TaxMamas TaxQuips: Tax Quips

Today TaxMama® wants to tell you about even more news from the IRS. It just keeps on a-comin’!               Dear Family, The IRS is still in the process of sending out stimulus checks to people, electronically and on paper. Many people were surprised and delighted to receive $1,200 checks for family members who had died in 2018 or 2019. Conveniently, the checks even had DECEASED printed directly on the check. There has been some controversy about whether or not we had to return those checks to the IRS. Especially since the CARES Act did say that when folks filed their 2020 tax returns, they wouldn’t have to return the money if it turned out they received too much. And therein lies the answer. People who died in 2018 and 2019 will not be filing 2020 tax returns. (Their estates might for income after death that is still to be distributed to heirs; but that’s not the same thing, is it?) Yesterday, the IRS updated their FAQs on this topic. https://www.irs.gov/coronavirus/economic-impact-payment-information-center? FAQ #10 says to return the money. FAQ #41 explains how to return the money Note: The IRS actually says to return the money if the person died before the check was issued (i.e. even in 2020). Many tax professionals do not agree with this. So consider holding on to those funds until this part of the question is resolved. more-> Taxpayers with cases in the Tax Court The IRS and IRS Counsel has stepped up to try to help taxpayers with docketed cases settle the cases, while the Tax Court is not in session, formally.  IRS Chief Counsel has scheduled Virtual Settlement Days in Detroit and Atlanta. Frankly, most people who have solid cases generally get them settled at this level anyway without ever setting foot in the Tax Court. So this is an excellent opportunity to settle and close your case. Get your documents together and follow the process the IRS has just set up for you. (If you don’t know what a docketed case is, you don’t have one.) ;~) Have a passion to help taxpayers? The IRS is accepting applications for grants to fund Low Income Tax Clinics (LITC) and Tax Counseling for the Elderly (TCE) and Volunteer Income Tax Assistance (VITA) grant programs. Read the instructions to the applications. Although it says you need to provide matching “funds,” the value of your time and your specific team of volunteers can be taken into account.   The Enrolled Agents Examination – PLEASE JOIN US Prometric sites will not be opening in the month of May. We hope they will open by June 1st. In the meantime, here’s everything else you need to know about the EA Exam.

Today TaxMama® wants to talk to you about some more news from the IRS. As you know, they are issuing announcements frequently.         Dear Family, The IRS announces that they have updated the stimulus look-up tools. Several people have told me that they can finally find their information. I was also able to do so – but only after I filed my 2019 return. Some tips I learned this weekend. Don’t enter your address EXACTLY as it appears on your tax return. We use a P.O. Box – should have entered it without the periods, as PO Box. That worked. All you responsible taxpayers who applied your 2018 refund to 2019, so you don’t have a bank account listed – enter ZERO as your refund. The IRS is sending some people back to work on the Campuses in states that have opened up – a bit. With extensive COVID19 safety protocols in place. This was only announced to the media, not to the public. We don’t have SPECIFIC information about what will start functioning again, but here’s what the Commissioner said he’d like to accomplish. Mostly the focus is to get more refunds into the hands of taxpayers. The IRS resumes a number of key responsibilities, including opening mail that has been held for a number of weeks, processing of paper tax returns that may offer refunds to taxpayers, working on returns with refundable credits, answering taxpayers’ questions on our toll-free lines, and performing Income Verification Express Service and certain lien/levy functions. The new funds issued by Congress? It seems that the SBA was flooded with applications within 10 minutes of making them available. Whew – that money will be gone quickly. TaxMama’s updated recommendation for paper communications? Wait two weeks or so for the returning IRS staff to get their feet on the ground and work their way through the backlog before sending in new paper tax returns or correspondence. And it’s quite possible that that IRS may open up some fax lines for more functions – so stand by for updates. The Enrolled Agents Examination – PLEASE JOIN US Prometric sites will not be opening in the month of May. We hope they will open by June 1st. In the meantime, here’s everything else you need to know about the EA Exam. 

