by | Mar 13, 2020 | Tax Tips and News
Victims of the recent tornadoes that swept through Tennessee have gotten some tax relief from the Internal Revenue Service. Taxpayers in the storm-wrecked areas will have until July 15 to file various individual and business tax returns—and to make their tax payments.
Who is Eligible?
The IRS says the relief is available in any area that has been designated by the Federal Emergency Management Agency (FEMA) as qualifying for individual assistance. At present, that designation has been granted to taxpayers in Davidson, Putnam and Wilson counties of Tennessee, but other areas may be added later. Taxpayers in towns or counties added later will have the same relief.
Check the disaster relief page on the IRS website for the latest updates on qualified areas.
What’s Covered?
The IRS’ action postpones various tax-filing and payment deadlines that started on March 3. Now, individual taxpayers and businesses in the qualified areas have until July 15 to file their returns and pay any tax due. This would include not only individual tax returns normally due April 15, but the various 2019 business returns that would be due March 15.
The relief terms also mean affected taxpayers will have until July 15 to make their 2019 IRA contributions. For businesses, any penalties on payroll and excise tax deposits normally due on or after March 3 and before March 18 will be abated by the IRS as long as the deposits are made by March 18.
There’s no need for a taxpayer in any of the affected counties to contact the IRS to see if they qualify. The IRS systems are programmed to automatically give the specified relief based on the taxpayer’s address on file.
However, if taxpayers outside the FEMA-designated counties claim losses of records that affect their ability to meet an IRS deadline, they should call the IRS at 866-562-5227. This also includes workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization.
If an affected taxpayer gets a late filing or late payment notice from the IRS with a deadline date that falls within the postponement period, the taxpayer should call the phone number on the letter to have the penalty abated.
Claim Storm Losses
The IRS says both individuals and businesses within the federally declared disaster area who had uninsured or unreimbursed losses related to the disaster can choose to claim them on either the return for the year the loss occurred (in this case, the 2020 return to be filed next year), or the return for the prior year. That means taxpayers can, if they choose, claim the losses on the 2019 return they are filling out this tax season.
Taxpayers who file a return with losses from the Tennessee storms should remember to include the FEMA declaration number—4476—on the return. For more details, check out Publication 547.
Source: IR-2020-51
– Story provided by TaxingSubjects.com
by | Mar 13, 2020 | Tax Tips and News
House Committee letter to IRS asks if coronavirus will force a tax season extension?
The House Ways and Means Committee yesterday sent a letter to the Internal Revenue Service to ask whether the April 15 deadline should be extended due to concerns about the coronavirus.
Officials have responded to the COVID-19 outbreak by issuing quarantines, closing schools, canceling conferences, and instituting containment zones. It looks like the tax filing deadline could also be affected by the disease.
Billing itself as “the chief tax-writing committee in the House of Representatives,” Ways and Means is responsible for overseeing and dictating the direction of the tax system. To address coronavirus-related disruptions, the committee asked the IRS whether it would recommend extending the filing deadline.
“Specifically,” the Committee wrote, “we are concerned about the ability of the IRS to provide taxpayer assistance and process returns, as well as the ability of taxpayers, free tax preparation sites, and tax professionals to meet the filing deadline.”
The letter also raises the possibility of penalty relief: “We are hopeful that the IRS will consider the need for relief from certain filing and payment penalties for taxpayers and communities impacted by COVID-19.”
Source: WaysAndMeans.House.gov
– Story provided by TaxingSubjects.com
by | Feb 10, 2020 | Tax Tips and News
The Internal Revenue Service recently announced that tax relief has once again been expanded for earthquake victims in Puerto Rico. This marks the second such update for areas that can qualify for this relief.
What areas of Puerto Rico qualify for earthquake-related tax relief?
Just three days after Christmas 2019, Puerto Rico was rocked by an earthquake that ultimately led to a FEMA disaster declaration for affected parts of the US territory. While the initial declaration covered six municipalities, the January 22 and February 6 updates have ballooned that number.
According to the IRS, Puerto Ricans in Arecibo, Ciales, Hormigueros, Juana Díaz, Las Marías, Mayagüez, Morovis, Orocovis, and Sabana Grande may now qualify for tax relief. The full list includes 25 municipalities:
|
Adjuntas
|
Arecibo
|
Cabo Rojo
|
Ciales
|
Corozal
|
|
Guánica
|
Guayanilla
|
Hormigueros
|
Jayuya
|
Juana Díaz
|
|
Lajas
|
Lares
|
Las Marías
|
Maricao
|
Mayagüez
|
|
Morovis
|
Orocovis
|
Peñuelas
|
Ponce
|
San Germán
|
|
Sabana Grande
|
San Sebastián
|
Utuado
|
Villalba
|
Yauco
|
If any additional municipalities are designated for tax relief, the IRS will issue another update.
