News

WASHINGTON — In a major step to help people who owe back taxes, the Internal Revenue Service today announced new penalty relief for approximately 4.7 million individuals, businesses and tax-exempt organizations that were not sent automated collection reminder notices during the pandemic.

The IRS will be providing about $1 billion in penalty relief. Most of those receiving the penalty relief make under $400,000 a year.

Due to the unprecedented effects of the COVID-19 pandemic, the IRS temporarily suspended the mailing of automated reminders to pay overdue tax bills starting in February 2022. These reminders would have normally been issued as a follow up after the initial notice. Although these reminder notices were suspended, the failure-to-pay penalty continues to accrue for taxpayers who did not fully pay their bills in response to the initial balance due notice.

Given this unusual situation, the IRS is taking several steps in advance of resuming normal collection notices for tax years 2020 and 2021 to help taxpayers with unpaid tax bills, including some people who have not received a notice from the IRS in more than a year.

To help taxpayers as the normal processes resume, the IRS will be issuing a special reminder letter starting next month. The letter will alert the taxpayer of their liability, easy ways to pay and the amount of penalty relief, if applied. The IRS urges taxpayers who are unable to pay their full balance due to visit IRS.gov/payments to make arrangements to resolve their bill.

The IRS is also taking steps to waive the failure-to-pay penalties for eligible taxpayers affected by this situation for tax years 2020 and 2021. The IRS estimates 5 million tax returns -- filed by 4.7 million individuals, businesses, trusts, estates and tax-exempt organizations -- are eligible for the penalty relief. This represents $1 billion in savings to taxpayers, or about $206 per return.

As a first step, the IRS has adjusted eligible individual accounts and will follow with adjustments to business accounts in late December to early January, and then trusts, estates and tax-exempt organizations in late February to early March 2024. Nearly 70 percent of the individual taxpayers receiving penalty relief have income under $100,000 per year.

The IRS is releasing Notice 2024-7, which explains how the agency is providing failure-to-pay penalty relief to eligible taxpayers affected by the COVID-19 pandemic to help them meet their federal tax obligations.

"As the IRS has been preparing to return to normal collection mailings, we have been concerned about taxpayers who haven't heard from us in a while suddenly getting a larger tax bill. The IRS should be looking out for taxpayers, and this penalty relief is a common-sense approach to help people in this situation," said IRS Commissioner Danny Werfel. "We are taking other steps to help taxpayers with past-due bills, and we have options to help people struggling to pay."

This penalty relief is automatic. Eligible taxpayers don't need to take any action to get it. Eligible taxpayers who already paid their full balance will benefit from the relief, too; if a taxpayer already paid failure-to-pay penalties related to their 2020 and 2021 tax years, the IRS will issue a refund or credit the payment toward another outstanding tax liability.

The penalty relief only applies to eligible taxpayers with assessed tax under $100,000. Eligible taxpayers include individuals, businesses, trusts, estates and tax-exempt organizations that filed certain Forms 1040, 1120, 1041 and 990-T income tax returns for tax years 2020 or 2021, with an assessed tax of less than $100,000, and that were in the IRS collection notice process -- or were issued an initial balance due notice between Feb. 5, 2022, and Dec. 7, 2023. The IRS notes the $100,000 limit applies separately to each return and each entity. The failure-to-pay penalty will resume on April 1, 2024, for taxpayers eligible for relief.

Taxpayers who are not eligible for this automatic relief also have options. They may use existing penalty relief procedures, such as applying for relief under the reasonable cause criteria or the First-Time Abate program. Visit IRS.gov/penaltyrelief for details.

If the automatic relief results in a refund or credit, individual and business taxpayers will be able to see it by viewing their tax transcript. The IRS will send the first round of refunds starting now through January 2024. If a taxpayer does not receive a refund, a special reminder notice may be sent with their updated balance beginning in early 2024. Taxpayers with questions on penalty relief can contact the IRS after March 31, 2024.

Help for taxpayers needing assistance

The IRS reminds taxpayers that there are a number of payment options and online tools that can help taxpayers with unpaid tax debts, whether it's a new tax bill or a long-standing tax debt for an unfiled return.

"The IRS wants to help taxpayers and provide them easy options to deal with unpaid tax bills and avoid additional interest and penalties," said Werfel. "People receiving these notices should remember that there are frequently overlooked options that can help them set up an automatic payment plan or catch up with their tax filings. Making additional improvements in the collection area will be an important focus for the IRS going forward as we continue and accelerate our transformation work."

Following funding from the Inflation Reduction Act, it's now easier for taxpayers to get assistance with tax bills with new self-help tools, like the IRS Document Upload Tool, improved phone service with callback features and the addition of bots that can answer simple questions, set up or modify a payment plan and request a transcript. The IRS also encourages taxpayers to get an IRS Online Account, where they can see information about an unpaid tax bill or apply for an online payment plan.










