just how much tax theft and tax fraud they are encouraging in the way (and the timing) of the passage of their laws. Especially when they pass laws that affect tax returns for the year we are currently filing – after we have already filed the returns.

2) The IRS is trying to interpret Congress’ laws and turn them into forms and procedures to make it possible for tax software companies to incorporate those changes into the software – and to find ways to deal with the millions of people who have already filed tax returns before these tax breaks came into effect. AND the IRS is also tasked with getting another round of stimulus checks out – especially to people who haven’t bothered to file tax returns for years, but had income and should have filed. And this is causing even more fraud and theft as people try to file and catch up and turn their children into independent adults when they clearly don’t qualify.

3) And you. Yes, you. Clients are constantly calling or emailing your tax pros asking the eternal question “Is it ready yet?” Do you have any idea how much extra time it takes to answer that annoying question for 50, 100, 500 people each week?  No wonder your return isn’t ready! Believe me, if your tax return were ready, YOU would be the first person your tax pros would contact. After all they want to get paid.

But why isn’t your return ready?

The BIG complaints from tax pros this year:

• Even our long-term clients are not sending us all their usual documents – and it’s like pulling teeth following up and asking for the same missing docs – and then being pressured because they aren’t cooperating – but want their tax returns done.
• Many people have issues that are affected by tax law changes and we are waiting for the updated forms and guidance from the IRS – but the clients want their tax returns finished NOW – which will mean amending later. But they don’t want to amend or pay for amended returns – but they want all the breaks NOW.
• There are all kinds of new complications we are still trying to figure out – especially thousands of dollars worth of tax credits for employers, and dealing with PPP loan forgiveness and whether or not your state complies with the IRS, and…and…so much more – that we really need some uninterrupted time to learn, to think this through, and to get it right, so you get the biggest tax refunds and the best breaks.
• And of course, the brilliant way that Congress wrote the $10,200 rule relating to non-taxable unemployment income that has everyone scrambling to see if people should be filing married filing separately or not.
• Then, don’t forget the extra funds coming to families with the child tax credit starting this summer. Trying to explain to clients that maybe they don’t want those advance funds – these will have to be paid back, if they don’t end up qualifying.

This is just a little of what your tax pro is dealing with.

What do I recommend?

• When your tax pro asks you for something – GET IT TO THEM ASAP.
• If you want to do tax planning – set up a SEPARATE tax appointment for that purpose –
  
  1. that’s not part of the tax preparation process or fee.
  2. Meanwhile, have them put your tax return on extension
  
  
  
  
• Stop calling and putting pressure on your tax pro. They will reach out to you with their questions – and when your return is ready.
• If they tell you you’re better off on extension right now – don’t argue. Believe them.
• When you find out that your fee has increased, accept it. Do not bicker or bargain. There is a lot of new information to integrate into your tax return, and education that reputable tax pros engaged in this year – more than ever before.
• Chill out. Your stress is contagious. Your tax pros are about to either have a nervous breakdown – or just walk away from their tax practice, or both.

I know this is not what you want to hear from your TaxMama®. But I will admit that I am getting very frustrated with people posting questions in the TaxMama® Forum and wanting to argue when they don’t like our answers because we aren’t helping them rip off the system. And I have added a notice on that discussion group – if you have complex tax issues and hundreds of thousands of dollars at stake – you need to pay a tax professional. A free advice column will not give you the help you need – and are apt to tell you that we won’t answer.

There’s more you need to know, and your tax pros and I are rapidly learning everything we can to get you the most tax credits and refunds, legally possible.

 (Right now, we are all taking as many classes as time permits.)

For those folks planning to study for the EA Exam this year,  it’s going to be a really tough exam! Good news. THIS new law won’t be on the exam.
Join me our annual free webinar (a bribe is included for those who attend):
Everything You Wanted to Know About the 2021-2022 Enrolled Agent Exam.

Sign up for the next date.

April 19 – 10:05 am Pacific
http://iTaxMama.com/Everything_EA_April

Meanwhile, I will be posting various updates and webinars that I am teaching, on this Events page – https://irsexams.school/events-and-webinars/

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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TaxQuips

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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