Should You File Taxes Early or Wait Until the Deadline?

Tax season brings a common question to many: Is it better to file taxes early or wait until the deadline? While there’s no universal answer, understanding the advantages and drawbacks of each approach can help make an informed decision. Also, if you live in Michigan and have any tax related questions, contact ATS Advisors. Let’s dive into the pros and cons of filing early versus waiting until the tax deadline.

The Case for Filing Early

Filing taxes early can be an appealing option for many. The primary benefit is receiving your tax refund sooner. If you’re owed a refund, filing early means the IRS processes your return faster. This can result in receiving your money weeks ahead of time, which could ease financial pressures or help with big expenses.

Another advantage of filing early is avoiding the rush. Tax season tends to get hectic closer to the deadline, and waiting can increase your risk of errors. Early filers have more time to review their returns and avoid making mistakes that could lead to audits, delays, or penalties.

Identity theft is another concern. The earlier you file, the less time someone has to file a fraudulent tax return using your personal information. Once your return is submitted, it essentially “locks out” anyone trying to file in your name.

Reasons to Wait Until the Deadline

Despite the benefits of filing early, there are also valid reasons why some taxpayers choose to wait. One significant reason is missing forms. By mid-February, most W-2 and 1099 forms are sent out, but some might still be delayed. Rushing to file without all the necessary documents can lead to incorrect filings and costly amendments later on.

Waiting may also allow you to take advantage of any last-minute tax law changes. Congress sometimes passes new tax legislation late in the year, and waiting can give you a better idea of how these changes affect your return.

Taxpayers with more complex financial situations might also benefit from waiting. If you own a business, have multiple income streams, or invest in the stock market, you may need additional time to gather all the necessary documents. Filing early without all the proper forms can be a headache down the line, especially if your taxes require professional help.

The Middle Ground: File on Time

For most people, filing on time without rushing or delaying too much is the best approach. Filing by the April deadline ensures that you avoid penalties while still giving you enough time to accurately report all your financial information. If you anticipate needing more time, requesting a filing extension can give you six extra months without penalties for late filing.

An important thing to remember is that if you owe taxes, waiting to file doesn’t delay the payment. The IRS requires payment by the April deadline, regardless of when you file.

Conclusion

When it comes to filing taxes, timing matters. Filing early can result in a quicker refund, protection from identity theft, and a smoother process. However, waiting until the deadline might allow for more complete filings, avoiding the need for amendments or corrections. Ultimately, the decision depends on your financial situation, the complexity of your taxes, and personal preferences. Whether you file early or wait, the key is to stay organized and informed, ensuring your tax return is accurate and timely.

IRS Launches New ECO Platform to Streamline Compliance

The IRS introduces its new electronic compliance system, the ECO platform. It is designed to improve taxpayer compliance, communication, and efficiency. The platform offers various features to make the tax filing process more user-friendly and transparent.

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Simplified Filing and Reporting

The ECO platform simplifies filing by offering an intuitive user interface. Taxpayers can now easily navigate complex forms and filing requirements. ECO allows users to upload documents, track their progress, and receive updates in real time. This eliminates the need for paper submissions and reduces the chances of errors.

The platform also enhances the reporting process. Businesses and individuals can now submit required reports through ECO, making it easier to stay compliant. Automated reminders and notifications help users avoid missing deadlines or submitting incorrect information.

Enhanced Communication with the IRS

One of ECO’s key benefits is improved communication between the IRS and taxpayers. The platform offers a secure messaging system, enabling real-time conversations with IRS agents. Taxpayers can get immediate answers to their questions without long wait times on the phone.

In addition, ECO allows users to access their IRS accounts and review past filings. This transparency helps taxpayers better understand their tax obligations and ensures they stay up to date.

Data Security and Privacy

The IRS takes data security seriously with the ECO platform. The system uses advanced encryption technology to protect personal and financial information. Users can feel confident their data is safe from breaches or unauthorized access.

Furthermore, the platform is designed to comply with the latest data privacy regulations. This ensures that taxpayers’ sensitive information remains confidential while meeting legal requirements.

Benefits for Tax Professionals

Tax professionals also benefit from the new ECO platform. It provides tools to manage multiple client accounts, track filing statuses, and communicate directly with the IRS. This makes their work more efficient and allows them to focus on providing value to clients.

Additionally, tax professionals can access training materials and resources through the platform. This ensures they remain updated on the latest tax laws and regulations.

Conclusion

IRS Launches New ECO Platform is a significant step toward modernizing the tax process. By simplifying filing, enhancing communication, and securing data, the platform provides a more efficient experience for both taxpayers and professionals. Its launch marks a positive change in how tax compliance is managed in the U.S.