Resumption of collection notices begins in 2024

In January, the IRS will begin sending automated collection notices and letters to individuals with tax debts prior to tax year 2022, and businesses, tax exempt organizations, trusts and estates with tax debts prior to 2023, with exceptions for those with existing debt in multiple years. These notices and letters were previously paused due to the pandemic and high inventories at the IRS but will gradually resume during the next several months. Current tax year 2022 individual and third quarter 2023 business taxpayers began receiving automated collection notices this fall as the IRS took steps to return to business as usual.

The pause in collection mailings affected only follow-up reminder mailings. The IRS did not suspend the mailing of the first, or initial, balance due notices for taxpayers such as the CP14 and CP161 notices.

The pause meant that some taxpayers who have long-standing tax debt have not received a formal letter or notice from the IRS in more than a year while some of this older collection work has been paused. To help the taxpayers in this category as the normal processes resume, the IRS will be issuing a special reminder letter to them starting next month.

This reminder letter will alert the taxpayer of the liability and will direct them to contact the IRS or make alternative arrangements to resolve the bill. Tax professionals and taxpayers will see these reminder letters in the form of letter LT38, Reminder, Notice Resumption.

This letter will remind taxpayers about their tax liability, giving them an opportunity to address the tax issue before the next round of letters are issued. After receiving the reminder mailing, these taxpayers with long-standing unresolved tax issues will receive the next notice, informing them of a more serious step in the tax collection process.

The IRS urges taxpayers to carefully read any letter or notice they receive before calling the IRS. There are also important resources available to get help for tax debt on IRS.gov.

The IRS will issue these balance due notices and letters in gradual stages next year to ensure taxpayers who have questions or need help are able to reach an IRS assistor. This will also provide additional time for tax professionals assisting taxpayers.

Here's what taxpayers should know about possible penalties and interest

Taxpayers who owe tax and don't file on time may be charged a failure-to-file penalty. This penalty is usually 5 percent of the tax owed for each month or part of a month that the tax return is late, up to 25 percent.

The failure-to-pay penalty applies if a taxpayer doesn't pay the taxes they report on their tax return by the due date or if the taxpayer doesn't pay the amount required to be shown on their return within 21 calendar days of receiving a notice demanding payment (or 10 business days if the amount is greater than $100,000).

The IRS is required by law to charge interest when a tax balance is not paid on time. Interest cannot be reduced due to reasonable cause. Interest is based on the amount of tax owed for each day it's not paid in full. The interest is compounded daily, so it is assessed on the previous day's balance plus the interest. Interest rates are determined every three months and can vary based on type of tax; for example, individual or business tax liabilities. More information is available on the interest page of IRS.gov.



Source: IRS.gov

US TAX, U.S. TAX
 

IRS, Dec.7, 2023

1. Withholding on Dispositions by Foreign Persons of U.S. Real Property Interests, Calendar Year 2020 A new table presenting data for Calendar Year 2020 from Withholding Tax on Dispositions of U.S. Real Property Interests by Foreign Persons (Form 8288-A) is now available on SOI's Tax Stats webpage. The table presents the number of returns reporting the sales price of U.S. real property interest, Federal income tax withheld, and country of residence of foreign persons as reported on Form 8288-A.

2. Foreign Recipients of U.S. Income, Tax Year 2021 Three tables from SOI's Foreign Recipients of U.S. Income Study, Tax Year 2021 are now available on SOI's Tax Stats webpage. The tables present data from Foreign Person's U.S. Source Income Subject to Withholding (Form 1042-S). Tables 1 and 2 include statistics for the number of returns, total income, tax withheld, income subject to withholding, income exempt from withholding, and income by category. Data are available by selected countries and recipient types. Table 3 presents data for returns reporting payments and amounts withheld pursuant to Chapter 4 of the Internal Revenue Code. Table 3 also includes statistics for the number of returns, total income, tax withheld, income subject to withholding, and income exempt from withholding. Data are available by selected income types.

3. Individual Returns with Business Attributes, Tax Year 2021 A new table for Tax Year 2021 Individual Income Tax Returns with Small Business Income and Losses is now available on SOI's Tax Stats webpage. This tabulation provides detailed information about Individual Income Tax Returns with Small Business Income and Losses. This includes income from Schedule C, Profit or Loss from Business, Schedule E, Supplemental Income or Loss, and Schedule F, Profit or Loss from Farming.



Source: IRS.gov

US TAX, U.S. TAX
 

IRS, Sep.28, 2023
Individual retirement accounts can be important tools in retirement planning

It is never too early to begin planning for retirement. Individual retirement accounts provide tax incentives for people to make investments that can provide financial security when they retire. These accounts can be with a bank or other financial institution, a life insurance company, mutual fund or stockbroker.
A traditional IRA is the most common type of individual retirement account. IRAs let earnings grow tax deferred. Individuals pay taxes on investment gains only when they make withdrawals. Depositors may be able to claim a deduction on their individual federal income tax return for the amount they contributed to an IRA.
What to consider before investing in a traditional IRA


A traditional IRA is a tax-advantaged personal savings plan where contributions may be tax deductible.
Generally, the money in a traditional IRA isn't taxed until it's withdrawn.
There are annual limits to contributions depending on the person's age and the type of IRA.
When planning when to withdraw money from an IRA, taxpayers should know that:

They may face a 10% penalty and a tax bill if they withdraw money before age 59½ unless they qualify for an exception.
Usually, they must start taking withdrawals from their IRA when they reach age 73 (age 72 if they turned 72 in 2022). For tax years 2019 and earlier, that age was 70½.
Special distribution rules apply for IRA beneficiaries.









