IRS.gov helps taxpayers get tax information they need; find tools for filing, paying, checking accounts and answering questions

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If you have tax related questions, please call Kevin M. Sayed, J.D., LL.M., at 252-321-2020.  The following materials were originally published by the IRS.

The Internal Revenue Service reminds taxpayers today about several online tools available to help them get the tax information they need as the IRS has limited operations due to the coronavirus.

More taxpayers are using IRS.gov than ever before; as of May 8, the agency’s website had been visited a record 1 billion times, up 141% compared to the same time last year.

The tools on IRS.gov are easy-to-use and available 24 hours a day. Millions of taxpayers use them to help file and pay taxes, find information about their accounts and get answers to tax questions.

Take advantage of Free File products 
The IRS Free File program, available only through IRS.gov, offers 70% of all taxpayers the choice of 10 brand-name tax preparation software packages to use at no cost. The software does all the work of finding deductions, credits and exemptions for which the taxpayer qualifies. It‘s free for those who earned $69,000 or less in 2019. Some of the Free File packages also offer free state tax return preparation.

Any taxpayer, regardless of income, who is comfortable preparing their own taxes can use Free File Fillable Forms. Taxpayers also use this electronic version of paper IRS tax forms to file tax returns online.

The IRS automatically extended the federal income tax filing due date from April 15, 2020, to July 15, 2020. Individual taxpayers who need more time to file their income tax returns beyond the July 15 deadline can use IRS Free File to electronically request an automatic tax-filing extension. This gives the taxpayer until Oct. 15 to file their tax return. To get the extension, the taxpayer must estimate their tax liability and pay any amount due.

Choose from a variety of payment options
Taxpayers should visit the “Pay” tab on IRS.gov to see their payment options. Most tax software products give taxpayers various payment options, including the option to withdraw the funds from a bank account. These include:

Last month, the IRS also announced that taxpayers generally have until July 15, 2020, to pay federal income taxes originally due on April 15. No late-filing penalty, late-payment penalty or interest will be due. This includes estimated tax payments normally due April 15 and June 15, which are now extended to July 15, 2020.

View tax account information online
To see their tax account, taxpayers can use the View Your Account tool. They’ll find information such as a payoff amount, the balance for each tax year owed, up to 24 months of their payment history and key information from their current tax year return as originally filed.

Taxpayers can use the Get Transcript tool to view, print or download their tax transcripts after the IRS has processed the return. Taxpayers will notice a delay in the processing of their Forms 4506, Request for Copy of Tax Return, because of closed IRS offices due to COVID-19. Tax return transcripts show most line items from an original tax return, along with any forms and schedules, but not any changes made after the taxpayer filed it. The tool is free and available on IRS.gov. Ordering a tax transcript will not speed up a taxpayer’s refund or provide an updated refund date.

Taxpayers can easily find the most up-to-date information about their tax refund using the “Where’s My Refund?” tool on IRS.gov and on the official IRS mobile app, IRS2Go. Within 24 hours after the IRS acknowledges receipt of an e-filed return, taxpayers can start checking on the status of their refund. Taxpayers should be aware that the IRS isn’t currently processing paper tax returns due to the COVID-19 pandemic.

Get answers to tax questions and Economic Impact Payments
Taxpayers may find answers to many of their questions using the Interactive Tax Assistant (ITA), a tax law resource that works using a series of questions and provides responses. IRS.gov has answers for Frequently Asked Questions. The IRS website has tax information in: Spanish (Español); Chinese (中文); Korean (한국어); Russian (Pусский); Vietnamese (Tiếng Việt); and Haitian Creole (Kreyòl ayisyen).

For questions concerning Economic Impact Payments, visit the Economic Impact Payments section of IRS.gov. Taxpayers will find two tools there to help them get their payments: “Get My Payment” and “Nonfilers: Enter Payment Info Here.” Both tools are available in English and in Spanish.

Taxpayers should use “Get My Payment” to check payment status, confirm payment type and enter bank account information for direct deposit if the IRS doesn’t have that information and hasn’t sent payment yet. Those who don’t normally file taxes must use “Nonfilers: Enter Payment Info Here” to provide simple information, so they can get their payment.

People who receive Social Security retirement or disability benefits (SSDI), Supplemental Security Income (SSI), Railroad Retirement benefits and VA Compensation and Pension (C&P) benefits don’t use the “Nonfilers: Enter Payment Info Here” tool to receive their Economic Impact Payment. The IRS already has this information and those who receive these benefits will automatically receive $1,200. But, for those who receive benefits in these groups and have a qualifying child, they may be eligible for an additional $500 per child. However, their payment will be $1,200 and, by law, the IRS would pay the additional $500 per eligible child amount in association with a return filing for tax year 2020.

