by | Nov 4, 2020 | Tax Tips and News
The Internal Revenue Service has unveiled changes they say will help struggling taxpayers affected by the pandemic settle their IRS tax debts more easily.
The agency says it took a hard look at its collection activities to see how it could offer some relief to taxpayers who owe tax due but are struggling financially because of the pandemic. The goal, IRS says, was to expand taxpayer options for making payments while offering alternatives to resolve the balances owed.
“The IRS understands that many taxpayers face challenges, and we’re working hard to help people facing issues paying their tax bills,” said IRS Commissioner Chuck Rettig. “Following up on our People First Initiative earlier this year, this next phase of our efforts will help with further taxpayer relief efforts.”
“We want people to know our IRS employees are committed to continue helping taxpayers wherever possible, including offering many options for those struggling to pay their tax bills,” said Darren Guillot, the IRS Small Business/Self-Employed Deputy Commissioner for Collection and Operations Support. Guillot discussed the new relief options in a new edition of IRS “A Closer Look.”
To be sure, taxpayers who owed tax due have long had options through payment plans and other IRS tools; the new Taxpayer Relief Initiative expands on those tools even more.
The revised COVID-related collection procedures will be helpful to taxpayers, especially those who have a record of filing their returns and paying their taxes on time.
Among the highlights of the Taxpayer Relief Initiative:
- Taxpayers who qualify for a short-term payment plan option may now have up to 180 days to resolve their tax liabilities instead of 120 days.
- The IRS is offering flexibility for some taxpayers who are temporarily unable to meet the payment terms of an accepted Offer in Compromise.
- The IRS will automatically add certain new tax balances to existing Installment Agreements, for individual and out of business taxpayers. This taxpayer-friendly approach will occur instead of defaulting the agreement, which can complicate matters for those trying to pay their taxes.
- To reduce burden, certain qualified individual taxpayers who owe less than $250,000 may set up Installment Agreements without providing a financial statement or substantiation if their monthly payment proposal is sufficient.
- Some individual taxpayers who only owe for the 2019 tax year and who owe less than $250,000 may qualify to set up an Installment Agreement without a notice of federal tax lien filed by the IRS.
Additionally, qualified taxpayers with existing Direct Debit Installment Agreements may now be able to use the Online Payment Agreement system to propose lower monthly payment amounts and change their payment due dates.
The IRS has more details on the Taxpayer Relief Initiative.
The IRS offers options for short-term and long-term payment plans—including Installment agreements—through the Online Payment Agreement (OPA) system.
In general, this service is available to individual taxpayers who owe $50,000 or less in combined income tax, penalties and interest or businesses that owe $25,000 or less combined that have filed all tax returns. The short-term payment plans are now able to be extended from 120 to 180 days for certain taxpayers.
Installment Agreement options are available to those who cannot fully pay their balance now, but can pay their balance over time. The Installment Agreement options were expanded to remove the requirement for financial statements and substantiation in more circumstances for balances owed up to $250,000 if the monthly payment proposal is sufficient.
The IRS also modified Installment Agreement procedures to further limit the requirements for Federal Tax Lien determinations for some taxpayers who only owe taxes for tax year 2019.
In addition to payment plans and Installment Agreements, the IRS also offers other tools to assist taxpayers who owe taxes:
Temporarily Delaying Collection — Taxpayers can contact the IRS to request a temporary delay of the collection process. If the IRS determines a taxpayer is unable to pay, it may delay collection until the taxpayer’s financial condition improves.
Offer in Compromise — Certain taxpayers qualify to settle their tax bill for less than the amount they owe by submitting an Offer in Compromise. To help determine eligibility, use the Offer in Compromise Pre-Qualifier tool. Now, the IRS is offering additional flexibility for some taxpayers who are temporarily unable to meet the payment terms of an accepted offer in compromise.
Relief from Penalties — The IRS is highlighting reasonable cause assistance available for taxpayers with failure to file, pay and deposit penalties. First-time penalty abatement relief is also available for the first time a taxpayer is subject to one or more of these tax penalties.
