Protax & Accounting Services

12/01/2023

ED (Enforcement Directorate) என்னும் உத்தமர்கள்!

யோக்கியன் வருகிறான் .. செம்பை எடுத்து உள்ளே வையுங்க..

05/03/2023

Dirty Dozen: Taking tax advice on social media can be bad news for taxpayers; schemes circulating involving tax forms https://www.irs.gov/newsroom/dirty-dozen-taking-tax-advice-on-social-media-can-be-bad-news-for-taxpayers-schemes-circulating-involving-tax-forms

02/13/2023

Schwab Center for Financial Research.

Here are eight things to keep in mind as you prepare to file your 2022 taxes.

1. Income tax brackets shifted a bit
There are still seven tax rates, but the income ranges (tax brackets) for each rate have shifted slightly to account for inflation. For 2022, the following rates and income ranges apply:
Taxable income brackets
Taxable income brackets
Tax rate Single filers
Married couples filing jointly (and qualifying widows or widowers)
10% $0 to $10,275 $0 to $20,550
12% $10,276 to $41,775 $20,551 to $83,550
22% $41,776 to $89,075 $83,551 to $178,150
24% $89,076 to $170,050 $178,151 to $340,100
32% $170,051 to $215,950 $340,101 to $431,900
35% $215,951 to $539,900 $431,901 to $647,850
37% $539,901 or more $647,851 or more

2. The standard deduction increased slightly
After an inflation adjustment, the 2022 standard deduction increases to $12,950 for single filers and married couples filing separately and to $19,400 for single heads of household, who are generally unmarried with one or more dependents. For married couples filing jointly, the standard deduction rises to $25,900.

3. Itemized deductions remain mostly the same
For most filers, taking the higher standard deduction is more practical and saves the hassle of keeping track of receipts. But if you have enough tax-deductible expenses, you might benefit from itemizing.
The following rules for itemized deductions haven't changed much for 2022, but they're still worth pointing out.
State and local taxes: The deduction for state and local income taxes, property taxes, and real estate taxes is capped at $10,000.
Mortgage interest deduction: The mortgage interest deduction is limited to $750,000 of indebtedness. But people who had $1,000,000 of home mortgage debt before December 16, 2017 will still be able to deduct the interest on that loan.
Medical expenses: Only medical expenses that exceed 7.5% of adjusted gross income (AGI) can be deducted in 2022.
Charitable donations: The deductions for charitable donations are not as generous as they were in 2021. In 2022, the annual income tax deduction limits for gifts to public charities1 are 30% of AGI for contributions of non-cash assets—if held for more than one year—and 60% of AGI for contributions of cash.
Miscellaneous deductions: No miscellaneous itemized deductions are allowed.

4. IRA contribution limits remain the same and 401(k) limits are slightly higher
The traditional IRA and Roth contribution limits in 2022 remain the same as the prior year. Individuals can contribute up to $6,000 to an IRA, and those age 50 and older also qualify to make an additional $1,000 catch-up contribution. If you're able to max out your IRA, consider doing so—you may qualify to deduct some or all of your contribution.
However, the 2022 contribution limits for 401(k) accounts have increased to $20,500. If you're age 50 or older, you qualify to make an additional $6,500 catch-up contribution for this tax year as well.

5. You can save a bit more in your health savings account (HSA)
For 2022, the maximum you can contribute to an HSA is $3,650 for an individual (up $50 from 2021) and $7,300 for a family (up $100). People age 55 and older can contribute an extra $1,000 catch-up contribution.
To be eligible for an HSA, you must be enrolled in a high-deductible health plan (which usually has lower premiums as well). Learn more about the benefits of an HSA.

