Federal Tax Posts

Did you ask for an extension for your 2019 tax return this year? If so, keep in mind that Oct. 15, 2020 is the last day to file for most people who requested an extension. You can file your return any time before that date if you have all your required tax documents. Contact us for assistance. October isn’t that far away.


The IRS offers after-tax-day troubleshooting tips for taxpayers still facing issues. They include: checking the status of your refund using the link provided below and doing a “paycheck checkup” to ensure the right amount of tax is being withheld from your pay so you can avoid an unexpected tax bill and possible penalties for 2020. Also, taxpayers who owe money to the IRS can view their federal tax balances online, pay their tax bills or apply for payment plans. Find answers here: https://bit.ly/2CYkV3F  If you discover that you made an error or omission on your tax return, you can amend an already-filed return. Contact us for assistance or with questions.


Generally, individuals can roll funds from one IRA into another within 60 days, tax-free. The IRS may waive the 60-day rule when the failure to meet the deadline is due to events out of the reasonable control of the taxpayer. In one case, a taxpayer received an IRA distribution and failed to meet the rollover deadline. She contended that the financial institution that issued the check didn’t inform her the check represented an IRA distribution. Also, she was in the midst of a divorce and her then-husband had handled tax and financial matters. In a Private Letter Ruling, the IRS stated that the documentation she submitted supported her assertions and it waived the 60-day rule. (PLR 202029006)


Don’t fall for misleading ads that claim you can easily resolve your tax debt for “pennies on the dollar,” warns the IRS. These ads made the IRS 2020 list of “Dirty Dozen” top scams that target taxpayers. While it’s true that taxpayers who owe more than they can pay can seek an “Offer in Compromise” (OIC) from the IRS, unscrupulous companies exaggerate the chances of settling tax debts for practically nothing. A true OIC requires taxpayers to meet specific criteria under law. Thousands of taxpayers benefit from OICs every year, but not everyone qualifies. In fiscal year 2019, there were 54,000 OICs submitted but only 18,000 were accepted. Contact us for help seeking a true OIC from the IRS.


Here’s a reminder for taxpayers using the IRS’s Income Verification Express Service (IVES). July 31 is the deadline for providing an electronic signature and certifying the update of your account. The IVES program is used by mortgage lenders and others in the financial community to confirm the income of a borrower during the processing of a loan application. In order to update its records and continue each IVES participant’s participation in the program, the IRS requires all IVES participants to take these steps. Failure to submit the certification will result in suspension and potential removal from the IVES program, according to the IRS.


Some people missed the July 15 federal tax filing deadline. If a person is entitled to a refund, there’s no penalty for filing late. But if there’s a balance due, penalties and interest began accruing on unpaid taxes on July 16, 2020. The IRS urges anyone who owes tax and didn’t file (and didn’t request an extension) to file as soon as possible. If a penalty is charged for late filing, there may be penalty relief by calling the IRS at the phone number on the penalty notice. Also, certain taxpayers are permitted extra time to pay, including some disaster victims, military service members and eligible support personnel in combat zones. Here’s more from the IRS: https://bit.ly/2COxhvk 


So you’ve filed your income tax return, you’re getting a refund, and you’re eager to receive it. The IRS says it normally issues most refunds in less than 21 days. Taxpayers who mailed their tax return will experience a longer wait. Using the IRS’s “Where’s My Refund?” tool, you can check the status of your refund. Its tracker displays progress through three phases: Return Received, Refund Approved and Refund Sent. All you need to use the tool is your Social Security number, tax filing status (e.g., single, married filing jointly, head of household) and the exact amount of the refund claimed on your 2019 tax return. To find out your refund’s status, go to https://bit.ly/2dgAqlt 


Even if you can’t pay your tax bill, you can avoid excessive penalties by taking certain steps. The IRS recommends that you file your tax return or request an extension and pay what you can to minimize penalties and interest. Not filing will result in a failure-to-file penalty of 5% of the unpaid tax required to be reported, per month or part of a month. Returns filed more than 60 days after the due date (with extensions) are subject to minimum penalties, which can be significant. You’ll generally also be charged a failure-to-pay penalty, which starts at .5% of the tax reported but unpaid and depends on certain circumstance. Here are more details about penalties: http://bit.ly/3ejMWj0 


