2021 Tax Filing Season Opening Date Announced by the IRS!

Bruce - Your Host at The Tax Nook January 16, 2021 No Comments

A Highway Traffic Sign with the words 'Tax Time Just Ahead'.

Well now that the 2020 holidays have passed and the 2021 new year ship has already set sail, everyone’s favorite time of year is approaching: Tax Time!

Wait, it is EVERYONE’S favorite time of year? Isn’t it?

Hmm, I getting a sense that tax time a/k/a tax season is not the most joyful period for a lot of you.

Um…

Well, I will bear the burden of letting you know that our beloved IRS has let us know that tax filing time is near.

The Internal Revenue Service (IRS) has announced that tax season will open on Friday, February 12, 2021. Yep, on a Friday.

The IRS will begin accepting paper and electronic tax returns on that date. This is about two weeks later than had been expected. The delay allows the IRS time to do additional programming and testing of IRS systems following the December 27 tax law changes – especially those involving a second round of stimulus checks (formally known as: Economic Impact Payments, or EIPs). BTW, I’ve answered a bunch of questions about the second round of stimulus payment in a prior post which you can find here.

Richard Neal the House Ways and Means Committee Chairman said, about the date, “While I am disappointed that this year’s filing season will begin later than usual, I recognize that the IRS has faced extraordinary challenges throughout the COVID crisis. It’s a relief to know that despite contending with the distribution of two rounds of economic impact payments, facility closures, and other disruptions, the agency will be able to begin accepting returns within the next month. It is also encouraging that the IRS expects taxpayers who file electronically at the beginning of the season and claim refundable tax credits to receive their refunds by the first week of March. I urge taxpayers to complete their returns and file electronically as early as possible.”

The IRS also had a comment. “Planning for the nation’s filing season process is a massive undertaking, and IRS teams have been working non-stop to prepare for this as well as delivering Economic Impact Payments in record time,” according to IRS Commissioner Charles Rettig. “Given the pandemic, this is one of the nation’s most important filing seasons ever. This start date will ensure that people get their needed tax refunds quickly while also making sure they receive any remaining stimulus payments they are eligible for as quickly as possible.”

Last year’s average tax refund was more than $2,500. More than 150 million tax returns are expected to be filed this year, with the vast majority before the Thursday, April 15 deadline. While there has been talk about an extension, so far, it is just that. TALK. According to the IRS, the tax return deadline remains April 15, 2021.

The delayed start date may ease the waiting game for some taxpayers. But something to keep in mind is that the law now requires the IRS to hold refunds tied to the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC) until February 15 – that’s just a few days after the season opens. In addition, this rule which bars IRS from issuing refunds for taxpayers claiming the Earned Income Tax Credit or the Additional Child Tax Credit before mid-February applies to the entire refund. Even the portion that is not associated with the EITC and ACTC. So plan accordingly.

The IRS still anticipates issuing more than nine out of 10 refunds in less than 21 days. You can check out Where’s My Refund? at IRS.gov or the IRS2Go phone app for projected deposit dates.

But, in closing, if you have all of your tax documents ready before February 12 you can still make an appointment with Solid Tax Solutions (SolidTaxSolutions.com) to have your taxes prepared before that date. This way you will beat the rush and be done and we will e-file your tax return early on February 12.

To schedule your appointment just call us at: (845) 344-1040.

AS ALWAYS: PLEASE, PLEASE, PLEASE STAY WELL and STAY HEALTHY!

BRUCE

______________________________________________________________________

Bruce – Your Host at The Tax Nook

Our Firm’s Website: SolidTaxSolutions.com

The Second Round of Stimulus Checks – Q & A

Bruce - Your Host at The Tax Nook January 6, 2021 No Comments

A Photo of Blank Treasury Department Checks.

Hello Everyone! Chances are that you’ve already received notification about your second round of stimulus checks. This batch of checks is being issued much more quickly than the first round from 2020 (you can view see the Q & A regarding the first round of stimulus checks here). The second round of checks is part of the Coronavirus Response and Relief Supplemental Appropriations Act of 2021 (if you are in need of 2,124 pages of good bedtime reading, then you are in luck because you can find that bill —->here), signed into law by President Trump at 2020 year-end.

Since the new law took effect, I’ve been receiving phone calls, emails, and messages from people with questions about the second round of stimulus checks. As with anything tax-related, there’s a little bit of confusion. To help you sort it out, here are a few questions and answers:

Some General Questions:

What do I need to do to get my check? You don’t have to take any action to receive your checks: this second round of payments will be distributed automatically.

How big will my check be? Eligible individuals will receive checks of up to $600 for individuals ($1,200 for married couples) and up to $600 for each qualifying child. The amount of the checks would start to phaseout for those earning more than $75,000 ($150,000 for joint returns and $112,500 for heads of household).

What’s a phaseout and how does it affect the amount of my check? The amount of the checks would start to phaseout for those earning more than $75,000 ($150,000 for joint returns and $112,500 for heads of household). This is adjusted gross income (AGI), not taxable income – so this will be before your standard or itemized deductions.

How does a phaseout work? Phaseout means that the benefit goes down as income goes up. It’s a 5% drop which means that for every $100 of income above those thresholds, your check will drop by $5. So, if you are a single filer earning $75,100, your check will be $595 ($600 – $5). If you are a single filer earning $85,000, your check will be $100 ($600 – $500). If you do the quick math on that, it means that you’ll phaseout completely (meaning that you’ll get nothing) once you reach $87,000 as a single filer, $174,000 as a married couple filing jointly, or $124,500 for heads of household.

Does the phaseout apply to the dependent portion, too? Yes.

Eligibility

Are there limits on kids? There are no limits on the number of children that qualify. The definition of a child will be the same as for the child tax credit. There was no “dependent fix” which means that children 17 and over do not qualify as a dependent for purposes of stimulus checks.

