Harless Tax Blog
Released: March 21, 2020
The Treasury Department and the Internal Revenue Service are providing special tax filing and payment relief to individuals and businesses in response to the COVID-19 Outbreak. The filing deadline for tax returns has been extended from April 15 to July 15, 2020. The IRS urges taxpayers who are owed a refund to file as quickly as possible. For those who can't file by the July 15, 2020 deadline, the IRS reminds individual taxpayers that everyone is eligible to request an extension to file their return.This filing and payment relief includes:
The 2019 income tax filing and payment deadlines for all taxpayers who file and pay their Federal income taxes on April 15, 2020, are automatically extended until July 15, 2020. This relief applies to all individual returns, trusts, and corporations. This relief is automatic, taxpayers do not need to file any additional forms or call the IRS to qualify.
This relief also includes estimated tax payments for tax year 2020 that are due on April 15, 2020.
Penalties and interest will begin to accrue on any remaining unpaid balances as of July 16, 2020. You will automatically avoid interest and penalties on the taxes paid by July 15.
Individual taxpayers who need additional time to file beyond the July 15 deadline can request a filing extension by filing Form 4868 through their tax professional, tax software or using the Free File link on IRS.gov. Businesses who need additional time must file Form 7004.
State tax returns
This relief only applies to federal income returns and tax (including tax on self-employment income) payments otherwise due April 15, 2020, not state tax payments or deposits or payments of any other type of federal tax. Taxpayers also will need to file income tax returns in 42 states plus the District of Columbia. State filing and payment deadlines vary and are not always the same as the federal filing deadline. The IRS urges taxpayers to check with their state tax agencies for those details. More information is available at https://www.taxadmin.org/state-tax-agencies.
The U.S. Small Business Administration South Florida District Office will host virtual office hours to answer questions about the SBA Economic Injury Disaster Loan Program.
In addition to the virtual office hours, the District Office will also be hosting webinars twice daily to help small businesses navigate the disaster loan application. Details about the webinars coming soon!
In the meantime, feel free to contact the staff during the hours listed below.
Virtual Office Hours:
Monday, March 23 - Friday, April 04
11:00 a.m. – 1:00 p.m.
3:00 p.m. – 5:00 p.m
- Limited to 250 callers at one time.
- Participants may call at anytime and are welcome to enter and exit at will.
- Callers will be muted upon entry and will be taken in the order they are received.
WASHINGTON — Today the U.S. Treasury Department, Internal Revenue Service (IRS), and the U.S. Department of Labor (Labor) announced that small and midsize employers can begin taking advantage of two new refundable payroll tax credits, designed to immediately and fully reimburse them, dollar-for-dollar, for the cost of providing Coronavirus-related leave to their employees. This relief to employees and small and midsize businesses is provided under the Families First Coronavirus Response Act (Act), signed by President Trump on March 18, 2020.
The Act will help the United States combat and defeat COVID-19 by giving all American businesses with fewer than 500 employees funds to provide employees with paid leave, either for the employee's own health needs or to care for family members. The legislation will enable employers to keep their workers on their payrolls, while at the same time ensuring that workers are not forced to choose between their paychecks and the public health measures needed to combat the virus.
Happy New Year!! In the tax world, it wouldn’t be a New Year without tax legislation impacting your planning. Welcome to 2020 and with it, new significant tax legislation that may have a meaningful impact on your retirement planning.
What’s important to know?
NAME: The Setting Every Community Up for Retirement Enhancement Act of 2019 (the “SECURE” Act) was signed into law on December 20, 2019.
EFFECTIVE: The SECURE Act is effective January 1, 2020.
CHANGES: The Most Notable Changes to Retirement Planning under The SECURE Act:
- Elimination of the “Stretch” IRA. Elimination of the ability to “stretch” certain inherited retirement accounts over a designated beneficiary’s life expectancy.
- Raises RMD Age. Raises the age at which required minimum distributions (RMDs) must begin from the year the taxpayer attains age 70 ½ to 72.
NEW LAW: Under the SECURE Act:
- “10-Year Rule”. An IRA must be distributed by December 31 of the 10th year following the year in which the retirement account owner dies. Designated
- Exceptions to the 10-Year Rule if the IRA designated beneficiary is:
- a surviving spouse
- a disabled or chronically ill person
- the child of the decedent who is younger than 18 years of age until the child attains 18 and then the 10-year rule applies (exception does not apply to grandchildren)
- an individual who is not more than 10 years younger than the decedent
- IRAs that have already been inherited should be grandfathered, and thus free from the SECURE Act new requirements
NO CHANGE TO “5-YEAR” RULE.