All taxpayers can access important information on IRS.gov. Many taxpayers requesting payment plans, including Installment Agreements, can apply through IRS.gov without ever having to talk to a representative.
Requests for relief—including the options in this new initiative—can be made by contacting the phone number on the taxpayer’s IRS notice. Taxpayers can also make the request in writing. But the IRS stresses that if taxpayers get a notice of a balance due, the one thing they should not do is nothing.
“If you’re having a tax issue, don’t go silent. Please don’t ignore the notice arriving in your mailbox,” Guillot said. “These problems don’t get better with time. We understand tax issues and know that dealing with the IRS can be intimidating, but our employees really are here to help.”
Throughout the pandemic, the IRS has adjusted its operations to help ensure the health and safety of employees and taxpayers alike. The adjustments have extended to the relief contained in its People First Initiative.
More information and background on collection relief and procedures can be found in “A Closer Look.”
“While it’s been important for us and the nation to resume our critical tax compliance responsibilities, we continue to assess the wide-ranging impacts of COVID-19 and other difficulties people are experiencing,” Guillot said.
Source: IR-2020-248
– Story provided by TaxingSubjects.com
by | Nov 3, 2020 | Tax Tips and News
Most US citizens, entities, and resident aliens with a foreign bank or financial account have seen their IRS reporting deadline come and go. But for some taxpayers, one more deadline remains to file their 2019 Report of Foreign Bank and Financial Accounts, or FBAR.
Most FBAR filings were due by October 31, 2020.
The bulk of FBAR filings came on Oct. 31. Originally slated for the April 15 tax filing deadline, FBAR filing of the Financial Crimes Enforcement Network Form 114 was automatically extended to Oct. 15 due to the coronavirus pandemic, then extended again to Oct. 31.
But taxpayers got a further reprieve if they were affected by one of the following federally recognized natural disasters:
These FBAR filers have until Dec. 31, 2020 to file their forms. At present, the relief for FBAR filers applies only to those within the federally declared disaster areas.
FBAR filers who live outside the affected areas seeking assistance in meeting their filing obligations (including workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization), should contact the FinCEN Regulatory Support Section at 800.767.2825 or electronically at frc@fincen.gov.
Who needs to file?
This requirement to file applies to, among others, U.S. citizens and anyone with dual citizenship. It also applies to legal entities, such as corporations, partnerships, limited liability companies, estates and trusts.
In addition, U.S. citizens, entities and resident aliens should check to see if they have a U.S. tax liability and a federal tax return filing requirement. Those required to file should make sure all income is reported and federal tax return filing requirements are met regarding the reported accounts.
In general, the requirement to file applies to anyone who had an interest in, or signature or other authority, over foreign financial accounts with an aggregate value of over $10,000 at any time during 2019.
Because of the threshold, the IRS encourages U.S. individuals or entities with foreign accounts—even relatively small ones—to check if the filing requirement applies to them.
The FBAR, FinCEN Form 114, is only available through the BSA E-Filing System website.
The IRS reminds taxpayers that the FBA should never be filed with individual, business, trust or estate tax returns.
Source: IR-2020-247
– Story provided by TaxingSubjects.com
by | Oct 29, 2020 | Tax Tips and News
The Internal Revenue Service is making good on its pledge to provide information and assistance to underserved communities. The agency has now made two publications that are key to tax professionals available in Spanish.
Publication 947, Practice Before the IRS and Power of Attorney, is now available online. A Spanish version of Circular No. 230, Regulations Governing Practice Before the Internal Revenue Service, is expected to be posted on IRS.gov soon.
IRS Commissioner Chuck Rettig said making these two publications available in Spanish helps the IRS reach its goal of serving all taxpayers, no matter where they live, their background, or what language they speak.
“Spanish-speaking tax pros have long played a vital role in helping businesses and families understand their tax-reporting responsibilities and take full advantage of valuable tax benefits,” said Commissioner Rettig. “We believe adding these two important professional resources in Spanish will help tax pros more effectively serve and represent this important community. This is just one more step in our continuing efforts to increase the information and services available in Spanish and other languages.”