Differences between a Roth and a traditional IRA
A Roth IRA is another tax-advantaged personal savings plan with many of the same rules as a traditional IRA, but there are exceptions:


A taxpayer can't deduct contributions to a Roth IRA.
Qualified distributions are tax free.
Roth IRAs don't require withdrawals until after the death of the owner.

Other types of IRAs


Simplified Employee Pension - A SEP IRA is set up by an employer. The employer makes contributions directly to an IRA set up for each employee.
Savings Incentive Match Plan for Employees - A SIMPLE IRA allows the employer and employees to contribute to an IRA set up for each employee. It is suited as a start-up retirement savings plan for small employers not currently sponsoring a retirement plan.
Payroll Deduction IRA - Employees set up a traditional or a Roth IRA with a financial institution and authorize a payroll deduction agreement with their employer.
Rollover IRA - The IRA owner receives a payment from their retirement plan and deposits it into an IRA within 60 days.



Resource: 
https://www.irs.gov/newsroom/individual-retirement-accounts-can-be-important-tools-in-retirement-planning
US TAX, U.S. TAX
 

IRS, Oct.10, 2023
The deadline is around the corner for taxpayers with an extension to file. It’s important for taxpayers to gather all their records and get copies of any missing documents before they sit down to prepare their return, and taxpayers who use a professional tax preparer should make sure they have all their information ready before their appointment. This helps them file a complete and accurate tax return. 

Here’s the information taxpayers may need. Not all information applies to all taxpayers.


Social Security numbers of everyone listed on the tax return. 
Bank account and routing numbers for direct deposit or information to make a tax payment.
Forms W-2 from employer(s).
Forms 1099 from banks, issuing agencies and other payers including unemployment compensation, dividends, distributions from a pension, annuity or retirement plan.
Form 1099-K, 1099-MISC, W-2 or other income statement for workers in the gig economy.
Form 1099-INT for interest received.
Other income documents and records of virtual currency transactions.
Form 1095-A, Health Insurance Marketplace Statement.
Information to support claiming other credits or deductions such as receipts for child or dependent care, college expenses or donations.






Missing documents: What taxpayers should do 
To request a missing W-2 or Form 1099, taxpayers should contact the employer, payer or issuing agency. This also applies for taxpayers who received an incorrect W-2 or Form 1099.
If they still can't get the forms, taxpayers can complete Form 4852, Substitute for Form W-2, Wage and Tax Statement, or Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. If a taxpayer doesn't receive the missing or correct form in time to file their tax return, they can estimate the wages or payments made to them and any taxes withheld. They can use Form 4852 to report this information on their federal tax return. 

Find an authorized e-file provider 
For help finding a tax professional, taxpayers can use the Authorized IRS e-file Provider Locator Service. This is a nationwide listing of all businesses that the IRS has authorized as an IRS e-file provider. They’re qualified to prepare, transmit and process e-filed returns.

Resource: 
https://www.irs.gov/newsroom/irs-reminds-extension-filers-to-have-all-their-info-before-visiting-a-tax-professional
US TAX, U.S. TAX
 

Don’t panic! It is important to remember – not all correspondence from the IRS necessarily contains bad news. 

It is the IRS’s responsibility to make sure your tax return is as accurate as it can be while it is processed and verified. These verification checks can include anything from finding and fixing basic mathematical errors to checking for required attachments, like schedules that support a credit or deduction you are claiming. The IRS also checks to confirm the amounts shown on your return match what banks, employers, third parties, and other government agencies have reported. In some cases, these checks may identify a credit that if you if you are eligible, could result in a bigger refund. 

What should I do if I get correspondence regarding my tax return? 

Open it, read it, and keep it in a safe place (in case you need it later). IRS correspondence always tells you why the IRS is writing, what topic it is about, and either what you need to do in response and by when, or it will tell you that you don’t need to reply at all. 

Letters and notices aren’t always easy to understand. So, here are three resources we recommend you use if you want more help understanding that particular notice or letter: 

Taxpayer Advocate Service’s Taxpayer Roadmap: Use the ‘Did you get a notice from the IRS?’ look-up feature to find a simplified explanation of why it is being sent. Then click on the ‘See notice details’ area to find a fuller explanation of why it is being sent, what this means for you and what next steps you should take. It also provides additional links to related resources you may need to see or use to provide missing information. 
Taxpayer Advocate Service’s Get Help pages: These webpages provide detailed instructions to help you resolve the most common issues we see by yourself. They are grouped by categories. For return processing issues, start with I Got a Notice From the IRS. Then if needed review specific topics that apply to your situation like, I Made a Mistake on My Return or I Need Help Resolving My Balance Due. 
IRS’s Understanding Your IRS Notice or Letter page: These pages explain why notices are sent and contain a search feature to find your specific notice and related information. 


