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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.

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)

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

Why I Should Use Cloud Accounting Professionals ?

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We welcome you to try our expert services. Our staff has over ten years experience in the accounting industry.  We are focused on helping you achieve financial success. You will never worry about crunching numbers,meeting costly deadlines or procuring IRS Penalties.

Cloud Access

Our cloud technology lets you access all your personal information regardless of where you are. It also allows us to assist you in ways a traditional company structure can not. We know keeping in touch with your accountant is difficult, so we made sure you have access our services and experience from anywhere in the world.

Convenient

We offer a convenient way to file your taxes. Documents are sent through the online client portal, so our accountants are ready when you are. If you forget to file a form, there’s no need to worry and reschedule; just upload it at your convenience! We make the process easier by allowing you to submit documents online.

Security

Security is our primary concern. We use data encryption to make sure all communication and data sharing is protected. It’s the same encryption used by big banks. Additionally our Client portal servers reside in accredited data centers with additional power sources and data backups. Your information is protected against almost any disaster.

Expertise

From bookkeeping to taxes, we make sure our staff is experienced in handling all possible problems that may arise when organizing your business information. Unlike other large companies, our professionals are trained year long and serve solely to help you with your accounting needs.

Year long support

Unlike most tax companies, we operate outside tax season to assist you with all your financial needs. We’re open year round so you can call or pass by our office for immediate service. No matter what happens to you or your business, we will assist you during any time of the year.

One Stop Shop

The days of going to one business for taxes and another for bookkeeping are gone.  We get it all done for you under the same roof. We analyze your financial information to see how it affects your taxes. We get you started and review the information to see what other services you benefit from.

Florida Number One In Identity Theft

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ID Theft

 

 

Identity theft as defined by the IRS occurs when someone uses your personal information such as your name, Social Security number (SSN) or other identifying information, without your permission, to commit fraud or other crimes.

 

“Identity theft continues to top the Federal Trade Commission’s national ranking of consumer complaints, and American consumers reported losing over $1.6 billion to fraud overall in 2013, according to the FTC’s annual report on consumer complaints released today.”

Information Valuable to Identity thieves:

  •         Name, address
  •         Date of birth
  •         Medicare card number
  •         Driver’s license number
  •         Social Security number
  •         Passwords

How does Identity theft happen?

  •          Data breaches
  •          Phony emails from imposters
  •          Social networking
  •          Stolen wallets
  •          Corrupt tax preparation services

Warning signs:

  •         Unusual delay in getting a refund
  •         IRS notifications:

o   Duplicate tax return filing

o   Unreported income

o   Duplicate dependents

Although there are many ways someone may try to steal your identity there are many ways to reduce the risk of theft.

  1.       Minimize personal information kept in your purse, wallet and smartphone.
  2.       Shred documents with any personal information.
  3.       Do not give out personal information.
  4.       Do not click on links sent from strange emails.
  5.       Use complex passwords
  6.       Check your annual credit reports, one CRA every quarter.

 

In previous posts we have said how it is important to trust your tax preparer as you have voluntarily given them the information needed to steal your identity. According to a Treasury Department report, in 2012 there were more than 1.8 million cases of stolen returns from taxpayer identity theft. This crime costs taxpayers billions of dollars every year and the statistics show that is it growing. Which state is currently leading the country in the number of cases, none other than our very own sunshine state Florida.

It seems lawmakers have taken notice of the increasing number of cases and are doing something about it. Last month leaders of the the Senate Finance Committee introduced a bill to improve the protection taxpayers have against fraudulent refunds that were claimed with stolen identities. This month the House passed a bill that was introduced by Debbie Wasserman Schultz. D-Fla,  with co-sponsors Lamar Smith, R-Texas, and Bob Goodlatte, R-Va, that would make tougher penalties for people that would try to steal tax returns through identity theft.

The intent of the bill is to make stealing the identity of someone less appealing. The bill would increase the maximum penalties for someone caught stealing an identity. It would also add to the definition of identity theft the use of a business or charitable organization to gain sensitive information from people, also known as “phishing”. Another point of the bill would be to have local law enforcement working in better coordination with Justice Department.

It is good to see that lawmakers are trying to put a stop to a growing problem with fraudulent returns and identity theft. As this crime is prevalent here in south Florida it is important to remember that as of right now this bill is not a law, so take care of your sensitive information and make sure to take it to a reputable person if you need help preparing and filing your taxes.

