Click on link to see details.

June 28, 2021

Re: Important changes to the child tax credit; please contact our office

Recently, there were changes made to the child tax credit that will benefit many taxpayers. As part of the American Rescue Plan Act that was enacted in March 2021, the child tax credit:

• Amount has increased for certain taxpayers
• Is fully refundable (meaning you can receive it even if you don’t owe the IRS)
• May be partially received in monthly payments

The new law also raised the age of qualifying children to 17 from 16, meaning some families will be able to take advantage of the credit longer.

The IRS will pay half the credit in the form of advance monthly payments beginning July 15. Taxpayers will then claim the other half when they file their 2021 income tax return.

Though these tax changes are temporary and only apply to the 2021 tax year, they may present important cashflow and financial planning opportunities today. It is also important to note that the monthly advance of the child tax credit is a significant change. The credit is normally part of your income tax return and would reduce your tax liability. The choice to have the child tax credit advanced will affect your refund or amount due when you file your return. To avoid any surprises, please contact our office.

Qualifications and how much to expect

The child tax credit and advance payments are based on several factors, including the age of your children and your income.

• The credit for children ages five and younger is up to $3,600 –– with up to $300 received in monthly payments.
• The credit for children ages six to 17 is up to $3,000 –– with up to $250 received in monthly payments.

To qualify for the child tax credit monthly payments, you (and your spouse if you file a joint tax return) must have:

• Filed a 2019 or 2020 tax return and claimed the child tax credit or given the IRS your information using the non-filer tool
• A main home in the U.S. for more than half the year or file a joint return with a spouse who has a main home in the U.S. for more than half the year
• A qualifying child who is under age 18 at the end of 2021 and who has a valid Social Security number
• Income less than certain limits

You can take full advantage of the credit if your income (specifically, your modified adjusted gross income) is less than $75,000 for single filers, $150,000 for married filing jointly filers and $112,500 for head of household filers. The credit begins to phase out above those thresholds.

Higher-income families (e.g., married filing jointly couples with $400,000 or less in income or other filers with $200,000 or less in income) will generally get the same credit as prior law (generally $2,000 per qualifying child) but may also choose to receive monthly payments.

Taxpayers generally won’t need to do anything to receive any advance payments as the IRS will use the information it has on file to start issuing the payments.

IRS’s child tax credit update portal

Using the IRS’s child tax credit and update portal, taxpayers can update their information to reflect any new information that might impact their child tax credit amount, such as filing status or number of children. Parents may also use the online portal to elect out of the advance payments or check on the status of payments.

The IRS also has a non-filer portal to use for certain situations.

Let us help you.

With any tax law change, it’s important to revisit your full financial roadmap. We can help you determine how much credit you may be entitled to and whether advance payments are appropriate. How you choose to receive the credit (partially advanced via monthly payments or solely on your next year’s return) could have many impacts to your financial plans.

Please contact our office today at 859-635-2077 to discuss your specific situation. As always, planning ahead can help you maximize your family’s financial situation and position you for greater success.

Sincerely,

Bezold Tax & Accounting Services, LLC

As the coronavirus (COVID-19) continues to affect local communities and global economies, Bezold Tax & Accounting Services, LLC remains committed to serving your tax and financial planning needs. As part of this commitment, we want to make you aware of key tax provisions impacting businesses contained in the year-end coronavirus relief legislation, known as the Consolidated Appropriations Act, 2021 (H.R. 133), that was signed into law on Dec. 27, 2020.

Business Clients – Regarding Forgivable PPP Loans and Employee Retention Tax Credit.

 As the coronavirus (COVID-19) continues to affect local communities and global economies, Bezold Tax & Accounting Services, LLC remains committed to serving your tax and financial planning needs. As part of this commitment, we want to make you aware of key tax provisions impacting businesses contained in the year-end coronavirus relief legislation, known as the Consolidated Appropriations Act, 2021 (H.R. 133), that was signed into law on Dec. 27, 2020.

 Payroll Protection Program (PPP) Round 2

Businesses may qualify for first and/or second draw of PPP. If you did not apply for first draw or were originally denied, you may qualify if your business has been negatively impacted by COVID-19. Self-employed business owners may qualify even if business doesn’t have employees. The first draw for such a business would be based on 2019 or 2020 Schedule C net income. If your business did receive a first draw on PPP 1, you may qualify for a second draw if your business experienced a reduction in gross receipts of 25% in any quarter of 2020 compared to same quarter of 2019 and has already used or will use 100% of first draw funds. Borrowers may be eligible for 100% loan forgiveness if they meet specific requirements.

 Employee Retention Tax Credit

The new law extends the employee retention tax credit (ERTC sometimes referred to as ERC) through June 30, 2021. It also expands the ERTC. A noteworthy modification provides that employers who receive PPP funds may still qualify for the ERTC with respect to wages that are not paid with forgiven PPP proceeds. Employers are now able to claim the ERTC retroactively for 2020. This would entail filing amended Form 941 payroll tax returns, but may result in substantial refunds.

We at Bezold Tax and Accounting Services are committed to keeping you our clients informed of any new opportunities during this trying time. Please contact our office to discuss your circumstances in more detail.

There are many other provisions that benefit businesses.  Please visit the Newsletter page on our website www.bezoldtax.com to learn more and contact us to discuss your circumstances in more detail.

 

Here we go again! Seems like we just finished filing 2019 returns and ready, set, go for 2020.

We have learned a lot this year! And, we face 2021 with great optimism. The last few months have been spent upgrading and learning new ways to communicate with you as our main priority. As you are aware, late the filing season everyone's world was rocked with COVID 19. Ours included. We had to maximize safety precautions to keep both you and us safe and still prepare accurate and timely tax returns. Like doing a 360 in the middle of an ocean!

BEZOLD TAX AND ACCOUNTING SERVICES, LLC

7817 Alexandria Pike

P O Box 382

ALEXANDRIA, KY 41001

Phone: 859-635-2077

Fax: 859-635-9118

Janet@bezoldtax.com

January l, 2021

Here we go again! Seems like we just finished filing 2019 returns and ready, set, go for 2020.

We have learned a lot this year! And, we face 2021 with great optimism. The last few months have been spent upgrading and learning new ways to communicate with you as our main priority. As you are aware, late the filing season everyone's world was rocked with COVID 19. Ours included. We had to maximize safety precautions to keep both you and us safe and still prepare accurate and timely tax returns. Like doing a 360 in the middle of an ocean!

I think we got it. Some of you have already been introduced to our "Verlfyle" program. It is a secure messaging program to send and receive personal information. Your link is forever and you can upload 2020 information to this program. The information is delivered directly to us. For those who are not set up with "Verifyle" and would like to be, please call the office and we will set you up. Please DO NOT send personal Information over regular email. It is not safe.

We added phone lines and the ability to conduct "Zoom" meetings. We miss our personal meetings with you and did not want to lose the ability to review your return, answer your questions and concerns, and conduct tax planning. It isn't perfect but it has proven to be helpful.

With all of the turmoil, some of you have not picked up your 2019 tax information. We have it here! Therefore, you do not have your "envelope" for 2020 Information or the check-off list, We will accept any envelope! And, we have included a list of "Documents most often not included" with your tax information that usually delay the processing of returns. Rule of thumb for all information is if it says "Tax Document", please Include. And if you're not sure if we need it, include it. We would rather have it and not need it than need it and not have it. Each and every one of you do a tremendous job of gathering your information, and for this, we are most grateful.

Following are new legislation and things to expect on your 2020 tax returns. Also, changes at Bezold Tax and Accounting to serve you our most precious asset.

Be Well and Safe!

Janet

DOCUMENTS TO REMEMBER:

Soon you will be receiving and want to gather for your tax returns: Forms W-2, wage and tax statements; Forms 1099-MISC; 1099NEC (new this year for Non-employee Contract work); All Income Documents: 1099NT; 1099B; 1099DIV•, 1099R just to name a few. Sales of Stock require a Cost Basis. This is what you actually paid for the stock, usually it is listed on the statement but purchases before 2011 the owner of the stock would need to provide.

