September 6, 2023

IRS: South Carolina taxpayers impacted by Idalia qualify for tax relief; Oct. 16 deadline, other dates postponed to Feb. 15

WASHINGTON — The Internal Revenue Service today announced tax relief for individuals and businesses affected by Idalia, anywhere in South Carolina. These taxpayers now have until Feb. 15, 2024, to file various federal individual and business tax returns and make tax payments. This is similar to relief already being provided in most of Florida.

Link to IRS disaster web page

The IRS is offering relief to any area designated by the Federal Emergency Management Agency (FEMA). All 46 counties in South Carolina qualify. Individuals and households that reside or have a business in these counties qualify for tax relief. The current list of eligible localities is always available on the disaster relief page on IRS.gov.

Filing and Payment Relief
The tax relief postpones various tax filing and payment deadlines that occurred from Aug. 29, 2023, through Feb. 15, 2024 (postponement period). As a result, affected individuals and businesses will have until Feb. 15, 2024, to file returns and pay any taxes that were originally due during this period.

This means, for example, that the Feb. 15, 2024, deadline will now apply to:

• Individuals who had a valid extension to file their 2022 return due to run out on Oct. 16, 2023. The IRS noted, however, that because tax payments related to these 2022 returns were due on April 18, 2023, those payments are not eligible for this relief.
• Quarterly estimated income tax payments normally due on Sept. 15, 2023, and Jan. 16, 2024.
• Quarterly payroll and excise tax returns normally due on Oct. 31, 2023, and Jan. 31, 2024.
• Calendar-year partnerships and S corporations whose 2022 extensions run out on Sept. 15, 2023.
• Calendar-year corporations whose 2022 extensions run out on Oct. 16, 2023.
• Calendar-year tax-exempt organizations whose extensions run out on Nov. 15, 2023.

In addition, penalties for the failure to make payroll and excise tax deposits due on or after Aug. 29, 2023, and before Sept. 13, 2023, will be abated as long as the deposits are made by Sept. 13, 2023.

The IRS disaster relief page has details on other returns, payments and tax-related actions qualifying for relief during the postponement period.

The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. These taxpayers do not need to contact the agency to get this relief.

It is possible an affected taxpayer may not have an IRS address of record located in the disaster area, for example, because they moved to the disaster area after filing their return. In these kinds of unique circumstances, the affected taxpayer could receive a late filing or late payment penalty notice from the IRS for the postponement period. The taxpayer should call the number on the notice to have the penalty abated.

In addition, the IRS will work with any taxpayer who lives outside the disaster area but whose records necessary to meet a deadline occurring during the postponement period are located in the affected area. Taxpayers qualifying for relief who live outside the disaster area need to contact the IRS at 866-562-5227. This also includes workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization.

Additional Tax Relief
Individuals and businesses in a federally declared disaster area who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either the return for the year the loss occurred (in this instance, the 2023 return normally filed next year), or the return for the prior year (2022). Taxpayers have extra time – up to six months after the due date of the taxpayer’s federal income tax return for the disaster year (without regard to any extension of time to file) – to make the election. Be sure to write the FEMA declaration number – DR-3597-EM − on any return claiming a loss. See Publication 547, Casualties, Disasters, and Thefts, for details.

Qualified disaster relief payments are generally excluded from gross income. In general, this means that affected taxpayers can exclude from their gross income amounts received from a government agency for reasonable and necessary personal, family, living or funeral expenses, as well as for the repair or rehabilitation of their home, or for the repair or replacement of its contents. See Publication 525, Taxable and Nontaxable Income, for details.

Additional relief may be available to affected taxpayers who participate in a retirement plan or individual retirement arrangement (IRA). For example, a taxpayer may be eligible to take a special disaster distribution that would not be subject to the additional 10% early distribution tax and allows the taxpayer to spread the income over three years. Taxpayers may also be eligible to make a hardship withdrawal. Each plan or IRA has specific rules and guidance for their participants to follow.

The IRS may provide additional disaster relief in the future.

The tax relief is part of a coordinated federal response to the damage caused by this storm and is based on local damage assessments by FEMA. For information on disaster recovery, visit disasterassistance.gov.

