Top 5 things to remember when filing income tax returns in 2022 – Your Plymouth Accountants

Your Plymouth Accountants – ATS Advisors
IR-2022-16, January 20, 2022

ATS Advisors

WASHINGTON — With filing season beginning January 24, the Internal Revenue Service reminded taxpayers about several key items to keep in mind when filing their federal income tax returns this year.

Given the unprecedented circumstances around the pandemic and unique challenges for this tax season, the IRS offers a 5-point checklist that can help many people speed tax return processing and refund delivery while avoiding delays.

1. File an accurate return and use e-file and direct deposit to avoid delays. Taxpayers should electronically file and choose direct deposit as soon as they have everything they need to file an accurate return. Taxpayers have many choices, including using a trusted tax professional. For those using e-file, the software helps individuals avoid mistakes by doing the math. It guides people through each section of their tax return using a question-and-answer format.

2. For an accurate return, collect all documents before preparing a tax return; make sure stimulus payment and advance Child Tax Credit information is accurate. In addition to collecting W-2s, Form 1099s and other income-related statements, it is important people have their advance Child Tax Credit and Economic Impact Payment information on hand when filing.

  • Advance CTC letter 6419: In late December 2021, and continuing into January, the IRS started sending letters to people who received advance CTC payments. The letter says, “2021 Total Advance Child Tax Credit (AdvCTC) Payments” near the top and, “Letter 6419” on the bottom righthand side of the page. Here’s what people need to know:
    • The letter contains important information that can help ensure the tax return is accurate.
    • People who received advance CTC payments can also check the amount of the payments they received by using the CTC Update Portal available on IRS.gov.
    • Eligible taxpayers who received advance Child Tax Credit payments should file a 2021 tax return to receive the second half of the credit. Eligible taxpayers who did not receive advance Child Tax Credit payments can claim the full credit by filing a tax return.
  • Third Economic Impact Payment letter 6475: In late January 2022, the IRS will begin issuing letters to people who received a third payment in late January 2021. The letter says, “Your Third Economic Impact Payment” near the top and, “Letter 6475” on the bottom righthand side of the page. Here’s what people need to know:
    • Most eligible people already received their stimulus payments. This letter will help individuals determine if they are eligible to claim the Recovery Rebate Credit (RRC) for missing stimulus payments.
    • People who are eligible for RRC must file a 2021 tax return to claim their remaining stimulus amount.
    • People can also use IRS online account to view their Economic Impact Payment amounts.

Both letters – 6419 and 6475 – include important information that can help people file an accurate 2021 tax return. If a return includes errors or is incomplete, it may require further review while the IRS corrects the error, which may slow the tax refund. Using this information when preparing a tax return electronically can reduce errors and avoid delays in processing.

3. Avoid lengthy phone delays; use online resources before calling the IRS. Phone demand on IRS assistance lines remains at record highs. To avoid lengthy delays, the IRS urges people to use IRS.gov to get answers to tax questionscheck a refund status or pay taxes. There’s no wait time or appointment needed — online tools and resources are available 24 hours a day.

Additionally, the IRS has several ways for taxpayers to stay up to date on important tax information:

4. Waiting on a 2020 tax return to be processed? Special tip to help with e-filing a 2021 tax return: In order to validate and successfully submit an electronically filed tax return to the IRS, taxpayers need their Adjusted Gross Income, or AGI, from their most recent tax return. For those waiting on their 2020 tax return to be processed, here’s a special tip to ensure the tax return is accepted by the IRS for processing. Make sure to enter $0 (zero dollars) for last year’s AGI on the 2021 tax return. For those who used a Non-Filer tool in 2021 to register for an advance Child Tax Credit or third Economic Impact Payment in 2021, they should enter $1 as their prior year AGI. Everyone else should enter their prior year’s AGI from last year’s return. Remember, if using the same tax preparation software as last year, this field will auto-populate.