Form 1099SA — Health Savings Account Distributions along with a statement that all distributions were used for qualified Health cost.

Form 1099-T Tuition Statement for College Students. To maximize your College Credit it is beneficial for us to complete the students and the parent's returns. Also if you paid for books and fees separately please note with your information.

Form 1099-Q for those who used distributions from a "College Plan" for Tuition and fees please include this document. It can be taxable income and we need this form to complete worksheets to prove non-taxable.

New Baby! ! Congratulations, please remember to include a copy of the Social Security Card and Birthdate.

Copy of all newly issued Driver' s License that may have expired In 2020.

For our retirees, please include the pink and grey Social Security Statement received in January.

A question on the return is "Did you at any time during 2020, receive, sell, send, exchange or otherwise acquire any financial interest in any virtual currency? YES NO Please circle one. If you have circled YES, we will need the information included with your documents. Thank You.

This was a big year for unemployment benefits. Unemployment is taxable income so please include the tax document for unemployment received for 2020.

Notice 1444 — this is new this year, see information later In the newsletter.

You may have made Estimate Tax Payments during the year. Please include the date and amount -of each estimated payment separated by Federal and State. If you have them, please include the canceled checks with our information. Remembering the one made in January 2021 if for 2020 tax year and the one made in January 2020 was for 2019 tax year.

It is not too soon to be taking steps to gather the vital tax information we will need to ensure you file both a complete and accurate tax return and to pay the lowest legal amount of tax. Questions? Call 859-635-2077

APPOINTMENTS: We are forced to re-think appointments. During this uncertain time, we are asking for you to brmg in your tax information and leave with the front desk. Please have it contamed in an envelope with your name, a good phone number, and email address. We will notify you when we start the return and if we have any questions. Once we finish the return, we will set up either a zoom meeting or phone call to go over the return with you. We have enhanced software that allows for virtual signatures. We will also accommodate clients who do not have internet access for signatures. We realize this may not be ideal and we sincerely appreciate everyone's patience and cooperation.

For those who cannot drop off during business hours, we have a secure drop box next to the garage door in the brick. We will notify you that we have received your information so you do not worry.

We are concemed about everyone's safety and want to do everything we can to follow guidelines to prevent the spread of the "Big Germ" (direct quote from my great-granddaughter). We now have the promise of a vaccine to fight COVID-19 and hopefully we can see a bright light at the end of the tunnel. Again, thank you all for your understanding and cooperationa Prayers for all who have been affected by the virus and wishes for a full recovery

RETURNS: With the ability of sending you a PDF of your return, please note with your information If you prefer a PDF —OR- PAPER copy.

Bezold Tax and Accounting was voted Best Accountmg/CPA Services of NKY! We were recognized in the Best of INKY Magazine. Thank you we are honored and humbled with the award.

WEBSITE: Please refer to our website for complete information of Legislative updates. We will be posting a monthly newsletter for Individuals and one for businesses. Bezoldtax.com

2020 WHAT TO EXPECT

RECOVERY REBATE CREDIT - New in 2021, those who didn't receive an Economic Impact Payment (stimulus check) may be able to claim the Recovery Rebate Credit. Taxpayers may be able to clann the Recovery Rebate Credit if they met the eligibility criteria in 2020 and they didn't receive an EIP In the spring of 2020, or their was less than it should have been. For instance, your income was less in 2020 than it was on the return they used to calculate your payment or you added a child 111 2019 or 2020 that was not included with your EIP payment. These adjustments can be made on your 2020 return and you Will receive the credit as an additional refund.

This EIP is nontaxable income, but we must report the amount that you received. You will need Notice 1444, which was mailed to you at the time of the payment. Most taxpayers Will not have this; it wasn't marked as a tax document. If you can bring in a bank statement or check stub of what you received, we can figure the credit. If you do have the Notice 1444, please include with your tax information.

End of December another Stimulus payment went out to qualifying taxpayers. Please list this one separate from the first one.

REFUNDS: Although the IRS issues most refunds in less than 21 days, the IRS cautions taxpayers not to rely on receivmg a 2020 federal tax refund by a certain date, especially when making major purchases or paying bills. Some returns may require additional review and may take longer. Refunds that include the Earned Income Tax Credit or Additional Child Tax Credit should be available by the first week of March. By law, the IRS cannot issue refunds for people clanmng the EITC or ACTC before mid-February.

INTEREST PAYMENTS: Taxpayers who received a federal tax refund in 2020 may have been paid interest. The IRS sent interest payments to individual taxpayers who timely filed their 2019 federal Income tax returns and received refunds. Most interest payments were received separately from tax refunds. Interest payments are taxable and must be reported on 2020 income tax returns. In January 2021, the IRS will send a form 1099-INT, Interest Income, to anyone who received interest totalmg at least $10.00

STANDARD DEDUCTION: The Standard deduction for married filing jointly rises to $24,800, for single taxpayers and married individuals filing separately $12,400, and for head of household status $18,650

ITEMIZING DEDUCTIONS: The CARES act allows a $300 "above-the-line" deduction for cash contributions to charity if you take the standard deduction when you file in 2021. For those who itemize, the law lifts the 60% of adjusted gross income limitation, on cash contributions. Individuals can elect to deduct donations up to 100% of their 2020 income. Contributions must be made In cash (check, cash, and credit card) to a public charity, The unlimited amount is not applicable to private foundations nor to gifts of appreciated stock or Donor-Advised Funds.

The exclusion for Medical Expenses in 2020 is 7.5% of the Adjusted Gross Income. If your income is $100,000, the first $7 ,500 in Medical is not deductible.

RETIREMENT WITHDRAWAL: Waiver of the Early Withdrawal Penalty on up to $100,000 withdrawal from IRAs and Defined Contribution Plans such as 401(k)'s made between January 1 and December 31, 2020 by a person who or whose family is infected with the Coronavirus or they are economically harmed. Rules are complex and we should discuss.

Required Minimum Distributions, RMDs, otherwise required for 2020 from 401(k) plans and IRAs are waived, meaning you do not have to take them in 2020. This includes distributions that would have been required by April 1, 2020 due to the account owner's having turned age 70 ¹/2 in 2019.

CAPTIAL GAINS: Income thresholds for long-term capital gains rates also increased. Single and married filing separately taxpayers with income up to $40,000, up to $80,000 for married filing jointly, and up to $53,600 for Head of Household can experience a 0% Long Term Capital Gains rate. The rate then goes to 15% and 20% as Income thresholds increase

ESTATES AND GIFTS: The annual exclusion for gifts is $15,000 for calendar 2020, the same as it was for calendar 2019

BUSINESS NEWS

The CARES Act instituted an Employee Retention Credit that an employer can qualify for a refundable credit against generally the employer's 6.2% portion of the social security payroll tax for 50% of certain wages paid to employees during the COVD-19 crisis.

The most notable provision was the section on the Paycheck Protection Program loan. The IRS had repeatedly said that taxpayers who received debt forgiveness for spending the PPP loan on specific expenses could not take those expenses as deductions on their 2020 tax returns. Congress said otherwise and basically corrected the CARES Act which did not address this issue. CAA2021 now states that the expenses used to receive debt forgiveness would be allowed as deductions on the taxpayers return. We have been waiting for this ever since they issued the loans in the spring of 2020, For those who we are tracking and monitoring expenses, we can now complete the loan forgiveness application as soon as the banks issue the revised application.

Consolidated Appropriations Act, 2021 signed into law 12-27-2020 provides additional aid to small businesses Including PPP-2 (Payroll Protection Program) and EIDL (Economic Injury Disaster Loan)-The requirements for obtaining these are more restricted than original ald provided through the CARES Act. We can help you calculate if you are eligible. You can call for specific details if you want to apply.

NET OPERATING LOSSES (NOLS) have been liberalized. The 2017 Tax Cuts and Jobs Act limited NOL's arising after 2017 to 80% of taxable income and eliminated the ability to carry NOL'S back to prior tax years. For NOL's arising in tax years beginnina before 2021, the CARES Act allows taxpayers to carryback 100% of NOL's to the prior five tax years, effectively delaying for carrybacks the 80% taxable Income limitation and carryback prohibition until 2021. NOL carryforwards are also liberalized. For NOL's m tax years beginning before 2021 taxpayers can take an NOL deduction equal to 100% of taxable income, rather than the present 80%.