For more information on the payments see the Economic Impact Payment FAQs and see our Get My Payment FAQs for more information about this tool.

Watch out for scams related to Economic Impact Payments
The IRS urges taxpayers to be on the lookout for scams related to the Economic Impact Payments. To use the new app or get information, taxpayers should visit IRS.gov. People should watch out for scams using email, phone calls or texts related to the payments. Be careful and cautious: The IRS will not send unsolicited electronic communications asking people to open attachments, visit a website or share personal or financial information. Remember, go directly and solely to IRS.gov for official information.

The IRS is regularly updating Economic Impact Payments and Get My Payment application frequently asked questions pages on IRS.gov. Check IRS.gov/coronavirus often for the latest additions that answer many common questions.

Tax Return Filing Procedures & Economic Impact Payments

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If you have questions regarding tax returns, please call Kevin M. Sayed, J.D., LL.M., at 252-321-2020.  The following materials were originally published by the IRS.

Revenue Procedure 2020-28 provides two tax return filing procedures for certain individuals who are eligible for the economic impact payment https://www.irs.gov/coronavirus/economic-impact-payments under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), Public Law 116-136, 134 Stat. 281 (March 27, 2020), but are not otherwise required to file 2019 Federal income tax returns. The first procedure is a simplified procedure for eligible individuals who voluntarily wish to file a Federal income tax return only to receive allowed economic impact payments. These eligible individuals are encouraged to use the “Non-Filers: Enter Payment Info Here” https://www.irs.gov/coronavirus/non-filers-enter-payment-info-here tool, available at www.irs.gov/coronavirus, to submit information to the Internal Revenue Service (IRS) to receive their allowed economic impact payment much more quickly than if they filed a paper return. The second procedure accommodates zero AGI electronic filers who utilize tax return preparation software or otherwise need to provide more detail in filing State or local tax returns than that allowed by the simplified procedure.

Federal income tax returns filed in accordance with these procedures should be filed as soon as possible but not later than October 15, 2020, to ensure that the IRS will have sufficient time to process all returns and make all resulting economic impact payments before December 31, 2020, as required by the CARES Act. The “Get My Payment” tool provides the most up-to-date information regarding the status of an eligible individual’s economic impact payment.

Answers to your Economic Impact Payment Questions

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If you have tax related questions, please call Kevin M. Sayed, J.D., LL.M., at 252-321-2020.  The following materials were originally published by the IRS.

The IRS is regularly updating the Economic Impact Payment  and the Get My Payment tool frequently asked questions pages on IRS.gov as more information becomes available. Taxpayers should check the FAQs often for the latest additions; many common questions are answered in these.

More than 80 million Economic Impact Payments have already been delivered to the nation’s taxpayers. More payments are on their way. As part of this effort, the IRS has launched two tools to help taxpayers get their payments:

  1.  Get My Payment is helping millions of taxpayers. Since its launch on April 15, millions of  taxpayers have been able to input their direct deposit information to speed—and track—their payments. The IRS reminds taxpayers the information is updated once daily, usually overnight, so they only need to enter information once a day.
  2.  The Non-Filers Enter Payment Info tool is helping millions of taxpayers successfully submit basic information to receive Economic Impact Payments quickly to their bank accounts. This tool is designed only for people who are not required to submit a tax return.The IRS is working hard to deliver Economic Impact Payments to all eligible Americans as quickly as possible.

Quick links to the Frequently Asked Questions on IRS.gov:

Economic Impact Payments: www.irs.gov/eipfaq
Get My Payment tool: www.irs.gov/getmypaymentfaq

IRS increases visits to high-income taxpayers who haven’t filed tax returns

If you are a taxpayer or tax preparer experiencing these issues, please call Kevin M. Sayed, J.D., LL.M., at 252-321-2020. The following materials were originally published by the IRS.

WASHINGTON – As part of a larger effort to ensure compliance and fairness, the Internal Revenue Service today announced that it will step up efforts to visit high-income taxpayers who in prior years have failed to timely file one or more of their tax returns.

Following the recent and ongoing hiring of additional enforcement personnel, IRS revenue officers across the country will increase face-to-face visits with high-income taxpayers who haven’t filed tax returns in 2018 or previous years. These visits are primarily aimed at informing these taxpayers of their tax filing and paying obligations and bringing these taxpayers into compliance.

