by Socheata Ten EA, LLC | Nov 2, 2021 | Tax Tips and News
Families who have significant income changes to report for the advance Child Tax Credit payments are running out of time to pass those changes on to the Internal Revenue Service.
The IRS says the changes must be entered on the Child Tax Credit Update Portal (CTC UP) by November 29 to be in effect for the December payment. A Spanish version of the CTC UP is expected to launch in late November.
When income is updated, the IRS can adjust the remaining advance payment amounts so the eligible taxpayers get the correct total amount for the year. The agency reminds married couples that if one spouse updates income on the portal, the update will apply to both spouses and so could affect future advance payments of the CTC for them both.
Time is short for tweaks
There’s no need to report minor fluctuations in income through the portal. Instead, the IRS says, taxpayers should use the online update portal to report substantial changes in annual income.
With the December payment being the last advance installment to be paid in 2021, it’s also the last chance for families to report income changes and have them put into effect for the year.
Updates have to be received on the portal before midnight on November 29 to be included in the December 15 advance payment.
Some families receiving the advance monthly payments are getting amounts below the maximum and may be eligible for an increase. This could happen if, for example, the taxpayer had a job loss during the year or had some other decline in income. Reporting the loss of income through the portal could increase the taxpayer’s advance Child Tax Credit payments for the remainder of 2021.
Updating income through the CTC UP is also important for those CTC recipients who find themselves making more income. Those who now get the maximum monthly payments – but expect to qualify for less at tax time – should update their income amounts now to avoid surprises when they file their income tax return.
Topic C of the IRS’ Frequently Asked Questions has more on calculating the Child Tax Credit. QC4 and QC5 have details for families that qualify to receive less than the full amount.
The IRS has tips for using the CTC Update Portal
The IRS says its Child Tax Credit Update Portal is only available to any taxpayer who is already eligible for the tax credit and is receiving advance payments of the CTC. But there are other limitations to keep in mind:
- The update portal is the only place to report a change in income circumstance to the IRS by advance payment recipients. IRS telephone operators can’t take these changes from callers and representatives at Taxpayer Assistance Centers cannot take them in person.
- Joint filers should note that taxpayers who submitted a joint return in 2020 can only update their income on the portal if they intend to submit a joint return for 2021 with the same spouse.
- Portal users should not be caught off-guard if the portal doesn’t show details of their changes. The IRS says the CTC UP will acknowledge a change was made – but will not display the change itself. Calling the IRS won’t be much help; their telephone representatives won’t be able to confirm a change was made, either.
There’s still time to sign up for the CTC
Low-income families still have time to sign up for the remaining advance payment of the Child Tax Credit.
Any family that isn’t normally required to file a tax return and isn’t already receiving advance payments of the CTC need to check out the IRS website. IRS.gov has tools to help determine a taxpayer’s eligibility for the credit and to help them fill out a simplified tax return to sign up.
Taxpayers have until November 15 to sign up.
Eligible families can get half of the credit amount as advance payments; the other half comes as a refund when the taxpayer files a tax return in 2022.
Need more information?
A special Advance Child Tax Credit 2021 page providing the most recent information about the tax credit and advance payments is available at IRS.gov/childtaxcredit2021. The site provides a number of online tools, including a list of frequently asked questions and a user guide for the Child Tax Credit Update Portal (Publication 5549).
In addition, the site contains direct links to the portal and other tools and resources.
Source: IR-2021-211
– Story provided by TaxingSubjects.com
by Socheata Ten EA, LLC | Oct 29, 2021 | Tax Tips and News
While most of the nation’s attention is turned to fall colors and the Thanksgiving holidays, residents of some Mississippi counties still have all-too-vivid memories of meaner weather earlier in the summer.
That’s when Hurricane Ida ravaged the state with high winds, heavy rain and serious flooding. Because of the problems caused by Ida, the Internal Revenue Service is placing some Mississippi Counties in the relief measures tailored to help the storm’s worst-off victims.
Not all of the state is covered by this relief package. Currently, the expanded relief applies to Amite, Claiborne, Copiah, Covington, Franklin, Georgia, Hancock, Harrison, Jackson, Jefferson, Jefferson Davis, Lawrence, Lincoln, Pearl River, Pike, Simpson, Walthall, Wayne and Wilkinson counties.
