Beware! 5 Common IRS Scams You Need to Know About
As tax season approaches, it’s not just the looming deadlines that taxpayers need to worry about. Scammers are gearing up to exploit the confusion and stress that often accompanies filing taxes. The Internal Revenue Service (IRS) has been vigilant in warning taxpayers about various scams that can lead to financial loss and identity theft. Here are the top common IRS scams you should be aware of. 1. Employee Retention Credit Claims Employee retention credit is a tax credit introduced by the Coronavirus Aid, Relief, and Economic Security (CARES) Act to help businesses retain employees during the COVID-19 pandemic. This credit is designed explicitly for eligible employers who have experienced significant revenue loss due to the pandemic. To claim this credit, employers must meet specific criteria, including being in business since January 1, 2020, experiencing at least a 50% decline in gross receipts compared to the same quarter in 2019, and not receiving a Paycheck Protection Program loan. Employers can claim up to $5,000 per employee for wages paid between March 13 and December 31, 2020. However, scammers are taking advantage of this situation and posing as IRS representatives, offering to expedite or increase the amount of these credits for a fee. These fraudulent claims can result in business fines and penalties and potential legal action. The IRS has issued warnings about these scams and advises employers to be cautious when providing personal information or paying any fees for claiming employee retention credits. The agency has also reminded taxpayers that they do not initiate contact via email or phone requesting personal or financial information. It is essential for businesses to carefully review all correspondence from the IRS before responding or taking any action. The official website of the IRS is irs.gov, where taxpayers can find legitimate resources and information related to tax credits and other programs available during these challenging times. In addition, employers must keep accurate records of all wages paid during the eligible period as proof when claiming employee retention credits. These records should include payment dates, amounts spent, the number of employees receiving wages during this time frame, and evidence of significant revenue loss. Employers should also be aware that there are no shortcuts or special services offered by third parties that can speed up or guarantee approval of their claims. Any offers promising such services should be viewed with suspicion and reported to the IRS immediately. Businesses should be vigilant when claiming employee retention credits and avoid falling victim to scammers. By following the guidelines set by the IRS and keeping proper documentation, employers can successfully claim this credit without any risk of fraud or penalties. 2. Phishing Tax Scams Phishing tax scams are becoming increasingly common and sophisticated, making it more critical than ever to stay vigilant against potential fraud. Whatis phishing? Phishing is an online scam where criminals attempt to gather sensitive information such as passwords, credit card numbers, and social security numbers by posing as a legitimate organization or business. In the case of IRS scams, criminals will impersonate the Internal Revenue Service (IRS) to steal personal and financial information from unsuspecting victims. They often use fear tactics and urgency to pressure individuals to provide sensitive information. One standard method used in phishing tax scams is through email communication. Scammers will send fraudulent emails that appear to be from the IRS, claiming that there is an issue with the recipient’s taxes or that they are eligible for a large tax refund. The email may contain official-looking logos and language designed to trick individuals into clicking on links or downloading attachments that can infect their computers with malware. Another tactic used by scammers is phone calls. These fake agents will call individuals, claiming to be from the IRS and demanding immediate payment for outstanding taxes. They may threaten legal action if payment is not made immediately or request personal information over the phone. It is important to note that the IRS will never contact taxpayers by email, text, or social media regarding personal tax matters. If you receive any communication claiming to be from the IRS through these channels, it is most likely a phishing scam. Protecting Yourself from Phishing Tax Scams To protect yourself against phishing tax scams, always be cautious when sharing personal information online. Never click on links or open attachments from unknown sources, and do not provide personal information over the phone unless you initiate contact with a reputable source. In addition, it’s essential to regularly monitor your financial accounts for any suspicious activity and report any unauthorized charges immediately. If you believe you have been a victim of a phishing tax scam or have received suspicious correspondence pretending to be from the IRS, you should report it to the IRS directly. You can also file a complaint with the Federal Trade Commission (FTC) and consider placing a fraud alert on your credit report. Phishing tax scams are a severe threat that can result in financial loss and identity theft. By staying informed and vigilant against these fraudulent activities, you can protect yourself and your finances from falling victim to these criminals. Remember always to verify the legitimacy of any communication claiming to be from the IRS before taking any action or providing personal information. 