“The IRS is committed to fairness in the tax system, and we want to remind people across all income categories that they need to file their taxes,” said Paul Mamo, Director of Collection Operations, Small Business/Self Employed Division. “These visits focusing on high-income taxpayers will be taking place across the country.  We want to ensure taxpayers know their options to get right with their taxes and avoid bigger issues later.”

For the current tax season, the IRS reminds taxpayers that everyone should file their 2019 tax return by the April 15 filing deadline regardless of whether they can pay in full. Six-month filing extensions are also available, although that does not extend the April deadline for paying any taxes owed.

“Taxpayers having delinquent filing or payment obligations should consult a competent tax advisor before waiting to be contacted by an IRS revenue officer, Mamo said. “It is always worthwhile to take advantage of various methods of getting back into filing or payment compliance before being personally contacted by the IRS.”

For the new visits taking place, high-income non-filers taxpayers are those who generally received income in excess of $100,000 during a tax year and did not file a tax return with the IRS. Taxpayers who exercise their best efforts in filing their tax returns and paying or entering into agreements to pay their taxes deserve to know that the IRS is aggressively pursuing others who have failed to satisfy their filing and payment obligations.

During the visits, IRS revenue officers will share information and work with the taxpayer to hopefully resolve the tax issue.

How to pay

There are many payment options for people having trouble paying their tax bill. Payment plans can be set up quickly online.

Once returns are filed or an assessment occurs, there are various online payment options available at IRS.gov, including direct pay through a bank account or using a debit or credit card. Other ways to pay include the Electronic Federal Tax Payment System (best option for businesses or large payments; enrollment required), Electronic Funds Withdrawal (using during e-filing), same-day wire (bank fees may apply), check or money order or cash (at a participating retail partner). Those who can’t pay immediately may be able to meet their tax obligation in monthly installments by applying for a payment plan (including installment agreements and those who owe less than $50,000), they can find out if they qualify for an offer in compromise  (a way to settle their tax debt for less than the full amount), or request that the IRS temporarily delay collection until their financial situation improves.

For those who refuse to pay, the IRS has a number of options available under the law, ranging from a series of civil enforcement actions and, when appropriate, pursuing criminal cases against taxpayers. IRS compliance personnel are also now working more closely with IRS criminal investigators on priority compliance issues, including high-income cases.

“These compliance visits underscore the importance of people filing their taxes this April, even if they can’t pay the full amount of tax due,” said Hank Kea, Director of Field Collection Operations, Small Business/Self Employed Division. “Not filing because you don’t believe you can pay at the time of filing makes the problem worse, as interest and penalties mount over time. We have many payment options available on IRS.gov to help taxpayers. It’s better to work on these issues up front rather than ignoring it and ultimately getting to the point of the IRS taking more serious action. Our continued use of ever-changing technologies, coupled with additional enforcement personnel, would suggest that waiting is not a viable option for delinquent taxpayers.”

What’s a revenue officer’s job?
Revenue officers are trained IRS civil enforcement employees who work to resolve compliance issues, such as missing returns or taxes owed. Revenue officers conduct interviews to gather financial information and provide taxpayers with the necessary steps to become and remain compliant with the law. When necessary, they will take the appropriate enforcement actions to collect the amount owed, following the law while respecting taxpayer rights and following the law.

Don’t be confused: Visits are not a scam
For this new initiative, these high-income taxpayers have typically received numerous letters from the IRS over an extended period of time, so they generally realize they have a tax issue.

Revenue officer visits shouldn’t be confused with scams. Here’s what to look for:

  • While most IRS revenue officer visits to a taxpayer are unannounced, they will always provide two forms of official credentials, both include a serial number and photo of the IRS employee. Taxpayers have the right to see each of these credentials.
  • A legitimate revenue officer helps taxpayers understand and meet their tax obligations. The officer will explain the liability to the taxpayer, along with the consequences of failing to comply with the law. The IRS employee will not make threats nor demand an unusual form of payment for a nonexistent liability.
  • Visits by revenue officers generally occur after numerous contacts by mail about an existing tax issue; taxpayers should be aware they have a tax issue when these visits occur.
  • If someone has an outstanding federal tax debt, the visiting officer will request payment but will provide a range of options, including paying by check written to the U.S. Treasury.
  • More information on identifying legitimate IRS representatives and how to report scams can be found at IRS.gov.

