Don’t be victim to #‘ghost’ #tax#return#preparers

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. 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.

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No age limit for IRA contribution and RMD age raised to 72

A $1.4 trillion year-end spending bill was signed into law on December 20, 2019 in order to keep the government running. Tucked away inside this mammoth piece of legislation is the Setting Every Community Up for Retirement Enhancement (SECURE) Act, which became effective January 1, 2020.

This new law includes significant changes to retirement accounts, including:

Age Limit Eliminated for Traditional IRA Contributions

Beginning in 2020, the new law eliminates the age limit for traditional IRA contributions (formerly 70 ½). Now, those who are still working can continue to contribute to a traditional IRA, regardless of their age.

RMD Age Raised to 72

The SECURE Act also raises the age for beginning RMDs to 72 for all retirement accounts subject to RMDs. IRA owners reaching age 70 ½ in 2020 catch a break and will not have to take their first RMD in 2020 now that the RMD deadline has been extended to age 72.

from article by Sarah Brenner, JD
IRA Analyst

IRS: Make a tax payment now, avoid a tax-time surprise

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IRS NewswireDecember 18, 2019
News EssentialsWhat’s HotNews ReleasesIRS – The BasicsIRS GuidanceMedia ContactsFacts & FiguresAround The Natione-News SubscriptionsThe Newsroom TopicsMultimedia CenterNoticias en EspañolRadio PSAsTax ScamsThe Tax GapFact SheetsIRS Tax TipsArmed ForcesLatest News HomeIRS ResourcesCompliance & EnforcementContact My Local OfficeFiling OptionsForms & InstructionsFrequently Asked QuestionsNewsTaxpayer AdvocateWhere to FileIRS Social MediaTaxpayers who paid too little tax during 2019 can still avoid a tax-time surprise by making a quarterly estimated tax payment now, directly to the Internal Revenue Service. The deadline for making a payment for the fourth quarter of 2019 is Wednesday, Jan. 15, 2020.Income taxes are pay-as-you-go. This means that by law, taxpayers are required to pay most of their tax during the year as income is received. There are two ways to do this:Withholding from paychecks, pension payments, Social Security benefits or certain other government payments. This is how most people pay most of their tax.Making quarterly estimated tax payments throughout the year. Self-employed people and investors, among others, often pay tax this way.Either method can help avoid a surprise tax bill at tax time and the accompanying penalty that often applies. If a taxpayer failed to make required quarterly estimated tax payments earlier in the year, making a payment to cover these missed payments, as soon as possible, will usually lessen and may even eliminate any possible penalty.The IRS recommends that everyone check their possible tax liability by using the IRS Tax Withholding Estimator. This online tool allows taxpayers to see if they are withholding the right amount and find out if they need to make an estimated tax payment. Form 1040-ES, available on IRS.gov, includes a worksheet for figuring the right amount to pay as well.This is especially important for anyone who owed taxes when they filed their 2018 return. Taxpayers in this situation may include those who itemized in the past but will now claim the increased standard deduction, as well as two wage-earner households, employees with non-wage sources of income and those with complex tax situations.Taxpayers who owed taxes when they last filed and who did not adjust their 2019 withholding may find that they owe taxes again, and even a penalty, when they file their 2019 return next year. Making a quarterly estimated tax payment now can help. In addition, various financial transactions, especially late in the year, can often have an unexpected tax impact. Examples include year-end and holiday bonuses, stock dividends, capital gain distributions from mutual funds and stocks, bonds, virtual currency, real estate or other property sold at a profit.Publication 505, Tax Withholding and Estimated Tax, has additional details, including worksheets and examples, that can be especially helpful to those who have dividend or capital gain income, owe alternative minimum tax or self-employment tax, or have other special situations.The fastest and easiest way to make an estimated tax payment is to do so electronically using IRS Direct Pay or the Treasury Department’s Electronic Federal Tax Payment System (EFTPS). For information on other payment options, visit IRS.gov/payments. If paying by check, be sure to make the check payable to the “United States Treasury.”Though it’s too early to file a 2019 return, it’s never too early to get ready for the tax-filing season ahead. For more tips and resources, check out the Get Ready page on IRS.gov.Back to Top

Taxpayers can take steps now to Get Ready to file their taxes in 2020

There are steps people can take now to make sure their tax filing experience goes smoothly next year. First, they can visit the Get Ready page on IRS.gov to find out more.