3. Online Account Help from Third-Party Scammers In recent years, there has been a rise in the number of third-party scammers targeting individuals with fake offers of online account help from the Internal Revenue Service (IRS). These scammers often pose as legitimate IRS representatives and use tactics to trick unsuspecting victims into giving away their personal and financial information. It is essential to be aware of these scams and know how to protect yourself from falling victim. One common scam involves receiving an unsolicited email or phone call claiming to be from the IRS. The scammer may assist with setting up an online account for tax purposes or declare a problem with your account that needs immediate attention. They may also ask for personal information
IRS Plans Take a Billion in Overdue and Unpaid Taxes
Heads up Taxpayers due to a new analysis that the IRS and the Treasury Department did, the IRS plans to take in hundreds of billions of dollars more in overdue and unpaid taxes than previously anticipated. Tax revenues are expected to rise by as much as $561 billion from 2024 to 2034, thanks to stepped-up enforcement made possible with money from the Democrats’ Inflation Reduction Act, which became law in August 2022. The Congressional Budget Office in 2022 estimated that the tens of billions of new IRS funding provided by the IRA would increase revenues by $180.4 billion from 2022 to 2031. The IRS now says that if IRA funding is restored, renewed, and diversified, estimated revenues could reach as much as $851 billion from 2024 to 2034. President Joe Biden’s Re-Election Campaign Administration officials are using the report to promote President Joe Biden’s economic agenda as he campaigns for reelection — and as the IRS continually faces threats to its funding. “This analysis demonstrates that President Biden’s investment in rebuilding the IRS will reduce the deficit by hundreds of billions of dollars by making the wealthy and big corporations pay the taxes they owe,” National Economic Adviser Lael Brainard said in a statement. “Congressional Republicans’ efforts to cut IRS funding show that they prioritize letting the wealthiest Americans and big corporations evade their taxes over cutting the deficit,” Brainard said. What is the Inflation Reduction Act? The Inflation Reduction Act gave the IRS an $80 billion infusion of funds. However, House Republicans built a $1.4 billion reduction to the IRS into the debt ceiling and budget cuts package passed by Congress last summer. A separate agreement took an additional $20 billion from the IRS over the next two years to divert to other non-defense programs. The IRS has tried to show how it is spending the money it has left, in hopes of stemming the cuts. New customer service improvements rolled out as the tax season began Jan. 29, and earlier this month the IRS announced that it had recouped half a billion dollars in back taxes from rich tax cheats. Rep. Jason Smith, the Republican chairman of the House Ways and Means Committee, said in a statement that the report “calls for even more IRS funding, uses pie-in-the-sky numbers, all without being straightforward about where the burdens of massive new enforcement efforts will fall.” He said increased funding will inevitably result in hundreds of thousands of additional audits for taxpayers making less than $75,000. Making sure citizens pay their taxes is one of the tax collection agency’s biggest hurdles. This is understandable because people are often afraid of taxes. Even the audit rate of millionaires fell by more than 70% from 2010 to 2019 and the audit rate on large corporations fell by more than 50%, Treasury’s Deputy Assistant Secretary for Tax Analysis Greg Leiserson told reporters. So it’s not just the average person avoiding paying taxes. So many citizens just lack knowledge and are outright afraid of the thought of taxes. The tax gap, which is the difference between taxes owed and taxes paid, has grown to more than $600 billion annually, according to the IRS. Stay Updated with Beck + Ibarra Beck + Ibarra is dedicated to keeping our clients informed and empowered in navigating the complexities of the IRS and the ever-evolving financial landscape. Through regular updates, newsletters, and tailored communication channels, we ensure that you stay abreast of crucial developments, regulatory changes, and strategic insights that impact your financial affairs. Our commitment to delivering timely, accurate, and relevant information underscores our mission to support your financial success and safeguard your interests. With Beck + Ibarra, you can trust that you’re equipped with the knowledge and resources needed to make informed decisions and stay ahead in today’s dynamic financial world. Schedule a meeting with us today.
