IRS Delays Form 1099-K Reporting Threshold: A Detailed Update for Taxpayers

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📷 📣 Important Update: IRS Delays Form 1099-K Reporting Threshold for 2023! 📅

The IRS has some news that will make tax season a bit smoother for everyone. They’ve decided to delay the implementation of the new $600 reporting threshold for Form 1099-K for the year 2023, and here’s why:

To reduce confusion among taxpayers, tax professionals, and payment processors.
To make 2023 a transition year, where reporting is only required if you receive over $20,000 and have more than 200 transactions.

But wait, there’s more! Looking ahead to 2024, the IRS plans to introduce a $5,000 reporting threshold, aligning it with the $600 threshold required by the American Rescue Plan Act. The goal? Minimizing the reporting burden and making it easier for you to stay compliant.

Here are 5 key takeaways to keep in mind as of November 2023:

1️⃣ The IRS has your back with a delay to make the transition smoother.
2️⃣ For 2023, report only if you exceed $20,000 in earnings and 200 transactions.
3️⃣ Get ready for a $5,000 threshold in 2024.
4️⃣ This change aligns with the American Rescue Plan Act.
5️⃣ Stay informed and compliant – it’s a win for everyone!

Questions? Reach out to Cloud Accounting Professionals for guidance. 💼🔍

The IRS drafts new Form 1040-SR tax return for seniors & 1040 updates for 2019

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On July 2019, The Internal Revenue Service (IRS) has posted a draft version of 1040 tax return for senior citizens, calling this new form 1040-SR U.S. Tax Return for seniors. The draft for the new Form 1040-SR has improved its font sizes and removed the shading around some of the boxes to improve contrast for taxpayers with declining vision. The draft also includes a “Standard Deduction chart” so that taxpayers can “add the number of boxes checked in the ‘Age/Blindness’ section of the Standard Deduction area.” Along with this new Form 1040-SR U.S. Tax Return for senior citizens, the IRS also has a new draft of Schedule R, which will be “the credit for the elderly or disabled.”
For the next filing tax season taxpayers are expected to be presented with a more updated Form 1040 Tax Return that will come with a few drastic changes but not really. Since last filing season Form 1040 had to be shortened due to the 2017 mandatory tax law. For example, it is said that the signature box will be moved to page 2, in order to make more space for entering names of a spouse and children. Also, the Health care coverage checkbox will be removed since it’s no longer mandatory to have health insurance. The Earned Income credit, additional child tax credit, American opportunity credit, and some other line related subjects are to change position.

Did you know that if you have homeowners Insurance and there’s a Hurricane that causes damages to your home? You may qualify for a Tax Deduction?

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If you live in Florida, you know that nothing says summer more than the word “hurricane” and now we are officially in the hurricane/tropical storm season. If you’ve ever experienced any hurricane or tropical storm before, you know very well that you should start preparing for the worst-case scenario now rather than ending up completely washed out.
Whether you rent or own a home, insurance can be a lifesaver especially for any out of our hand situations such as a hurricane. First check with your home insurance policy. Even if you have a $250 deductible, a hurricane-related claim might fall under a different deductible (which can sometimes be higher.)
If there is a hurricane, you may also want to protect your important documents. You can do so by storing them in a sealed container that is elevated from the floor, to avoid being damaged if there is flooding. Flood insurance is also a good idea since South Florida is prone to flooding in heavy rains. Be careful though as some water-related damage might not necessarily fall under a hurricane claim.

Congress Approves the Taxpayers First Act Reform Bill

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On Tuesday, July 2nd, 2019, The U.S. President, Trump, has signed the Taxpayers First Act filing bill into law.
The bill is to make improvements to the Internal Revenue Services, such as modernizing technology, updating their customer service techniques, helping any tax-related identity theft victims by securing their rights.

The bill also makes limitations on the types of tax receivables that private debt collection services can assign, it may remove any taxpayer if their income is only based on disability insurance and if their income doesn’t exceed 200% of the applicable poverty level.

The Installment agreements that is offered by a private debt collector would increase its maximum length from five years to seven years.
This bill directs the IRS to create an online platform to allow taxpayers to prepare and file for the Forms 1099.

The IRS will be required to notify any organizations before revoking their exempt status for failure to file a return for three years, the IRS is to notify that it has no records of a return for two or more years. The revocation will occur after the third year and the failure to file penalty fee is to increase to $330.

If there are any tax-related identity theft victims or any suspects of identity theft the IRS will make it a single point of contract to notify the taxpayers. The penalty for improper use of information by a tax return preparer, and if the use or disclosure is made in connection to identity theft the penalty in some cases will increase. For each disclosure, the penalty will be $1,000 (instead of $250) and the annual maximum will be $50,000 (instead of $1,000).

I Missed the Filing Deadline! What Happens Now?

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This year’s individual deadline for 2015 was April 18, 2016. What happens if it was missed? The urgency in getting your taxes filed is really dependent upon whether you’re expecting a refund or you owe additional taxes.

