Tag Archives: South Carolina

IRS issues guidance on state tax payments to help taxpayers

 

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.

[1] Only for the supplemental Energy Relief Payment received in addition to the annual Permanent Fund Dividend.

[2] Illinois and New York issued multiple payments and in each case one of the payments was a refund of taxes, which should be treated as noted above, and one of the payments is in the category of disaster relief payment.

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

SC Tax Consequences of Federal Student Loan Debt Forgiveness

September 1, 2022

South Carolina Tax Treatment. South Carolina adopts Internal Revenue Code Section 108. During the 2022 Legislative Session, South Carolina conformed to the Internal Revenue Code as of December 31, 2021,2 including conformity to the amendment to Internal Revenue Code Section 108(f)(5), as amended by Section 9675 of the federal American Rescue Plan Act of 2021.

Since South Carolina adopts Internal Revenue Code Section 108, to the extent a student loan described in Internal Revenue Code Section 108(f) is forgiven for federal income tax purposes and excluded from federal taxable income, then the amount is also excluded from South Carolina taxable income.

For federal income tax purposes, the receipt of a loan is not a taxable event. Forgiveness of a loan is often treated as taxable income under Internal Revenue Code Section 61, “Gross Income Defined,” and Internal Revenue Code Section 108, “Income from Discharge of Indebtedness.”
Federal Tax Treatment of Student Loan Debt Forgiveness and Temporary Provisions. Internal Revenue Code Section 108(f) relates to student loans.

The federal American Rescue Plan of 20211 (enacted by Congress on March 11, 2021), Section 9675, “Modification of Treatment of Student Loan Forgiveness,” amended Internal Revenue Code Section 108(f)(5) to temporarily add special rules for the discharge of student loans in 2021 through 2025.

South Carolina Individual Income Tax rebates are on the way

August 10, 2022
The South Carolina Department of Revenue (SCDOR) will issue close to one billion dollars in state tax rebates before the end of the year but only to those who have filed their 2021 SC Individual Income Tax returns by October 17, 2022, the filing extension deadline.
State lawmakers approved the rebates in June as they finalized the state budget. This rebate is based on your tax liability up to a certain amount. However, that amount cannot be determined until after October 17, when all eligible returns have been filed.
Keep reading to learn more about the coming rebates, including how much money you can expect and how to determine your eligibility. We also recommend that you bookmark our rebate homepage, which will be updated regularly with the latest information.
It’s easy to determine if you’re eligible to receive a rebate:
● You must have filed an SC Individual Income Tax return (SC1040) for tax year 2021 by October 17, 2022.
● You must have owed state Income Tax for tax year 2021, what tax professionals call tax liability. Specifically, that is the Income Tax you owe minus any credits.
● You can be a South Carolina resident, part-year resident, or nonresident.
The following groups are not eligible to receive a rebate:
● Those who have not filed an SC Individual Income Tax return by October 17, 2022.
● Taxpayers who have no state Individual Income Tax liability for the 2021 tax year.
You can calculate the rebate amount you can expect by looking at your 2021 Individual Income Tax return (SC1040):
● On your 2021 SC1040, add your refundable credits, lines 21 and 22. Now subtract those credits, if any, from line 15.That’s line 15 – (line 21 + line 22)
● If that amount is less than the rebate cap set by the SCDOR after October 17, you will receive that amount.
● If it is greater than or equal to the cap, you will receive the cap amount.
● While the legislation sets a minimum cap of $700, the actual amount will be set by the SCDOR after October 17. That’s the deadline for extension filers and when we’ll know how many taxpayers are eligible for a rebate.
● Taxpayers do not need to send their self-calculation or any additional information to the SCDOR to receive their rebate.
For most taxpayers, the SCDOR will issue rebates in much the same way we issued refunds this year.
● If you received a refund by direct deposit, the SCDOR will use the same bank account to issue your rebate by direct deposit.
● If your bank account has changed since receiving your 2021 direct deposit refund, notify us by November 1. Download and complete the SC5000 and email it to SCRebate@dor.sc.gov. You will receive your rebate as a paper check.
Paper checks will be issued if:
● You received your 2021 refund by debit card or paper check.
● You had a balance due and did not receive a refund.
● You received your 2021 refund using a tax preparer’s account.
Be sure your address on file with the SCDOR is current.
● If you need to change your address, notify us of your new address by November 1. Download and complete the SC5000 and email it to SCRebate@dor.sc.gov.

The SCDOR to begin accepting Tax returns on Monday, January 28, 2019.