BOI Report 2024
There is a crucial update that business owners need to be aware of. This update affects all business owners outside of sole proprietorship owners. So, if you are a freelancer, self-employed, or contractor, this doesn’t apply unless you have filed an LLC. If you have an established entity such as an LLC or S-corp, the FinCEN (Financial Crimes Enforcement Network) is requiring all entities to file a BOI report this year or the penalties will be gruesome. This became an official legal requirement as of January 1, 2024. This came forward due to the Corporate Transparent Act. This act was set in place to stop the ongoing money laundering and tax fraud crimes that are taking place in America. What is a BOI Report? A Beneficial Ownership Information (BOI report) is a report that has specific personal information about the entity’s owner. This information does not only include the direct owner but any partial owners as well. If they own 25% or more of the company, they have to be included in that report. The size of the business doesn’t matter, it could be a huge corporation or a small local business owner, and the responsibility remains the same. This report is supposed to help prevent financial crimes that not only put the average person at risk for their safety but expose vulnerabilities to small business owners who want to experience the American Dream. There are so many popular money laundering shows and even though some find it entertaining, it’s very dangerous in real life. There are people creating shell companies to look like official businesses but they hide the true intention of the entity. Who has to File a BOI Report? People who own a business reporting company. In the era of side hustles, also called the gig economy, it’s important to explain who exactly is the BOI for. The BOI is for those who have filled an entity that is under an LLC, Partnership, Cooperation, or S-Corp. Most gig workers and freelancers are self-employed i.e. sole proprietorship. During the pandemic a lot of citizens decided to go into business and start an LLC, this was primarily due to lack of work, being stuck in the house, or the pandemic benefits that were provided to business owners to compensate their employees and prevent laying them off. These incentives unfortunately have backfired on many business owners who did not properly use the funding or lied to receive the money. How to File a BOI 2024 Report? You can file a Business Ownership Information report by going to FinCEN’s site. The cost of filing the report is Free. Business owners could hire a CPA or for larger more complex companies, they could hire an attorney to fill the information out correctly preventing any possible mistakes. Business owners could also file this form on their own, however, because it’s such a crucial document it would be more effective to receive help. Choosing entrepreneurship is an amazing up-and-down journey that has set individuals free and has helped them create jobs for individuals to provide for their families and pay for their needs. It’s important to remember that this form is not to make legal business owners afraid but to protect their best interests. When is the BOI deadline? The BOI report has two different deadlines depending on when the business entity was filed. If the business was filed before 2023, businesses have until December 2024, to get their documents ready and file their BOI report. If the business owner files a business entity in 2024, the business owner has up to 90 days max to file. By 2025, entities will have only 30 days to file their BOI report before consequences start occurring. There are huge penalties if business owners do not file in time. The penalty from the deadline starts at a $500 fine which will be charged daily up to $10,000 and up to two years in jail. Since these are very big consequences it’s important to follow instructions and protect your business and yourself. Stay Updated with Beck + Ibarra If you need help filing your BOI 2024 report or have questions about the quick changes in the financial world, it’s crucial to stay up to date with all that’s going on. Here at Beck + Ibarra, we take financial knowledge seriously. We want to help our readers and clients with what they need to the best of our ability. Stay connected with us so you can learn more about your finances and protect your business entities.
