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Archive for the ‘IRS’ Category

2022 IRS Inflation Adjustments

Posted by taxguru on November 10, 2021

IRS has officially calculated the various increases for 2022 that are required to be adjusted annually.

IRS News Release with some of the “most popular” changes

Revenue Procedure 2021-45 with all of the details (29 Page PDF)

Not mentioned in either of the above referenced documents is the fact that there should be a huge asterisk with the disclaimer that all of these figures are subject to changes at the whim of the rulers currently in power.  With all of the threats to retroactively increase all tax rates coming from DC, we can only hope that the IRS assumptions of 2022 rates will actually survive.

One noteworthy change for 2022 is the annual Gift Tax exclusion, which can only be increased in $1,000 increments after multiple years of inflation.  For 2022, it will be raised from the current $15,000 per donor (giver) per donee (recipient) to $16,000.  Many people design their long-term gifting strategies based on these annual exclusion amounts.

[Update 11-30-2021]: The good folks at TheTaxBook have produced this handy one page summary of the most popular inflation adjustment amounts for 2020, 2021 and 2022.

Posted in inflation, IRS | Comments Off on 2022 IRS Inflation Adjustments

IRS Spying Negotiations Continue

Posted by taxguru on October 19, 2021

Mallard.Fillmore.Perpetual.IRS.Audit(10-15-2021)

When the Dims proposed allowing IRS to spy on everyone’s bank account that has at least $600 in it, I had a sneaking suspicion that using such an insanely low threshold so as to encompass everybody was a negotiating tactic. It would eventually lead to people feeling a sense of relief when the break-point for IRS spying was raised to a higher level.

As this news story shows, the second phase of this “negotiation” with the public has been announced by the Dims, raising  the “spying is acceptable” threshold to $10,000. This actually isn’t as big a compromise as it may seem at first blush. It doesn’t mean balances of $10,000 or more, which would exempt a lot of accounts.  It is $10,000 or more total deposits and withdrawals during a year.  That works out to a little more than $192 per week.  That would put a lot more accounts into the IRS crosshairs.

IRS.Spies.On.Banks(10-26-2021)

Their ultimate goal is to make everyone comfortable with the concept of IRS examining every aspect of all of our finances. Once the spying mechanism is accepted as a valid government procedure, even if it begins at $10,000, it will then be an easy step for that number to be lowered.  The camel’s nose under the tent cliché fits here.

This process reminds me of the old joke about negotiating a price for sex.

Current Treasury Secretary Janet Yellen and other wacko Dims can’t stop screaming about the fact that every single person in this country is a dastardly tax cheat and the only way to close the wildly exaggerated Tax Gap is to give IRS even more powers to ignore the Constitution and do whatever it takes to squeeze more money out of everybody.  Dims have never been shy about their guiding philosophy of the ends justifying the means approach to accomplishing their goals, even if those are flagrantly unconstitutional.

Lisa Benson cartoon

Posted in IRS | Comments Off on IRS Spying Negotiations Continue

More IRS Spying–What Could Go Wrong With That?

Posted by taxguru on October 8, 2021

There has been plenty of news coverage over the Dims’ plans to increase the IRS’s powers to spy on every aspect of everyone’s finances.  While text and audio can explain the pitfalls of such an insane and unconstitutional  scheme, nothing can convey the upcoming horror better than an illustration like this one from Ben Garrison of GrrrGraphics.

    Ben.Garrison-IRS.MOnster(10-8-2021)

Posted in Big Brother, IRS, spying | Comments Off on More IRS Spying–What Could Go Wrong With That?

Tax Day is Now May 17 For Individuals

Posted by taxguru on March 17, 2021

After a lot of teasing us with “will they or won’t they,” IRS has decided to give most of the country until Monday, May 17 to file 2020 tax returns or extensions.

Tax Day for individuals extended to May 17: Treasury, IRS extend filing and payment deadline

While we should all appreciate any extension of the filing deadline, just moving it back by one month seems a bit half-assed.  While most people were expecting another July 15 Tax Day, I was betting on June 15, which would have brought everyone else in sync with Texas, Louisiana and Oklahoma,

Of course, there is a possibility that one month from now, IRS may move Tax Day out by another month or two, adding even more confusion to the process of preparing and filing tax returns.

It’s another crazy Tax Season.