 

If you need more time to respond than indicated, contact the IRS using the contact information provided. 

Note: To find the correspondence number look in either the top or bottom right-hand corner. They will generally be preceded by the letters CP or LTR. 

Do I need to reply? 

Whether you need to reply or not will depend on the issue. 

If you agree with the information or change listed, sometimes there is no need to reply. Other times, even if you do agree, you may need to provide specific information to resolve the issue, particularly if you need to verify your identity or if a schedule is missing. In most tax return processing situations, you generally have 60 days to reply, but be sure to go by the date specified in your letter. 

If you disagree, the letter should outline how to dispute the issue, including what action(s) is needed and a date to complete the action by, as well information about your Taxpayer Rights. 

Whether you agree or not, if it requires a reply – do not delay! You must reply by the date required or you may lose certain resolution options or may also have to pay in full before the IRS will consider your position. See more on this below. 

When to respond 

If your notice or letter requires a response by a specific date, there are many reasons you’ll want to comply. Here are just a few: 
minimize additional interest and penalty charges;  prevent further action from being taken on the account or against you; and  preserve your appeal rights if you don’t agree. 




How and where to reply 

The correspondence should tell you exactly where to send your response, whether it’s to a mailing address or fax number. Follow the instructions. 

What if I want to talk to someone? 

Each notice or letter should include contact information. The telephone number is usually found in the upper right-hand corner. 

If a specific employee is working your case, it will show a specific phone number for that employee or the department manager. Otherwise, it will show the IRS toll-free number (800-829-1040). 

The IRS encourages taxpayers to make use of the IRS.gov website and its online resources, like Tax Law Questions to get questions answered and find resources to resolve problems. 


Important: You’ll want to check the IRS’s Help for taxpayers and tax professionals: Special filing season alerts page for announcements related to processing 2022 tax returns before you call in case the information you need is located there. 


The best days to call the IRS are Wednesdays, Thursdays, and Fridays. The IRS advises that wait times are the longest on Mondays and Tuesdays, and close to the April filing deadline. 

Have a copy of your tax return and the correspondence available when you call. 

Wait – I still need help 

You can generally resolve most notices or letters without help, but you can also get the help of a professional – either the person who prepared your return, or another tax professional. 

If you can’t afford to hire a tax professional to assist you, you may be eligible for free or low cost representation from an attorney, certified public accountant, or enrolled agent associated with a Low Income Taxpayer Clinic (LITC). In addition, LITCs can help if you speak English as a second language and need help understanding the notice or letter. For more information or to find an LITC near you, see the LITC page or IRS Publication 4134, Low Income Taxpayer Clinic List. 

If your IRS problem is causing you financial hardship, see Can TAS help me with my tax issue?. 

More resources 


Issues & Errors Get Help topics 
Paying Taxes Get Help topics 
Notices from the IRS 
Understanding your CP12 Notice from the IRS 
NTA Blog: Math Error Part I 
NTA Blog: Math Error Part II: Math Error Notices Aren’t Just Confusing; Millions of Notices Adjusting the Recovery Rebate Credit Also Omitted Critical Information 
Let Us Help You 



Resource: https://www.taxpayeradvocate.irs.gov/news/tas-tax-tip-what-if-i-receive-an-irs-notice-that-says-something-is-wrong-with-my-2022-tax-return/
US TAX, U.S. TAX
 

IR-2023-112, June 8, 2023

WASHINGTON ― The Internal Revenue Service today encouraged nearly 1.5 million people across the nation to submit a tax return to claim their refunds for tax year 2019 by the July 17, 2023, deadline.

The IRS estimates almost $1.5 billion in refunds remain unclaimed because people haven't filed their 2019 tax returns yet. Available data includes a special state-by-state estimate of how many people are potentially eligible for these refunds in each state and each state's median potential refund. The average median refund for tax year 2019 was $893.

"Time is running out for more than a million people to get their tax refunds for 2019," said IRS Commissioner Danny Werfel. "Many people may have overlooked filing a 2019 tax return due to the pandemic. We don't want people to miss their window to receive their refund. We encourage people to check their records and act quickly before the deadline. The IRS has several important ways that people can get help."

Under the law, taxpayers usually have three years to file and claim their tax refunds. If they don't file within three years, the money becomes the property of the U.S. Treasury.

For 2019 tax returns, however, people have more time than usual to file to claim their refunds. Usually, the normal filing deadline to claim old refunds falls around the April tax deadline, which was April 18 this year for 2022 tax returns. But the three-year window for 2019 unfiled returns was postponed to July 17, 2023, due to the COVID-19 pandemic emergency. IRS Notice 2023-21, issued on Feb. 27, 2023, provided legal guidance on claims made by the postponed deadline. The law requires taxpayers to properly address, mail and ensure the tax return is postmarked by July 17, 2023.