But my child is 17 and lives with me and eats all of the food in my house. Are you saying I don’t get a check for my kid? Yes. Qualifying dependents must be under age 17 on December 31, 2019.

Wait, the child tax credit requires that the child be related to me. So, if I take care of a child who is not related to me, I can’t get a check for that child? That’s correct. The child has to be related to you, such as your son, daughter, stepchild, brother, sister, stepbrother, stepsister, half-brother, half-sister, or a descendant of any of them (for example, grandchild, niece, or nephew) – and meet the other criteria for dependency. Foster children and adopted children also qualify.

Will I need a Social Security Number to get a check? Yes. Or in the alternative, an adoption taxpayer identification number. Ditto for spouses and kids.

What about ITINs? You need a valid SSN to get a check. However, if you are married to someone with an ITIN and you file jointly, this will not disqualify you from getting a check (your spouse will not receive a check). Additionally, if you are a married taxpayer filing jointly and at least one of you has a valid SSN, you will receive a check for your dependent (this is different from the CARES Act). But if both of you and your spouse do not have an SSN, your child will not receive a check even if your child has an SSN. Additionally, an ITIN won’t be accepted for a qualifying child.

Will seniors and retired people get a check? Yes. Seniors and retired people are eligible so long as they meet the other criteria (Social Security numbers, income thresholds, etc.).

What about those on government benefits? And those with no income? Yes, eligible people include those with no income, as well as those whose income comes entirely from benefit programs like as SSI or SSDI benefits.

So I don’t have to work to get a check? No.

What if I normally work but I am unemployed? That still doesn’t matter. You don’t need to work to be eligible for a check.

My husband/wife/grandmother/neighbor died this year. Are they eligible for a check? A payment won’t be issued to someone who has died before January 1, 2020. And if you filed a joint return in 2019 and your spouse died before January 1, 2020, you won’t receive a $600 payment for your deceased spouse, but you’ll still be eligible for your check plus the amount for any qualifying children.

My husband/wife/grandmother/neighbor is in jail. Are they eligible for a check? Yes. An incarcerated individual is entitled to a check if all eligibility requirements are met.

Will I still get the check if I owe the IRS some money? Yes.

What if my check is normally seized for child support? Yes, your second stimulus check will not be offset for any Federal or state debts. Your first stimulus check may have already been offset (the rules were different for the first round of payments under the CARES Act).

Timing and Payment

When will I get my check? Initial direct deposit payments began arriving last week. Paper checks were mailed beginning on Wednesday, December 30. Mailed payments, including those to check recipients who live abroad, will require more processing and mailing time.

How will I get my check? If you didn’t receive your earlier stimulus payment by direct deposit, you will receive a check or, in some instances, a debit card. If you don’t receive a direct deposit by early January, watch the mail for either a paper check or a debit card.

What if I changed or closed my bank account? If your account is closed, no longer active, or unfamiliar, your bank must return the payment to the IRS. If that happens, you won’t get your payment as a direct deposit: you’ll get a check.

What if I’ve moved? Under the law, the Treasury must send notice of the payment by mail to your last known address. The notice will include how the payment was made and the amount of the payment. The notice will also include a phone number for the appropriate point of contact at the Internal Revenue Service (IRS) if you didn’t receive the payment. You can help make sure that it goes to the right place by updating your address after a move. Usually, you’d do that on your tax return, but you can also submit a federal form 8822, Change of Address (it downloads as a PDF). It generally takes four to six weeks to process a change of address.

Can I update my bank account or my address online? No.

Status Of Your Check

How can I check on the status of my check? Use the Get My Payment tool on irs.gov: it’s updated once a day. You can find out more here.

But the Get My Payment tool ISN’T WORKING. What now? If you get a “please wait” or error message, the IRS says that’s normal and is due to the high volumes coming in. Check back later.

When I did come back to Get My Payment later, it still was not working. Now what? There is a limit to the number of times people can access Get My Payment each day. When people reach the maximum number of accesses, Get My Payment will inform them they will need to check back the following day.

What happens if Get My Payment says “not available”? If the tool shows “Payment Status #2 – Not Available,” then you will not receive a second Economic Impact Payment and instead you need to claim the Recovery Rebate Credit on your 2020 Tax Return.

Taxes and Benefits

Is my check taxable? No, no, and BTW…..no. This is not taxable income.

Do I have to pay it back? No.

Will my federal benefits, like food stamps, be affected? No.

How will this affect my 2020 tax return? If you did not receive the full amount of stimulus payments that you were entitled to receive, you can fix it on your 2020 tax return (the one you’ll file this year, in 2021). There will be a worksheet on your tax return so that you can calculate what’s called the Recovery Rebate Credit. You will need to know the amounts of the first and second payments to fill out the worksheet.

Do you have any other articles related to stimulus payment? It’s funny you should ask but I wrote an article about whether or not Nursing Homes are allowed to keep your stimulus check. You can find that article —–> here. And for those of you who will be receiving a physical check (rather than a direct deposit), you can find out how to tell if that stimulus check is real with this article here.

EVERYONE PLEASE, PLEASE, PLEASE STAY WELL and STAY HEALTHY!

BRUCE

______________________________________________________________________

Bruce – Your Host at The Tax Nook

Our Firm’s Website: SolidTaxSolutions.com

Categories: Hudson Valley NY, Income Tax, Middletown NY, Orange County NY, Tax Return Filing, Taxes in the News

Are Nursing Homes Allowed to Take Your Stimulus Check???

Bruce - Your Host at The Tax Nook July 9, 2020 No Comments

Hello everyone. I am starting to notice a recurring theme in the contacts that I am having with people about stimulus checks recently, and it goes something like this: How can I keep my stimulus check from being taken?