5. Free resources are available to help taxpayers file. During this challenging year, the IRS reminds taxpayers there are many options for free help, including many resources on IRS.gov. For those looking to avoid the delays with a paper tax return, IRS Free File is an option. With Free File, leading tax software providers make their online products available for free as part of a 20-year partnership with the Internal Revenue Service. This year, there are eight products in English and two in Spanish. IRS Free File is available to any person or family who earned $73,000 or less in 2021. Qualified taxpayers can also find free one-on-one tax preparation help around the nation through the Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs.

 

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IRS Free File Taxes available today; filers can claim important tax benefits

IR-2022-14, January 14, 2022

ATS Advisors

WASHINGTON — The IRS today announced the availability of Free File, providing taxpayers online tax preparation products available at no charge. Today’s launch of IRS Free File, available only through IRS.gov, provides people an early opportunity to file their taxes and claim the 2021 Recovery Rebate Credit, the enhanced Child Tax Credit, the Earned Income Tax Credit, and other important credits. Taxpayers can use Free File to claim the remaining amount of their Child Tax Credit and claim any advance payments of the Child Tax Credit they did not receive in 2021.

Leading tax software providers make their online products available for free as part of a 20-year partnership with the Internal Revenue Service. This year, there are eight products in English and two in Spanish. IRS Free File is available to any person or family who earned $73,000 or less in 2021.

“Free File is part of a wide selection of services available on IRS.gov to help people file taxes during this challenging period,” said IRS Commissioner Chuck Rettig. “IRS Free File offers taxpayers an easy, free way to do their taxes from the safety of their own home. Free File also provides electronic filing with direct deposit, which is the best way to avoid delays and receive refunds quickly and securely.”

Because the filing season starts on January 24, 2022, IRS Free File providers will accept completed tax returns and hold them until they can be filed electronically on that date. The Free File Fillable Forms, the electronic version of IRS paper forms, will be available on January 24, 2022. Free File Fillable Forms is available for use by everyone, regardless of income, but should be used only by people who are comfortable preparing their own taxes.

Other important information related to the January 24 start of tax season is available on IRS.gov, including important filing tips.

How IRS Free File works

Each IRS Free File provider sets its own eligibility rules for products based on age, income, and state residency. However, for those who make $73,000 or less, they will find at least one product that matches their needs, and usually more. Some providers also offer free state income tax return preparation. [Some state tax benefits, such as state Earned Income Tax Credits, are based on information contained on the taxpayer’s federal income tax return. Taxpayers are encouraged to check with their state tax agency about state tax benefits and requirements to file a state income tax return.] Active-duty military can use any IRS Free File product if their income was $73,000 or less.

Here’s a step-by-step overview of how to find the right Free File product:

  1. Go to IRS.gov/freefile.
  2. Use the “Choose an IRS Free File Offer” tool for help in finding the right product, or
  3. Review each offer by a provider using the “Browse All” tool.
  4. Select a product.
  5. Follow links to the provider’s website to begin a tax return.

No computer? No problem. Taxpayers can complete and file their tax return using IRS Free File products through smart phones or tablets.

Child Tax Credit, 2021 Recovery Rebate Credit and other tax benefits

IRS Free File is all taxpayers need to claim the Child Tax Credit (CTC), 2021 Recovery Rebate Credit, and other tax benefits such as the Earned Income Tax Credit (EITC).

The IRS also continues to urge people who received one or more advance Child Tax Credit payments in 2021 to carefully review their taxes before filing. Families who received advance payments will need to compare the advance Child Tax Credit payments they received in 2021 with the amount of the Child Tax Credit they can properly claim on their 2021 tax return. To help taxpayers who received an advance Child Tax Credit payment, the IRS started sending Letter 6419, 2021 Advance CTC, in late December 2021.

The letter contains important information on advance Child Tax Credit payments that can help ensure the tax return is accurate. People who received the advance CTC payments can also check the amount of their payments by using the CTC Update Portal available on IRS.gov.