If you are unable to file your return by the original due date, the IRS allows you to file an extension giving you an additional six months to file your taxes. It is important to note that this is simply an extension of time to file your taxes and not an extension of time to pay any amounts due. If you do not pay the anticipated balance owed by the original due date, you may be subject to additional interest and penalties.

I’m Getting a Refund

If you are expecting a refund, you have until April 18, 2019, in order to file your return and claim the money due to you. You are currently providing an interest-free loan to the government. If the statute of limitations runs out prior to filing your return, the government gets to keep your money.

I Will Have a Balance Due

If you anticipate that you will owe taxes, then the situation becomes much more difficult. If you did not file for an extension, you are now subject to both interest and penalties. In addition, unlike being in a refund situation, if you do not file a return when a balance is owed, the government has an unlimited time to demand payment. In some instances, they will file a tax return on your behalf and send you a bill for any balance they believe you owe.

There are a number of penalties that you become subject to when you do not file your return with a balance owed. The failure to file penalty (FTF) is assessed at a monthly rate of 5% of your balance. The maximum amount of the penalty is 25% of any amount owed.

The failure to pay penalty (FTP) is incurred when you fail to pay the estimated amount owed by the April 15th deadline. It is assessed at a rate of 0.5% of the balance owed per month up to a 25% maximum of the amount due.

In cases where both penalties apply, the failure to file penalty is reduced by the failure to pay penalty. These two penalties are automatically assessed by the IRS.

If you have a balance due, you may also be subject to underpayment penalties. These can vary depending on your specific circumstance.

Even if you are unable to pay the amount owed to the IRS, it is imperative that you file your return. The IRS will then allow you to work with them on a payment plan to pay off your debt. In some extreme cases, you may be eligible to negotiate an offer in compromise with the IRS allowing you to pay a significantly reduced portion of the balance that you owe. The eligibility requirements for being approved for an offer in compromise from the IRS are very stringent. Your tax professional can help you in walking through this process and determining your eligibility.

If this is the first time you have missed the filing deadline, there may be some good news for you. The IRS has a first-time abatement penalty waiver which allows qualifying taxpayers to eliminate failure to file and failure to pay penalties for a single return period.

In order to qualify, taxpayers must not have been subject to any significant amount of penalties in the previous three years. You must also be in compliance with all other filing and payment obligations.

Taxes are already difficult enough. Missing the due date without a timely filed extension makes things that much more complicated for taxpayers who owe money to the IRS. Consult your tax advisor for help with all your options to get back into the IRS’s good graces.

Identity Protection PINs

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IRS acknowledges an error in letters sent with Identity Protection PINs

 

The Internal Revenue Service (IRS) has just announced that taxpayers will be receiving Identity Protection Personal Identity Number (IP PIN) letters with a mistake. The IP PIN helps the IRS verify a taxpayer’s identity and accept their electronic or paper tax return. When you have an IP PIN, it prevents someone else from filing a tax return with your SSN.

The notice on the CP01A incorrectly indicates the IP PIN issued is to be used for filing the 2014 tax return when the number is supposed to be used for the 2015 tax return.

Thankfully this issue shouldn’t affect anything else involving the IP PIN Process.

 

More information about the CP01A:

CP01A (https://www.irs.gov/Individuals/Understanding-Your-CP01A-Notice)

Security Awareness for Taxpayers

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As tax season will be underway the tax scams are picking up.

Here are a few things you can do in order to protect yourself from these scams according to the IRS.

 

Note that the IRS will never:

 

1) Call to demand immediate payment, nor will the agency call about taxes owed without first having mailed you a bill.

2) Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.

3) Require you to use a specific payment method for your taxes, such as a prepaid debit card.

4) Ask for credit or debit card numbers over the phone.

5) Threaten to bring in local police or other law-enforcement groups to have you arrested for not paying.

 

If you don’t owe taxes, or have no reason to think that you do:

 

1) Do not give out any information. Hang up immediately.

2) Contact TIGTA to report the call. Use their “IRS Impersonation Scam Reporting” web page. You can also call 800-366-4484.

3) Report it to the Federal Trade Commission. Use the “FTC Complaint Assistant” on FTC.gov. Please add “IRS Telephone Scam” in the notes.

 

 

 

More information:

Security Summit Identity Theft Tips Overview
Tax Scams

 

IRS websites:

https://www.irs.gov/uac/Tax-Scams-Consumer-Alerts
https://www.irs.gov/uac/IRS-Urges-Public-to-Stay-Alert-for-Scam-Phone-Calls

 

 

Tax Updates For 12/09/2015

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Here’s a quick snippet of tax updates from Hillary Clinton proposing a new “exit tax” to the USDA interested in making sure its beer is created using green energy.



TaxUpdate10082015

Changes to Due Dates Effective Now

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In a bill for highway funding extension some provisions in the bill were what you would not expect, they were tax provision that changed due dates and additional requirements. The bill was signed into law by President Barack Obama on July 31, 2015. While the tax provisions are divided between new tax return due dates and clarification of previous tax laws. It is clear to see that legislators are starting to listen to the profession. As these changes are what the AICPA and other accounting societies have been trying to suggest would make it easier for preparers.