Update 3/19/21:  There are a lot of critics, such as the AICPA, of this limited filing delay because it doesn’t cover businesses, which have a lot of new confusing issues to deal with from the pandemic, and the fact that IRS supposedly still wants people to send in their first estimated (ES) tax payment for 2021 by April 15.  Again, this is very much like the confusion we went through at this time last year, when for a while, IRS was requiring the second ES payment for 2020 to be made by June 15, while the first wasn’t due until July 15.  IRS is a master at complicating what should be a simple across the board delay for everyone.    

Posted in IRS, TaxDay | Comments Off on Tax Day is Now May 17 For Individuals

Delayed Tax Day for Three States

Posted by taxguru on March 12, 2021

While we are all waiting for IRS to announce a nation-wide extension of the filing deadline for 2020 tax returns, they have officially given a two month delay – until June 15 – to three States which had some nasty weather recently.

Victims of Texas winter storms get deadline extensions and other tax relief

IRS announces tax relief for Oklahoma severe winter storm victims

IRS announces tax relief for Louisiana severe winter storm victims

 

The insane two trillion dollar “stimulus” bill that was signed into law yesterday has some tax related items that will require modifications to the IRS’s computers, as well as to the software we practitioners use.  Trying to get all of that up to speed with an April 15 filing deadline will just make an already crazy Tax Season even more so.

While everyone will still have the option to file for their own extensions, until October 15, there is a big difference between that approach and IRS delaying the initial filing deadline.  If IRS doesn’t give us all extra time, we will have to do some tax calculations and submit payments for any expected taxes due by April 15. 

If IRS gives us the extra time like we had last year, those payments won’t be due until the new Tax Day, which will hopefully be July 15 for everyone.  It would also delay the deadline for some other tax return related events, such as when money could be deposited into an IRA account and be deducted on the 2020 returns.

Posted in IRS, TaxDay | Comments Off on Delayed Tax Day for Three States

Another Uncertain Tax Season

Posted by taxguru on March 10, 2021

It’s impossible not to have déjà vu feelings related to last year, when at this same point in time, there was a confusing “will they or won’t they” tension in the country in regard to IRS extending the official filing deadlines for 2019 tax returns.  We are currently in the midst of exactly that same debate for 2020 returns, with calls for July 15 to be Tax Day again this year.

Of course until IRS makes its official declaration of a later tax filing deadline, we have to operate as if the normal due dates of March 15 and April 15 are still our targets.

Very interesting analysis of the current status of how behind IRS currently is in this article from Accounting Today:

Momentum builds for delaying tax deadline

Posted in IRS, TaxDay | Comments Off on Another Uncertain Tax Season

IRS Mileage Rates For 2021

Posted by taxguru on December 23, 2020

With plenty of time for employers to adjust their employee reimbursement rates for next year’s business trips, IRS has published what the standard mileage deductions will be for 2021 tax returns.

Beginning on January 1, 2021, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

    56 cents per mile driven for business use, down 1.5 cents from the rate for 2020,
    16 cents per mile driven for medical, or moving purposes for qualified active duty members of the Armed Forces, down 1 cent from the rate for 2020, and
    14 cents per mile driven in service of charitable organizations, the rate is set by statute and remains unchanged from 2020.

 

My normal comments on this subject still apply.

It’s a good idea to keep track of actual vehicle expenses during the year, because there are plenty of times when they will exceed the IRS’s calculation of average operating costs.

I have yet to hear an explanation from the wizards in Congress who write our tax laws as to why they believe that it costs so much less to operate a vehicle when it is being driven on non-business trips, such as for charity, medical or moving.  Just another oxymoron, Congressional Logic.

Posted in Deductions, IRS, Vehicles | Comments Off on IRS Mileage Rates For 2021

The PPP Loan Forgiveness Enigma

Posted by taxguru on December 3, 2020

Normally, during this last month of the year, we tax pros are working with our calendar year clients to get a handle on what their income taxes will look like so they can take any necessary steps to bring their numbers into sync with their goals by December 31. 

This year, there is a new twist to the calculations we are doing: SBA and lender forgiveness of PPP loans; both those waived by 12/31/20, as well as those expected to be canceled next year.

There is no uncertainty regarding the fact that the amount of the forgiven loans will not be considered to be taxable Cancellation of Debt income.  However, there is still a lot of confusion and difference of opinion regarding whether the expenses that had been paid from those loan proceeds can be deducted on the 2020 tax returns.  It’s even trickier in relation to expenses paid during 2020, with an expected forgiveness in the future, as compared to situations where the loan has been cancelled as of 12/31/20. There are disagreements on how we should handle this.