Circular 230 is considered a crucial document for those who practice before the IRS.
The title refers to Treasury Department Circular No. 230, which defines and governs who may practice before the IRS. Those covered by Circular 230 include attorneys, certified public accountants, Enrolled Agents, enrolled retirement plan agents, enrolled actuaries and others who practice before the IRS.
The IRS Office of Professional Responsibility has oversight over Circular 230, including enforcing violations.
“Circular 230 will turn 100 years old in February, and making this document available in Spanish for the first time is an appropriate milestone,” said Sharyn Fisk, IRS Office of Professional Responsibility Director. “We will continue to look for other opportunities to make information available to tax professionals in additional languages.”
In another first, Form 1040 will be available in Spanish in tax-year 2020. The 2020 Form 1040 will also allow taxpayers to indicate on the form whether they wish to be contacted in a language other than English, should the IRS have a need to communicate with them.
More information about tax help in Spanish—and other languages—can be found on IRS.gov.
Source: IR-2020-246
– Story provided by TaxingSubjects.com
by | Oct 28, 2020 | Tax Tips and News
The Internal Revenue Service is continuing its push to get non-filers to register so they can receive an Economic Impact Payment or EIP.
In keeping with that mission, the IRS has designated Nov. 10 as “National EIP Registration Day.” It comes just a few days ahead of the extended Nov. 21 registration deadline.
The event will feature support from IRS partner groups both inside and outside of the tax community, including those who work with low-income and underserved communities.
These partner groups will help spread the word about the new Nov. 21 deadline and, in some cases, provide special support for people who still need to register for a payment.
IRS is getting the word out.
Nearly 9 million letters have been sent by the IRS to people who may be eligible for the $1,200 Economic Impact Payment, but don’t normally file an income tax return. The letters, and the Nov.10 event both urge people to use the Non-Filers: Enter Info Here tool, available only on IRS.gov.
“Our partner groups have been a critical part of the unprecedented IRS outreach and education campaign this year to contact as many people as possible about these payments,” said IRS Commissioner Chuck Rettig. “As a result, millions of Americans have successfully used the Non-filers portal and received their Economic Impact Payment. Registration is quick and easy, and we urge everyone to share this information to reach as many people before time runs out on November 21.”
Many partner groups have already been working with the IRS on the registration effort, spreading information about the EIP and translating the notices and other information into as many as 35 languages.
The IRS also plans a social media campaign in several languages to support the final push for registrations.
No EIP if you don’t register.
Most eligible U.S. taxpayers have already automatically received their Economic Impact Payment; but others who don’t have an obligation to file a tax return should use the Non-Filers tool to register with the IRS to get their money. Typically, this includes people who receive little or no income.
Since the Non-Filers tool launched in the spring, over 8 million people who normally aren’t required to file a tax return have registered for the payments. The IRS continues to work to reach others who haven’t used the tool yet, which led to the special mailing and the special Nov. 10 registration event.
The tool is designed for people with incomes typically below $24,400 for married couples, and $12,200 for singles, who could not be claimed as a dependent by someone else. This includes couples and individuals who are experiencing homelessness.
Those using the Non-Filers tool can speed up their payment’s arrival by choosing to get it by direct deposit. Recipients not choosing this option will get their payment by check.
Starting two weeks after they register, people can track the status of their payment by using the Get My Payment tool, available only on IRS.gov.
Source: IR-2020-242
– Story provided by TaxingSubjects.com
by | Oct 28, 2020 | Tax Tips and News
Taxpayers trying to plan their 2021 deductible retirement plan contributions will be happy to learn that the Internal Revenue Service this week published Notice 2020-79.
The IRS says the notice includes “income ranges for determining eligibility to make deductible contributions to traditional Individual Retirement Arrangements (IRAs), to contribute to Roth IRAs and to claim the Saver’s Credit all increased for 2021.”
The deductibility of traditional IRA contributions is further limited when a taxpayer or their spouse is covered by a workplace retirement plan. The agency explains that this can trigger the following phase-out ranges, which can ultimately reduce the deduction to zero:
- For single taxpayers covered by a workplace retirement plan, the phase-out range is $66,000 to $76,000, up from $65,000 to $75,000.