March 30, 2023

WASHINGTON – As part of the annual Dirty Dozen tax scams series, the Internal Revenue Service today renewed a warning about so-called Offer in Compromise “mills” that often mislead taxpayers into believing they can settle a tax debt for pennies on the dollar.

The IRS continues to see instances of heavily advertised promises offering to settle taxpayer debt at steep discounts. The IRS sees many situations where taxpayers don’t meet the technical requirements for an offer, but they had to face excessive fees from promoters for information they can easily obtain themselves.

Offer in Compromise mills highlight day nine of the Dirty Dozen series. Offers in Compromise are an important program to help people who can’t pay to settle their federal tax debts. But “mills” can aggressively promote Offers in Compromise in misleading ways to people who clearly don’t meet the qualifications, frequently costing taxpayers thousands of dollars.

A taxpayer can check their eligibility for free using the IRS’s Offer in Compromise Pre-Qualifier tool.

“Too often, we see some unscrupulous promoters mislead taxpayers into thinking they can magically get rid of a tax debt,” said IRS Commissioner Danny Werfel. “This is a legitimate IRS program, but there are specific requirements for people to qualify. People desperate for help can make a costly mistake if they clearly don’t qualify for the program. Before using an aggressive promoter, we encourage people to review readily available IRS resources to help resolve a tax debt on their own without facing hefty fees.”

The Dirty Dozen is an annual IRS list of 12 scams and schemes that put taxpayers and the tax professional community at risk of losing money, personal data and more. Some items on the list are new and some make a return visit. While the list is not a legal document or a formal listing of agency enforcement priorities, it is intended to alert taxpayers, businesses and tax preparers about scams at large.

Working together as the Security Summit, the IRS, state tax agencies and the nation’s tax industry have taken numerous steps to warn people about common scams and schemes during tax season and beyond. The Security Summit initiative is committed to protecting taxpayers, businesses and the tax system from scammers and identity thieves.

Watch to watch out for: Offer in Compromise mills
An Offer in Compromise (OIC) is when the taxpayer works with the IRS to settle a tax debt for less than the full amount owed. It is an option for those unable to pay the full tax liability or if doing so creates a financial hardship. The IRS takes in consideration each unique set of facts and circumstances. This agreement can happen directly between the taxpayer and the IRS without a third party.

An Offer in Compromise “mill” will usually make outlandish claims, frequently in radio and TV ads, about how they can settle a person’s tax debt for cheap. In reality, the promoter fees are often excessive, and taxpayers pay the OIC mill to get the same deal they could have received on their own by working directly with the IRS. This takes unnecessary money out of the taxpayer’s wallet.

In addition, not every taxpayer will qualify for an OIC. Some promoters knowingly advise indebted taxpayers to file an OIC application even though the promoters know the person will not qualify, costing honest taxpayers money and time.

The IRS urges people to take a few minutes to review information on IRS.gov to see if they might be a good candidate for the OIC program – and avoid costly promoters. As a first step, a taxpayer can check their OIC eligibility for free using the IRS’s Offer in Compromise Pre-Qualifier tool. And the IRS reminds taxpayers about the First Time Penalty Abatement policy, where taxpayers can go directly to the IRS for administrative relief from a penalty that would otherwise be added to their tax debt.

Tax On Wheels, LLC offers legitimate services to assist you with your IRS debt. Sometimes the best answer is to simply pay your bill, either in installments or with a single lump sum. However, you may fit into a category that will allow you some relief on your tax debts. Tax On Wheels, LLC can assist you with:

1. 1. Bringing you into compliance by preparing and filing all past due tax returns
   2. Determining if you have criminal exposure and will need to consult with a tax attorney
   3. Evaluating your tax debt and your personal financial situation to determine if you might be eligible for any of several tax debt relief tools available from the IRS
   4. Developing a strategy for using any of the legally available tools to minimize the amount of your tax debt you actually have to pay
   5. Preparing and submitting the necessary forms and requests to obtain the tax relief that you are entitled to under the law, up to and including possible total elimination of your tax debt.
   6. Providing ongoing monitoring and assistance in dealing with the IRS bureaucracy to insure your application is processed as quickly as the law requires the IRS to act and your rights are protected

If you need help with tax debt resolution or IRS representation, don’t hesitate to call Tax On Wheels, LLC for a free initial consultation today at 877 439-3514.

