Haila J. Conant, CPA, P.C

09/15/2023

https://www.irs.gov/newsroom/to-protect-taxpayers-from-scams-irs-orders-immediate-stop-to-new-employee-retention-credit-processing-amid-surge-of-questionable-claims-concerns-from-tax-pros?utm_campaign=ERC%20Campaign%202023&utm_medium=email&_hsmi=274369550&_hsenc=p2ANqtz--z60jMagcffbYprQ9TbV3y8JUxbeDb-TdxiV6OzUDmDfFLPNopsLC2H8dUT2WCjoHfXNsk0hVfNr5jsh5sjS1oBSWZYg&utm_content=274369550&utm_source=hs_email

IR-2023-169, Sept. 14, 2023 — Amid rising concerns about a flood of improper Employee Retention Credit claims, the Internal Revenue Service today announced an immediate moratorium through at least the end of the year on processing new claims for the pandemic-era relief program to protect honest sm...

04/19/2022

How taxpayers can check the status of their federal tax refund

Once a taxpayer files their tax return, they want to know when they’ll receive their refund. The most convenient way to check on a tax refund is by using the Where's My Refund? Tool on IRS.gov. Taxpayers can start checking their refund status within 24 hours after the IRS acknowledges receipt of the taxpayer's e-filed return. The tool also provides a personalized refund date after the return is processed and a refund is approved.

Taxpayers can access the Where's My Refund? tool two ways:

• Visiting IRS.gov
• Downloading the IRS2Go app

To use the tool, taxpayers will need:

• Their Social Security number or Individual Taxpayer Identification number
• Tax filing status
• The exact amount of the refund claimed on their tax return

The tool shows progress in three phases:

• Return received
• Refund approved
• Refund sent

When the status changes to approved, this means the IRS is preparing to send the refund as a direct deposit to the taxpayer's bank account or directly to the taxpayer in the mail, by check, to the address used on their tax return.

The IRS updates the Where's My Refund? tool once a day, usually overnight, so taxpayers don't need to check the status more often.

Taxpayers allow time for their bank of credit union to post the refund to their account or for it to be delivered by mail. Calling the IRS won't speed up a tax refund. The information available on Where's My Refund? is the same information available to IRS telephone assistors.

04/13/2022

Here’s how to tell the difference between a hobby and a business for tax purposes

A hobby is any activity that a person pursues because they enjoy it and with no intention of making a profit. People operate a business with the intention of making a profit. Many people engage in hobby activities that turn into a source of income. However, determining if that hobby has grown into a business can be confusing.

To help simplify things, the IRS has established factors taxpayers must consider when determining whether their activity is a business or hobby.

These factors are whether:
The taxpayer carries out activity in a businesslike manner and maintains complete and accurate books and records.

The taxpayer puts time and effort into the activity to show they intend to make it profitable.

The taxpayer depends on income from the activity for their livelihood.

The taxpayer has personal motives for carrying out the activity such as general enjoyment or relaxation.

The taxpayer has enough income from other sources to fund the activity.

Losses are due to circumstances beyond the taxpayer's control or are normal for the startup phase of their type of business.

There is a change to methods of operation to improve profitability.

Taxpayer and their advisor have the knowledge needed to carry out the activity as a successful business.

The taxpayer was successful in making a profit in similar activities in the past.

Activity makes a profit in some years and how much profit it makes.

The taxpayer can expect to make a future profit from the appreciation of the assets used in the activity.
All factors, facts, and circumstances with respect to the activity must be considered. No one factor is more important than another.

If a taxpayer receives income from an activity that is carried on with no intention of making a profit, they must report the income they receive on Schedule 1, Form 1040, line 8.

04/07/2022

Why it may take longer than 21 days for some taxpayers to receive their federal refund

The IRS issues most refunds in fewer than 21 days for taxpayers who file electronically and choose direct deposit. However, some returns have errors or need more review and may take longer to process. The IRS works hard to get refunds to taxpayers quickly, but taxpayers shouldn’t rely on getting a refund by a certain date.