 

Tips for taxpayers who make money from a hobby

For answers to your questions regarding tax returns, please call Kevin M. Sayed, J.D., LL.M., at 252-321-2020. The following materials were originally published by the IRS.

Many people enjoy hobbies that are also a source of income. From painting and pottery to scrapbooking and soap making, these activities can be sources of both fun and finances. Taxpayers who make money from a hobby must report that income on their tax return.

However, the rules for how to report the income and expenses depend on whether the activity is a hobby or a business.

There are special rules and limits for deductions taxpayers can claim for hobbies. Here are five things to consider:

If the activity is a business or a hobby.
If someone has a business, they operate the business to make a profit. In contrast, people engage in a hobby for sport or recreation, not to make a profit. Taxpayers should consider nine factors when determining whether their activity is a business or a hobby. They should base their determination on all the facts and circumstances of their activity.

Allowable hobby deductions.
Taxpayers can only deduct ordinary and necessary hobby expenses:

  • Ordinary expense is common and accepted for the activity.
  • Necessary expense is appropriate for the activity.

Limits on hobby expenses.
Taxpayers can generally only deduct hobby expenses up to the amount of hobby income. If hobby expenses are more than its income, taxpayers have a loss from the activity. However, a hobby loss can’t be deducted from other income.

How to deduct hobby expenses.
Taxpayers must itemize deductions on their tax return to deduct hobby expenses. Taxpayers can look into this now to determine if they will itemize their deductions when they file their 2019 tax return next year. Expenses may fall into three types of deductions, and special rules apply to each type.

Use IRS Free File.
Hobby rules can be complex. IRS Free File can make filing a tax return easier.

More Information:
Publication 334, Tax Guide for Small Business
Publication 525, Taxable and Nontaxable Income
Publication 529, Miscellaneous Deductions
Publication 535, Business Expenses
Publication 17, Your Federal Income Tax
About Schedule C, Profit or Loss from Business
Estimated Taxes

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IRS releases Data Book for 2018 showing range of tax data including audits, collection actions and taxpayer service

For answers to your questions regarding tax returns, please call Kevin M. Sayed, J.D., LL.M., at 252-321-2020. The following materials were originally published by the IRS.

The Internal Revenue Service today released the 2018 IRS Data Book, a snapshot of agency activities for the fiscal year.

The 2018 IRS Data Book describes activities conducted by the IRS from Oct. 1, 2017, to Sept. 30, 2018, and includes information about tax returns, refunds, examinations and appeals. The annual publication is illustrated with charts showing changes in IRS enforcement activities, taxpayer assistance levels, tax-exempt activities, legal support workload and IRS budget and workforce levels when compared to fiscal year 2017 and prior years. Included this year is a section on taxpayer attitudes from a long-running opinion survey.

“Underlying the numbers in this year’s edition of the Data Book is the hard work of IRS employees,” said IRS Commissioner Chuck Rettig. “Our employees are the backbone of this agency, delivering our mission efficiently and effectively. They work hard to help taxpayers, and the numbers outlined in the Data Book reflect their commitment.”

Revenue Collection, Returns Processing, Taxpayer Service and Enforcement Actions

During fiscal year 2018, the IRS collected nearly $3.5 trillion, processed more than 250 million tax returns and other forms, and issued over 120 million individual income tax refunds totaling almost $395 billion.

The IRS received and processed more of every major type of form during FY 2018 than during the prior year, with the exception of estate tax returns; those filings were down slightly less than 1 percent compared to the prior year. However, filings by pass-through entities were up in FY 2018; partnerships filed almost 5 percent more forms with the IRS in FY 2018 than in the prior year, S-corporation filings were up almost 6 percent in the same time frame.

The IRS provided taxpayer assistance through more than a half-billion visits to IRS.gov and helped more than 64.8 million taxpayers through different service channels, such as correspondence, toll-free telephone helplines or at Taxpayer Assistance Centers. There were also more than 309 million inquiries to the “Where’s My Refund?” application, up 11 percent compared to the prior year.

Net revenue from delinquent collection activities rose to just over $40 billion, an increase of 1.6 percent compared to the prior year. IRS levies were up 8.3 percent compared to the prior year, but the agency filed about 8 percent fewer liens than in fiscal year 2017.

Compared to the prior year, there were fewer audits during fiscal year 2018. The IRS audited more than 892,000 individual income tax returns during the fiscal year, down slightly from the prior year.

