by Taxing Subjects | Nov 13, 2023 | Tax Tips and News
The Internal Revenue Service has passed along an early Christmas present of sorts to many taxpayers by increasing the maximum contribution amounts for 401(k) plans in 2024.
The contribution hike covers those employees who take part in 401(k), 403(b), or most 457 plans. Participants in the federal Thrift Savings Plan are also included in the increase. Taxpayers who participate in any of these plans can now contribute up to $23,000 for 2024; that’s up from $22,500 under the previous rules. Catch-up contribution limits for these same taxpayers, however, stay at present levels.
For those with SIMPLE retirement accounts, contribution limits have been raised from $15,500 to $16,000.
The new rules also boost the limit on contributions to an IRA, raising the bar from $6,500 to $7,000. Despite legislation including an annual cost-of-living adjustment (via the SECURE 2.0 Act of 2022), IRA 2024 catch-up contribution limits remain at $1,000 for those participants 50 and over.
Income Limits on Deduction Eligibility Increased.
A taxpayer’s eligibility to deduct their contributions to traditional IRAs or Roth IRAs, or to claim the Saver’s Credit can hinge on the filer’s income. In all three instances, these income ranges were increased by the IRS as well.
Deduction phase-out for traditional IRAs gets an overhaul from the new guidance. Affected taxpayers include Single covered by a retirement plan at work, and Married filing jointly with the spouse making the IRA contribution covered by a workplace retirement plan.
Complete details on these and deduction phase-outs – including those for Roth and SIMPLE plans, and the Saver’s Credit – are available in Notice 2023-75 on the IRS website. The Notice has technical guidance on all the cost-of-living adjustments set in motion by the SECURE Act 2.0 legislation.
Source: 401(k) limit increases to $23,000 for 2024, IRA limit rises to $7,000
– Article provided by Taxing Subjects.
by Taxing Subjects | Nov 3, 2023 | Tax Tips and News
We are just weeks away from a new tax season, and that means it’s time for tax professionals to renew their Preparer Tax Identification Numbers (PTINs). This identification number expires annually on December 31st for paid tax professionals.
There are currently some 800,000 active tax preparers who prepare federal tax returns for a fee which means they are required to have a valid PTIN. The paid preparer’s PTIN must be included on any return or claim for refund filed with the Internal Revenue Service. Paid tax preparers who don’t have or use a valid PTIN will be subject to penalties.
At $19.75, the fee for a 2024 PTIN is affordable enough, and renewal is simple. The online renewal process takes just 15 minutes to complete. There is also a paper option, Form W-12, IRS Paid Preparer Tax Identification Number (PTIN) Application and Renewal, available along with instructions from the IRS website. Be aware, however, that while the online application is processed in real time, the paper version could take up to six weeks.
PTIN Can be a Gateway to Higher Readiness for Non-Credentialed Preparers.
Acquiring a valid 2024 PTIN is more than a requirement; it can also open doors to higher levels of professionalism for those preparers who aren’t enrolled agents (EAs), attorneys or CPAs. The IRS’ Annual Filing Season Program (AFSP) is a voluntary series of courses tailor-made for the non-credentialed tax pro.
Once they’ve acquired their new PTIN, participants have until Dec. 31 to complete up to 18 hours of continuing education from IRS-approved CE providers, aimed at increasing their knowledge and improving filing season readiness. DrakeCPE offers options for those tax preparers who would like to grow professionally; read more about the classes we offer here.
Participants also must agree to abide by the rules and obligations in Treasury Department Circular 230, Regulations Governing Practice Before the Internal Revenue Service.
For their hard work and cooperation, the successful tax pro gets a diploma of sorts – an Annual Filing Season Program Record of Completion – and something even more valuable: a listing in an online directory of tax return preparers that includes credentials and select qualifications.
This directory is searchable and aims to connect taxpayers with tax professionals in their area who have completed the AFSP or have other credentials recognized by the IRS.
One of the highest such credentials is the enrolled agent, bestowed on tax professionals for their special talents in a number of tax areas, including federal tax planning, individual and business tax return preparation and other representation situations. Enrolled agents have unlimited rights to practice before the IRS and are allowed to represent any client before the IRS on any tax issue. To learn more about what it means to be an enrolled agent and other certification information, check out our blog Certifications for Tax Professionals.