This has been a year of change, for just about everyone, both business and personal. We have only scratched the surface of the results of the new legislation and the CARES Act. We have been in seminars for the most part since October 15^th and still getting updates.

We look forward to working with you with your taxes for 2020 and tax planning for changes that may occur in 2021. Our clients are planners and we Invite the chance to travel that road with you. Allow us to serve you,

ON THE HOME FRONT:

We are very excited to welcome to our Bezold Tax and Accounting Family Donna McClure and Linda Espelage-Scaggs.

Donna McClure an EA is a long-time friend of mine and very experienced in tax for over 30 Years. Donna is married to her long time love of her life Mac and has 3 grown children, all married with 8 Grand Children. It's a new day every day! And Donna enjoys every minute, We are very excited you have added us to your family and can't wait to kick off the tax season with you!

Linda Espelage-Scaggs is an EA who also holds an accounting degree. Linda is a selfproclaimed "tax nerd" and has extensive experience in tax and accounting. Linda lives in Pendleton County with her long-time soul mate Rusty. They have 6 children and 17 grandchildren. Now that's a Christmas to remember! Thank you for adding us to your family, Linda! Lookina forward to a great tax season!

Donna and Linda are new faces and we can't walt for all of you to meet them. You will find out very quickly how they complement our team with their knowledge and interest in helping each of you reach your goals and understand your taxes.

Debbie and Jeff are still empty nesters. I guess that's a good thing? They have enjoyed many outdoor bike rides this summer. Tyler and Haylee still reside in Florida and have pursued very successful careers. Tyler is getting back into the music industry a little, you can see his latest on https:/(www.youtube.com/user/tribetyler Kaitlyn is still in CA living the dream. She loves living close to the beach and the beautiful CA weather but still likes to visit us when she comes In town. Miss you!

Renee is learning all about virtual school! Laynie is now In the 4^th grade and little Kye is growing up too fast, Life surely has been different with all the hoops and new rules due to the Virus. Hopefully things get back on track for you Renee. Husband Shaun is still the best diesel mechanic in town.

Tina and Jimmy are down to one left in the house, but gaining a Grand Daughter in 2021! They are so excited. They look forward to spoiling her. Congratulations, Life will definitely change and you will love it! Just think after 3 boys you are finally gettmg a little girl!

Christy is commiserating with Renee. She has 3 girls in Virtual School. The internet is going wild. Carlee will be graduating High School this spring, Josie is a Freshman at Campbell County and Cassidy is in the 7^th grade at CC Middle School. Good Luck Girls! And hang in there Christy !

Haley is a very accomplished sophomore at NKU! Bringing the house down with great grades and sharing all of her expertise with us. We are so fortunate, her youth keeps us all young!

Thanks Haley!

Roger and Janet still living the dream! We welcomed our 2^nd Great Grand baby, Blakely Mae in August this year! Quinn's little sister and Andrew and Kayla's daughter. We celebrated a beautlful wedding of Grandson Brandon and Katie, good time had by all. Trevor and Madison are entrepreneurs of the year! It's all about the grandkids these days !

Wishing you a better 2021! Debbie, Renee, Tina, Christy, Haley, Linda, Donna, Roger and Janet

Filing Season Begins!

Filing Season Begins!

 

IRS Announces various dates related to tax season:  They will begin accepting Individual Income Tax returns on Friday February 12^th, 2021.  We can prepare and E-file prior to this date, the returns however, will not be accepted by IRS until this date.

The later date of accepting returns is a result of Congressional tax law changes in late December and IRS having to modify the forms and software to accommodate the changes.  Also, the Path Act requires IRS to hold refunds on returns claiming the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC) until at least February 15^th, allowing IRS to spend more time to detect and prevent fraud.  IRS anticipates starting to send out refunds from these returns the first week of March.

The due date for 2020 calendar year individual income tax returns is Thursday April 15^th, 2021.

We are ready, whenever you are! 

Dear Taxpayers:

Here is an overview of key provisions in the recent COVID relief legislation that affect individuals. The legislation is the COVID-related Tax Relief Act of 2020 (the "Act" or COVIDTRA) and the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (TCDTR), both of which are part of the Consolidated Appropriations Act, 2021.

January 14, 2021

Dear Taxpayers:

Here is an overview of key provisions in the recent COVID relief legislation that affect individuals. The legislation is the COVID-related Tax Relief Act of 2020 (the "Act" or COVIDTRA) and the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (TCDTR), both of which are part of the Consolidated Appropriations Act, 2021.

RECOVERY REBATE/ECONOMIC IMPACT PAYMENT

Direct-to-taxpayer recovery rebate. The Act provides for a refundable recovery rebate credit for 2020 that will paid in advance to eligible individuals, often automatically, early in 2021. (Code Sec. 6428A, as added by COVIDTRA Sec. 272) These payments are in addition to the direct payments/rebates provided for in earlier Federal legislation, the 2020 Coronavirus Aid, Relief, and Economic Security Act (CARES Act, PL 116-136, 3/27/2020), which were called Economic Impact Payments (EIP).

The amount of the rebate is $600 per eligible family member—$600 per taxpayer ($1,200 for married filing jointly), plus $600 per qualifying child. Thus, a married couple with two qualifying children will receive $2,400, unless a phase-out applies. The credit is phased out at a rate of $5 per $100 of additional income starting at $150,000 of modified adjusted gross income for marrieds filing jointly and surviving spouses, $112,500 for heads of household, and $75,000 for single taxpayers.

Treasury must make the advance payments based on the information on 2019 tax returns. Eligible taxpayers who claimed their EIPs by providing information through the nonfiler portal on IRS's website will also receive these additional payments.

Nonresident aliens, persons who qualify as another person's dependent, and estates or trusts don't qualify for the rebate. Taxpayers without a Social Security number are likewise ineligible, but if only one spouse on a joint return has a Social Security number, that spouse is eligible for a $600 payment. Children must also have a Social Security number to qualify for the $600-per-child payments.

Taxpayers who receive an advance payment that exceeds the amount of their eligible credit (as later calculated on the 2020 return) will not have to repay any of the payment. If the amount of the credit determined on the taxpayer's 2020 return exceeds the amount of the advance payment, taxpayers receive the difference as a refundable tax credit.

Advance payments of the rebates are generally not subject to offset for past due federal or state debts, and they are protected from bank garnishment or levy by private creditors or debt collectors.

Amount of payment. IRS has begun making payments of up to $600 to eligible taxpayers or up to $1,200 to married couples filing joint returns. Parents will get an additional $600 for each dependent child under age 17. Thus, a married couple with two children under 17 will get a $2,400 payment.

Who is eligible. U.S. citizens and residents are eligible for a full payment if their adjusted gross income (AGI) is under $75,000 for singles or marrieds filing separately, $112,500 for heads of household, and $150,000 for married couples filing jointly and surviving spouses. The recipient must not be the dependent of another taxpayer and must have a social security number that authorizes employment in the U.S.

Phaseout based on income. For individuals whose AGI exceeds the above thresholds, the payment amount is phased out at the rate of $5 for each $100 of income. Thus, the payment is completely phased out for single filers with AGI over $87,000 and for joint filers with no children with AGI over $174,000. For a married couple with two children, the payment will be completely phased out if their AGI exceeds $198,000.

Payments are nontaxable. The economic impact payment that you receive won't be included in your income for tax purposes. It won't cause you to owe tax or decrease your refund for 2020.

How to get a payment. The vast majority of people won't have to do anything to get an economic impact payment. IRS will calculate and send the payment automatically to those who are eligible.

If you've filed your 2019 tax return, IRS will use the AGI and dependents from that return to calculate the payment amount. The credit won't be allowed if the return doesn't include a valid identification number (typically, a social security number) for each individual for whom a credit is sought. Thus, for example, a joint return must include valid identification numbers for both spouses to get the full $1200 credit. A $600 credit is allowed if only one spouse provides a valid identification number, and no credit is allowed if neither spouse does so.

