TaxMamas TaxQuips

It’s TaxQuips time from TaxMama.com^® .
Today TaxMama® wants to talk to you about the very last filing deadline for calendar year taxpayers filing 2021 tax returns.

 

Dear Family,

The time has come, the Walrus said, to speak of many things.
Of needless delays, sad tales and ignoring all the nagging pings.

(apologies to Charles Lutwidge Dodgson)

The good news is, you have a couple of extra days to finish filing all your 2021 final returns  - until Monday, October 17, 2022, instead of October 15^th.

That includes personal tax returns and calendar-year C corporations returns (among certain others).

The better news (depending on your perspective) for filing deadlines – is the additional time, until February 15, 2023, available to people who were affected by the various, hurricanes, storms and disasters including Alaska, the entire East Cost, and even Puerto Rico. (Yup they file US returns, too.)
https://www.irs.gov/newsroom/tax-relief-in-disaster-situations#collapseCollapsible1665513380562

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The bad news

And this is really, really bad. Tax professionals are reporting actual threats and hostile actions from their last minute procrastinating clients. This isn’t just something to brush aside. Tax professionals have actually been shot by angry clients – and the industry is responding.

Many tax professionals have now come to the conclusion that they will be firing uncooperative clients. Some will be fired now – even with just a few days left to go. Others will be given solid deadlines to meet next year – and if not met, those clients will be shown the door. Still other clients who have been bullying and rude will be rejected forevermore.

In fact, to avoid problems, I have always had a policy in place – if you’re rude to my staff, you are never welcome to return. Period. Other firms are now adopting this policy, as well.

The biggest issue – taxpayer procrastination. Before April 15^th, tax pros review all the information and look at the data from last year to determine if you will need to make a 2021 payment when they file the extension for you. Around that time, or soon afterwards, they give you a list of “To-Dos” – documents to get in order to complete your tax return.

Then what happens?

The cooperative clients get the materials and give everything to the tax pros – and their tax returns get done quickly.

The procrastinators? The firm has to waste time calling, emailing or mailing requests to them repeatedly. And finally, the (often) very charming client shows up about a week before the final filing deadline all proud, with most, but not all, of the requested documents, expecting you to finish their returns immediately. And when rebuffed in favor of clients who got their materials in before they did – they are suddenly not so charming anymore.

So, for now?  What should you do if your tax return is not done yet?

• If you’re working with a tax professional, get them EVERYTHING they will need in order to complete your tax return by Friday. Leave nothing out.
  
  • If you are still missing some information – either get off your keister and get the records or WRITE the estimated amounts to be used for this year’s tax return. Don’t expect your tax pro to do the digging this weekend. There just isn’t time.
  
  
  
  
• If you have been turned away by your tax pro at this late date, don’t fight them.
  They will return any ORIGINAL documents you gave them. If you gave them only copies or scans of documents, then you should have them. It’s not their responsibility to dig up those records for you.
  
  • Log into your favorite online tax prep software and start entering all the data TODAY. You can finish it up over the weekend – after you have done your own work to dig up the missing information.
  
  

Honestly, these days, practically everything is online. You can log into your various accounts and download year-end statements for mortgages and other loans, credit cards, investment accounts – perhaps even medical expenses.

You don’t have time and just have to estimate amounts? Fine. Do that. But explain how you arrived at those estimates by including a statement with your tax return. And explain that you will file an amended return once you get the actual amounts.

Yes, even if you’re wrong (try not to be too wrong, to avoid penalties), you have 3 years to file an amended return.

But, whatever you do – FILE T TAX RETURN. Not filing, you’re immediately subject to a  late filing penalty of 5% per month. Does that start in April when the tax return was originally due?
Or does it start in October if you filed an extension? I don’t actually know for sure; but think it will start in April – so you’ve instantly incurred a 25% penalty. OUCH!

Sorry to make this such a negative post. But the IRS now requires tax professionals to apply a much higher level of due diligence and verification than ever before. In addition, we have several new tax law changes that took effect this year. And so many of the advance funds or corrected refunds that the IRS issued – that it’s taking longer than ever to prepare tax returns – even for the ideal clients. The IRS has issued so many erroneous collections notices (because payments were not posted) – that we have a lot of other time demands to prevent these collections actions.