- No designated beneficiary (i.e., if the beneficiary is a charity or certain trusts that do not qualify as a designated beneficiary) = “5-Year” Rule.
- Law Still in Effect After the SECURE Act – An inherited IRA with no designated beneficiary is ineligible for stretch treatment (both lifetime and now 10-year rule). Such inherited IRA is subject to an accelerated withdrawal period of 5 years.
Read article here.
There’s a new incentive to file a tax return this year: an Internal Revenue Service agent may be making a house call if you don’t.
The IRS is increasing efforts to reach high-income individuals who have failed to file at least one or more tax returns in recent years as a last-ditch attempt to encourage compliance, the agency said on Wednesday. This would be the final step before the agency would pursue more severe procedures, including civil or criminal action against that individual, the IRS said.
The agency will send several dozens agents to make at least 800 face-to-face visits in February and March of this year, Hank Kea, who directs the IRS field collections operations, said Thursday. The IRS will be identifying other non-compliant individuals throughout the year and adding cases as they find them, he said.
“Enforcement truly is our last resort,” Kea said. “Don’t delay filing or worse yet avoid filing all together.”
The IRS is concentrating efforts on individuals who received at least $100,000 in income during a year and didn’t file tax returns. The agency knows the incomes of many taxpayers from third-party reporting from employers or financial institutions, even if they don’t file a return.
The agency will focus on the most egregious cases first, Kea said, such as individuals contacted by the agency multiple times via mail with no response.
“The IRS is committed to fairness in the tax system, and we want to remind people across all income categories that they need to file their taxes,” Paul Mamo, the IRS’s director of collection operations, said in a statement. “We want to ensure taxpayers know their options to get right with their taxes and avoid bigger issues later.”
Not a Scam
The goal of these visits is to educate taxpayers about their filing requirements and try to bring them into compliance without taking stronger enforcement actions against the individual, Mamo said.
The agency will have several precautions in place to assure taxpayers that a home visit isn’t a scam. The IRS employee will provide two forms of official credentials, including a serial number and a photo ID. IRS employees will also not make threats nor demand an unusual form of payment, such as a gift card.
All taxpayers met in person will also have also been contacted multiple times by the IRS, so they should know they have a tax issue, the agency said. However, the timing of most visits will be unannounced.
The increased efforts to reach non-compliant people comes as the agency has come under criticism from its watchdog, the Treasury Inspector General for Tax Administration, and outside groups that say the agency isn’t effectively auditing corporations and high-income individuals with complicated returns. IRS Commissioner Chuck Rettig has said he is focusing on improving enforcement – in both criminal and civil cases – and has asked Congress for more money to staff these efforts.
In the past decade, the number of income tax returns increased by about 9%, but the IRS’s funding and number of employees both declined by more than 20%, according to a January report from the Taxpayer Advocate Service, an independent government office.
The report also found that some taxpayers who are audited or face adverse action from the IRS often cannot reach the agency to resolve the situation. The IRS received 15 million calls on its automated telephone lines in fiscal year 2019. Employees were able to answer only about 31% of those calls, and taxpayers who got through waited on hold for an average of 38 minutes, the Taxpayer Advocate said.
Some tax professionals worry that fewer employees at the agency mean that more taxpayers will try to cheat on their returns. Individuals face a 0.45% chance of being audited, while businesses are audited at a rate of 1.6%, some of the lowest audit figures on record, according to the IRS’s annual report, released in January.
Individual income taxes are the largest group of uncollected taxes before audits, representing about $314 billion, according to agency statistics on the tax gap.
Article from www.bloomberg.com
Source from fa-mag.com |
The U.S. House of Representatives approved legislation that relaxes the rules for retirement savers and corrects an unintended side-effect of the 2017 tax law that hit children of military members who died in combat with higher-than-expected tax bills.
The bill, which passed Thursday with a vote of 417-3, delays until 72 the age at which retirees must start withdrawing from individual retirement accounts and removes the age limit at which taxpayers must stop contributing. Now, taxpayers have to stop contributing to such accounts at age 70 1/2 and begin taking distributions. An amendment recently added to the bill also reverses an error in the 2017 tax law that had caused military families, known as “Gold Star” families to owe much higher taxes on survivor benefits.
The retirement legislation passed the House Ways and Means Committee last month. The bill has broad bipartisan support, making it one of the few pieces of legislation this year that might be approved by the Senate and signed into law. In addition to increasing the age limit for required minimum distributions, the bill also makes it easier for companies to unite and form joint retirement plans, and attempts to incentivize the creation of such plans for part-time workers and small businesses.
