BYJ Accountancy Corporation

04/24/2023

Don't be afraid about IRS letter.

When an IRS letter arrives, taxpayers don’t need to panic, but they do need to read it.

Getting a letter from the IRS can make some taxpayers nervous – but there’s no need to panic. The IRS sends notices and letters when it needs to ask a question about a taxpayer's tax return, let them know about a change to their account or request a payment.

When an IRS letter or notice arrives in the mail, here's what taxpayers should do:

Read the letter carefully. Most IRS letters and notices are about federal tax returns or tax accounts. Each notice deals with a specific issue and includes any steps the taxpayer needs to take. A notice may reference changes to a taxpayer's account, taxes owed, a payment request or a specific issue on a tax return. Taking prompt action could minimize additional interest and penalty charges.

Review the information. If a letter is about a changed or corrected tax return, the taxpayer should review the information and compare it with the original return. If the taxpayer agrees, they should make notes about the corrections on their personal copy of the tax return and keep it for their records. Typically, a taxpayer will need to act only if they don't agree with the information, if the IRS asked for more information or if they have a balance due.

Take any requested action, including making a payment. The IRS and authorized private debt collection agencies do send letters by mail. Taxpayers can also view digital copies of select IRS notices by logging into their IRS Online Account. The IRS offers several options to help taxpayers who are struggling to pay a tax bill.

Reply only if instructed to do so. Taxpayers don't need to reply to a notice unless specifically told to do so. There is usually no need to call the IRS. If a taxpayer does need to call the IRS, they should use the number in the upper right-hand corner of the notice and have a copy of their tax return and letter.

Let the IRS know of a disputed notice. If a taxpayer doesn't agree with the IRS, they should follow the instructions in the notice to dispute what the notice says. The taxpayer should include information and documents for the IRS to review when considering the dispute.

Keep the letter or notice for their records. Taxpayers should keep notices or letters they receive from the IRS. These include adjustment notices when the IRS takes action on a taxpayer's account. Taxpayers should keep records for three years from the date they filed the tax return.

Watch for scams. The IRS will never contact a taxpayer using social media or text message. The first contact from the IRS usually comes in the mail. Taxpayers who are unsure whether they owe money to the IRS can view their tax account information on IRS.gov.

10/06/2022

Taxpayer Bill of Rights: America’s taxpayers are entitled to a fair and just tax system



Tax fairness means the tax system is equitable to all citizens. This is not just a concept - it is the law. The right to a fair and just tax system is one of 10 rights in the Taxpayer Bill of Rights, which clearly outline the fundamental rights of every taxpayer.

Here’s what the IRS wants all taxpayers to know about what this right means:

Taxpayers have the right to expect the tax system to consider facts and circumstances that might affect their underlying liabilities, ability to pay, or ability to provide information timely.

Taxpayers have the right to receive assistance from the Taxpayer Advocate Service if they’re experiencing financial difficulty resolving their tax issues properly and timely through normal IRS channels.

Taxpayers who cannot pay their tax debt in full and meet certain conditions can arrange a payment plan with the IRS. This means the taxpayer will pay a set amount over time, generally monthly.

Taxpayers can submit an offer in compromise asking the IRS to settle their tax debt for less than the full amount if they:

Believe they don’t owe all or part of the tax debt
Are unable to pay all the tax debt within the time permitted by law to collect
Have factors such as equity, hardship, or public policy they think the IRS should consider in determining whether to settle the liability

The IRS has a list of national and local guidelines covering the basic costs of living that it uses when considering a settlement offer reducing someone’s tax debt. IRS employees cannot use these guidelines if they would result in the taxpayer not having enough money to pay their basic living expenses. In these cases, the IRS will use the taxpayer’s actual expenses.

The IRS cannot seize all of someone’s wages to collect their unpaid tax. A portion is exempt from levy to allow the taxpayer to pay basic living expenses.