 

Resources:

Ftc.gov/idtheft

Ftc.gov/taxidtheft

 

 

3 Common Mistakes on Taxes to Avoid!

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 1-  Incorrect or missing social security number

This is a common mistake constantly noted by the IRS. The Social Security number for the taxpayer, spouse, dependents, and children who qualify for the Earned Income Credit or Child Tax Credit, must be written on the return form exactly as they appear on the Social Security Card. Always double-check.

 

SS

 

2-  Misspelled or different names

Although the IRS is all about numbers, words are important too. When your name or the name of your spouse, children, etc. do not match, this causes the to IRS to slow down the processing time on your tax return or throw it out completely. One common cause is when a taxpayer legally changes their name, most notably after getting married.

 

diffnames

 

“Remember to notify the Social Security Administration of your name change after your wedding”

 

3-  Failing to sign/ date a return

Sounds simple, yet every year, hundreds commit this common mistake of forgetting to sign their tax return. The IRS won’t process your return it if it’s missing a signature, even on e-filed returns. The IRS does not accept tax returns that are not signed, Period.

 

“Both spouses must sign a joint return.”

 

signature

 

 

 

For more information please visit: http://www.irs.gov/taxtopics/tc303.html

 

IRS Taxpayer Bill Of Rights

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The Internal Revenue Service adopted a “Taxpayer Bill Of Rights.” Most of them are rights that are already exist in the tax code, but this allows them to be more visible to clients.

Taxpayer Bill of Rights

  1. The Right to Be Informed
  2. The Right to Quality Service
  3. The Right to Pay no More than the Correct Amount Of Tax
  4. The Right to challenge the IRS’s Position and Be Heard
  5. The Right to Appeal an IRS Decision in an Independent Forum
  6. The Right to Finality
  7. The Right to Privacy
  8. The Right to Confidentiality
  9. The Right to Retain Representation
  10. The Right to a Fair and Just Tax System

 

These rights can be found under the IRS Publication 1. They will also be sent to taxpayers when they receive notices from the IRS; including audits and collections.

 

“The Taxpayer Bill of Rights contains fundamental information to help taxpayers,” said IRS Commissioner John A. Koskinen.

“These are core concepts about which taxpayers should be aware. Respecting taxpayer rights continues to be a top priority for IRS employees, and the new Taxpayer Bill of Rights summarizes these important protections in a clearer, more understandable format than ever before.”

 

The IRS released the Taxpayer Bill of Rights after an extensive discussion with the Taxpayer Advocate Service; an independent office inside the IRS that represents the interest of U.S. taxpayers. Since 2007, it has been the Offices priority to publish the Taxpayer Bill of Rights and report it in their most recent Annual Report to Congress.

 

“Congress has passed multiple pieces of legislation with the title of ‘Taxpayer Bill of Rights,'” Olson said. “However, taxpayer surveys conducted by my office have found that most taxpayers do not believe they have rights before the IRS, and even fewer can name their rights. I believe the list of core taxpayer rights the IRS is announcing today will help taxpayers better understand their rights in dealing with the tax system.”

 

The timing of this Bill is important because the IRS is currently at its peak of sending notices to taxpayers from the 2014 filing season. The publication will initially be available in English and Spanish, but will be translated to other languages in the future. To help spread the word, the IRS created a special section on the IRS.gov website highlighting the ten rights. They will also add posters and signs to its public offices in the coming months.

 

The importance of this was echoed by IRS Commissioner Koskinen, who said.  “This information is critically important for taxpayers to read and understand. We encourage people to take a moment to read the Taxpayer Bill of Rights, especially when they are interacting with the IRS. While these rights have always been there for taxpayers, we think the time is right to highlight and showcase these rights for people to plainly see.”

 

“I also want to emphasize that the concept of taxpayer rights is not a new one for IRS employees; they embrace it in their work every day,” Koskinen added. “But our establishment of the Taxpayer Bill of Rights is also a clear reminder that all of the IRS takes seriously our responsibility to treat taxpayers fairly. Koskinen added, “The Taxpayer Bill of Rights will serve as an important educational tool, and we plan to highlight it in many different forums and venues.”

 

This is a move in the right direction because many taxpayers are afraid of the IRS and unaware they have rights. As they become more aware of their rights, it might subside the general feeling of fear.

 

In my professional career, I have seen clients so scared of opening letters from the IRS they wait for me to open it for them. Most of the time it’s nothing but a harmless notification, But the fact remains the IRS logo scares people and makes them unsure of what to do next. If you ever do get a notice from the IRS, be aware you do have rights and there are professionals who can help you resolve any issue.


Source:
http://www.irs.gov/uac/Newsroom/IRS-Adopts-Taxpayer-Bill-of-Rights;-10-Provisions-to-be-Highlighted-on-IRSgov,-in-Publication-1