New tax laws for 2020: Recent Episodes
David Fender
Rent expense
Rent
Unreasonable rent
Rent on your home
Rent paid in advance
Taxes on leased property
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Bonuses
Education Expenses
Fringe Benefits
Meals & Lodging
Transportation (commuting) benefits
Employee benefit programs
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Employees' Pay
Tests for Deducting Pay
Test 1. It must be reasonable.
Test 2. It must be for services performed.
Kinds of Pay
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What Can I Deduct?
Cost of Goods Sold
Capital Expenses
Going into Business
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f someone owes you money that you can't collect, you may have a bad debt. For a discussion of what constitutes a valid debt, refer to Publication 550, Investment Income and Expenses (PDF) and Publication 535, Business Expenses. Generally, to deduct a bad debt, you must have previously included the amount in your income or loaned out your cash. If you're a cash method taxpayer (most individuals are), you generally can't take a bad debt deduction for unpaid salaries, wages, rents, fees, interests, dividends, and similar items. For a bad debt, you must show that at the time of the transaction you intended to make a loan and not a gift. If you lend money to a relative or friend with the understanding the relative or friend may not repay it, you must consider it as a gift and not as a loan, and you may not deduct it as a bad debt.
There are two kinds of bad debts – business and nonbusiness.
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Coronavirus-related distributions (CVDs) from IRAs are tax-favored
How do you qualify for CVDs?
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What is new.
Types of organizations
Contributions you can deduct
Contributions from which you benefit
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Before you give your vehicle to a charitable organization:
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Check out the charity,
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See if you will get a tax benefit,
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Check the value of your vehicle,
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See what your responsibilities are as a donor to a charity.
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What is a Limited Liability Company.
Classification of an LLC
LLCs Classified as Partnerships
Member manager
Change in default classification
LLCs Classified as Disregarded Entities
LLCs Classified as Corporations
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What's a Lump-Sum Distribution? A lump-sum distribution is the distribution or payment within a single tax year of a plan participant's entire balance from all of the employer's qualified plans of one kind (for example, pension, profit-sharing, or stock bonus plans). Additionally, a lump-sum distribution is a distribution that's paid:
- Because of the plan participant's death,
- After the participant reaches age 59½,
- Because the participant, if an employee, separates from service, or
- After the participant, if a self-employed individual, becomes totally and permanently disabled.
Lump-Sum Treatment Options You can elect to treat the portion of a lump-sum distribution that's attributable to your active participation in the plan using one of five options:
- Report the taxable part of the distribution from participation before 1974 as a capital gain (if you qualify) and the taxable part of the distribution from participation after 1973 as ordinary income.
- Report the taxable part of the distribution from participation before 1974 as a capital gain (if you qualify) and use the 10-year tax option to figure the tax on the part from participation after 1973 (if you qualify).
- Use the 10-year tax option to figure the tax on the total taxable amount (if you qualify).
- Roll over all or part of the distribution. No tax is currently due on the part rolled over. Report any part not rolled over as ordinary income.
- Report the entire taxable part as ordinary income.
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f you have income from your farming or fishing business, you may be able to avoid making any estimated tax payments by filing your return and paying your entire tax due on or before March 1 of the year your return is due. This rule generally applies if farming or fishing income was at least two-thirds of your total gross income in either the current or the preceding tax year. If March 1 falls on a weekend or legal holiday, you have until the next business day to file your return and pay the tax.
If you choose not to file by March 1, you can make a single estimated tax payment by January 15 or the next business day if January 15 falls on a weekend or legal holiday, to avoid an estimated tax penalty. If these special rules don't apply, you may have to make quarterly estimated tax payments. For more information on estimated tax, refer to Publication 505, Tax Withholding and Estimated Tax.
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Interest is an amount you pay for the use of borrowed money. Some interest can be claimed as a deduction or as a credit. To deduct interest you paid on a debt, review each interest expense to determine how it qualifies and where to take the deduction.
Mortgage Interest Deduction
Mortgage Interest Credit
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Tax Treatment of Alimony and Separate Maintenance
Alimony or Separate Maintenance – In General
Payments Not Alimony or Separate Maintenance
Reporting Taxable Alimony or Separate Maintenance
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Deferred federal income tax payment deadline for individuals
Individuals can defer their federal income tax payments (including any self-employment tax) for the 2019 tax year from the normal April 15 deadline until July 15. That means you can put off paying what you still owe for last year until July 15 without incurring any interest or penalties.