The IRS has the authority to decrease an excessive unpaid portion of any tax or liability assessed after the statutory period of limitations has expired or is erroneously or illegally assessed.

The IRS has the discretion to decrease interest on an underpayment when an IRS employee caused an unreasonable delay or error, and when no significant aspect of the error is attributed to the taxpayer.

10/05/2022

An IRS online account makes it easy for people to quickly get the tax planning info they need. With the same ease that taxpayers have when banking online or placing an online shopping order, they can log in and get the latest on their payment history, balance, and more.

Taxpayers can view information about their account including:

Their payoff amount, which is updated for the current day
The balance for each tax year for which they owe taxes
Their payment history
Key information from their most current tax return as originally filed
Payment plan details if they have one
Digital copies of select IRS notices
Their address on file
With an online account, taxpayers can also:

Make a same day payment
Set up an online payment plan
Access tax records and transcripts
Authorize another person to represent them before the IRS or view their tax records
Approve and electronically sign Power of Attorney and Tax Information Authorization requests from their tax professional
A taxpayer's balance will update no more than once every 24 hours, usually overnight. Taxpayers should also allow one to three weeks for payments to show in the payment history.

Share this tip on social media -- : An IRS online account is simple, safe, and secure.

Tax Tip 2022-153, October 5, 2022 — An IRS online account makes it easy for people to quickly get the tax planning info they need. With the same ease that taxpayers have when banking online or placing an online shopping order, they can log in and get the latest on their payment history, balance, a...

09/28/2022

File 2019 and 2020 tax returns by Sept. 30 to receive COVID penalty relief

Individuals and businesses, affected by the COVID-19 pandemic, may qualify for late-filing penalty relief if they file their 2019 and 2020 tax returns by September 30, 2022. This penalty relief is automatic. Eligible taxpayers who already filed their tax return do not need to apply for it, and those filing now do not need to attach any additional statement or document to their tax return. Most taxpayers should receive these refunds by the end of September.

The relief was announced last month. It only applies to the failure-to-file penalty. This penalty is usually assessed at a rate of 5% per month, up to 25% of the unpaid tax, when a federal income tax return is filed late. This relief applies to forms in the Form 1040 and 1120 series, as well as others listed in Notice 2022-36, on IRS.gov.

This is a great opportunity for those who fell behind on their taxes during the pandemic to catch up. Any eligible income tax return must be filed on or before September 30, 2022.

The failure-to-pay penalty and interest will still apply to unpaid tax, based on the return's original due date. The failure-to-pay penalty is normally 0.5% per month. The interest rate is currently 5% per year, compounded daily, but that rate is due to rise to 6% on October 1, 2022.

Taxpayers can limit these charges by paying as soon as possible. For fast and convenient electronic payment options, taxpayers can visit the Payments page of IRS.gov. Penalty and interest charges generally don't apply to refunds.

Certain international tax returns may qualify
The notice also provides details on relief for filers of certain international information returns when a penalty is assessed at the time of filing. No relief is available for applicable international information returns when the penalty is part of an examination. To qualify for this relief, any eligible tax return must be filed on or before September 30, 2022.

Which tax returns are not eligible
Penalty relief is not available in all situations, such as where a fraudulent return was filed, where the penalties are part of an accepted offer in compromise or a closing agreement, or where the penalties were finally determined by a court. For complete details, taxpayers should read Notice 2022-36, available on IRS.gov.

Other penalties, such as the failure to pay penalty, are not eligible. However, taxpayers may use existing penalty relief procedures for penalties not eligible under Notice 2022-36. More information about existing procedures is available on the Penalty Relief page of IRS.gov.

This relief doesn't apply to any 2021 tax returns. Everyone who still needs to file a 2021 tax return should do so as soon as possible.

09/19/2022

Issue Number: IR-2022-159
Inside This Issue
IRS updates Information on tax credit helping businesses to hire certain categories of workers

WASHINGTON – The IRS today updated information on the Work Opportunity Tax Credit (WOTC), available to employers that hire designated categories of workers who face significant barriers to employment. For employers facing a tight job market, the WOTC may be able to help.