 

February 10, 2023

WASHINGTON – The Internal Revenue Service provided details today clarifying the federal tax status involving special payments made by 21 states in 2022.

The IRS has determined that in the interest of sound tax administration and other factors, taxpayers in many states will not need to report these payments on their 2022 tax returns.

During a review, the IRS determined it will not challenge the taxability of payments related to general welfare and disaster relief. This means that people in the following states do not need to report these state payments on their 2022 tax return: California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Maine, New Jersey, New Mexico, New York, Oregon, Pennsylvania and Rhode Island. Alaska is in this group as well, but please see below for more nuanced information.

In addition, many people in Georgia, Massachusetts, South Carolina and Virginia also will not include state payments in income for federal tax purposes if they meet certain requirements. For these individuals, state payments will not be included for federal tax purposes if the payment is a refund of state taxes paid and either the recipient claimed the standard deduction or itemized their deductions but did not receive a tax benefit.

The IRS appreciates the patience of taxpayers, tax professionals, software companies and state tax administrators as the IRS and Treasury worked to resolve this unique and complex situation.

The IRS is aware of questions involving special tax refunds or payments made by certain states related to the pandemic and its associated consequences in 2022. A variety of state programs distributed these payments in 2022 and the rules surrounding their treatment for federal income tax purposes are complex. While in general payments made by states are includable in income for federal tax purposes, there are exceptions that would apply to many of the payments made by states in 2022.

To assist taxpayers who have received these payments file their returns in a timely fashion, the IRS is providing the additional information below.

Refund of state taxes paid

If the payment is a refund of state taxes paid and either the recipient claimed the standard deduction or itemized their deductions but did not receive a tax benefit (for example, because the $10,000 tax deduction limit applied) the payment is not included in income for federal tax purposes.

Payments from the following states in 2022 fall in this category and will be excluded from income for federal tax purposes unless the recipient received a tax benefit in the year the taxes were deducted.

• Georgia
• Massachusetts
• South Carolina
• Virginia

General welfare and disaster relief payments

If a payment is made for the promotion of the general welfare or as a disaster relief payment, for example related to the outgoing pandemic, it may be excludable from income for federal tax purposes under the General Welfare Doctrine or as a Qualified Disaster Relief Payment.  Determining whether payments qualify for these exceptions is a complex fact intensive inquiry that depends on a number of considerations.

The IRS has reviewed the types of payments made by various states in 2022 that may fall in these categories and given the complicated fact-specific nature of determining the treatment of these payments for federal tax purposes balanced against the need to provide certainty and clarity for individuals who are now attempting to file their federal income tax returns, the IRS has determined that in the best interest of sound tax administration and given the fact that the pandemic emergency declaration is ending in May, 2023 making this an issue only for the 2022 tax year, if a taxpayer does not include the amount of one of these payments in its 2022 income for federal income tax purposes, the IRS will not challenge the treatment of the 2022 payment as excludable for income on an original or amended return.

Payments from the following states fall in this category and the IRS will not challenge the treatment of these payments as excludable for federal income tax purposes in 2022.

• Alaska[1]
• California
• Colorado
• Connecticut
• Delaware
• Florida
• Hawaii
• Idaho
• Illinois[2]
• Indiana
• Maine
• New Jersey
• New Mexico
• New York²
• Oregon
• Pennsylvania
• Rhode Island

For a list of the specific payments to which this applies, please see this chart.

Other payments

Other payments that may have been made by states are generally includable in income for federal income tax purposes.  This includes the annual payment of Alaska’s Permanent Fund Dividend and any payments from states provided as compensation to workers.

September 22, 2021

WASHINGTON — The Internal Revenue Service has awarded new contracts to three private-sector collection agencies for collection of overdue tax debts. The new contracts begin Thursday following today’s expiration of the old contracts; taxpayers may be contacted by one of three groups.