IRS Notice 2020-20 confirms that individuals can also defer until July 15 their initial quarterly estimated federal income tax payments for the 2020 tax year
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Under the tax law, certain tax benefits can significantly reduce a taxpayer's regular tax amount. The alternative minimum tax (AMT) applies to taxpayers with high economic income by setting a limit on those benefits. It helps to ensure that those taxpayers pay at least a minimum amount of tax.
How Is the AMT Calculated? The AMT is the excess of the tentative minimum tax over the regular tax. Thus, the AMT is owed only if the tentative minimum tax for the year is greater than the regular tax for that year. The tentative minimum tax is figured separately from the regular tax. In general, compute the tentative minimum tax by:
- Computing taxable income eliminating or reducing certain exclusions and deductions, and taking into account differences with respect to when certain items are taken into account in computing regular taxable income and alternative minimum taxable income (AMTI),
- Subtracting the AMT exemption amount,
- Multiplying the amount computed in (2) by the appropriate AMT tax rates, and
- Subtracting the AMT foreign tax credit.
The law sets the AMT exemption amounts and AMT tax rates. Taxpayers can use the special capital gain rates in effect for the regular tax if they're lower than the AMT tax rates that would otherwise apply. In addition, some tax credits that reduce regular tax liability don't reduce AMT tax liability.
Am I Subject to the AMT? To find out if you may be subject to the AMT, refer to the Alternative Minimum Tax (AMT) line instructions in the Instructions for Form 1040 and 1040-SR (PDF). If subject to the AMT, you may be required to complete and attach Form 6251, Alternative Minimum Tax – Individuals. See the Instructions for Form 6251.
Am I Eligible for a Tax Credit? If you're not liable for AMT this year, but you paid AMT in one or more previous years, you may be eligible to take a special minimum tax credit against your regular tax this year. If eligible, you should complete and attach Form 8801, Credit for Prior Year Minimum Tax - Individuals, Estates, and Trusts (PDF) to claim the minimum tax credit.
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Dividends are distributions of property a corporation may pay you if you own stock in that corporation. Corporations pay most dividends in cash. However, they may also pay them as stock of another corporation or as any other property. You also may receive distributions through your interest in a partnership, an estate, a trust, a subchapter S corporation, or from an association that's taxable as a corporation. A shareholder of a corporation may be deemed to receive a dividend if the corporation pays the debt of its shareholder, the shareholder receives services from the corporation, or the shareholder is allowed the use of the corporation's property without adequate reimbursement to the corporation. Additionally, a shareholder that provides services to a corporation may be deemed to receive a dividend if the corporation pays the shareholder service-provider in excess of what it would pay a third party for the same services. A shareholder may also receive distributions such as additional stock or stock rights in the distributing corporation; such distributions may or may not qualify as dividends.
Form 1099-DIV
Return of Capital
Capital Gain Distributions
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A licensed, commissioned, or ordained minister is generally the common law employee of the church, denomination, sect, or organization that employs him or her to provide ministerial services. However, there are some exceptions, such as traveling evangelists who are independent contractors (self-employed) under the common law. Regardless of whether you're a minister performing ministerial services as an employee or a self-employed person, all of your earnings, including wages, offerings, and fees you receive for performing marriages, baptisms, funerals, etc., are subject to income tax. However, the way you treat expenses related to those earnings differs if you earn the income as an employee or as a self-employed person.
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A qualified tuition program (QTP), also referred to as a section 529 plan, is a program established and maintained by a state, or an agency or instrumentality of a state, that allows a contributor either to prepay a beneficiary's qualified higher education expenses at an eligible educational institution or to contribute to an account for paying those expenses. Eligible educational institutions can also establish and maintain QTPs but only to allow prepaying a beneficiary's qualified higher education expenses. Qualified higher education expenses include tuition expenses in connection with a designated beneficiary's enrollment or attendance at an elementary or secondary public, private, or religious school, i.e. kindergarten through grade 12, up to a total amount of $10,000 per year from all of the designated beneficiary's QTPs. It also includes expenses for fees, books, supplies, and equipment required for the participation in an apprenticeship program registered and certified with the Secretary of Labor and qualified education loan repayments in limited amounts.
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Deductible medical expenses may include but aren't limited to the following:
- Payments of fees to doctors, dentists, surgeons, chiropractors, psychiatrists, psychologists, and nontraditional medical practitioners.