IRS will deposit the payment directly into the bank account reflected on the return. IRS has developed a web-based tool called Get My Payment, www.irs.gov/coronavirus/get-my-payment, for individuals to provide banking information to IRS, so that payments can be received by direct deposit rather than by check sent in the mail. The tool includes the date the payment is scheduled to be issued to the individual.

If you have not yet filed for 2019. The due date for 2019 individual income tax returns was July 15, 2020, or October 15 if an automatic extension of time was requested on Form 4868. Individuals who are required to file a return for 2019 and haven't done so should file the return as soon as possible. Doing so will help give IRS time to process and make all resulting economic impact payments before January 15, 2021 (the deadline for processing payments).

If you aren't required to file. If you receive social security, supplemental security income, social security disability income, railroad retirement, or veterans' compensation and pension benefits, and you aren't required to file a tax return, you don't have to file to receive a payment. IRS will generate an automatic payment using information from the Social Security Administration and the Department of Veterans Affairs. The payment will be made by direct deposit or paper check, in the same manner as the recipient's regular benefits.

If you aren't required to file a tax return and you don't receive any of the above payments, you can register to receive an economic impact payment by providing information on IRS's web-based Non-Filers: Enter Payment Info Here tool, www.irs.gov/coronavirus/non-filers-enter-payment-info.

Non-filers with dependent children; $600 payment. Non-filers who have a dependent child under age 17 must register their dependents on the Non-Filers: Enter Payment Info Here tool to receive the additional payment of $600 per child. Non-filers who receive the economic impact payment before registering a dependent child can still get the additional $600 payment by filing a 2020 income tax return on which the dependent is listed.

Pro-taxpayer changes to CARES Act Economic Impact Payment rules. As noted above, the CARES Act provided EIPs. 

The Act makes the following changes to the CARES Act EIP:

• Provides that the $150,000 limit on adjusted gross income before the credit amount starts to phase out, which, under the CARES Act, applied to joint returns, also applies to surviving spouses. (Code Sec, 6428(c)(1), as amended by Act Sec. 273(a)) This change may allow taxpayers who qualify to use the surviving-spouse filing status to claim a larger EIP on their 2020 returns.
• Makes the requirement to provide IRS with the taxpayer's identification number identical to the same requirement under the new rebate, described above under "Direct-to-taxpayer recovery rebate." (Code Sec. 6428(g), as amended by COVIDTRA Sec. 273(a))

DEDUCTIONS

$250 educator expense deduction applies to PPE, other COVID-related supplies. The Act provides that eligible educators (i.e., kindergarten-through-grade-12 teachers, instructors, etc.) can claim the existing $250 above-the-line educator expense deduction for personal protective equipment (PPE), disinfectant, and other supplies used for the prevention of the spread of COVID-19 that were bought after March 12, 2020. IRS is directed to issue guidance to that effect by Feb. 28, 2021. (COVIDTRA Sec. 275; Code Sec. 62(a)(2)(D)(ii))

7.5%-of-AGI "floor" on medical expense deductions is made permanent. The Act makes permanent the 7.5%-of-adjusted-gross-income threshold on medical expense deductions, which was to have increased to 10% of adjusted gross income after 2020.

The lower threshold will allow more taxpayers to take the medical expense deduction in 2021 and later years. (Code Sec. 213(a), as amended by Act Sec. 101)

Mortgage insurance premium deduction is extended by one year. The Act extends through 2021 the deduction for qualifying mortgage insurance premiums, which was due to expire at the end of 2020. The deduction is subject to a phase-out based on the taxpayer's adjusted gross income. (Code Sec. 163(h)(3)(E)(iv)(I), as amended by Act Sec. 133)

Above-the-line charitable contribution deduction is extended through 2021; increased penalty for abuse. For 2020, individuals who don't itemize deductions can take up to a $300 above-the-line deduction for cash contributions to "qualified charitable organizations." The Act extends this above-the-line deduction through 2021 and increases the deduction allowed on a joint return to $600 (it remains at $300 for other taxpayers). (Code Sec. 170(p), as added by Act Sec. 212(a)) Taxpayers who overstate their cash contributions when claiming this deduction are subject to a 50% penalty (previously it was 20%). (Code Sec. 6662(l), as added by Act Sec. 212(b))

Extension through 2021 of allowance of charitable contributions up to 100% of an individual's adjusted gross income. In response to the COVID pandemic, the limit on cash charitable contributions by an individual in 2020 was increased to 100% of the individual's adjusted gross income. (The usual limit is 60% of adjusted gross income.) The Act extends this rule through 2021. (Code Sec. 170(b)(1)(G), as amended by Act Sec. 213)

EXCLUSIONS FROM INCOME

Exclusion for benefits provided to volunteer firefighters and emergency medical responders made permanent. Emergency workers who are members of a "qualified volunteer emergency response organization" can exclude from gross income certain state or local government payments received and state or local tax relief provided on account of their volunteer services. This exclusion was due to expire at the end of 2020, but the Act made it permanent. (Code Sec. 139B, as amended by Act Sec. 103)

Exclusion for discharge of qualified mortgage debt is extended, but limits on amount of excludable discharge are lowered. Usually, if a lender cancels a debt, such as a mortgage, the borrower must include the discharged amount in gross income. But under an exclusion that was due to expire at the end of 2020, a taxpayer can exclude from gross income up to $2 million ($1 million for married individuals filing separately) of discharge-of-debt income if "qualified principal residence debt" is discharged. The Act extends this exclusion through the end of 2025, but lowers the amount of debt that can be discharged tax-free to $750,000 ($375,000 for married individuals filing separately). (Code Sec. 108(a)(1)(E), as amended by Act Sec. 114(a))

Extension of exclusion for certain employer payments of student loans.  Qualifying educational assistance provided under an employer's qualified educational assistance program, up to an annual maximum of $5,250, is excluded from the employee's income. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act, PL 116-136, 3/27/2020) added to the types of payments that are eligible for this exclusion, "eligible student loan repayments" made after Mar. 27, 2020, and before Jan. 1, 2021. These payments, which are subject to the overall $5,250 per employee limit for all educational payments, are payments of principal or interest on a qualified student loan by the employer, whether paid to the employee or a lender. The Act extends the exclusion for eligible student loan repayments through the end of 2025. (Code Sec. 127(c)(1)(B), amended by Act Sec. 120)

TAX CREDITS

Individuals may elect to base 2020 refundable child tax credit (CTC) and earned income credit (EIC) on 2019 earned income. If an individual's child tax credit (CTC) exceeds the taxpayer's tax liability, the taxpayer is eligible for a refundable credit equal to 15% percent of so much of the taxpayer's taxable "earned income" for the tax year as exceeds $2,500. And the earned income credit (EIC) equals a percentage of the taxpayer's "earned income." For both of these credits, earned income means wages, salaries, tips, and other employee compensation, if includible in gross income for the tax year. But for determining the refundable CTC and the EIC for 2020, the Act allows taxpayers to elect to substitute the earned income for the preceding tax year, if that amount is greater than the taxpayer's earned income for 2020. (Act Sec. 211(a))

Health coverage tax credit (HCTC) for health insurance costs of certain eligible individuals is extended by one year. A refundable credit (known as the health coverage tax credit or "HCTC") is allowed for 72.5% of the cost of health insurance premiums paid by certain individuals (i.e., individuals eligible for Trade Adjustment Assistance due to a qualifying job loss, and individuals between 55 and 64 years old whose defined-benefit pension plans were taken over by the Pension Benefit Guaranty Corporation). The HCTC was due to expire at the end of 2020, but the Act extended it through 2021. (Code Sec. 35(b)(1)(B), amended by Act Sec. 134)

New Markets tax credit extended. The New Markets credit provides a substantial tax credit to either individual or corporate taxpayers that invest in low-income communities. This credit was due to expire at the end of 2020, but the Act extended it through the end of 2025. Carryovers of the credit were extended, as well. (Code Sec. 45D(f)(1)(H), amended by Act Sec. 112(a))