Today TaxMama® wants to talk to you about some of the information and updates from the IRS. They have been sending out news constantly. Let’s filter through the noise, OK?     more->       Dear Family, On a personal note, a family friend, from my babyhood, just had his 100th birthday yesterday – attended via Zoom. Appropriately, his name is Simcha – which means joy. So, happy 100th birthday – and may he, and all of you, remain healthy, safe and frisky. So, tax news. You heard about the new legislation passed by Congress this week. The Paycheck Protection Program and Health Care Enhancement Act, HR 266.  The good news – they are adding more money to the overall system. Also good news – many major corporations who received millions in loans have agreed to return/repay the money right away, making it available to more small businesses. (Weird news/note: In the TCJA, Congress defined a “small business” as having a 3-year average of $25 million in sales, increased annually by inflation. Which explains why SMALL businesses are not getting the funds.)  Even more good news – they didn’t include any new tax law changes. What a relief! As you know, everything is still closed in most of the country. The IRS campuses are closed, so there is no point in mailing any paper forms or documents right now. Your submissions will just be added to the growing pile of paper and probably start breaking down from the weight, like at all dump sites. TaxMama’s recommendation for paper communications? a) If you MUST send something – wait until late June (or after you learn that the IRS is processing the paper) to send things in. Then, send it with proof of delivery – certified mail has been recommended by a CPA. I don’t think anyone can sign for it. So I recommend USPS Priority Mail, or UPS/FedEx/DHL with tracking. b) See if you can use the variety of IRS electronic tools to look things up and to submit certain kinds of information. For the majority of US taxpayers, those who have been filing tax returns every year, you should have no problem using the online log-in systems. If you haven’t filed since 2017, you won’t have access at all. You WILL have problems if you don’t have a cell phone with a dedicated account (i.e. if you use prepaid phones, Google or other online phone systems). You won’t be able to receive the IRS codes. You may have a problem if you have locked your credit accounts – the IRS needs to tap into that information to verify your identity. So release the lock before trying to set up or log into the IRS services. c) Try to use other ways to get your info into the hands of the IRS. For instance, if you want to harvest the Net Operating Losses (that could be a 2 to 3-hour conversation – and there are webinars about this topic), you can file the forms using a set of new IRS fax numbers. They just opened these lines on April 17th so you can submit these two forms to request tentative refunds, to be issued within 45-60 days: Form 1139 (corporations)  - 844-249-6236 Form 1045 (individuals) – 844-249-6237   d) ACS – The IRS’ Automated Collections System is open. So, taxpayers with balances due can contact them for assistance. And tax professionals are able to submit their Powers of Attorney forms to ACS to get access to transcripts for new clients, in your e-services accounts. (Yes, I know they are doing this. And tax pros can use Call EnQ to get through the phone lines faster.)   The Enrolled Agents Examination Prometric sites will not be opening in the month of May. We hope they will open by June 1st. In the meantime, here’s everything else you need to know about the EA Exam. 

Dear Friends People are starting see the checks in their bank accounts. The IRS has opened BOTH portals – they are both found on this page: https://www.irs.gov/coronavirus/economic-impact-payments For people who didn’t need to file but want to file a zero ($1) tax return to get their bank account info into the system For people who filed in 2019 or 2018, but didn’t have their bank account numbers on their tax return, for any number of reasons. For what it’s worth, the portals are slooooooooooooooow…but functioning. The (2) portal didn’t work for me. We always have our refunds applied to next year, so we don’t enter a bank account number. We haven’t yet filed for 2019 – but have filed for 2018. It gave me the same vague error message that many of you are getting – “Status Not Available”. So I asked the IRS about this:           This is what the IRS said about the two portals: The Get My Payment site is operating smoothly and effectively. As of mid-day today, more than 6.2 million taxpayers have successfully received their payment status and almost 1.1 million taxpayers have successfully provided banking information, ensuring a direct deposit will be quickly sent. IRS is actively monitoring site volume; if site volume gets too high, users are sent to an online “waiting room” for a brief wait until space becomes available, much like private sector online sites. Media reports saying the tool “crashed” are inaccurate. In situations where payment status is not available, the app will respond with “Status Not Available”. The IRS reminds users you may receive this message for one of the following reasons: If you are not eligible for a payment (see IRS.gov on who is eligible and who is not eligible) [I am eligible!] If you are required to file a tax return and have not filed in tax year 2018 or 2019. [I DID file for 2018!] If you recently filed your return or provided information through Non-Filers: Enter Your Payment Info on IRS.gov. Your payment status will be updated when processing is completed. If you are a SSA or RRB Form 1099 recipient, SSI or VA benefit recipient – the IRS is working with your agency to issue your payment; your information is not available in this app yet. You can check the app again to see whether there has been an update to your information. The IRS reminds taxpayers that Get My Payment data is updated once per day, so there’s no need to check back more frequently. The IRS continues to closely monitor the situation. In addition, more information will be shared on IRS.gov shortly on some common questions taxpayers are asking. The IRS also said this about  Supplemental Security Income recipients; They will receive automatic Economic Impact Payments; step follows work between Treasury, IRS, Social Security Administration. Its clarified that SSI recipients will receive a $1,200 Economic Impact Payment with no further action needed on their part. The IRS projects the payments for this group will go out no later than early May