- Payments for inpatient hospital care or residential nursing home care, if the availability of medical care is the principal reason for being in the nursing home, including the cost of meals and lodging charged by the hospital or nursing home. If the availability of medical care isn't the principal reason for residence in the nursing home, the deduction is limited to that part of the cost that's for medical care.
- Payments for acupuncture treatments or inpatient treatment at a center for alcohol or drug addiction; or for participation in a smoking-cessation program and for drugs to alleviate nicotine withdrawal that require a prescription.
- Payments to participate in a weight-loss program for a specific disease or diseases diagnosed by a physician, including obesity, but not ordinarily payments for diet food items or the payment of health club dues.
- Payments for insulin and for drugs that require a prescription for its use by an individual.
- Payments made for admission and transportation to a medical conference relating to a chronic illness of you, your spouse, or your dependent (if the costs are primarily for and essential to necessary medical care). However, you may not deduct the costs for meals and lodging while attending the medical conference.
- Payments for false teeth, reading or prescription eyeglasses, contact lenses, hearing aids, crutches, wheelchairs, and for a guide dog or other service animal to assist a visually impaired or hearing disabled person, or a person with other physical disabilities.
- Payments for transportation primarily for and essential to medical care that qualify as medical expenses, such as payments of the actual fare for a taxi, bus, train, ambulance, or for transportation by personal car; the amount of your actual out-of-pocket expenses such as for gas and oil; or the amount of the standard mileage rate for medical expenses, plus the cost of tolls and parking.
- Payments for insurance premiums you paid for policies that cover medical care or for a qualified long-term care insurance policy covering qualified long-term care services. However, if you're an employee, don't include in medical expenses the portion of your premiums treated as paid by your employer. Employer-sponsored premiums paid under a premium conversion plan, cafeteria plan, or any other medical and dental expenses paid by the plan aren't deductible unless the premiums are included in box 1 of your Form W-2, Wage and Tax Statement (PDF). For example, if you're a federal employee participating in the premium conversion plan of the Federal Employee Health Benefits (FEHB) program, you may not include the premiums paid for the policy as a medical expense.
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An employer may outsource some or all of its federal employment tax withholding, reporting, and payment obligations. An employer who outsources payroll and related tax duties (that is, withholding, reporting, and paying over social security, Medicare, FUTA, and income taxes) to a third-party payer, generally will remain responsible for those duties, including liability for the taxes.
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No regular payroll period
Employee paid for period less than one year
Using Form W-4 to figure withholding
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Cash tips your employee receives from customers are generally subject to withholding. Your employee must re-port cash tips to you by the 10th of the month after the month the tips are received. Cash tips include tips paid by cash, check, debit card, and credit card. The report should include tips you paid over to the employee for charge customers, tips the employee received directly from customers, and tips received from other employees under any tip-sharing arrangement. Both directly and indirectly tipped employees must report tips to you. No report is required for months when tips are less than $20. Your employee reports the tips on Form 4070 or on a similar statement. The statement must be signed and dated by the employee and must include:
• The employee's name, address, and SSN;
• Your name and address;
• The month and year (or the beginning and ending dates, if the statement is for a period of less than 1 calendar month) the report covers; and
• The total of tips received during the month or period.
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Health insurance plans. If you pay the cost of an accident or health insurance plan for your employees, including an employee's spouse and dependents, your payments aren't wages and aren't subject to social security, Medicare, and FUTA taxes, or federal income tax with-holding. Generally, this exclusion also applies to qualified long-term care insurance contracts. However, for income tax withholding, the value of health insurance benefits must be included in the wages of S corporation employees who own more than 2% of the S corporation (2% shareholders). For social security, Medicare, and FUTA taxes, the health insurance benefits are excluded from the 2% shareholder's wages. See Announcement 92-16 for more information. You can find Announcement 92-16 on page 53 of Internal Revenue Bulletin 1992-5.
Health savings accounts (HSAs) and medical savings accounts (MSAs). Your contributions to an employee's HSA or Archer MSA aren't subject to social security, Medicare, or FUTA taxes, or federal income tax withholding if it is reasonable to believe at the time of payment of the contributions they’ll be excludable from the income of the employee. To the extent it isn't reasonable to believe they’ll be excludable, your contributions are subject to these taxes. Employee contributions to their HSAs or MSAs through a payroll deduction plan must be included in wages and are subject to social security, Medicare, and FUTA taxes and income tax withholding. However, HSA contributions made under a salary reduction arrangement in a section 125 cafeteria plan aren't wages and aren't subject to employment taxes or withholding. For more information, see the Instructions for Form 8889.