Nonbusiness energy property credit extended by one year. A credit is available for purchases of "nonbusiness energy property"—i.e., qualifying energy improvements to a taxpayer's main home. The Act extends this credit, which was due to expire at the end of 2020, through 2021. (Code Sec. 25C(g)(2), amended by Act Sec. 141)

Qualified fuel cell motor vehicle credit extended by one year. The credit for purchases of new qualified fuel cell motor vehicles, which was due to expire at the end of 2020, was extended by the Act through the end of 2021. (Code Sec. 30B(k)(1), as amended by Act Sec. 142)

2-wheeled plug-in electric vehicle credit extended by one year. The 10% credit for highway-capable, two-wheeled plug-in electric vehicles (capped at $2,500) was extended until the end of 2021 by the Act. (Code Sec. 30D(g)(3)(E)(ii), amended by Act Sec. 144)

Residential energy-efficient property (REEP) credit extended by two years, bio-mass fuel property expenditures included. Individual taxpayers are allowed a personal tax credit, known as the residential energy efficient property (REEP) credit, equal to the applicable percentages of expenditures for qualified solar electric property, qualified solar water heating property, qualified fuel cell property, qualified small wind energy property, and qualified geothermal heat pump property. The REEP credit was due to expire at the end of 2021, with a phase-down of the credit operating during 2020 and 2021. The Act extends the phase-down period of the credit by two years—through the end of 2023; the REEP credit won't apply after 2023. (Code Sec. 25D(h), as amended by Act Sec. 148(a))

The Act also adds qualified biomass fuel property expenditures to the list of expenditures qualifying for the credit, effective beginning in 2021. (Code Sec. 25D(a), as amended by Act Sec. 148(b)).

DISASTER-RELATED CHANGES IN RETIREMENT PLAN RULES

10% early withdrawal penalty does not apply to qualified disaster distributions from retirement plans. A 10% early withdrawal penalty generally applies to, among other things, a distribution from employer retirement plan to an employee who is under the age of 59½. The Act provides that the 10% early withdrawal penalty doesn't apply to any "qualified disaster distribution" from an eligible retirement plan. The aggregate amount of distributions received by an individual that may be treated as qualified disaster distributions for any tax year may not exceed the excess (if any) of $100,000, over the aggregate amounts treated as qualified disaster distributions received by that individual for all prior tax years. (TCDTR Sec. 302(a))

Increased limit for plan loans made because of a qualified disaster. Generally, a loan from a retirement plan to a retirement plan participant cannot exceed $50,000. Plan loans over this amount are considered taxable distributions to the participant. The Act increases the allowable amount of a loan from a retirement plan to $100,000 if the loan is made because of a qualified disaster and meets various other requirements. (TCDTR Sec. 302(c)(3))

As always, we are here to assist in tax preparation and planning.  Your questions are important and as we approach the 2021 filing season we assure you your confidence in us is well-placed.

 

Your referral of us to a friend or a colleague is the greatest compliment you can pay.

 

Thank you for your loyalty.

 

The Bezold Tax and Accounting Team.

Dear Business Client:

The Consolidated Appropriations Act, 2021 (the CCA, 2021), signed into law on December 27, 2020, is a further legislative response to the coronavirus (COVID-19) pandemic. The CCA, 2021 includes--along with spending and other non-tax provisions and tax provisions primarily affecting individuals--the numerous business tax provisions briefly summarized below. The provisions are found in two of the several acts included in the CCA, 2021, specifically, (1) the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (the TCDTR) and (2) the COVID-related Tax Relief Act of 2020 (the COVIDTRA).

Dear Business Client:

The Consolidated Appropriations Act, 2021 (the CCA, 2021), signed into law on December 27, 2020, is a further legislative response to the coronavirus (COVID-19) pandemic. The CCA, 2021 includes--along with spending and other non-tax provisions and tax provisions primarily affecting individuals--the numerous business tax provisions briefly summarized below. The provisions are found in two of the several acts included in the CCA, 2021, specifically, (1) the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (the TCDTR) and (2) the COVID-related Tax Relief Act of 2020 (the COVIDTRA).

Tax provisions made permanent (without other changes). The TCDTR makes permanent without other changes (1) the railroad track maintenance credit and (2) the exclusion of the aging period in determining the mandatory interest capitalization period in producing beer, wine or distilled spirits.

Tax provisions extended (without other changes). The TCDTR extends the following tax credits without other changes: (1) the new markets tax credit, (2) the work opportunity credit, (3) the employer credit for paid family and medical leave that was provided by the 2017 Tax Cuts and Jobs Act (2017 TCJA), (4) the carbon sequestration credit, (5) the business energy credit (the ‘‘Code Sec. 48 credit’’) both as regards termination dates and phase-downs of credit amounts, (6) the credit for electricity produced from renewable resources (the ‘‘Code Sec. 45 credit’’) and the election to claim the Code Sec. 48 credit instead for certain facilities (but the phase-down of the amount of the Code Sec. 45 credit for wind facilities isn’t deferred), (7) the Indian employment credit, (8) the mine rescue team training credit, (9) the American Samoa development credit, (10) the second generation biofuel producer credit, (11) the qualified fuel cell motor vehicle credit as applied to businesses, (12) the alternative fuel refueling property credit as applied to businesses, (13) the two-wheeled plug-in electric vehicle credit as applied to businesses, (14) the credit for production from Indian coal facilities, and (15) the energy efficient homes credit.  

Additional provisions extended by the TCDTR without other changes are the following: (1) the exclusion from employee income of certain employer payments of student loans, (2) the 3-year recovery period for certain racehorses, (3) favorable cost recovery rules for business property on Indian reservations, (4) the 7-year recovery period for motor sports entertainment complexes, (5) expensing for film, television and live theatrical productions, (6) empowerment zone tax incentives except for the increased section 179 expensing for qualifying property and the deferral of capital gain for dispositions of qualifying assets, and (7) the exclusion from being personal holding company income for certain payments or accruals of dividends, interest, rents, and royalties from a related person that is a controlled foreign corporation.

Energy provisions. The TCDTR makes changes to energy provisions in addition to making them permanent or extending them.

The TCDTR adds ‘‘waste energy recovery property’’ to the types of property that qualify for the Code Sec. 48 credit (above). And the credit rate assigned is 30%. ‘‘Waste energy recovery property’’ is property (1) the construction of which begins before 2024, (2) that has a capacity of no more than 50 megawatts, and (3) generates electricity solely from heat from buildings or equipment if the primary purpose of that building or equipment isn’t the generation of electricity. But it doesn’t include property eligible for the Code Sec. 48 credit for cogeneration property unless the taxpayer doesn’t take the Code Sec. 48 credit for that property.

For wind facilities that are ‘‘qualified offshore wind facilities,’’ the TCDTR relaxes the rules under which wind facilities that are eligible for the Code Sec. 45 credit can, by election (see above), be eligible instead for the Code Sec. 48 credit.

The TCDTR makes permanent the energy efficient commercial buildings deduction. Additionally, the TCDTR indexes for inflation the per-square-foot dollar caps on the full and partial versions of the deduction. And the TCDTR provides that to the extent that deductibility depends on specified recognized energy efficient standards, the referred-to standards will be standards issued within two years of construction (rather than the standards bearing now-stale dates that applied under pre- TCDTR law).

Clarifications of tax consequences of PPP loan forgiveness. The COVIDTRA clarifies that the non-taxable treatment of Payroll Protection Program (PPP) loan forgiveness that was provided by the 2020 CARES Act also applies to certain other forgiven obligations. Also, the COVIDTRA clarifies that taxpayers whose PPP loans or other obligations are forgiven as described above, are allowed deductions for otherwise deductible expenses paid with the proceeds and that the tax basis and other attributes of the borrower’s assets won’t be reduced as a result of the forgiveness.

Waiver of information reporting for PPP loan forgiveness. The COVIDTRA allows IRS to waive information reporting requirements for any amount excluded from income under the exclusion- from-income rule for forgiveness of PPP loans or other specified obligations. Note: IRS had already waived information returns and payee statements for loans that, before enactment of the COVIDTRA, were guaranteed by the Small Business Administration under section 7(a)(36) of the Small Business Act.