IRS operations to process third-party authorizations are now closed. Please do not fax requests for Centralized Authorization File (CAF) numbers until further notice. The Income Verification Express Service also is temporarily on hold. Possible alternative for tax administration purposes: clients can go to Get Transcript Online, create an account to verify their identities and immediately review or print a tax transcript. Our efforts to protect IRS employees, taxpayers and our stakeholders mean extremely limited services are currently available. The IRS is unable to process paper tax returns, respond to paper correspondence or staff toll-free live service lines. Please use all electronic options available to you on IRS.gov or through your tax software provider. See IRS urges taxpayers to use electronic options; outlines online assistance The IRS will be able to issue economic impact payments for those who filed returns with the IRS, including their bank account information, starting next week. TaxMama’s response to the IRS: 1) A lot of taxpayers are unable to file electronically – for a variety of valid reasons. I understand why you cannot process paper tax returns – but just WOW! 2) Taxpayers who have not filed tax returns for a year or more  and are trying to get back into the system cannot use the get transcript system – unless the IRS can provide some other way to verify their identity besides their AGI from a previous year. 3) The extension of time to file 2016 is generous – but it won’t help people who don’t have their 2016 3rd party data.   This also means that those amended returns made available by the CARES Act for  several retroactive tax breaks to 2018, and the Net Operating Loss (NOL) carrybacks are now, effectively not available. NOLs that could be taken for losses before 12/31/17 could have been filed by July 27, 2020. But if you have to file on paper – well, that’s out. So it only works if you can file Forms 1139 and 1045 electronically. (Can you?) Essentially, Congress did not coordinate any of their generous provisions with the IRS and their capabilities – and all that was before the COVID19 shutdown of the IRS’s system. This also means that people who didn’t already file 2018 and prior tax returns might not be able to get their stimulus checks until they file their 2020 returns.   NOTE: This also affects payroll tax returns – which are filed on paper. Send them in on time (and save proof of the postmark if you can). SEND THE PAYMENTS (via EFTPS) regardless.  The EFTPS system is the only way to make electronic payroll tax payments. You cannot use pay.gov, though you might sill be able to pay through your bank? if your business doesn’t already have an EFTPS account, set it up immediately. It can normally take up to two weeks to set up – hopefully, it won’t take longer. Note: Visit the TaxMama.com site for more COVID19 IRS News  

Today TaxMama® wants to talk to you about all the noise about filing deadline extensions and other insanity in the air.     Dear Family, First of all, I do hope all of you are well, and have enough toilet paper. On the other hand, I haven’t been able to find bread or water in my supermarkets. Perhaps we will just have to get bread from a real bakery and see if we can survive drinking tap water. Heavens! But that’s not why I am writing to you today. As ever, SLOW DOWN. Don’t rely on everything you see or hear in the news. As of yet, we do NOT have an IRS filing due date on July 15th . It’s still April 15th. Although the actual Secretary of the Treasury made that announcement, he was completely vague about the which payments are extended until July 15th (balance due for 2019? Estimated tax payments for 2020? Payroll tax deposits?  Or…?) He did NOT say that the filing deadline was extended. We are waiting for the Commissioner of the IRS to make a specific announcement about what is and is not extended – and until when. However, just a side note. In cases where the President has declared an disaster area, the Further Consolidated Appropriations Act in December 2019 did actually establish an automatic 60 day extension on all filing deadlines and payments. So, since he declared a national emergency, it might be possible to rely on that, if all else fails, that should take up to at least June 15th. In the meantime, I know many people cannot get to your tax professionals, or to places where you can copy or scan your information. So, for now, just put your personal tax returns on extension – use Form 4868. You can do it online or on paper. If you can afford to pay on time, do so. Don’t rely on any extensions. https://www.irs.gov/payments  . If you cannot, fine, then wait until the July 15th deadline and if you get penalty letters – just respond that the Secretary of the Treasury gave you more time. (Note: There is no announcement on the Treasury website about this. hmmm) And remember, you can find answers to all kinds of questions about taxes and business issues, and Enrolled Agent tax education, free. Where? Where else? At www.TaxMama.com.   To make comments please drop into the TaxQuips Forum.

Today TaxMama® wants to talk to you about the upcoming deadline on Monday. Yes, we do have an extra day, because the 15th is on a weekend.             Dear Family, Coming up on Monday, here is what’s due: Form 1065 – Partnership tax returns and K-1s (for partnerships and LLCs filing as partnerships) Form 1120S – S Corporation returns and K-1s (for S corps and LLCs filing as S Corps) OR to file extensions for the Form 1065 and 1120S – use Form 7004. The decision to become an S corp or to revoke the election for 2020 – using Form 2553. No. There is no extension for making and revoking the S Corp election. more-> I recommend that you put your business returns on extension. There are too many reasons to list. But some of them include:   How best to use the 20% Qualified Business Income Deduction. What depreciation rules apply to you. How do the new rules for small businesses and inventory affect your tax return? Are you subject to the interest expense deduction limitations and the GILTI taxes – because you have investments in other partnerships or businesses – even through your brokerage account? Do you need to amend 2018 before preparing 2019’s return because of law changes at the end of last year? And more… Give yourself and your tax professional time to work your way through this year’s tax maze. You’ll stress less and have a more profitable and harmonious outcome.   And remember, you can find answers to all kinds of questions about taxes and business issues, and Enrolled Agent tax education, free. Where? Where else? At www.TaxMama.com.   Incidentally, I don’t know if you know - TaxMama.com® is a free resource for people to get answers to tax questions BEFORE they make major, costly moves. To make comments please drop into the TaxQuips Forum.  