A Comprehensive Guide to Understanding Tax Brackets
Tax season can be a daunting time for many individuals and businesses. The complex web of tax laws and regulations makes it easy to feel overwhelmed and confused. One area that often confuses is tax brackets. What exactly are they? How do they work? And, more importantly, how can you use them to your advantage? In this comprehensive guide, we will break down the concept of tax brackets in a step-by-step manner, ensuring that you clearly understand how they operate. We’ll also explore strategies for effective tax planning, debunk common misconceptions surrounding tax brackets, and highlight recent changes in tax legislation that may impact your financial decisions. Whether you’re an individual taxpayer or a business owner, this guide will provide valuable insights to help you confidently navigate the complexities of taxes. What are Tax Brackets? Tax brackets are an essential component of the U.S. tax system. Simply put, they represent different income ranges that determine how much tax you owe to the government. The tax code is structured so that individuals and businesses pay more of their income as they move up into higher income brackets. Here’s how it works: let’s say you fall into the 10% tax bracket for individuals earning up to $9,950. Your first $9,950 of taxable income will be taxed at 10%. However, if your earnings surpass this threshold and enter the next bracket. An example is the 12% bracket for incomes between $9,951 and $40,525, only the amount within that range will be subjected to a 12% tax rate. Not all of your income is taxed at one flat rate. Instead, it is divided into increments based on these brackets. Understanding which bracket(s) you fall into can help you estimate how much taxes you’ll owe and plan accordingly. Tax brackets also vary depending on filing status (single individual, married couple filing jointly or separately), further complicating matters. It’s crucial to accurately determine your filing status so that you can correctly identify which set of brackets applies to your situation. While navigating through multiple tiers may seem complex and overwhelming, understanding how these brackets function can empower taxpayers with valuable knowledge about their financial position. How Tax Brackets Work: A Step-by-Step Guide Understanding how tax brackets work is essential for navigating the complex world of taxation. Here’s a step-by-step guide to help demystify this often confusing concept. By following these steps and understanding how progressive taxation works, you can better comprehend how much you owe in taxes based on various income levels. Remember that this guide provides a general overview. This should not replace personalized advice from a qualified accountant or financial advisor who can consider additional factors, such as credits and deductions specific to your situation when determining accurate taxation figures. Understanding Changes in Tax Brackets Tax brackets are not set in stone. They can change over time due to various factors, such as changes in tax laws or adjustments for inflation. It is crucial to stay updated on these changes to ensure accurate tax planning. Plus, it will minimize any surprises when filing your taxes. One common reason for changes in tax brackets is legislation aimed at adjusting tax rates to reflect economic conditions or political priorities. For example, during times of economic downturn, governments may lower tax rates for certain income levels to stimulate consumer spending and encourage investment. Another factor that affects changes in tax brackets is inflation. As the cost of living increases, individuals’ purchasing power decreases. To account for this, tax brackets are often adjusted annually based on the Consumer Price Index (CPI) or another measure of inflation. It’s important to note that changes in tax brackets sometimes mean higher taxes for everyone. While some individuals may find themselves moving into a higher bracket due to increased income or changing deductions, others may benefit from lower rates if their income falls within a newly created lower bracket. To navigate these changes effectively, you must review your financial situation regularly and consult a knowledgeable accountant or financial advisor who can guide you through any potential impacts on your tax liability. By staying informed about updates related to taxation policies and being proactive with your financial planning, you can take advantage of available opportunities and potentially reduce your overall taxable income. Understanding how shifts in tax brackets can affect you personally will help ensure compliance while maximizing benefits within the parameters set by current legislation. Strategies for Tax Planning When it comes to tax planning, being proactive is vital. By developing a solid strategy, you can potentially minimize your tax liability and maximize your savings. Here are some strategies to consider: Remember that taxpayers’ circumstances are unique; what works for one person may not work for another. Evaluating each strategy carefully and consulting with professionals before implementing any plan is essential. Businesses and Tax Brackets When it comes to taxes, businesses often navigate a complex web of rules and regulations—understanding how tax brackets work is crucial for any business owner looking to optimize their financial strategy. One key thing to remember is that businesses are not subject to the same tax brackets