The South Carolina Department of Revenue (SCDOR) and the IRS will begin accepting Individual Income Tax returns on Monday, January 28, 2019.
The SCDOR is encouraging taxpayers to file electronically. “It’s faster, more accurate, and the safest method of filing,” said SCDOR Director Hartley Powell. “Last year, 89% of South Carolinians filed electronically. We hope to exceed that number this year.”
Five things to know for the 2019 filing season:
  1. Filing electronically is the fastest and most secure way to file.
  2. Processing your return and refund is expected to take 6-8 weeks.
  3. Fighting fraud to protect taxpayer dollars is our priority.
  4. State and federal returns are due April 15, 2019.
  5. Check your refund status at dor.sc.gov/refund.
Filing electronically saves you time and money, plus:
  • Automatic calculations reduce the chance of errors;
  • Systematic checkpoints ensure your return is complete before submission; and
  • We receive your return sooner.
Expecting a refund? Processing may take 6-8 weeks.
We will begin processing returns February 4 to allow employers to meet the January 31 W2 submission deadline. Return and refund processing is expected to take 6-8 weeks from February 4 or the date you file, whichever is later. This allows time for the SCDOR to use all available tools to check for fraud and protect your refund. “We’re going to make every effort to issue refunds as quickly and securely as possible, so the right taxpayer ends up with the right refund amount,” said Powell.
Make sure you have all W2s, 1099s, and other withholding information before filing your return because year-end pay stub information may not match what your employer reports to the SCDOR. When the information you provide does not match your employer’s information, it slows down your return and refund.
Stay informed:
Find more resources for the tax season at dor.sc.gov/iit. Connect with us on Facebook and Twitter to stay up-to-date with the latest news, tax tips, and available taxpayer resources.

Liberty Tax franchises closed by IRS due to alleged fraud

November 5, 2016

Liberty tax outlets across the country have suffered a string of setbacks in the past few months.  Federal authorities allege fraudulent tax returns were generated at several locations.  Most recently, three local Liberty Tax franchise stores were shut down by federal authorities and the operator of the franchise was permanently barred from preparing tax returns.

But that is not the end of the story.  Apparently, as part of a court ordered injunction, the franchise operator will have to provide to the IRS a list of all of its customers.  We don’t think the IRS wants that information so it can update their holiday greeting card list.  We suspect that many of those on the list can expect some type of inquiry/audit from tax authorities in the near future.  And here’s a pro tip, there is no statute of limitations on tax fraud.  Normally, if you have been reasonably accurate in filing your tax return you can assume that the IRS cannot and will not challenge your return after 3 years.  But not so if you have filed a fraudulent return, or had one filed on your behalf. The IRS can come after you at any time in the future with no deadline or time limit.  Ouch!

Even if you consider yourself a victim of unscrupulous tax return preparers and you had no idea there was anything wrong, you are ultimately responsible for everything on your tax return.  You may be babe in the woods innocent, but that will not change your tax liability.  You will be responsible for all of the taxes the IRS believes you owe.  The good news is you may be able to convince the IRS to relieve you of some of the quite substantial penalties that may apply.

If you find that you need assistance in responding to a letter or audit from a state or federal taxing authority, whether due to the recent Liberty Tax troubles or not, please let us see how we can help you.  We’ll give you an honest assessment of your situation and provide you with several steps to take to help mitigate the damage, all for no cost or obligation.  If, however, you would like our assistance in responding to the letter or audit, Tax On Wheels,LLC is here to help.  We will offer you a fair price, to help resolve your tax issues.  Frequently we find that our prices are significantly lower than many of our competitors to obtain the exact same results.

Tax On Wheels, LLC can be reached at 803 732-4288 or toll free at 877 439-3514.  Our email address is taxonwheels@att.net.

IRS Gives Victims of Hurricane Matthew Until March 15 to File

October 17, 2016

IRS Gives Expanded Tax Relief to Victims of Hurricane Matthew; Parts of Four States Eligible; Extension Filers Have Until March 15 to File

Caution:  This is not an extension to pay taxes due by April 17, 2016! Read this carefully to understand the relief granted.

WASHINGTON –– Hurricane Matthew victims in much of North Carolina and parts of South Carolina, Georgia and Florida have until March 15, 2017, to file certain individual and business tax returns and make certain tax payments, the Internal Revenue Service announced today. This includes an additional filing extension for those with valid extensions that run out at midnight tonight, Oct. 17.

The IRS is now offering this expanded relief to any area designated by the Federal Emergency Management Agency (FEMA), as qualifying for either individual assistance or public assistance. Moreover, taxpayers in counties added later to the disaster area will automatically receive the same filing and payment relief.

The IRS is taking this step due to the unusual factors involving Hurricane Matthew and the interaction with the Oct. 17 extension deadline.

The tax relief postpones various tax filing and payment deadlines that occurred starting on Oct. 4, 2016. As a result, affected individuals and businesses will have until March 15, 2017, to file returns and pay any taxes that were originally due during this period. This includes the Jan. 17 deadline for making quarterly estimated tax payments. For individual tax filers, it also includes 2015 income tax returns that received a tax-filing extension until today, Oct. 17, 2016. The IRS noted, however, that because tax payments related to these 2015 returns were originally due on April 18, 2016, those are not eligible for this relief.

A variety of business tax deadlines are also affected including the Oct. 31 and Jan. 31 deadlines for quarterly payroll and excise tax returns. It also includes the special March 1 deadline that applies to farmers and fishermen who choose to forgo making quarterly estimated tax payments.