subtitle: Why donations are down – especially vehicles Today TaxMama® wants to talk to you about charitable contributions, especially vehicle donations.       How are charitable donations of vehicles affected because of the new tax rules – effective as of December  2017, in the Tax Cuts and Jobs Act – https://www.irs.gov/charities-non-profits/charitable-organizations/irs-guidance-explains-rules-for-vehicle-donations ? The first tax return year that would be affected is 2018. The IRS hasn’t published statistics for that yet. And Charity Navigator is still only showing statistics up to 2017. But odds are, all donations are probably down – not just vehicles. Why?  The average person is no longer able to itemize because the standard deductions is over $12,000 for individuals; and over $24,000 for couples. The average person no longer needs to build up tax deductible expenses. However, people who do want to continue their current program of donations can continue to do so – and should. It’s not about the tax deduction. more-> You may have heard that people who cannot get a tax benefit from their donations in the current year can carry unused donations forward for the next 5 years.  That’s true. But only if you itemize. So if you don’t itemize, you cannot carry your donations forward. People who do itemize, but don’t get any benefit from their charitable contributions are allowed to carry them forward for up to 5 years. That gives them time to structure their income and deductions so they can benefit from the donations in the 3rd to 5th year. Another strategy is to gift the money to a trusted friend or family member who can use the charitable contribution deductions. They can make the donation in your honor – and you get to keep your social standing in your religious organization or charity – and they get the tax deduction.   Let’s talk about donating vehicles, though. The rules for making vehicle donations to charity are complicated and difficult to deal with for the average person. Often, the net benefit is not worth the trouble. If you really want the organization to get a benefit from your car – just sell it and give your charity the money. There is no taxable income from selling your personal vehicle. There might be if it’s a business vehicle. For donations – here the main rules – and the drawbacks: a) the vehicle has to be in good condition – usually people only donate their cars when they are in such bad shape that the car cannot be sold. OR…when the car is in good shape, it’s usually an inherited vehicle from a recently deceased relative. Those vehicles might generate worthwhile deductions. b) If the vehicle is worth more than $500, you need to get Form 1098 from the charity that defines what they did with the car https://www.irs.gov/pub/irs-pdf/f1098c.pdf https://www.irs.gov/pub/irs-pdf/i1098c.pdf if they are keeping it – they can give you the form quickly if they are donating it or auctioning it off, then you must wait for them to dispose of the car to get the value – which often comes AFTER the tax return is due. c) If you give it one of those cash for cars charities that provide incentives (like trips to Las Vegas, etc.), you must deduct the value of the goodies you receive from your donation. So, your $750 donation might be reduced by $100 for the trip to Las Vegas (which is usually a time-share sales pitch anyway). 3) It’s must faster, cheaper and easier to dispose of it yourself a) You can trade the car in (least amount of trouble, you never have to deal with an unhappy buyer). b) If the car doesn’t pass smog (at least in California) you can take it to a designated disposal site and get $1,000 – $1,500 from the State of CA . Does your state have a program like this? (Incidentally, if your car doesn’t pass the smog check, the State of CA might be able to give you $500 to get it repaired. Essentially, for the average person, there is little or no value in donating your car to a charity. The best tax breaks for vehicle donations will go to those people with expensive cars and collectors’ items. In that case, you might not only end up with a terrific deduction, but you won’t have to report the sale of an appreciated asset. After all, those gorgeous classic cars have usually gone up in value over time.  

       Today TaxMama® wants to talk to you about common errors people are making.       Dear Family, We have been answering hundreds of questions from taxpayers and tax professionals in the TaxMama® Forum.  http://iTaxMama.com/AskQuestion Oddly enough, people are upset with our answers. Why? Because they are asking questions AFTER they have taken financial steps without first exploring the consequences. Or they have filed tax returns without waiting for all the W-2s, 1099s, etc. to arrive. Look, if you don’t want to pay someone for advice – even when your transactions involve over $100,000 or more of sales or distributions – that’s your business. But, at least ask TaxMama®. We point you to useful information for free.   more-> And sometimes, we even give you tips that would otherwise cost you thousands of dollars if you went to a tax professional for planning. (Yes, really.) Here are some common issues that are raised: I filed my tax return and then got another W-2 or 1099-MISC Depending on how much income is missing, you can either amend, or wait for the IRS CP-2000 assessment I was given the opportunity to take a distribution from my retirement account of (say) $50,000 – and went ahead and cashed it out. Now I owe thousands of dollars in taxes and penalties! How can I fix this? You can’t. The time to address this is BEFORE taking the distributions. You could have rolled it over to an IRA account with no taxes. You could have taken some money as an annuity. Or other options might have even given you some tax-free access to the cash. IF you asked before acting. My siblings and I inherited our parents’ home and we sold it. All the money was distributed to each of us. How do we report this on our taxes? You should have set up a decedent’s estate, and sold the house using the tax ID number of the estate. Then it would have been simple to report the sale on the estate tax return. And NEVER distribute all the money before the final tax returns are filed and all costs are paid. The executor is responsible to make sure all the tax returns are filed and that the taxes are paid. I am divorced with a child, who lives with me all year. My ex already filed his tax return and claimed my child. What can I do? Discuss these things openly with your ex-spouse (or whoever) before tax season and sort these things out. Even when you have a legal right to claim your child, if someone files first, it can turn into a nasty tax battle – which can result in holding support for ransom, or worse. Easily avoided through communication during the divorce process. This course can help you with that. There are more, many more questions that arise. Real life is much more bizarre than I could possibly make up. Maybe that’s why there are so many reality shows on TV. And remember, you can find answers to all kinds of questions about taxes and business issues, and Enrolled Agent tax education, free. Where? Where else? At www.TaxMama.com. To make comments please drop into the TaxQuips Forum.