Extensions and modifications of earlier payroll tax relief. The TCDTR extends the CARES Act credit, allowed against the employer portion of the Social Security (OASDI) payroll tax or of the Railroad Retirement tax, for qualified wages paid to employees during the COVID-19 crisis. Under the extension, qualified wages must be paid before July 1, 2021 (instead of January 1, 2021). Additionally, beginning on January 1, 2021, the credit rate is increased from 50% to 70% of qualified wages. and qualified wages are increased from $10,000 for the year to $10,000 per quarter. Many other rules are also relaxed. And the TCDTR makes some retroactive clarifications and technical improvements to the credit as initially enacted.

The COVIDTRA extends (1) the credits provided by the Families First Coronavirus Response Act (FFCRA) against the employer portion of OASDI and Railroad Retirement taxes for qualifying sick and family paid leave and (2) the equivalent FFCRA-provided credits for the self-employed against the self-employment tax. Under the extension of the employer credits, wages taken into account are those paid before April 1, 2021 (instead of January 1, 2021). Under the extension of the credits for the self employed, the days taken into account are those before April 1, 2021 (instead of January 1, 2021).

The COVIDTRA also makes retroactive clarifications of (1) the employer (but not self-employed equivalent) FFCRA paid leave credits that were extended as discussed above, (2) the exclusion of qualifying paid leave in calculating the employer portion of Railroad Retirement taxes and (3) and the increase in the amount of the FFRCA paid leave credits against the employer portion of Railroad Retirement taxes by the amount of the Medicare payroll taxes on qualifying paid leave. Additionally, the COVIDTRA directs IRS to extend the Presidentially ordered deferral of the employee’s share of OASDI and Railroad Retirement taxes. As first provided by IRS, the deferral was of taxes to be withheld and paid on wages and other compensation (up to $4,000 every two weeks) paid in the period from September 1, 2020 to December 31, 2020 so that the taxes were instead withheld and paid ratably in the period from January 1, 2021 to April 30, 2021. Under the deferral, the period over which the deferred-from-2020 taxes are ratably withheld and paid is extended to all of 2021 (instead of the four-month period ending on April 30, 2021).

Employee benefits and deferred compensation. The TCDTR provides that expenses for business-related food and beverages provided by a restaurant are fully deductible if they are paid or incurred in calendar years 2021 or 2022, instead of being subject to the 50% limit that generally applies to business meals. The TCDTR temporarily allows (1) carryovers and relaxed grace period rules for unused flexible spending arrangement (FSA) amounts, whether in a health FSA or a dependent care FSA, (2) the raising of the maximum eligibility age of a dependent under a dependent care FSA from 12 to 13 and (3) prospective changes in election limits set forth by a plan (subject to the applicable limits under the Code). 

With a view to layoffs in the current economic climate, the TCDTR relaxes rules that would otherwise cause a partial qualified retirement plan termination if the number of active participants decreases.

Because of market volatility during the COVID-19 pandemic, the COVIDTRA relaxes, if certain conditions are met, the funding standards that, if met, allow a defined benefit pension plan to transfer funds to a retiree health benefits account or retiree life insurance account within the plan. The CARES Act’s relaxed rules for ‘‘coronavirus-related distributions’’ are retroactively amended by the COVIDTRA to additionally provide that a coronavirus-related distribution that is a during-employment withdrawal from a money purchase pension plan meets the distribution requirements of Code Sec. 401(a).

And under a provision of narrow applicability, the TCDTR lowers to 55 years, from the usually applicable 59½ years, the age at which certain employees in the building or construction trades can, though still employed, receive pension plan payments under certain multiple employer plans without affecting the status of trusts that are part of the pension plans as qualified trusts.

Residential real estate depreciation. For tax years beginning after December 31, 2017, the TCDTR assigns a 30-year ADS depreciation period to residential rental property even though it was placed in service before January 1, 2018 (when the 2017 TCJA first applied the more-favorable 30-year period) if the property (1) is held by a real property trade or business electing out of the limitation on business interest deductions and (2) before January 1, 2018 wasn’t subject to the ADS.

Farmers’ net operating losses. The COVIDTRA allows farmers who had in place a two-year net operating loss carryback before the CARES Act to elect to retain that two-year carryback rather than claim the five-year carryback provided in the CARES Act. It also allows farmers who before the CARES Act waived the carryback of a net operating loss, to revoke the waiver.

Low-income housing credit. The TCDTR provides a 4% per year credit floor for buildings that aren’t eligible for the 9% per-year credit floor. (Both floors are alternatives to the calculation under which the per-year credit is generally a percentage, prescribed by IRS, that is intended to result in a credit that, in the aggregate over the 10-year credit period, has a present value of 70% of the qualified basis for certain new buildings and 30% of the qualified basis for certain other buildings.)

Life insurance. The TCDTR changes the interest rate assumptions that determine whether a contract meets the cash value and premium caps for qualifying as a life insurance contract. The change is to designated floating rates from the respective 4% and 6% rates fixed by prior law.

Disaster relief. The TCDTR includes several provisions targeted at ‘‘qualified disaster areas,’’ some of which affect individuals and some which affect businesses as described below. ‘‘Qualified disaster areas’’ are areas for which a major disaster was Presidentially declared during the period beginning on January 1, 2020 and ending February 25, 2021. The incidence period of the disaster must begin after December 27, 2019 but not after December 27, 2020. Excluded are areas for which a major disaster was declared only because of COVID-19.

The relief includes relief for retirement funds that consists of the following: (1) waiver of the 10% early withdrawal penalty for up to $100,000 of certain withdrawals by individuals living in a qualified disaster area and that have suffered economic loss because of the disaster (qualified individuals), (2) a right to re-contribute to a plan distributions that were intended for home purchase but not used because of a qualified disaster, and (3) relaxed plan loan rules for qualified individuals. Changes to plan amendment rules facilitate the relief.

The relief also provides to employers in the harder-hit parts of a qualified disaster area an up-to-$ 2,400-per-employee employee retention credit, subject to coordination with certain other employer tax credits. Generally, tax-exempt organizations can take it as a credit against FICA taxes.

Corporations are provided with relaxed charitable deduction rules for qualified-disaster-related contributions, and individuals are provided with relaxed loss allowance rules for qualified-disaster-related casualties.

The low-income housing credit is modified to allow, subject to various limitations, increases in the state-wide credit ceilings to the extent allocations are made to harder-hit parts of qualified disaster areas.

Excise taxes. The TCDTR makes various excise tax changes for beer, wine and distilled spirits. The TCDTR also provides that the temporary increase in the Black Lung Disability Trust Fund tax won’t apply to coal sales after 2021 (instead of after 2020). And the end of the liability imposed because of the Oil Spill Liability Trust Fund Rate is deferred until after 2025. Additionally, the alternative fuels credit against the diesel and special motor fuels tax is extended.

Food and Beverage No Longer 50% deductible for 2021 and 2022. You have probably heard that the recent stimulus legislation included a provision that removes the 50% limit on deducting business meals provided by restaurants in 2021 and 2022 and makes those meals fully deductible. Here are the details.

In general, the ordinary and necessary food and beverage expenses of operating your business are deductible. However, the deduction is limited to 50% of the otherwise allowable expense.

The new legislation adds an exception to the 50% limit for expenses for food or beverages provided by a restaurant. This rule applies to expenses paid or incurred in calendar years 2021 and 2022.

The use of the word "by" (rather than "in") a restaurant makes it clear that the new rule is not limited to meals eaten on the restaurant's premises. Takeout and delivery meals provided by a restaurant are also fully deductible.

It's important to note that, other than lifting the 50% limit for restaurant meals, the legislation does not change the rules for deducting business meals. All the other existing requirements continue to apply.  To be deductible:

• The food and beverages cannot be lavish or extravagant under the circumstances.
• You or one of your employees must be present when the food or beverages are
• This is defined as a current or prospective customer, client, supplier, employee,             engage or deal in your business.