Beginning Thursday, Sept. 23, 2021, taxpayers with unpaid tax bills may be contacted by one of the following three agencies:

Notification by IRS and the private collection agencies
The IRS will always notify a taxpayer before transferring their account to a private collection agency (PCA).

• First, the IRS will send a letter to the taxpayer and their tax representative informing them that their account was assigned to a PCA and giving the name and contact information for the PCA. This mailing will include a copy of Publication 4518, What You Can Expect When the IRS Assigns Your Account to a Private Collection Agency (.pdf).
• Following IRS notification, the PCA will send its own letter to the taxpayer and their representative confirming the account transfer. To protect the taxpayer’s privacy and security, both the IRS letter and the PCA’s letter will contain information that will help taxpayers identify the tax amount owed and assure taxpayers that future collection agency calls they may receive are legitimate.

How it works
The private collectors will identify themselves as contractors collecting taxes on behalf of the IRS. Employees of these collection agencies must follow the provisions of the Fair Debt Collection Practices Act, and like IRS employees, must be courteous and must respect taxpayer rights.

Private firms are not authorized to take enforcement actions against taxpayers. Only IRS employees can take these actions, such as filing a notice of Federal Tax Lien or issuing a levy.

Payment options
The private firms are authorized to discuss payment options, including setting up payment agreements with taxpayers. But as with cases assigned to IRS employees, any tax payment must be made directly to the IRS. A payment should never be sent to the private firm or anyone besides the IRS or the U.S. Treasury. Checks should only be made payable to the United States Treasury. To find out more about available payment options, visit IRS.gov/Payments.

More information
The IRS established the Private Debt Collection program in 2016, as authorized under federal law, and contracted with several agencies to collect certain unpaid tax debts on the government’s behalf. To learn more about the private debt collection program, visit the Private Debt Collection page on IRS.gov. Additional information can be found at the following links:

• Private Debt Collection – Accounts Assigned to Private Collection Agencies
• Questions and answers
• Get Transcript
• Private Collection of Overdue Taxes YouTube Video
• Publication 4518, What You Can Expect When the IRS Assigns Your Account to a Private Collection Agency (.pdf).
• Understanding Your CP40 Notice
• Taxpayer Bill of Rights | Internal Revenue Service (irs.gov)

Please feel free to contact Tax On Wheels, LLC for assistance if you find yourself owing money to the IRS or any state taxing authority; we can be reached at 803 732-4288.

September 13, 2021

Small business owners have a variety of tax responsibilities. The IRS knows that understanding and meeting tax obligations is vital to the success of all businesses, especially a new one. IRS.gov has the resources and information to help people through the process of starting a new business.

Here are some tips for new entrepreneurs:

Choose a business structure.
The form of business determines which income tax return a business taxpayer needs to file. The most common business structures are:

• Sole proprietorship: An unincorporated business owned by an individual. There’s no distinction between the taxpayer and their business.
• Partnership: An unincorporated business with ownership shared between two or more people.
• Corporation: Also known as a C corporation. It’s a separate entity owned by shareholders.
• S Corporation: A corporation that elects to pass corporate income, losses, deductions and credits through to the shareholders.
• Limited Liability Company: A business structure allowed by state statute.

Choose a tax year.
A tax year is an annual accounting period for keeping records and reporting income and expenses. A new business owner must choose either:

• Calendar year: 12 consecutive months beginning January 1 and ending December 31.
• Fiscal year: 12 consecutive months ending on the last day of any month except December.

Apply for an employer identification number.
An EIN is also called a federal tax identification number. It’s used to identify a business. Most businesses need one of these numbers. It’s important for a business with an EIN to keep the business mailing address, location and responsible party up to date. IRS regulations require EIN holders to report changes in the responsible party within 60 days. They do this by completing Form 8822-B, Change of Address or Responsible Party and mailing it to the address on the form.

Have all employees complete these forms:

• Form I-9, Employment Eligibility Verification U.S. Citizenship and Immigration Services
• Form W-4 Employee’s Withholding Allowance Certificate

Pay business taxes.
The form of business determines what taxes must be paid and how to pay them.

Visit state’s website.
Prospective business owners should visit their state’s website for info about state requirements.