Today TaxMama® has an announcement from the IRS that I want to share with you. The IRS IS coming to visit your small business – if you fall behind on your payroll tax deposits. Beware!       Dear Family, This is the IRS’ latest announcement – you’re going to love this! This is a pet project of Darren Guillot, Deputy Commissioner for Collection and Operations Support in the Small Business/Self-Employed Division (SB/SE). He refined the process in his last post as Director of Field Collection Operations. All sarcasm aside, his heart IS in the right place. His intention, believe it or not, is to help small businesses that start to get behind on payroll tax deposits – before they get so far behind that it’s too late to save the business. The fact is, one of the most common reason that small businesses fail (other than ineptitude, bad planning and lack of funds) is that the owner thinks it’s OK to use the money withheld from employees’ paychecks to pay their own bills, as a short-term loan. It might work once. But payroll after payroll, the boss starts getting more behind. The funds don’t get paid back. The payroll taxes don’t ever get deposited. This affects the employees, trying to get their refunds. This often causes businesses to go under. The other part of issue is the one affecting the IRS. The majority of the money that the IRS collects is from payroll taxes – not your income tax returns. They rely on all employers to get this deposited correctly. Which is why the late deposit penalties can be as high as 15%, depending on the delay. (That doesn’t really help, because they don’t have the money to pay the underlying taxes, anyway.) The IRS still has to give the employee credit for the withholding reported on the W-2s, even if the IRS hasn’t received the money. You and I, as taxpayers, pay for this shortfall when employers steal this money from their employees and the IRS. And YES! The IRS does consider this “theft” because the employers are stealing money that legally belongs to their employees – not the employer. Please read this note from the IRS and share it. Tax Professionals – Please advise your clients to call you when they get this visit Business owners, please call your tax pro when you get the visit. As part of a nationwide effort by the IRS to ensure fairness in the tax system, teams of IRS Revenue Officers will be conducting special efforts in Los Angeles for individual and business taxpayers who need education and compliance assistance beginning January 27, 2020.  IRS revenue officers work cases that involve an amount owed by a taxpayer or a delinquent tax return. Their role involves education, investigation, and when necessary, appropriate enforcement. The IRS routinely conducts face-to-face visits with taxpayers who have a previously known tax issue that wasn’t resolved through mail contact. IRS revenue officers are in about 250 locations throughout the country, and they regularly provide scheduled and unscheduled visits with tax payers who are having difficulty becoming compliant. This initiative will help close geographical gaps between those locations and provide additional revenue officers in areas that need extra help with cases. So, while they are starting in Los Angeles, they will be spreading around the country. For more information about these efforts can be found on IRS.gov: IRS Fact Sheet 2019-15 Special IRS efforts to focus on tax compliance, education begin https://www.irs.gov/newsroom/special-irs-efforts-to-focus-on-tax-compliance-education-begin IRS Tax Tip 2017-67 https://www.irs.gov/newsroom/how-to-know-if-the-knock-on-your-door-is-actually-someone-from-the-irs And remember, you can find answers to all kinds of questions about taxes and business issues, and Enrolled Agent tax education, free. Where? Where else? At www.TaxMama.com. Incidentally, I don’t know if you know - TaxMama.com® is a free resource for people to get answers to tax questions BEFORE they make major, costly moves.  