In late January, the IRS will begin sending Letter 6475, Your Third Economic Impact Payment, to individuals who received a third stimulus payment in 2021, including initial and “plus-up” payments. While most eligible people already received their Economic Impact Payments, or stimulus payments, this letter will help them determine if they are eligible to claim the 2021 Recovery Rebate Credit for missing stimulus payments. If so, they must file a 2021 tax return to claim this credit. People can also use IRS online account to view both payment amounts.

IRS Free File also can be used by workers to claim the EITC, which provides a refundable tax credit based on a filer’s income and family size.

Please remember that unemployment benefits paid by states are taxable income. States should send Forms 1099-G to those who received jobless benefits.

IRS Free File participants

For 2022, these providers are participating in IRS Free File:

  • 1040Now.NET
  • ezTaxReturn.com (available in Spanish)
  • FreeTaxReturn.com INC
  • FileYourTaxes.com
  • On-Line Taxes at OLT.com
  • TaxAct
  • FreeTaxUSA ®
  • TaxSlayer (coming soon in Spanish)

IRS releases its 2021 Progress Update detailing challenging year

IR-2022-07, January 7, 2022

WASHINGTON — The Internal Revenue Service today released its 2021 annual report describing the agency’s work delivering taxpayer service and compliance efforts during the pandemic while highlighting efforts taken by IRS employees to help people during the year.

Internal Revenue Service Progress Update / Fiscal Year 2021 – Putting Taxpayers First PDF outlines how the agency continued to work through difficulties related to the pandemic while delivering two rounds of Economic Impact Payments and millions of advance Child Tax Credit payments, all in record time. Meanwhile, IRS employees continued to make adjustments to deliver the filing season despite office closures, social distancing mandates and an extended tax filing deadline.

“This has been an unprecedented period facing the IRS and the nation,” said IRS Commissioner Chuck Rettig. “IRS employees worked hard during the pandemic, repeatedly delivering for taxpayers under tight timeframes and difficult circumstances. As the 2022 filing season approaches, more work remains for us to help taxpayers as well as tax professionals. We will continue to make progress on critical areas thanks to the hard work of so many people. I’m incredibly proud of what our employees have been able to accomplish during this period, and we also appreciate the efforts taking place by our partners inside and outside the tax system to help people struggling during COVID-19.”

Since the pandemic began, the IRS has successfully delivered more than $1.5 trillion to people across the nation through Economic Impact Payments, tax refunds and advance Child Tax Credit payments.

A large portion of that amount was distributed during Fiscal Year 2021, which is the focal point of this year’s Progress Update. The 56-page report highlights accomplishments around the agency’s six strategic goals and identifies ongoing modernization efforts. This year’s edition also discusses work related to implementing the various new pieces of legislation related to the pandemic, including the American Rescue Plan.

In his opening comments in the Progress Update, Rettig explained that each year the IRS collects more than $3 trillion in taxes and generates approximately 96% of the funding that supports the federal government’s operations.

“The 2021 Progress Update is not just a report, it’s the story of a dedicated group of public servants who continued to deliver for the nation, as they do every year, even in challenging times and while overcoming concerns for themselves, their families and their communities during the pandemic,” he said.

The document gives numerous examples of how IRS employees helped taxpayers, including:

  • Expanded information and assistance available to taxpayers in additional languages and underserved communities to help deliver Economic Impact Payments, advance Child Tax Credit payments and other services.
  • Developed new online portals for individuals to check on their pandemic-related relief payments and make updates to their personal information.
  • Offered a new online option for tax professionals to obtain signatures from individual and business clients and submit authorization forms electronically. Tax pros also now have an online account option, with new features being added.
  • Served their communities outside official duties through charitable work and service projects.

The report also shows ways IRS employees worked to maintain the tax system through a strong, visible and robust tax enforcement presence.

“We’ve continued to develop innovative approaches to understanding, detecting and resolving potential noncompliance to maintain taxpayer confidence in the tax system. We have expanded use of data, analytics and artificial intelligence across all lanes from selection to examination,” Rettig said.

