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Archive for the ‘IRS’ Category

IRS Tries To Explain the New July 15 Tax Day Details

Posted by taxguru on March 25, 2020

As is almost always the case with the wonderful tax systems in this country, even the simplest of concepts is more complicated and twisted than necessary.

Moving the 2020 Tax Day for 2019 tax returns to July 15 has already created a lot of confusion among taxpayers and tax practitioners.  To remedy, or add to, the confusion, IRS has already published 24 FAQs related to this new date.

Filing and Payment Deadlines Questions and Answers

The University of Illinois TaxSchool has posted this video explanation of the IRS FAQs.

As the presenter says, these FAQs are fluid and will almost certainly be changed before July 15 comes around and as a result of items in the massive stimulus bill that is working its way through Congress.

One of the craziest answers from IRS is Q16 regarding the due date of the second estimated tax payment for 2020.

A16. No, second quarter 2020 estimated income tax payments are still due on June 15, 2020. First quarter 2020 estimated income tax payments are postponed from April 15 to July 15, 2020.

The second quarterly payment is due a month before the first payment.  Does this make sense to anybody?  In the Bizarro world of Washington DC, it probably does.

Posted in IRS, TaxDay | Comments Off on IRS Tries To Explain the New July 15 Tax Day Details

IRS Filing Deadline Has Not Been Extended

Posted by taxguru on March 18, 2020

As is all too common, there is a lot of misinformation being reported by the media regarding the comments by the Treasury Secretary, Steven Mnuchin.  This has already led to widespread confusion among clients and the public at large.

For the past week, I was fully expecting to be able to write a headline that Tax Day was extended to July 15, which is what was widely speculated by the AICPA and other tax pros.

However, yesterday’s comments by Mnuchin were not as simple as giving everyone an additional 90 days (July 14) to file their 2019 income tax returns, or extensions.  What was actually announced was a 90 day grace period for paying taxes due for 2019, from the normal April 15 deadline to July 14, for up to one million dollars of taxes for individuals.  Tax returns or extensions still need to be submitted to IRS by April 15.

This interest free payment extension doesn’t give the level of stress reduction that was advertised.  Preparing tax returns and extensions is still a hassle that is added to the current extreme pressures from all of the closings, layoffs and cancelations around the country.  Idiotic is the word that comes to mind.

I am hopeful that there will be a great deal of push-back to this ridiculous plan and our rulers in DC do the right thing before April 15 and just set the filing date for 2019  tax returns and extensions as July 15. 

Posted in extensions, IRS, TaxDay | Comments Off on IRS Filing Deadline Has Not Been Extended

Virus Extends Filing Deadlines

Posted by taxguru on March 13, 2020

For the past several days, there has been a lot of speculation that all of the disruption surrounding the nationwide panic over the Wuhan Virus would motivate IRS to officially extend the upcoming filing due dates for 2019 income tax returns; March 16 for 1120S (S-corps) and 1065s (LLC & partnerships) and April 15 for personal (1040), trusts (1041) and Gift Tax (709) returns.  With today’s declaration by the President of a National Emergency, that should be a certainty.  However, no official announcement has yet been made by IRS on their news page.

Normally in situations of large disasters and emergencies, IRS is the first to issue such filing extensions so that affected people can focus on dealing with their more pressing problems.  The State tax agencies then usually follow suit with their own announcements of filing extensions.  Some States, such as California, have a policy of automatically complying with any IRS sanctioned extension of filing deadlines.  In the current situation, the Calif Franchise Tax Board (FTB) has beaten IRS to the punch and has issued its own press release giving a new due date of June 15 for all tax returns that are due March 16 and April 15.  

This is different from a normal extension that taxpayers file, because that kind is only for requesting an extension of time to file the tax returns.  It is not an extension of time for paying the taxes owed.  Penalties and interest are assessed on late payments of taxes, while the normal extension avoids the much more expensive late filing penalties.  This new emergency related extension allows all Calif. taxes for 2019 to be paid up until June 15 without any additional charges for penalties or interest. 

Whether this June 15 date will stick as the due date will obviously depend on how long it takes for the panic in the country to subside and things to get back to normal.  If the virus scare stretches out for months and months. there is a possibility that the June 15 due date will itself be extended.

I intend to add to this post as news comes out, including the anticipated IRS announcement, as well as any by other States.

This is definitely going to be another very strange Tax Season.

[Update 3/14/2020] – Still no official announcement from IRS.  The U.S. Tax Court has announced that it has cancelled all of its March and April trials, which will really back things up for them.