What is the CASST?

The IRS has recently announced the formation of a new task force called the Coalition Against Scam and Scheme Threats (CASST). This initiative is designed to combat the growing number of scams and fraudulent schemes targeting taxpayers. With the rise of digital communication and the sophistication of cybercriminals, the IRS recognizes the need for a coordinated and comprehensive approach to protect individuals and businesses from financial harm.

CASST brings together various federal, state, and local agencies, along with private sector partners, to form a unified front against tax-related fraud. The task force’s primary goal is to identify, investigate, and prosecute those involved in scams and schemes that prey on taxpayers. By pooling resources and expertise, CASST aims to improve the detection and prevention of these illegal activities.

Key Components of the CASST:

One of the key components of CASST is its focus on public awareness and education. The task force plans to launch extensive campaigns to inform taxpayers about the most common scams, including phishing emails, phone scams, and identity theft. By educating the public, CASST hopes to reduce the number of victims and make it more difficult for scammers to succeed.

In addition to public outreach, CASST will also work closely with technology companies and financial institutions to enhance the security of online transactions. This collaboration is crucial in an era where much of our financial activity takes place online. By working with these partners, CASST aims to develop new tools and strategies to prevent unauthorized access to taxpayer information and ensure that digital communication with the IRS is secure.

Another important aspect of CASST’s mission is to streamline the process for reporting scams and schemes. The task force is developing a centralized reporting system that will make it easier for taxpayers to report suspicious activity. This system will also allow law enforcement agencies to quickly share information and coordinate their efforts to take down scam operations.

The creation of CASST reflects the IRS’s commitment to protecting taxpayers from the growing threat of fraud. With the task force in place, the IRS is better equipped to address the evolving tactics of scammers and ensure that taxpayers are not taken advantage of. This initiative is a significant step forward in the fight against tax-related crime and demonstrates the importance of collaboration in tackling complex and widespread issues.

Conclusion:

As CASST begins its work, taxpayers are encouraged to stay informed and vigilant. By being aware of the risks and knowing how to protect themselves, individuals can help reduce the effectiveness of scams and contribute to the overall success of this new task force. The IRS remains dedicated to safeguarding taxpayer information and ensuring that the tax system operates fairly and securely for all.

The Clean Fuel Production Credit (CFPC) is an essential incentive for businesses involved in producing environmentally friendly fuels. This credit, designed to promote sustainable energy practices, provides significant financial benefits to qualifying producers.

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Here are three key aspects you should know about the CFPC:

1. Eligibility Criteria for Producers

To qualify for the CFPC, producers must meet specific eligibility criteria set by the government. These criteria are primarily focused on the type of fuel produced and the production methods used. The credit applies to producers of clean fuels such as biodiesel, renewable diesel, and certain types of sustainable aviation fuel. Additionally, the production facilities must adhere to stringent environmental standards to ensure minimal negative impact on the environment. Producers need to provide detailed documentation proving their adherence to these standards to qualify for the credit.

2. Financial Benefits and Calculations

The CFPC offers substantial financial benefits, which can significantly reduce a producer’s tax liability. The amount of the credit is calculated based on the quantity of clean fuel produced and sold. For example, the credit for biodiesel and renewable diesel is typically $1.00 per gallon, but this amount can vary based on the fuel type and specific regulations. Producers can claim the credit against their federal tax liabilities, providing a direct incentive to increase clean fuel production. It’s crucial for producers to keep accurate records of their production and sales to maximize their benefits under this program.

3. Impact on the Clean Energy Sector

The CFPC plays a crucial role in promoting the clean energy sector by making the production of clean fuels more financially viable. This credit encourages investment in renewable energy technologies and infrastructure, helping to reduce greenhouse gas emissions and reliance on fossil fuels. By providing a tangible financial incentive, the CFPC supports the development and expansion of clean fuel production facilities. This growth in the clean energy sector not only benefits the environment but also creates jobs and stimulates economic growth in related industries.

In conclusion, the Clean Fuel Production Credit is a vital tool for promoting sustainable energy practices. Understanding the eligibility criteria, financial benefits, and its impact on the clean energy sector is essential for producers and stakeholders in the renewable energy industry. By leveraging this credit, producers can contribute to a greener future while enjoying significant financial advantages.

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The Internal Revenue Service today urged business taxpayers to begin planning now to take advantage of tax-saving opportunities and get ready for reporting changes that take effect in 2023.