“A few of our recent notable accomplishments include the creation of an Office of Fraud Enforcement in 2020 as well as an Office of Promoter Investigations in 2021,” he said. “These and other steps will help us do a better job of rooting out tax fraud, especially shutting down abusive tax avoidance transactions, including syndicated conservation easements and micro-captive insurance arrangements, as well as abusive transactions involving virtual currencies.”

The new Progress Update also highlights IRS work partnering on landmark criminal investigative cases that brought down child pornography, drug and terrorist organizations. In 2021, IRS Criminal Investigation’s conviction rate remained the highest among federal law enforcement at nearly 93% overall, and 96% for tax cases in particular.

“I’m especially proud of our Criminal Investigation Division’s efforts overall and in conjunction with the dark web illicit marketplace known as Silk Road,” Rettig said.

In January 2021, the IRS delivered the Taxpayer First Act Report to Congress PDF, a comprehensive set of recommendations to re-imagine the taxpayer experience, enhance employee training and restructure the organization to increase collaboration and innovation. The report introduced three integrated sets of recommendations required by the law and recognized as major improvement strategies.

“We appointed the first-ever Chief Taxpayer Experience Officer,” Rettig explained. “And, while outlining the design for the new Taxpayer Experience Office, we initiated several activities toward implementing the Taxpayer Experience Strategy.”

The IRS will remain focused on making progress and serving the nation as the 2022 filing season begins later this month.

“We remain confident the IRS will continue to deliver for our country, just as we have during other times of national urgency,” Rettig said.

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IRS revises Form 1024, allowing for electronic filing for exempt organizations

IRS revises Form 1024, allowing for electronic filing for exempt organizations.
IR-2022-2, January 3, 2022

WASHINGTON — As part of ongoing efforts to improve service for the tax-exempt community, the IRS has revised Form 1024, Application for Recognition of Exemption Under Section 501(a) or Section 521 of the Internal Revenue Code, to allow electronic filing.

Beginning January 3, 2022, applications for recognition of exemption on Form 1024 must be submitted electronically online at Pay.gov. The IRS will provide a 90-day grace period during which it will continue to accept paper versions of Form 1024 (Rev. 01-2018) and letter applications.

“Electronic filing makes it easier to complete an application for tax-exempt status while reducing errors,” said Sunita Lough, Commissioner of the IRS Tax Exempt and Government Entities division. “Electronic filing also shortens IRS processing time so applicants won’t wait as long for a response.”

Organizations requesting determinations under Section 521 are now also able to use the electronic Form 1024 instead of Form 1028, Application for Recognition of Exemption Under Section 521 of the Internal Revenue Code.

The required user fee for Form 1024 will remain $600 for 2022. Applicants must pay the fee through Pay.gov when submitting the form. Payment can be made directly from a bank account or by credit or debit card.

Organizations are encouraged to subscribe to Exempt Organizations Update, a free IRS e-Newsletter, for form updates and other exempt organization news.

As part of the revision, applications for recognition of exemption under Sections 501(c)(11), (14), (16), (18), (21), (22), (23), (26), (27), (28), (29) and 501(d) can no longer be submitted as letter applications. Instead, these requests must be made on the electronic Form 1024. Accordingly, organizations that are described in Section 501(c) (other than 501(c)(3) and (c)(4)) and 501(d) applying for tax-exempt status must now use the electronic Form 1024. Section 501(c)(3) organizations must continue to use Form 1023 or Form 1023-EZ, and Section 501(c)(4) organizations must continue to use Form 1024-A. Those forms also must be filed electronically.

Additional information on how to apply for IRS recognition of tax-exempt status:

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IRS issues 2022 Standard Mileage Rates

2022 Standard Mileage Rates – IR-2021-251

WASHINGTON — The Internal Revenue Service today issued the 2022 optional standard mileage rates. These rates are used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on January 1, 2022, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

  • 58.5 cents per mile driven for business use, up 2.5 cents from the rate for 2021,
  • 18 cents per mile driven for medical, or moving purposes for qualified active-duty members of the Armed Forces, up 2 cents from the rate for 2021 and
  • 14 cents per mile driven in service of charitable organizations; the rate is set by statute and remains unchanged from 2021.