Here are a few other things people can do now:

Check their withholding and make any adjustments soon
Since most employees typically only have a few pay dates left this year, checking their withholding soon is especially important. It’s even more important for those who:

  • Received a smaller refund than expected after filing their 2018 taxes this year.
  • Owed an unexpected tax bill last year.
  • Experienced personal or financial changes that might change their tax liability.

Some people may owe an unexpected tax bill when they file their 2019 tax return next year. To avoid this kind of surprise, taxpayers should use the Tax Withholding Estimator to perform a quick paycheck or pension income checkup. Doing so helps them decide if they need to adjust their withholding or make estimated or additional tax payments now. 

Gather documents
Everyone should come up with a recordkeeping system. Whether it’s electronic or paper, they should use a system to keep all important information in one place. Having all needed documents on hand before they prepare their return helps them file a complete and accurate tax return. This includes:

  • Their 2018 tax return.
  • Forms W-2 from employers.
  • Forms 1099 from banks and other payers.
  • Forms 1095-A from the marketplace for those claiming the premium tax credit.

Confirm mailing and email addresses
To make sure these forms make it to the taxpayer on time, people should confirm now that each employer, bank and other payer has the taxpayer’s current mailing address or email address. Typically, forms start arriving by mail or are available online in January.

People should keep copies of tax returns and all supporting documents for at least three years. Also, taxpayers using a software product for the first time may need the adjusted gross income amount from their 2018 return to validate their electronically filed 2019 return.

File electronically and choose direct deposit for a faster refund
Errors delay refunds. The easiest way to avoid them is to file electronically. Using tax preparation software is the best and simplest way to file a complete and accurate tax return. Tax prep software guides taxpayers through the process and does all the math. In fact, taxpayers can start looking into their filing options now.

Another way to speed thing up is to use direct deposit. Combining direct deposit with electronic filing is the fastest way to get a refund. With direct deposit, a refund goes directly into a taxpayer’s bank account. They don’t need to worry about a lost, stolen or undeliverable refund check.

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#401(k) #contribution #limit increases to #$19,500 for #2020; #catch-up limit rises to $6,500

WASHINGTON — The Internal Revenue Service today announced that employees in 401(k) plans will be able to contribute up to $19,500 next year.

The IRS announced this and other changes in Notice 2019-59, posted today on IRS.gov. This guidance provides cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2020.

Highlights of changes for 2020

The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $19,000 to $19,500.

The catch-up contribution limit for employees aged 50 and over who participate in these plans is increased from $6,000 to $6,500.

The limitation regarding SIMPLE retirement accounts for 2020 is increased to $13,500, up from $13,000 for 2019.

The income ranges for determining eligibility to make deductible contributions to traditional Individual Retirement Arrangements (IRAs), to contribute to Roth IRAs and to claim the Saver’s Credit all increased for 2020.

Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If during the year either the taxpayer or his or her spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income. (If neither the taxpayer nor his or her spouse is covered by a retirement plan at work, the phase-outs of the deduction do not apply.) Here are the phase-out ranges for 2020:

  • For single taxpayers covered by a workplace retirement plan, the phase-out range is $65,000 to $75,000, up from $64,000 to $74,000.
  • For married couples filing jointly, where the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is $104,000 to $124,000, up from $103,000 to $123,000.
  • For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $196,000 and $206,000, up from $193,000 and $203,000.
  • For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

The income phase-out range for taxpayers making contributions to a Roth IRA is $124,000 to $139,000 for singles and heads of household, up from $122,000 to $137,000. For married couples filing jointly, the income phase-out range is $196,000 to $206,000, up from $193,000 to $203,000. The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

The income limit for the Saver’s Credit (also known as the Retirement Savings Contributions Credit) for low- and moderate-income workers is $65,000 for married couples filing jointly, up from $64,000; $48,750 for heads of household, up from $48,000; and $32,500 for singles and married individuals filing separately, up from $32,000.