- For married couples filing jointly, where the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is $105,000 to $125,000, up from $104,000 to $124,000.
- For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $198,000 and $208,000, up from $196,000 and $206,000.
- For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
Roth IRAs similarly have a phase-out range, which was also increased in Notice 2020-79:
- Single taxpayers and heads of household: $125,000 to $140,000, up from $124,000 to $139,000
- Married couples filing jointly: $198,000 to $208,000, up from $196,000 to $206,000
The IRS notes that “the phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.”
The Saver’s Credit income limits were also increased for 2021:
- Single taxpayers and married couples filing separately: $33,000, up from $32,500
- Heads of household: $49,500, up from $48,750
- Married couples filing jointly: $66,000, up from $65,000
Finally, the IRS says that certain employee contribution limits were not changed by Notice 2020-79:
- 401(k), 403(b), most 457 plans, and the Thrift Savings Plan: $19,500
- Catch-up contributions for employees aged 50 with a 401(k), 403(b), most 457 plans, and the Thrift Savings Plan: $6,500
- SIMPLE retirement accounts: $13,500
- Annual contributions to an IRA: $6,000
- Additional catch-up contribution limit for individuals aged 50 and over: $1,000 (not affected by annual cost-of-living adjustment)
For more information about the updated income ranges, check out the notice on IRS.gov.
Source: IR-2020-244
– Story provided by TaxingSubjects.com
by | Oct 27, 2020 | Tax Tips and News
The Internal Revenue Service has revealed a second settlement effort for taxpayers under audit who took part in abusive micro-captive insurance transactions.
This is the second such settlement offer to go out from the IRS. This second offer, however, puts forth stricter terms than the first, which went out last year. The IRS has now deployed its 12 newly formed micro-captive examination teams to increase examinations of abusive micro-captive insurance transactions.
What are the new terms for the settlement?
The IRS says it can resolve certain cases if the taxpayer agrees to “substantial concessions” of the income tax benefits claimed, along with penalties that can be partly mitigated if the taxpayer can demonstrate good faith, reasonable reliance on an independent, competent tax advisor, and if the taxpayer can demonstrate they did not participate in any other reportable transactions.
“The IRS maintains a relentless agency-wide commitment to combat abusive transactions,” said IRS Large Business & International Commissioner Douglas O’Donnell. “Our offer terms are only getting stricter; and taxpayers would be well advised to consult with an objective, competent advisor with the aim of getting out now and putting this behind them.”
At present, this newest settlement offer is limited to taxpayers with at least one open year under exam.
Taxpayers who also have unresolved years under the jurisdiction of the IRS Independent Office of Appeals may also be eligible, but those with tax years involving micro-captive transactions docketed in Tax Court under Counsel’s jurisdiction, in general, are not eligible.
Taxpayers who do not receive an offer letter are not eligible for this settlement.
The terms only get tougher from here.
Because the terms of this new settlement offer reflect the IRS’ current settlement position, certain taxpayers who received an offer under the first limited-time initiative—but rejected it—are eligible to get a new offer but under the new, stricter terms.
In other words, they get a second chance, but the rules have changed.
“Taxpayers who receive offer letters under this settlement initiative, but who opt not to participate, will continue to be audited by the IRS under its normal procedures,” an IRS news release states. “Potential outcomes include, but are not limited to, full disallowance of captive insurance deductions, inclusion of income by the captive, withholding tax related to any foreign captives and imposition of all applicable penalties.”
Taxpayers who decline to take part in this new settlement offer will have full Appeals rights. However, the IRS Independent Office of Appeals is aware of the settlement initiative. Given the current state of the law, the IRS says taxpayers shouldn’t bank on getting better terms in the Appeals process than those in this new settlement offer.
More information on micro-captive insurance transactions, including which transactions may qualify as having potential for tax avoidance and evasion, can be found in Notice 2016-66.
– Story provided by TaxingSubjects.com
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