    Today TaxMama® wants to give you some very big news about tax law changes. On December 20th President Trump signed into law the Further Consolidated Appropriations Act. Those 715 pages included two major tax bills – the Setting Every Community Up for Retirement Enhancement Act (SECURE Act) and the Taxpayer Certainty and Disaster Tax Relief Act (TCDTRA) of 2019.   more->       Dear Family, Why is this new set of laws important to you https://www.congress.gov/bill/116th-congress/house-bill/1865/text – other than the fact that it includes a budget bill to keep the government in operation? Well, the TCDTRA includes extenders to tax laws that had previously expired. In fact, many of those extenders go back to January 1, 2018 – which may give you an opportunity to amend those 2018 tax returns – if you choose to do so. The SECURE Act gives you some major benefits regarding your retirement savings and distributions. Seeing this information will give you an idea about why the IRS will undoubtedly delay the start of the efiling season. Both the IRS and all the tax software companies must rapidly re-write a significant part of their tax software to accommodate these changes – which have been waiting since June or July to be passed. No one expected them to pass at the last minute like this. Let me give you a brief overview of provisions that will affect you directly. Key TCDTRA Extenders *Division Q” – affecting 2018 to 2020: Mortgage Insurance Premiums (PMI) are deductible Medical expenses are reduced by 7.5% instead of 10% Principal residence debt cancellation is not taxable. $4,000 tuition and fees deduction is restored $500 lifetime non-business energy credit is back. Qualified Fuel Cell Motor Vehicles Credit is restored 2-Wheeled plug-in electric vehicle credit is back. Employer tax credit for paid family leave gets an extra year Remember, you can amend your 2018 return if these changes make a significant difference for you. But if the affect is minor, don’t. Expect these amended returns to take many months to process, since the IRS will be flooded. How will the SECURE Act affect you? Let me count the ways. New $500 employer tax credit for setting up a retirement plan (or adding to current plan) for employees, where they are automatically enrolled – employees must opt out of these plans. (This is in addition to the tax credit for new retirement plans) Part-time employees may qualify for 401(k) participation Certain fellowships and stipend payments are considered earned income to allow recipients to make IRA contributions. Payments to home healthcare workers, which are excluded from income qualify to allow them to make IRA contributions The IRA contribution age limit of 70.5 has been removed – you can contribute as long as you have earned income The age for required minimum distributions (RMDs) from IRAs and retirement plans has risen from 70.5 to age 72 Money drawn from IRAs and retirement plans for adoptions will avoid the 10% early withdrawal penalty. Funds may be withdrawn from Section 529 plans to cover up to $10,000 of student loan principal and interest – once in a lifetime Inherited IRAs and qualified plans must now be distributed over 10 years, instead of the actuarial of the beneficiary or the deceased (except for spouses) Kiddie tax rates are back at the parents’ rate instead of the higher trust rates (optional) – this is effective for 2018, in case you want to amend There are many more provisions. To get more details, please sign up for my 2 tax update courses at CCH CPE Link https://www.cchcpelink.com/teamtaxmama. I am in the process of updating those courses (including the California course), as well as the 2020 edition of Small Business Taxes Made Easy. Incidentally, I don’t know if you know - TaxMama.com® is a free resource for people to get answers to tax questions BEFORE they make major, costly moves. And remember, you can find answers to all kinds of questions about taxes and business issues, and Enrolled Agent tax education free. Where? Where else? At www.TaxMama.com. To make comments please drop into the TaxQuips Forum. [Note: If you were subscribed to the e-mailed version of TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]

  Today TaxMama® wants to give you news and some steps to take before the end of 2019.        Dear Family, In the tax world, we spent this year trying to understand how to interpret all sorts of provisions of the Tax Cuts and Jobs Act that was passed at the last minute of 2017. The IRS has released hundreds of pages of explanations and clarifications – and I have read practically all of them. Yet, many provisions eluded even me, which is why I take classes from teams who know more than I do. The good news is, we got little or no new legislation related to your tax return this year. Not even extenders. However, we are about to get a major new law signed, hopefully this week. more-> Tax Pro, Jim Faucett just sent me a note about the SECURE Act – Setting Every Community Up for Retirement Enhancement ACT. The House has passed this bill – apparently the Senate has also passed it – and the President will sign it. https://www.congress.gov/bill/116th-congress/house-bill/1994 (not yet updated with the latest passage and signature). But it does have an excellent summary of the provisions of the Bill. When this passes, I will let you know the details. Just know, that this will have a major impact on your ability to set money aside for retirement – and to delay when you are forced to withdraw it, among other things. As some of you know, I have been working on a major update to Small Business Taxes Made Easy. The 4th edition was done, and off to editing. But if the Senate and President get this bill passed and signed this year, I will have time to include it in the book. Regardless, you will get the updates here, at TaxMama.com . Back to this year and this month. What to do? Here are some ideas. Update your withholding – file a new Form W-4 by January 1st -  https://www.irs.gov/pub/irs-pdf/fw4.pdf The IRS has created a totally different Form W-4. It’s confusing as all heck. But they have tools for employees to use and for employers to use. Even employees with self-employment income. Seniors age 70 1/2 – remember to withdraw your Required Minimum Distribution from your retirement accounts -  https://www.irs.gov/newsroom/dec-31-deadline-for-most-retirees-to-take-required-minimum-distributions  50% penalty if you don’t – but you may have the draw sent directly to your favorite charity to avoid taxation. Make charitable contributions – now deductible up to 60% of income, instead of 50% – and start getting copies of receipts right now  https://www.irs.gov/taxtopics/tc506 Also a great time for the annual “clear out the clutter” effort to donate clothing, toys and other household effects in good condition to charities. The IRS has some tips about deductions for charity, medical, and military moving. Review your investment portfolio - If you have capital gains this year, sell some losers to offset the gains. If you’re in the two lowest tax brackets (10% – 12%), your capital gains rate is -0-! As long as your capital gains don’t take your income beyond those brackets. For people collecting Social Security (SS) benefits – watch the increased income carefully, so 85% of your SS benefits don’t become taxable, suddenly. Maximize your Retirement contributions- one of the best ways to reduce your taxes and build up savings – up to $19,000 for employee 401ks  - http://www.401khelpcenter.com/2020_401k_plan_limits.html Make your January mortgage paymentin the last week of December to get the maximum interest deduction early (or to even out 2019, if you used this strategy in 2018). Generate enough medical expenses by 12/31 to get reimbursed for your Flexible Spending account funds withheld from your pacheck https://www.irs.gov/publications/p969#en_US_2018_publink1000204176 Roth Conversion, anyone? If you’re in a low enough tax bracket, it may be worthwhile moving money from a regular IRA to a Roth IRA ITINs - since the PATH Act of 2015, Congress set up a system where ITINs expire in a 3-year cycle. This year is the last year of that cycle. So if you haven’t renewed your ITIN in the last three years, or haven’t filed a US tax return in the last 3 years, you may have already lost your ITIN – for yourself and your family. Start working on updated it RIGHT NOW!  https://www.irs.gov/individuals/individual-taxpayer-identification-number And employees with high business expenses – you really should re-negotiate your situation with your employer. Were you shocked at losing all your deductions when you tried to prepare your 2018 tax returns? Nasty! If you haven’t re-negotiated your situation in 2019, the same thing will happen this year. To fix that for 2020, sign up for TaxMama’s Special Trump Update on-demand webinar to get the tools and template to make this negotiation work. http://iTaxMama.com/TrumpTax_Planning Incidentally, I don’t know if you know - TaxMama.com® is a free resource for people to get answers to tax questions BEFORE they make major, costly moves. And remember, you can find answers to all kinds of questions about taxes and business issues, free. Where? Where else? At www.TaxMama.com. To make comments please drop into the TaxQuips Forum.