6. The Child Tax Credit is lower after a one-year bump
Tax credits, which reduce the tax you owe dollar for dollar, are normally better than deductions, which reduce how much of your income is subject to tax.
In 2021, the American Rescue Plan Act (ARPA) temporarily enlarged the Child Tax Credit. But in 2022, the credit returns to $2,000 per child age sixteen or younger. The credit is also subject to a phase-out starting at $400,000 for joint filers and $200,000 for single filers. For other qualified dependents, you can claim a $500 credit.
7. The alternative minimum tax (AMT) exemption is higher
Until the AMT exemption enacted by the Tax Cuts and Jobs Act expires in 2025, the AMT will continue to affect mostly households with incomes over $500,000. For 2022, the AMT exemptions are $75,900 for single filers and $118,100 for married taxpayers filing jointly. The phase-out thresholds are $1,079,800 for married taxpayers filing a joint return and $539,900 for all other taxpayers. (Once your income for the AMT hits the phase-out threshold, your AMT exemption begins to phase out at 25 cents for every dollar over the threshold.)

8. The estate tax exemption is even higher
The estate and gift tax exemption, which is indexed to inflation, rises to $12.06 million for 2022. But the now-higher exemption is set to expire at the end of 2025, meaning it could be essentially cut in half at that time if Congress doesn't act.
The annual gift exclusion, which allows you to give money to your loved ones each year without incurring any tax liability or using up any of your lifetime estate and gift tax exemption, increases to $16,000 per recipient (up $1,000 from 2021).

10/13/2022

Certain Required Minimum Distributions for 2021 and 2022

Notice 2022-53 announces that the Department of the Treasury and the Internal Revenue Service intend to issue final regulations related to required minimum distributions under section 401(a)(9) of the Internal Revenue Code that will apply no earlier than the 2023 distribution calendar year. In addition, this notice provides guidance related to certain provisions of section 401(a)(9) that apply for 2021 and 2022.

08/27/2022

Credit for Qualified Retirement Savings Contributions

You may be able to take a tax credit for making eligible contributions to your IRA or employer-sponsored retirement plan. And, beginning in 2018, if you’re the designated beneficiary, you may be eligible for credit for contributions to your Achieving a Better Life Experience (ABLE) account.

Who's eligible for the credit?

You're eligible for the credit if you're:
Age 18 or older,
Not claimed as dependent on another person’s return, and
Not a student.
You were a student if during any part of 5 calendar months of the tax year you:

Were enrolled as a full-time student at a school, or
Took a full-time, on-farm training course given by a school or a state, county, or local government agency.
A school includes technical, trade, and mechanical schools. It does not include on-the-job training courses, correspondence schools, or schools offering courses only through the Internet.

See Form 8880, Credit for Qualified Retirement Savings Contributions, for more information.

Amount of the credit

Depending on your adjusted gross income reported on your Form 1040 series return, the amount of the credit is 50%, 20% or 10% of:

contributions you make to a traditional or Roth IRA,
elective salary deferral contributions to a 401(k), 403(b), governmental 457(b), SARSEP, or SIMPLE plan,
voluntary after-tax employee contributions made to a qualified retirement plan (including the federal Thrift Savings Plan) or 403(b) plan,
contributions to a 501(c)(18)(D) plan, or
contributions made to an ABLE account for which you are the designated beneficiary (beginning in 2018).
Rollover contributions do not qualify for the credit. Also, your eligible contributions may be reduced by any recent distributions you received from a retirement plan or IRA, or from an ABLE account.

The maximum contribution amount that may qualify for the credit is $2,000 ($4,000 if married filing jointly), making the maximum credit $1,000 ($2,000 if married filing jointly). Use the chart below to calculate your credit.

Example: Jill, who works at a retail store, is married and earned $41,000 in 2021. Jill’s spouse was unemployed in 2021 and didn’t have any earnings. Jill contributed $2,000 to her IRA for 2021. After deducting her IRA contribution, the adjusted gross income shown on her joint return is $39,000. Jill may claim a 50% credit of $1,000 for her $2,000 IRA contribution on her 2021 tax return.