Today’s updates include information on the pre-screening and certification process. To satisfy the requirement to pre-screen a job applicant, on or before the day a job offer is made, a pre-screening notice (Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit) must be completed by the job applicant and the employer.

The Targeted Jobs Tax Credit (TJTC), which preceded WOTC, did not contain a pre-screening requirement. In enacting WOTC to replace the TJTC in 1996, Congress included the requirement that employers pre-screen job applicants before or on the same day the job offer is made. In doing so, Congress emphasized that the WOTC is designed to incentivize the hiring and employment of certain categories of workers.

After pre-screening a job applicant, the employer must then request certification by submitting Form 8850 to the appropriate state workforce agency no later than 28 days after the employee begins work. Other requirements and further details can be found in the instructions PDF to Form 8850.

WOTC has 10 designated categories of workers. The 10 categories are:

Qualified IV-A Temporary Assistance for Needy Families (TANF) recipients
Certain veterans, including unemployed or disabled veterans
The formerly incarcerated or those previously convicted of a felony
Designated community residents living in Empowerment Zones or Rural Renewal Counties
Vocational rehabilitation referrals
Summer youth employees living in Empowerment Zones
Food stamp (SNAP) recipients
Supplemental Security Income (SSI) recipients
Long-term family assistance recipients
Qualified long-term unemployment recipients.
Although the credit generally is not available to tax-exempt organizations, a special provision allows them to claim the WOTC against the employer’s share of Social Security tax for hiring qualified veterans. These organizations claim the credit on Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans. Visit the WOTC page on IRS.gov for more information.

09/08/2022

Know what’s deductible after buying that first home, sweet home

Making the dream of owning a home a reality is a big step for many people. Whether a fixer-upper or dream home, homeownership is a milestone that can come with a learning curve. First-time homeowners should make themselves familiar with authorized deductions, programs that can assist with home ownership and the use of housing allowances that can be beneficial.

When it comes to home ownership, the IRS considers a home to be a house, condominium, cooperative apartment, mobile home, houseboat or house trailer that contains a sleeping space, toilet and cooking facilities.

Most home buyers take out a mortgage loan to buy their home and then make monthly payments to the mortgage holder. This payment may include several costs of owning a home. The only costs the homeowner can deduct are:

state and local real estate taxes, subject to the $10,000 limit
home mortgage interest, within the allowed limits
mortgage insurance premiums
Taxpayers must file Form 1040, U.S. Individual Income Tax Return or Form 1040-SR, U.S. Income Tax Return for Seniors, and itemize their deductions to deduct home ownership expenses. However, taxpayers can’t take the standard deduction if they itemize.

Non-deductible payments and expenses
Homeowners can’t deduct any of the following items.

Insurance, other than mortgage insurance, including fire and comprehensive coverage, and title insurance
The amount applied to reduce the principal of the mortgage
Wages you pay for domestic help
Depreciation
The cost of utilities, such as gas, electricity, or water
Most settlement or closing costs
Forfeited deposits, down payments, or earnest money
Internet or Wi-Fi system or service
Homeowners’ association fees, condominium association fees, or common charges
Home repairs
Mortgage interest credit
The mortgage interest credit is meant to help individuals with lower income afford home ownership. Those who qualify can claim the credit each year for part of the home mortgage interest paid.

A homeowner may be eligible for the credit if they were issued a qualified Mortgage Credit Certificate from their state or local government. An MCC is issued only for a new mortgage for the purchase of a main home. The MCC will show the certificate credit rate the homeowner will use to figure their credit. It will also show the certified indebtedness amount and only the interest on that amount qualifies for the credit.