Photo by CreditDebitPro[/caption]   Today, TaxMama® wants to talk to you about your delayed tax refund.           Dear Family, This has been a remarkably busy year for all tax professionals  and the IRS  – as we have been learning the IRS’ interpretations of the full-blown Tax Cuts and Jobs Act (and some other provisions). Congress writes a few vague words of law – and the IRS is faced with having to issue hundreds of page of explanations. (For instance, just the real estate considerations of the Section 199A deduction span about 400 pages.) First some good news. IRS’ efforts to reduce tax identity theft, and the related theft of millions of dollars of refunds is working. Fewer people are affected by identity theft, and IRS is resolving those cases in about the half the time as before. The bad news. The efforts to prevent refund theft is slowing down your refunds. Who’s affected? Primarily people with refundable credits, especially if they file as head of household – earned income credit, child tax credit, American Opportunity Credit. For some people, it’s taking MONTHS to get your refunds released. IMPORTANT! When the IRS sends you a notice about the delay, if they ask you for documents, reply immediately. Grouse and complain later. Get them the copy of the W-2 and a letter from your employer when they ask for it, or whatever else the IRS wants.  They are only asking because they are missing key evidence of your income, or they don’t have your employer’s W-2 in the system for some reason. (Maybe s/he didn’t file electronically and it takes longer?) Not responding – your account gets flagged and turned over for more in-depth investigation. The IRS figures that real taxpayers will respond. But identity criminals used your name, address and Social Security number, but their bank account. So the criminals won’t be getting a copy of the IRS notices. Now, do you understand why, when you don’t respond to IRS inquiries about the tax return YOU filed, the IRS can’t be sure you were the one who filed that return? So get back to them right away. However, some people have told me they sent in their responses more than 6 weeks ago and still have not seen their refunds. In that case, it’s time to get the Taxpayer Advocate Service (TAS) involved. The fastest way to do that is to find your local Taxpayer Advocate’s office. You will get through on their phone lines more quickly than calling the national number. https://taxpayeradvocate.irs.gov/contact-us And if you’re a tax professional with a power of attorney, the Practitioner Priority Service hotline can help you reach TAS. And remember, you can find answers to all kinds of questions about taxes and business issues, and EA Education, free. Where? Where else? At http://iTaxMama.com/AskQuestion