There are a variety of small business tax credits that can be taken advantage of so continue reading!

During National Small Business Week, April 30 to May 6, the IRS is joining the Small Business Administration and others in both the public and private sector to celebrate the hard work, ingenuity and dedication of America’s small businesses and their contributions to the economy.

With next year’s filing deadline nearly a year away, entrepreneurs still have time to identify possible tax benefits, take action to qualify for them and then claim them when they file in 2024. They also have time to plan for reporting changes and even claim overlooked tax benefits from the recent past.

Cutting energy costs for small businesses

The Inflation Reduction Act (IRA), enacted last summer, includes provisions that can save small business owners money on energy costs. For example:

• Small businesses can receive a tax credit covering 30% of the cost of switching over to low-cost solar power, lowering operating costs and protecting against volatile energy prices.
• Small business building owners can receive a tax credit up to $5 per square foot to support energy efficiency improvements that deliver lower utility bills.
• Through the Clean Commercial Vehicle Credit, small businesses that use vehicles such as trucks and vans can benefit from tax credits up to 30% of purchase costs for clean commercial vehicles, like electric and fuel cell models that meet applicable requirements. There is no limit on the number of Clean Commercial Vehicle credits a business can claim.

These credits are nonrefundable, so businesses can’t get back more on the credit than they owe in taxes.

Employee Retention Credit: Claim it if eligible but avoid ERC scams

Eligible employers who overlooked the Employee Retention Credit (ERC) when they filed payroll tax returns for 2020 and 2021 can still claim it by filing an amended federal payroll tax return.

At the same time, the IRS has warned businesses not to fall victim to one of the many ERC-related scams being promoted online, in social media, on the radio and even phone calls and emails. Anyone who improperly claims the ERC has to pay it back, possibly with penalties and interest, so it’s important to avoid getting scammed.

Among other things, scammers misrepresent many features of the ERC and in some cases are merely using the credit as a ploy to steal the taxpayer’s identity or take a cut of the taxpayer’s improperly claimed credit. Eligible employers who need help claiming the credit should work with a trusted tax professional, not one of these scammers. ERC scams are so widespread this year that the IRS added them to its annual Dirty Dozen list of tax scams.

The ERC is designed to help employers who kept paying their employees while shut down during the pandemic or who suffered a significant decline in gross receipts during the eligibility period. The ERC is a payroll tax credit, not an income tax credit, and it was available only during 2020 and 2021.

Most eligible employers who overlooked the credit can still claim it by filing Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund, available on IRS.gov. Form 941-X filers and businesses that file other types of returns can visit IRS.gov/ERC for details, forms and instructions.

Educational assistance programs can be used to pay student loans

Employers who have educational assistance programs can use them to help pay student loan obligations for their employees.

Though educational assistance programs have been available for many years, the option to use them to pay student loans has been available only for payments made after March 27, 2020, and, under current law, will continue to be available until Dec. 31, 2025.

Traditionally, educational assistance programs have been used to pay for books, equipment, supplies, fees, tuition and other education expenses for the employee. These programs can now also be used to pay principal and interest on an employee’s qualified education loans. Payments made directly to the lender, as well as those made to the employee, qualify.

By law, tax-free benefits under an educational assistance program are limited to $5,250 per employee per year. Normally, assistance provided above that level is taxable as wages.

Employers who don’t have an educational assistance program may want to consider setting one up. In a tight labor market, worthwhile fringe benefits such as educational assistance programs can help employers attract and retain good workers.

These programs must be in writing and cannot discriminate in favor of highly compensated employees. For information on other requirements, see Publication 15-B, Employer’s Tax Guide to Fringe Benefits. For details on what qualifies as a student loan, see Chapter 10 in Publication 970, Tax Benefits for Education.

More people will receive 1099-Ks

Starting in 2023, businesses and other taxpayers who receive more than $600 in income from third-party settlement organizations, including popular payment apps, may receive Forms 1099-K, Payment Card and Third Party Network Transactions. Typically, they’ll receive these reporting forms during January 2024.

The $600 reporting threshold is lower than it’s been in the past. For that reason, some people and businesses may receive a Form 1099-K that didn’t receive one in previous years.

There are no changes to what counts as income or how tax is calculated. For business taxpayers, most income is taxable, even if it’s not reported to them on a 1099 or another form issued by a third party.
The 1099-K reports various business transactions, including income from:

• A business the taxpayer owns.
• Self-employment.
• Activities in the gig economy.
• The sale of personal items and assets.

Good recordkeeping is key. For more information, visit the Understanding Your Form 1099-K page on IRS.gov.