Before Thursday’s vote, some Republicans expressed frustration that the House late in the process stripped from the bill a provision that would allow parents to use education-savings plans to pay for some home-schooling expenses.
Retirement policy has long been a priority for Ways and Means Chairman Richard Neal, who took control of the tax-writing committee this year. Neal has said Thursday’s bill won’t be the last time he tries to work with Representative Kevin Brady, the senior Republican on the committee, to modify the retirement system.
“This is the most substantive promotion of retirement savings in the last 15 years,” Neal said on the House floor before the vote.
However, at least some of the committee’s work for the remainder of 2019 is likely to be overwhelmed by the higher-profile battle for President Donald Trump’s tax returns. Neal helms one of only three committees that the law empowers to request individual taxpayers’ information. Neal invoked the power last month and followed with a subpoena this month. So far Treasury Secretary Steven Mnuchin hasn’t complied on the grounds that the Department of Justice says the request violates the Constitution. That means Neal will likely take the executive branch to court.
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Source from irs.gov | Now that the April tax-filing deadline has come and gone, many taxpayers are eager to get details about their tax refunds. When it comes to refunds, there are several common myths going around social media.
Here are five of these common myths:
Myth 1: Getting a refund this year means there’s no need to adjust withholding for 2019
To help avoid an unexpected tax outcome next year, taxpayers should make changes now to prepare for next year. One way for a taxpayer to do this is to adjust their tax withholding with their employer. The IRS encourages people to do a Paycheck Checkup using the IRS Withholding Calculator to determine whether their employer is withholding the right amount. This is especially important for anyone who got an unexpected result from filing their tax return this year. This could have happened because the taxpayer’s employer withheld too much or too little tax from the employee’s paycheck in 2018.
Myth 2: Calling the IRS or a tax professional will provide a better refund date
Many people mistakenly think that talking to the IRS or calling their tax professional is the best way to find out when they will get their refund. In reality, the best way to check the status of a refund is online through the “Where’s My Refund?” tool at IRS.gov or with the IRS2Go mobile app. Taxpayers without Internet access can call the automated refund hotline at 800-829-1954. “Where’s My Refund?” has the same information available to IRS telephone assistors, so there is no need to call unless “Where’s My Refund?” says to do so.
Myth 3: Ordering a tax transcript is a ‘secret way’ to get a refund date
Doing so will not help taxpayers find out when they will get their refund. "Where’s My Refund?" tells the taxpayer their tax return has been received and if the IRS has approved or sent the refund.
Myth 4: ‘Where’s My Refund?’ must be wrong because there’s no deposit date yet
Updates to “Where's My Refund?” on both IRS.gov and the IRS2Go mobile app are made once each day. These updates are usually made overnight. Even though the IRS issues most refunds in less than 21 days, it’s possible a refund may take longer. This means that in some cases, a taxpayer who filed later may receive their refund sooner than someone who filed earlier in the season. The IRS contacts a taxpayer by mail when it needs more information to process their tax return. Taxpayers should also remember to consider the time it takes for the banks to post the refund to the taxpayer’s account. Taxpayers waiting for a refund in the mail should plan for the time it takes a check to arrive.
Myth 5: ‘Where’s My Refund?’ must be wrong because a refund amount is less than expected
There are several factors that could cause a tax refund to be larger or smaller than expected. Situations that could decrease a refund include:
- The taxpayer made math errors or mistakes
- The taxpayer owes federal taxes for a prior year
- The taxpayer owes state taxes, child support, student loans or other delinquent federal nontax obligations
- The IRS holds a portion of the refund while it reviews an item claimed on the return
The IRS will mail the taxpayer a letter of explanation if these adjustments are made. Some taxpayers may also receive a letter from the Department of Treasury's Bureau of the Fiscal Service if their refund was reduced to offset certain financial obligations.
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Source from cnbc.com |
Around two or three times per month, KVC Health Systems, a midsize nonprofit agency for child welfare based in Kansas City, receives phishing emails from criminals with the goal of rerouting an employee’s paycheck by direct deposit.
The emails look legitimate at first, as though they come from the CEO, CFO or payroll director.
The scammer is trying to convince human resources personnel to change the bank account and routing information the employee uses to have paychecks direct-deposited. Once routed to the criminal’s account, the company is on the hook for replacing the stolen funds and the employee faces the inconvenience of a late paycheck.