Please feel free to call Tax On Wheels, LLC at 803 732-4288 if you would like to discuss your business tax filing obligations

July 1, 2021

WASHINGTON — The Internal Revenue Service today upgraded a key online tool to enable families to quickly and easily update their bank account information so they can receive their monthly Child Tax Credit payment.

The bank account update feature was added to the Child Tax Credit Update Portal, available only on IRS.gov. Any updates made by Aug. 2 will apply to the Aug. 13 payment and all subsequent monthly payments for the rest of 2021.

Families will receive their July 15 payment by direct deposit in the bank account currently on file with the IRS. Those who are not enrolled for direct deposit will receive a check. The IRS encourages people without current bank account information to use the tool to update their information so they can get the payments sooner.

The IRS also urges people to be on the lookout for scams related to the Child Tax Credit. People who need to update their bank account information should go directly to the IRS.gov site and not click on links received by email, text or phone.

How to update direct deposit information

First, families should use the Child Tax Credit Update Portal to confirm their eligibility for the payments. If eligible, the tool will also indicate whether they are enrolled to receive their payments by direct deposit.

If so, it will list the full bank routing number and the last four digits of their account number. This is the account that will receive their July 15 payment, and if they don’t change the account, all future payments will go there as well.

Next, if they choose, they can change the bank account receiving the payment starting with the Aug. 13 payment. They can do that by updating the routing number and account number and indicating whether it is a savings or checking account. Note that only one account number is permitted for each recipient—that is, the entire payment must be direct deposited in only one account.

How to switch from paper check to direct deposit

If the Update Portal shows that a family is eligible to receive payments but not enrolled to receive direct deposits, they will receive a check each month. If they want to switch to receiving their payments by direct deposit, they can use the tool to add their bank account information. They do that by entering their bank routing number and account number and indicating whether it is a savings or checking account.

The IRS urges any family receiving checks to consider switching to direct deposit. With direct deposit, families can access their money more quickly. Direct deposit removes the time, worry and expense of cashing a check. In addition, direct deposit eliminates the chance of a lost, stolen or undelivered check.

Families can stop payments anytime

Even after payments begin, families can stop all future monthly payments if they choose. They do that by using the unenroll feature in the Child Tax Credit Update Portal. Eligible families who make this choice will still receive the rest of their Child Tax Credit as a lump sum when they file their 2021 federal income tax return next year.

To stop all payments starting in August and the rest of 2021, they must unenroll by Aug. 2, 2021.

For more information about the unenrollment process, including a schedule of deadlines for each monthly payment, see Topic J  of the Child Tax Credit FAQs on IRS.gov.

Who should unenroll?

Instead of receiving these advance payments, some families may prefer to wait until the end of the year and receive the entire credit as a refund when they file their 2021 return. The Child Tax Credit Update Portal enables these families to quickly and easily do that.

The unenroll feature can also be helpful to any family that no longer qualifies for the Child Tax Credit or believes they will not qualify when they file their 2021 return. This could happen if, for example:

• Their income in 2021 is too high to qualify them for the credit.
• Someone else (an ex-spouse or another family member, for example) qualifies to claim their child or children as dependents in 2021.
• Their main home was outside of the United States for more than half of 2021.

What is the Child Tax Credit Update Portal?

The Child Tax Credit Update Portal is a secure, password-protected tool, available to any eligible family with internet access and a smart phone or computer. It is designed to enable them to manage their Child Tax Credit accounts.  Right now, this includes updating their bank account information with the IRS or unenrolling from monthly payments. Soon, it will allow people to check on the status of their payments. Later this year, the tool will also enable them to make other status updates and be available in Spanish.

To access the Child Tax Credit Update Portal, a person must first verify their identity. If a person has an existing IRS username or an ID.me account with a verified identity, they can use those accounts to easily sign in. People without an existing account will be asked to verify their identity with a form of photo identification using ID.me, a trusted third party for the IRS. Identity verification is an important safeguard and will protect the user’s account from identity theft.

Anyone who lacks internet access or otherwise cannot use the online tool may unenroll by contacting the IRS at the phone number included in the outreach letter they received from the IRS.

Who is getting a monthly payment?