Other tax benefits

From business start-up expenses and the home office deduction to the qualified business income deduction and the health-insurance deduction for self-employed individuals, there are a variety of tax benefits that may be available to entrepreneurs and other business owners.

For details on these and other tax benefits see Publication 535, Business Expenses. Details on another major expense for most businesses, depreciation of buildings, equipment and other assets can be found in Publication 946, How to Depreciate Property.

Yet another worthwhile resource for any small business is the agency’s Publication 334, Tax Guide for Small Business. All these publications are available on IRS.gov.

For more information featuring useful tax-related tools and resources to help small business owners, employers and self-employed individuals succeed visit the IRS.gov Small Business Week webpage.

Small Business Tax Credits 2023

Your general business credit for the year consists of your carryforward of business credits from prior years plus the total of your current year business credits. In addition, your general business credit for the current year may be increased later by the carryback of business credits from later years. You subtract this credit directly from your tax.

Most of the following credits are part of the general business credit. The form you use to figure each credit is shown below.

• Form 3800, General Business Credit
• Form 3468, Investment Credit
  This consists of the sum of the rehabilitation, energy, and reforestation credits.
• Form 5735, American Samoa Economic Development Credit
• Form 5884, Work Opportunity Credit
• Form 6478, Alcohol and Cellulosic Biofuel Fuels Credit
• Form 6765, Credit for Increasing Research Activities
• Form 8586, Low-Income Housing Credit
• Form 8820, Orphan Drug Credit
• Form 8826, Disabled Access Credit
• Form 8834, Qualified Plug-in Electric and Electric Vehicle Credit
• Form 8835, Renewable Electricity, Refined Coal, and Indian Coal Production Credit
• Form 8844, Empowerment Zone Employment CreditNote: The Renewal Community Employment Credit (Carry forward only) credit was previously on Form 8844, Empowerment Zone Employment Credit; however, the credit has expired for calendar years after 2009. The Form 8844 with instructions for 2009 contains the details on the credit. The carryforward is claimed on Form 3800, General Business Credit.
• Form 8845, Indian Employment Credit
• Form 8846, Credit for Employer Social Security and Medicare Taxes Paid on Certain Employee Tips
• Form 8864, Biodiesel and Renewable Diesel Fuels Credit
• Form 8874, New Markets Credit
• Form 8881, Credit for Small Employer Pension Plan Startup Costs
• Form 8882, Credit for Employer-Provided Childcare Facilities and Services
• Form 8896, Low Sulfur Diesel Fuel Production Credit
• Form 8900, Qualified Railroad Track Maintenance Credit
• Form 8906, Distilled Spirits Credit
• Form 8908, Energy Efficient Home Credit
• Form 8910, Alternative Motor Vehicle Credit
• Form 8911, Alternative Fuel Vehicle Refueling Property Credit
• Form 8923, Mine Rescue Team Training Credit
• Form 8932, Credit for Employer Differential Wage Payments
• Form 8933, Carbon Dioxide Sequestration Credit
• Form 8936, Qualified Plug-In Electric Drive Motor Vehicle Credit
• Form 8941, Credit for Small Employer Health Insurance Premiums
• Form 8994, Employer Credit for Paid Family and Medical Leave

How to Claim the Credit

To claim a general business credit, you will first have to get the forms you need to claim your current year business credits.

In addition to the credit form, in most cases you may also need to file Form 3800.

If you file a Form 1040 or 1040-SR Schedule C, you may be eligible to claim the Earned Income Tax Credit (EITC). To learn more about EITC, refer to It’s easier than ever to find out if you qualify for EITC, or use the EITC Assistant to find out if you are eligible.

IR-2024-26, Jan. 29, 2024

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WASHINGTON — Filing season has begun (3 Tips) to get you off to a great start. The Internal Revenue Service today reminded employers of the Jan. 31 deadline to file Forms W-2 and other wage statements with the Social Security Administration (SSA).

Filing these documents timely prevents late-filing penalties for employers, helps employees file their income tax returns and prevents tax fraud.

Employers must file copies of their 2023 Form W-2, Wage and Tax Statements, and Form W-3, Transmittal of Wage and Tax Statements, with the SSA by Jan. 31, whether filing electronically or by paper forms.

Employers must also provide copies B, C and 2 of Form W-2 to their employees by Jan. 31. For more information on filing Form W-2, see General Instructions for Forms W-2 and W-3.

The Jan. 31 deadline also applies to Forms 1099-NEC filed with the IRS to report non-employee compensation to independent contractors. Employers and payers can review the Instructions for Forms 1099-MISC and 1099-NECPDF for details and other due dates.