If food or beverages are provided at an entertainment activity, either they must be purchased separately from the entertainment or their cost must be stated on a separate bill, invoice, or receipt. This is required because the entertainment, unlike the food and beverages, is nondeductible.

I will be pleased to hear from you at any time with questions about the above news or any other matters.

Very truly yours,

The Bezold Tax Team

The Internal Revenue Service is still working on the details of how it is going to help taxpayers that may have fallen for deceptive marketing that led them to improperly receive employee retention tax credits.

The Internal Revenue Service is still working on the details of how it is going to help taxpayers that may have fallen for deceptive marketing that led them to improperly receive employee retention tax credits.

Internal Revenue Service Commissioner Daniel Werfel said that the agency is still working to figure out the process of how to help those who have already received their ERC "and now realize they believe they received it inappropriately," including how to come forward preemptively before the IRS takes collection action against them, as well as "on settlement terms for paying back in a way we hope works out for those companies economically."

He also noted the agency is working on updating its procedures "for how we review credits, how we communicate with stakeholders to make sure there’s exact clarity, and we’re even stronger in our outreach in terms of what are the issues that we see companies in thinking they’re eligible when they are not." Werfel made his comments November 14, 2023, at the AICPA & CIMA National Tax & Sophisticated Tax Conference.

The IRS already has issued procedures on how taxpayers can withdraw claims for the employee retention credit if the claim has not been processed, as well as placed a moratorium on processing claims until at least the end of year.

Werfel also used his speech to reiterate previously highlighted improvements in customer service and compliance and enforcement following the supplemental funding provided by the Inflation Reduction Act.

National Taxpayer Advocate Erin Collins also acknowledged the improvement in the wake of the issues that arose during the COVID-19 pandemic.

"The good news is the IRS is in a much better place than it was over the last three years," Collins said during the conference. "The not-so-good news is we still have a long way to go."

In particular, she targeted the continued filing of paper returns as a key contributor to delays in processing returns and other correspondence. The IRS has been working to improve the abilities to filing tax returns and other correspondence electronically as a means of speeding up the processing, and she noted that what has been accomplished thus far "is a good thing."

However, she noted that another challenge is that even if they are electronically filed, they are still manually processed and more work needs to be done to improve the technology to help get them electronically processed.

By Gregory Twachtman, Washington News Editor

The IRS has announced that calendar year 2023 would continue to be regarded as a transition period for enforcement and administration of the de minimis exception for reporting by third party settlement organizations (TPSO) under Code Sec. 6050W(e).

The IRS has announced that calendar year 2023 would continue to be regarded as a transition period for enforcement and administration of the de minimis exception for reporting by third party settlement organizations (TPSO) under Code Sec. 6050W(e). The IRS has also planned for a threshold of $5,000 for tax year 2024 to phase in implementation. Previously, in Notice 2023-10, the IRS announced that 2022 would be regarded as a transition period for the same issue. Specifically, the transition period focuses on the implementation of the amendment to Code Sec. 6050W(e) by the American Rescue Plan Act of 2021 (P.L. 117-2) that lowered the de minimis exception for TPSOs to $600.

Background

Code Sec. 6050W requires a TPSO to file an information return (Form 1099-K) each calendar year to report the annual gross amount of reportable payment transactions to the IRS and provide a copy of the return to the participating payee. A de minimis exception to this reporting requirement is provided in Code Sec. 6050W(e). Prior to the amendment by the American Rescue Plan Act, a TPSO was exempt from the reporting requirement if the gross amount that would otherwise be reported did not exceed $20,000 and the number of such transactions with that participating payee did not exceed 200. Section 9674(a) of the American Rescue Plan Act amended the de minimis exception to require a TPSO to file an information return if the gross amount of total reportable payment transactions exceeds $600, effective for tax years beginning after December 31, 2021.

Transition Period

Notice 2023-74 extends the transition period issued under Notice 2023-10 to the 2023 calendar tax year. Under the transition period, a TPSO would not be required to file Form 1099-K to report payments in settlement of third-party network transactions unless the gross amount of aggregate payments to be reported exceeds $20,000 and the number of such transactions with that participating payee exceeds 200. Further, a TPSO exempt from reporting due to the transition period would not be subject to penalties under Code Secs. 6721 or 6722 for the failure to file or furnish Form 1099-K.

The transition period is limited to the amendments made by the American Rescue Plan Act to Code Sec. 6050W(e) and does not apply to other requirements under Code Sec. 6050W. In addition, the transition period does not apply to backup withholdings under Code Sec. 3406(a). TPSOs that have performed backup withholding for a payee during calendar year 2023 must file a Form 945 and a Form 1099-K with the IRS provide copies to the participating payee if total reportable payments to the payee exceeded $600.

The IRS has released the annual inflation adjustments for 2024 for the income tax rate tables, plus more than 60 other tax provisions. The IRS makes these cost-of-living adjustments (COLAs) each year to reflect inflation.

The IRS has released the annual inflation adjustments for 2024 for the income tax rate tables, plus more than 60 other tax provisions. The IRS makes these cost-of-living adjustments (COLAs) each year to reflect inflation.

2024 Income Tax Brackets

For 2024, the highest income tax bracket of 37 percent applies when taxable income hits:

• $731,200 for married individuals filing jointly and surviving spouses,
• $609,350 for single individuals and heads of households,
• $365,600 for married individuals filing separately, and
• $15,200 for estates and trusts.

2024 Standard Deduction

The standard deduction for 2024 is:

• $29,200 for married individuals filing jointly and surviving spouses,
• $21,900 for heads of households, and
• $14,600 for single individuals and married individuals filing separately.

The standard deduction for a dependent is limited to the greater of:

• $1,300 or
• the sum of $450, plus the dependent’s earned income.

Individuals who are blind or at least 65 years old get an additional standard deduction of:

• $1,550 for married taxpayers and surviving spouses, or
• $1,950 for other taxpayers.

Alternative Minimum Tax (AMT) Exemption for 2024

The AMT exemption for 2024 is:

• $133,300 for married individuals filing jointly and surviving spouses,
• $85,700 for single individuals and heads of households,
• $66,650 for married individuals filing separately, and
• $29,900 for estates and trusts.

The exemption amounts phase out in 2024 when AMTI exceeds:

• $1,218,700 for married individuals filing jointly and surviving spouses,
• $609,350 for single individuals, heads of households, and married individuals filing separately, and
• $99,700 for estates and trusts.

Expensing Code Sec. 179 Property in 2024

For tax years beginning in 2024, taxpayers can expense up to $1,220,000 in section 179 property. However, this dollar limit is reduced when the cost of section 179 property placed in service during the year exceeds $3,050,000.

Estate and Gift Tax Adjustments for 2024

The following inflation adjustments apply to federal estate and gift taxes in 2024:

• the gift tax exclusion is $18,000 per donee, or $185,000 for gifts to spouses who are not U.S. citizens;
• the federal estate tax exclusion is $13,610,000; and
• the maximum reduction for real property under the special valuation method is $1,390,000.

2024 Inflation Adjustments for Other Tax Items

The maximum foreign earned income exclusion amount in 2024 is $126,500.

The IRS also provided inflation-adjusted amounts for the:

• adoption credit,
• earned income credit,
• excludable interest on U.S. savings bonds used for education,
• various penalties, and
• many other provisions.

Effective Date of 2024 Adjustments

These inflation adjustments generally apply to tax years beginning in 2024, so they affect most returns that will be filed in 2025. However, some specified figures apply to transactions or events in calendar year 2024.

The 2024 cost-of-living adjustments (COLAs) that affect pension plan dollar limitations and other retirement-related provisions have been released by the IRS. In general, many of the pension plan limitations will change for 2023 because the increase in the cost-of-living index due to inflation met the statutory thresholds that trigger their adjustment. However, other limitations will remain unchanged.

The 2024 cost-of-living adjustments (COLAs) that affect pension plan dollar limitations and other retirement-related provisions have been released by the IRS. In general, many of the pension plan limitations will change for 2023 because the increase in the cost-of-living index due to inflation met the statutory thresholds that trigger their adjustment. However, other limitations will remain unchanged.