The standard mileage rate for business use is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.

It is important to note that under the Tax Cuts and Jobs Act, taxpayers cannot claim a miscellaneous itemized deduction for unreimbursed employee travel expenses. Taxpayers also cannot claim a deduction for moving expenses, unless they are members of the Armed Forces on active duty moving under orders to a permanent change of station. For more details see Moving Expenses for Members of the Armed Forces.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

Taxpayers can use the standard mileage rate but must opt to use it in the first year the car is available for business use. Then, in later years, they can choose either the standard mileage rate or actual expenses. Leased vehicles must use the standard mileage rate method for the entire lease period (including renewals) if the standard mileage rate is chosen.

Notice 22-03 PDF, contains the optional 2022 standard mileage rates, as well as the maximum automobile cost used to calculate the allowance under a fixed and variable rate (FAVR) plan. In addition, the notice provides the maximum fair market value of employer-provided automobiles first made available to employees for personal use in calendar year 2022 for which employers may use the fleet-average valuation rule in or the vehicle cents-per-mile valuation rule.

Your Plymouth Tax Office – ATS Advisors

Your Plymouth Tax Office – ATS Advisors

Looking for help with your taxes this year? Look no further than ATS Advisors. ATS offers a wide variety of individual and business services to help you come out on top during tax season. ATS has 4 convenient locations in Plymouth, Royal Oak, Allen Park, & Grayling, MI.

About Us:

ATS Advisors is not just another CPA firm. As your partner we understand your desire to save time and money. We work with you, not just for you, to find effective solutions for your needs whether they are tax, accounting, finance, business or personal.

We build and maintain long-lasting relationships. Nearly 100% of our business was built on referrals and we take great pride in this fact. Your financial well-being is of paramount importance to us and we take that responsibility very seriously.

Our philosophy is simple: we only work with clients we respect and believe have the tools, and drive, to succeed. You will never receive an unexpected bill for services. We discuss all our fees up front and do not have any hidden costs.

Please take a look at our business and individual services to find more detailed information as to how we may serve you. Visit your Plymouth Tax Office today at 875 S Main St. Plymouth, MI 48170.

 

Charitable tax deduction available through Dec. 31

Special rule helps most people get a Charitable tax deduction of up to $300 per individual, $600 for couples for gifts to charity; National Council of Nonprofits and Independent Sector highlight how donations can help the nation’s charitable community

IR-2021-247, December 13, 2021

WASHINGTON — The Internal Revenue Service joined today with several leading nonprofit groups to highlight a special tax provision that allows more people to deduct donations to qualifying charities on their 2021 federal income tax return.

The Independent Sector and National Council of Nonprofits joined with the IRS to highlight this pandemic-related provision where married couples filing jointly can deduct up to $600 in cash donations and individual taxpayers can deduct up to $300 in donations.

Under the temporary law, taxpayers don’t need to itemize deductions on their tax returns to take advantage of this, which creates tax-favorable donation options not normally available to about 90 percent of tax filers. Ordinarily, people who choose to take the standard deduction cannot claim a deduction for their charitable contributions. But this special provision permits them to claim a limited deduction on their 2021 federal income tax returns for cash contributions made to qualifying charitable organizations by year’s end, December 31, 2021.

At a time when many charitable groups are struggling during the pandemic, the IRS highlights the new provision and urges people to make sure they donate to a qualifying charity. The special Tax Exempt Organization Search tool on IRS.gov can help people make sure they donate to a qualified charity.

“The pandemic has created unique challenges for tax-exempt organizations, and we want to make sure people don’t overlook this special tax deduction that’s available this year,” said Sunita Lough, IRS Commissioner of the Tax Exempt and Government Entities division. “Donations to qualifying charities can reduce people’s tax bill when they file in 2022.”