Taxpayers could lose more than just their refund of taxes withheld or paid during 2019. Many low- and moderate-income workers may be eligible for the Earned Income Tax Credit (EITC). For 2019, the credit was worth as much as $6,557. The EITC helps individuals and families whose incomes were below certain thresholds in 2019. Those who are potentially eligible for EITC in 2019 had incomes below:

$50,162 ($55,952 if married filing jointly) for those with three or more qualifying children.
$46,703 ($52,493 if married filing jointly) for people with two qualifying children.
$41,094 ($46,884 if married filing jointly) for those with one qualifying child.
$15,570 ($21,370 if married filing jointly) for people without qualifying children.


 

The IRS reminds taxpayers seeking a 2019 tax refund that their checks may be held if they have not filed tax returns for 2020 and 2021. In addition, the refund will be applied to any amounts still owed to the IRS or a state tax agency and may be used to offset unpaid child support or past due federal debts, such as student loans.

Current and prior-year tax forms (such as the tax year 2019 Forms 1040 and 1040-SR) and instructions are available online on the IRS Forms, Instructions and Publications page or by calling toll-free 800-TAX-FORM (800-829-3676).
 

Need to file a 2019 tax return? Several options to get key documents

Although it's been several years since 2019, the IRS reminds taxpayers there are ways they can still gather the information they need to file this tax return. People should begin now to make sure they have enough time to file before the July deadline for 2019 refunds. Here are some options:


Request copies of key documents: Taxpayers who are missing Forms W-2, 1098, 1099 or 5498 for the years 2019, 2020 or 2021 can request copies from their employer, bank or other payers.



Use Get Transcript Online at IRS.gov. Taxpayers who are unable to get those missing forms from their employer or other payers can order a free wage and income transcript at IRS.gov using the Get Transcript Online tool. For many taxpayers, this is by far the quickest and easiest option.



Request a transcript. Another option is for people to file Form 4506-T, Request for Transcript of Tax Return, with the IRS to request a "wage and income transcript." A wage and income transcript shows data from information returns received by the IRS, such as Forms W-2, 1099, 1098, Form 5498 and IRA contribution information. Taxpayers can use the information from the transcript to file their tax return. But plan ahead – these written requests can take several weeks; people are strongly urged to try the other options first.




State-by-state estimates of individuals who may be due 2019 income tax refunds

Based on tax information currently available, the IRS estimated how many people in each state may be entitled to a tax refund. The actual refund amount will vary based on a household's tax situation.
 




State or District
Estimated
Number of
Individuals
Median
Potential
Refund
Total
Potential
Refunds*




Alabama
23,900
$880
$23,694,700


Alaska
6,000
$917
$6,542,300


Arizona
35,400
$824
$33,911,500


Arkansas
12,800
$864
$12,586,100


California
144,700
$856
$141,780,000


Colorado
30,100
$859
$29,514,000


Connecticut
15,400
$934
$16,198,400


Delaware
5,700
$880
$5,754,900


District of Columbia
4,400
$887
$4,550,100


Florida
89,300
$893
$89,530,400


Georgia
48,000
$826
$46,269,000


Hawaii
8,800
$932
$9,197,700


Idaho
7,600
$758
$6,996,000


Illinois
55,800
$916
$57,591,300


Indiana
31,700
$916
$32,115,100


Iowa
15,300
$926
$15,492,600


Kansas
14,600
$913
$14,753,700


Kentucky
18,600
$906
$18,574,200


Louisiana
22,000
$877
$22,274,800


Maine
6,400
$876
$6,197,300


Maryland
31,400
$897
$32,344,500


Massachusetts
35,700
$966
$38,400,900


Michigan
48,500
$888
$48,582,600


Minnesota
23,200
$848
$22,387,800


Mississippi
12,300
$820
$11,836,700


Missouri
31,800
$880
$31,345,700


Montana
5,200
$854
$5,144,900


Nebraska
7,800
$893
$7,745,600


Nevada
15,800
$869
$15,550,300


New Hampshire
6,900
$974
$7,451,800


New Jersey
40,500
$924
$42,035,900


New Mexico
9,600
$867
$9,522,400


New York
81,600
$945
$86,826,200


North Carolina
45,800
$862
$44,426,600


North Dakota
3,700
$958
$3,997,100


Ohio
51,800
$868
$50,234,900


Oklahoma
21,400
$897
$21,770,000


Oregon
23,700
$801
$22,348,900


Pennsylvania
56,000
$924
$57,572,600


Rhode Island
4,300
$924
$4,468,700


South Carolina
18,200
$809
$17,264,100


South Dakota
3,700
$918
$3,746,700


Tennessee
28,100
$873
$27,623,700


Texas
135,300
$924
$142,235,200


Utah
11,700
$845
$11,198,400


Vermont
3,100
$901
$3,036,600


Virginia
42,200
$869
$42,110,500


Washington
42,400
$934
$44,823,200


West Virginia
6,500
$959
$6,818,900


Wisconsin
21,000
$834
$20,003,100


Wyoming
3,300
$949
$3,534,800


Totals
1,469,000
$893
$1,479,913,400




* Excluding credits.