In general, monthly payments will go to eligible families who:

• Filed either a 2019 or 2020 federal income tax return.
• Used the Non-Filers tool on IRS.gov in 2020 to register for an Economic Impact Payment.
• Registered for the advance Child Tax Credit this year using the new Non-Filer Sign-Up Tool on IRS.gov.

An eligible family who took any of these steps does not need to do anything else to get their payments.

Normally, the IRS will calculate the advance payment based on the 2020 income tax return. If that return is not available, either because it has not yet been filed or it has not yet been processed, the IRS is instead determining the payment using the 2019 tax return.

Eligible families will receive advance payments, either by direct deposit or check. Each payment will be up to $300 per month for each child under age 6 and up to $250 per month for each child ages 6 through 17. The IRS will issue advance Child Tax Credit payments on these dates: July 15, Aug. 13, Sept. 15, Oct. 15, Nov. 15 and Dec. 15.

Tax returns processed by June 28 will be reflected in the first batch of monthly payments scheduled for July 15.

Taxpayers will receive several letters

Taxpayers will also receive several letters related to the Child Tax Credit. In the next few weeks, letters are going to eligible families who filed either a 2019 or 2020 federal income tax return or who used the Non-Filers tool on IRS.gov to register for an Economic Impact Payment. The letters will confirm their eligibility, the amount of payments they’ll receive and that the payments begin July 15. Families who receive these letters do not need to take any further action. The personalized letters follow up on the Advance Child Tax Credit Outreach Letter, sent in early- and mid-June, to every family who appeared to qualify for the advance payments.

Child Tax Credit 2021

The IRS has created a special Advance Child Tax Credit 2021 page, designed to provide the most up-to-date information about the credit and the advance payments. It’s at IRS.gov/childtaxcredit2021.

Among other things, it provides direct links to the Child Tax Credit Update Portal, as well as two other online tools −the Non-filer Sign-up Tool and the Child Tax Credit Eligibility Assistant, a set of frequently asked questions and other useful resources.

Child Tax Credit changes

The American Rescue Plan raised the maximum Child Tax Credit in 2021 to $3,600 for children under the age of 6 and to $3,000 per child for children ages 6 through 17. Before 2021, the credit was worth up to $2,000 per eligible child.

The new maximum credit is available to taxpayers with a modified adjusted gross income (AGI) of:

• $75,000 or less for singles,
• $112,500 or less for heads of household and
• $150,000 or less for married couples filing a joint return and qualified widows and widowers.

For most people, modified AGI is the amount shown on Line 11 of their 2020 Form 1040 or 1040-SR. Above these income thresholds, the extra amount above the original $2,000 credit — either $1,000 or $1,600 per child — is reduced by $50 for every $1,000 in modified AGI. In addition, the credit is fully refundable for 2021. This means that eligible families can get it, even if they owe no federal income tax. Before this year, the refundable portion was limited to $1,400 per child.

For the most up-to-date information on the Child Tax Credit and advance payments, visit Advance Child Tax Credit Payments in 2021.

As always, Tax On Wheels, LLC is help you with this or any other tax related issue; feel free to call us at 803 732-4288 if we may be of assistance to you.

May 17, 2021

WASHINGTON – The Internal Revenue Service and the U.S. Department of the Treasury announced today that the first monthly payment of the expanded and newly-advanceable Child Tax Credit (CTC) from the American Rescue Plan will be made on July 15. Roughly 39 million households—covering 88% of children in the United States—are slated to begin receiving monthly payments without any further action required.

IRS and Treasury also announced the increased CTC payments will be made on the 15th of each month unless the 15th falls on a weekend or holiday. Families who receive the credit by direct deposit can plan their budgets around receipt of the benefit. Eligible families will receive a payment of up to $300 per month for each child under age 6 and up to $250 per month for each child age 6 and above.

The American Rescue Plan increased the maximum Child Tax Credit in 2021 to $3,600 for children under the age of 6 and to $3,000 per child for children between ages 6 and 17. The American Rescue Plan is projected to lift more than five million children out of poverty this year, cutting child poverty by more than half.