Leaders from the National Council of Nonprofits and the Independent Sector, two prominent organizations representing the nation’s charitable groups, highlighted that the special tax provision can provide additional assistance to organizations hit hard by the pandemic. Some groups have seen reduced charitable donations and others have seen increased demand for their services during this unprecedented period.

“At a time when nonprofits continue to see immense demand for services, are facing significant challenges hiring and retaining staff to deliver those services–every donation counts,” said David L. Thompson, Vice President of Public Policy at National Council of Nonprofits. “We’re thankful that the universal (or non-itemizer) deduction is available through the end of the year to encourage every taxpayer give a little bit more to the missions they care about.”

“Over the past two years, charities have helped America confront generational health, economic and social crises. They have answered the call to serve their communities despite facing lost revenue, disrupted operations and dramatically increased need,” said Daniel J. Cardinali, president and CEO of Independent Sector. “Congress has sent a powerful message that everyone – not just those who itemize on their taxes – has a role to play in helping meet this moment, and we know people in America will respond in kind. We hope charitable contributions and deductions will increase in the coming years.”

Included in the Coronavirus Aid, Relief, and Economic Security (CARES) Act, enacted in March 2020, a more limited version of this temporary tax benefit originally only applied to tax-year 2020. The Taxpayer Certainty and Disaster Tax Relief Act of 2020, enacted last December, generally extended it through the end of 2021.

Nearly nine in 10 taxpayers now take the standard deduction and could potentially qualify. Under this provision, tax year 2021 individual tax filers, including married individuals filing separate returns, can claim a deduction of up to $300 for cash contributions made to qualifying charities during 2021. The maximum deduction is increased to $600 for married individuals filing joint returns.

Cash contributions include those made by check, credit card or debit card as well as amounts incurred by an individual for unreimbursed out-of-pocket expenses in connection with their volunteer services to a qualifying charitable organization. Cash contributions don’t include the value of volunteer services, securities, household items or other property.

The IRS reminds taxpayers that to receive a deduction, they must donate to a qualified charity. To check the status of a charity, they can use the IRS Tax Exempt Organization Search tool.

Cash contributions to most charitable organizations qualify for a deduction. But contributions made either to supporting organizations or to establish or maintain a donor advised fund do not. Contributions carried forward from prior years do not qualify, nor do contributions to most private foundations and most cash contributions to charitable remainder trusts.

In general, a donor-advised fund is a fund or account maintained by a charity in which a donor can, because of their donor status, advise the fund on how to distribute or invest amounts contributed by the donor and held in the fund. A supporting organization is a charity that carries out its exempt purposes by supporting other exempt organizations, usually other public charities.

The IRS encourages all donors to be wary of scams masked as charitable solicitations. Criminals create fake charities to take advantage of the public’s generosity. Fake charities once again made the IRS’s Dirty Dozen list of tax scams for 2021. In October, the IRS also joined international organizations and other regulators in highlighting the fight against charity fraud.

Keep good records

Special recordkeeping rules apply to any taxpayer claiming a charitable contribution deduction. Usually, this includes obtaining an acknowledgment letter from the charity before filing a return and retaining a cancelled check or credit card receipt for contributions of cash.

For details on the recordkeeping rules for substantiating gifts to charity, see Publication 526, Charitable Contributions, available on IRS.gov.

How To Prepare For 2022 Taxes

How To Prepare For 2022 Taxes – December 1, 2021

There are steps people, including those who received stimulus payments or advance child tax credit payments, can take now to make sure their tax filing experience goes smoothly in 2022. They can start by visiting the Get Ready page on IRS.gov. Here are some other things they should do to prepare to file their tax return.

Gather and organize tax records

Organized tax records make preparing a complete and accurate tax return easier. They help avoid errors that lead to processing delays that slow refunds. Having all needed documents on hand before taxpayers prepare their return helps them file it completely and accurately. This includes:

Taxpayers should also gather any documents from these types of earnings. People should keep copies of tax returns and all supporting documents for at least three years.

