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PPP Loan Forgiveness Form is Easier (or Less Complicated) Now for Borrowers of Less than $50,000

Fri, 09 Oct 2020 15:10:51 GMT

1) The SBA has released a new form ( 3508S ) for borrowers seeking forgiveness if the amount of the loan was less than $50,000.

2) Loan forgiveness is not automatic.

3) Borrowers who use this form are not subject to forgiveness reduction because there were reductions in the pay of an employee.

4) Borrowers who use this form are not subject to forgiveness reductionif there was a reduction in FTE (full time equivalents). This basically means if the number of employees decreased during the covered period the amount of forgiveness does not decrease just because of it.

5) The borrower does not have to show the calculations used to determine their loan forgiveness amount.

6) The borrower is still responsible to calculate the loan forgiveness amount and to be prepared to provide this information if requested.

7) The new form may be simpler but it is still complicated and it is advisable to consult a professional for its preparation.

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IRS extends Economic Impact Payment Deadline to Nov. 21 to Help Non-filers

Tue, 06 Oct 2020 17:58:14 GMT

"We took this step to provide more time for those who have not yet received a payment to register to get their money, including those in low-income and underserved communities," said IRS Commissioner Chuck Rettig. "The IRS is deeply involved in processing and programming that overlaps filing seasons. Any further extension beyond November would adversely impact our work on the 2020 and 2021 filing seasons. The Non-Filers portal has been available since the spring and has been used successfully by many millions of Americans."

Special note: This additional time into November is solely for those who have not received their EIP and don't normally file a tax return. For taxpayers who requested an extension of time to file their 2019 tax return, that deadline date remains October 15.

To support the ongoing EIP effort, many partner groups have been working with the IRS, helping translate and making available in 35 languages IRS information and resources on Economic Impact Payments.

To help spread the word, the IRS sent nearly 9 million letters in September to people who may be eligible for the $1,200 Economic Impact Payments but don't normally file a tax return. This push encourages people to use the Non-Filers tool on IRS.gov.

"Time is running out for those who don't normally file a tax return to get their payments," Rettig added. "Registration is quick and easy, and we urge everyone to share this information to reach as many people before the deadline."

While most eligible U.S. taxpayers have automatically received their Economic Impact Payment, others who don't have a filing obligation need to use the Non-Filers tool to register with the IRS to get their money. Typically, this includes people who receive little or no income.

The Non-Filers tool is secure and is based on Free File Fillable Forms, part of the Free File Alliance's offering of free products on IRS.gov.

The Non-Filers tool is designed for people with incomes typically below $24,400 for married couples, and $12,200 for singles who could not be claimed as a dependent by someone else. This includes couples and individuals who are experiencing homelessness.

Anyone using the Non-Filers tool can speed the arrival of their payment by choosing to receive it by direct deposit. Those not choosing this option will get a check.

Beginning two weeks after they register, people can track the status of their payment using the Get My Payment tool, available only on IRS.gov.

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The Filing Deadline for Extension Filers is Almost Here

Tue, 06 Oct 2020 17:49:39 GMT

Even though time before the extension deadline is dwindling, there’s still time for taxpayers to file a complete and accurate return. Taxpayers should remember they don’t have to wait until October 15 to file. They can file whenever they are ready.

Taxpayers who did not request an extension and have yet to file a 2019 tax return can generally avoid additional penalties and interest by filing the return as soon as possible and paying the amount owed.

Here are a few tips and reminders for taxpayers who have not yet filed:

Taxpayers getting a refund should use Direct Deposit.

The fastest way for taxpayers to get their refund is to file electronically and use direct deposit .

Taxpayers with extensions should file their tax returns by Oct. 15 and, if they owe, pay as much as possible to reduce interest and penalties. IRS Direct Pay allows individuals to securely pay from their checking or savings accounts. These taxpayers can consider a payment plan , which allows them to pay over time. For other payment options, taxpayers can visit the Paying Your Taxes page on IRS.gov.

Military members and those serving in a combat zone generally get more time to file . These taxpayers usually have until at least 180 days after they leave the combat zone to file returns and pay any taxes due.

People who have a valid extension and are in – or affected by – a federally-declared disaster may be allowed more time to file .

Taxpayers should keep a copy of their tax return and all supporting documents for at least three years.

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Choosing the Best Business Structure

Wed, 23 Sep 2020 18:14:56 GMT

First Consulting professional advice is an important step .

Your business structure affects how much you pay in taxes , your ability to raise money, the paperwork you need to file, and your personal liability.

You'll need to choose a business structure before you register your business with the state. Most businesses will also need to get a tax ID number and file for the appropriate licenses and permits .

Choose carefully. While you may convert to a different business structure in the future, there may be restrictions based on your location. This could also result in tax consequences and unintended dissolution, among other complications.