Comprehensive Taxpayer Attitude Survey

The IRS Data Book contains the results of the 2018 Comprehensive Taxpayer Attitude Survey (CTAS) which drew from feedback from 2,000 taxpayers through cell phone, landline phone or online surveys. Their opinions continue to inform IRS’ efforts to improve taxpayer service. Some of the results of the survey for 2018 show the following results:

  • Most taxpayers continued to agree that it is not at all acceptable to cheat on their income taxes. This attitude has remained within a four-point range since 2009.
  • Most taxpayers are still satisfied with their personal interactions with the IRS.
  • Almost half of the taxpayers who responded in 2018 agreed that service and enforcement are properly balanced.

The IRS Data Book’s online format makes navigating data on taxpayer assistance, enforcement, and IRS operations easier. The publication contains depictions of key areas and quick links to the underlying data.

An electronic version of the 2018 IRS Data Book can be found on the Tax Stats page of IRS.gov. Printed copies of the 2018 IRS Data Book, Publication 55B, will be available June 2019 from the U.S. Government Printing Office. To obtain a copy, write to the Superintendent of Documents, P.O. Box 371954, Pittsburgh, PA 15250-7954, or call (202) 512-1800 for voicemail or fax a request to (202) 512-2250.

IRS issues guidance relating to deferral of gains for investments in a qualified opportunity fund

For answers to your questions regarding tax returns, please call Kevin M. Sayed, J.D., LL.M., at 252-321-2020. The following materials were originally published by the IRS.

The Internal Revenue Service today issued guidance (PDF) providing additional details about investment in qualified opportunity zones.

The proposed regulations allow the deferral of all or part of a gain that is invested into a Qualified Opportunity Fund (QO Fund) that would otherwise be includible in income. The gain is deferred until the investment is sold or exchanged or Dec. 31, 2026, whichever is earlier. If the investment is held for at least 10 years, investors may be able to permanently exclude gain from the sale or exchange of an investment in a QO Fund.

Qualified opportunity zone business property is tangible property used in a trade or business of the QO Fund if the property was purchased after Dec. 31, 2017. The guidance permits tangible property acquired after Dec. 31, 2017, under a market rate lease to qualify as “qualified opportunity zone business property” if during substantially all of the holding period of the property, substantially all of the use of the property was in a qualified opportunity zone.

A key part of the newly released guidance clarifies the “substantially all” requirements for the holding period and use of the tangible business property:

  • For use of the property, at least 70 percent of the property must be used in a qualified opportunity zone.
  • For the holding period of the property, tangible property must be qualified opportunity zone business property for at least 90 percent of the QO Fund’s or qualified opportunity zone business’s holding period.
  • The partnership or corporation must be a qualified opportunity zone business for at least 90 percent of the QO Fund’s holding period.

The guidance notes there are situations where deferred gains may become taxable if an investor transfers their interest in a QO Fund. For example, if the transfer is done by gift the deferred gain may become taxable. However, inheritance by a surviving spouse is not a taxable transfer, nor is a transfer, upon death, of an ownership interest in a QO Fund to an estate or a revocable trust that becomes irrevocable upon death.

The guidance (PDF) is posted on IRS.gov. These regulations relate to the Tax Cuts and Jobs Act (TCJA), the tax reform legislation enacted in December 2017.

For information about other TCJA provisions, visit IRS.gov/taxreform

Trump’s shutdown could hinder tax collectors for ‘months, and even years’

For answers to your tax questions, please call Kevin M. Sayed, J.D., LL.M., at 252-321-2020. The following article by Joe Davidson was originally published by The Washington Post.

Taxpayer trust in tax system and voluntary compliance have been undermined.

President Trump’s partial government shutdown is over, but the haunting effects are not.

Perhaps nowhere is that demonstrated more than in the Internal Revenue Service, one agency that affects all Americans.

Listen to the words of advocate Nina Olson, an independent official within the IRS. Her latest report describes an agency with a “shocking” level of service, suffering a “cycle of frustration,” and one beset with long-standing problems made worse by the 35-day partial shutdown.

She described an agency so damaged that taxpayer trust and confidence in our tax system have been crippled.

“It is irresponsible for an agency that touches all aspects of people’s lives to be underfunded, understaffed, and at the mercy of shutdowns,” she wrote. “It is making strategic decisions that ultimately burden taxpayers, increase its own rework, and create distance and distrust between taxpayers and the tax agency, thereby undermining voluntary compliance.”