Resource: https://www.irs.gov/newsroom/time-is-running-out-taxpayers-missing-1-point-5-billion-in-refunds-for-2019-must-file-by-july-17


 

Did you miss a credit or deduction, or need to correct something else on your tax return for this year or past years?
If so, you can file an amended tax return.
Here are five things you need to know about amending a tax return:



First, be sure to identify the year of the return you're amending. Remember, normally you can only go back three years.
Second, choose how you want to file your amended return.Returns for tax year 2019 or later can be amended electronically.If you're amending a return prior to 2019, you'll need to mail the paper Form 1040-X to the IRS.
Third, if you're amending more than one return, you must prepare a separate 1040X for each year.If you mail these Forms 1040-X to the IRS, use separate envelopes, and be sure you send them to the correct IRS address depending on where you live. You can find this information in the form's instructions.
Fourth, if you're filing for an additional refund, wait until you get your original refund before filing a 1040-X.
Finally…don't amend your return just because of math errors. We'll check your math and fix the error for you.


You can learn more at irs.gov/1040x.





Youtube : https://www.youtube.com/watch?v=X7Bol664lhw
Resource: https://www.irs.gov/newsroom/amending-a-return-youtube-video-text-script   
US TAX, U.S. TAX
 

IRS Tax Tip 2023-64, May 9, 2023

The IRS wants every taxpayer to be know and understand their rights in the event they need to work with the IRS on a personal tax matter. These 10 fundamental rights are collectively known as the Taxpayer Bill of Rights. Included on this list is the right to challenge the IRS's position and be heard. Here's more about what this right means for taxpayers.

Taxpayers have the right to:


Raise objections.
Provide additional documentation in response to formal or proposed IRS actions.
Expect the IRS to consider their timely objections.
Have the IRS consider any supporting documentation promptly and fairly.
Receive a response if the IRS does not agree with their position.


Here are some specific things this right affords taxpayers.






















In some cases, the IRS will notify a taxpayer that their tax return has a math or clerical error. If this happens, the taxpayer:

Has 60 days to tell the IRS that they disagree.
Should provide copies of any records that may help correct the error.
May call the number listed on the letter or bill for assistance.
Can expect the agency to make the necessary adjustment to their account and send a correction if the IRS upholds the taxpayer's position.
 


Here's what will happen if the IRS does not agree with the taxpayer's position:

The agency will issue a notice proposing a tax adjustment. This is a letter that comes in the mail.
This notice provides the taxpayer with a right to challenge the proposed adjustment.
The taxpayer makes this challenge by filing a petition in U.S. Tax Court. The taxpayer must generally file the petition within 90 days of the date of the notice, or 150 days if it is addressed outside the United States.
 


Taxpayers can submit documentation and raise objections during an audit. If the IRS does not agree with the taxpayer's position, the agency issues a notice explaining why it is increasing the tax. Prior to paying the tax, the taxpayer has the right to petition the U.S. Tax Court and challenge the agency's decision.
 
In some circumstances, the IRS must provide a taxpayer with an opportunity to have hearing with the independent Office of Appeals before taking enforcement actions to collect tax debt. These actions include levying the taxpayer's bank account immediately after filing a notice of federal tax lien in the appropriate state filing location. If the taxpayer disagrees with the decision of the Appeals Office, they can petition the U.S. Tax Court.


More Information:


Publication 556, Examination of Returns, Appeal Rights, and Claims for Refund 


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Resource:https://www.irs.gov/newsroom/what-the-right-to-challenge-the-irss-position-and-be-heard-means-for-taxpayers

   US TAX, U.S. TAX
 

IR-2023-97, May 4, 2023

WASHINGTON — The Internal Revenue Service reminds taxpayers that making certain energy efficient updates to their homes could qualify them for home energy tax credits.

The credit amounts and types of qualifying expenses were expanded by the Inflation Reduction Act of 2022. Taxpayers who make energy improvements to a residence may be eligible for expanded home energy tax credits.

What taxpayers need to know

Taxpayers can claim the Energy Efficient Home Improvement Credit and the Residential Clean Energy Credit for the year the qualifying expenditures are made.

Homeowners who improve their primary residence will find the most opportunities to claim a credit for qualifying expenses. Renters may also be able to claim credits, as well as owners of second homes used as residences. Landlords cannot claim this credit.

IRS encourages taxpayers to review all requirements and qualifications at IRS.gov/homeenergy for energy efficient equipment prior to purchasing. Additional information is also available on energy.gov, which compares the credit amounts for tax year 2022 and tax year 2023.

Energy Efficient Home Improvement Credit

Taxpayers that make qualified energy-efficient improvements to their home after Jan. 1, 2023, may qualify for a tax credit up to $3,200 for the tax year the improvements are made.

As part of the Inflation Reduction Act, beginning Jan. 1, 2023, the credit equals 30% of certain qualified expenses:


Qualified energy efficiency improvements installed during the year which can include things like:

Exterior doors, windows and skylights.
Insulation and air sealing materials or systems.





Residential energy property expenses such as:

Central air conditioners.
Natural gas, propane or oil water heaters.
Natural gas, propane or oil furnaces and hot water boilers.





Heat pumps, water heaters, biomass stoves and boilers.
Home energy audits of a main home.