People are working longer hours, often through the night. Tempers are flaring – both among clients and tax pros. Expect the industry to change next year. If you want to work with your tax professional next year – treat them with respect and respond timely to all information requests.

For now – don’t call your tax pro about “where is my return?”
When it’s ready, THEY will reach out to you.

And remember, you can find answers to all kinds of questions about taxes and business issues, and EA Education, free. Where? Where else? At http://iTaxMama.com/AskQuestion

To make comments, please drop into the TaxQuips Forum.

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It’s TaxQuips time from TaxMama.com^® .
Today TaxMama® wants to talk to you about some imminent deadlines – and about the IRS dropping by your place of business.

 

 

 

Dear Family,

This year has flown by so quickly. I blinked and now it’s almost autumn.

First, the upcoming deadline – September 15^th is the final filing deadline for calendar year (December 31^st) partnerships and S corporations.

Let me be clear. There are no  more extensions. So if you haven’t gotten all your information together yet – do it NOW. Even if something is missing or incomplete – work out reasonable estimates for the missing information. Include a disclosure statement with your tax return to explain which amounts are estimated, why, and how you arrived at your estimate.

BUT FILE THAT RETURN ON TIME – REGARDLESS!!!!
Not filing generates instant late filing penalties – several actually – because there are penalties for not filing the forms 1065 and 1120S, and separate penalties for not filing the Schedules K-1. This can run into the thousands of dollars.  

Great news: One interesting last-minute tip. Since your 2021 business and personal returns are on extension, you still have time to reduce your 2021 taxes if you open and fund a retirement plan by September 15^th (for partnerships and S corporation) and October 15^th (for Schedule Cs and C corporations).

Join me for a free webinar on Monday September 12^th at 3:00 pm Pacific
to learn how to open and use a Solo401k before your filing deadlines.
https://iTaxMama.com/Special-Webinar-Solo-401k

Sad news: Incidentally, if you are  working with a tax professional and haven’t given them your information yet – but they have been requesting documents for months…don’t expect them to finish your tax return by the deadline. And, potentially, expect to be fired. There’s a lot of talk in the industry among tax practitioners who are exhausted and resent having to baby-sit procrastinating clients.

Moving on to more cheerful matters – the IRS is coming. The IRS is coming!

Yup. Even before Congress passed the Inflation Bill providing additional funding to the IRS for new hires and operations – the IRS has upped their field operations.
https://www.irs.gov/newsroom/understanding-how-the-irs-contacts-taxpayers-avoiding-scams-and-how-to-know-its-really-the-irs-reaching-out

Revenue Officers (collections) have started to go out into the field. They have three purposes:

• Naturally, to collect past due taxes – especially where the taxpayer has been unresponsive. In which case, the visit might be unannounced.
• A regular, scheduled visit to structure a payment plan to settle their business or payroll tax debt.
• To educate employers who are starting to fall behind on their payroll tax deposits – before they get too far behind.

Revenue Agents (auditors) are also heading out into the field – to conduct audits.

In most cases, there will be mailed correspondence before they show up. If you didn’t get any correspondence, it could be one of these reasons:

• You moved and didn’t file a change of address with the IRS.
• You haven’t had the courage to open your IRS mail and you’re waiting to show it to your tax professional.
• It could be someone from the IRS Criminal Investigation division
  But if you’ve never done anything shady, I wouldn’t worry about that.
• The visitor is not really from the IRS.

 

It’s the unannounced (or unexpected) visits that I want to talk to you about – to help you verify if they are really from the IRS. There are a lot of scam artists out there – and they are worse than the IRS.

So let’s start with what a real IRS agent will have:

• They have “pocket commission” – their official card and badge.
  
  • Problem: Do you know what a REAL “pocket commission” looks like?
    I don’t. And neither did most of the tax professionals in our Stakeholder Liaison discussion group dealing with IRS Systemic Issues.
  
  
  
  
• They have an HSPD12 card – that describes the agent’s height, appearance, etc.
  
  • Problem: Again, easy to create a phony document with the scammer’s description, since most people don’t really know what that card looks like.
  • Yes – it has an IRS contact number you can call to verify them. But if they are con artists, the phone number on their card will go to a friend or colleague.
  