Here are the Main Business Structures

1) A Sole Proprietorship is easy to form and gives you complete control of your business. You're automatically considered to be a sole proprietorship if you do business activities but don't register as any other kind of business.

Sole proprietorships do not produce a separate business entity. This means your business assets and liabilities are not separate from your personal assets and liabilities. You can be held personally liable for the debts and obligations of the business. Sole proprietors are still able to get a trade name . It can also be hard to raise money because you can't sell stock, and banks are hesitant to lend to sole proprietorships.

Sole proprietorships can be a good choice for low-risk businesses and owners who want to test their business idea before forming a more formal business.

2) Partnerships are the simplest structure for two or more people to own a business together. There are two common kinds of partnerships: limited partnerships (LP) and limited liability partnerships (LLP).

Limited partnerships have only one general partner with unlimited liability, and all other partners have limited liability. The partners with limited liability also tend to have limited control over the company, which is documented in a partnership agreement. Profits are passed through to personal tax returns, and the general partner — the partner without limited liability — must also pay self-employment taxes.

Limited liability partnerships are similar to limited partnerships, but give limited liability to every owner. An LLP protects each partner from debts against the partnership, they won't be responsible for the actions of other partners.

Partnerships can be a good choice for businesses with multiple owners, professional groups (like attorneys), and groups who want to test their business idea before forming a more formal business.

3) A Limited Liability Corporation (LLC) lets you take advantage of the benefits of both the corporation and partnership business structures.

LLCs protect you from personal liability in most instances, your personal assets — like your vehicle, house, and savings accounts — won't be at risk in case your LLC faces bankruptcy or lawsuits.

Profits and losses can get passed through to your personal income without facing corporate taxes. However, members of an LLC are considered self-employed and must pay self-employment tax contributions towards Medicare and Social Security.

LLCs can have a limited life in many states. When a member joins or leaves an LLC, some states may require the LLC to be dissolved and re-formed with new membership — unless there's already an agreement in place within the LLC for buying, selling, and transferring ownership.

LLCs can be a good choice for medium- or higher-risk businesses, owners with significant personal assets they want to be protected, and owners who want to pay a lower tax rate than they would with a corporation.

4) S Corporations (S corps) are a special type of corporation that's designed to avoid the double taxation drawback of regular C corps. S corps allow profits, and some losses, to be passed through directly to owners' personal income without ever being subject to corporate tax rates.

Not all states tax S corps equally, but most recognize them the same way the federal government does and taxes the shareholders accordingly. Some states tax S corps on profits above a specified limit and other states don't recognize the S corp election at all, simply treating the business as a C corp.

S corps must file with the IRS to get S corp status, a different process from registering with their state .

There are special limits on S corps. S corps can't have more than 100 shareholders, and all shareholders must be U.S. citizens. You'll still have to follow strict filing and operational processes of a C corp.

S corps also have an independent life, just like C corps. If a shareholder leaves the company or sells his or her shares, the S corp can continue doing business relatively undisturbed.

S corps can be a good choice for a businesses that would otherwise be a C corp, but meet the criteria to file as an S corp .

5) A Corporation (C corp) is a legal entity that's separate from its owners. Corporations can make a profit, be taxed, and can be held legally liable.

Corporations offer the strongest protection to its owners from personal liability, but the cost to form a corporation is higher than other structures. Corporations also require more extensive record-keeping, operational processes, and reporting.

Unlike sole proprietors, partnerships, and LLCs, corporations pay income tax on their profits. In some cases, corporate profits are taxed twice — first, when the company makes a profit, and again when dividends are paid to shareholders on their personal tax returns.

Corporations have a completely independent life separate from its shareholders. If a shareholder leaves the company or sells his or her shares, the C corp can continue doing business relatively undisturbed.

Corporations have an advantage when it comes to raising capital because they can raise funds through the sale of stock, which can also be a benefit in attracting employees.

Corporations can be a good choice for medium- or higher-risk businesses, businesses that need to raise money, and businesses that plan to "go public" or eventually be sold.

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People Receiving Unemployment Should Consider Having Tax Withheld to Avoid a Tax-time Surprise

Tue, 15 Sep 2020 18:22:24 GMT

By law, these benefits are taxable and must be reported on a federal income tax return for the tax year it was received. Taxable benefits include any of the special unemployment compensation authorized under the Coronavirus Aid, Relief, and Economic Security Act.

Withholding is voluntary

Federal law allows recipients to choose a flat 10% withholding from these benefits to cover part or all their tax liability. To do this, recipients should complete Form W-4V, Voluntary Withholding Request , and give it to the agency paying their benefits. Don't send the form to the IRS. If the paying agency has its own withholding request form, use it instead.