Key limit remains unchanged

The limit on annual contributions to an IRA remains unchanged at $6,000. The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.

Details on these and other retirement-related cost-of-living adjustments for 2020 are in Notice 2019-59, available on IRS.gov.

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Here’s basic info for #businesses #filing #excise_taxes

Businesses providing goods and services that are subject to excise tax must file a Form 720 quarterly to report the tax to the IRS.

What is excise tax?
Excise taxes are charged on a wide variety of goods, services and activities. The tax may be imposed at the time of:

  • Import
  • Sale by the manufacturer
  • Sale by the retailer
  • Use by the consumer

Many excise taxes go into trust funds earmarked for related capital projects, such as highway and airport improvements. Excise taxes are independent of income taxes. People pay excise taxes on things like gasoline, indoor tanning, airline tickets and tires.

Since the excise cost is usually included in the price, the seller or manufacturer is responsible for sending these tax payments to the IRS and filing Form 720.

When to file?
Businesses must file the form for each quarter of the calendar year. Here are the due dates:

  • Quarter 1 – January, February, March: Deadline = April 30
  • Quarter 2 – April, May, June: Deadline = July 31
  • Quarter 3 – July, August, September: Deadline = October 31
  • Quarter 4 – October, November, December: Deadline = January 31

If the due date for filing a return falls on a Saturday, Sunday or legal holiday, the due date is the next business day.

How to file?
While the IRS still accepts paper Forms 720, they encourage businesses to file electronically. To help excise taxpayers do this, the IRS posts the contact information on IRS.gov of all approved e-file transmitters for excise forms. Businesses can submit forms online 24 hours a day.

That said, not all excise forms can be filed electronically. Those that are available for electronic filing are:

  • Form 720, Quarterly Federal Excise Tax.
  • Form 2290, Heavy Highway Vehicle Use Tax.
  • Form 8849, Claim for Refund of Excise Taxes, Schedules 1, 2, 3, 5, 6 and 8.

When businesses file Form 720 electronically, they not only get confirmation the IRS received the form, but it reduces processing time and errors. To electronically file Form 720, business taxpayers will have to pay the provider’s fee for online submission.

More information:
Form 720 e-file providers page
2290 Modernized e-file Providers
8849 Modernized e-file Providers
Excise Tax Forms and Publication

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#Tax treatment for #family_members_working in the #family_business

One of the advantages of someone running their own business is hiring family members. But when including family members in business operations, certain tax treatments and employment tax rules apply. Here are some facts to know when working with a spouse, parent or child.

Both spouses carrying on the trade or business

If spouses carry on a business together and share in the profits and losses, they may be partners whether or not they have a formal partnership agreement. If so, they should report income or loss from the business on Form 1065. They should not report the income on a Schedule C (Form 1040) in the name of one spouse as a sole proprietor. But, the spouses can elect not to treat the joint venture as a partnership by making a qualified joint venture election. 

Qualified joint venture

Spouses may elect treatment as a qualified joint venture instead of a partnership. A qualified joint venture conducts a trade or business where:

  • The only members are a married couple who file a joint return,
  • Both spouses materially participate in the trade or business, and
  • Both spouses elect not to be treated as a partnership.

Only businesses owned and operated by spouses as co-owners and not in the name of a state law entity, such as a limited partnership or limited liability company, are eligible for the qualified joint venture election. Find more information on joint ventures in Publication 541, Partnerships.

Spouses electing qualified joint venture status are sole proprietors for federal tax purposes. Each spouse must file a separate Schedule C to report their share of profits and losses. They don’t need an EIN unless their sole proprietorship must file excise, employment, alcohol, tobacco or firearms returns. One spouse cannot continue to use the partnership’s Employer Identification Number (EIN) for the qualified joint venture. The EIN must stay with the partnership; it’s used by the partnership for any year in which the business doesn’t meet qualified joint venture requirements.

Employment taxes

If the business has employees, either of the spouses as sole proprietors may report and pay the employment taxes. The spouse, as an employer, must have an EIN for their sole proprietorship. If the business filed or paid employment taxes for part of the year under the partnership’s EIN, the spouse may be considered the employee’s “successor employer” for purposes of figuring whether wages reached the Social Security and federal unemployment wage base limits.
 