  
  
  

With the potential to create fake ID’s how can you be SURE the person at your door really is from the IRS?

A real IRS agent will generally have information taken directly from your personal, business and or payroll tax return that you have recently filed.
No one else should have that.

There are some more specifics here
https://www.irs.gov/newsroom/how-to-know-if-its-really-the-irs-calling-or-knocking-on-your-door

If you are still uncomfortable (or start out that way), here are your options when the IRS shows up unannounced – we were assured by the IRS managers at the Stakeholder Liaison meeting that this is acceptable:

• For taxpayers – Ask them for their business card. Then, politely refuse to let them in until they first contact your tax professional – and provide your tax pro’s contact information.
  
  • Call your tax pro immediately and sign a power of attorney so they can handle the contacts.
  • Or if you want to handle it yourself, arrange to schedule a meeting at an IRS office facility. You can verify all IRS campus addresses online.
  
  
  
  
• For tax professionals – Ask them for their business card.
  
  • Reschedule the appointment either at an IRS campus – or later, after you have had time to verify their identity objectively.
  • Verify their identity. Verify that such a person really works for the IRS and ask for a description. Do this by contacting one of these IRS groups:
    
    • The Practitioner Priority Service – if you can get through on their phone lines these days
    • Your local stakeholder liaison office (you can call or fax to them).
    
    
    
    
  
  
  
  

We have been assured that, when handled politely, the IRS agent will be gracious about this delay on their visit.

But remember, if you did get advance notice and you don’t want to be facing that person alone – contact your tax practitioner immediately. That would be an Enrolled Agent, a CPA or an attorney.

The IRS does have a verification phone number – on the real HSPD12 cards. But they don’t want to make it public, for security reasons.

And remember, you can find answers to all kinds of questions about taxes and business issues, and EA Education, free. Where? Where else? At http://iTaxMama.com/AskQuestion

To make comments, please drop into the TaxQuips Forum.

 

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It’s TaxQuips time from TaxMama.com^® .
Today TaxMama® wants talk to give you some basics about the new Inflation Reduction Act. And some observations.

 

Dear Family,

By now, you are aware that President Biden has signed the Inflation Reduction Act into law. Although there are 273 pages to this Bill, only a few issues may affect you directly. I will give you more details about this Bill in the next couple of weeks. Meanwhile, here are the highlights:

• Extending the Premium Tax Credits (buying insurance through the Marketplace and having the government pay part of your premiums) for another 3 years
• Increased tax credits for alternative fuel vehicles
• Increased tax credits for more energy efficient homes and commercial properties
• For those small businesses involved in qualified research activities, the research credit has doubled, and can be used to reduce payroll taxes.

The Bill also adds a corporate Alternative Minimum Tax of 15%. But that only applies to corporations with a BILLION DOLLARS of book income, or more.

more->
Please excuse this editorial comment about all the screaming I have heard about how this tax will be passed on to consumers in higher prices:

A corporation with a BILLION DOLLARS of profits, that has to pay out $150 million dollars, still gets to keep $850 MILLION dollars of profits. Isn’t that enough? Why do they need to pass on the cost of the additional taxes to consumers?

Are you worried about the $80 billion going to the IRS and the 87,000 new IRS agents being hired?

Please don’t. Let’s face it, right now, it’s practically impossible to reach someone at the IRS on the phone. The fact is, the IRS provided only a 19.5% level of service, according to TIGTA (the agency that audits the IRS). Paper mail and tax filings of any kind are delayed for months because the IRS doesn’t have the staff to process all that input.

And did you see this Washington Post article (with pictures) about just how handicapped the IRS paper processing is? So, a lot of the new hires will be for areas like this – they won’t be field operatives. Many will be providing customer service and answering phones calls. This is for our benefit.

Sure, there will be more audits coming up. But the IRS cannot afford to initiate audits that don’t generate revenue. They just don’t have the staff. So expect the audits to focus on taxpayers that are likely to have under-reported their income, or inflated expenses or the basis for their sales. They simply don’t have the staff.