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Wages subject to federal employment taxes generally include all you give to an employee for services performed.
The pay may be in cash or in other forms. It includes salaries, vacation allowances, bonuses, commissions, and taxable fringe benefits. It doesn't matter how you measure or make the payments. Amounts an employer pays as a bonus for signing or ratifying a contract in connection with the establishment of an employer-employee relationship and an amount paid to an employee for cancellation of an employment contract and relinquishment of contract rights are wages subject to social security, Medicare, and FUTA taxes and income tax withholding. Also, compensation paid to a former employee for services performed while still employed is wages subject to employment taxes.
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If you and your spouse jointly own and operate a business and share in the profits and losses, you may be partners in a partnership, whether or not you have a formal partner-ship agreement. See Pub. 541 for more details. The partnership is considered the employer of any employees, and is liable for any employment taxes due on wages paid to its employees.
Exception - Qualified Joint Venture
Family Employees
One Spouse Employed by Another Spouse
Covered Services of a Child or Spouse
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This publication explains your tax responsibilities as an employer. It explains the requirements for withholding, depositing, reporting, paying, and correcting employment taxes. It explains the forms you must give to your employees, those your employees must give to you, and those you must send to the IRS and the SSA. References to “in-come tax” in this guide apply only to “federal” income tax. Contact your state or local tax department to determine their rules.
When you pay your employees, you don't pay them all the money they earned. As their employer, you have the added responsibility of withholding taxes from their pay-checks. The federal income tax and employees' share of social security and Medicare taxes that you withhold from your employees' paychecks are part of their wages that you pay to the U.S. Treasury instead of to your employees. Your employees trust that you pay the withheld taxes to the U.S. Treasury by making federal tax deposits. This is the reason that these withheld taxes are called trust fund taxes. If federal income, social security, or Medicare taxes that must be withheld aren't withheld or aren't de-posited or paid to the U.S. Treasury, the trust fund recovery penalty may apply. See section 11 for more information.
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What's New
Redesigned Form W-4 for 2020
Social Security and Medicare Tax for 2020
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Social Security Coverage
Earning Credits in 2019 and 2020
Social Security Administration (SSA) time limit for posting
Who Must Pay Self-Employment Tax
SE Tax Rate
Maximum Earnings Subject to SE Tax
Additional Medicare Tax
Employment Taxes
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Are You Self-Employed
Are You a Statutory Employee
Business Owned and Operated by Spouses
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Sole Proprietorships
Partnerships
Corporations
LLCs for Federal Tax Purposes
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Nonresident Aliens
Resident Aliens
Green Card Test
Substantial Presence Test
Choosing Resident Alien Status
Dual-Status Tax Year
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Statutory Stock Options
-- Incentive Stock Option
-- Employee Stock Purchase Plan
Nonstatutory Stock Options
-- Readily Determined Fair Market Value
-- Not Readily Determined Fair Market Value
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You're self-employed for this purpose if you're a sole proprietor (including an independent contractor), a partner in a partnership (including a member of a multi-member limited liability company (LLC) that is treated as a partnership for federal tax purposes) or are otherwise in business for yourself. The term sole proprietor also includes the member of a single member LLC that's disregarded for federal income tax purposes and a member of a qualified joint venture. You usually must pay self-employment tax if you had net earnings from self-employment of $400 or more. Generally, the amount subject to self-employment tax is 92.35% of your net earnings from self-employment. You calculate net earnings by subtracting ordinary and necessary trade or business expenses from the gross income you derived from your trade or business. You can be liable for paying self-employment tax even if you currently receive social security benefits. The law sets a maximum amount of net earnings subject to the social security tax. This amount changes annually. All of your net earnings are subject to the Medicare tax.
Optional Methods
Church Employee
Self-Employment Tax Rate
Additional Medicare Tax
Reporting Self-Employment tax
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Amounts that meet the requirements for any of the following exceptions aren't cancellation of debt income.
EXCEPTIONS to Cancellation of Debt Income: 1. Amounts canceled as gifts, bequests, devises, or inheritances 2. Certain qualified student loans canceled under the loan provisions that the loans would be canceled if you work for a certain period of time in certain professions for a broad class of employers 3. Certain other education loan repayment or loan forgiveness programs to help provide health services in certain areas. 4. Amounts of canceled debt that would be deductible if you, as a cash basis taxpayer, paid it 5. A qualified purchase price reduction given by the seller of property to the buyer 6. Any Pay-for-Performance Success Payments that reduce the principal balance of your home mortgage under the Home Affordable Modification Program 7. Amounts from student loans discharged on the account of death or total and permanent disability of the student.