Recipients who don't choose voluntary withholding, or if the withholding isn't enough, can make quarterly estimated tax payments . The payment for the first two quarters of 2020 was due on July 15. Third quarter is due September 15, 2020 and fourth quarter on January 15, 2021. Taxpayers can visit IRS.gov to view all payment options .

Here are other types of payments taxpayers should check for withholding

Benefits paid by a state or the District of Columbia from the Federal Unemployment Trust Fund
Railroad unemployment compensation benefits
Disability benefits paid as a substitute for unemployment compensation
Trade readjustment allowances under the Trade Act of 1974
Unemployment assistance under the Disaster Relief and Emergency Assistance Act of 1974
Unemployment assistance under the Airline Deregulation Act of 1978 Program

Recipients who return to work before the end of the year can use the IRS Tax Withholding Estimator to make sure the right amount of tax is taken out of their pay. This online tool is available only on IRS.gov, and it can help workers or pension recipients avoid or lessen year-end tax bills or can estimate a refund.

Reporting unemployment compensation

In January 2021, unemployment benefit recipients should receive a Form 1099-G, Certain Government Payments , from the agency paying their benefits. This form will show the amount of unemployment compensation received during 2020 and any federal income tax withheld. Taxpayers should report this information, along with other income, on their 2020 federal tax return.

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Federal Benefit Recipients with Children Have More Time to Get the $500 Economic Impact Payment

Tue, 08 Sep 2020 18:27:17 GMT

Federal benefit recipients can use the Non-Filers: Enter Payment Info Here tool to get a catch-up payment for a qualifying child if they have NOT done one of the following:

already used the Non-Filers tool to provide information about their qualifying child
filed their 2019 or 2018 tax return

The Non-Filers tool is available on IRS.gov in both English and Spanish. Eligible individuals can use the tool until Wednesday, September 30 to enter information about their qualifying children to receive a catch-up $500 payment per child. This payment will be issued in October.

Those unable to access the Non-Filers tool, may file a simplified paper return following the instructions in this FAQ on IRS.gov.

Anyone who misses the September 30 deadline will need to wait until next year and claim the payment as a credit on their 2020 federal income tax return.

Those who received their original Economic Impact Payment by direct deposit will also have any catch-up payment direct deposited to the same account. Others will receive a check.

Federal benefit recipients who used the Non-Filers tool after May 5, don't need to take any further action

Social Security, SSI, Department of Veterans Affairs and Railroad Retirement Board beneficiaries who have already used the Non-Filers tool to provide information on children don't need to take any further action. The IRS will automatically send a payment in October.

Get a payment status at IRS.gov

Eligible recipients can check the status of their catch-up payment using the Get My Payment tool on IRS.gov. They will also receive another Notice 1444 in the mail stating after the payment is issued that should be kept with their tax records.

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Earning Side Income: Is it a Hobby or a Business?

Thu, 27 Aug 2020 18:29:42 GMT

A business operates to make a profit. People engage in a hobby for sport or recreation, not to make a profit.

Here are nine things taxpayer must consider when determining if an activity is a hobby or a business:

Whether the activity is carried out in a businesslike manner and the taxpayer maintains complete and accurate books and records.
Whether the time and effort the taxpayer puts into the activity show they intend to make it profitable.
Whether they depend on income from the activity for their livelihood.
Whether any losses are due to circumstances beyond the taxpayer's control or are normal for the startup phase of their type of business.
Whether they change methods of operation to improve profitability.
Whether the taxpayer and their advisors have the knowledge needed to carry out the activity as a successful business.
Whether the taxpayer was successful in making a profit in similar activities in the past.
Whether the activity makes a profit in some years and how much profit it makes.
Whether the taxpayers can expect to make a future profit from the appreciation of the assets used in the activity.

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Prepare for Disasters by Safeguarding Tax Records

Mon, 24 Aug 2020 18:34:39 GMT

Create a Backup Set of Records Electronically Taxpayers should keep a set of backup records in a safe place. The backup should be stored away from the original set. Keeping a backup set of records –– including,

for example, bank statements, tax returns, insurance policies, etc. –– is easier now that many financial institutions provide statements and documents electronically, and much financial information is available on the Internet. Even if the original records are provided only on paper, they can be scanned into an electronic format. With documents in electronic form, taxpayers can download them to a backup storage device, like an external hard drive, or burn them to a CD or DVD.

Document Valuables Another step a taxpayer can take to prepare for disaster is to photograph or videotape the contents of his or her home, especially items of higher value. The IRS has a disaster loss workbook, Publication 584, which can help taxpayers compile a room-by-room list of belongings. A photographic record can help an individual prove the market value of items for insurance and casualty loss claims. Photos should be stored with a friend or family member who lives outside the area.