And it all starts with renewing that PTIN.
For more information on PTINs, to renew a PTIN or to apply for a PTIN online, go to IRS.gov/taxpros on the IRS website.
Source: IRS 2024 PTIN renewal period underway for tax professionals
– Article provided by Taxing Subjects.
by Taxing Subjects | Nov 2, 2023 | Tax Tips and News
As we prepare for the 2024 tax season, the IRS is also updating regulations for tax forms and filing requirements. One such regulation establishes a new threshold for electronic filing of certain returns. This change has implications for employers and taxpayers alike, as it affects the way tax-related information is submitted to the IRS.
In this blog, we discuss the details of this amendment, its significance, and how it may impact employers and taxpayers in the years to come.
Context for the amendment
On February 23, 2023, the Treasury Department issued Treasury Decision 9972, amending Regulations Section 301.6011-2. This amendment specifically targets the threshold for electronic filing of information returns—once a business exceeds a certain number of returns, the business is required to file the returns electronically.
The new threshold is now 10 returns, which is no small change. What’s more, the new threshold goes into effect next year, which means that tax year 2023 will fall under the new rules—some of which are required to be filed by January 31, 2024.
Why the change?
The amendment serves several important purposes:
- Enhanced Efficiency: Electronic filing is often more efficient and less prone to errors than paper-based filing. Lowering the threshold encourages employers to utilize electronic filing, thus contributing to smoother tax processing.
- Cost Reduction: Electronic filing can be more cost-effective for employers in the long run, eliminating the need for paper forms, postage, and manual data entry.
- Reduced Environmental Impact: Encouraging electronic filing aligns with efforts to reduce paper waste and promote environmentally friendly practices.
- Timely Filing: The amendment ensures that information returns for tax year 2023, specifically Forms W-2, are filed electronically by January 31, 2024, allowing for timely and accurate processing.
With these priorities in mind, the amendment’s purposes become more clear.
Forms affected by Treasury Decision 9972
The returns that fall under this new threshold include the following:
- Forms W-2
- Form 1099-NEC
- Form 1099-MISC
- Form 1042-S
- The Form 1094 series
- Form 1095-B
- Form 1095-C
- Form 1097-BTC
- Form 1098
- Form 1098-C
- Form 1098-E
- Form 1098-Q
- Form 1098-T
- The Form 1099 series
- Form 3921
- Form 3922
- The Form 5498 series
- Form 8027
- Form W-2G
Employers must add together the number of these information returns and the number of Forms W-2 they need to file in a calendar year. If the total equals or exceeds 10, they are required to file all forms electronically.
However, it’s important to note that corrected returns are treated separately and are not included in the calculation of the threshold mentioned above. Employers must adhere to specific rules when correcting Forms W-2c, which are detailed on the IRS website.
e-Filing solutions for small businesses: Meet Drake Accounting
These new regulations don’t have to break the bank for small businesses who are facing the e-filing threshold for the first time in 2024.
With Drake Accounting, you get unlimited e-filing, clients, installs per site, payroll, and form generation. Use different modes to process different types of paperwork in the Payroll Module and Accounting Module. At time of writing, 51 state forms can be e-filed from within the software.
Download a free trial version to see how Drake Accounting can help you provide professional accounting services.
Join the Taxing Subjects Newsletter to stay on top of tax news
As IRS regulations continue to evolve, staying informed about these changes is crucial for employers and taxpayers. The recent amendment, which lowers the threshold for electronic filing of certain information returns, promotes efficiency, cost-effectiveness, and environmental responsibility.
Employers must be prepared to adapt to these changes and ensure compliance with the new threshold starting in 2024. By understanding these modifications and acting accordingly, employers can contribute to a smoother tax process and a greener future.
Source: New electronic filing requirements for Forms W-2 | Internal Revenue Service (irs.gov)
– Article provided by Taxing Subjects.
by Taxing Subjects | Oct 27, 2023 | Tax Tips and News
Drake Software® Update Schools return this year in 4 U.S. cities plus our hometown of Franklin, NC! Experts from Drake Software including Chief Revenue Officer John Sapp, CPA; Director of Education Christine Reynolds; Software Trainer Ann Campbell, CPA, CIA and many others; along with industry experts Randy Adams, EA and Director of the Stakeholder Liaison organization in the IRS Derek Ganter will be sharing important updates with Users about what to expect in the 2024 Tax Season plus exciting new software updates.