Households covering more than 65 million children will receive the monthly CTC payments through direct deposit, paper check, or debit cards, and IRS and Treasury are committed to maximizing the use of direct deposit to ensure fast and secure delivery. While most taxpayers will not be required to take any action to receive their payments, Treasury and the IRS will continue outreach efforts with partner organizations over the coming months to make more families aware of their eligibility.

Today’s announcement represents the latest collaboration between the IRS and Bureau of the Fiscal Service—and between Treasury and the White House American Rescue Plan Implementation Team—to ensure help quickly reaches Americans in need as they recover from the COVID-19 pandemic. Since March 12, the IRS has also distributed approximately 165 million Economic Impact Payments with a value of approximately $388 billion as a part of the American Rescue Plan.

Additional information for taxpayers on how they can access the Child Tax Credit will be available soon on at IRS.gov/childtaxcredit2021.

 

Please feel free to contact Tax On Wheels, LLC at 803 732-4288 if we can assist you with this or any other tax matter.

March 31, 2021

WASHINGTON – To help taxpayers, the Internal Revenue Service announced today that it will take steps to automatically refund money this spring and summer to people who filed their tax return reporting unemployment compensation before the recent changes made by the American Rescue Plan.

The legislation, signed on March 11, allows taxpayers who earned less than $150,000 in modified adjusted gross income to exclude unemployment compensation up to $20,400 if married filing jointly and $10,200 for all other eligible taxpayers. The legislation excludes only 2020 unemployment benefits from taxes.

Because the change occurred after some people filed their taxes, the IRS will take steps in the spring and summer to make the appropriate change to their return, which may result in a refund. The first refunds are expected to be made in May and will continue into the summer.

For those taxpayers who already have filed and figured their tax based on the full amount of unemployment compensation, the IRS will determine the correct taxable amount of unemployment compensation and tax. Any resulting overpayment of tax will be either refunded or applied to other outstanding taxes owed.

For those who have already filed, the IRS will do these recalculations in two phases, starting with those taxpayers eligible for the up to $10,200 exclusion. The IRS will then adjust returns for those married filing jointly taxpayers who are eligible for the up to $20,400 exclusion and others with more complex returns.

There is no need for taxpayers to file an amended return unless the calculations make the taxpayer newly eligible for additional federal credits and deductions not already included on the original tax return.

For example, the IRS can adjust returns for those taxpayers who claimed the Earned Income Tax Credit (EITC) and, because the exclusion changed the income level, may now be eligible for an increase in the EITC amount which may result in a larger refund. However, taxpayers would have to file an amended return if they did not originally claim the EITC or other credits but now are eligible because the exclusion changed their income.

These taxpayers may want to review their state tax returns as well.

According to the Bureau of Labor Statistics, over 23 million U.S. workers nationwide filed for unemployment last year. For the first time, some self-employed workers qualified for unemployed benefits as well. The IRS is working to determine how many workers affected by the tax change already have filed their tax returns.

The new IRS guidance also includes details for those eligible taxpayers who have not yet filed.

The IRS has worked with the tax return preparation software industry to reflect these updates so people who choose to file electronically simply need to respond to the related questions when electronically preparing their tax returns. See New Exclusion of up to $10,200 of Unemployment Compensation for information and examples. For others, instructions and an updated worksheet about the exclusion were available in March and posted to IRS.gov/Form 1040. These instructions can assist taxpayers who have not yet filed to prepare returns correctly.

As always, please feel free to contact Tax On Wheels, LLC at 803 732-4288 if we can assist you with this or any other tax matter.

March 29, 2021

The IRS continues to issue the third round of Economic Impact Payments to eligible individuals, with payments being issued as a direct deposit or by mail as a paper check or prepaid EIP debit card. No action is needed by most eligible people to receive a third Economic Impact Payment automatically.

Check Get My Payment to see if a third payment is scheduled People can check to see if the their third payment has been scheduled using the Get My Payment tool on IRS.gov. The tool does not show the amount of the third Economic Impact Payment.

The form of payment for the third EIP may be different than earlier stimulus payments. More people are receiving direct deposits, while those receiving a payment in the mail may get a paper check or an EIP Card. IRS and the Treasury Department urge eligible people to check Get My Payment and see whether their payment has been scheduled for delivery as a direct deposit or by mail as a check or EIP card.