The maximum credit that can be claimed each year is:


$1,200 for energy property costs and certain energy efficient home improvements, with limits on doors ($250 per door and $500 total), windows ($600) and home energy audits ($150).
$2,000 per year for qualified heat pumps, biomass stoves or biomass boilers.


The credit is available only for qualifying expenditures to an existing home or for an addition or renovation of an existing home, and not for a newly constructed home. The credit is nonrefundable which means taxpayers cannot get back more from the credit than what is owed in taxes and any excess credit cannot be carried to future tax years.


















Residential Clean Energy Credit

Taxpayers who invest in energy improvements for their main home, including solar, wind, geothermal, fuel cells or battery storage, may qualify for an annual residential clean energy tax credit. Taxpayers may be able to claim a credit for certain improvements other than fuel cell property expenditures made to a second home that they live in part-time and don't rent to others.

The Residential Clean Energy Credit equals 30% of the costs of new, qualified clean energy property for a home in the United States installed anytime from 2022 through 2033.

Qualified expenses include the costs of new, clean energy equipment including:


Solar electric panels.
Solar water heaters.
Wind turbines.
Geothermal heat pumps.
Fuel cells.
Battery storage technology (beginning in 2023).


Clean energy equipment must meet the following standards to qualify for the Residential Clean Energy Credit:


Solar water heaters must be certified by the Solar Rating Certification Corporation or a comparable entity endorsed by the applicable state.
Geothermal heat pumps must meet Energy Star requirements in effect at the time of purchase.
Battery storage technology must have a capacity of at least 3 kilowatt hours.


The credit is available for qualifying expenditures incurred for installing new clean energy property in an existing home or for a newly constructed home. This credit has no annual or lifetime dollar limit except for fuel cell property. Taxpayers can claim this credit each tax year they install eligible property until the credit begins to phase out in 2033.

This is a nonrefundable credit, which means the credit amount received cannot exceed the amount owed in tax. Taxpayers can carry forward excess unused credit and apply it to any tax owed in future years.

Additional information is available at IRS.gov on qualifying residences and information for taxpayers who also use their home for a business.

When it is time to file a tax return, taxpayers can use Form 5695, Residential Energy Credits, to claim the credit. This credit must be claimed for the tax year when the property is installed, not just purchased.

Good recordkeeping and related resources

Taxpayers are encouraged to keep good records of purchases and expenses during the time the improvements are made. This will assist in claiming the applicable credit during tax filing season.

Other resources:


Energy.gov Credit Comparison Chart
Fact Sheet: Frequently asked questions about energy efficient home improvements and residential clean energy property creditsPDF




Resource:https://www.irs.gov/newsroom/irs-going-green-could-help-taxpayers-qualify-for-expanded-home-energy-tax-credits

   US TAX, U.S. TAX
 

IRS Tax Tip 2023-61, May 3, 2023

Sometimes the line between having a hobby and running a business can be confusing, but knowing the difference is important because hobbies and businesses are treated differently when it's time to file a tax return. The biggest difference between the two is that businesses operate to make a profit while hobbies are for pleasure or recreation.

Whether someone is having fun with a hobby or running a business, if they accept more than $600 for goods and services using online marketplaces or payment apps, they could receive a Form 1099-K. Profits from the sale of goods, including personal items, and services is taxable income that must be reported on tax returns.

There are a few other things people should consider when deciding whether their project is a hobby or business. No single thing is the deciding factor. Taxpayers should review all of the factors to make a good decision.


















How taxpayers can decide if it's a hobby or business

These questions can help taxpayers decide whether they have a hobby or business:


Do they carry out the activity in a businesslike manner and keep complete and accurate books and records?
 
Does the time and effort they put into the activity show they intend to make a profit?
 
Does the activity make a profit in some years – if so, how much profit does it make?
 
Can they expect to make a future profit from the appreciation of the assets used in the activity?
 
Do they depend on income from the activity for their livelihood?
 
Are any losses due to circumstances beyond their control or are the losses normal for the startup phase of their type of business?
 
Do they change their methods of operation to improve profitability?
 
Do the taxpayer and their advisors have the knowledge needed to carry out the activity as a successful business?


Whether taxpayers have a hobby or run a business, good record keeping is always key when it's time to file taxes.

More information:


Publication 535, Business Expenses
Publication 334, Tax Guide for Small Business (For Individuals Who Use Schedule C)
Small Business and Self-Employed Tax Center at IRS.gov
Understanding Your Form 1099-K




U.S. TAX
Resourse: https://www.irs.gov/newsroom/hobby-or-business-heres-what-to-know-about-that-side-hustle
 

IR-2023-94, May 2, 2023

WASHINGTON — Florida storm victims now have until Aug. 15, 2023, to file various federal individual and business tax returns and make tax payments, the Internal Revenue Service announced today.

The IRS is offering relief to any area designated by the Federal Emergency Management Agency (FEMA) as a result of tornadoes, severe storms and flooding that occurred from April 12 to 14. This means that individuals and households that reside or have a business in Broward County qualify for tax relief. Other areas added later to the disaster area will also qualify for the same relief. The current list of eligible localities is always available on the disaster relief page on IRS.gov.