The report provided a slew of statistics demonstrating the depth of the problem. For the last week of the shutdown, ending Jan. 26, 12.8 percent of taxpayer calls on installment agreements and balance-due questions were answered. Those that were answered waited 93 minutes. The day before the shutdown stopped, the IRS had:

  • “Over 5 million pieces of mail that had not been batched for processing.”
  • “80,000 responses to FY 2018 Earned Income Tax Credit audits that had not been addressed.”
  • “87,000 amended returns waiting to be processed.”

Metrics like these “translate into real harm to real taxpayers,” Olson said. “And they represent increased rework for the IRS downstream, at a time when the IRS is already resource challenged.”

IRS officials responded with a statement that said the agency “successfully reopened operations following the shutdown, and the agency is seeing a good start to the 2019 filing season. We are continuing to assess the impact of the shutdown on our various operations across the agency and remain proud of the many IRS employees who have risen to the resulting challenges.”

The full impact of the shutdown won’t be known for “months, and even years, down the road,” Olson predicted. She praised IRS employees who “returned to work with energy.”

National Treasury Employees Union (NTEU) President Tony Reardon said that “in some cases, employees are being asked to work overtime specifically to get the agency caught up. Orientation for new hires and refresher training for employees is also behind schedule in some areas. These are all signs of an agency still grappling with a record five-week shutdown on the eve of a tax filing season that was already going to be challenging because of the new tax law.”

Despite its many difficulties, the IRS remains the lifeblood of the federal government. Tax collectors raise about 93 percent of the national budget. They do so on a relative shoestring. The $3.5 trillion collected in fiscal 2018 was on an $11.43 billion IRS budget, a return on investment of about 300 to 1.

“I don’t know how anyone can read this report,” Reardon said, “and not be alarmed at the massive amount of damage that has been done to the agency’s workforce and the taxpayers they want to serve.”

The damage did not begin with the shutdown. Years of taxpayer-advocate reports, congressional testimony, taxpayer protests and employee complaints have chronicled an agency that suffered at the hands of Republican appropriators who wanted to punish the tax collectors. Republicans charged the IRS with unfairly scrutinizing conservative nonprofit organizations under the Obama administration, despite evidence that progressive groups also were scrutinized.

The IRS still has not recovered. The title of the report’s list of “Most Serious Problems” is illustrative — “The Taxpayer’s Journey.”

The problems, which cause “extreme frustration” for taxpayers and employees, include “antiquated technology systems” that if not replaced will “increasingly harm taxpayers and impair revenue collection,” according to the report. Olson also cited agreements between private tax collectors (PCA) and low-income taxpayers “to make payments they cannot afford.” Of “taxpayers who made commissionable payments while their debts were assigned to PCAs,” she added, “24 percent had incomes at or below the federal poverty level.”

Because of the shutdown, employees estimate that “it may take them almost a year to catch up, but many taxpayers cannot wait that long because they need their responses” by April 15, when 2018 taxes are due, said David Carron, a revenue agent speaking as president of NTEU Chapter 6 covering Louisiana and Arkansas. “We would relate this to an assembly line that has been stopped for over a month, but the same amount of products have to be produced” by then.

Federal charity drive extended

The donation period for the Combined Federal Campaign (CFC), the federal workplace-giving vehicle for a variety of charities, has been extended until Friday. The original date was Jan. 11, which came during the shutdown.

“Many charities came to the aid of Federal employees throughout the shutdown in December and January,” said a memorandum announcing the extension from Keith Willingham, CFC director for the Office of Personnel Management. “Those organizations are under fiscal pressure with increased demands and because of an interruption.”

That represents a reversal of position.

On Dec. 19, shortly before the shutdown began, Willingham said that “under no circumstances will the 2019 CFC solicitation period be extended.”

Wiser heads prevailed.

 

After tax reform, many corporations will pay blended tax rate

Please call Kevin M. Sayed, J.D., LL.M., with questions about tax issues, and tax or business planning, at 252-321-2020. The following materials were originally published by the IRS.

Last year’s tax reform legislation replaced the graduated corporate tax structure with a flat 21 percent corporate tax rate. This new maximum tax rate for corporations is effective for tax years beginning after Dec. 31, 2017.

A corporation with a fiscal year that includes Jan. 1, 2018, will pay federal income tax using what is called a blended tax rate. They will not use the flat 21 percent tax rate for their entire fiscal year. To calculate their blended tax rate, these corporations will:

  • First calculate their tax for the entire taxable year using the tax rates that were in effect prior to the Tax Cuts and Jobs Act.
  • Then calculate their tax using the new 21 percent rate.
  • Proportion each tax amount based on the number of days in the taxable year when the different rates were in effect.
  • Take the sum of these two amounts, which is the corporation’s federal income tax for the fiscal year.