It’s a new version of wire fraud scams that have devastated businesses in recent years, and a more focused version of a series of payroll fraud crimes that the IRS warned late last year were on the rise. The fraud is growing, experts said, because it easily bypasses many existing technical controls, and the small sums stolen are inoffensive enough that they can be folded into the cost of doing business.
The fake emails defy many existing controls for malicious communications, said Erik Nyberg, director of information technology at KVC. They are usually well written, cordial and lack the misspellings, grammar mistakes and exclamation points that would trigger many popular email filters that search for spam or phishing attempts.
“They might just say, ’I need to update my direct deposit information,” said Nyberg. “Or they start with, ‘Hey, do you have a second?’ and if that target person responds, then they go from there.” KVC has had a few near misses, Nyberg said, but has not transferred any paychecks to scammers.
A new scam with a convincing pitch
The scam has only emerged in the past month, according to Adrien Gendre, chief solutions architect at email security company Vade Secure.
Many companies “have put processes in place to validate big wire transfers, so now [criminals] want to stay under the radar. It’s a new approach, and every day we have more customers reporting it,” he said. Gendre said a dozen Vade companies have reported attempts to change direct deposit information.
The scam does not only bypass some email controls. It also bypasses warnings companies may have already issued to their employees about wire fraud, because scammers aren’t asking for money or an invoice transfer — they’re simply asking to change a bank account number.
The fraudsters typically impersonate the company’s higher-value employees, like the CFO or CEO, Nyberg said. The emails are usually brief, polite and lightly urgent, and often ask HR personnel to change the direct deposit information quickly, “before the next paycheck.”
Others try to discourage the target from calling, by writing “I am going into a meeting now.”
The spoofing doesn’t require the criminal to hack into anyone’s email account, as it often does with bigger-ticket wire fraud. The scammers generate the fake emails with free services like Gmail -- the scammer simply opens a new Gmail account and fills in the employee’s name — which allows them to get around tools meant to detect hacking attempts on employee email, Nyberg explained. Employees may not notice, either because they are working quickly and they don’t notice the full email address, or they are working on a mobile device where only the person’s name is displayed in the “from” field, he said.
Why would scammers target a nonprofit? Nyberg said he expects that the organization may be attractive in part because of its genial culture: “The nature of our work is helpful, people who are very literally here to help other people. They might also believe that our training isn’t as rigorous as a Fortune 500 company,” he said.
Despite the relatively low dollar figure associated with this scam -- thousands of dollars compared with hundreds of thousands in a typical wire scam -- Gendre said it’s so cheap to execute that he expects it to become more attractive for criminals.
“They have found a way to automate it, which means you can scale it. You may not make $100,000 in one hit, but you may be able to make 20 hits staying in one company, and be able to make your return [on investment].”
How to combat it
To fight the threat, Nyberg said the organization has focused on training people on a simple truth: “The CEO is never going to email you out of the blue and ask you for any deposit changes. And if you have any sliver of a doubt, call the person who is making the request.”
Gendre said his company has used “natural language processing,” which analyzes the language used in incoming emails to test for “urgency,” then flagging those emails as potentially suspicious, especially if they come from a new email address.
Nyberg also said they’ve asked executives to avoid using their personal emails when sending messages to staff, and the company has also tweaked its email filters to pick up on common hallmarks of the request. Companies that see versions of the scam can also report them to the FBI’s IC3 tip line.
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Source from cnbc.com | Tax Tip 2019-39 | With the April tax filing due date just a few days away, taxpayers should remember to both file and pay any taxes they owe by the deadine. Taxpayers who do not file and pay timely will see their tax debt grow. In fact, penalties and interest can cause a taxpayer’s debt to grow by more than thirty percent in just a few months.
Here are some tips for taxpayers who owe tax, but who can’t immediately pay their tax bill. Taxpayers should:
- File their tax return or request an extension of time to file by the April deadline.
Taxpayers who owe tax and do not file their return on time or request an extension may face a failure-to-file penalty for not filing on time.
- Pay as much as possible by the April due date.
Whether filing a return or requesting an extension, taxpayers must pay their bill in full by the April filing deadline. Taxpayers who do not pay their taxes on time will face a failure-to-pay penalty. Taxpayers should remember that an extension of time to file is not an extension of time to pay.
- Set up a payment plan as soon as possible.
Taxpayers who owe, but cannot pay in full by the deadline don’t have to wait for a tax bill to request a payment plan. Taxpayers can apply for a payment plan on IRS.gov. Taxpayers can also submit a payment plan request in writing using Form 9465, Installment Agreement Request.
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