Other counties may be added if they become part of the Federal Emergency Management Administration’s (FEMA) disaster declaration, which names counties and localities that qualify for individual or public assistance.
The terms of relief
In a nutshell, the IRS relief package postpones various deadlines for filing and paying federal taxes in the named counties until Jan. 3, 2022. In other parts of Mississippi—covered by a separate relief measure previously—the deadline remains Nov. 1 of this year.
To see a full list of eligible locations, check out the disaster relief page on the IRS website.
This new relief package applies only to the counties named, and delays filing and payment deadlines that otherwise would have started on August 28. The relief applies to qualified individuals and businesses alike, giving them until Jan. 3, 2022, to file tax returns and pay any tax that would have otherwise been due during that time.
Taxpayers with a valid extension to file by Oct. 15, 2021, now have until Jan. 3, 2022 to file. In the case of extensions, however, any tax due should have already been paid back on the original filing deadline of May 17 and is not covered by the new relief package.
What else is covered?
Quarterly estimated income tax payments, usually due in September, are also postponed due to the new relief terms, as are quarterly payroll and excise tax returns that would otherwise be due on November 1.
In addition, businesses with an original or extended due date have more time; this includes calendar-year partnerships and S corporations with 2020 extensions that ran out in September, and calendar-year corporations with 2020 extensions that ended on October 15.
Calendar-year tax-exempt organizations with 2020 extensions ending November 15 are also covered.
To see a full list of what returns, payments and other tax-related actions qualify for the January 3 filing date, visit the IRS disaster relief page.
Do not contact the IRS
There’s no need for taxpayers to contact the IRS to see if they qualify for the delayed filing and payment deadline. The agency automatically determines eligibility by the taxpayer’s address of record on file when a return is filed.
Taxpayers who qualify for relief but live outside one of the 19 currently named counties should contact the IRS at 866-562-5227; this includes relief workers who are part of a recognized government or philanthropic organization.
Taxpayers within the federal disaster area who seek to claim their uninsured or unreimbursed losses from the storm on their federal income tax return can do it in one of two ways. They can claim the losses on the return for the year the loss occurred—in this case, on their 2021 return that will be filed next year—or they can claim the loss on the return for the prior year, which would be 2020.
In either case, the taxpayer has to write the FEMA declaration number on any return claiming a loss. To claim a loss in the original disaster area, which includes the entire state of Mississippi, the declaration number is EM-3569.
The declaration number for the new, 19-county disaster declaration is EM-4626.
Publication 547 has details on filing and claiming disaster losses.
The IRS says its disaster relief measures are part of a coordinated response to Hurricane Ida that includes not just FEMA and the IRS, but a number of federal agencies. For the full scope of the federal response to the hurricane, visit DisasterAssistance.gov.
Source: IR-2021-210
– Story provided by TaxingSubjects.com
by Socheata Ten EA, LLC | Oct 28, 2021 | Tax Tips and News
The Internet is filled with cybersecurity threats that can jeopardize family finances. Just one of many scams, identity theft tax refund fraud (ITTRF) is big business for criminals, and it can cause big headaches for victims.
The IRS, state departments of revenue, and private members of the tax industry established the Security Summit in 2015 to help combat the rising incidence of tax-related scams. One of the primary ways the group works toward this goal is by spreading awareness of new scams, common phishing tactics, and basic data security strategies.
4 tips for safely using the Internet from the Security Summit
For National Cybersecurity Awareness Month, the Security Summit is providing four tips that “children, teens, and other vulnerable groups” can follow to avoid scams and malware when online:
- Teach them to recognize and avoid scams. Phishing emails, threatening phone calls and texts from thieves posing as the IRS or legitimate organizations pose ongoing risks. Do not click on links or download attachments from unknown or suspicious emails.
- Remind them why security is important. Be careful not to reveal too much personal information. Keeping data secure and only providing what is necessary minimizes online exposure to scammers and criminals. Birthdates, addresses, age, financial information such as bank account and Social Security numbers are among things that should not be shared freely.