Homeowners Assistance Fund
The Homeowners Assistance Fund program provides financial assistance to eligible homeowners for paying certain expenses related to their principal residence to prevent mortgage delinquencies, defaults, foreclosures, loss of utilities or home energy services, and also displacements of homeowners experiencing financial hardship after January 21, 2020.

Minister's or military housing allowance
Ministers and members of the uniformed services who receive a nontaxable housing allowance can still deduct their real estate taxes and home mortgage interest. They don’t have to reduce their deductions based on the allowance.

08/30/2022

Understanding federal tax obligations during Chapter 13 bankruptcy

Bankruptcy is a last resort for taxpayers to get out of debts. For individuals, the most common type of bankruptcy is a Chapter 13. This section of the bankruptcy law allows individuals and small business owners in financial difficulty to repay their creditors. Chapter 13 bankruptcy is only available to wage earners, the self-employed and sole proprietor businesses.

Tax obligations while filing Chapter 13 bankruptcy:

Taxpayers must file all required tax returns for tax periods ending within four years of their bankruptcy filing.
During a bankruptcy taxpayers must continue to file, or get an extension of time to file, all required returns.
During a bankruptcy case taxpayers should pay all current taxes as they come due.
Failure to file returns and pay current taxes during a bankruptcy may result in a case being dismissed, converted to a liquidating bankruptcy chapter 7, or the chapter 13 plan may not be confirmed.
Other things to know:

If the IRS is listed as a creditor in their bankruptcy, the IRS will receive electronic notice about their case from the U.S. Bankruptcy Courts. People can check by calling the IRS’ Centralized Insolvency Operation at 800-973-0424 and giving them the bankruptcy case number.
If one of the reasons a taxpayer is filing bankruptcy is overdue federal tax debts, they may need to increase their withholding or their estimated tax payments. The Tax Withholding Estimator can help people determine the proper withholding. The IRS.gov Estimated Taxes page has more information on estimated taxes.
People can receive tax refunds while in bankruptcy. However, refunds may be subject to delay or used to pay down their tax debts. Taxpayers can see if their refund has been delayed or offset against their tax debts by going to the Where’s My Refund tool or by contacting the Centralized Insolvency Operations Unit.
Other types of bankruptcy
Partnerships and corporations file bankruptcy under Chapter 7 or Chapter 11 of the bankruptcy code. Individuals may also file under Chapter 7 or Chapter 11. Other types of bankruptcy include Chapters 9, 12 and 15. Cases under these chapters of the bankruptcy code involve municipalities, family farmers and fisherman, and international cases.

08/25/2022

IRS increases mileage rate for remainder of 2022

The IRS announced an increase in the optional standard mileage rate for the final 6 months of 2022 in recognition of recent gasoline price increases. Taxpayers may use the optional standard mileage rates to calculate the deductible costs of operating an automobile for business and certain other purposes, effective July 1, 2022.

2023 inflation adjusted amounts for Health Savings Accounts

Revenue Procedure 2022-24 provides the 2023 inflation adjusted amounts for Health Savings Accounts (HSAs) as determined under Section 223 of the Internal Revenue Code and the maximum amount that may be made newly available for excepted benefit health reimbursement arrangements (HRAs) provided under Section 54.9831-1(c)(3)(viii) of the Pension Excise Tax Regulations.

For calendar year 2023, the annual limitation on deductions for:

Individual with self-only coverage under a high deductible health plan is $3,850
Individual with family coverage under a high deductible health plan is $7,750
Election workers: Reporting and withholding

Each election year, thousands of state and local government entities hire workers to conduct primary and general elections. To understand the correct tax treatment of these workers, you need to be aware of specific statutes that apply to them as well as whether they are covered by a Section 218 Agreement.

Who are election workers?

Election workers are individuals hired by government entities to perform services at polling places in connection with national, state and local elections. An election worker may be referred to by other terms and titles, for example, poll worker, moderator, machine tender, checker, ballot clerk, voting official, polling place manager, absentee ballot counter or deputy head moderator. These workers may be employed by the government entity exclusively for election work or may work in other capacities as well. Compensation paid to election workers is includible as wage income for income tax purposes and may be treated as wages for Social Security and Medicare (F**A) tax purposes.