How does disaster tax relief help victims?
Taxpayers who qualify for disaster-related tax relief often receive a number of benefits, like getting deadline extensions, claiming disaster-related casualty losses, and deducting personal property losses.
Specific to this earthquake tax relief, the IRS says that “certain deadlines falling on or after December 28,2019 and before April 30, 2020, are granted additional time to file through April 30, 2020.” Here are some of the affected deadlines noted by the IRS:
- Individual income tax return deadlines
- Quarterly estimated income tax payments for January and April
- Quarterly payroll and excise tax returns for January
Generally, victims do not need to contact the IRS to receive disaster-related tax relief, but the IRS says there are exceptions. Taxpayers who were impacted by the earthquake but don’t live in officially announced areas need to call the IRS at 866-562-5227.
Sources: PR-2020-01; FEMA Statement on recent Puerto Rico Earthquakes
– Story provided by TaxingSubjects.com
by | Jan 31, 2020 | Tax Tips and News
The IRS wants more eligible taxpayers to claim the Earned Income Tax Credit
The Internal Revenue Service wants more taxpayers to know about the Earned Income Tax Credit, which is why the agency has coordinated the annual EITC Awareness Day event for more than a decade.
January 31, 2020 marks the fourteenth anniversary of EITC Awareness Day. The IRS used the occasion to highlight taxpayers who might be eligible and online resources for determining EITC eligibility and tracking refund status.
Why is the EITC important?
According to the IRS, “25 million taxpayers received over $61 billion in EITC” last year. When it comes to individual households, receiving the EITC can be a pretty substantial benefit. The IRS says that the EITC can provide “as much as $6,557 for a family with children or up to $529 for taxpayers who do not have a qualifying child.”
To make sure that more taxpayers look into the EITC, the IRS highlighted eight groups they say could qualify but often “overlook this important credit:”
- [Taxpayers] without children
- [Taxpayers] living in non-traditional families, such as a grandparent raising a grandchild
- [Taxpayers] whose earnings declined or whose marital or parental status changed
- [Taxpayers] with limited English language skills
- [Taxpayers] who are members of the armed forces
- [Taxpayers] living in rural areas
- [Taxpayers] who are Native Americans
- [Taxpayers] with disabilities or who provide care for a disabled dependent
The next step, naturally, is actually determining EITC eligibility.
How do I determine EITC eligibility?
The EITC Assistant is a free online resource provided by the IRS. According to the press release, “Taxpayers earning $55,952 or less can see if they qualify using the EITC Assistant tool … [which] helps users determine if they are eligible and if they have a qualifying child or children, and it estimates the amount of the EITC they may get.”
Even if the assistant says they are eligible, the IRS says that taxpayers need to be careful when applying for the EITC. “The EITC rules can be complicated,” the IRS warns. “Errors can have a lasting impact on future eligibility to claim EITC and leave taxpayers with a penalty.”
Tax professionals can help navigate the intricacies of the EITC rules, but the IRS says taxpayers should be suspicious of anyone who promises the maximum EITC payout—especially if their fee is based on a percentage of the refund.
(The Directory of Federal Tax Return Preparers with Credentials and Select Qualifications is a great resource for finding legitimate preparers in your area.)
When will the IRS issue EITC refunds?
The IRS says that refunds for returns claiming the EITC cannot be issued before the middle of February. The delay, triggered by a provision in the PATH Act, is designed to give the IRS more time to identify returns fraudulently filed by identity thieves.
While some early filers may receive refunds on February 22, the IRS says most taxpayers will probably have to wait a few months: “Most EITC- or ACTC-related refunds [will] be available in taxpayer bank accounts or on debit cards by the first week of March, if they choose direct deposit and there are no other issues with their tax return.”
Taxpayers who want to keep a close eye on their refund status can use the “Where’s My Refund?” tool.
Source: IR-2020-22
– Story provided by TaxingSubjects.com
by | Jan 28, 2020 | Tax Tips and News
From Uber to AirBnB, Lyft to TaskRabbit, more Americans are getting involved in the gig economy. Whether their involvement is just a side hustle or the main event, taxpayers can find income earned in this way can affect their tax returns—and it’s not always in a positive way.