So, the details may change from one taxpayer to the next, but it’s clear to me that many of you are worried about your stimulus checks being seized. The CARES Act made it clear that the only reason a stimulus check might be offset (i.e., seized) is for past-due child support support.

Your stimulus check may not be seized by the government for any other debt, including back taxes.

But, once the stimulus check hits a your bank account, there is no longer protection from seizure. One such seizure that is particularly appalling is those from nursing homes and assisted living facilities.

The Federal Trade Commission (FTC) has issued an alert to consumers (which you can find here) to be on the lookout for nursing homes and assisted living facilities that are requiring residents, who are on Medicaid, to sign their stimulus checks over to the facilities. To be specific, nursing home and assisted living facilities have been accused of pressuring residents to sign the checks over, claiming that stimulus checks count as “resources” under the rules of federal benefit programs that must be used to pay for services.

But that is so not true. Keep in mind, stimulus checks are really advanced tax credits. (See my prior article regarding stimulus checks here).

And, Lois Greisman, the Elder Justice Coordinator for the FTC, reminds taxpayers that tax credits do not count as “resources” for federal benefits programs like Medicaid. So that means that nursing homes and assisted living facilities can’t take that money from residents just because they’re on Medicaid. And if you need more legalese, Greisman references this link, which takes you to the Congressional Summary for the CARES Act which notes that tax credits are not countable as resources for federal government programs (see page 3).

Ms. Greisman advises that if a nursing home or assisted living facility has already taken your stimulus check, you should get in touch with your state attorney general and ask them to help you get it back. Then, she says, tell the FTC.

You can also talk with the nursing home or assisted living facility directly, but let’s be real: it can be scary to ask for your money back when you don’t feel like you’re in a position of power. If you feel like you need some muscle on your side, definitely reach out to your state attorney general.

If you’re not sure what happened to a check belonging to a loved one who lives in a nursing facility, talk with them. SOON! I know this is happening because I am hearing from a lot of you wondering how to handle this situation. Now you have your answer.

You can find more helpful information from the National Center on Law & Elder Rights for people who live in nursing homes or assisted living facilities.

EVERYONE PLEASE, PLEASE, PLEASE STAY WELL and STAY HEALTHY (Even though the country is, as of now, re-opening in phases)!

BRUCE

______________________________________________________________________

Bruce – Your Host at The Tax Nook

Our Firm’s Website: SolidTaxSolutions.com

Categories: Income Tax, Taxes in the News Tags: Coronavirus, COVID-19, Health, Health Care

How to Tell if Your ‘Stimulus Check’ is Real (Here are six ways)!

Bruce - Your Host at The Tax Nook April 29, 2020 No Comments

So, to give you fine folks an update, the Internal Revenue Service is making good progress in getting the Economic Impact Payments (i.e., ‘Stimulus Payments’) to eligible individuals.

Just in case you missed my article regarding Economic Impact Payments, or would just like to refresh your understanding of these payments and the process involved in their delivery, you can take a look at that article here.

Most of the money, so far, has been directly deposited into recipients’ bank accounts.

Some people, however, will be receiving paper checks.

Paper Check Problems: This is a bit of a concern for two reasons.

First, as with tax refunds issued by check and snail mailed to taxpayers, there’s always the possibility that crooks could steal the relief payments from their curbside mail boxes.

Second, some coronavirus crooks have created fake stimulus checks. This is latest variation of the bogus government payment scam that’s been around for years.

In these instances, con artists send fake checks to their scam victims, advising them to quickly deposit the checks. Then the second part of the scam kicks in, with the crooks telling their prey that the checks are too large.

Since they got more than they were due, according to the crooks perpetrating this type of scam, the recipients of the fake checks need to send back part of the money. Yep, send the alleged excess back to the crooks who issued the worthless counterfeit checks.

It’s easy to blame the victim, saying that they should know better, but some of the counterfeit checks are quite convincing. There have been cases where it’s taken even banks weeks to discover that checks they accepted were not real (You can see what the Federal Trade Commission has to say about that here).

Know your real government check: With so many people eagerly awaiting their much-needed money and the stimulus payments (the physical check version) providing a new opportunity for fake checks, Uncle Sam has called in the big guns. The U.S. Secret Service is getting involved.

This federal law enforcement agency, which operates under the direction of the Department of Homeland Security, is best known for its agents who protect U.S. presidents. However, Secret Service agents also investigate counterfeiting law violations, as well as a wide range of financial fraud, including financial document counterfeiting.

Because of its expertise in fighting counterfeiting, the Secret Service has joined the Treasury Department in a new “Know Your U.S. Treasury Check” campaign. This is an effort to make individuals, retailers and financial institutions aware of possibly fake ‘stimulus’ checks and educate them on how they can protect themselves from becoming victims of counterfeit government checks.

The agencies have created a two page PDF (which you can read right here) with more on the legitimate coronavirus ‘stimulus checks’.

Here are six security features noted in that document that are found on all real Treasury checks and the COVID-19 Economic Relief Payment (pictured above) in particular:

Treasury Seal — This is a new seal to the right of the Statue of Liberty. It should say “Bureau of the Fiscal Service” and has replaced the old seal that said “Financial Management Service.”
Bleeding Ink — When moisture is applied to the seal to the right of the Statue of Liberty, the black ink will run and turn red.
Watermark — All U.S. Treasury checks are printed on watermark paper. The watermark reads “U.S. TREASURY” and is seen from both front and back when held up to a light source.
Ultraviolet Overprinting — A protective ultraviolet (UV) pattern is invisible to the naked eye, consisting of lines of “FMS” bracketed by the FMS seal on the left and the U.S. Seal (eagle) on the right. As of 2013, a new ultraviolet patter was introduced into the check that says “FISCALSERVICE.” Either one of these UV patterns maybe be seen.
Microprinting — This is located on the back of the check, showing the words “USAUSAUSA.”
Economic Impact Payment Notation — The Economic Impact Payment checks will have a special note at the lower left side of the check, next to the Statue of Liberty image. It says “Economic Impact Payment President Donald J. Trump.”