Employer Identification Numbers

Employers need to make sure the employer identification number (EIN) on their wage and tax statements (Forms W-2, W-3, etc.) and their payroll tax returns (Forms 941, 943, 944, etc.) match the EIN the IRS assigned to their business.

Do not use a Social Security number (SSN) or Individual Taxpayer Identification number (ITIN) on forms that ask for an EIN, and never truncate EINs or SSNs on any forms.

Extensions

Employers may request a 30-day extension to file Forms W-2 with SSA by submitting Form 8809, Application for Extension of Time to File Information Returns, by Jan. 31. Additionally, extensions of time to furnish Forms W-2 to employees must also occur by Jan. 31.

For detailed information and instructions on how to file an extension of time to furnish Forms W-2 to employees or to request a 30-day extension with the SSA, see Form 8809 and General Instructions for Forms W-2 and W-3.

Electronic filing

Beginning Jan. 1, 2024, the electronic filing threshold for information returns reduced from 250 to 10 for filing season 2024. Filers need to combine all information return types they file to determine if they meet the 10-return threshold and if the requirement to file electronically applies to them.

The IRS offers a free e-file service for the Form 1099 series, the Information Returns Intake System (IRIS) Taxpayer Portal. IRIS is a web-based platform that is accurate, convenient, easy to use, secure and doesn’t require any additional software. Learn more about e-filing information returns with IRIS and its features.

For help with filing information returns electronically, review Publication 1220, Specification for Electronic Filing of Forms 1097, 1098, 1099, 3921, 3922, 5498, and W-2GPDF and the Filing Information Returns Electronically (FIRE) webpage.

E-filing is the most secure and accurate method to file returns, and saves taxpayers time and prevents delays in processing returns.

For more information about e-filing Forms W-2 visit the SSA’s Business Services Online, and Employer W-2 Filing Instructions & Information and Publication 15, Employer’s Tax Guide.

Filing season has begun (3 Tips)

IR-2024-06, Jan. 9, 2024

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WASHINGTON – With tax season rapidly approaching, the IRS reminds employers that Jan. 31 is the deadline for submitting wage statements and forms for independent contractors with the government.

Employers must file their copies of Form W-2, Wage and Tax Statement, and Form W-3, Transmittal of Wage and Tax Statements, with the Social Security Administration by Jan. 31.

The Jan. 31 deadline also applies to Forms 1099-MISC, Miscellaneous Income, and Forms 1099-NEC, Nonemployee Compensation, that are filed with the IRS to report non-employee compensation to independent contractors. Various other due dates related to Form 1099-MISC, Form 1099-K and Form 1099-NEC, including dates due to the IRS, can be found on the forms’ instructions.

The IRS offers a free electronic filing service for the Form 1099 series using the Information Returns Intake System (IRIS). Filers can also use this online portal to prepare payee copies for distribution, file corrections and request automatic extensions.

New filing requirements

New electronic filing requirements affect Forms W-2 that are required to be filed in 2024. Businesses that file 10 forms or more must file W-2s and certain information returns electronically. See New electronic filing requirements for Forms W-2 for more information.

E-filing is the quickest, most accurate and convenient way to file forms. For more information on e-filing Forms W-2, employers can refer to Employer W-2 Filing Instructions & Information on the Social Security Administration’s website.

Key points to remember

• Extensions to file are not automatically granted. Employers may request a 30-day extension to file Forms W-2 by submitting Form 8809, Application for Extension of Time to File Information Returns, by Jan. 31.
• Filing Form 8809 does not extend the due date for furnishing wage statements to employees. A separate extension must be filed by Jan. 31. See Extension of time to furnish Forms W-2 to employees for more information.
• Filing by the deadline helps the IRS to fight fraud by making it easier to verify income. Employers can help support that process and avoid penalties by filing the forms on time and without errors.
• Penalties may be assessed for failure to file correctly and on time. For more information visit the IRS’ Information Return Penalties page.
• Form 1099-K $600 reporting threshold delayed. This means that for 2023 and prior years, payment apps and online marketplaces are only required to send out Forms 1099-K to taxpayers who receive over $20,000 and have over 200 transactions. For tax year 2024, the IRS plans for a threshold of $5,000 to phase in reporting requirements.

The IRS encourages employers and taxpayers to visit About Form W-2, Wage and Tax Statement and Publication 1220, Specifications for Electronic Filing of Forms 1097, 1098, 1099, 3921, 3922, 5498, and W-2GPDF, for more information.