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Last Minute Tips for 2020 Taxes!

File Your 2020 Taxes On Time

As of this writing, returns for 2020 taxes are due on April 15th. It’s possible that the pandemic will shake things up again, but even if it does, the tips below will help you file on time and get the most out of the 2020 tax year.

5 Things to Do Before You File 2020 Taxes

Make your final tax-deferred contribution.

You can contribute to your traditional IRA until April 15. If you’re over 50, your maximum contribution is $7,000, and if you’re under 50, it’s $6,000. If you’re a small-business owner with a Keogh or SEP IRA, you have until Oct. 15 to contribute up to $57,000 to your plan.
Spend any funds remaining in your Flexible Spending Account (FSA).

These employer programs are “use it or lose it,” and you can spend your funds through March 21, 2021.
Consider the home office deduction if you’re self-employed.

Using this deduction no longer impacts the tax-free status of your home sale for values of up to $250,000 (single filers) or $500,000 (married filers).
Double-check your itemizable expenses.

Even if you plan to use the standard deduction, check your itemizable expenses because they could be greater than the standard deduction, your state might allow you to deduct property taxes, and this knowledge will help you plan for the future. If you’d like, I can help you with that planning! DLJ Wealth Services, LLC is a registered investment advisor.
Consider deducting your charitable donations.

Even without itemizing, you are allowed a deduction of up to $300 for your 2020 donations to eligible charities.

Your Tax Document Checklist

Before you file, you also need to gather your documents! To find out what you need, download our free checklist at DLJTaxServices.com/TaxChkList.

Still waiting for your stimulus?

If you haven’t received your stimulus check(s), do not call the IRS. Instead, visit IRS.gov/coronavirus/Get-My-Payment or download the “IRS2GO” app. You will need your social security number/ITIN, filing status, and the exact refund amount list on your refund to log in.

Need an extension?

You’re automatically qualified for an extension through Oct. 15, if you file a Form 4868 to notify the IRS.

However, you must pay any taxes owed by April 15. For more information on how to avoid penalties, reach out to my team.

Still have tax questions?

Contact me directly here for help with your 2020 taxes.

Take Advantage of Your Taxpayer Bill of Rights

Tax tips to help you avoid scams and stand up to the IRS

Did you know as a taxpayer that you are protected under a Taxpayer Bill of Rights?

You can read more about the Taxpayer Bill of Rights on the IRS website, but I wanted to make certain you are aware of your rights. By being familiar with these “rights,” you will easily identify scammers as well.

Here’s an overview of your 10 Taxpayer Bill of Rights:

1. The right to be informed. You have the right to know what is required to comply with the tax laws.
2. The right to quality service. You are to receive prompt, courteous and professional assistance.
3. The right to pay no more than the correct amount of tax.
4. The right to challenge the IRS’s position and be heard. More details below.
5. The right to a fair and impartial appeal to an IRS decision in an independent forum.
6. The right to finality.
7. The right to privacy.
8. The right to confidentiality.
9. The right to retain representation before the IRS on your behalf. More details below.
10. The right to a fair and just tax system.

The IRS tries to administer fair and just processes while trying to identify those who are trying to cheat the system. For the tax code to be fair, all citizens must fall under the same rules and regulations.

However, most people are not aware of their rights. Plus, many scammers out there try to convince you that you don’t have any! That’s why we want to help the IRS get the word out about these privileges and go into some detail on two, important ones.

First, you have the right to challenge an IRS position and be heard.

Have you ever received a letter from the IRS that said you owed money or made an error and know that you didn’t? Well, before you yell obscenities and throw the notice in the garbage, you have rights!

Specifically, the IRS reports their changes to you based on the information they have been provided by other entities. Sometimes, these entities do not file correct forms with the IRS. So, if you have an issue with the IRS, there is no need to feel defensive.

Just gather the letter you received from the IRS, and/or other correspondence so you, or your tax preparer, can view the information and make the appropriate adjustments. Often times, the IRS is correct… but not always! That is why you have a right to challenge a decision and provide additional documentation to support your position or objection.

What if you disagree with an IRS decision?

