Federal Tax Posts

The IRS needs to tighten procedures for direct deposit of refunds, according to a recent report. The Treasury Inspector General for Tax Administration (TIGTA) initiated an audit after an internal referral revealed that a program weakness “facilitated an IRS employee being able to divert and steal taxpayer refunds.” TIGTA earlier recommended that the IRS require software developers to modify direct deposit programs. Five vendors didn’t [...]

The IRS may request tax-related information about a U.S. citizen or resident’s foreign bank or other accounts. According to the IRS, the action is in accordance with the Foreign Account Tax Compliance Act (FACTA), and applies even if the U.S. doesn’t have a tax treaty or other agreement to exchange tax information. The FATCA generally requires withholding agents to withhold tax on certain payments to [...]

As a new tax season approaches, the IRS continues dealing with delays due to COVID-19. According to an update on the IRS website, that includes processing millions of unopened tax returns. Refunds due will be sent in 2021 by paper check. To taxpayers expecting responses by mail, the IRS stated: “While we are opening mail within our normal timeframe, processing these responses is taking longer [...]

The IRS has announced that eligible victims of Hurricane Sally qualify for federal tax relief. This includes victims in counties of Florida that are designated as federal disaster areas qualifying for individual assistance. They now have more time to make tax payments and file returns. Deadlines for certain other time-sensitive acts also are postponed. The IRS already announced relief for Hurricane Sally victims in some [...]

COVID-19 is causing operational delays for the IRS, as it has with many businesses. An IRS official recently acknowledged that the tax agency is experiencing delays in processing paper returns and other mail due to limited staffing. As of Oct. 2, around 5 million pieces of unopened mail (about half of which are tax returns) remain unopened and are stored at various IRS processing centers. [...]

Do you know someone who isn’t required to file a tax return and hasn’t yet received an Economic Impact Payment (EIP)? The IRS has announced that the deadline to register for an EIP is now Nov. 21, 2020. This new date will provide an additional five weeks beyond the original deadline. EIPs are being sent by the federal government to eligible Americans to help mitigate [...]

The IRS has released answers to frequently asked questions about marijuana businesses. For example, one question asks if a taxpayer operating a marijuana business in compliance with his or her state’s laws has the same income and employment tax filing obligations as other businesses. The answer is “yes” even though the federal government considers the business an illegal activity. “Income from any source is taxable,” [...]

The IRS has issued final regulations on the business expense deduction for meals and entertainment. The Tax Cuts and Jobs Act generally eliminated the deduction for expenses related to activities generally considered entertainment or recreation. However, taxpayers may still deduct some business expenses related to food and beverages. The final regs address the disallowance of the deduction for expenses related to entertainment or recreation, including [...]

How does the tax code define “dependent” for tax purposes? The IRS has finalized the definition based on changes brought by the Tax Cuts and Jobs Act (TCJA) for tax years 2018 through 2025. The definition of dependent includes a qualifying relative who meets two tests. The “income test” is met if the individual receives gross income below the exemption amount in effect that year [...]

Taxpayers have the right to know what they need to do to comply with the tax laws. “The right to be informed” is included in the IRS’s “Taxpayer Bill of Rights.” The tax agency explains that this means you have the right: to have a clear explanation of the laws and IRS procedures in all IRS materials, including in correspondence; to be informed of IRS [...]

Final regulations clarify that the premium tax credit isn’t affected by the suspended personal exemption. The IRS has issued an advance copy of final regs stating that the reduction of the personal exemption deduction to zero for tax years beginning after Dec. 31, 2017, and before Jan. 1, 2026, doesn’t have an effect on an individual taxpayer’s ability to claim the premium tax credit. A [...]

The IRS has submitted its 2021 budget request to Congress. In its budget justification report, the IRS is requesting $12 billion in funding, which is a 5% increase over 2020 funding levels. The request includes a $400 million program integrity investment in 2021 “that over 10 years will generate $79 billion in additional revenue and reduce the $381 billion net tax gap,” the IRS said [...]

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 [...]