2022 Saver's Credit

Credit Rate Married Filing Jointly Head of Household All Other Filers*
50% of your contribution AGI not more than $41,000 AGI not more than $30,750 AGI not more than $20,500
20% of your contribution $41,001- $44,000 $30,751 - $33,000 $20,501 - $22,000
10% of your contribution $44,001 - $68,000 $33,001 - $51,000 $22,001 - $34,000
0% of your contribution more than $68,000 more than $51,000 more than $34,000
*Single, married filing separately, or qualifying widow(er)

2021 Saver's Credit

Credit Rate Married Filing Jointly Head of Household All Other Filers*
50% of your contribution AGI not more than $39,500 AGI not more than $29,625 AGI not more than $19,750
20% of your contribution $39,501 - $43,000 $29,626 - $32,250 $19,751 - $21,500
10% of your contribution $43,001 - $66,000 $32,251 - $49,500 $21,501 - $33,000
0% of your contribution more than $66,000 more than $49,500 more than $33,000
*Single, married filing separately, or qualifying widow(er)

04/25/2022

Taxing capital income
William G. Gale, Swati Joshi, Christopher Pulliam, and John Sabelhaus Wednesday, April 20, 2022

Legislated changes affecting capital income have dramatically reduced the federal income tax base and revenues over the past 25 years. A significant share of capital income is never subject to tax. The massive “leakage” between the generation of economic income and the reporting of income on tax forms calls for careful analysis of (a) which forms of income do not show up on tax forms, (b) where in the income distribution that divergence is occurring, (c) how base erosion is changing over time, and (d) the revenue and distributional effects of broadening the capital income tax base.

A significant share of capital income is never subject to tax. William Gale, Swati Joshi, Christopher Pulliam, and John Sabelhaus explore research on the massive “leakage” between the generation and taxation of economic income.

03/30/2022

2021 Tax Updates

03/30/2022

Operate and Maintain a SEP Plan
What are the contribution rules?

Employer contributions for each eligible employee must be:

Based only on the first $305,000 of compensation for 2022 ($290,000 for 2021, $285,000 for 2020)
The same percentage of compensation for every employee
Limited annually to the smaller of of $61,000 for 2022 ($57,000 for 2020) or 25% of compensation
Paid to the employee's SEP-IRA
In plan operation, you must follow the definition of compensation stated in the document. Compensation generally includes the pay a participant received from you for personal services for a year.

Special computations for self-employed individuals. When figuring the contribution for your own SEP-IRA, compensation is your net earnings from self-employment, less the following deductions:

one-half of your self-employment tax and
contributions to your own SEP-IRA.
For more information on the deduction limitations for self-employed individuals, see Publication 560 PDF.

03/08/2022

Tax Time Guide: IRS reminds taxpayers to report gig economy income, virtual currency transactions, foreign source income and assets

WASHINGTON — The Internal Revenue Service reminds taxpayers of their reporting and potential tax obligations from working in the gig economy, making virtual currency transactions, earning foreign-source income or holding certain foreign assets. Information available on IRS.gov and instructions on Form 1040 can help taxpayers in understanding and meeting these reporting and tax requirements.

Gig economy earnings are taxable
Generally, income earned from the gig economy is taxable and must be reported to the IRS. The gig economy is activity where people earn income providing on-demand work, services or goods. Often, it's through a digital platform like an app or website. Taxpayers must report income earned from the gig economy on a tax return, even if the income is:

From part-time, temporary or side work,
Not reported on an information return form - like a Form 1099-K, 1099-MISC, W-2 or other income statement or
Paid in any form, including cash, property, goods or virtual currency.
For more information on the gig economy, visit the gig economy tax center.

Understand virtual currency reporting and tax requirements
The IRS reminds taxpayers that once again there is a question at the top of Form 1040 and Form 1040-SR asking about virtual currency transactions. All taxpayers filing these forms must check the box indicating either "yes" or "no." A transaction involving virtual currency includes, but is not limited to:

The receipt of virtual currency as payment for goods or services provided;
The receipt or transfer of virtual currency for free (without providing any consideration) that does not qualify as a bona fide gift;
The receipt of new virtual currency as a result of mining and staking activities;
The receipt of virtual currency as a result of a hard fork;
An exchange of virtual currency for property, goods or services;
An exchange/trade of virtual currency for another virtual currency;
A sale of virtual currency; and
Any other disposition of a financial interest in virtual currency.
If an individual disposed of any virtual currency that was held as a capital asset through a sale, exchange or transfer, they should check "Yes" and use Form 8949 to figure their capital gain or loss and report it on Schedule D (Form 1040).