The key is to respond promptly. If you receive correspondence from the IRS you do not agree with, they usually provide the timeframe you have to respond. You have the option to call or mail in your information. For example, let’s say the IRS notifies you of a simple mathematical or clerical error, and you disagree with any adjustments the IRS made to your tax return. You have 60 days to respond to their letter and provide copies of your records to help correct the errors.

If the IRS agrees with the documentation you submitted, they will send a correction. If not, they will send you a written notice in the mail proposing the tax adjustment they recommend. But they will also outline how to challenge their decision if you disagree with it.

If you still disagree, you have the right to be heard before The Independent Appeals Office. As an independent organization within the IRS, they will try to work out a settlement with you via an informal, fair administrative process.

If you still believe you are being taxed or treated unfairly after exhausting your administrative options, you may file a petition to the U.S. Tax Court. This is a federal court established by the U.S. Congress that, “is committed to providing taxpayers, most of whom are self-represented, with a reasonable opportunity to appear before the Court, with as little inconvenience and expense as is practicable. The Court is also committed to providing an accessible judicial forum with simplified procedures for disputes involving relatively small amounts of tax.”

Note that it is important for you, the taxpayer, to respond within the timeframe stated in the letter. For appeals, this is typically 90 days from the date of the notice. (If the taxpayer is living outside the U.S., they have and an additional 60 days to respond.)

Does this seem a bit intimidating?

Well, the second Taxpayer Bill of Rights I want to point out is that you don’t have to do this alone!

You do not need to self-represent yourself before the IRS, Appeals Office or U.S. Tax Court. Instead, you can retain and authorize a qualified representative to help you deal with the IRS. This includes attorneys, CPAs, enrolled Agents, enrolled actuaries, or other persons permitted to represent taxpayers before the IRS. It you hire a representative, you will not have to appear unless formally summoned by the IRS.

There is even an independent, Low Income Taxpayer Clinic available to taxpayers whose income is below a certain level and can represent individuals in audits, appeals or tax collection. To learn more, go to https://www.irs.gov/advocate/low-income-taxpayer-clinics. This service is one of the Taxpayer Advocate Services programs.

You have rights!

The next time you get correspondence from the IRS that has errors you want to correct, remember your Taxpayer Bills of Rights! There are procedures, independent organizations and tax professionals available to help you review mistakes with the IRS and correct the information without massive legal fees and stress. And the best part is that you don’t have to do it alone!

Did you receive a letter from the IRS or just need help with your taxes? Please contact us here for additional information.

Avoid Identity Theft During Tax Season

Protect your taxpayer identity and personal information from scammers

Today’s scam artists use the latest, sophisticated technologies to steal your data so it’s more important than ever to protect your personal information from identity theft, especially during tax season.

We all seem to know someone who had their identity stolen, and this year, the fraud is big in unemployment claims. For example, my neighbor who was fortunate enough to work through 2020 recently received a notice that she had claimed, and received, unemployment benefits in a state she had not lived in for over 30 years!

The Federal Trade Commissions, 2020 Consumer Sentinel Network indicates that in 2019, out of 3.2 million reports, they saw an increase from 2018 to 2019 of fraud (with 1.7 million cases – 53% of all reports) and identity theft (650,572 cases – 20% of all reports). “In 2019, people filed more reports about Identity Theft (20.3% of all reports), in all its various forms, than any other type of complaint,” states the report.

To combat this rising crime, the IRS has administered a program for over a decade to confirm taxpayers’ identities who have been victims of identity theft. The program is called the Identity Protection PIN, or IP PIN program, and it’s a private, six-digit code known only by the taxpayer and the IRS.

If someone enters the wrong code when filing their taxes, the system rejects the electronic return. Then, the taxpayer must file a paper return, which we know takes much longer to process. However, this gives the IRS time to catch, deter and prevent tax fraud.

For several years, the IP PIN program was only available to victims of identity theft. Now, any taxpayer can apply!

Even the IRS fell victim to fraudsters in 2016 when identity thieves tried generating e-file PINs for stolen social security numbers. This caused the IRS to shut down the online PIN service for a short time. This highlights what’s at stake with tax fraud. And ultimately, this costs the taxpayers in lost revenues to support government programs. On a personal level, it can delay your tax return and refund from being processed for several months.