- Teach them about public Wi-Fi networks. Connection to Wi-Fi in a mall or coffee shop is convenient but it may not be safe. Hackers and cybercriminals can easily intercept personal information. Always use a virtual private network when connecting to public Wi-Fi.
- Always use security software with firewall and anti-virus protections. Make sure the security software is always turned on and can automatically update. Remember, to encrypt sensitive files such as tax records stored on computers. Be sure all family members have comprehensive protection especially if devices are being shared. Use strong, unique passwords for each account.
Finally, the Summit closes the press release by reminding that the IRS “does not use text messages or social media to discuss personal tax issues, such as those involving tax refunds, stimulus payments, or tax bills.” Instead, the agency will first reach out to taxpayers in an official letter or notice before following up with other methods of communication.
Want to learn more about data security?
Check out the following links from the IRS to learn more about data security issues:
Need help creating or updating a written tax office security plan?
Download the Drake Software Tax Office Security Plan.
Source: IR-2021-209
– Story provided by TaxingSubjects.com
by Socheata Ten EA, LLC | Oct 26, 2021 | Tax Tips and News
There’s not much doubt that the COVID-19 pandemic has taken a strong labor market and turned it on its ear, producing a shortage of available workers.
To help employers navigate these uncertain waters, the Internal Revenue Service is reassuring them that businesses rehiring retirees or keeping employees after they reach retirement age won’t put them crossways with their pension plans.
Many employers, including governmental agencies—public school districts, for example—have had to resort to these measures in order to keep key positions filled. Previously, hiring back workers who retired or retaining those older than the normal retirement age while paying them retirement benefits may have jeopardized the status of their pension plans.
The IRS, however, has posted two new sets of frequently asked questions (FAQs) giving guidance to public and private employers who have pension plans for their employees. These new instructions are aimed helping employers meet their staffing needs while still managing to comply with their pension plan’s qualification rules.
The FAQs explain an employer can usually deal with unexpected hiring needs by rehiring former employees—even if they have already retired and started receiving pension benefits. If the plan permits, these rehired employees can even continue getting pension benefits after they are rehired.
Giving employers another tool to retain older employees, the FAQs also allow employers to make retirement distributions available to existing workers who reach age 59 1/2—or whatever the normal retirement age of their plan may be.
The IRS is also hosting two webinars in October on school labor shortages. Webinar 1 deals with teacher and substitute teacher shortages, while Webinar 2 targets staff shortages, such as bus drivers and food service workers. Follow the links to preregister.
Source: IR-2021-208
– Story provided by TaxingSubjects.com
by Socheata Ten EA, LLC | Oct 22, 2021 | Tax Tips and News
It’s that time again: time for federal tax return preparers to renew their Preparer Tax Identification Numbers (PTINs) for the coming year. It’s no time to procrastinate, since 2021 PTINs will expire on Dec. 31.
A valid PTIN is required for anyone who prepares—or assists in preparing—a federal tax return for a fee. This requirement includes Enrolled Agents, whether or not EAs actually prepare returns.
A PTIN must be valid before the tax pro prepares any returns for the year, and should show up on filed returns as part of the identifying number.
“Taxpayers are relying on your expertise to help them meet their tax obligations and for some to complete their largest financial transaction for the year. Make sure you’re ready by renewing your PTIN now,” said Carol A. Campbell, director, Return Preparer Office.
The cost for a 2022 PTIN is $35.95, which is non-refundable. Whether the tax professional is renewing a PTIN or applying for the first time, the entire amount must be paid before the PTIN process will complete.
It’s faster online
In the case of renewing a PTIN, the Internal Revenue Service recommends using its online renewal process. It takes about 15 minutes to complete.
Renewing online is easy, and you get confirmation after completion:
- Start at gov/taxpros.
- Select the “Renew or Register” button.
- Enter the user ID and password to login to the online PTIN account.
- Follow the prompts to verify information and answer a few questions.
Besides renewing their PTINs, tax pros can use the online system to bring up a summary of the number of filed returns linked to their PTIN in the current year, and to get communications from the IRS Return Preparer Office through a secure mailbox.
First-time applicants can also get a PTIN online, using the same system, with prompts tailored to their process:
- Start at gov/taxpros.