Unfortunately, the IRS must still some statistical audits as part of their National Research Program. I say unfortunately because those are line-by-line audits of people who were randomly selected. There is no way out of this one. (Although the Taxpayer Advocate did once suggest that some of these people get paid for this hardship.)

And the fact is, even if they agree to hire 1,000 people each day – it will take about 6 months for the federal background check by the Office of Personnel Management (OPM); then several more months for training. New hires are not likely to be effective this year.

But even before those hires, using current staff, the IRS is going back out into the field to collect unpaid taxes from business that are behind on payroll and business taxes. And Revenue Agents (field auditors) are heading out to hold examinations at the taxpayers’ places of business. Ideally, they will have notified the taxpayer or the representative of the impending visit. If they have not, and you are not absolutely certain that the person at your door IS from the IRS, you have the right to ask that the meeting be moved to an IRS office, so you can make sure they are not scammers. (More about this in next week’s post)

Incidentally, there are no new taxes on taxpayers – not even those earning $400,000 or more. Even so, with the marriage penalties in the current law, some couples might want to think about getting a divorce for tax reasons. Read this article in Think Outside the Tax Box. (Only partially tongue-in-cheek.)

And remember, you can find answers to all kinds of questions about taxes and business issues, and EA Education, free. Where? Where else? At http://iTaxMama.com/AskQuestion

To make comments, please drop into the TaxQuips Forum.

 

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It’s TaxQuips time from TaxMama.com^® .
Today TaxMama® wants talk to you about a big flaw in the current tax laws.

 

 

 

Dear Family,

It’s summer! Can you believe the year is going by so quickly?

The past month has been a whirlwind with teaching, taking classes and even going to a live, in-person CSTC Tax Symposium in Reno. It’s the first time since early 2000 that I have had the opportunity to meet friends, peers, students and TaxMama® fans. We met, learned, hugged, ate a LOT – and didn’t get the least bit sick. (Well, OK…a little sunburnt…but that passes.)

I also got started on a new crusade – to fix the tax law neglect when it comes to the Romance Scams – and the 14 other scams listed on the FBI’s site.

The problem? The Tax Cuts and Jobs Act (Trump Tax Act) completely eliminated taxpayers’ rights to deduct casualty and theft losses – unless they were in Presidentially-declared disaster areas.

As soon as I saw that in the law, it was clear this was going to be a problem for all the people who face routine disasters – like a fire burning down their home because of a smoldering cigarette; burst plumbing flooding the house (especially folks who are gone from home in the winter); people getting their assets stolen in scams that do not meet the limited definition of a Ponzi scheme; vandalism or theft from local thugs (or tenants)…and the list goes on.

Well, now it hits home. A client got scammed for over $400,000. There may actually be a round-about way to claim the deduction – but it’s almost guaranteed to be audited. So I would much rather find a way to change the law itself.

I am totally open to your help if you have contacts to bring this about.
It will affect the millions of people who have been victimized in the 15 scams on the FBI list – and possibly others, depending on how broadly we can change (or re-interpret)  the Tax Code or Regulations.  Perhaps you, or your family or friends – or clients have been affected, already. (Romance Scam victims have lost over $1 BILLION dollars in in 2021.)

Here’s what I was thinking – it’s really hard to get Congress to act jointly on practically anything these days. So I wanted to find a work-around.

But here is a possibility – the Seniors Fraud Prevention Act is a bi-partisan bill from Senators Susan Collins® and Amy Klobuchar (D) that recently passed by both houses! However, it’s limited to education and monitoring – and doesn’t go far enough to get those seniors the casualty loss deduction. If you have a way to reach either of these legislators, please help me ask them to add this to their bill – or add it to an upcoming bill.

Knowing this can take years, I have started the process to reach out to the IRS and the Taxpayers Advocate Service (TAS) to start exploring solutions – and to see if anyone can take this issue to the Secretary of Treasury, or someone close to President Biden or Vice President, Kamala Harris. Why, an easy solution would be to have the President declare these scams as Presidentially-Declared casualties. Then we don’t have to change the law itself. (There is precedent for a non-geographic declaration – COVID19.)

