by | Aug 31, 2020 | Tax Tips and News
Businesses that were wondering how to handle the upcoming “payroll tax holiday” created by a Presidential Memorandum signed earlier this month received an answer late last week. The Internal Revenue Service published a notice that explains the upcoming Social Security tax withholding deferral.
This guidance comes just in time, since the tax relief officially begins tomorrow.
How long is the Social Security tax withholding deferral period?
IRS Notice 2020-65 explains that certain wages paid from September 1, 2020, to December 31, 2020, may be deferred to the following period (January 1, 2021, through April 30, 2021). If employers do not pay the deferred tax by May 1, 2021, “interest, penalties, and additions to tax will begin to accrue.”
What wages are eligible for deferral?
The IRS says applicable wages and compensation paid during the deferral period are defined in section 3121(a) and section 3231(e)3. In the press release, they identify some limitations.
“The employee Social Security tax deferral may apply to payments of taxable wages to an employee that are less than $4,000 during a bi-weekly pay period, with each pay period considered separately,” the IRS writes. “No deferral is available for any payment to an employee of taxable wages of $4,000 or above for a bi-weekly pay period.”
For more information about the deferral of certain employee Social Security taxes, read Notice 2020-65.
Sources: IR-2020-195; Notice 2020-65
– Story provided by TaxingSubjects.com
by | Aug 28, 2020 | Tax Tips and News
The Internal Revenue Service has approved the use of e-signatures on certain forms that can’t be filed electronically. The move comes in response to the coronavirus pandemic, in order to protect the health of taxpayers and tax professionals alike.
The change helps reduce in-person contact while lessening the risks to taxpayers and tax professionals by allowing them to work remotely and file forms in a timely manner.
“We take the health and safety of the nation’s taxpayers, the tax professional community and our employees very seriously,” said IRS Commissioner Chuck Rettig. “Expanding the use of digital signatures is an important step during COVID-19 to help tax professionals. We understand the importance of digital signatures to the tax community, and we will continue to review our processes to determine where long-term actions can help reduce burden for the tax community, while appropriately balancing that with critical security and protection against identity theft and fraud.”
The Form 1040, U.S. Individual Income Tax Return, already uses an electronic signature when filed electronically, either by using a taxpayer self-selected PIN if self-prepared, or a tax-preparer selected PIN if using a tax professional.
More than 90% of Form 1040s are filed electronically. The IRS recommends taxpayers consider e-filing forms this year whenever possible due to COVID-19.
Which forms will temporarily accept e-signatures?
At least 10 forms have been earmarked to take a digital signature if mailed by or on Dec. 31, 2020:
- Form 3115, Application for Change in Accounting Method;
- Form 8832, Entity Classification Election;
- Form 8802, Application for U.S. Residency Certification;
- Form 1066, U.S. Income Tax Return for Real Estate Mortgage Investment Conduit;
- Form 1120-RIC, U.S. Income Tax Return For Regulated Investment Companies;
- Form 1120-C, U.S. Income Tax Return for Cooperative Associations;
- Form 1120-REIT, U.S. Income Tax Return for Real Estate Investment Trusts;
- Form 1120-L, U.S. Life Insurance Company Income Tax Return;
- Form 1120-PC, U.S. Property and Casualty Insurance Company Income Tax Return; and
- Form 8453 series, Form 8878 series, and Form 8879 series regarding IRS e-file Signature Authorization Forms.
These forms cannot be e-filed and are generally printed and mailed. The IRS will not specify which digital signature product tax pros have to use.
The IRS also assures it will monitor this temporary option for e-signatures and determine if additional steps are needed.
– Story provided by TaxingSubjects.com
by | Aug 26, 2020 | Tax Tips and News
Some 50,000 individuals who had a portion of their Economic Impact Payment diverted to pay their spouse’s past-due child support will soon get a check to make up the difference.
The Internal Revenue Service says the catch-up payments are due to be issued in early-to-mid-September. They will be mailed as checks to eligible spouses who submitted Form 8379, Injured Spouse Allocation, along with their 2019 federal income tax return, or in some cases, their 2018 return.
These spouses do not need to take any action to get their money, since the IRS will automatically issue the portion of the EIP that was applied to the other spouse’s debt.
The IRS says it understands that some individuals didn’t file Form 8379 and didn’t get their portion of the Economic Impact Payment for the reasons mentioned. These individuals also don’t need to take any further action and don’t need to submit Form 8379.
The IRS stresses that while it doesn’t have a timeframe, the agency will automatically issue the portion of the EIP that was applied to the other spouse’s debt at a later date.
To check the status of their payment, affected taxpayers can go online to the IRS’ Get My Payment Tool, which is available only on the IRS.gov website.
Taxpayers can also get more information in the Receiving My Payment section of the Frequently Asked Questions in the Economic Payment Information Center on IRS.gov.