Income documents can help taxpayers determine if they’re eligible for deductions or credits. People who need to reconcile their advance payments of the child tax credit and premium tax credit will need their related 2021 information. Those who did not receive their full third Economic Impact Payments will need their third payment amounts to figure and claim the 2021 recovery rebate credit.

Taxpayers should also keep end of year documents including:

  • Letter 6419, 2021 Total Advance Child Tax Credit Payments, to reconcile advance child tax credit payments
  • Letter 6475, Your 2021 Economic Impact Payment, to determine eligibility to claim the recovery rebate credit
  • Form 1095-A, Health Insurance Marketplace Statement, to reconcile advance premium tax credits for Marketplace coverage

Confirm mailing and email addresses and report name changes

To make sure forms make it to the them on time, taxpayers should confirm now that each employer, bank and other payer has their current mailing address or email address. People can report address changes by completing Form 8822, Change of Address and sending it to the IRS. Taxpayers should also notify the postal service to forward their mail by going online at USPS.com or their local post office. They should also notify the Social Security Administration of a legal name change.

View account information online

Individuals who have not set up an Online Account yet should do so soon. People who have already set up an Online Account should make sure they can still log in successfully. Taxpayers can use Online Account to securely access the latest available information about their federal tax account.

Review proper tax withholding and make adjustments if needed

Taxpayers may want to consider adjusting their withholding if they owed taxes or received a large refund in 2021. Changing withholding can help avoid a tax bill or let individuals keep more money each payday. Life changes – getting married or divorced, welcoming a child or taking on a second job – may also be reasons to change withholding. Taxpayers might think about completing a new Form W-4, Employee’s Withholding Certificate, each year and when personal or financial situations change.

People also need to consider estimated tax payments. Individuals who receive a substantial amount of non-wage income like self-employment income, investment income, taxable Social Security benefits and in some instances, pension and annuity income should make quarterly estimated tax payments. The last payment for 2021 is due on Jan. 18, 2022.

 

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Interest rates remain the same for the first quarter of 2022

2022 Interest Rates – IR-2021-234

WASHINGTON — The Internal Revenue Service today announced that interest rates will remain the same for the calendar quarter beginning January 1, 2022. The rates will be:

  • 3% for overpayments (two (2) percent in the case of a corporation),
  • 0.5% for the portion of a corporate overpayment exceeding $10,000,
  • 3% for underpayments, and
  • 5% for large corporate underpayments.

Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.

Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.

The interest rates announced today are computed from the federal short-term rate determined during October 2021 to take effect November 1, 2021, based on daily compounding.

Revenue Ruling 2021-24 PDF, announcing the rates of interest, is attached and will appear in Internal Revenue Bulletin 2021-50, dated December 13, 2021.

 

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House passes Build Back Better Act with universal paid leave

BBB Act, Universal Paid Leave – Journal Of Accountancy

The nearly $2 trillion Build Back Better (BBB) Act, passed Friday by the U.S. House of Representatives, contains many items of interest to CPAs, their clients, and their employers.

This article examines nontax provisions in the bill, H.R. 5376. A separate article covers the myriad tax-related items in the bill.

The vote passing the bill was 220-213.

The House’s passage of the BBB Act came after months of negotiations between moderate and progressive Democrats in the House and the U.S. Senate. House Speaker Nancy Pelosi, D-Calif., had hoped to have the House vote on the bill on Nov. 5, but those plans were scrapped when several moderate Democrats said they would not vote on the bill until the Congressional Budget Office released its official estimate of the impact on the U.S. deficit.

The CBO’s estimate on the bill adding $160 billion to the deficit over 10 years was finalized on Thursday.

The bill now goes to the U.S. Senate, where it is expected to undergo a couple of weeks of assessment to determine if all provisions of the bill qualify to be passed through the budget reconciliation process. Reconciliation allows certain budget-related bills to be passed by as few as 51 votes and avoid being stopped by a filibuster, which requires 60 votes to end.