Update Emergency Plans Emergency plans should be reviewed annually. Personal and business situations change over time as do preparedness needs. When employers hire new employees or when a company or organization changes functions, plans should be updated accordingly and employees should be informed of the changes.

Check on Fiduciary Bonds Employers who use payroll service providers should ask the provider if it has a fiduciary bond in place. The bond could protect the employer in the event of default by the payroll service provider.

IRS Ready to Help If disaster strikes, an affected taxpayer can call 1-866-562-5227 to speak with an IRS specialist trained to handle disaster-related issues. Back copies of previously-filed tax returns and all attachments, including Forms W-2, can be requested by filing Form 4506, Request for Copy of Tax Return.

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Here’s What Taxpayers Need to Know About the Home Office Deduction

Tue, 11 Aug 2020 18:39:21 GMT

Here are some things to help taxpayers understand the home office deduction and whether they can claim it:

Employees are not eligible to claim the home office deduction.
The home office deduction Form 8829 is available to both homeowners and renters.
There are certain expenses taxpayers can deduct. They include mortgage interest, insurance, utilities, repairs, maintenance, depreciation and rent.
Taxpayers must meet specific requirements to claim home expenses as a deduction. Even then, the deductible amount of these types of expenses may be limited.
The term "home" for purposes of this deduction:

Includes a house, apartment, condominium, mobile home, boat or similar property.
Also includes structures on the property. These are places like an unattached garage, studio, barn or greenhouse.
Doesn't include any part of the taxpayer's property used exclusively as a hotel, motel, inn or similar business.

There are two basic requirements for the taxpayer's home to qualify as a deduction:

There must be exclusive use of a portion of the home for conducting business on a regular basis. For example, a taxpayer who uses an extra room to run their business can take a home office deduction only for that extra room so long as it is used both regularly and exclusively in the business.
The home must be the taxpayer's principal place of business. A taxpayer can also meet this requirement if administrative or management activities are conducted at the home and there is no other location to perform these duties. Therefore, someone who conducts business outside of their home but also uses their home to conduct business may still qualify for a home office deduction.

Expenses that relate to a separate structure not attached to the home will qualify for a home office deduction. It will qualify only if the structure is used exclusively and regularly for business.
Taxpayers who qualify may choose one of two methods to calculate their home office expense deduction:

The simplified option has a rate of $5 a square foot for business use of the home. The maximum size for this option is 300 square feet. The maximum deduction under this method is $1,500.
When using the regular method, deductions for a home office are based on the percentage of the home devoted to business use. Taxpayers who use a whole room or part of a room for conducting their business need to figure out the percentage of the home used for business activities to deduct indirect expenses. Direct expenses are deducted in full.

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Paycheck Protection Loan Application Deadline is August 8th

Mon, 20 Jul 2020 18:55:55 GMT

The Paycheck Protection Program resumed accepting applications July 6, 2020, at 9:00 AM EDT in response to President signing the program's extension legislation. The new deadline to apply for a Paycheck Protection Program loan is August 8, 2020.

Paycheck Protection Program Loan Information

The Paycheck Protection Program is a loan designed to provide a direct incentive for small businesses to keep their workers on the payroll.

SBA will forgive loans if all employee retention criteria are met, and the funds are used for eligible expenses. Click here to read more about PPP loan forgiveness.

How To Apply

You can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. You should consult with your local lender as to whether it is participating in the program. View a list of lenders participating in the Paycheck Protection Program by state .

If you wish to begin preparing your application, you can download a copy of the PPP borrower application form (revised June 24, 2020) to see the information that will be requested from you when you apply with a lender.

Supplemental Materials

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IRS Unveils "Dirty Dozen" List of Tax Scams for 2020

Mon, 20 Jul 2020 18:48:48 GMT

The Internal Revenue Service has announced its annual "Dirty Dozen" list of tax scams with a special emphasis on aggressive and evolving schemes related to coronavirus tax relief, including Economic Impact Payments.

This year, the Dirty Dozen focuses on scams that target taxpayers . The criminals behind these bogus schemes view everyone as potentially easy prey. The IRS urges everyone to be on guard all the time and look out for others in their lives.

"Tax scams tend to rise during tax season or during times of crisis, and scam artists are using pandemic to try stealing money and information from honest taxpayers," said IRS Commissioner Chuck Rettig. "The IRS provides the Dirty Dozen list to help raise awareness about common scams that fraudsters use to target people. We urge people to watch out for these scams. The IRS is doing its part to protect Americans. We will relentlessly pursue criminals trying to steal your money or sensitive personal financial information."