The blended rate applies to all fiscal year corporations whose fiscal year includes Jan. 1, 2018.  Fiscal year corporations that have already filed their federal income tax returns that do not reflect the blended rate may want to consider filing an amended return.

This change will affect many tax forms and instructions that corporations use. For a complete list, see the 2017 Fiscal Tax Year Filers Must Use Blended Corporate Tax Rates page on IRS.gov.
More information:
Notice 2018-38

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401(k) contribution limit increases to $19,000 for 2019; IRA limit increases to $6,000

Please call Kevin M. Sayed, J.D., LL.M., with questions about tax issues and tax planning at 252-321-2020.  The following materials were originally published by the IRS.

The Internal Revenue Service today announced cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2019.  The IRS today issued technical guidance detailing these items in Notice 2018-83.

Highlights of Changes for 2019

The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $18,500 to $19,000.

The limit on annual contributions to an IRA, which last increased in 2013, is increased from $5,500 to $6,000. The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.

The income ranges for determining eligibility to make deductible contributions to traditional Individual Retirement Arrangements (IRAs), to contribute to Roth IRAs and to claim the saver’s credit all increased for 2019.

Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If during the year either the taxpayer or their spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income. (If neither the taxpayer nor their spouse is covered by a retirement plan at work, the phase-outs of the deduction do not apply.) Here are the phase-out ranges for 2019:

  • For single taxpayers covered by a workplace retirement plan, the phase-out range is $64,000 to $74,000, up from $63,000 to $73,000.
  • For married couples filing jointly, where the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is $103,000 to $123,000, up from $101,000 to $121,000.
  • For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $193,000 and $203,000, up from $189,000 and $199,000.
  • For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

The income phase-out range for taxpayers making contributions to a Roth IRA is $122,000 to $137,000 for singles and heads of household, up from $120,000 to $135,000. For married

couples filing jointly, the income phase-out range is $193,000 to $203,000, up from $189,000 to $199,000. The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

The income limit for the Saver’s Credit (also known as the Retirement Savings Contributions Credit) for low- and moderate-income workers is $64,000 for married couples filing jointly, up from $63,000; $48,000 for heads of household, up from $47,250; and $32,000 for singles and married individuals filing separately, up from $31,500.

Highlights of Limitations that Remain Unchanged from 2018

The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan remains unchanged at $6,000.

Detailed Description of Adjusted and Unchanged Limitations

Section 415 of the Internal Revenue Code (Code) provides for dollar limitations on benefits and contributions under qualified retirement plans. Section 415(d) requires that the Secretary of the Treasury annually adjust these limits for cost of living increases. Other limitations applicable to deferred compensation plans are also affected by these adjustments under Section 415. Under Section 415(d), the adjustments are to be made following adjustment procedures similar to those used to adjust benefit amounts under Section 215(i)(2)(A) of the Social Security Act.

Effective Jan. 1, 2019, the limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) is increased from $220,000 to $225,000. For a participant who separated from service before Jan. 1, 2019, the limitation for defined benefit plans under Section 415(b)(1)(B) is computed by multiplying the participant’s compensation limitation, as adjusted through 2018, by 1.0264.

The limitation for defined contribution plans under Section 415(c)(1)(A) is increased in 2019 from $55,000 to $56,000.

The Code provides that various other dollar amounts are to be adjusted at the same time and in the same manner as the dollar limitation of Section 415(b)(1)(A). After taking into account the applicable rounding rules, the amounts for 2019 are as follows:

The limitation under Section 402(g)(1) on the exclusion for elective deferrals described in Section 402(g)(3) is increased from $18,500 to $19,000.

The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased from $275,000 to $280,000.

The dollar limitation under Section 416(i)(1)(A)(i) concerning the definition of key employee in a top-heavy plan is increased from $175,000 to $180,000.

The dollar amount under Section 409(o)(1)(C)(ii) for determining the maximum account balance in an employee stock ownership plan subject to a five year distribution period is increased from

$1,105,000 to $1,130,000, while the dollar amount used to determine the lengthening of the five year distribution period is increased from $220,000 to $225,000.

The limitation used in the definition of highly compensated employee under Section 414(q)(1)(B) is increased from $120,000 to $125,000.