The Internal Revenue Service says a little pre-planning can help gig economy workers be ready when it’s time to file their taxes.
Defining the Gig Economy
The gig economy is known by a few different names; it has also been called the on-demand economy, the sharing economy or the access economy. People involved in the gig economy may earn income as a freelancer, independent worker or employee. They use technology to provide goods or services. This includes things like renting out a home or spare bedroom and providing car rides.
There are a few things taxpayers should know about the gig economy and taxes:
- Money earned through this work is usually taxable.
- There are tax implications for both the company providing the platform and the individual performing the services.
- This income is usually taxable even if the:
o Taxpayer providing the service doesn’t receive an information return, like a Form 1099-MISC, Form 1099-K, or Form W-2.
o Activity is only part-time or side work.
o Taxpayer is paid in cash.
- People working in the gig economy are generally required to pay:
o Income taxes.
o Federal Insurance Contribution Act or Self-employment Contribution Act tax.
o Additional Medicare taxes.
Independent contractors may be able to deduct their business expenses, but they should double-check IRS rules when it comes to deducting expenses relating to use of things like their car or home. Remember to always keep records of business expenses.
Special rules apply to rental property when it’s also used as a residence during the tax year. Taxpayers should remember that rental income is generally fully taxable.
Workers who don’t have taxes withheld from their side hustle pay have two choices to pay their taxes in advance. Gig economy workers who have another job where the employer withholds taxes from their paycheck can fill out and submit a new Form W-4. This is done to request that the withholding employer sets aside an additional amount in order to cover taxes owed on the gig economy income.
Another way to stay on the good side of the IRS is to make quarterly estimated tax payments. This way, the taxpayer can pay taxes and any self-employment taxes owed throughout the year.
– Story provided by TaxingSubjects.com
by | Jan 16, 2020 | Tax Tips and News
What is the Gig Economy Tax Center?
Freelancers aren’t a new part of the workforce, but the rapid growth of contract labor has popularized terms like “gig economy” and “on-demand work.” To help taxpayers, the Internal Revenue Service unveiled a new online resource: the Gig Economy Tax Center.
The IRS explains that the gig economy largely gained momentum through app-driven services: “The gig economy … usually includes businesses that operate an app or website to connect people to provide services to customers. While there are many types of gig economy businesses, ride-sharing and home rentals are two of the most popular.”
Taxpayers accustomed to earning their income as an employee might not realize they need to keep track of the extra money generated by their weekend Uber work: “Many don’t receive Form W-2s, 1099s, or other information returns for their work … [despite the fact that] income from these sources is generally taxable, regardless of whether workers receive information returns.” Further, newly minted freelancers also might not realize there are other responsibilities that come with taking on contracted work.
The IRS hopes to address these awareness problems with the Gig Economy Tax Center, which will help fill in the blanks on a number of freelance tax issues:
- Filing requirements
- Making quarterly estimated income tax payments
- Paying self-employment taxes
- Paying FICA, Medicare, and Additional Medicare
- Deductible business expenses
- Special rules for reporting vacation home rentals
While these resources are not a replacement for a qualified tax professional, they can be an excellent supplement for taxpayers to lean on when putting together their information packet.
How do I use the Gig Economy Tax Center?
The first thing you see after navigating to the Gig Economy Tax Center are subheadings addressing basic gig economy topics—“What is the Gig Economy?,” “Gig Economy Income is Taxable,” “What is Gig Work?”—and two blue buttons in the middle of the page: Manage Taxes for Your Gig Work and Digital Platforms for Businesses.
Manage Taxes for Your Gig Work provides a number of resources specific to independent contractors:
- Accordion menu containing a to-do list that includes links to relevant publications and forms for topics like record keeping, making payments, and preparing tax information for filing a tax return
- Help menu with links to pages that explain IRS notices, the 1099-K, and how to determine if you’re an independent contractor or an employee
- Estimated tax information, like due dates and a Make a Payment button that links to the “Paying Your Taxes” page
Digital Platforms for Businesses has information tailored to taxpayers who “operate a digital platform, marketplace, or business in the gig economy.” At first glance, this page looks sparse when compared to Manage Taxes for Your Gig Work, but the accordion menu contains information for four important business topics: “Classify Workers,” “Report Payments,” “File and Pay Taxes,” and “Help Workers Meet Their Tax Obligations.”
Sources: IR-2020-04; “Gig Economy Tax Center”
– Story provided by TaxingSubjects.com
Arnold & Company, LLC