Taxpayers are encouraged to review the list in a special section on IRS.gov and be on the lookout for these scams throughout the year. Taxpayers should also remember that they are legally responsible for what is on their tax return even if it is prepared by someone else. Consumers can help protect themselves by choosing a reputable tax preparer.

The IRS urges taxpayers to refrain from engaging potential scammers online or on the phone. The IRS plans to unveil a similar list of enforcement and compliance priorities this year as well.

An upcoming series of press releases will emphasize the illegal schemes and techniques businesses and individuals use to avoid paying their lawful tax liability. Topics will include such scams as abusive micro captives and fraudulent conservation easements.

Here are this year's "Dirty Dozen" scams:

Phishing:

Taxpayers should be alert to potential fake emails or websites looking to steal personal information. The IRS will never initiate contact with taxpayers via email about a tax bill, refund or Economic Impact Payments. Don't click on links claiming to be from the IRS. Be wary of emails and websites − they may be nothing more than scams to steal personal information.

IRS Criminal Investigation has seen a tremendous increase in phishing schemes utilizing emails, letters, texts and links. These phishing schemes are using keywords such as "coronavirus," "COVID-19" and "Stimulus" in various ways.

These schemes are blasted to large numbers of people in an effort to get personal identifying information or financial account information, including account numbers and passwords. Most of these new schemes are actively playing on the fear and unknown of the virus and the stimulus payments. ( For more see IR-2020-115, IRS warns against COVID-19 fraud; other financial schemes .)

Fake Charities:

Criminals frequently exploit natural disasters and other situations such as the current COVID-19 pandemic by setting up fake charities to steal from well-intentioned people trying to help in times of need. Fake charity scams generally rise during times like these.

Fraudulent schemes normally start with unsolicited contact by telephone, text, social media, e-mail or in-person using a variety of tactics. Bogus websites use names similar to legitimate charities to trick people to send money or provide personal financial information. They may even claim to be working for or on behalf of the IRS to help victims file casualty loss claims and get tax refunds.

Taxpayers should be particularly wary of charities with names like nationally known organizations. Legitimate charities will provide their Employer Identification Number (EIN), if requested, which can be used to verify their legitimacy. Taxpayers can find legitimate and qualified charities with the search tool on IRS.gov.

Threatening Impersonator Phone Calls:

IRS impersonation scams come in many forms. A common one remains bogus threatening phone calls from a criminal claiming to be with the IRS. The scammer attempts to instill fear and urgency in the potential victim. In fact, the IRS will never threaten a taxpayer or surprise him or her with a demand for immediate payment.

Phone scams or "vishing" (voice phishing) pose a major threat. Scam phone calls, including those threatening arrest, deportation or license revocation if the victim doesn't pay a bogus tax bill, are reported year-round. These calls often take the form of a "robocall" (a text-to-speech recorded message with instructions for returning the call).

The IRS will never demand immediate payment, threaten, ask for financial information over the phone, or call about an unexpected refund or Economic Impact Payment. Taxpayers should contact the real IRS if they worry about having a tax problem.

Social Media Scams:

Taxpayers need to protect themselves against social media scams, which frequently use events like COVID-19 to try tricking people. Social media enables anyone to share information with anyone else on the Internet. Scammers use that information as ammunition for a wide variety of scams. These include emails where scammers impersonate someone's family, friends or co-workers.

Social media scams have also led to tax-related identity theft. The basic element of social media scams is convincing a potential victim that he or she is dealing with a person close to them that they trust via email, text or social media messaging.

Using personal information, a scammer may email a potential victim and include a link to something of interest to the recipient which contains malware intended to commit more crimes. Scammers also infiltrate their victim's emails and cell phones to go after their friends and family with fake emails that appear to be real and text messages soliciting, for example, small donations to fake charities that are appealing to the victims.

EIP or Refund Theft:

The IRS has made great strides against refund fraud and theft in recent years, but they remain an ongoing threat. Criminals this year also turned their attention to stealing Economic Impact Payments as provided by the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

Much of this stems from identity theft whereby criminals file false tax returns or supply other bogus information to the IRS to divert refunds to wrong addresses or bank accounts.

The IRS recently warned nursing homes and other care facilities that Economic Impact Payments generally belong to the recipients, not the organizations providing the care. This came following concerns that people and businesses may be taking advantage of vulnerable populations who received the payments. These payments do not count as a resource for determining eligibility for Medicaid and other federal programs They also do not count as income in determining eligibility for these programs. See IR-2020-121, IRS alert: Economic Impact Payments belong to recipient, not nursing homes or care facilities for more.

Taxpayers can consult the Coronavirus Tax Relief page of IRS.gov for assistance in getting their EIPs. Anyone who believes they may be a victim of identity theft should consult the Taxpayer Guide to Identity Theft on IRS.gov.