 

Changes to Form 1098 Mortgage Interest Statements

 

New information will start showing on Forms 1098, which many of you will recognize as the form that you turn in to your accountant. The form has information about your mortgage interest. These forms will require to provide more information such as the outstanding principal on the mortgage at the beginning of the year, the date the mortgage started and the address of the property that the information relates to. Certain companies have already started to add this information but does not become mandatory until 2017.

 

Consistent Reporting For Estate

 

Estate reporting will now require executor to furnish informational returns to the IRS and to any person receiving interest in property from the estate. Additionally it now adds a new law that requires inherited property cannot have a higher basis than what is reported by the estate. This is meant to curtail any confusion in basis as it has happened before. This change is effective for any estate tax return filed past the date of the new law.

 

6 Year Statute Of Limitations In Cases Of Overstatement Of Basis.

 

After the IRS lost in court back in 2012 due to the vague writing of a law in the case of U.S.  v. Home Concrete & Supply, LLC. The Supreme court held that the IRS could not extend the statute of limitations to six years when it applied to matters of capital gains and overstatement of basis. Resulting in the taxpayer keeping the three year statute of limitation. The IRS decided to correct this mistake by making it clear that an overstatement in basis will be considered an omission from gross income and therefore they will be able to extend the statute of limitations to six years. This change applied to any returns that are filed after this new law becomes effective and also for any other returns that are still within the statute of limitations.

 

Modification to Tax Return Due Dates

 

  • Partnership Tax Return will now be due March 15 previously these were due April 15, For fiscal year partnership they are due on the 15th day of the third month after their closing.
  • C Corporations their new due date is 15th day of the fourth month after their closing. currently they are due on the third month
  • FinCEN Report 114 is now due April 15 much earlier than previous deadline which was June 30. an Extension is now available.
  • Corporations will be allowed a six month extension with different starting dates depending on  if you are calendar or fiscal year corporation.
  • Foreign trust reporting Form 3520-A Annual Information Return of a Foreign Trust with a United states Owner has been changed to the 15th day of the third month after closing.
  • Form 3520 Annual Return to Report transactions with Foreign Trust with Receipt Of Certain Foreign Gifts has been changed to April 15.
  • Due dates apply to taxable years beginning after December 31, 2015 with one exception C corporation with fiscal years have an extra ten years to make the change.

 

Modification to Extensions

 

  • Form 1065: 6 Month Extension ending on September 15 for Calendar year taxpayers.
  • Form 1041: 5 ½ Month period ending on September 30 dor calendar year taxpayer.
  • Form 5500: Automatic 3 ½ month period ending on November 15 for calendar year plans
  • Form 990: Automatic 6 month period ending on November 15 for calendar year
  • Form 4720: Automatic 6 month period beginning on the due date for filing the return.
  • Form 5227:  Automatic 6 month period beginning on the due date for filing the return.
  • Form 6069:  Automatic 6 month period beginning on the due date for filing the return.
  • Form 8870:  Automatic 6 month period beginning on the due date for filing the return.
  • Form 3520-A: 6  Month Extension
  • Form 3520:     6 Month Extension
  • FinCEN Report 114: 6 month period ending on October 15

Does Your Tax Preparer Have A Record Of Completion?

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Record of Completion

 

Many of you know that it is important to find a tax preparer that knows what they’re doing because in the end it affects you. This year was the start of a new program by the IRS called the Annual Filing Season Program. What this program aims to do is make sure that the people that are preparing tax returns for compensation are competent and know what they are doing. Recently the IRS has stated that 44,000 preparers completed the program for the first year. This is a good sign for people that are looking for help when it comes to preparing and filing their taxes.

The Annual Filing Season Program was started in the hopes that all tax return preparers will maintain a level of knowledge that will help their clients. In order to complete this program a person must complete a certain amount of continuing education. The total needed is 18 hours which consists of 6 hours of “refresher courses”, 10 hours on federal tax laws, and 2 hours of ethics. On top of these requirements those that participate in this program must agree to specific obligations set by the IRS which will make them accountable for their actions.

This program is completely voluntary but can negatively affect the preparer and the taxpayer if they choose to not participate. After December 31, 2015 those who do not participate in the Annual Filing Season Program will not be able to represent their clients before the IRS for tax returns and claims for refunds. This means that if your return is selected for additional review, your tax preparer may not be able to help you with the review. Attorneys, CPA, and Enrolled Agents will have full representation rights for clients but are usually expensive to keep. Those who are part of the Annual Filing Season Program will have limited representation rights, but will still be able to represent clients they have prepared a return for.

We at Cloud Accounting Professionals are proud to say that all our tax preparers have earned the Annual Filing Season Program Record of Completion. This means that we have put time into keeping up with changing tax laws and made sure we can help our clients when needed. The IRS shows that as of the start of the 2015 filing season there were more than 666,000 tax return preparers with active PTINs. This means that only 6% of those tax return preparers volunteered to take and finished the program.

Many people do not make the commitment to sign the taxes they prepare and to stand by their work. We are proud of helping others to prepare and file their returns and will continue to show it. When you come to Cloud Accounting Professionals to help prepare your taxes, you can rest assured that you are in good hands.