Amounts that meet the requirements for any of the following exclusions aren't included in income, even though they're cancellation of debt income.
EXCLUSIONS from Gross Income: 1. Debt canceled in a Title 11 bankruptcy case 2. Debt canceled to the extent insolvent 3. Cancellation of qualified farm indebtedness 4. Cancellation of qualified real property business indebtedness 5. Cancellation of qualified principal residence indebtedness that is discharged subject to an arrangement that is entered into and evidenced in writing before January 1, 2021.
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Deductible travel expenses while away from home include, but aren't limited to, the costs of:
- Travel by airplane, train, bus or car between your home and your business destination. (If you're provided with a ticket or you're riding free as a result of a frequent traveler or similar program, your cost is zero.)
- Fares for taxis or other types of transportation between:
The airport or train station and your hotel,
The hotel and the work location of your customers or clients, your business meeting place, or your temporary work location. 3. Shipping of baggage, and sample or display material between your regular and temporary work locations. 4. Using your car while at your business destination. You can deduct actual expenses or the standard mileage rate, as well as business-related tolls and parking fees. If you rent a car, you can deduct only the business-use portion for the expenses. 5. Lodging and non-entertainment-related meals. 6. Dry cleaning and laundry. 7. Business calls while on your business trip. (This includes business communications by fax machine or other communication devices.) 8. Tips you pay for services related to any of these expenses. 9. Other similar ordinary and necessary expenses related to your business travel. (These expenses might include transportation to and from a business meal, public stenographer's fees, computer rental fees, and operating and maintaining a house trailer.)
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Pass-Through Business Entities
Non-Pass-Through Business Entities
Tax Advantages of Corporations
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Under the Tax Cuts and Jobs Act, pass-through business entity owners can potentially deduct 20% of their business income.
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You Must Have a Pass-Through Business
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You Must Have Qualified Business Income
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20% Deduction for Taxable Income Below Annual Threshold
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Deduction for Income Above Annual Threshold
you need to determine whether your business falls within one of the following service provider categories:
- health (doctors, dentists, and other health fields)
- law
- accounting
- actuarial science
- performing arts
- consulting
- athletics
- financial services
- brokerage services (not including real estate or insurance brokers)
- investing and investment management (not including property managers), or
- trading and dealing in securities or commodities.
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To deduct expenses for business use of the home, you must use part of your home as one of the following:
- Exclusively and regularly as your principal place of business for your trade or business;
- Exclusively and regularly as a place where you meet and deal with your patients, clients, or customers in the normal course of your trade or business;
- A separate structure that's not attached to your home used exclusively and regularly in connection with your trade or business;
- On a regular basis for storage of inventory or product samples used in your trade or business of selling products at retail or wholesale;
- For rental use; or
- As a daycare facility.
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Fully Taxable Payments
Partially Taxable Payments
Additional 10% Tax on Early Distributions
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Real Estate Rentals
Personal Property Rentals
Rental Income
Rental Expenses
Personal Use
Minimal Rental Use
Dividing Expenses between Rental and Personal Use
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Ineligible Distributions
Timeframe to Complete a Rollover
IRA-to-IRA Rollover Limitation
Additional Taxes
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Short-term or Long-term
Capital Gain Tax Rates
Limit on the Deduction and Carryover of Losses
Net Investment Income Tax
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Contributions
Distributions
Hardship Withdrawals
Additional 10% Tax
Taxable and Nontaxable Income
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What is the Earned Income Tax Credit?
How to qualify for the Earned Income Tax Credit?
How much can I get?