In addition, the IRS is waiving late-deposit penalties for federal payroll and excise tax deposits normally due on or after Oct. 4 and before Oct. 19 if the deposits are made by Oct. 19, 2016. Details on available relief can be found on the disaster relief page on IRS.gov.

The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. Thus, taxpayers need not contact the IRS to get this relief. However, if an affected taxpayer receives a late filing or late payment penalty notice from the IRS that has an original or extended filing, payment or deposit due date falling within 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.

Individuals and businesses 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 2016 return normally filed next year), or the return for the prior year (2015). See Publication 547 for details.

Currently, the following areas are eligible for relief:

North Carolina: Beaufort, Bertie, Bladen, Brunswick, Camden, Carteret, Chowan, Columbus, Craven, Cumberland, Currituck, Dare, Duplin, Edgecombe, Gates, Greene, Harnett, Hoke, Hyde, Johnston, Jones, Lenoir, Martin, Nash, New Hanover, Onslow, Pamlico, Pasquotank, Pender, Perquimans, Pitt, Robeson, Sampson, Tyrrell, Washington, Wayne and Wilson counties.

South Carolina: Beaufort, Berkeley, Charleston, Colleton, Darlington, Dillon, Dorchester, Florence, Georgetown, Horry, Jasper, Marion, Orangeburg and Williamsburg counties.

Georgia: Bryan, Camden, Chatham, Glynn, Liberty and McIntosh counties.

Florida: Brevard, Duval, Flagler, Indian River, Nassau, St. Johns, St. Lucie and Volusia counties.

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

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

SCDOR Offering Hurricane Matthew Tax Relief for Certain Taxpayers

October 12, 2016
The South Carolina Department of Revenue is extending certain South Carolina tax deadlines for taxpayers in counties declared a federal disaster area. Official information including tax types and deadlines will be outlined in a forthcoming SCDOR Information Letter. Affected counties include:
  • Beaufort
  • Berkeley
  • Charleston
  • Colleton
  • Darlington
  • Dillon
  • Dorchester
  • Florence
  • Georgetown
  • Horry
  • Jasper
  • Marion
  • Williamsburg
For More Information:
DOR Public Affairs Office
(803) 898-5773
As always, please feel free to contact Tax On Wheels, LLC at 803 732-4288 if we can be of assistance to you with this or any other tax matter.

Mark your calendar! The Sales Tax Holiday Weekend is coming up!

July 1, 2016
The 2016 Sales Tax Holiday Weekend begins Friday, August 5, 2016 and continues through Sunday, August 7. During this time, the 6% state sales and use tax and any local sales and use taxes will not be imposed on*:
  • clothing and clothing accessories (e.g., hats, scarves, hosiery, handbags)
  • footwear
  • school supplies (e.g., pens, pencils, paper, binders, notebooks, books, bookbags, lunchboxes, calculators)
  • computers and computer software
  • printers and printer supplies
  • bath washcloths, bath towels, shower curtains, bath rugs and mats
  • blankets, bed spreads, bed linens, sheet sets, comforter sets
  • pillows and pillowcases
Sales Tax Holiday Resources

*The list above is not comprehensive. For a more detailed list of exempt items, please see SC Revenue Ruling #10-7 provided above.

New York State highlights sound ways to use your tax refund

March 30, 2016

The New York State Department of Taxation and Finance, and the New York Department of State’s Division of Consumer Protection, are highlighting five ways that the seven million New Yorkers who receive tax refunds can make smart decisions with their money.

  • Save–Use your tax refund to bolster your emergency savings. This could help you avoid credit card debt and resulting interest payments if something unforeseen happens. Financial experts suggest having at least three months’ worth of savings to cover all your fixed expenses, such as mortgage or rent, utilities, food, and insurance.
  • Maintenance–If you’ve never had the extra money to build that new deck or put in those new kitchen cabinets that you’ve always wanted, now might be the time. In addition to improving the look and functionality—and possibly increasing the overall value—of your home, many home improvements qualify for tax benefits as well. Any project considered a capital improvement is exempt from sales tax.
  • Avoid debt–Your tax refund can put a sizable dent in—or even erase—your credit card debt. If you pay it off now, you won’t continue to pay interest charges. Your tax refund can also help to pay off your student loans earlier.
  • Retirement planning–Investing your tax refund now for the future is smart financial planning. There are many ways to save for retirement, including adding your refund money to your 401(k). If your employer doesn’t offer a 401(k) option, then consider opening an IRA. The sooner you start saving for retirement, the more time your money has to grow.
  • Training–To earn that promotion or switch career paths you often need additional training and education. You can spend your tax refund on college courses to help you in your career. You could also invest in a 529 College Savings Plan to help pay for your child’s future education.

“There’s no harm in treating yourself, of course—you’ve earned it!” says New York State Commissioner of Taxation and Finance Jerry Boone. “But making a smart decision now can help pave the way to a better financial situation down the road.”

“Foresight and education are keys to being a smart consumer,” said Acting Secretary of State Rossana Rosado. “These suggestions provide New Yorkers with some of the options available to help them secure a better financial future.”

For more information contact Tax On Wheels, LLC at 803 732-4288