Since this cyberattack and making security adjustments, the IRS began expanding the IP PIN program regionally to individuals on a voluntary basis. Now, this program is available to any taxpayer who can verify their identity. The initial IP PIN application involves a vigorous verification process, and once finalized, you receive a new PIN number each calendar year (issued by mail or retrievable online).

How to Get Your Identity Protection PIN

You can apply for the IP PIN program easily online at IRS.gov/IPPIN from mid-January thru October. Select, “Get an IP PIN.” Then, create an account, verify your identity and you get your official number immediately. Note that you receive a new IP PIN every year. And currently, you can’t opt-out of the program, but the IRS is looking to change this in 2022.

If you can’t apply for your IP PIN online, the IRS provides other options:

• “If your adjusted gross income is $72,000 or less, you may complete Form 15227, Application for an Identity Protection Personal Identification Number, and mail or fax to the IRS. An IRS customer service representative will contact the taxpayer and verify their identities by phone. Taxpayers should have their prior year tax return at hand for the verification process. Your IP PIN will be mailed to you.

• If you cannot verify their identities online or by phone and have adjusted gross income greater than $72,000, you must contact the IRS and make an appointment at a Taxpayer Assistance Center to verify their identities in person. Taxpayers should bring two forms of identification, including one government-issued picture identification. Your IP PIN will then be mailed to you.”

Remember never to share you IP PIN with anyone but your trusted tax provider. The IRS will never call, text or email you to request your IP PIN, but scammers will attempt to steal it from you.

Identity theft during tax season and beyond is not going away!

Authorities are trying to stop fraud, but identity thieves are always looking for new ways to scam innocent people out of their well-earned funds. An IP PIN is one way to deter their efforts.

Specifically, I know a young mother with two daughters who was the victim of identity fraud. She was waiting to file her return until April because she qualified for the earned income credit and the child credits and was looking forward to her refund check to supplement a waitress’ income. Unfortunately, someone had already filed a tax return with her social security number and requested similar credits.

Now this hard-working mother had to submit her tax return via mail and wait… and wait and wait. Then, she had to go through a process to prove she was who she said she was. As she was preparing for the following tax season, she still did not have her refund or tax return issues cleared. However, she did have an IP PIN which made that current year go smoothly. The refund for the prior year eventually came through about 3 or 4 months later.

If you don’t think identity theft can happen to you, think again. Now is the time to put as many precautions in place as possible. Protect yourself, your family, and the assets you worked so hard to earn!

View this short video from the IRS on how to get your IP PIN here in English and Spanish.

For additional information to protect yourself against identity them during tax season and help prepare your taxes, please contact me here.

Individual Tax Filing Starts February 12th!

So much has happened due to COVID-19, here is a quick summary of some of the latest changes that may affect you.

While business filing began in January, individual tax filing begins February 12th.

Here are some of the important insights and recent updates to help you prepare for your 2020 tax return.

• Did you receive a Form 1099-G for unemployment benefits you didn’t actually apply for or receive?

Since the pandemic, the IRS has noticed many scammers taking advantage of the unemployment benefit situation by using stolen, personal information to claim benefits. They receive the money, and the victims receive the tax documentation!

If you receive one of these unemployment forms and did not apply for benefits, contact the state agency as soon as possible to correct this error.

It is important to get the 1099-G corrected because unemployment benefits are taxable and are being reported as YOUR income.

Make certain you then report the fraud. Identity Theft Central at the IRS provides valuable information on the steps you should take if your identity has been compromised.

In addition, you may want to think about applying for an Identity Protection Pin from the IRS.

This is a private identification number provided by IRS and is known only by the taxpayer and the IRS (and your tax preparer at filing time). It prevents anyone else from filing a tax return under your Social Security number. This security PIN option is now open to everyone and is something I think everyone should apply for.

• Are you eligible for the Earned Income Tax Credit (EITC) or the Additional Child Tax Credit (ACTC)?

Fraudsters love to claim other taxpayer’s Earned Income Tax Credits and/or Additional Child Tax Credits. So, to reduce the number of fraudulent claims, the IRS will hold paying refunds to taxpayers eligible for these credits until the first week of March.

This is to give to the rightful taxpayer the opportunity to file their tax return before the fraudster walks away with the money. This is also a very important reason not to delay filing your tax return.

• Is your refund on the way?