The dollar limitation under Section 414(v)(2)(B)(i) for catch-up contributions to an applicable employer plan other than a plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over remains unchanged at $6,000. The dollar limitation under Section 414(v)(2)(B)(ii) for catch-up contributions to an applicable employer plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over remains unchanged at $3,000.

The annual compensation limitation under Section 401(a)(17) for eligible participants in certain governmental plans that, under the plan as in effect on July 1, 1993, allowed cost of living adjustments to the compensation limitation under the plan under Section 401(a)(17) to be taken into account, is increased from $405,000 to $415,000.

The compensation amount under Section 408(k)(2)(C) regarding simplified employee pensions (SEPs) remains unchanged at $600.

The limitation under Section 408(p)(2)(E) regarding SIMPLE retirement accounts is increased from $12,500 to $13,000.

The limitation on deferrals under Section 457(e)(15) concerning deferred compensation plans of state and local governments and tax-exempt organizations is increased from $18,500 to $19,000.

The limitation under Section 664(g)(7) concerning the qualified gratuitous transfer of qualified employer securities to an employee stock ownership plan remains unchanged at $50,000.

The compensation amount under Section 1.61 21(f)(5)(i) of the Income Tax Regulations concerning the definition of “control employee” for fringe benefit valuation remains unchanged at $110,000. The compensation amount under Section 1.61 21(f)(5)(iii) is increased from $220,000 to $225,000.

The dollar limitation on premiums paid with respect to a qualifying longevity annuity contract under Section 1.401(a)(9)-6, A-17(b)(2)(i) of the Income Tax Regulations remains unchanged at $130,000.

The Code provides that the $1,000,000,000 threshold used to determine whether a multiemployer plan is a systemically important plan under Section 432(e)(9)(H)(v)(III)(aa) is adjusted using the cost-of-living adjustment provided under Section 432(e)(9)(H)(v)(III)(bb). After taking the applicable rounding rule into account, the threshold used to determine whether a multiemployer plan is a systemically important plan under Section 432(e)(9)(H)(v)(III)(aa) is increased for 2019 from $1,087,000,000 to $1,097,000,000.

The Code also provides that several retirement-related amounts are to be adjusted using the cost-of-living adjustment under Section 1(f)(3). After taking the applicable rounding rules into account, the amounts for 2019 are as follows:

The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for married taxpayers filing a joint return is increased from $38,000 to $38,500; the limitation under Section 25B(b)(1)(B) is increased from $41,000 to $41,500; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D) is increased from $63,000 to $64,000.

The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the Retirement Savings Contribution Credit for taxpayers filing as head of household is increased from $28,500 to $28,875; the limitation under Section 25B(b)(1)(B) is increased from $30,750 to $31,125; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D) is increased from $47,250 to $48,000.

The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the Retirement Savings Contribution Credit for all other taxpayers is increased from $19,000 to $19,250; the limitation under Section 25B(b)(1)(B) is increased from $20,500 to $20,750; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D) is increased from $31,500 to $32,000.

The deductible amount under Section 219(b)(5)(A) for an individual making qualified retirement contributions is increased from $5,500 to $6,000.

The applicable dollar amount under Section 219(g)(3)(B)(i) for determining the deductible amount of an IRA contribution for taxpayers who are active participants filing a joint return or as a qualifying widow(er) increased from $101,000 to $103,000. The applicable dollar amount under Section 219(g)(3)(B)(ii) for all other taxpayers who are active participants (other than married taxpayers filing separate returns) increased from $63,000 to $64,000. If an individual or the individual’s spouse is an active participant, the applicable dollar amount under Section 219(g)(3)(B)(iii) for a married individual filing a separate return is not subject to an annual cost-of-living adjustment and remains $0. The applicable dollar amount under Section 219(g)(7)(A) for a taxpayer who is not an active participant but whose spouse is an active participant is increased from $189,000 to $193,000.

The adjusted gross income limitation under Section 408A(c)(3)(B)(ii)(I) for determining the maximum Roth IRA contribution for married taxpayers filing a joint return or for taxpayers filing as a qualifying widow(er) is increased from $189,000 to $193,000. The adjusted gross income limitation under Section 408A(c)(3)(B)(ii)(II) for all other taxpayers (other than married taxpayers filing separate returns) is increased from $120,000 to $122,000. The applicable dollar amount under Section 408A(c)(3)(B)(ii)(III) for a married individual filing a separate return is not subject to an annual cost-of-living adjustment and remains $0.