Things that can delay a refund:

The return has errors, is incomplete or is affected by identity theft or fraud.
The return needs a correction to the child tax credit or recovery rebate credit amount.
The return has a claim filed for an earned income tax credit, additional child tax credit, or includes a Form 8379, Injured Spouse Allocation.
The time it takes a taxpayer’s bank or credit union to post the refund to the taxpayer’s account.
The IRS will contact taxpayers by mail if it needs more information to process their return.

The fastest way to get a tax refund is by filing electronically and choosing direct deposit. People who don’t have a bank account can learn about opening an account at an FDIC-Insured bank or the National Credit Union Locator tool.

Taxpayers can check the status of their refund online.

To check the status of a refund, taxpayers should use the Where’s My Refund? tool on IRS.gov. If taxpayers file electronically, they should wait twenty-four hours before checking the status of their refund. If taxpayers file a paper return, they should wait four weeks before checking the status.

IRS representatives on the phone and at Taxpayer Assistance Centers can only research the status of a refund if:

It’s been 21 days or more since the taxpayer filed the return electronically.
It’s been six weeks or more since the taxpayer mailed the return.
The Where's My Refund? tool tells the taxpayer to contact the IRS.

04/05/2022

Options for taxpayers who need help paying their tax bill

Taxpayers who can’t pay the full amount of federal taxes they owe should file their tax return on time and pay as much as possible. This will help reduce penalties and interest. If they can’t pay their full bill, they have some other options.

Get a loan
In many cases, loan costs may be lower than the combination of interest and penalties the IRS must charge under federal law. Normally, the late-payment penalty is 0.5% per month, not to exceed 25% of unpaid taxes. The interest rate, adjusted quarterly, is currently 4% per year, compounded daily.
If a taxpayer can’t get a loan, the IRS offers other options.

Online payment plans
Most individual taxpayers qualify to set up an online payment plan with the IRS, and it only takes a few minutes to apply. Applicants are notified immediately if their request is approved. There is no need for them to contact the IRS for a payment plan or an installment agreement. The agency generally processes online payment plans quicker than requests made with electronically filed tax returns. If a taxpayer just filed their return and they know they’ll owe a balance, they may be able to set up a payment plan online before they even receive a notice or bill.

There are two main types of online payment plans:

Short-term payment plan – The payment period is 180 days or less and the total amount owed is less than $100,000 in combined tax, penalties, and interest. There's no fee for setting one up, though interest and the late-payment penalty continue to accrue.
Long-term payment plan – Payments are monthly, and the amount owed must be less than $50,000 in combined tax, penalties, and interest. If the IRS approves a long-term payment plan, also known as an installment agreement, a setup fee normally applies. Low-income taxpayers may qualify to have the fee waived or reimbursed. In addition, for anyone who filed their return on time, the late-payment penalty rate is reduced while an installment agreement is in effect. The late payment penalty accrues at the rate of 0.25% per month, instead of up to 1% per month.
Taxpayers who do not qualify for an online payment agreement may still be able to pay in installments. Taxpayers should review the Additional Information on Payment Plans page of IRS.gov for details.

Delayed collection
If the IRS determines a taxpayer is unable to pay, it may delay collection until their financial condition improves. However, the total amount owed will still increase because penalties and interest continue to accrue until the taxpayer pays in full. Taxpayers can request a delay by calling the phone number on their notice or 800-829-1040.

Penalty relief
Some taxpayers qualify to have their late-filing or late-payment penalties reduced or eliminated. This is done on a case-by-case basis, based on reasonable cause. Alternatively, where a taxpayer has a history of compliance, the IRS can typically provide relief under the First Time Abatement program. Taxpayers should review the Penalty Relief page of IRS.gov for more information.

Offer in Compromise
Some taxpayers qualify to settle their tax bill for less than the full amount due, through an Offer in Compromise. There is a $205 non-refundable OIC application fee; however, it is generally waived for individual low-income taxpayers. Offers require a partial payment of the offer amount except for offers filed based on doubt as to liability. The Offer in Compromise Pre-Qualifier tool can help determine eligibility for individuals interested in applying.