When you get your check in your mail box, check it out using the “Know Your U.S. Treasury Check” guidelines.

So everyone please be careful because the only thing worse than having to wait for your Corona Virus ‘stimulus’ money is falling for a fake stimulus check scam.

EVERYONE PLEASE, PLEASE, PLEASE STAY WELL and STAY HEALTHY!

BRUCE

______________________________________________________________________

Bruce – Your Host at The Tax Nook

Our Firm’s Website: SolidTaxSolutions.com

Categories: Business, Income Tax, Tax Return Filing, Taxes in the News Tags: Economic Impact Payments, Stimulus Checks, Tax Stimulus Checks

Tax Stimulus Checks – Q & A

Bruce - Your Host at The Tax Nook April 5, 2020 No Comments

As COVID-19 continues to impact the United States, the federal government is taking action to ease the burden on taxpayers. Most recently, the U.S. Senate and the House of Representatives passed a massive stimulus package and the Coronavirus Aid, Relief, and Economic Security or CARES act was subsequently signed into law by the President (You can access the Senate bill at this link—–> THE SENATE and the House version at this link—–> THE HOUSE).

A key feature of this stimulus package is individual ‘stimulus checks’ (To avoid any confusion, the IRS refers to these ‘stimulus checks’ as ‘Economic Impact Payments’).

As with anything that is tax-related, there’s a little bit of confusion. To help you sort it out, here are a few questions and answers:

Who qualifies for the stimulus payments? The payments go to almost any adult with a Social Security number, as long as they aren’t dependents of someone else. Those adults will get the payments for the children in their household.

When will I get my check? Checks are supposed to be produced “as rapidly as possible”. Treasury Secretary Steve Mnuchin has hinted they will come in April, but it’s been suggested that it could take up to two months. One thing that is true: if you use direct deposit, you’ll get your money faster.

(UPDATE: The Treasury Department and officials from the IRS have told the House Ways and Means Committee that the initial wave of payments will go out the week of April 13. The payments will be automatically deposited into the same bank account reflected on the 2019 or 2018 tax return filed.

Taxpayers who will be in the first wave will have already had their direct deposit information on file with the IRS from their 2018 or 2019 tax returns. Paper checks will then start going out in May to people who don’t have direct deposit information on file with the IRS. About 5 million checks will be sent weekly, and it could take up to 20 weeks to distribute all of them. People with the lowest incomes will get their checks first.

In the coming weeks, the U.S. Treasury plans to develop a web-based portal that will allow individuals who have not recently submitted banking information to the IRS to do so enabling them to receive payments immediately as opposed to waiting for a check to arrive in the mail.

In addition the IRS anticipates creating a “Where’s my Economic Impact Payment?” tracker, similar to the “Where’s my refund?” system.)

How big will my check be? So, there are three dollar figures to be aware of in terms of the stimulus payments: $1,200 will be given to individual taxpayers, $2,400 will go to married couples filing jointly and taxpayers will receive an additional $500 per qualifying child (listed on the taxpayer’s tax return) under the age of 17.

Are there income limits on checks? The amount of the checks would start to phaseout for those adjusted gross income more than $75,000 ($150,000 for joint returns and $112,500 for heads of household). Take note that this is adjusted gross income (AGI), not taxable income – so this will be income before your standard or itemized deductions. FYI, you’ll find your AGI number on line 8(b) of your form 1040.

Wait a minute, how does a phaseout work? I am glad you asked. A phaseout means that the benefit goes down as income goes up. In this case, for every $100 of income above those thresholds, your check will drop by $5. So, if you are a single filer and your AGI is $75,100, your check will be $1,195 ($1,200 – $5). If you are a single filer and your AGI is $85,000, your check will be $700 ($1,200 – $500). This also means that your stimulus check will be phased out completely (meaning that you’ll get nothing) once your AGI reaches $99,000 as a single filer, $198,000 as a married couple filing jointly, or $136,500 for heads of household.

What about limits on children? There are no limits on the number of children that qualify. The definition of child will be the same as for the child tax credit.

Do children born in 2020 get the payment? Parents of children born this year won’t get a payment for that child now.

However, assuming the parents qualify based on their 2020 income, they would get $500 added to their tax refund or subtracted from their income-tax bill when they file their 2020 tax returns in early 2021.

Will I need a Social Security Number to get a check? Yes. Or as an alternative (where applicable), an adoption taxpayer identification number (ATIN). This also holds true for spouses and children.

So how does this work? Do I need to file anything to get my check? Technically, the checks are advances of refundable credits. The Treasury will advance your check based on your most recently filed tax return (i.e., your 2018 or 2019 tax return). If you haven’t filed a tax return, and your income is from Social Security benefits (or Railroad Retirement benefits), the bill allows the Treasury to use the information on your 2019 Form SSA-1099, Social Security Benefit Statement, or Form RRB-1099, Social Security Equivalent Benefit Statement . After some initial confusion, this was confirmed by the Treasury. You can see what the Treasury said here and you can see the statement put out by the IRS here.

Okay, I don’t understand. What the heck is a refundable tax credit? A refundable credit means that you can take advantage of the credit even if you do not owe any tax. Unlike with a nonrefundable credit, if you don’t have any tax liability, the “extra” credit is not lost but is instead refunded to you.