Children and the Earned Income Tax Credit
If you do not have children
Consequences of an EIC-related error
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Six Tax Deductions to claim without itemizing:
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IRA Contributions
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HSA Contributions
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Self-employment tax
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Health insurance premiums
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Educator expenses
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Student loan interest
Mistakes to avoid:
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Wrong Social Security Number
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Choosing the wrong tax-filing status
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Writing off itemizing before calculating the numbers
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Failing to report all of your income
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Filing your taxes on paper
Line 8 Home Mortgage Interest
Limits on home mortgage interest
Limit for loan proceeds not used to buy, build, or substantially improve your home
Limit on loans taken out on before December 15, 2017
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Use Schedule 1 to report income or adjustments to income that are not included directly on Form 1040 or 1040-SR
Virtual Currency
Line 1: Taxable Refunds, Credits, Offsets of State and Local Income Taxes
Line 2a and 2b: Alimony Received
Line 3: Business Income or (Loss)
Line 4: Other Gains or (Losses)
Line 7: Unemployment Compensation
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Examples of Qualified Charitable Organizations
Amounts You Cannot Deduct
Gifts by Cash or Check
Qualified Contributions
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Affordable Care Act
Form 1040-SR
Fewer Numbered Schedules
IRA and Pension Reporting
Capital Gain or (Loss) reported on line 6
Health Care Coverage Shared Responsibility Payment
Standard Deduction Amount Increased
Qualified Business Income Deduction
Alternative Minimum Tax (AMT) Exemption Amount Increased
Qualified Opportunity Investment
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Extended tax provisions
Forgiveness of debt on principal residence
Deduction of private mortgage deduction
Energy efficiency improvements
Tuition and fees deduction
Pass-through business deduction
Other dependent credit
How to refile your tax return
File Form 1040-X
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Taxes You Paid but Cannot Deduct
Federal income and most excise taxes
Social security, Medicare, federal unemployment (FUTA)
Customs duties
Federal estate and gift taxes
Certain state and local taxes
Foreign personal or real property taxes
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What's New:
Mortgage Insurance Premiums
Qualified Contributions
Charitable Contribution Deduction
Standard Mileage Rates
Medical & Dental Expenses
Deceased Taxpayer
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Itemized Deductions
Standard Deductions
Exception 1 ... Dependent
Exception 2 ... Born before January 2, 1955 or blind
Exception 3 ... Separate return or dual-status alien
Exception 4 ... Increased standard deduction for net qualified disaster loss.
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Qualified Dividends....Line 3a
Ordinary Dividends....Line 3b
Nondividend distributions
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Further SALT Cap Activity
Withholding by Partnerships with Foreign Partners
Decline in Qualified Opportunity Zone Interest
Cryptocurrency Audits and Investigations
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Outcome of the Federal Election
Tax Extenders and the SECURE Act
Internal Revenue Code Section 163 (j) Limitation and Carried Interest Regulations
Qualified Improvement Property's 'Retail Glitch"
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Line 2a Tax-Exempt Interest
Line 2b Taxable Interest
Line 31 Qualified Dividends
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Foreign-Source Income
Chapter 11 Bankruptcy Cases
Community Property States
Rounding Off to Whole Dollars
Line 1: Wages, Salaries, Tips, etc.
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Single
Married filing jointly
Married filing separately
Head of household
Qualifying widow(er)
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Form 1040-SR
Fewer numbered schedules
IRA and pension reporting
Capital gain or (loss) is now reported on Line 6
Health care coverage shared responsibility payment
Standard deduction amount increased
Qualified business income deduction
Alternative Minimum Tax (AMT) exemption amount increased
Qualified opportunity investment
Virtual currency
Email address
Medicaid waiver payments
Extended tax provisions
Disaster tax relief
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The Internal Revenue Service announced today the overwhelming acceptance of a time-limited settlement offer made to certain taxpayers under audit who participated in abusive micro-captive insurance transactions.
Nearly 80% of taxpayers who received offer letters elected to accept the settlement terms. In addition, the IRS is establishing 12 new examination teams that are expected to open audits related to thousands of taxpayers in coming months.
"The overwhelming acceptance rate of the private settlement offer is a reflection of the success of the government's work to stop this abuse," said IRS Commissioner Chuck Rettig. "Taxpayers who elected to accept the IRS' terms have done the right thing by coming into compliance with their federal tax obligations and putting this behind them. Putting an end to abusive schemes is a high priority for the IRS."
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Taxpayers may qualify for significant tax benefit
The Internal Revenue Service and its partners nationwide remind taxpayers about the Earned Income Tax Credit on January 31, "EITC Awareness Day." This is the 14th year of the EITC awareness campaign that alerts millions of workers to this significant tax credit.
Workers who can claim the EITC
Workers at risk for overlooking this important credit can include taxpayers:
- Without children
- Living in non-traditional families, such as a grandparent raising a grandchild
- Whose earnings declined or whose marital or parental status changed
- With limited English language skills
- Who are members of the armed forces
- Living in rural areas
- Who are Native Americans
- With disabilities or who provide care for a disabled dependent
How to claim the EITC
Refunds
Avoid Errors
Beware of scams
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The Internal Revenue Service wants tax-exempt organizations to know about recent tax law changes that might affect them. The Taxpayer Certainty and Disaster Tax Relief Act, passed on December 20, 2019, includes several provisions that may apply to tax-exempt organizations' current and previous tax years.