A reminder: Taxpayers receiving Social Security (SS) benefits may have to pay federal income tax on a portion of those benefits. For example, up to 85% of a taxpayer’s benefits may be taxable if he or she is: 1) filing single, head of household or qualifying widow or widower with more than $34,000 income, 2) married filing jointly with more than $44,000 income, 3) married filing separately and lived apart from their spouse for all of 2019 with more than $34,000 income, or 4) married filing separately and lived with their spouse at any time during 2019. Social Security benefits include monthly retirement, survivor and disability benefits. Learn more: https://bit.ly/2CyOgkX 


Many U.S. taxpayers don’t speak English well enough to understand their rights and responsibilities under tax law. That includes their eligibility for federal stimulus checks and other tax relief during the COVID-19 crisis. To reach as many people as possible, the IRS translates tax information into multiple languages. To get information in one of those languages, taxpayers can click on the language dropdown tab at the top of every IRS.gov page. Languages currently available include Spanish, Chinese, Korean, Russian, Vietnamese and Haitian-Creole. The IRS also offers information in a variety of file formats, such as Braille and screen-reading software. Here’s more: https://bit.ly/37gtstW 


If you owe money to the IRS, a bill may be coming your way soon. As a result of office closures due to the COVID-19 crisis, the IRS had been unable to mail some previously printed “balance due” notices. But the notices will be delivered to taxpayers in the next few weeks as IRS operations continue to reopen, according to the tax agency. An insert in the notice will provide an extended due date of either July 10 or July 15. Taxpayers with questions about their balance due should visit the website supplied in the mailing or call the phone number provided. IRS phone lines remain extremely busy.


COVID-19-affected investors and businesses involved in New Markets Tax Credit transactions are granted deadline relief. The extension applies to community development entities (CDEs) and qualified active low-income community businesses (QALICBs) working in low-income communities. IRS Notice 2020-49 provides a CDE or QALICB with a deadline extension for certain time-sensitive acts due to be performed on or after April 1, 2020, and before Dec. 31, 2020. These actions include making investments, reinvesting and expending amounts for real estate construction. The deadline for performing these actions is now Dec. 31, 2020. Read the notice: http://bit.ly/3cQzTFe 


Proposed IRS regulations define real property for Section 1031 like-kind exchanges. Under the Tax Cuts and Jobs Act, Sec. 1031 like-kind exchange rules are limited to exchanges of real property completed after Dec. 31, 2017. The proposed regs reflect this change by amending the existing regs to add a definition of real property. The proposed regulations also provide a rule addressing a taxpayer’s receipt of personal property that’s incidental to real property received in the exchange. Taxpayers may rely on the proposed regs for exchanges of real property beginning after Dec. 31, 2017, until the final regs are published. For more info on the proposed regs: https://bit.ly/2MU9Mm6 


Reminder: The extended deadline for paying estimated taxes is about a month away. If you pay estimated taxes, be aware that the first and second quarter payments for tax year 2020, which were originally due April 15 and June 15, are now due July 15. Individuals and corporations that make quarterly estimated tax payments have until July 15 to make their payment without penalty. The deadlines were extended as a response to the COVID-19 pandemic.


A leave-sharing program is one an employer sets up where employees can donate their vacation, sick or personal leave in exchange for the employer making cash payments to a tax-exempt organization. The IRS just provided guidance on leave-sharing programs that provide relief to COVID-19 victims. Specifically, Notice 2020-46 provides that cash payments employers make, under leave-sharing programs, to tax-exempt organizations providing relief to COVID-19 victims, won’t be treated as wages or compensation to the employees for federal tax purposes. Employees who forgo leave can’t claim a charitable contribution deduction for its value. For additional details: https://bit.ly/2Yt0LG7