as individuals. Instead, they have their own set of tax rates based on different factors such as entity type and taxable income. For example, corporations have a flat tax rate, regardless of income level. This means that whether a corporation earns $50,000 or $5 million in taxable income, it will be taxed at the same rate. On the other hand, pass-through entities like partnerships and S-corporations pass their profits through to individual owners, who then pay personal income taxes based on their tax bracket. Business owners need to understand the implications of these different tax structures to make informed decisions regarding cash flow management and investment opportunities. Strategic Tax Planning for Businesses Additionally, strategic planning can play a significant role in reducing overall tax liability for businesses. Businesses can effectively lower their taxable income and potentially move into lower tax brackets by taking advantage of deductions, credits, and exemptions
IRS Rejects 20,000 Employee Retention Credit (ERC) Requests
The IRS is cracking down on business entities. During the pandemic, the IRS created the Employee Retention Credit which was established to help business owners pay their employees despite the government shutdown. The IRS eventually became overwhelmed with other sectors due to paper and e-filings getting backed up. Since then, the IRS has been able to go through all of the files and it became very apparent that many entities were not compliant with the requirements to receive the ERC. This is primarily due to mass marketing scams about the benefits of the ERC which caused a lot of miscommunication. There have been over 20,000 disallowed letters sent to entities to choose to opt-out and of course correct this situation so that repercussions aren’t given to them. What caused this phenomenon was entities filed for an ERC without employees or simply the entity truly didn’t exist. IRS Withdraw Program for Entity Filers The IRS understands how this happened. There were a lot of misleading marketing campaigns that promoted the Employee Retention Credit. Since the IRS saw through the manipulation, they are giving filers a chance to make it right with the help of their special Withdraw Program. The Withdraw program is specifically for those with a pending claim who realize they filed an inaccurate claim. There will also be a separate voluntary disclosure program which will be unveiled allowing those who received questionable payments to come in and avoid future IRS action. The program is an olive branch for filers who either were manipulated or just didn’t realize the true requirements to receive the ERC. If you are an entity that also filed for this credit but wasn’t in compliance, follow the guidelines of the IRS and withdraw to prevent them from taking action. Starting this week, taxpayers who are ineligible for the credit will begin receiving copies of Letter 105 C, Claim Disallowed. This group of letters will cover taxpayers ineligible for the ERC either because their entity did not exist or did not have employees for the period when the credit was claimed. What is Letter 105 C The “Claim Disallowance” IRS Letter 105C or Letter 106C is your legal notice that the IRS is not allowing the credit or refund you claimed. This notice or letter may include additional topics that have not yet been covered here. The letter states the reason for the IRS’s decision, the date of the decision, and the tax year or period for which the claim is denied. In addition, the letter provides a timeframe in which you must file suit if you wish to challenge the denial in court. What is My Taxpayers Rights The IRS respects taxpayer rights, and the disallowance letter will explain that a taxpayer who disagrees with the disallowance can respond with documentation that supports their eligibility or claim amount, or they can file an administrative appeal. The disallowance letters that identify ineligible claims before they’re paid serve several purposes that help taxpayers and tax administration help ineligible taxpayers avoid audits, repayment, penalties, and interest. It protects taxpayers by preventing an incorrect refund from going to an ERC promoter, and saves IRS resources by disallowing incorrect credits before they enter the audit process. The IRS plans additional letters beyond the disallowance letters. Plans are also being finalized for a special voluntary disclosure program involving ERC claims that will be announced later this month. The IRS is also continuing to review ERC claims and may request more information from taxpayers to support their ERC claim. Trust Dallas’ IRS Experts – Beck + Ibarra for Employee Retention Credit (ERC) Help Trust in Beck + Ibarra as Dallas’ IRS experts, where our seasoned professionals bring unparalleled expertise and commitment to navigating the intricate landscape of IRS regulations. With a proven track record of delivering exceptional service, Beck + Ibarra is dedicated to providing comprehensive and accurate assistance to individuals and businesses alike. Whether it’s tax planning, preparation, or addressing complex IRS-related issues, clients can rely on Beck + Ibarra’s in-depth knowledge and attention to detail. Our team understands the importance of compliance and works tirelessly to ensure clients are well-informed and positioned for success in their dealings with the IRS. Choose Beck + Ibarra for a trustworthy partner in managing your IRS-related matters with confidence and precision.