- Repeal of "parking lot tax" on exempt employers
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Tax simplification for private foundations
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Exclusion of certain government grants by exempt utility co-ops
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Qualified individuals get as much as a 20% deduction from their income from pass-through entities such as LLCs and partnerships.
There are income limitations and complex ways of determining the deductible amount for taxpayers.
Examples of pass-through entities include:
LLCs,
S-corporations,
partnerships, and
sole proprietorships.
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Charitable contributions
Retirement savings
The pass-through deduction
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WASHINGTON — The Internal Revenue Service has provided relief to financial institutions that were expected to provide required minimum distribution (RMD) statements to IRA owners by January 31, 2020.
Notice 2020-6 (PDF) clarifies that if an RMD statement is provided for 2020 to an IRA owner who will turn age 70½ in 2020, the IRS will not consider the statement to be incorrect, but only if the financial institution notifies the IRA owner no later than April 15, 2020, that no RMD is due for 2020.
The Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act) changed the age for which an RMD is first required from age 70½ to 72. Under prior law, financial institutions would have needed to notify IRA owners who attained age 70½ in 2020 about their 2020 RMDs by January 31, 2020.
The IRS encourages all financial institutions, in communicating these RMD changes, to remind IRA owners who reached age 70½ in 2019, and have not yet taken their 2019 RMDs, that they are still required to take those distributions by April 1, 2020.
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COMMON IRS WHERE’S MY REFUND QUESTIONS AND ERRORS
What Does Tax Topic 151 Mean?
What Does Tax Topic 152 Mean?
Why Does It Give Me A Direct Deposit Date, And Then Say Call If Not Received By Another Date?
I Called And Verified My ID - Did I Have An Identity Theft Issue?
Are You Sure I Had To Verify My ID?
But The IRS Told Me To Wait 6 or 9 Weeks? Is That True?
What Does Return Received vs. Refund Approved Mean?
I Lost All My Bars, Or I Have No Bars
I'm Getting An Error Code 9001
I'm Getting An Error Code, What Does It Mean?
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IRS YouTube video
Easy to use
Split refunds
E-file plus direct deposit yields fastest refunds
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Customer service
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Aging technology
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Staffing
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Refund delays
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Free File frustrations
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Untrained preparers
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Appeals process
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Few multilingual notices
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Confusing audit letters
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Settling tax debts
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A globally coordinated day of action to put a stop to the suspected facilitation of offshore tax evasion has been undertaken this week across the United Kingdom (UK), United States (US), Canada, Australia and the Netherlands.
The action occurred as part of a series of investigations in multiple countries into an international financial institution located in Central America, whose products and services are believed to be facilitating money laundering and tax evasion for customers across the globe.
It is believed that through this institution a number of clients may be using a sophisticated system to conceal and transfer wealth anonymously to evade their tax obligations and launder the proceeds of crime.
The coordinated day of action involved evidence, intelligence and information collection activities such as search warrants, interviews and subpoenas. Significant information was obtained as a result and investigations are ongoing. It is expected that further criminal, civil and regulatory action will arise from these actions in each country.
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IR-2020-17, January 22, 2020
WASHINGTON — With the start of the 2020 tax filing season near, the Internal Revenue Service is reminding taxpayers to avoid unethical "ghost" tax return preparers.
According to the IRS, a ghost preparer does not sign a tax return they prepare. Unscrupulous ghost preparers will print the return and tell the taxpayer to sign and mail it to the IRS. For e-filed returns, the ghost will prepare but refuse to digitally sign as the paid preparer.
By law, anyone who is paid to prepare or assists in preparing federal tax returns must have a valid Preparer Tax Identification Number, or PTIN. Paid preparers must sign and include their PTIN on the return. Not signing a return is a red flag that the paid preparer may be looking to make a fast buck by promising a big refund or charging fees based on the size of the refund.
Ghost tax return preparers may also:
- Require payment in cash only and not provide a receipt.
- Invent income to qualify their clients for tax credits.
- Claim fake deductions to boost the size of the refund.
- Direct refunds into their bank account, not the taxpayer's account.
The IRS urges taxpayers to choose a tax return preparer wisely. The Choosing a Tax Professional page on IRS.gov has information about tax preparer credentials and qualifications. The IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications can help identify many preparers by type of credential or qualification.