If they received any virtual currency as compensation for services or disposed of any virtual currency they held for sale to customers in a trade or business, they must report the income as they would report other income of the same type (for example, W-2 wages on Form 1040 or 1040-SR, line 1, or inventory or services from Schedule C on Schedule 1). More information on virtual currency can be found in the instructions for Form 1040 and on the Virtual Currencies page on IRS.gov.

Report Foreign Source Income
A U.S. citizen or resident alien's worldwide income is generally subject to U.S. income tax, regardless of where they live. They're also subject to the same income tax filing requirements that apply to U.S. citizens or resident aliens living in the United States.

U.S. citizens and resident aliens must report unearned income, such as interest, dividends, and pensions, from sources outside the United States unless exempt by law or a tax treaty. They must also report earned income, such as wages and tips, from sources outside the United States. An income tax filing requirement generally applies even if a taxpayer qualifies for tax benefits, such as the Foreign Earned Income Exclusion or the Foreign Tax Credit, which substantially reduce or eliminate U.S. tax liability. These tax benefits are only available if an eligible taxpayer files a U.S. income tax return.

A taxpayer is allowed an automatic 2-month extension to June 15 if both their tax home and abode are outside the United States and Puerto Rico. Even if allowed an extension, a taxpayer will have to pay interest on any tax not paid by the regular due date of April 18, 2022.

Those serving in the military outside the U.S. and Puerto Rico on the regular due date of their tax return also qualify for the extension to June 15. IRS recommends attaching a statement if one of these two situations apply. More information can be found in the instructions for Form 1040 and 1040-SR PDF, Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad and Publication 519, U.S. Tax Guide for Aliens.

Reporting required for foreign accounts and assets
Federal law requires U.S. citizens and resident aliens to report their worldwide income, including income from foreign trusts and foreign bank and other financial accounts. In most cases, affected taxpayers need to complete and attach Schedule B to their tax return. Part III of Schedule B asks about the existence of foreign accounts, such as bank and securities accounts, and usually requires U.S. citizens to report the country in which each account is located.

In addition, certain taxpayers may also have to complete and attach to their return Form 8938, Statement of Foreign Financial Assets. Generally, U.S. citizens, resident aliens and certain nonresident aliens must report specified foreign financial assets on this form if the aggregate value of those assets exceeds certain thresholds. See the instructions for this form for details.

Further, separate from reporting specified foreign financial assets on their tax return, taxpayers with an interest in, or signature or other authority over foreign financial accounts whose aggregate value exceeded $10,000 at any time during 2020, must file electronically with the Treasury Department a Financial Crimes Enforcement Network (FinCEN) Form 114, Report of Foreign Bank and Financial Accounts (FBAR). Because of this threshold, the IRS encourages taxpayers with foreign assets, even relatively small ones, to check if this filing requirement applies to them. The form is only available through the BSA E-filing System website.

The deadline for filing the annual Report of Foreign Bank and Financial Accounts (FBAR) is the same as that of Form 1040. FinCEN grants filers who missed the original deadline an automatic extension until October 15, 2022, to file the FBAR. There is no need to request this extension.

This news release is part of a series called the Tax Time Guide, a resource to help taxpayers file an accurate tax return. Additional help is available in Publication 17, Your Federal Income Tax.

01/31/2022

Taxpayers beware:
Tax season is prime time for phone scams.

With the new tax season starting this week, the IRS reminds taxpayers to be aware that criminals continue to make aggressive calls posing as IRS agents in hopes of stealing taxpayer money or personal information.

Here are some telltale signs of a tax scam along with actions taxpayers can take if they receive a scam call.

The IRS will never:

Call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer. Generally, the IRS will first mail a bill to any taxpayer who owes taxes.
Threaten to immediately bring in local police or other law enforcement groups to have the taxpayer arrested for not paying.
Demand that taxes be paid without giving taxpayers the opportunity to question or appeal the amount owed.
Call unexpectedly about a tax refund.
Taxpayers who receive these phone calls should:

Record the number and then hang up the phone immediately.
Report the call to TIGTA using their IRS Impersonation Scam Reporting form or by calling 800-366-4484.
Report the number to [email protected] and be sure to put “IRS Phone Scam” in the subject line

01/04/2022

Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. Explore your rights and our obligations to protect them.

