Federal Tax Posts

The Government Accountability Office (GAO) has issued a report that examines the challenges associated with enforcing rules governing IRAs invested in unconventional assets. The bottom line of the report is that the IRS can do a better job informing taxpayers about noncompliance related to such assets. Unconventional IRA investments include real estate, certain precious metals, private equity and virtual currency. Account owners may be unaware [...]

What’s best for you, taking the standard deduction or claiming itemized deductions? The standard deduction changes yearly and is based on age and filing status. The Tax Cuts and Jobs Act raised the standard deduction so that more people could benefit from its simplicity. Itemizing deductions requires more work, but taxpayers can save taxes if the total exceeds the standard deduction. Eligible taxpayers may prefer [...]

Taxpayers have fundamental rights when dealing with the IRS. Among them is the right to only pay what’s legally owed. You also have the right to: receive a refund if you overpay: be in contact with the IRS if you believe you’re being billed unfairly; and amend a tax return if you discover an error. In addition, you can ask to have an “amount owed” [...]

The IRS clarifies how recent changes affect an insured person’s basis in a life insurance contracts. Generally, the adjusted basis for determining gain or loss from the sale or exchange of property is its adjusted cost, as provided in the U.S. tax code. In Revenue Ruling 2020-5, the IRS clarifies how amendments to the code, made by the Tax Cuts and Jobs Act, apply when [...]

IRS field revenue officers (ROs) have begun knocking on the doors of taxpayers with ongoing tax compliance issues. According to the IRS, these home visits (starting in AK, TX and WI) are made if numerous mail contacts have proven unsuccessful. ROs are trained IRS civil enforcement employees who work to resolve issues, such as missing returns or unpaid taxes. They can ask for payment of [...]

More Puerto Rican earthquake disaster victims now qualify for tax relief. The IRS has announced that victims living in designated federal disaster areas as a result of the Dec. 28, 2019, Puerto Rico earthquakes have additional time to make tax payments and file returns. For affected Puerto Rico municipalities, the extended filing date is April 30, 2020. In other news, the U.S. House passed a [...]

The IRS has posted instructions for how exempt organizations can claim a refund or credit of the unrelated business income tax they paid with respect to qualified transportation fringe benefits. This is the so-called “church parking tax.” In December 2019, legislation retroactively repealed the tax. Before being repealed, a provision required the unrelated business taxation income (UBTI) of tax-exempt organizations to be increased by expenses [...]

What if you file your federal tax return and then realize you made a mistake? According to the IRS, the answer depends on the mistake. If the error is mathematical, there’s a good chance it will be caught during the processing and corrected by the IRS. But if you chose the wrong filing status, need to change your income, or forgot deductions or credits, you [...]

Generally, amounts withdrawn from an IRA before age 59 ½ are subject to an additional 10% penalty tax. Exceptions exist, including when a distribution is related to the taxpayer’s disability. In one case, a man who was under age 59 ½ took an early distribution from his IRA. He didn’t pay the 10% tax on his joint tax return because his wife was disabled and [...]

A new Government Accountability Office report looks at campaign finance law. It identifies impermissible levels of political campaign intervention by tax-exempt organizations and the outcomes of IRS enforcement efforts. In fiscal years 2010 through 2017, the IRS conducted and closed 226 examinations related to organizations’ non-compliant political campaign intervention. More than half of the examinations didn’t result in the IRS revoking an organization’s exempt status [...]

How do dependents affect federal income taxes? The Congressional Budget Office recently issued a report (https://bit.ly/3bbJarM ) on this topic. It analyzed tax return data under 2019 tax rules and compared it with the rules that are scheduled to be in place for 2026. It estimated that the average tax benefit per dependent for 2019 is $2,300 ($3,800 per family). Under the 2026 tax rules, [...]

If you’re making charitable contributions specifically for disaster relief efforts in 2018 and 2019, they must be made by Feb. 18, 2020, to qualify under special disaster area charitable gift rules. A new law temporarily suspends certain limits on charitable contribution deductions. For example, cash charitable contribution deductions are generally limited to 60% of adjusted gross income (AGI). But this limit doesn’t apply to qualified [...]

It’s tax season and with it comes the risk of identity theft. As taxpayers focus on filing their returns, cybercriminals are focused on stealing their personal identifying information. That’s why the IRS just launched Identity Theft Central, with online access to information about identity theft and data security for taxpayers, tax pros, and businesses. This resource helps you to spot identity theft and protect against [...]

The application for tax-exempt organizational status goes fully electronic. Starting January 31, but with a grace period until April 30, the IRS will require applicants to file electronically “Form 1023, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code.” The required fee for Form 1023 will remain $600 for 2020.