Free basic income tax return preparation with e-file is available to qualified individuals from IRS-certified volunteers at Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) sites across the country. For more information and to find the closest visit Free Tax Return Preparation for Qualifying Taxpayers on IRS.gov
No matter who prepares the return, the IRS urges taxpayers to review it carefully and ask questions about anything not clear before signing. Taxpayers should verify both their routing and bank account number on the completed tax return for any direct deposit refund. And taxpayers should watch out for ghost preparers inserting their bank account information onto the returns.
Taxpayers can report preparer misconduct to the IRS using IRS Form 14157, Complaint: Tax Return Preparer (PDF). If a taxpayer suspects a tax preparer filed or changed their tax return without their consent, they should file Form 14157-A, Tax Return Preparer Fraud or Misconduct Affidavit (PDF).
Page Last Reviewed or Updated: 22-Jan-2020
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What is Gig Work? Gig work is certain activity you do to earn income, often through an app or website (digital platform), like:
- Drive a car for booked rides or deliveries
- Rent out property or part of it
- Run errands or complete tasks
- Sell goods online
- Rent equipment
- Provide creative or professional services
- Provide other temporary, on-demand or freelance work
Note: This list does not include all types of gig work.
What are Digital Platforms? Digital platforms are businesses that match workers' services or goods with customers via apps or websites. This includes businesses that provide access to:
- Ridesharing services
- Delivery services
- Crafts and handmade item marketplaces
- On-demand labor and repair services
- Property and space rentals
Note: This list does not include all types of digital platforms.
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Here's how Free File works:
- Go to IRS.gov/freefile to see all Free File options.
- Military personnel who meet the income requirement can select from any of the nine providers that have "Free for Active Military for Adjusted Gross Income of $69,000 or less" in their offer. Nine of the 10 partners are making the offer. One product is in Spanish.
- Select a provider and follow the links to their web page to begin your tax return.
- Complete and e-file your tax return only if you have all the income and deduction records you need. The fastest way to get a refund is by filing electronically and selecting direct deposit. If you owe, use direct pay or electronic options.
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Not filing a tax return if you earned more than the standard deduction
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Paying late
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Hiding income from the government
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Taking tax deductions and credits that you shouldn't
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Not taking tax deductions and credits you qualify for
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Getting rid of important tax documents
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Making the wrong decision about itemizing deductions
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Identification & Basic Information
Income Documents
Expense Documents
Health Insurance Information
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Standard Deduction
Personal Exemption
Marginal Rates
Alternative Minimum Tax
Earned Income Credit
Transportation Fringe Benefit
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Review Your W-4
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Revisit Your Filing Status
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Claim the Earned Income Tax Credit
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Include the Child and Dependent Care Credit
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Excess Business Losses.
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Net Operating Losses.
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Meal and Entertainment
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Fines and Penalties Paid to a Government
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Payments Made in Sexual Harassment or Sexual Abuse Cases.
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Business taxpayers should recalculate estimated tax payments.
New or revised deductions for businesses.
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- The Tax Cuts and Jobs Act marked the first overhaul of the tax code in more than three decades.
- Massive changes that went through include a doubling of the standard deduction, the elimination of personal exemptions and a cut to individual income tax rates.
- In 2018, the first year of the overhaul, the IRS issued 111.6 million refunds for 2018 returns filed through Nov. 22, with taxpayers getting an average refund of $2,860.
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What is different?
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Who needs to fill out a new W-4
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What happens if you make mistakes
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No Individual Mandate Penalty
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No Alimony Deduction
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Higher Retirement Account Contribution Limits
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Higher HSA Contribution Limits
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Higher Standard Deductions
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Higher Income Brackets
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Higher Standard Deduction
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Higher 401K contribution rates
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Higher Health Savings Account limits
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Higher Income Limits for Roth IRAs
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the Taxpayer Certainty and Disaster Tax Relief Act (TCDTRA) of 2019....the extenders
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The Volunteer Income Tax Assistance Program (VITA)
Tax Counseling for the Elderly
AARP Tax-Aide
The Armed Forces Tax Council
Low Income Taxpayer Clinics
Taxpayer Assistance Centers
Taxpayer Advocate Service
IRS Free File
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On December 20, 2019, President Trump signed into force two new tax laws, i.e. SECURE Act and TCDTRA, which have significant impact on taxpayers from January 1, 2020.
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