Senior Fraud:

Senior citizens and those who care about them need to be on alert for tax scams targeting older Americans. The IRS recognizes the pervasiveness of fraud targeting older Americans along with the Department of Justice and FBI, the Federal Trade Commission, the Consumer Financial Protection Bureau (CFPB), among others.

Seniors are more likely to be targeted and victimized by scammers than other segments of society. Financial abuse of seniors is a problem among personal and professional relationships. Anecdotal evidence across professional services indicates that elder fraud goes down substantially when the service provider knows a trusted friend or family member is taking an interest in the senior's affairs.

Older Americans are becoming more comfortable with evolving technologies, such as social media. Unfortunately, that gives scammers another means of taking advantage. Phishing scams linked to Covid-19 have been a major threat this filing season. Seniors need to be alert for a continuing surge of fake emails, text messages, websites and social media attempts to steal personal information.

Scams targeting non-English speakers:

IRS impersonators and other scammers also target groups with limited English proficiency. These scams are often threatening in nature. Some scams also target those potentially receiving an Economic Impact Payment and request personal or financial information from the taxpayer.

Phone scams pose a major threat to people with limited access to information, including individuals not entirely comfortable with the English language. These calls frequently take the form of a "robocall" (a text-to-speech recorded message with instructions for returning the call), but in some cases may be made by a real person. These con artists may have some of the taxpayer's information, including their address, the last four digits of their Social Security number or other personal details – making the phone calls seem more legitimate.

A common one remains the IRS impersonation scam where a taxpayer receives a telephone call threatening jail time, deportation or revocation of a driver's license from someone claiming to be with the IRS. Taxpayers who are recent immigrants often are the most vulnerable and should ignore these threats and not engage the scammers.

Unscrupulous Return Preparers:

Selecting the right return preparer is important. They are entrusted with a taxpayer's sensitive personal data. Most tax professionals provide honest, high-quality service, but dishonest preparers pop up every filing season committing fraud, harming innocent taxpayers or talking taxpayers into doing illegal things they regret later.

Taxpayers should avoid so-called "ghost" preparers who expose their clients to potentially serious filing mistakes as well as possible tax fraud and risk of losing their refunds. With many tax professionals impacted by COVID-19 and their offices potentially closed, taxpayers should take particular care in selecting a credible tax preparer.

Ghost preparers don't sign the tax returns they prepare. They may print the tax return and tell the taxpayer to sign and mail it to the IRS. For e-filed returns, the ghost preparer will prepare but not digitally sign as the paid preparer. By law, anyone who is paid to prepare or assists in preparing federal tax returns must have a Preparer Tax Identification Number (PTIN). Paid preparers must sign and include their PTIN on returns.

Unscrupulous preparers may also target those without a filing requirement and may or may not be due a refund. They promise inflated refunds by claiming fake tax credits, including education credits, the Earned Income Tax Credit (EITC) and others. Taxpayers should avoid preparers who ask them to sign a blank return, promise a big refund before looking at the taxpayer's records or charge fees based on a percentage of the refund.

Taxpayers are ultimately responsible for the accuracy of their tax return, regardless of who prepares it. Taxpayers can go to a special page on IRS.gov for tips on choosing a preparer .

Offer in Compromise Mills:

Taxpayers need to wary of misleading tax debt resolution companies that can exaggerate chances to settle tax debts for "pennies on the dollar" through an Offer in Compromise (OIC). These offers are available for taxpayers who meet very specific criteria under law to qualify for reducing their tax bill. But unscrupulous companies oversell the program to unqualified candidates so they can collect a hefty fee from taxpayers already struggling with debt.

These scams are commonly called OIC "mills," which cast a wide net for taxpayers, charge them pricey fees and churn out applications for a program they're unlikely to qualify for. Although the OIC program helps thousands of taxpayers each year reduce their tax debt, not everyone qualifies for an OIC. In Fiscal Year 2019, there were 54,000 OICs submitted to the IRS. The agency accepted 18,000 of them.

Individual taxpayers can use the free online Offer in Compromise Pre-Qualifier tool to see if they qualify. The simple tool allows taxpayers to confirm eligibility and provides an estimated offer amount. Taxpayers can apply for an OIC without third-party representation; but the IRS reminds taxpayers that if they need help, they should be cautious about whom they hire.

Fake Payments with Repayment Demands:

Criminals are always finding new ways to trick taxpayers into believing their scam including putting a bogus refund into the taxpayer's actual bank account. Here's how the scam works:

A con artist steals or obtains a taxpayer's personal data including Social Security number or Individual Taxpayer Identification Number (ITIN) and bank account information. The scammer files a bogus tax return and has the refund deposited into the taxpayer's checking or savings account. Once the direct deposit hits the taxpayer's bank account, the fraudster places a call to them, posing as an IRS employee. The taxpayer is told that there's been an error and that the IRS needs the money returned immediately or penalties and interest will result. The taxpayer is told to buy specific gift cards for the amount of the refund.