In this case, the stimulus check acts like a refund that you get in advance based on your 2020 income. That’s confusing because you don’t know yet how much you’re going to earn in 2020, but that is why the IRS is using earlier tax returns. But this advance payment on the credit does not affect your “normal” tax refund for 2020: you won’t lose out on your expected tax refund for 2020 with the stimulus check

What if I don’t get the right amount? When you file your 2020 tax return, the IRS will compare numbers. If you should have gotten a check and didn’t, or if you should have gotten more than you did because the IRS didn’t know something important (like you had a child in 2020), you should get more money.

So taxpayers who ultimately qualify for a higher stimulus check amount than they receive this year (for example: a person whose income drops from $100,000 to $70,000) would get the rest through a larger tax refund or smaller tax payment in early 2021.

On the other hand, if the numbers on your 2020 tax return suggest that you got more than you should because of your income, you should not have to pay it back. As it stands at this point, if your 2020 income is higher than the thresholds mentioned above and you received the stimulus check, you will not need to pay back any part of the payment. Don’t worry: most taxpayers should get just the right amount.

Is my check taxable? NO! This is not taxable income.

What if I am expecting a refund for the 2019 tax year? Your 2019 refund will not be affected by the stimulus check.

How will I get my check? Direct deposit, if you’re lucky. The IRS will deposit your payment directly into the same banking account you used for direct deposit on your last filed return.

But what if the IRS doesn’t have my direct deposit information? According to the IRS, the Treasury ~~plans to develop~~ has developed a web-based portal for individuals to provide their banking information to the IRS online so that individuals can receive their payments more quickly rather than waiting for a paper check. ~~It’s not up yet but, per the IRS, it slated to be up and running by Mid-April~~. UPDATE (4/15/2020): That web-based portal is now up and running folks. So you can now enter your bank information to receive, by direct deposit, your ‘Economic Impact Payment’ (i.e.,stimulus payment). You will find it on the web-portal in the ‘Filers: Get Your Payment’ section. For your convenience you can access that web-portal right here.

UPDATE (4/12/2020): This feature will be unavailable if the Economic Impact Payment has already been > scheduled < for mail delivery.

What if I’ve moved? Under the law, the Treasury must send notice of the payment by mail to your last known address. The notice will include how the payment was made and the amount of the payment. The notice will also include a phone number for the appropriate point of contact at the Internal Revenue Service (IRS) if you didn’t receive the payment. You can help make sure that it goes to the right place by updating your address after a move. Usually, you’d do that on your tax return, but you can also submit a federal form 8822, Change of Address (downloads as a PDF). It generally takes four to six weeks to process a change of address.

What if I haven’t filed for 2018 and 2019? Do it soon, even if you have a simple, zero return. And don’t forget to include your direct deposit banking information on your return.

But what if I am not required to file a tax return? If you don’t file a tax return due to low income and you do not receive Social Security or Railroad Retirement benefits you can use the new “Non-Filers: Enter Your Payment Info Here” application at the IRS website to provide simple information so that you can receive your stimulus check.

You will be able to find that website right here.

What about retired folks? Retired seniors are eligible so long as they meet the other criteria (Social Security numbers, Income thresholds, etc.). As I noted above, if you depend on Social Security (or Railroad Retirement) but normally don’t file a tax return, the Treasury will rely on your SSA-1099 form (or its equivalent the RRB-1099 ) to figure and send your check.

What about those on government benefits? And those with no income? Yes, eligible folks include those with no income, as well as those whose income comes entirely from non-taxable means-tested benefit programs, such as SSI benefits. I’ve seen a lot of confusion about this; it’s because one of the original proposals limited the checks to those who earned income. This is no longer the case.

Will I still get the check if I owe the IRS some money? Yes. If your refund would normally be seized to pay a tax debt, that shouldn’t happen here. SHOULDN’T. Assuming it works as planned.

I will say, though, that while the IRS has not officially provided guidance (i.e., direction) on this matter the Senate Finance Committee stated that the bill turns off nearly all ‘administrative offsets’ that ordinarily may reduce tax refunds for taxpayers who have past tax debts, or who are behind on other payments to federal or state governments, including student loan payments. The only ‘administrative offset’ that will be enforced applies to those who have past due child support obligations that the states have reported to the Treasury Department.

What if my check is normally seized for child support? Child support is an exception to the “we won’t offset your check” rule. Under the law, your check can be seized for child support arrears.

This is a done deal, right? Yes. It passed in the Senate and the House. The President has signed it.

So no changes? Right? I didn’t say that. There could be additional guidance from the IRS. I’ll let you know by updating this blog.

Not that I don’t trust you, but where can I find this in writing? You can read the Congressional Record, which notes the discussion about the checks, the vote, and the text right —-> here. (downloads as a PDF). The IRS has confirmed some of this information and will eventually post more information on its website right —-> here, but for now, there is just a banner.

UPDATE (4/12/2020): The IRS is reporting that, for security reasons, it plans to mail a letter about the Economic Impact Payment (i.e., the stimulus check) to the taxpayer’s last known address within 15 days after the payment is paid. The letter will provide information on how the payment was made and how to report any failure to receive the payment. If a taxpayer is not sure that they are receiving a legitimate letter from the IRS, the IRS is urging taxpayers to visit IRS.gov first to protect against scam artists.

EVERYONE PLEASE, PLEASE, PLEASE STAY WELL and STAY HEALTHY!

BRUCE

______________________________________________________________________

Bruce – Your Host at The Tax Nook

Our Firm’s Website: SolidTaxSolutions.com

Categories: Business, Income Tax, Tax Debt, Tax Law, Tax Return Filing, Taxes in the News Tags: Economic Impact Payments, Stimulus Checks, Tax Stimulus Checks

The New W-4 Form for 2020 Has Arrived!

Bruce - Your Host at The Tax Nook December 29, 2019 No Comments

The IRS has recently released the final version of the 2020 Form W-4 – Employee’s Withholding Certificate (you can view and download the new W-4 form here) to, hopefully, properly reflect the changes enacted by the Tax Cuts and Jobs Act.