Who’s going?
Drake Software users and tax preparers from across the country will be flying or driving to Update Schools to network and socialize with their peers in the industry. Attendees will earn up to 8 hours of CPE credit while reviewing best practices and getting an overview of industry updates and how they affect software use. They will also learn all about the Drake Software updates our team has been tirelessly working on and have the opportunity to ask questions and receive expert opinions from our tax software specialists. Drake Software’s team will also be joined at the event by industry sponsors such as Rightworks, the National Association of Tax Professionals, Refund Advantage, Avantax, and EPS.
Representatives from the Taxpayer Advocate service will be available at Baltimore, Dallas, Atlanta and Las Vegas locations to help attendees resolve disputes for their clients.
What to Expect
Bonus classroom training is the first event of the week. It takes place the day before each Update School and is an opportunity to ask questions and improve your understanding of tax preparation. There are two courses available for classroom training. Drake Essentials is our new user course centered around gaining practical knowledge, navigating software, preparing returns, and e-filing. Drake Expanded is a more advanced class to add to your tax preparation skills and explore how different forms, schedules, and tax situations should be handled in Drake Tax. In the evening after the classroom session, all attendees are invited to a reception hosted by our industry sponsors.
The next day kicks off the Update School with a morning session presented by John Sapp. The subjects of this first session are important tax industry topics and how they will impact your tax practice this season, along with how tax law updates will change your Drake Tax® preparation. During the afternoon session, Drake Software and tax industry leaders will participate in a panel discussion. Topics of note are Drake Tax 2023 updates and enhancements, tips and best practices, and industry insights and information to use for your e-filing businesses.
Our experts will discuss the latest changes and headlines in tax news and break down what this means for preparers and how to adapt business practices to maximize the outcome of these changes. Topics like 1099s, cryptocurrency, and EV tax credits are all important this year and will receive air time during our learning sessions.
What’s the Big Deal?
Update Schools are the perfect event for the Tax Pro who wants to achieve many goals at the same time:
- Refreshing and gaining knowledge to improve your tax practice
- Asking questions in-person to our most accomplished and experienced team members,
- Networking and socializing with other Drake users, Drake partners and vendors, and the minds behind Drake Software
Take advantage of this unique tax event!
When is it?
The Update Schools schedule begins 11/9 in Baltimore, and continues with events on 11/16 in Franklin, 11/29 in Dallas, 12/6 in Atlanta, 12/12 in Las Vegas, 12/20 in Franklin, and 01/05 in Franklin. All times are listed on the registration schedule.
Registration
To register for Drake Software’s premier User event of the year, click on our update school scheduling link here to select the location and sessions that work be for you! Our companion session and classroom training link can be selected here.
Drake Software has been planning, designing, and preparing all year for Update Schools! We are excited to host the event and are looking forward to seeing new and familiar faces and meeting up with our partners in the tax industry. We will see you all soon!
– Article provided by Taxing Subjects.
by Taxing Subjects | Oct 24, 2023 | Tax Tips and News
The Internal Revenue Service has given small business owners and others who may have unintentionally filed inaccurate claims for the Employee Retention Credit (ERC) a way to escape a portion of the monetary consequences for filing a bogus tax claim.
The IRS has now established a process allowing certain ERC filers to withdraw their credit claim before it’s processed, thereby avoiding interest and penalties.
The withdrawal option treats the claims as if they were never filed, and, because the withdrawal request is filed before the bogus claim is paid, the would-be recipient doesn’t have to pay their refund amount back to the IRS.
Filers who are worried about the accuracy of their ERC claim have legitimate reason for concern, particularly if their claim was submitted with premeditation. The IRS has made it clear that filers who knowingly submitted a fraudulent claim for credit won’t be able to escape criminal investigation or prosecution even if their bogus claim is withdrawn.
Scammers Behind the Push to File Inaccurate or Outright Bogus Claims.
The Employee Retention Credit was created as a refundable tax credit for businesses that paid their employees through the Covid-19 pandemic while the business was partially or completely shut down due to a government order or had a major drop in gross receipts during the eligibility periods.