The SECURE 2.0 Act (P.L. 117-328) made some retirement-related amounts adjustable for inflation beginning in 2024. These amounts, as adjusted for 2024, include:

• The catch up contribution amount for IRA owners who are 50 or older remains $1,000.
• The amount of qualified charitable distributions from IRAs that are not includible in gross income is increased from $100,000 to $105,000.
• The limit on one-time qualified charitable distributions made directly to a split-interest entity is increased from $50,000 to $53,000.
• The dollar limit on premiums paid for a qualifying longevity annuity contract (QLAC) remains $200,000

Highlights of Changes for 2024

The contribution limit has increased from $22,500 to $23,000 for employees who take part in:

• -401(k),
• -403(b),
• -most 457 plans, and
• -the federal government’s Thrift Savings Plan

The annual limit on contributions to an IRA increased from $6,500 to $7,000.

The catch-up contribution limit for individuals aged 50 and over is subject to an annual cost-of-living adjustment beginning in 2024 but remains $1,000.

The income ranges increased for determining eligibility to make deductible contributions to:

• -IRAs,
• -Roth IRAs, and
• -to claim the Saver's Credit.

Phase-Out Ranges

Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. The deduction phases out if the taxpayer or their spouse takes part in a retirement plan at work. The phase out depends on the taxpayer's filing status and income.

• -For single taxpayers covered by a workplace retirement plan, the phase-out range is $77,000 to $87,000, up from between $73,000 and $83,000.
• -For joint filers, when the spouse making the contribution takes part in a workplace retirement plan, the phase-out range is $123,000 to $143,000, up from between $116,000 and $136,000.
• -For an IRA contributor, who is not covered by a workplace retirement plan but their spouse is, the phase out is between $230,000 and $240,000, up from between $218,000 and $228,000.
• -For a married individual covered by a workplace plan filing a separate return, the phase-out range remains between $0 and $10,000.
• The phase-out ranges for Roth IRA contributions are:
• -$146,000 and $161,000, for singles and heads of household,
• -$230,000 and $240,000, for joint filers, and
• -$0 to $10,000 for married separate filers.

Finally, the income limit for the Saver' Credit is:

• -76,500 for joint filers,
• -$57,375 for heads of household, and
• -$38,250 for singles and married separate filers.

The IRS reminded taxpayers who may be entitled to claim Recovery Rebate Credit (RRC) to file a tax return to claim their credit before the April-May, 2024 deadlines. It has been estimated that certain individuals are still eligible to claim RRC for years 2020 and 2021. The deadlines to file a return and claim the 2020 and 2021 credits are May 17, 2024, and April 15, 2025, respectively. Additionally, the IRS reminded that taxpayers must first file a tax return to make their RRC claims irrespective of income slab and source of income.

The IRS reminded taxpayers who may be entitled to claim Recovery Rebate Credit (RRC) to file a tax return to claim their credit before the April-May, 2024 deadlines. It has been estimated that certain individuals are still eligible to claim RRC for years 2020 and 2021. The deadlines to file a return and claim the 2020 and 2021 credits are May 17, 2024, and April 15, 2025, respectively. Additionally, the IRS reminded that taxpayers must first file a tax return to make their RRC claims irrespective of income slab and source of income.

The Recovery Rebate Credit, is a refundable credit for those who missed out on one or more Economic Impact Payments such as stimulus payments which were issued in 2020 and 2021. The persons eligible to claim the 2020 and 2021 RRC must:

• have been a U.S citizen or U.S resident alien in the respective year;
• not have been a dependent of another taxpayer for the respective year;
• have a social security number issued before the due date of the tax return which is valid for employment in the U.S;
• for 2021 RRC- have a valid social security number as above or claim a dependent who has a Social Security number issued by the due date of the tax return, or claim a dependent with an Adoption Taxpayer Identification Number.

For qualified taxpayers who require one-on-one tax preparation help, they can avail the same through the Free tax return preparation assistance available on the IRS website. The IRS urges people to look into possible benefits available to them under the tax law. People can make use of their IRS Online Account also to keep track of payments due to them.

The Internal Revenue Service is looking to improve its customer service metrics as well as improve its technology offerings in the coming tax filing season.

The Internal Revenue Service is looking to improve its customer service metrics as well as improve its technology offerings in the coming tax filing season.

Building on the supplemental funding from the Inflation Reduction Act, the IRS has already seen improvements to its phone service and is now looking to improve on it.

"Massive investments in customer service mean taxpayers will get the information and support they deserve," Department of the Treasury Secretary Janet Yellen said November 7, 2023, during an event at IRS headquarters.

For the 2024 tax filing season, the IRS is committed to maintaining the 85 percent level of service it achieved in the 2023 filing season on the agency’s main taxpayer help line. It also is targeting a hold time of five minutes or less while offering 95 percent call back availability when projected wait times are expected to exceed 15 minutes.

IRS Commissioner Daniel Werfel, speaking at the event, also highlighted a trust target.

"This past filingseason, 84 percent of taxpayers who interacted with our phone assisters stated that this interaction increased their trust in the IRS," Werfel said. "That’s up from 70 percent two years ago. In the coming filingseason, we want to continue to again [the Office of Management and Budget’s] trust goal of 75 percent."

Yellen also highlighted how the "Where’s My Refund?" tool will be improved for the coming season, including incorporating "conversational voice-bot technology to help taxpayers get answers more quickly, and it will provide clearer and more detailed information so taxpayers can address barriers to processing their returns and receive their refunds quickly."

She also said that Taxpayer Assistance Centers increase the hours of face-to-face assistance provided by more than 8,000 hours compared to what was provided in the 2023 filing season.

Yellen also stated that the IRS has met a technology goal and in the 2024 filing season, taxpayers will be able to "digitally upload all correspondence and responses to notices instead of mailing them. … The impact will be significant and far reaching. Taxpayers will save time and effort. The IRS will reduce errors and storage costs and will speed up processing time for the system as a whole."

Additionally, there will be 20 more forms that taxpayers can electronically file in the 2024 filing season.

Yellen and Werfel also reiterated recent announcements on compliance and enforcement efforts and committed to continuing to ensure everyone is paying their fair share of taxes owed.

By Gregory Twachtman, Washington News Editor

The Internal Revenue Service announced the launch of the first phase of rolling out business taxpayer accounts, as well as enable taxpayers to respond to notices online.

The Internal Revenue Service announced the launch of the first phase of rolling out business taxpayer accounts, as well as enable taxpayers to respond to notices online.

In an October 20, 2023, statement, the agency announced that the first phase will allow "unincorporated sole proprietors who have an active Employer Identification Number to set up a business tax account, where they can view their business profits and manage authorized users."

The IRS noted that the business tax accounts will expand to allow taxpayers "to view letters or notices, request transcripts, add third parties for power of attorney or tax information authorizations, schedule or cancel tax payments, and store bank account information."

The business tax accounts were enabled by the agency’s receiving of supplemental funding from the Inflation Reduction Act.

Another technology improvement announced allowing taxpayers to respond online to notices, something that previously required responses via mail.

"During the filing season 2023, taxpayers were able to respond to 10 of the most common notices for credits like the Earned Income and Health Insurance Tax Credits online, saving them time and money," the agency reported, adding that as of September 29, 2023, it has received more than 32,000 responses to notices via the online tool.

Additionally, the IRS will now accept electronic submissions for three forms via a mobile device-friendly forms. Those forms include:

• Form 15109, Request for Tax Deferment;
• Form 14039, Identity Theft Affidavit; and
• Form 14242, Reporting Abusive Tax Promotions and/or Preparers

The next form expected to have a mobile-friendly option later this fall is Form 13909, Tax-Exempt Organization Complaint, and at least 20 more of the most-used tax forms will have mobile device availability in early 2024, the IRS stated.

"An estimated 15 percent of Americans rely solely on mobile phones for their internet access – they do not have broadband at home – so it is important to make forms available in mobile-friendly formats," the agency sad.

For tax professionals, their online accounts also received enhancements, including helping practitioners manage their active client authorizations on file with the Centralized Authorization File database as well as the ability to view their client’s tax information, including balance due.

By Gregory Twachtman, Washington News Editor