- Select the “Renew or Register” button and select “Create Account” in the New User box.
- First-time users are issued a temporary password and will be prompted to change their password upon logging in.
- Once logged in, select the appropriate “PTIN Sign Up” option.
- Follow the prompts to obtain a PTIN online.
There is a paper option which uses Form W-12 and its instructions, usable for both applications and renewals, but this option can take up to six weeks to process. Depending on when the paper form is submitted, tax pros choosing this option might find themselves in danger of being without a valid PTIN at the start of tax season.
Non-credentialed tax preparers have professional education opportunities
A voluntary IRS offering, the Annual Filing Season Program, seeks to encourage non-credentialed tax pros to get the credentials they need through continuing education courses. this increases their knowledge and boosts their filing season readiness at the same time.
Program participants have to renew their PTIN, finish 18 hours of continuing education from IRS-approved CE providers and agree to follow the specific obligations set out in Circular 230, all by Dec. 31, 2021. An IRS video shows how to sign the Circular 230 consent form and how to print the Record of Completion.
A preparer successfully completing the program gets an Annual Filing Season Program Record of Completion from the IRS, and is listed in a public IRS directory of return preparers with credentials and other qualifications.
The directory can be used by taxpayers to find tax pros in their area who have completed the program or hold other IRS-recognized credentials.
IRS suggests tax pros get the Enrolled Agent credential
The IRS issues its elite Enrolled Agent certification to tax pros who have shown special competence in in a number of areas, including federal tax planning, individual and business tax return preparation, and representation. Enrolled Agents have the ability to represent any client before the IRS on any tax matter.
The IRS encourages non-credentialed preparers to consider becoming Enrolled Agents to push their careers to a higher level.
Continuing education opportunities are available from DrakeCPE
Tax professionals who need to complete continuing education requirements can sign up for courses at DrakeCPE.com.
Source: IR-2021-207
– Story provided by TaxingSubjects.com
by Socheata Ten EA, LLC | Oct 20, 2021 | Tax Tips and News
Businesses and individuals looking to recoup part of their capital spent on research and experimentation of products and processes now have a clearer roadmap on how to do that.
The Internal Revenue Service has unveiled the Chief Counsel memorandum, laying out just what information the IRS requires to validate a research credit claim. The memorandum aims to spell out instructions in plain language, thereby facilitating valid claims by taxpayers while reducing the number of claim-related disputes.
Researching a better way
It’s important that taxpayers understand just what’s expected from them when making a claim for the research and experimentation (R&E) credit. The IRS gets thousands of R&E claims every year totaling hundreds of millions of dollars from businesses, corporations and individuals.
Administering the credit, the IRS says, consumes a lot of the agency’s resources. A substantial number of A&E credit claims have to be audited to ensure they meet the requirements of IRC Section 41, taking time and money.
The IRS hopes to streamline the process through the use of the Chief Counsel’s memorandum, giving those who claim the credit clear instructions on what information is needed. If that’s done, the IRS says it can quickly and more efficiently determine if the R&E claim for a refund is valid—or if more examination is needed.
Here’s how the new process works: The Chief Counsel memorandum specifies that for a Section 41 research credit claim for refund to be considered, the taxpayer has to provide certain specific information when the claim is filed.
This can be viewed as a three-step process:
STEP 1: Identify all the business components that the Section 41 research credit claim applies to for that year.
STEP 2: For each business component, identify all research activities performed and name the individuals who performed each research activity, as well as the information each individual sought to discover.
STEP 3: Provide the total qualified employee wage expenses, total qualified supply expenses, and total qualified contract research expenses for the claim year. Use Form 6765, Credit for Increasing Research Activities.
Grace period provided
Taxpayers are being eased into the new procedure with a grace period until Jan. 10, 2022. After that date, a one-year transition period starts, where taxpayers who don’t comply with the new instructions get a 30-day reprieve to perfect their claim for the R&E credit.
The IRS says it will have more details on this new process later, but taxpayers can start sending the new required information now. Also, look for the agency to do more research of its own with stakeholders on research credit issues.
Send comments to [email protected].
Source: IR-2021-203
– Story provided by TaxingSubjects.com
Socheata Ten EA, LLC