The IRS will never demand payment by a specific method. There are many payment options available to taxpayers and there's also a process through which taxpayers have the right to question the amount of tax we say they owe. Anytime a taxpayer receives an unexpected refund and a call from us out of the blue demanding a refund repayment, they should reach out to their banking institution and to the IRS.

Payroll and HR Scams:

Tax professionals, employers and taxpayers need to be on guard against phishing designed to steal Form W-2s and other tax information. These are Business Email Compromise (BEC) or Business Email Spoofing (BES). This is particularly true with many businesses closed and their employees working from home due to COVID-19. Currently, two of the most common types of these scams are the gift card scam and the direct deposit scam.

In the gift card scam, a compromised email account is often used to send a request to purchase gift cards in various denominations. In the direct deposit scheme, the fraudster may have access to the victim's email account (also known as an email account compromise or "EAC"). They may also impersonate the potential victim to have the organization change the employee's direct deposit information to reroute their deposit to an account the fraudster controls.

BEC/BES scams have used a variety of ploys to include requests for wire transfers, payment of fake invoices as well as others. In recent years, the IRS has observed variations of these scams where fake IRS documents are used in to lend legitimacy to the bogus request. For example, a fraudster may attempt a fake invoice scheme and use what appears to be a legitimate IRS document to help convince the victim.

The Direct Deposit and other BEC/BES variations should be forwarded to the Federal Bureau of Investigation Internet Crime Complaint Center (IC3) where a complaint can be filed. The IRS requests that Form W-2 scams be reported to: phishing@irs.gov (Subject: W-2 Scam).

Ransomware:

This is a growing cybercrime. Ransomware is malware targeting human and technical weaknesses to infect a potential victim's computer, network or server. Malware is a form of invasive software that is often frequently inadvertently downloaded by the user. Once downloaded, it tracks keystrokes and other computer activity. Once infected, ransomware looks for and locks critical or sensitive data with its own encryption. In some cases, entire computer networks can be adversely impacted.

Victims generally aren't aware of the attack until they try to access their data, or they receive a ransom request in the form of a pop-up window. These criminals don't want to be traced so they frequently use anonymous messaging platforms and demand payment in virtual currency such as Bitcoin.

Cybercriminals might use a phishing email to trick a potential victim into opening a link or attachment containing the ransomware. These may include email solicitations to support a fake COVID-19 charity. Cybercriminals also look for system vulnerabilities where human error is not needed to deliver their malware.

The IRS and its Security Summit partners have advised tax professionals and taxpayers to use the free, multi-factor authentication feature being offered on tax preparation software products. Use of the multi-factor authentication feature is a free and easy way to protect clients and practitioners' offices from data thefts. Tax software providers also offer free multi-factor authentication protections on their Do-It-Yourself products for taxpayers.

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Can't Make the Tax Filing Deadline? It is July 15th This Year

Tue, 07 Jul 2020 19:03:10 GMT

If you need extra time to file your returns this year file the Form

4868 Application for an Automatic Extension. You can let us know you need an

extension or you can request an extension by Efile or by filing out form 4868 and

mailing it to the IRS by July 15th. The extension gives you an

additional six months, until Oct. 15th 2020, to file the tax return.

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IRS Unclaimed Refunds of $1.5 Billion Waiting for Tax Year 2016; Taxpayers Face July 15 Deadline

Tue, 07 Jul 2020 19:00:27 GMT

"The IRS wants to help taxpayers who are owed refunds but haven't filed their 2016 tax returns yet," said IRS Commissioner Chuck Rettig. "Time is quickly running out for these taxpayers. There's only a three-year window to claim these refunds, and the window closes on July 15. To claim the refund, a return for tax year 2016 must be filed by July 15, 2020."

In Notice 2020-23 (PDF) , the IRS extended the due date for filing tax year 2016 returns and claiming refunds for that year to July 15, 2020, as a result of the COVID-19 pandemic. As the IRS is issuing Economic Impact Payments to Americans, the agency urges taxpayers who haven't filed past due tax returns to file now to claim these valuable refunds.

To collect refunds for tax year 2016, taxpayers must file their 2016 tax returns with the IRS no later than this year's extended tax due date of July 15, 2020.

The IRS estimates the midpoint for the potential refunds for 2016 to be $861 — that is, half of the refunds are more than $861 and half are less.

In cases where a federal income tax return was not filed, the law provides most taxpayers with a three-year window of opportunity to claim a tax refund. If they do not file a tax return within three years, the money becomes the property of the U.S. Treasury.