It should be noted that the ERC is not available to individuals.
Scammers and unscrupulous promoters took the appeal of a big refund to business owners and other taxpayers who may not have qualified for the tax credit in the first place or gave in to pressure from the schemers to inflate various numbers to get a larger refund.
Promoters of these scams took to the airwaves, claiming the ERC application process was simple and fast, when, in reality, the credit is a complex piece of tax code, requiring exacting application requirements.
Under pressure from relentless marketing of these scams, the IRS was flooded with claims for the ERC, totaling some 3.6 million claims over the course of the program. We wrote about how the agency responded with a moratorium on processing new ERC claims in September. Instead, the IRS said it was doing more to screen incoming claims for compliance, to stem the flood of ineligible filings.
Some of those taxpayers, suspecting their claims for the credit may not have been strictly legitimate, are having second thoughts and may be looking for a way out.
That’s where the IRS withdrawal offer comes in. Employers seeking to withdraw their filed claims for the Employee Retention Credit may do so, but only if all the following conditions are met:
- The claim was made on an adjusted employment return, such as Forms 941-X, 943-X, 944-X or CT-1X;
- The adjusted return was filed only to claim the ERC and no other adjustments were made;
- The taxpayer seeks to withdraw the entire amount of the ERC claim; and
- The IRS has not paid the claim, or the IRS has paid the claim, but the taxpayer hasn’t cashed or deposited the refund check.
Those not eligible to use the withdrawal option still have a way back by filing an amended return that reduces or eliminates their ERC claim. Details on all the options for ERC filers are available in a Nov. 2 IRS webinar as well as a new question-and-answer checklist.
Check out Fact Sheet 2023-24 and IRS.gov/withdrawmyerc for more details on the ERC withdrawal process.
Source: IRS announces withdrawal process for Employee Retention Credit claims; special initiative aimed at helping businesses concerned about an ineligible claim amid aggressive marketing, scams
– Article provided by Taxing Subjects.
by Taxing Subjects | Oct 11, 2023 | Tax Tips and News
As electric cars become more common on American roads, fully electric autos (termed “clean vehicles” by the Internal Revenue Service) are now showing up in the used car markets.
Owners of new electric vehicles are already able to claim the Clean Vehicle Credit for 2023, but starting in 2024, a credit will also be offered to qualified buyers of a used clean vehicle.
To keep up with demand, the IRS is proposing new regulations and is updating the language in its guidance for the Clean Vehicle Credit and how the credit can be transferred from the original buyer of the car to an eligible dealer.
The proposed regulations, new guidance and language will apply to electric cars put in service after Dec. 31 of this year.
Legislation Set Electric Wheels in Motion.
The changes in regulations, guidance and other language was put in place by the Inflation Reduction Act, covering new and used electric vehicles.
The new guidance, set forth in Revenue Procedure 2023-33, aims to clarify how taxpayers can transfer clean vehicle credits to an eligible dealer, enabling that dealer to receive advance payments of the credit for an EV, for example, that was taken as a trade-in.
Among other things, the revenue procedure sets out how a dealer would register with the IRS in order to be eligible to receive transfers of the credit from individual taxpayers. Additional details include how and when dealers have to submit seller reports.
The IRS has also updated its list of frequently-asked-questions (FAQs) for the Clean Vehicle Credit, tweaking the topics of:
- Eligibility Rules for the new Clean Vehicle Credit
- Income and Price Limitations for the New Clean Vehicle Credit
- When the New Requirements Apply
- Eligibility Rules for Previously Owned Clean Vehicles
- Claiming the Previously Owned Clean Vehicles Credit
- Qualified Commercial Clean Vehicles Credit
- Transfer of the Clean Vehicles Credit and Previously Owned Clean Vehicles Credi;
- Registering a Dealer for Reporting and Credit Transfers
- Seller Report Information for Buyers of Tax Credits in 2024
More information on the updated FAQs can be found on Fact Sheet 2023-22.
The IRS website, IRS.gov, has details on the proposed regulations and clean vehicle credits, as well as a handy reference chart on the clean vehicle credits.
Source: IRS issues guidance for the transfer of clean vehicle credits and updates frequently asked questions
– Article provided by Taxing Subjects.
Ambassador Tax Services, Inc.