The tax relief postpones various tax filing and payment deadlines that occurred starting on April 12, 2023, and is based on an April 27 FEMA disaster declaration. As a result, affected individuals and businesses will have until Aug. 15, 2023, to file returns and pay any taxes that were originally due during this period.

This means that taxpayers will have until Aug. 15 to file any 2022 individual income tax returns and various business returns that were originally due on April 18. They will also have until Aug. 15 to pay any tax originally due on these returns. Taxpayers will get the extra time, even if they failed to request a tax-filing extension by April 18.

Among other things, this also means that eligible taxpayers will have until Aug. 15 to make 2022 contributions to their IRAs and health savings accounts.

The Aug. 15 deadline also applies to the quarterly estimated tax payments, normally due on April 18 and June 15.

The Aug. 15 deadline also applies to the quarterly payroll and excise tax returns normally due on May 1 and July 31, 2023. In addition, penalties on payroll and excise tax deposits due on or after April 12 and before April 27, will be abated as long as the tax deposits were made by April 27, 2023.

The IRS disaster relief page has details on other returns, payments and tax-related actions qualifying for the additional time.

Affected individual taxpayers who need more time to file, beyond the Aug. 15 deadline, must file their extension requests on paper using Form 4868. That's because e-file options for requesting an extension are not available after April 18.

By filing this form, disaster-area taxpayers will have until Oct. 16 to file, though tax payments are still due by Aug. 15. Visit IRS.gov/extensions for details.














The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. Therefore, taxpayers do not need to contact the agency to get this relief. However, if an affected taxpayer receives a late filing or late payment penalty notice from the IRS that has an original or extended filing, payment or deposit due date falling within the postponement period, the taxpayer should call the number on the notice to have the penalty abated.

In addition, the IRS will work with any taxpayer who lives outside the disaster area but whose records necessary to meet a deadline occurring during the postponement period are located in the affected area. Taxpayers qualifying for relief who live outside the disaster area need to contact the IRS at 866-562-5227. This also includes workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization.

Individuals and businesses in a federally declared disaster area who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either the return for the year the loss occurred (in this instance, the 2023 return normally filed in early 2024), or the return for the prior year (that is, the 2022 return normally filed in 2023). Be sure to write the FEMA declaration number – 4709-DR − on any return claiming a loss. See Publication 547 for details.

The tax relief is part of a coordinated federal response to the damage caused by these storms and is based on local damage assessments by FEMA. For information on disaster recovery, visit DisasterAssistance.gov.

U.S. TAX
Resourse: https://www.irs.gov/newsroom/irs-florida-storm-victims-qualify-for-tax-relief-april-18-deadline-other-dates-extended-to-aug-15

 

IRS Tax Tip 2023-58, April 27, 2023

When a taxpayer can't pay their full tax liability or if paying would cause financial hardship, they may want to consider applying for an Offer in Compromise. This agreement between a taxpayer and the IRS settles a tax debt for less than the full amount owed. The goal is a compromise that's in the best interest of both the taxpayer and the agency. The application fee for an offer in compromise is $205. Low-income taxpayers don't have to pay this fee, and they should check if they meet the definition of low-income in the instructions for Form 656, Offer in Compromise.

When reviewing applications, the IRS considers the taxpayer's unique set of facts and special circumstances affecting their ability to pay including their:


Income.
Expenses.
Asset equity.


The Offer in Compromise Booklet has detailed information

The booklet covers everythingPDF a taxpayer needs to know about submitting an Offer in Compromise including:


Eligibility.
Costs to apply.
Application process.
Forms.


The booklet is also available in Spanish. Taxpayers should download and use the latest version of the OIC booklet to avoid processing delays.

 

 










Taxpayers can also watch a how-to video series on Offer in Compromise

The IRS has a free how-to video series on Offer in Compromise available in English, Spanish and Simplified Chinese. The playlist has easy-to-find information that taxpayers need to know when they consider and apply for an OIC. Topics in the series include:


Overview of the OIC process, forms and pre-qualifier tool.
Step-by-step guides for completing Forms 433-A and 433-B OIC. These are collection information statements which are required for both individual and business-related offers.
Step-by-step example of how to complete Form 656, Offer in Compromise.
Checklist of everything that's needed to submit a valid offer.


Taxpayers can see if they're eligible with the pre-qualifier tool 

Taxpayers can enter their financial information and tax filing status in the tool to calculate a preliminary offer amount. The tool is only a guide. The IRS will make the final decision on whether to accept the taxpayer's application.

Beware of offer in compromise mills

Offers in compromise are an important program to help people who can't pay to settle their federal tax debts. But "offer in compromise mills" can aggressively promote offers in compromise in misleading ways to people who clearly don't meet the qualifications, often costing taxpayers thousands of dollars. Taxpayers can check their eligibility for free using the IRS Offer in Compromise Pre-Qualifier tool.

U.S. TAX
Resourse: https://www.irsvideos.gov/Business/SBTW/Lesson3