The Right to Be Informed
The Right to Quality Service
The Right to Pay No More than the Correct Amount of Tax
The Right to Challenge the IRS’s Position and Be Heard
The Right to Appeal an IRS Decision in an Independent Forum
The Right to Finality
The Right to Privacy
The Right to Confidentiality
The Right to Retain Representation
The Right to a Fair and Just Tax System

The Right to Be Informed
Taxpayers have the right to know what they need to do to comply with the tax laws. They are entitled to clear explanations of the laws and IRS procedures in all tax forms, instructions, publications, notices, and correspondence. They have the right to be informed of IRS decisions about their tax accounts and to receive clear explanations of the outcomes.

Learn more about your right to be informed.

The Right to Quality Service
Taxpayers have the right to receive prompt, courteous, and professional assistance in their dealings with the IRS, to be spoken to in a way they can easily understand, to receive clear and easily understandable communications from the IRS, and to speak to a supervisor about inadequate service.

Learn more about your right to quality service.

The Right to Pay No More than the Correct Amount of Tax
Taxpayers have the right to pay only the amount of tax legally due, including interest and penalties, and to have the IRS apply all tax payments properly.

Learn more about your right to pay no more than the correct amount of tax.

The Right to Challenge the IRS’s Position and Be Heard
Taxpayers have the right to raise objections and provide additional documentation in response to formal IRS actions or proposed actions, to expect that the IRS will consider their timely objections and documentation promptly and fairly, and to receive a response if the IRS does not agree with their position.

Learn more about your right to challenge the IRS’s position and be heard.

The Right to Appeal an IRS Decision in an Independent Forum
Taxpayers are entitled to a fair and impartial administrative appeal of most IRS decisions, including many penalties, and have the right to receive a written response regarding the Office of Appeals’ decision. Taxpayers generally have the right to take their cases to court.

Learn more about your right to appeal an IRS decision in an independent forum.

The Right to Finality
Taxpayers have the right to know the maximum amount of time they have to challenge the IRS’s position as well as the maximum amount of time the IRS has to audit a particular tax year or collect a tax debt. Taxpayers have the right to know when the IRS has finished an audit.

Learn more about your right to finality.

The Right to Privacy
Taxpayers have the right to expect that any IRS inquiry, examination, or enforcement action will comply with the law and be no more intrusive than necessary, and will respect all due process rights, including search and seizure protections and will provide, where applicable, a collection due process hearing.

Learn more about your right to privacy.

The Right to Confidentiality
Taxpayers have the right to expect that any information they provide to the IRS will not be disclosed unless authorized by the taxpayer or by law. Taxpayers have the right to expect appropriate action will be taken against employees, return preparers, and others who wrongfully use or disclose taxpayer return information.

Learn more about your right to confidentiality.

The Right to Retain Representation
Taxpayers have the right to retain an authorized representative of their choice to represent them in their dealings with the IRS. Taxpayers have the right to seek assistance from a Low Income Taxpayer Clinic if they cannot afford representation.

Taxpayer Bill of Rights

Learn more about your right to retain representation.

The Right to a Fair and Just Tax System
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 are experiencing financial difficulty or if the IRS has not resolved their tax issues properly and timely through its normal channels.

Learn more about your right to a fair and just tax system.

05/26/2021

Public fascination with cryptocurrency tends to follow dramatic gains and losses in the market. While the latter results in pundits sounding the death knell for Bitcoin and its ilk, the most reliable predictor for the lifespan and legitimacy of crypto lies in the Internal Revenue Service—and some newly minted crypto-holding clients may have questions about the virtual currency checkbox on their tax year 2020 Form 1040.

Public fascination with cryptocurrency tends to follow dramatic gains and losses in the market. While the latter results in pundits sounding the death knell for Bitcoin and its ilk, the most reliable predictor for the lifespan and legitimacy of crypto lies in the Internal Revenue Service—and some ...