One spouse employed by another. The wages for the services of an individual who works for their spouse are subject to income tax withholding and Social Security and Medicare taxes but not to the Federal Unemployment Tax Act (FUTA).

Child employed by parents. Payments for the services of a child under age 18 aren’t subject to Social Security and Medicare taxes, if the business is a sole proprietorship or a partnership in which each partner is a parent of the child. Payments to a child under age 21 aren’t subject to FUTA. Payments are subject to income tax withholding, regardless of the child’s age.

Payments for the services of a child are subject to income tax withholding as well as Social Security, Medicare and FUTA taxes if they work for:

  • A corporation, even if it’s controlled by the child’s parent, or
  • A partnership, even if the child’s parent is a partner, unless each partner is a parent of the child.

Parent employed by child. The wages for the services of a parent employed by their child are subject to income tax withholding and Social Security and Medicare taxes. They’re not subject to FUTA tax.

Employees complete Form W-4 so that their employer can withhold the correct federal income tax from their pay. The IRS encourages everyone to use the Tax Withholding Estimator to help them make sure they have the right amount of tax withheld from their paycheck. The estimator automatically links to Form W-4, Employee’s Withholding Allowance Certificate, which they can then fill out and submit to their employer.

More information:

What #teachers should know about deducting #out-of-pocket #classroom #expenses

Now that fall is here and school has started, many teachers are dipping into their own pockets to buy classroom supplies. Doing this throughout the year can add up fast. Fortunately, eligible educators may be able to defray qualified expenses they paid in 2019 when they file their tax return in 2020.

Educators who work in schools may qualify to deduct up to $250 of unreimbursed expenses. That amount goes up to $500 if two qualified educators are married and file a joint return. However, neither spouse can deduct more than $250 of his or her qualified expenses when they file.

Taxpayers qualify for this deduction if they:

  • Teach any grade from kindergarten through twelfth grade. 
  • Are a teacher, instructor, counselor, principal or aide.
  • Work at least 900 hours during the school year.
  • Work in a school that provides elementary or secondary education.

Qualified expenses include:

  • Professional development courses.
  • Books.
  • Supplies.
  • Computer equipment including related software and services.
  • Supplementary materials.
  • Athletic supplies only for health and physical education.

Eligible taxpayers can claim this deduction when they file their taxes. The IRS encourages teachers to consider using tax software to help guide them through the process of claiming the deduction.

Many teachers may qualify to use online software for free with IRS Free File.


More information:
Topic No. 458 Educator Expense Deduction

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#IRS grants relief for U.S. persons who own #stock in certain #foreign #corporations

WASHINGTON — The Department of the Treasury and the Internal Revenue Service today issued Revenue Procedure 2019-40 and proposed regulations that provides relief to certain U.S. persons that own stock in certain foreign corporations.

The Revenue Procedure limits the inquiries required by U.S. persons to determine whether certain foreign corporations are controlled foreign corporations (“CFCs”). The Revenue Procedure also allows certain unrelated minority U.S. shareholders to rely on specified financial statement information to calculate their subpart F and GILTI inclusions and satisfy reporting requirements with respect to certain CFCs if more detailed tax information is not available. It also provides penalty relief to taxpayers in the specified circumstances. 

Finally, the Revenue Procedure announces that the IRS intends to amend the instructions for Form 5471 to reduce the amount of information that certain unrelated minority U.S. shareholders of the CFC are required to provide. It will also limit the filing requirements of U.S. shareholders who only constructively own stock of the CFC solely due to downward attribution from another person.

The proposed regulations provide additional relief to taxpayers affected by the repeal of section 958(b)(4). These regulations also propose modifications to existing regulations that are intended to ensure, in certain appropriate circumstances, that the operation of certain rules is consistent with their application before the repeal of section 958(b)(4). 

The repeal of section 958(b)(4) was part of the Tax Cuts and Jobs Act. For more information about this and other TCJA provisions, visit IRS.gov/taxreform.

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