For 2016 tax returns, the window closes July 15, 2020, for most taxpayers. The law requires taxpayers to properly address, mail and ensure the tax return is postmarked by the July 15 date.

The IRS reminds taxpayers that there is no penalty for filing late when a refund is involved. Taxpayers seeking a 2016 tax refund should know that their checks may be held if they have not filed tax returns for 2017 and 2018. In addition, the refund will be applied to any amounts owed to the IRS or a state tax agency and may be used to offset unpaid child support or past due federal debts, such as student loans.

By failing to file a tax return, people stand to lose more than just their refund of taxes withheld or paid during 2016. Many low- and moderate-income workers may be eligible for the Earned Income Tax Credit (EITC). For 2016, the credit was worth as much as $6,269.

The EITC helps individuals and families whose incomes are below certain thresholds. The thresholds for 2016 were:

$47,955 ($53,505 if married filing jointly) for those with three or more qualifying children;
$44,648 ($50,198 if married filing jointly) for people with two qualifying children;
$39,296 ($44,846 if married filing jointly) for those with one qualifying child, and;
$14,880 ($20,430 if married filing jointly) for people without qualifying children.

Current and prior year tax forms (such as the tax year 2016 Form 1040, 1040-A and 1040-EZ) and instructions are available on the IRS.gov Forms and Publications page or by calling toll-free 800-TAX-FORM ( 800-829-3676 ).

Taxpayers who are missing Forms W-2, 1098, 1099 or 5498 for the years 2016, 2017 or 2018 should request copies from their employer, bank or other payer. Taxpayers who are unable to get missing forms from their employer or other payer can order a free wage and income transcript at IRS.gov using the Get Transcript Online tool. Alternatively, they can mail Form 4506-T to request a wage and income transcript. A wage and income transcript shows data from information returns received by the IRS, such as Forms W-2, 1099, 1098, Form 5498 and IRA contribution information. Taxpayers can use the information from the transcript to file their tax return.

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Gig Economy Tips from the IRS Taxpayers Should Remember

Wed, 24 Jun 2020 19:09:56 GMT

Here are some things taxpayers should remember:

Income from these sources is taxable, regardless of whether an individual receives information returns. This is true even if the work is full-time, part-time or if an individual is paid in cash.
Taxpayers may also be required to make quarterly estimated income tax payments and pay their share of Social Security, Medicare or Medicaid taxes.

While providing gig economy services, it is important that the taxpayer is correctly classified.

This means the business or the taxpayer must determine whether the individual providing the services is an employee or independent contractor.
Taxpayers can use the worker classification page on IRS.gov to see how they are classified.
Independent contractors may be able to deduct business expenses, depending on tax limits and rules. It is important for taxpayers to keep records of their business expenses.

Since income from the gig economy is taxable, it's important that taxpayers remember to pay the right amount of taxes throughout the year to avoid owing when they file.

An employer typically withholds income taxes from their employees' pay to help cover income taxes their employees owe.
Gig economy workers who are not considered employees have two ways to cover their income taxes:

Submit a new From W-4 to their employer to have more income taxes withheld from their paycheck, if they have another job as an employee.
Make quarterly estimated tax payments to help pay their income taxes throughout the year, including self-employment tax.

The Gig Economy Tax Center on IRS.gov answers questions and helps gig economy taxpayers understand their tax responsibilities.

The tax filing deadline has been postponed to Wednesday, July 15, 2020. The IRS is processing tax returns, issuing refunds and accepting payments. Taxpayers who mailed a tax return will experience a longer wait. There is no need to mail a second tax return or call the IRS.

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What is in the Paycheck Protection Program Flexibility Act

Thu, 11 Jun 2020 19:11:52 GMT

Here are the major changes.

1) The covered period has been extended from June 30, 2020 to December 31, 2020.

2) Borrowers now have 24 weeks to spend the money received with the loan. Previously it was 8 weeks.

3) The amount of loan proceeds that need to be spent on payroll has been lowered from 75% to 60%.

4) The Exemption Based Upon Employee Availability specifies forgiveness amounts will not be reduced if the employer can verify the inability to rehire any employee (or similarly qualified replacement) who was working on February 15, 2020 by December 31,2020.

5) The Exemption Based Upon Employee Availability also specifies forgiveness amounts will not be reduced if the employer can document an inability to return to the same level of business activity as such business was operating at before February 15, 2020, due to compliance with requirements established for maintenance of standards for sanitation, social distancing, or any other worker or customer safety requirement related to COVID–19. ( An example of this would be a restaurant whose seating capacity is lowered because of social distancing).

6) Choosing to defer payroll taxes under the CARES Act will now not interfere with obtaining the loan forgiveness.

7) The maturity date for loans with a remaining balance has been extended to 5 years.

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