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 receiveemployee retention tax credits.
Internal Revenue Service Commissioner DanielWerfelsaid that the agency is still working to figure out theprocessof how to help those who have already received theirERC"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."Werfelmade 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 theemployee retention creditif the claim has not been processed, as well as placed a moratorium on processing claims until at least the end of year.
Werfelalso 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.
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).
TheIRShas announced that calendar year2023would continue to be regarded as a transition period for enforcement and administration of the de minimis exception forreportingby third party settlement organizations (TPSO) underCode Sec. 6050W(e). TheIRShas also planned for athresholdof $5,000 for tax year 2024 to phase in implementation. Previously, inNotice2023-10, theIRSannounced that 2022 would be regarded as a transition period for the same issue. Specifically, the transition period focuses on the implementation of the amendment toCode Sec. 6050W(e)by the American Rescue Plan Act of 2021 (P.L. 117-2) that lowered the de minimis exception forTPSOsto $600.
Code Sec. 6050Wrequires a TPSO to file an information return (Form 1099-K) each calendar year toreportthe annual gross amount of reportable payment transactions to theIRSand provide a copy of the return to the participating payee. A de minimis exception to thisreportingrequirement is provided inCode Sec. 6050W(e). Prior to the amendment by the American Rescue Plan Act, a TPSO was exempt from thereportingrequirement if the gross amount that would otherwise bereporteddid 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.
Notice2023-74extends the transition period issued underNotice2023-10to the2023calendar tax year. Under the transition period, a TPSO would not be required to fileForm 1099-Ktoreportpayments in settlement of third-party network transactions unless the gross amount of aggregate payments to bereportedexceeds $20,000 and the number of such transactions with that participating payee exceeds 200. Further, a TPSO exempt fromreportingdue to the transition period would not be subject to penalties underCode Secs. 6721or6722for the failure to file or furnishForm 1099-K.
The transition period is limited to the amendments made by the American Rescue Plan Act toCode Sec. 6050W(e)and does not apply to other requirements underCode Sec. 6050W. In addition, the transition period does not apply to backup withholdings underCode Sec. 3406(a).TPSOsthat have performed backup withholding for a payee during calendar year2023must file a Form 945 and aForm 1099-Kwith theIRSprovide 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.
TheIRShas released the annualinflation adjustmentsfor2024for the incometaxratetables, plus more than 60 othertaxprovisions. TheIRSmakes thesecost-of-living adjustments(COLAs) each year to reflect inflation.
For2024, the highest incometaxbracket 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.
$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.
Thestandard deductionfor a dependent is limited to the greater of:
the sum of $450, plus the dependent’s earned income.
Individuals who are blind or at least 65 years old get an additionalstandard deductionof:
$1,550 for married taxpayers and surviving spouses, or
$1,950 for other taxpayers.
Alternative Minimum Tax(AMT) Exemption for2024
$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 exemptionamountsphase out in2024when 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 in2024
Fortaxyears beginning in2024, 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 GiftTaxAdjustments for2024
The followinginflation adjustmentsapply to federal estate and gifttaxesin2024:
the gifttaxexclusion is $18,000 per donee, or $185,000 for gifts to spouses who are not U.S. citizens;
the federal estatetaxexclusion is $13,610,000; and
the maximum reduction for real property under the special valuation method is $1,390,000.
2024Inflation Adjustmentsfor OtherTaxItems
The maximum foreign earned income exclusionamountin2024is $126,500.
excludable interest on U.S. savings bonds used for education,
various penalties, and
many other provisions.
Effective Date of2024Adjustments
Theseinflation adjustmentsgenerally apply totaxyears beginning in2024, so they affect most returns that will be filed in 2025. However, some specified figures apply to transactions or events in calendar year2024.
The 2024cost-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.
The2024cost-of-living adjustments(COLAs) that affectpension plandollar limitations and otherretirement-related provisions have beenreleasedby the IRS. In general, many of thepension planlimitations 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 someretirement-related amounts adjustable for inflation beginning in2024. These amounts, as adjusted for2024, 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 for2024
The contribution limit has increased from $22,500 to $23,000 for employees who take part in:
-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 annualcost-of-living adjustmentbeginning in2024but remains $1,000.
The income ranges increased for determining eligibility to make deductible contributions to:
-Roth IRAs, and
-to claim the Saver's Credit.
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 aretirementplan at work. The phase out depends on the taxpayer's filing status and income.
-For single taxpayers covered by a workplaceretirementplan, 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 workplaceretirementplan, 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 workplaceretirementplan 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:
The IRS reminded taxpayers who may be entitled to claimRecovery 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.
TheIRSreminded taxpayers who may be entitled toclaimRecovery Rebate Credit(RRC) to file a tax return toclaimtheir credit before the April-May, 2024 deadlines. It has been estimated that certain individuals are stilleligibletoclaimRRC foryears2020 and 2021. The deadlines to file a return andclaimthe 2020 and 2021 credits are May 17, 2024, and April 15, 2025, respectively. Additionally, theIRSreminded that taxpayers must first file a tax return to make their RRCclaimsirrespective of income slab and source of income.
TheRecovery Rebate Credit, is a refundable credit for those who missed out on one or moreEconomic Impact Paymentssuch asstimulus paymentswhich were issued in 2020 and 2021. The personseligibletoclaimthe 2020 and 2021 RRC must:
have been a U.S citizen or U.S resident alien in the respectiveyear;
not have been a dependent of another taxpayer for the respectiveyear;
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 orclaima dependent who has a Social Security number issued by the due date of the tax return, orclaima dependent with an Adoption Taxpayer Identification Number.
For qualified taxpayers who require one-on-one tax preparation help, they can avail the same through theFree tax return preparation assistanceavailable on theIRSwebsite. TheIRSurges people to look into possible benefits available to them under the tax law. People can make use of theirIRSOnline Accountalso 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 filingseason.
The Internal Revenue Service is looking to improve its customer service metrics as well as improve its technology offerings in the coming taxfilingseason.
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 the2024taxfilingseason, the IRS is committed to maintaining the 85 percent level of service it achieved in the 2023filingseasonon 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 pastfilingseason, 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 comingfilingseason, we want to continue to again [the Office of Management and Budget’s] trustgoalof 75 percent."
Yellen also highlighted how the"Where’s My Refund?"tool will be improved for the comingseason, 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 2023filingseason.
Yellen also stated that the IRS has met a technologygoaland in the2024filingseason, 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 the2024filingseason.
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.
The Internal Revenue Service announced the launch of the first phase of rolling out businesstaxpayeraccounts, as well as enable taxpayers to respond to notices online.
TheInternal Revenue Serviceannounced thelaunchof the first phase of rolling outbusinesstaxpayeraccounts, as well as enabletaxpayersto 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 abusinesstaxaccount, where they can view theirbusinessprofits and manage authorized users."
TheIRSnoted that thebusinesstaxaccountswill expand to allowtaxpayers"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 bankaccountinformation."
Thebusinesstaxaccountswere enabled by the agency’s receiving of supplemental funding from the Inflation Reduction Act.
Another technology improvement announced allowingtaxpayersto respond online to notices, something that previously required responses via mail.
"During the filing season 2023,taxpayerswere 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, theIRSwill 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, theIRSstated.
"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 onlineaccountsalso 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.