If I can get something started and know that there is movement, either with respect to legislation, or a potential  Presidential declaration, then everyone who has been affected could file a “Protective Claim” to request a refund once the law or procedure change has been confirmed. What does that mean? It means that you won’t lose the right to deduct the losses and get a tax refund three years after the tax return was filed. When a “Protective Claim”  is filed within those three years, it makes it possible to get that refund, even if it takes 10 years or more for the legislation to change. But to file that “Protective Claim,” we need to be able to point to some tangible activity that will ultimately make these deductions kosher.

This is probably a crazy idea. But the people I have spoken to at the IRS, TAS and even Kelly Phillips Erb at Bloomberg, think there may be something to this.

So if you can help – please do. If you, or someone you know, has been affected, I would love to hear from you. Especially if they are willing to be profiled in the press. Use this email address so we can track your responses – romancescamtax@gmail.com

That’s it for now.

And remember, you can find answers to all kinds of questions about taxes and business issues, and EA Education, free. Where? Where else? At http://iTaxMama.com/AskQuestion

To make comments please drop into the TaxQuips Forum.

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It’s TaxQuips time from TaxMama.com® .
Today TaxMama® wants talk to you about an eclectic set of tidbits about IRS changes and news.

 

 

 

 

Dear Family,

Recently, the IRS started releasing updated Frequently Asked Questions (FAQs) about different topics. They didn’t actually add new information or change any procedures. But did add more clarifications (look for the updated date next to the FAQ):

The most important information for people still waiting for their 2020 and 2021 tax returns to be processed can be found in this FAQ. It tells you that your delay could be even longer than you could ever have imagined; to do nothing – just wait…and several other helpful tips.

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Are you missing stimulus/recovery payments? Are you convinced you never received them, even though the IRS transcripts say you did?

• Use Form 3911 to track the payment.
  
  • Save time and fax this request to the IRS to 855-332-3068
  • Call 800-919-9835 to follow up
  
  
  
  
• But first! Look through all your bank accounts to be sure the payments are not there.
• And here’s a delightful twist to make you crazy. Did you pay for your tax software or tax preparation fee by having it deducted from your refund?
  Your stimulus payments may have gone to bank that handled the fee payment to TurboTax, H&RBlock, etc., or to your tax pro. Oh no! That’s another place to inquire before filing your Form 3911.

Here are some other useful FAQs

• IRS revises FAQs for Tax Year 2021 Earned Income Tax Credit
• IRS revises 2021 Child Tax Credit and Advance Child Tax Credit frequently asked questions

What’s frustrating is that they don’t put the newest answers on top; or, on a page with 20 or more FAQs, it would be helpful to get a summary of which FAQs had changed. With links to those changed FAQs. (Remind me to suggest that to the IMRS team. They are the ones who convinced the IRS to show the dates of the changes.)

The IRS is raising interest rates on balances due. They have been pretty stable, at 3% until earlier in April of this year. With this 3^rd quarter increase, the IRS will have raised the interest rate by 2% for the second 2 quarters.

This is good news for people with refunds that are delayed. But not for people owe money to the IRS.

 

The IRS released their audit statistics for tax year 2019. As you can see, these audits are still in process. Look for your income bracket to see how likely you are to be selected. Audit rates have doubled for those in the $75,000 – $5 million range. Yet, they still remain well under 1% of the population.

Audits of those folks with incomes over $10 million have increased fourfold.(Believe it or not, the IRS has another set of statistics that shows the results of all these audits.)

 

 

Natural disasters are increasing. As we get ever more storms, floods, fires, hurricanes, tornadoes and other plagues, the IRS provides some tips to help you protect your financial data. These are things you can do now – before the next disaster hits your home.

Something no one seems to remind you about – your irreplaceable family documents, photographs, films – the memories and love that cannot be recreated if lost, stolen or damaged. Protect those! Load them someplace safe in the Cloud – perhaps copied into one or more different systems in case one of them gets hit with their own disaster. It’s inexpensive to be redundant about your most precious family treasures.

That’s it for now.  There are many, many  more questions in the TaxMama® Forum. Drop by and read – or ask your own.   http://iTaxMama.com/AskQuestion

And remember, you can find answers to all kinds of questions about taxes and business issues, and EA Education, free. Where? Where else? At http://iTaxMama.com/AskQuestion

To make comments please drop into the TaxQuips Forum.

 

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