[Updates 3/15/2020] – Still no official announcement from IRS. I’ve seen some mentions that any delay in deadlines requires an act of Congress, which makes no sense.  For the past several years, whenever there has been a presidentially declared disaster or emergency, such as from hurricanes and tornadoes, IRS has been pretty quick to announce official extensions of time to file returns for those in the affected areas, without any congressional action. On March 6, IRS announced an extended filing deadline of July 15 for those in the vicinity of the Nashville Tennessee tornadoes. This current virus panic is the same kind of thing, although on a much larger geographic scale, the entire country.

Some free tax assistance services, such as AARP’s Tax-Aide, have announced they have shut down due to this current health scare.  Seeing as how the affects of this virus are supposed to be much more dangerous for us older folks, that does seem to be a very prudent move.  As I have had to constantly remind clients, whenever it is necessary to prioritize between tax and health matters, health should always be first in line, with or without any official IRS permission.

Posted in Calif, extensions, IRS, TaxDay, TaxSeason | Comments Off on Virus Extends Filing Deadlines

IRS Mileage Rates For 2020

Posted by taxguru on December 31, 2019

A few weeks later than has usually been the case, IRS just today released its standard mileage rates for vehicle usage in 2020.  While these rates won’t be used on actual tax returns until more than a year from now, most businesses use the official IRS rates for charging customers and for reimbursing employees; so this is very relevant information for immediate use.

Beginning on January 1, 2020, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

  • 57.5 cents per mile driven for business use, down one half of a cent from the rate for 2019,
  • 17 cents per mile driven for medical or moving purposes, down three cents from the rate for 2019, and
  • 14 cents per mile driven in service of charitable organizations.

IRS Press Release: IRS issues standard mileage rates for 2020

I long ago gave up on ever understanding why IRS and the tax writers in Congress believe that vehicles cost less to operate when used for charity, medical or moving.  Like many aspects of tax law, we just have to accept it as gospel because our Rulers in DC consider themselves to be so much wiser than we “normal” little people are.

Posted in IRS, Vehicles | Comments Off on IRS Mileage Rates For 2020

IRS Releases 2020 Inflation Adjustments

Posted by taxguru on November 6, 2019

IRS has done its official calculations of the adjustments that will be required for more than 60 tax provisions in the year 2020.

Their Press Release:  IRS provides tax inflation adjustments for tax year 2020

All of the juicy details are in this 28 page PDF of Revenue Procedure 2019-44

A handy one-page version of the changes compared to previous years from TheTaxBook: 2019-11-13_Inflation_Adjusted_Amounts_for_2020

 

Gifting Exclusion

The Number One question I constantly receive regarding these IRS inflation adjustments has to do with the annual exclusion from Gift Tax reporting because many people structure their estate plans based on gifting the maximum each year.  Unlike most of the other inflation adjusted provisions, which do increase every year, the amount of the annual Gift Tax exclusion is only allowed to increase when the cumulative inflation factor warrants an increase of a full $1,000.  This does make a lot of sense.  Otherwise, the exclusion amount would be very odd, not round, figures that would be very confusing to keep track of.  For 2020, there will be no increase in the annual Gift Tax exclusion.  It will remain at $15,000 per donor (giver) per donee (recipient).

Posted in inflation, IRS | Comments Off on IRS Releases 2020 Inflation Adjustments

IRS Increases Standard Mileage Rate For 2019

Posted by taxguru on December 17, 2018

IRS has released its official standard mileage deductions for 2019, and the business rate has been increased by 3.5 cents over the 2018 rate.  This is the largest year to year jump in a very long time. 

While these amounts aren’t going to be used on actual tax returns for more than a year, many businesses use the official IRS rate for billing customers and for reimbursing employees; so this advance notice is useful right now. 

The IRS Announcement: IRS issues standard mileage rates for 2019

Beginning on Jan. 1, 2019, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

  • 58 cents per mile driven for business use, up 3.5 cents from the rate for 2018,
  • 20 cents per mile driven for medical or moving purposes, up 2 cents from the rate for 2018, and
  • 14 cents per mile driven in service of charitable organizations.

Posted in IRS, Vehicles | Comments Off on IRS Increases Standard Mileage Rate For 2019

2019 IRS Inflation Adjustments

Posted by taxguru on November 20, 2018

Even with all of the changes from the TCJA, there are still some items that are adjusted periodically for increases in the cost of living.  IRS has done the calculations for 2019 and released the following press release.

IRS provides tax inflation adjustments for tax year 2019 

The folks at TheTaxBook have summarized the 2019 changes, with comparisons to the 2018 and 2017 amounts.  I posted a copy of it on my Google Drive for easy downloading.