Keep an eye out for it and save yourself time! Do not call the IRS agents about your refund. They won’t have any more information than what you’ll find on their website. To track your refund status, go to “Where’s My Refund” here.

• Did you claim your COVID-19 tax credit for employers who kept their workers on payroll?

Employee Retention Credit (ECR)

December’s legislation extended the tax credit period for the Employee Retention Credit (ECR) to employers who retained employees due to COVID-19 through June 30, 2021. The Taxpayer Certainty and Disaster Tax Relief Act of 2020 allows eligible employers to claim a refundable tax credit against their share of Social Security tax equal to 70% of the qualified wages paid through this time due to COVID-19.

The maximum ECR amount available is $7,000 per employee per calendar quarter, for a total of $14,000 in 2021 (an increase from the 50% of $10,000 of wages allowed in 2020). For all of the specific details, visit COVID-19-Related Employee Retention Credits: How to Claim the Employee Retention Credit FAQs.

Family First Coronavirus Response Act (FFCRA)

Also, in December, legislation allows employers to extend the eligibility for tax credits for qualified sick and family leave wages (which includes leave time for parents who were force home due to school closing during the pandemic) paid before March 31st, 2021. This extension is voluntary, and the benefits will still depend on the reason for the leave and other criteria. Details on what wages qualify for the credit can be found on the IRS site here.

For example, if someone who is unable to work because they are ill due to the coronavirus and takes qualified leave, the employer can qualify for a credit up to $511/day or a maximum of 10 days for $5,110. If the employee is taking leave to care for others the credit is up to $200/day or a maximum of $2,000.

• Employers, did you defer Social Security taxes in 2020?

The Consolidated Appropriations Act 2021 that was signed into law in late December 2020 extends the time employers can take to make their first deferred Social Security tax payment. The first half is now due by Dec. 31, 2021. The second half is still due December 31, 2022.

Penalties and interest will begin on January 1, 2022 on unpaid deferred balances. The question that has NOT been answered is whether those charges will start from January 2021 or if they will be retroactive to the date the deferrals were taken. That could be costly, so you do not want to be late with those payments.

• Should you claim self-employed, COVID-19 sick and family leave tax credits?

If you are self-employed, you can fill out Form IRS 7202 to request sick and family leave tax credits under the Families First Coronavirus Response Act (FFCRA). You are eligible if you were unable to work due to COVID-19 health issues, cared for a sick family member with COVID-19 or are caring for children due to school closures because of COVID-19

Qualifying events include:

1) Work restricted due to Federal, State or Local quarantines or isolation orders

2) You were advised by a health profession to quarantine due to COVID-19

3) You experienced symptoms of COVID-19

Depending on the circumstances, tax credits are based on your qualified sick leave or family leave equivalent amounts. For details, see the FFCRA site here.

• Can you claim credits for carbon capture?

If you captured qualified carbon oxide, “using carbon capture equipment placed in service on or after Feb. 9, 2018,” you may qualify for a tax credit. The IRS provide information about claiming credits, guidance on carbon oxide recapture, current rules, and more. To see the final ruling, click here.

• Was your 401(k) automatic enrollment cap percentage increased on your safe harbor plan?

The Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act) is an initiative to encourage employers to automatically enroll employees in their 401K plans and to automatically increase their annual contributions to a certain level. The IRS recently addressed provisions of the Act which affect the safe harbor provision for 401(k) plans and certain 403(b) plans.

To maintain the plan’s safe harbor status as a qualified automatic contribution arrangement (QACA), the plan will not be required to increase the maximum qualified percentage to determine automatic elective contributions. The plan may set a percentage as long as it is applied uniformly across the plan and does not exceed 15% of compensation, or 10% during the initial automatic contribution period.

For details and guidance on these provisions, see https://www.congress.gov/bill/116th-congress/house-bill/1994 or if the legalese frustrates you, feel free to call our office (920) 944-6020 or (678) 491-9744.

New Tax Updates Can Save You Money

As new tax updates and guidelines come out on a regular basis from the IRS, it can be difficult to keep track of everything. Be sure to click on the links above that apply to you to get all of the information necessary and follow the appropriate rules. Or contact your tax preparer directly.

This way, you can be up-to-date and take advantage of all of the benefits you qualify for right now and in the year ahead.