03/28/2022

IRS reminds taxpayers an extension to file is not an extension to pay taxes
For most individual taxpayers the tax filing and payment deadline is Monday, April 18, 2022. Those who need more time to file can request an extension to file. Taxpayers must request an extension to file by April 18, or they may face a failure to file penalty. This extension gives them until October 17 to file their tax return. An extension to file is not an extension to pay.

Most taxpayers must pay taxes by April 18 to avoid penalties and interest on the amount owed after that date. Taxpayers in Maine and Massachusetts have until April 19 to pay to file their returns due to the Patriots' Day holiday in those states.

How to request an extension to file
To get an extension to file, the IRS urges taxpayers to do one of the following:
File Form 4868 through their tax professional, tax software or by using IRS Free File on IRS.gov. Individual taxpayers, regardless of income, can use Free File to electronically request an automatic tax-filing extension.
Submit an electronic payment with Direct Pay, Electronic Federal Tax Payment System or by debit, credit card or digital wallet and select Form 4868 or extension as the payment type. Taxpayers don’t need to file Form 4868 when making an electronic payment and indicating it’s for an extension. The IRS will automatically count it as an extension.
Some taxpayers may have extra time to file their tax returns and pay any taxes due. This includes some disaster victims, taxpayers living overseas, including members of the military, and eligible support personnel serving in combat zones.

01/31/2022

https://www.cpapracticeadvisor.com/tax-compliance/news/21254817/irs-to-start-requiring-facial-recognition-for-tax-transcripts-and-payments?oly_enc_id=7000E9596289B0R

That verification requirement will soon be required for all taxpayers to view other personal tax documents on the IRS website. Although ID.me is widely-used, including by other government entities, and is generally considered secure, the thought of ...

01/26/2022

Why taxpayers should have their tax refund direct deposited

As the 2022 filing season begins, the IRS encourages taxpayers to file electronically when they are ready and choose direct deposit to get their refund. Direct deposit is the safest and most convenient way to receive a tax refund.
Here are some other benefits of choosing IRS direct deposit:
It’s fast. The fastest way for taxpayers to get their refund is to electronically file and choose direct deposit. Visit IRS.gov for details about IRS Free File, Free File Fillable Forms, free tax return preparation and more. Taxpayers who file a paper return can also choose direct deposit, but it will take longer to process the return and get a refund.
It’s secure. Since refunds are electronically deposited, there's no risk of having a paper check stolen or lost in the mail.
It’s easy. Taxpayers can simply follow the instructions when selecting direct deposit as a refund method and enter their account information as directed. They must enter the correct account and routing numbers when they file.
It provides options. Taxpayers can split a refund into several financial accounts. These include checking, savings, health, education and certain retirement accounts. They should use IRS Form 8888, Allocation of Refund, Including Savings Bond Purchases to deposit a refund in up to three accounts. However, this form cannot be used to designate part of a refund to pay tax preparers.
Taxpayers should deposit refunds into U.S. bank accounts in their own name, their spouse's name or both. They should avoid making a deposit into accounts owned by others. Some banks require both spouses' names on the account to deposit a tax refund from a joint return. Taxpayers should check with their bank for direct deposit rules.
Get banked
Taxpayers who don't have a bank account can visit the FDIC website for information on banks that allow them to open an account online and how to choose the right account. Veterans can use the Veterans Benefits Banking Program for access to financial services at participating banks. Tax preparers may also offer electronic payment options.
Mobile apps may be an option
Some mobile apps and prepaid debit cards allow for direct deposit of tax refunds. They must have routing and account numbers associated with them that can be entered on a tax return. Taxpayers should check with the mobile app provider or financial institution to confirm which numbers to use.
Taxpayers must have their routing and account numbers for direct deposit available when they are ready to file. The IRS can't accept this information after a return is filed.
There is a limit of three direct deposit refunds made into a single financial account or prepaid debit card.