The 100 Senate seats are split 50-50 between Democrats and Republicans, with the chamber’s president, Vice President Kamala Harris, representing the tie-breaking vote. Republicans have been unified against the BBB Act, leaving Democrats with the chore of crafting legislation that adheres to reconciliation rules and is palatable to all 50 of their senators. The legislation looks unlikely to escape the Senate chambers in its current form, with Sen. Joe Manchin, D-W.Va., telling CNN on Thursday that he has not yet decided whether to support the bill.

BUSINESS ITEMS OF NOTE IN H.R 5376

Universal paid leave

In one of its most significant and contentious provisions, the BBB Act would provide all U.S. workers with paid leave for the first time. Specifically, the bill guarantees four weeks of paid leave to all workers who are:

  • New parents;
  • Dealing with their own serious medical conditions; or
  • In need of leave to care for a loved one with a serious medical issue.

The benefits would be provided to workers in one of three ways:

  • Via a public program run by the Social Security Administration that would cover all public- and private-sector workers without regard to employer size, including part-time and self-employed individuals.
  • An already-enacted “legacy state” paid leave program that provides benefits equivalent to, or better than, the federal benefit, and for which the state would be reimbursed up to what it would have cost to cover their workers in the federal program.
  • A plan (self-insured or via an insurer) from an employer that voluntarily chose to offer 100% of employees paid leave equal to or better than the public benefit in every respect. The leave policy must include job reinstatement protection even if a worker is not covered by the Family and Medical Leave Act. Employers whose plans meet these conditions would be reimbursed for the lesser of 90% of the national average cost of paid leave benefits or 90% of their insurance premium.

Small business investments

The BBB Act includes around $5 billion in funding to support small businesses.

Most of that money, $3.385 billion, is designated to improve the ability of small employers and entrepreneurs to access capital. Specifically, the bill allocates:

  • Almost $2 billion in total funding over a 10-year period to fund direct loans for the smallest businesses and government contractors under the 7(a) lending program administered by the U.S. Small Business Administration (SBA).
  • $950 million in immediate, direct fee relief for new borrowers of the SBA 7(a) and 504 loans. The funding will be available until Sept. 30, 2026, to reduce or waive fees for loans of $2 million or less.
  • $60 million to diversify and create equity within the Small Business Investment Company (SBIC) program.
  • $275.9 million to enhance and improve the Community Advantage program and also provide the SBA with authority to partner with not-for-profit lenders to deliver capital through the 7(a) loan program.
  • $100 million to establish a pilot program for providing capital for cooperatives.

Other small business-related investments include:

  • $1 billion over a 10-year period to establish a national network of “uplift incubators” to assist new businesses and small government contractors, with the goal of sparking economic development in underrepresented communities.
  • $200 million over 10 years to provide cash grants of at least $100,000 to growth accelerators to expand their capabilities to assists small businesses focused on technology.

Other business-related provisions

The BBB Act invests about $390 billion to fund universal pre-kindergarten programs for all 3- and 4-year-olds and to improve access to affordable child care. Democrats assert that child care costs are too expensive for many families, forcing millions of Americans out of the workforce and contributing to the labor shortage that has affected millions of employers. The BBB Act would ensure that nearly all families of four earning up to $300,000 would pay no more than 7% of their income on child care. In addition, the act would provide funding for child care providers to raise wages for their workers and add staff to serve more families.

Other business-related allocations scattered through the 2,100-page bill include:

  • $5 billion for the Department of Commerce to identify and monitor critical vulnerabilities in the manufacturing supply chain.
  • $1 billion in grants to help minority-owned businesses launch and expand their operations. The bill provides another $400 million to expand the Minority Business Development Agency and $200 million to establish rural business centers that primarily serve rural minority-owned businesses.
  • $500 million for the Federal Trade Commission to create and operate a new bureau dedicated to stopping unfair and deceptive acts and practices related to privacy violations, data security incidents, identity theft, and other data abuses.

 

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