Election workers may be compensated by a set fee per day or a stipend for the election period. The election period may include attending training or meetings prior to and after the election. Election workers may also be reimbursed for their mileage or other expenses. To be excludable from wages, expense reimbursements must be made under an accountable plan.

For more Information see Election Workers: Reporting and Withholding.

Visit Federal, State and Local Governments website

Find tax information and resources for federal, state and local government entities, including tax withholding requirements, information returns, employee benefits and e-services such as tools for Taxpayer Identification Number (TIN) matching. You can also find changes in guidance, law and procedures that affect federal, state and local governments.

Visit FSLG homepage

03/14/2022

Low Income Tax Clinics can help taxpayers resolve federal tax issues

Low income taxpayers who need help resolving a tax dispute with the IRS and can’t afford representation, may qualify for free or low-cost assistance from a Low Income Tax Clinic. These clinics are independent from the IRS and from the agency’s Taxpayer Advocate Service.

How LITCs can help taxpayers
These clinics can represent taxpayers in audits, appeals, and tax collection disputes before the IRS and in court. LITCs can also help taxpayers respond to IRS notices and correct account problems. They also can provide information about taxpayer rights and responsibilities in different languages for taxpayers for whom English is a second language.

Who qualifies for help from LITCs
To qualify for assistance from an LITC, a taxpayer’s income must be below a certain threshold, and the amount in dispute with the IRS is usually less than $50,000. For details taxpayers should review the Low Income Taxpayer Clinic Income Eligibility Guidelines.

How to find the nearest LITC
Taxpayers can find the LITC closest to them by reviewing the Low Income Taxpayer Clinic List or using the Low Income Taxpayer Clinic finder on the Taxpayer Advocate Service website.

The IRS is looking for organizations interested in joining the LITC Program
Organizations interested in representing, educating and advocating for low-income and English as a second language taxpayers should watch this video about applying for an LITC grant and review the most recent application package.

Currently there are no LITCs in Montana and North Dakota, or the territory of Puerto Rico. There are also unserved counties in Arizona, Florida, Idaho, Nevada, North Carolina, and Pennsylvania. Qualifying organizations looking to serve taxpayers in these areas are strongly encouraged to apply.

A complete list of current LITCs and their locations is in Publication 4134. Organizations who have questions or need additional information about the LITC program or application process, please contact Karen Tober with the LITC program office by email at [email protected].

03/03/2022

Understanding taxpayer rights: The right to be informed

Taxpayers have the right to know what they need to do to comply with the tax laws. Not just during filing season but, all year.

When something happens to a taxpayer's account, that taxpayer has the right to be informed about the activity. In fact, this right is one of ten outlined in the Taxpayer Bill of Rights.

The right to be informed means taxpayers have the right to:

Know what they need to do to comply with the tax laws.

Have clear explanations of the laws and IRS procedures in all forms, instructions, publications, notices, and correspondence.

Be informed of IRS decisions about their tax accounts.

Receive clear explanations of the outcomes of IRS decisions.
To make sure taxpayers are informed, the IRS will:

Include within certain notices any amount of the tax, interest, and certain penalties the taxpayer owes.

Explain why the taxpayer owes any taxes.

Explain the specific reasons why it denied a refund claim.

Post information on IRS.gov to help taxpayers understand their IRS notice or letter.

Send a letter when the agency assesses a tax. That letter must include:
Information on how the taxpayer can appeal the decision.
An explanation of the entire process from audit through collection.
Details on how the Taxpayer Advocate Service can help.

Send an annual statement to taxpayers who enter into a payment plan. The statement will include how much the taxpayer:
Owes at the beginning of the year.
Paid during the year.
Still owes at the end of the year.