        The time has come, TaxMama® said, to talk of many things. Filing deadlines, disaster extensions, and various confusions this year’s filing brings.     more->                          Dear Family, Here it is, another October filing deadline. This deadline applies to most individuals and calendar-year C corporations.  (You do know that your partnerships, S corps and 1041s were due last month, right?) Well, first of all, the good news – in the face of bad news. Those people in the path of Imelda will have until the end of January to file. https://www.irs.gov/newsroom/irs-announces-tax-relief-for-texas-victims-of-tropical-storm-imelda ( Here is the main IRS disaster page. See if your area is affected – and any special deadlines that might apply – https://www.irs.gov/newsroom/tax-relief-in-disaster-situations ) Then, in California, land of fires, floods and faults in the earth, some of our utility companies are turning off power TOTALLY in many parts of the state. Shocking and rather unheard-of in 21st century civilization. But after the utter conflagration that destroyed Paradise last year, this is actually a prudent move during fire season. Since the utilities are about half a century behind in their routine maintenance, any spark sets off another fire. Why bring this up when talking about deadlines? Both the IRS (privately to tax pro organizations) and California  have announced that they will waive late-filing penalties for anyone affected. They both encourage taxpayers to do their best to meet the deadline. But if they cannot, just respond to the penalty notice by telling them you were affected by the power shut-down. (Be SURE to print out the notice related to your area as support for your claim.) Also, expect the IRS California Wildfire page to be updated to include the current 2019 fires – https://www.irs.gov/newsroom/tax-help-for-california-wildfire-victims . What about if you’re still trying to prepare your tax return and you don’t have any of the natural disaster excuses – but you are too frustrated and annoyed due to missing information and new tax law confusion? Well, you’re not getting any breaks. So what should you do? FILE!       Even if you’re missing information, don’t understand Sec 199A, or other parts of the Tax Cuts and Jobs Act. Do the best you can to estimate, project, or compute the missing or confusing information as best you can. If you’re really not sure about the numbers – tell the IRS. And tell them why. Include a Form 8275 disclosure statement and identify each line in the tax return that you estimated. Include a worksheet, spreadsheet or explanation for each item – and explain why you had to estimate the amounts. Do the best you can with this. And remember, you have three years to amend the tax return once you get better information. The benefit of doing this? The main benefit is to avoid the 25% late filing penalty that will kick in almost immediately after October 15th. The other benefit is, you get it done and reduce your stress. You now have time to get help to fix any shortcomings in your return. Some business owners (especially those with no employees) still have time to reduce their balance due by opening and funding a SEP-IRA until October 15th, if you don’t already have one open (or fund your solo-401(k) if it’s already open.) Be SURE your financial institution sets it up properly and on time. Be absolutely certain to get the funds in and designated as 2018 contributions if you want to claim the deduction on your 2018 tax return. (Of course, if you have employees, make sure they are covered and funded as well – so this strategy may not be as easy for employers.) If you have a balance due, try to pay it in full. Though your interest on that balance is only about 3% – 4% per year, the late payment penalty is ½ % per month. That runs from April 15th. Remember to make your estimated tax payments for 2019. And remember, you can find answers to all kinds of questions about taxes and business issues, and EA Education, free. Where? Where else? At http://iTaxMama.com/AskQuestion To make comments please drop into the TaxQuips Forum.

My friends, this is great news. These are excellent appointments. Sure, they know how to handle audits and collections – work with the “Small Business” taxpayer. But better than that – they also understand the taxpayer’s problems and issues and would prefer to help them prosper – or return to prosperity – than to shut them down.   IR-2019-153, September 11, 2019     WASHINGTON — The Internal Revenue Service today announced that Darren Guillot has been selected as the Deputy Commissioner for Collection and Operations Support in the Small Business/Self-Employed Division (SB/SE) and De Lon Harris has been selected as the Deputy Commissioner for Examination. “De Lon and Darren will play integral roles in our efforts to improve our taxpayer service and enforcement efforts,” said Eric Hylton, the newly named Commissioner of the Small Business/Self-Employed division. “There will be a special emphasis on coordinating our enforcement efforts within the IRS and working to maintain a balanced approach to ensure public trust of our tax administration efforts. It’s important our compliance efforts are robust and visible to the public.” IRS Commissioner Chuck Rettig announced on July 31 that Hylton was named SB/SE chief following an extensive career in IRS Criminal Investigation, where he previously served as deputy chief. SB/SE serves more than 50 million taxpayers including self-employed and small businesses with assets under $10 million. It also handles the agency’s civil side audit issues and works in coordination with IRS Criminal Investigation. more-> “Eric is assembling a talented team to continue a strong emphasis on taxpayer service in SB/SE while increasing efforts on a variety of critical enforcement issues,” Rettig said. “We want to help those who are trying to get it right. It is similarly important to deter those who are avoiding their filing and reporting obligations. This helps to assure the vast majority of law-abiding taxpayers that everyone is paying their fair share. The new leadership team in SB/SE will help support this goal as part of the larger work underway at the IRS.” In his new role, Harris will provide executive oversight of SB/SE examination programs designed for taxpayers who file personal, corporate, flow-through, employment, excise and estate and gift returns. Prior to this position, De Lon served as the assistant deputy commissioner Compliance Integration in the Large Business & International division (LBI). Harris also previously served as director Field Operations-Mid-Atlantic in LB&I, and director Field Operations-West in the Office of Appeals. He holds a bachelor’s degree in accounting from Southwestern Oklahoma State University and a graduate certificate in project management from George Washington University. In his new role, Guillot will provide executive leadership to SB/SE collection and operations programs. He will direct and oversee programs impacting taxpayers who file personal, corporate, flow-through, employment, excise and estate and gift returns. Guillot previously served as the director of Field Collection where he led efforts to enforce tax laws and assist taxpayers in meeting their tax responsibilities. He also previously served as director, Enterprise Collection Strategy and director Field Operations, Office of Appeals. Guillot holds a bachelor’s degree from Our Lady of Holy Cross College. He is a fellow of the Loyola University Institute of Politics and was awarded the certificate in public leadership by the Brookings Institute.