Posted in inflation, IRS | Comments Off on 2019 IRS Inflation Adjustments

IRS Cutting It Close For Hurricane Michael Filing Delay

Posted by taxguru on October 12, 2018

With Hurricane Michael barreling down on us, I was wondering when IRS would announce their official special delayed filing due date for 2017 income tax returns, as had been their customary policy during other large destructive weather events.  I was checking their news page every few hours for the past week.

The hurricane was declared a Federal Disaster by Trump, one of IRS’s main criteria for allowing more time for those affected by a humongous natural catastrophe to get their tax returns in.  I knew they would eventually get around to issuing an official news release regarding this event.  However, considering that the extended 2017 1040s are due in the mail in three days from now, by Monday, October 15, today’s news release was just in time for those of us who were affected by Michael. Now, people can focus on the clean-up tasks rather than stressing to meet the Oct 15 filing deadline.

IRS’s news release from today:
IRS extends Oct. 15 and other upcoming deadlines, provides expanded tax relief for victims of Hurricane Michael

The money quote from this news release:

“individuals who had a valid extension to file their 2017 return due to run out on Oct. 15, 2018, will now have until Feb. 28, 2019, to file.”

Posted in Due Dates, hurricane, IRS | Comments Off on IRS Cutting It Close For Hurricane Michael Filing Delay

IRS QBI Proposed Regs

Posted by taxguru on August 8, 2018

As most people know, the most complicated aspect of the TCJA was the brand new Section 199A deduction for 20% of Qualified Business Income (QBI).  In a perfect example of hasty, sloppy, vague, poorly explained legislation, how this new tax break will work in the real world is a big mystery.  In my 43 years in the tax biz, I can’t recall a more poorly defined bit of tax legislation.

Since the TCJA was signed into law in December, there has been an unending stream of articles, books, webinars and seminars on how we tax pros are supposed to calculate and handle this new QBI deduction.  To say that there are huge discrepancies between how people have been interpreting this new IRC Section 199A is a massive understatement.  Many tax analysts have made the correct assumption that the actual real life application of this new deduction won’t be firmed up for several years, after disputes with IRS over real life tax returns have been adjudicated in court.

The IRS has also been studying this issue and has just today published their first draft of proposed regulations on the QBI deduction.  Contrary to popular belief, what IRS thinks about a certain tax matter doesn’t automatically make it indisputable gospel.  It is just their opinion and taxpayers and their advisors are free to exercise their own differing opinions if there is some valid logic behind them.  With a law as vaguely written as TCJA, there are gigantic opportunities for a slew of different interpretations that will make just as much logical sense as what the IRS has come up with and will in the future.   

IRS Press Release: IRS issues proposed regulations on new 20 percent deduction for passthrough businesses

The proposed regulations184 page PDF

IRS FAQ Page on Section 199A

Tony Nitti’s review of the proposed regs in Forbes

Kiplinger’s 3-Page FAQs from 7/12/2018 (before the release of IRS proposed regs)

Review of proposed regs from TaxSpeaker (nee Jennings Seminars)

Posted in IRS, NewTaxLaws, QBI | Comments Off on IRS QBI Proposed Regs

Interest Rates Rising

Posted by taxguru on March 8, 2018

Another sign of a growing economy is the rising interest rates being paid on bank accounts and charged by creditors.  One of those creditors charging higher interest rates are our friends at the IRS, who are required by law to adjust how much interest they charge and pay each calendar quarter. 

As per their latest press release, the IRS interest rate will be going up to Five Percent (5.0%) as of April 1, 2018 from the Four Percent (4.0%) rate that has been in effect since April 1, 2016.  It will stay at that rate of Five Percent at least through June 30, 2018.

As you can see on this useful pdf chart of IRS interest rates since 1991, the last time they charged as much as five percent was in the first quarter of 2009. It’s been either three or four percent ever since then.

Just a reminder that the IRS interest rate is an Annual Percentage Rate (APR).  Many people have the incorrect impression that it is a daily interest rate because it is compounded on a daily basis.  As shown on this interest rate calculator, a debt with a 5.0% APR has an effective interest rate of 5.13% when the interest is compounded on a daily basis.

Even at five percent, IRS is a much more reasonably priced lender than many other sources, such as credit cards, which often charge over 30% APR.  If you owe money to IRS, it will save you a ton of interest by working out an installment payment plan with them rather than committing yourself to the usurious rates of the blood sucking credit card loan sharks.

Another reminder – This discussion has dealt with IRS interest rates on Federal tax debts.  Each State tax agency has its own procedures for adjusting, or not adjusting, what they charge as interest on their overdue taxes.  Some modify the interest rate annually, while some never change their percentage.  Arkansas is an example of the latter.  They have been charging ten percent (10.0%) for as long as I can recall.

Posted in interest, IRS | Comments Off on Interest Rates Rising