Watch the mail for paper checks and EIP Cards Paper checks will arrive by mail in a white envelope from the U.S. Department of the Treasury. For those taxpayers who received their tax refund by mail, this paper check will look similar, but will have Economic Impact Payment in the memo field.

The EIP Card will also come in a white envelope prominently displaying the seal of the U.S. Department of the Treasury. The card has the Visa name on the front and the issuing bank, MetaBank, N.A. on the back. Information included with the card will explain that this is an Economic Impact Payment. Each mailing will include instructions on how to securely activate and use the card.

EIP cards issued for any of the three rounds of payments are not reloadable. Recipients will receive a separate card and will not be able to reload funds onto an existing card.

EIP Cards are safe, convenient, and secure
These cards provide certain protections against fraud, loss, and other errors. They can be used to make purchases online or in stores anywhere Visa® Debit Cards are accepted.

Cardholders can use the cards to do any of the following without paying a fee:

• Transfer funds to a personal bank account
• Make signature or PIN-debit purchases anywhere Visa Debit Cards are accepted — in stores, online or by phone
• Get cash back with a PIN debit purchase where available
• Get cash from in-network ATMs
• Get a replacement EIP Card, if needed
• Check their card balance online, through a mobile app or by phone

The EIP Card is sponsored by the Bureau of the Fiscal Service and is issued by Treasury’s financial agent, MetaBank, N.A. The IRS does not determine who receives a prepaid debit card.

For more information about these cards people can visit EIPcard.com. The latest details about the third round of Economic Impact Payments are available on IRS.gov.

As always, please feel free to contact Tax On Wheels, LLC at 803 732-4288 for assistance with this or any other tax matter.

February 16, 2021

WASHINGTON – The IRS announced today that, as required by law, all legally permitted first and second round of Economic Impact Payments have been issued and the IRS now turns its full attention to the 2021 filing season.

Beginning in April 2020, the IRS and Treasury Department began delivering the first round of Economic Impact Payments within two weeks of the legislation. The IRS issued more than 160 million EIPs to taxpayers across the country totaling over $270 billion, while simultaneously managing an extended filing season. In addition, since Congress enacted the COVID-related Tax Relief Act of 2020, the IRS has delivered more than 147 million EIPs in the second-round totaling over $142 billion.

The legislation required that the second round of payments be issued by Jan. 15, 2021. While some second round Economic Impact Payments may still be in the mail, the IRS has issued all first and second Economic Impact Payments it is legally permitted to issue, based on information on file for eligible people.

Get My Payment was last updated on Jan. 29, 2021, to reflect the final payments and will not update again for first or second Economic Impact Payments.

Most people who are eligible for the Recovery Rebate Credit have already received it, in advance, in these two rounds of Economic Impact Payments. If individuals didn’t receive a payment – or if they didn’t receive the full amounts – they may be eligible to claim the Recovery Rebate Credit and must file a 2020 tax return. Eligibility for and the amount of the Recovery Rebate Credit are based on 2020 tax year information while the Economic Impact Payments were based on 2019 tax year information. For the first Economic Impact Payment, a 2018 return may have been used if the 2019 was not filed or processed.

Individuals will need to know the amounts of any Economic Impact Payments they received to claim the Recovery Rebate Credit. Those who don’t have their Economic Impact Payment notices can view the amounts of their first and second Economic Impact Payments through their individual online account. For married filing joint individuals, each spouse will need to log into their own account.

To avoid refund delays, the IRS urges people to file a complete and accurate tax return. Filing electronically allows tax software to figure credits and deductions, including the Recovery Rebate Credit. The Recovery Rebate Credit Worksheet on Form 1040 and Form 1040-SR instructions can also help.

The fastest way to get a tax refund is to file electronically and have it direct deposited – contactless and free – into the individual’s financial account. Bank accounts, many prepaid debit cards and several mobile apps can be used for direct deposit when you provide a routing and account number.

As always, please feel free to contact Tax On Wheels, LLC if you have questions or need assistance with your tax filing obligations. We can be reached at 803 732-4288.