Last-Minute Adjustment to 1099-K Form Reporting Threshold
The IRS announced that they are delaying the 1099-K form enforcement until tax year 2024. This is to create enough time to adjust to the new way of reporting earnings. This was meant to be reinforced for 2023 to include popular third-party payment apps such as Cash App, Venmo, and PayPal. The new amount that would cause someone to have to report their earnings was $600, it caused a lot of controversies especially since people used these apps for a variety of different nuances such as helping with a bill, birthday gifts, and donations i.e. personal transactions. They kept a listening ear and following feedback from taxpayers, tax professionals, and payment processors. To reduce taxpayer confusion, the Internal Revenue Service delayed the new $600 Form 1099-K reporting threshold requirement for third-party payment organizations for tax year 2023 and is planning a threshold of $5,000 for 2024 to phase in the new law. The IRS made 2023 a transition year to implement the new requirements under the American Rescue Plan that changed the Form 1099-K reporting threshold for payments taxpayers get selling goods or providing a service over $600. What is the American Rescue Plan? The American Rescue Plan Act is a legislative package that was signed into law by President Joe Biden on March 11, 2021. It aimed to provide economic relief and address the challenges caused by the COVID-19 pandemic. The plan included various measures to support individuals, businesses, and state and local governments. Key components of the American Rescue Plan included direct payments to individuals, extended unemployment benefits, funding for vaccine distribution and COVID-19 testing, aid to state and local governments, assistance for schools, and provisions to combat child poverty. The overall goal of the plan was to provide relief to Americans facing financial hardships and stimulate the broader economy during the unprecedented circumstances brought about by the pandemic. What is the $600 Tax Rule? The $600 tax rule is basically how much the threshold of earrings you are allowed to receive before you have to start reporting it to the IRS. It used to be a threshold of more than 200 transactions per year, exceeding an aggregate amount of $20,000. This is very important because we are in the age of the side hustle. A lot of people are selling products, services, or even their time such as Uber, and DoorDash to supplement their income as inflation arises. As people were collecting funds from their side hustles they would use third-party apps like Cash App and Venmo to exchange the money. The IRS to note this and to better support America as a whole financially, started cracking down on the lack of reporting by making it $600. What to do if You Receive a 1099-K Form? The IRS Understanding your Form 1099-K webpage provides resources for taxpayers who receive a 1099-K, including what to do with a Form 1099-K and what to do if you get a Form 1099-K in error. Taxpayers who receive a Form 1099-K should review the forms, determine if the amount is correct, and determine any deductible expenses associated with the payment they may be able to claim when they file their taxes. The payment on a Form 1099-K may be reported in different places on your tax return depending on what kind of payment it is. For example, someone who is getting paid as a ride-share driver could report it on Schedule C. Get Tax Help from Beck + Ibarra: Dallas’ Best Tax Experts Beck + Ibarra stands out as Dallas’ premier tax experts, offering unparalleled assistance to individuals and businesses navigating the complexities of taxation. With a proven track record of delivering exceptional service, their team of seasoned professionals is dedicated to providing comprehensive tax help tailored to meet the unique needs of each client. Beck + Ibarra’s expertise extends beyond mere compliance; we excel in maximizing tax efficiency, identifying opportunities for savings, and ensuring adherence to the latest tax regulations. Clients can trust in the proficiency of Beck + Ibarra to guide them through the intricacies of tax planning and preparation, making us the go-to choice for anyone seeking reliable and expert tax assistance in Dallas.