Just in case you are not aware of the difference between a W-4 Form and a W-2 Form , a W-4 informs an employer of the appropriate tax withholding amount to be taken from an employee’s paycheck. The W-2, on the other hand, is a report generated by an employer that details an employee’s earnings and tax withholdings for the given tax year.

The major change to the W-4 is that the concept of “withholding exemptions” no longer exists and, of course, it is now a full page instead of just coupon-sized.

The form at one point is concerned that “more tax than necessary may be withheld”. While for the financially prudent taxpayer owing Uncle Sam $1,000 or less at tax time is actually beneficial (because excess withholding is an interest-free loan to the government, and owing a small amount means that you had full use of your money during the year) most taxpayers are more concerned with having less tax than necessary withheld, and would prefer a cushion to avoid a balance due on their 1040. For a peace of mind, if nothing else, being over-withheld is better than being under-withheld. And many taxpayers have historically used a substantial tax refund as a form of “forced savings”. This is both an individual and a personal choice.

In Step 1 (of the W-4) you enter your name, address, Social Security number, and filing status. There is no longer the option to claim “Married, but withhold at higher Single rate”. And the new W-4 includes the Head of Household status option, which was not on the old W-4.

As a point of information – you should claim “Head of Household” status on your W-4 only if you file your tax return each year as a Head of Household. So even though some people may consider themselves a “head of household”, the IRS may not. For IRS purposes a “household” does not consist of one person. There are very strict and specific rules for this filing status. Perhaps the best (but not the only) example of what the IRS considers a true “Head of Household” is a single parent with a dependent child.

Step 2 of the new W-4 finally recognizes the possibility that the job for which the W-4 is being submitted may not be the taxpayer’s only source of income, especially if he or she is married. If you have more than one job, or you are married and your spouse also has a job, check the box at item (c) in Step 2.

The complexity of the new W-4 lies in the “Multiple Jobs Worksheet” on Page 3 of the W-4 packet. Be careful when using this worksheet – it can very likely have your head spinning.

If you are using withholding as savings, do not make any entries in Step 3 for any dependents you are claiming. If this is not an issue, as a safety matter claim only half the number of actual dependents – if you have two children under age 17 claim only $2,000 here for one dependent; if you have two children age 17 or older claim only $500.
For a married couple only the spouse with the higher W-2 income
should claim any amount for dependents.

If you are married and both spouses work and one or both of the spouses has a second job neither of you should claim anything for dependents in Step 3.

Most definitely include any taxable non-W-2 income on line 4(a) in Step 4. This includes interest and dividends, capital gains, K-1 pass-through income, net self-employment income from Schedule C and any amounts that would be included on Line 8 of Form 1040 Schedule 1.
You can use your 2018, or starting in January the 2019, tax return as a guide for completing this Section. If you are receiving IRA, Pension or Social Security income you do not have to include this income here. You can request a specific percentage be withheld for federal income tax for these sources – and you should have federal income tax withheld from each source.

It is my recommendation that you do not include anything for “Deductions” on line 4(b) of Section 4 – even if you will be able to itemize or are entitled to any additional deductions. Here is another opportunity to provide a cushion.

As for entering any “Extra withholding” on line 4(c) – on the initial 2020 W-4 filing you can leave this blank. If after a month of withholding under the new W-2 you think you may need more withheld you can submit another W-4 with the same entries you made on the original but adding an additional amount on 4(c). After your 2019 return is filed (SolidTaxSolutions.com) you may want to submit a revised W-4.

Note: It is very important that you keep a copy of every 2020 Form W-4 you give to an employer for your records.

Looking at the form there is no place on the form for an employee to indicate “EXEMPT”, as there was on the old W-4. Dependent children with summer and after-school jobs do not need to have any income tax withheld. However, the instructions tell you to write ‘EXEMPT’ on Form W-4 in the space below Step 4(c). Do not enter anything in Steps 2 and 3 or elsewhere in Step 4.

While the 2020 Form W-4 is more involved, I believe it is actually better than the old method of calculating withholding, especially under the Tax Cut and Jobs Act.

For those of you have NYS income tax withholding, NY’s equivalent to the IRS’ W-4 is the IT-2104-Employee’s Withholding Allowance Certificate. You can view and download that NYS form IT-2104, for 2020, right ——> here.

Finally, if you are receiving a pension and would like to make a change to the amount of federal income tax that is being withheld (or to start having federal income tax withheld) from your pension there is a form for that too. The name of that form is: W-4P – Withholding Certificate for Pension or Annuity Payments. If you would like to see the W-4P form for 2020 or use this form to make changes to your withholdings from your pension you can view and download that form —–> here.

Bruce

________________________________________________________________________

Bruce – Your Host at The Tax Nook

Our Firm’s Website: SolidTaxSolutions.com

Categories: Business, Income Tax, Tax Return Filing, Taxes in the News Tags: W-2, W-4, Withholding

The Government Shutdown and the IRS! UPDATE: 1/8/2019

Bruce - Your Host at The Tax Nook January 8, 2019 No Comments

Hello again everyone! Since writing my prior article concerning the effect on the IRS resulting from the ‘government shutdown’ (BTW, you can read that article by clicking here) the IRS late yesterday (Monday, January 7th) has finally announced that they will begin processing tax returns on January 28th (a Monday). Hence that will be the start of ‘Tax Season’.

As usual, the filing deadline will be April 15th (a Monday) for most people. Taxpayers in Maine, Massachusetts and the District of Columbia will be the exception with the filing deadline to be April 17th due to local holidays.

The IRS plans to release details on it operational plans in the coming days, but did report that a significant portion of its furloughed employees will be recalled.