– Story provided by TaxingSubjects.com
by | Aug 25, 2020 | Tax Tips and News
Taxpayers in California and Iowa have a little extra time to file their tax returns and pay tax due, thanks to relief measures announced by the Internal Revenue Service.
Victims of California wildfires getting IRS disaster relief.
California has been hit by a series of wildfires going back to Aug. 14. Taxpayers now have until Dec. 15, 2020 to file their various individual and business tax returns and make any tax payments.
The IRS says the relief is for taxpayers and businesses in any area designated by the Federal Emergency Management Agency (FEMA) as qualifying for individual assistance.
This currently includes Lake, Monterey, Napa, San Mateo, Santa Cruz, Solano, Sonoma and Yolo counties in California. Taxpayers in other localities that are added to the disaster declaration later will automatically get the same relief.
The most current list of eligible counties and locations is available on the disaster relief page on IRS.gov.
The IRS says these relief measures postpone various deadlines that occurred starting Aug. 14.
“As a result, affected individuals and businesses will have until December 15, 2020, to file returns and pay any taxes that were originally due during this period,” an IRS release states. “This means individuals who had a valid extension to file their 2019 return due to run out on Oct. 15, 2020, will now have until Dec. 15, 2020, to file.”
It should be noted, however, that because payments related to these 2019 returns were due by July 15, 2020, those payments are not included in the relief package.
The Dec. 15 deadline also applies to quarterly estimated income tax payments due Sept. 15 and the quarterly payroll and excise tax returns normally due Oct. 31. It also applies to tax-exempt organizations operating on a calendar-year basis that had a valid extension date to run out on Nov. 15.
Businesses with extensions also have the additional time, including, among others, calendar-year corporations whose 2019 extensions run out on Oct. 15.
IRS is also providing relief for Iowa wind storm victims.
The IRS is also offering filing and payment for victims of a derecho storm that affected Linn County in Iowa. While the deadline for both filing and payment is now Dec. 15, 2020, other deadlines may differ from the California declaration.
At present, the Iowa relief applies only to residents and businesses in Linn County, but may be expanded when other localities are added to the declaration.
The IRS disaster relief page has details on the returns, payments and tax-related actions qualifying for the additional time.There’s no need for taxpayers in California or Iowa to contact the IRS in order to claim their relief. The IRS automatically applies the relief to a tax return or payment by reading the account’s address on record.
However, if an affected taxpayer receives a late filing or late payment penalty notice from the IRS that has an original or extended filing, payment or deposit due date falling within the postponement period, the taxpayer should call the number on the notice to have the penalty abated.
Individuals and businesses in a federally declared disaster area who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either the return for the year the loss occurred (in this instance, the 2020 return normally filed next year), or the return for the prior year (2019).
Be sure to write the FEMA declaration number – 4557 for Iowa or 4558 for California − on any return claiming a loss. See Publication 547 for details.
Source: IR-2020-191
– Story provided by TaxingSubjects.com
by | Aug 24, 2020 | Tax Tips and News
IRA owners, beneficiaries and workplace retirement plan participants who got a Required Minimum Distribution (RMD) this year have until Aug. 31 to rollover or repay the distribution in order to avoid being taxed on the payments.
The Coronavirus Aid, Relief, and Economic Security Act – also known as the CARES Act – waives RMDs during 2020 for IRAs and other retirement plans. It does the same for beneficiaries with inherited accounts.
The CARES Act waiver includes RMDs for individual who turned age 70 1/2 in 2019 and took their first RMD in 2020. Roth IRAs, however, don’t require withdrawals until after the death of the owner.
RMDs are eligible for rollover.
Individuals who took a Required Minimum Distributions in 2020 – including those who turned 70 1/2 during 2019 – have the option of putting their distribution back into the original account, or some other qualified plan.
Thanks to suspension of the RMD rule, RMDs taken during 2020 are considered eligible for rollover. So RMDs can be rolled over to another IRA, another qualified retirement plan, or returned to the original plan. But the rollover, no matter to what account, must be done by Aug. 31 to avoid paying taxes on the distribution.
IRS Notice 2020-51 also provides that the one-rollover-per-12-month-period limitation and the restriction on rollovers to inherited IRAs don’t apply to this repayment.
The CARES Act provisions apply to most retirement plans. This includes traditional IRAs, SEP IRAs, SIMPLE IRAs, 401(k) plans, 403(b) plans, 457(b) plans, profit sharing plans and other defined contribution plans.
The RMD suspension, however, doesn’t apply to qualified defined benefit plans.
Find more information on the CARES Act and retirement plans – including FAQs – visit the IRS’s Coronavirus-related relief for retirement plans and IRA questions and answers page.
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– Story provided by TaxingSubjects.com
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