IRS Broadens Mandate for E-File Taxes in 2024
There are new updates in regards to e-file taxes from the IRS for 2024. Starting February 2024 most businesses will be required to do electronic filing since the IRS agency received over four billion information-based returns this year. Utilizing e-filing taxes enhances efficiency, enabling the IRS to expedite return processing and maintain more accurate documentation records. The final rules also require filers to aggregate across nearly all information return types covered by the regulation to determine whether a filer meets the 10-return threshold. If business owners meet the 10-return threshold, they will be 100% required to file electronically. Under this new rule, the number of Forms W-2 and 1099 a company has would be combined to determine whether the 10-return threshold is met. What Type of Forms are Included in the New Mandate E-File Taxes in 2024 The following forms are required to be processed in this mandate: In 2019, the IRS still received nearly 40 million paper information returns, even though approximately 99% of all information returns for that year were e-filed. The IRS also noted that electronic filing has become more common, accessible, and economical, as evidenced by the prevalence of return preparers and service providers offering electronic filing services; the availability of relevant software, and the number of returns already being filed electronically voluntarily.. What Types of Businesses are Required to E-File Whether business owners operating as a corporation, partnership, or sole proprietorship, have been required to electronically file information returns when the aggregate number of these returns, regardless of the type of return, for a tax year was more than 250. The IRS issued regulations in February 2023 lowering the threshold to 10 or more returns, effective with the returns filed on or after January 1, 2024. For the most part, this means the electronic filing mandate will apply to 2023 information returns. Small business owners who previously submitted paper information returns will now find that they will need to file the forms electronically. This is because the number of information returns they had to issue was below the 250 threshold. Under the prior rules, the threshold number of returns for required e-filing applied separately to each type of return, while under the new regulations, all types of information returns are combined when totaling up the number of returns required to be filed. Affected employers may need significant lead time to implement new software, policies, and procedures to comply with the new rules. Why the E-Filing IRS Mandate? The IRS believes that the electronic filing mandate is necessary due to the sheer volume – some four billion information returns – they receive each year. Although about 99% of all information returns in 2019 were e-filed, that still left nearly 40 million paper information returns for the IRS to handle. During the pandemic, paper filings extremely slowed down the IRS’s ability to efficiently process returns. Instilling the lower threshold, the IRS also noted that electronic filing has become more common, accessible, and economical. There are other filings affected by the new mandate. The regulations also require the e-filing of certain returns and other documents such as: A partnership business with more than 100 partners must file its information returns electronically regardless of the number of information returns the partnership must file during the calendar year. Consequences for Not Filing Electronically with the IRS Penalties under IRC Section 6721 may apply for non-electronic filing of information returns (Forms W-2, 1099-series, and more) when electronic filing is required. Such penalties may also apply for non-filing, late filing, or incorrect information. The potential penalty in 2024 is up to $310 per information return, up to an annual maximum of $3,783,000. For businesses with annual gross receipts of less than $5 million, the maximum is $1,261,000. Penalty amounts are indexed and change annually. There is a waiver option for business owners. A business may request a waiver from having to electronically file information returns due to undue hardship. How to E-File Taxes in 2024 You can use the IRS portal. The IRS has an online portal to help businesses file Form 1099 series information returns electronically. This free electronic filing service portal is secure, accurate, and requires no special software. Even if filters are not required to file electronically under the new rules, they may want to consider doing so, to get familiar with the new process. Electronic filing may reduce administrative efforts compared to paper filing, can increase accuracy, and improve record retention. Need Personalized Help Leveraging the IRS online portal for electronic filing of Form 1099 series information returns proves to be a secure, accurate, and hassle-free solution for businesses. Beck + Ibarra is here to assist you with your financial advising needs including any questions on e-file taxes, and while the new rules may demand adjustments when it comes to filing, we can help you along the process. Contact us today for personalized tax help in Dallas Fort Worth.