01/24/2022

An overview of the credit for other dependents

Taxpayers with dependents who don't qualify for the child tax credit may be able to claim the credit for other dependents. This is a non-refundable credit. It can reduce or, in some cases, eliminate a tax bill but, the IRS cannot refund the taxpayer any portion of the credit that may be left over.

Here’s more information to help taxpayers determine if they’re eligible to claim it on their 2021 tax return.

The maximum credit amount is $500 for each dependent who meets certain conditions. These include:

Dependents who are age 17 or older.
Dependents who have individual taxpayer identification numbers.
Dependent parents or other qualifying relatives supported by the taxpayer.
Dependents living with the taxpayer who aren't related to the taxpayer.
The credit begins to phase out when the taxpayer's income is more than $200,000. This phaseout begins for married couples filing a joint tax return at $400,000.

A taxpayer can claim this credit if:

They claim the person as a dependent on the taxpayer's return.
They cannot use the dependent to claim the child tax credit or additional child tax credit.
The dependent is a U.S. citizen, national or resident alien.
Taxpayers can claim the credit for other dependents in addition to the child and dependent care credit and the earned income credit. They can use the IRS Interactive Tax Assistant, Does My Child/Dependent Qualify for the Child Tax Credit or the Credit for Other Dependents?, to help determine if they are eligible to claim the credit.

01/23/2022

“An IRS worker shortage, an enormous workload from administering pandemic-related programs and stalled legislation that would have given the agency billions of dollars for more expeditiously processing returns will combine to cause taxpayers pain this filing season.”

“The IRS right now has unacceptable backlogs and the customer service that people are receiving is not what the American public deserves,” White House press secretary Jen Psaki acknowledged Friday. “The agency has not been equipped with the resources to adequately serve taxpayers in normal times, let alone during a pandemic.”

WASHINGTON (AP) — Count 30-year-old Ethan Miller among that subset of Americans who are actually eager to file their taxes once income tax filing season opens on Monday.

01/19/2022

How small business owners can deduct their home office from their taxes

The home office deduction allows qualified taxpayers to deduct certain home expenses when they file taxes. To claim the home office deduction on their 2021 tax return, taxpayers generally must exclusively and regularly use part of their home or a separate structure on their property as their primary place of business.

Here are some details about this deduction to help taxpayers determine if they can claim it:

Employees are not eligible to claim the home office deduction.

The home office deduction, calculated on Form 8829, is available to both homeowners and renters.

There are certain expenses taxpayers can deduct. These may include mortgage interest, insurance, utilities, repairs, maintenance, depreciation and rent.

Taxpayers must meet specific requirements to claim home expenses as a deduction. Even then, the deductible amount of these types of expenses may be limited.

The term "home" for purposes of this deduction:
Includes a house, apartment, condominium, mobile home, boat or similar property.
Also includes structures on the property. These are places like an unattached garage, studio, barn or greenhouse.
Doesn't include any part of the taxpayer's property used exclusively as a hotel, motel, inn or similar business.

Generally, there are two basic requirements for the taxpayer's home to qualify as a deduction:
There generally must be exclusive use of a portion of the home for conducting business on a regular basis. For example, a taxpayer who uses an extra room to run their business can take a home office deduction only for that extra room so long as it is used both regularly and exclusively in the business.
The home must generally be the taxpayer's principal place of business. A taxpayer can also meet this requirement if administrative or management activities are conducted at the home and there is no other location to perform these duties. Therefore, someone who conducts business outside of their home but also uses their home to conduct business may still qualify for a home office deduction.

Expenses that relate to a separate structure not attached to the home may qualify for a home office deduction. They will qualify only if the structure is used exclusively and regularly for business.

Taxpayers who qualify may choose one of two methods to calculate their home office expense deduction:
The simplified option has a rate of $5 a square foot for business use of the home. The maximum size for this option is 300 square feet. The maximum deduction under this method is $1,500.
When using the regular method, deductions for a home office are based on the percentage of the home devoted to business use. Taxpayers who use a whole room or part of a room for conducting their business need to figure out the percentage of the home used for business activities to deduct indirect expenses. Direct expenses are deducted in full.