Since the actual tax returns aren’t due until April 15, 2021 for most businesses, there is still plenty of time for there to be an official resolution to this dilemma.  However, for year-end tax planning purposes, we don’t have the luxury of those four extra months.  Decisions need to be made now.  If our rulers don’t nail this issue down until next February or March, it will be too late for business managers to take the steps they needed to have done by December 31.

The AICPA has some good summaries of the situation:

From the Journal of Accountancy: IRS doubles down on nondeductibility of PPP-funded expenses

 

From The Tax Advisor: Expenses used for PPP loan forgiveness: Deductible or not?

From an AICPA press release that I received today (12/3/2020):

The AICPA and a coalition of more than 560 organizations representing millions of employers and American workers sent Congressional leaders a letter urging passage of legislation making it clear that expenses related to a forgiven Paycheck Protection Program (PPP) loan are tax deductible. The letter states that without legislation, there is “…the specter or a surprise tax increase of up to 37 percent on small businesses when they file their taxes for 2020.”

The actual letter that was sent to our rulers in DC comprises just the first two pages of this PDF document.  The remaining 17 pages list the various organizations “signing” the letter.  How successful this request will be in motivating an official resolution of this question is impossible to predict.

Posted in Deductions, IRS, PPP | Comments Off on The PPP Loan Forgiveness Enigma

IRS Releases 2021 Inflation Adjustments

Posted by taxguru on October 26, 2020

The Tax Game never ends.  As 2020 nears its end, people are starting to look ahead to what we can expect for 2021.  Every year, many items in the Tax Code are adjusted to reflect the official increase in the Cost of Living since the prior year. 

There are also a lot of things in the Tax Code that have been set in concrete by our Rulers in DC and have not been increased for decades, such as the measly $3,000 of net capital loss that can be used to offset other kinds of income.  I long ago gave up any hope for such concepts as Fairness or Consistency in the Tax Code in order to hold onto my sanity in this profession.

While some tax publishers had already released what they calculated as the inflation adjustments a few weeks ago, it’s not really official until IRS makes its calculations known, which has happened today.

They have a good summary of the changes in their news release:

IRS provides tax inflation adjustments for tax year 2021

 

All of the nitty-gritty specifics are spelled out in much more detail in the official 28 page Revenue Procedure 2020-45

Besides adjustments that affect Income taxes, there are some that affect Estate and Gift taxes.  One item that is closely watched is the change in the annual amount that can be gifted without the need to file a Gift Tax return (Form 709).  Many people have gifting plans that utilize this allowance in the amounts that are gifted each year.  Unlike the other inflation adjusted items, which normally increase every year and result in “odd-looking” numbers, the Gift tax allowance can only be increased when the cumulative inflation since the previous adjustment is close to an even $1,000.  That’s not happening in 2021.  The annual exemption will remain at $15,000 per donor (giver) per donee (recipient).

[Update 10-28-2020] – As they have done each year, the folks at TheTaxBook have posted this very handy one-page summary of the 2021 figures side by side with what they were for 2019 and 2020.

Posted in inflation, IRS | Comments Off on IRS Releases 2021 Inflation Adjustments

Reduced Stimulus Payments

Posted by taxguru on June 4, 2020

From a Client:

Good Morning Kerry I’ve a question ~ I received my “Economic Impact Payment “ due to COVID-19 I understood the checks to be $1,200.00 …mine was only $875.60 Were taxes to be taken out of these?

 

My Reply:

What you received is actually the correct amount per the current payment schedule. The amount can be as high as $1,200 per person, but is phased down for people whose most recently reported AGI was more than $75,000. I just used a handy phase-out calculator that I found on the web and entered your 2018 AGI of $81,488. Attached you can see the result of $876.

IRS-StimulusCheckAmount

It is still possible that you can get the additional $324, but that won’t be for more than a year. When we prepare your 2020 Federal income tax return, there will be a schedule to recalculate the proper amount using your 2020 AGI. If you qualify for more than the $876, you will get a credit for the extra amount. As it is currently being discussed, if you actually end up qualifying for less than what you received, you will not be forced to pay back the over-payment. That could change by next year. All of these special Covid related programs are still very fluid and being tinkered with constantly. There is even talk right now of a second round of stimulus payments in the next few months; so there will be no end to the confusion.

So, there is no need to contact IRS about your payment. They did send you the correct amount for this first round of payments.

I hope I have explained this adequately. Let me know if you have any other questions.

Kerry

Posted in COVID-19, IRS | Comments Off on Reduced Stimulus Payments