IRS Announces Waiver of Penalty Fees for Small Tax Debts
In a significant move aimed at providing relief to millions of Americans grappling with financial challenges exacerbated by the COVID-19 pandemic, the Internal Revenue Service (IRS) has announced the waiver of penalty fees for individuals, businesses, and tax-exempt organizations with back taxes totaling less than $100,000 per year for tax years 2020 and 2021. The relief, totaling approximately $1 billion, is expected to benefit nearly 5 million entities, with the majority earning less than $400,000 annually. The Unprecedented Circumstances The decision to waive penalty fees comes from the IRS’s temporary suspension of automated reminders for overdue tax bills during the pandemic, starting in February 2022. The agency’s leadership attributes this pause in reminders as a key factor behind the move to forgive failure-to-pay penalties. The IRS acknowledges the pandemic’s extraordinary challenges and the subsequent interruption in standard procedures. Impact on Taxpayers The relief is expected to automatically apply to many taxpayers, requiring no additional action on their part. IRS Commissioner Daniel Werfel emphasized that the change aims to provide a one-time reprieve due to the pandemic’s unprecedented circumstances. Taxpayers eligible for automatic relief include those who filed a Form 1040, 1041, 1120 series, or Form 990-T tax return for the years 2020 or 2021, owe less than $100,000 per year in back taxes, and received an initial balance-due notice between Feb. 5, 2022, and Dec. 7, 2023. Refunds for Those Who Paid Penalty Fees In a reassuring note for those who have already paid failure-to-pay penalty fees, Commissioner Werfel confirmed they would be eligible for a refund. This aspect of the relief underscores the IRS’s commitment to ensuring fairness and support for taxpayers navigating financial challenges during these extraordinary times. The Human Element “It was an extraordinary time, and the IRS had to take extraordinary steps,” Commissioner Werfel told reporters during the announcement. The sentiment echoes a recognition of the unprecedented difficulties individuals and businesses face during the global health crisis. The IRS’s decision to provide relief reflects a government effort to acknowledge the financial strain imposed by the pandemic and to assist those struggling to meet their tax obligations. One Time Measure The IRS’s decision to waive penalty fees for small tax debts is a welcome development for the millions of individuals, businesses, and tax-exempt organizations affected by the economic fallout of the COVID-19 pandemic. As the nation continues its recovery, this move underscores the government’s commitment to providing targeted relief to those facing financial challenges. While the IRS plans to resume regular collection notices, this announcement stands as a one-time measure, demonstrating a compassionate response to the exceptional circumstances imposed by the pandemic. Taxpayers can find solace in the fact that, during these challenging times, the IRS is on their side, working to alleviate financial burdens and foster economic recovery. How Will This Impact You In the aftermath of the recent IRS announcement waiving penalty fees for small tax debts, Certified Public Accountant (CPA) firms like Beck & Ibarra play a crucial role in guiding and assisting taxpayers through the intricacies of this welcomed relief. The CPA professionals at Beck & Ibarra are well-equipped to navigate the complexities of tax regulations and leverage their expertise to ensure individuals, businesses, and tax-exempt organizations capitalize on the newfound opportunity for financial relief. We can offer strategic advice on the most effective ways to address outstanding tax liabilities, leveraging their knowledge of the tax code to optimize clients’ financial positions. Additionally, our team can assist in reviewing past tax returns, ensuring compliance, and identifying any potential eligibility for refunds of previously paid penalty fees. Our proficiency in tax planning and compliance positions us as valuable partners for taxpayers seeking to make informed decisions and maximize the benefits of the IRS’s compassionate initiative. As trusted financial advisors,we are instrumental in helping clients navigate the evolving tax landscape, fostering financial stability and peace of mind in the wake of this significant policy shift. To get customized tax planning, contact us today.