Finally, the Treasury Department and the Office of Management and Budget (OMB) have agreed that the IRS can issue tax refunds during a prolonged government shutdown. However, as a reminder, the IRS cannot issue refunds to those claiming the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC) before mid-February.

Stay Tuned!

Bruce @

Solid Tax Solutions (SolidTaxSolutions.com)

(845) 344-1040

☛We are open year round: Government shutdown or no Government shutdown!☚

____________________________________________________________________

Bruce – Your Host at The Tax Nook

Our Firm’s Website: SolidTaxSolutions.com

Other Social Media Outlets: Facebook.com/SolidTaxSolutions.

Twitter: Twitter.com/@SolidTax1040 (BTW, We Follow-Back).

Categories: Hudson Valley NY, Income Tax, Middletown NY, Orange County NY, Tax Law, Tax Return Filing, Taxes in the News

The Government Shutdown and the IRS!

Bruce - Your Host at The Tax Nook December 28, 2018 No Comments

So, now that Christmas is over and Santa Claus has made all of his visits you may be wondering if the government shutdown will affect the IRS.

Well, as you know the government is officially on shutdown–or actually on a partial shutdown. There are a number of functions which are relatively unaffected, such as the court system, for one reason or another, but most departments have contingency plans. Most IRS employees are considered nonessential and are going on furlough. That may be good news for someone anticipating an audit, but not if you have a question for the IRS.

How serious the shutdown is for the IRS will depend on the length of time it continues. Much more than a week and plans will change. Here are some of the functions still staffed under the short-term contingency plan:

Completion and testing of the upcoming Filing Year programs
Electronic returns processed systemically up to the point of refunds
Processing paper tax returns through batching
Processing remittances
Processing disaster relief transcripts
Continuing IRS’s computer and accounting operations to prevent data loss
Protection of statute expiration, bankruptcy, liens and seizure cases
Upcoming tax year forms design and printing
Maintain criminal law enforcement and undercover operations

Some examples of functions that are non-excepted activities and will be on hold:

Service center processing after the point of batching (e.g., data transcription, error resolution)
Issuing refunds
Processing non-disaster relief transcripts, income verification express service/return and income verification services
Processing amended tax returns
Most Headquarters and administrative functions not related to the safety of life and protection of property
All audit functions, examination of returns, and processing of non-electronic tax returns that do not include remittances
Non-automated collections
Legal counsel
Taxpayer services such as responding to taxpayer questions (call sites) (during Non-Filing Season)
Information systems functions (except as necessary to prevent loss of data in process and revenue collections)
Planning, research, and training and development activities

So as you can see, certain basic functions will continue. But if you’re looking for answers to questions, you’ll probably have to look elsewhere. If the furlough approaches the start of the filing season, which is just past the middle of January, it’s likely the IRS will have a problem adhering to the above schedule. Rest assured, it’s highly unlikely the filing deadlines will be extended.

Bruce @

Solid Tax Solutions (SolidTaxSolutions.com)

(845) 344-1040

☛We are open year round: Government shutdown or no Government shutdown!☚

____________________________________________________________________

Bruce – Your Host at The Tax Nook

Our Firm’s Website: SolidTaxSolutions.com

Other Social Media Outlets: Facebook.com/SolidTaxSolutions.

Twitter: Twitter.com/@SolidTax1040 (BTW, We Follow-Back).

Categories: Income Tax, Tax Audit, Tax Debt, Tax Return Filing, Taxes in the News

The IRS Gives Insight into Entertainment Expenses (Hint: Can You Say Bye-Bye?)

Bruce - Your Host at The Tax Nook November 23, 2018 No Comments

Hello everyone! Over the past several months I have been heavily asked questions by various business people about how the new tax laws (officially named the Tax Cuts and Jobs Act) will effect their businesses and specifically about business entertainment and its deductibility for taxes.

So, I thought that it would be helpful to address how business entertaining will be handled, for tax purposes, in tax years 2018 and beyond (or until Congress makes changes to the ‘new’ tax law effecting business entertaining).

Take note, that if you would like to learn more about the new tax law (or would like a refresher) I have written five articles giving a more in-depth look at the new tax law. You can read Part 1 here.

So, the rules surrounding business meals and entertainment have been complex for some time. It’s not so much what’s deductible and what isn’t, it’s the record keeping associated with the meals that is challenged most often by the IRS. You can only deduct 50% of the cost of most business meals and, in the past, entertainment. (There are some limited exceptions to the 50% rule for business meals).

The Tax Cuts and Jobs Act (TCJA), passed in 2017, generally disallows a deduction for expenses with respect to entertainment, amusement, or recreation. Entertainment has been defined to be any activity which is of a type generally considered to constitute entertainment, amusement, or recreation such as entertaining at night clubs, cocktail lounges, theaters, country clubs, golf and athletic clubs, or sporting events. The term “entertainment” may include an activity, the cost of which is claimed as a business expense by the taxpayer, which satisfies the personal, living, or family needs of any individual, such as providing food and beverages, a hotel suite, or an automobile to a business customer or the customer’s family. The term “entertainment” does not include activities which, although satisfying personal, living, or family needs of an individual, are clearly not regarded as constituting entertainment, such as (a) supper money provided by an employer to an employee working overtime, (b) a hotel room maintained by an employer for lodging of employees while in business travel status, or (c) an automobile used in the active conduct of trade or business even though also used for routine personal purposes such as commuting to and from work (but other rules apply in this situation).

Unfortunately, the TCJA didn’t specifically address the deductibility of expenditures for business meals. It seemed clear that meals out-of-town on a business trip or at a business convention were still deducible (subject to the 50% rule). But the question of whether or not taking a client to lunch was still deductible was unanswered because that can be construed as entertainment. The IRS has just issued some guidance, in the form of Notice 2018-76 (which you can read right here) in explaining its position on the issue. The notice also announced the IRS intends to publish proposed regulations which will discuss the deductibility of certain business meals. Until the proposed regulations are effective, taxpayers may rely on Notice 2018-76 for guidance.

Under prior law, entertainment expenses such as a ball game, theater tickets, etc. would be deductible only if the taxpayer could show the item was directly related to the active conduct of the taxpayer’s trade or business (“directly related” exception) or in the case of an item directly preceding or following a substantial and bona fide business discussion (including business meetings at a convention or otherwise), that the item was associated with the active conduct of the taxpayer’s trade or business (“business discussion” exception).
Example–The directly related exception applies if you take a client out to lunch or dinner and discuss business during the meal. However, the IRS does make a distinction between a meal at a restaurant and a meal at a facility that wouldn’t be conducive to a business discussion. For example, having dinner at a pub with entertainment. (But that might qualify under the second exception).

Example–The business discussion exception applies if you have a bona fide business meeting and thereafter take the client for a quiet business meal. For example, you drop in on a client to show him new services your company offers. You’re discussing business from three in the afternoon to five. You take the client out for a business meal, but don’t discuss any business at dinner.

The new law doesn’t change the definition of entertainment. The IRS has noted that the legislative history of the TCJA clarifies that taxpayers generally may continue to generally deduct 50 percent of the food and beverage expenses associated with their trade or business. The IRS intends to publish proposed regulations clarifying when business meal expenses are nondeductible entertainment expenses and when they are 50 percent deductible expenses. Until the proposed regulations are effective, taxpayers may rely on the guidance in Notice 2018-76.

Taxpayers may deduct 50 percent of an otherwise allowable business meal if:

The expense is an ordinary and necessary expense, paid or incurred during the taxable year in carrying on a trade or business;
The expenses is not lavish or extravagant under the circumstances;
The taxpayer, or an employee of the taxpayer, is present at the furnishing of such food or beverages;
The food and beverages are provided to a current or potential business customer, client, consultant, or similar business contact; and
In the case of food and beverages provided during or at an entertainment activity, the food and beverages are purchased separately from the entertainment, or the cost of the food and beverages is stated separately from the cost of the entertainment on one or more bills, invoices, or receipts.

Notice 2018-76 also says that the entertainment disallowance rule may not be circumvented through inflating the amount charged for food and beverages.

Requirements 1, 2, 3, and 4 above are not totally new. But, because of the overall new restrictions on entertainment, they may get closer scrutiny. The third item, requiring the taxpayer or an employee to be present is unlikely to cause a problem. But, you should be aware that you can’t just tell a customer to take his or her spouse with them to a local restaurant and put it on your tab and still get a 50 percent deduction.
Example–Bob invites Michael and Joseph, both customers of Bob’s company to a round of golf. After the game Bob buys lunch for the three of them at the golf club. The cost of the round of golf including any associated fees is entertainment and not deductible. The cost of lunch for the three, assuming all the other requirements are met, is deductible, subject to the 50 percent rule.

Example–Cindy invites Peter and Paul, both vendors for Cindy’s company to a football game. The company maintains a suite at the stadium and food and drinks are part of the cost of the suite. Since the food and drinks are not separately stated, none of the expense is deductible. If the food and drinks were separately billed, they would be 50% deductible.

While the notice answers some of the big questions, there are many nuances that it doesn’t. Many may be addressed in forthcoming regulations. The fact that entertainment is no longer deductible will affect trips on the company aircraft, deductions at country clubs, etc. The IRS may concentrate on finding any such disguised deductions when auditing 2018 and later year returns. Heavier scrutiny of meals could also be an expected consequence.

———–>Give Solid Tax Solutions (SolidTaxSolutions.com) a call at (845) 344-1040 to discuss the new tax rules and how it will affect you.

Bruce

___________________________________________________________________________________________________________________________

Bruce – Your Host at The Tax Nook

Our Firm’s Website: SolidTaxSolutions.com

Other Social Media Outlets: Facebook.com/SolidTaxSolutions.

Twitter: Twitter.com/@SolidTax1040 (BTW, We Follow-Back).

Categories: Business, Income Tax, Tax Law, Tax Return Filing, Taxes in the News

Four States Sue the IRS Regarding the Cap on the State and Local Tax Deduction (SALT)

Bruce - Your Host at The Tax Nook July 21, 2018 No Comments

Well, well, well, four states are not taking the new (2018) cap on state and local taxes lying down.

New York, Connecticut, Maryland and New Jersey have filed a lawsuit against the IRS, the Department of the Treasury, and the United States of America seeking injunctive relief to invalidate the new $10,000 cap on the federal tax deduction for state and local taxes (SALT).

The lawsuit argues that the SALT deduction is essential to prevent the federal tax power from interfering with the states’ sovereign authority to make their own choices about whether and how much to invest in their own residents businesses, infrastructure and more. They note that the SALT deduction has been available since 1861.

The states make three claims of unconstitutionality that the SALT cap violates the 10th Amendment (states’ rights), that it violates the 16th Amendment (federal power to tax incomes) and that it violates Article I, Section 8 (Congress’s power to tax).

For more on the effect of the new $10,000 cap take a look at one of my prior articles here.

Just in case you are curious and would like to read the lawsuit 😂 you can take a look at it right here.

If you need help with your SALT (or other tax items), don’t be shy, just reach out to us (Solid Tax Solutions) at
(845) 344-1040 ☛ year round.

$$$

_____________________________________________________________________________________________________________________

Bruce – Your Host at The Tax Nook

Our Firm’s Website: SolidTaxSolutions.com

Other Social Media Outlets: Facebook.com/SolidTaxSolutions.

Twitter: Twitter.com/@SolidTax1040 (BTW, We Follow-Back).

Categories: Hudson Valley NY, Income Tax, Middletown NY, Orange County NY, Real Estate, Taxes in the News

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