Tag Archives: IRS

04.01 2021

Get Ready for Individual Tax Returns

On March 17, 2021, IRS announced that the federal income tax filing due date for individuals for the 2020 tax year will be automatically extended from April 15, 2021 to May 17, 2021. That means you do not have to file Form 4868 for the tax return extension unless you plan to file after May 17. For any return or payment postponed by this announcement, no penalty and interest to file a federal income tax return and its payment will be accrued between April 15 and May 17, 2021*.

* Postponement applies only to individual taxpayers (Form 1040); estimated income tax payments are due April 15, 2021 for 2021 tax years.

Taxpayers should double-check to ensure they have all their documents before filing a tax return. If taxpayers find errors or missing documents such as a W-2 or Form 1099, they should contact the employers and payers or other issuers to request the missing documents or to reissue corrected forms. If taxpayers do not receive missing or corrected documents in time to their returns, they may need to estimate the payments made to them. Estimated amounts can be reported on Form 3852 on their federal tax return. If they receive the missing or corrected Form W-2 or Form 1099-R after filing their return and the information differs from their estimate, they must file Form 1040-X, Amended U.S. Individual Income Tax Return.

Most taxpayers should have received income documents near the end of January, including:

Forms W-2, Wage and Tax Statement
Form 1099-MISC, Miscellaneous Income
Form 1099-INT, Interest Income
Form 1099-NEC, Nonemployee Compensation
Form 1099-G, Certain Government Payments; like unemployment compensation or state tax refund

02.28 2021

What is the Standard Deduction vs. Itemized Deduction?

Taxpayers have two deduction options: a Standard Deduction or Itemized Deduction. They can either claim the standard deduction or itemized deduction to lower their taxable income. *Taxpayers can do both. Many them might have a question which is better to take for their tax return. Let’s start understanding the difference between Standard Deduction and Itemized Deduction.

Standard Deduction

The standard deductions is a fixed amount that lower the income individuals taxed on. Congress sets the amount of the standard deduction each year. In 2020 standard deduction is:

FIling Status	2020 Tax Year	2021 Tax Year
Single	$12,400	$12,550
Married, filing Separately	$12,400	$12,550
Married, filing jointly	$24,800	$24,800
Head of Household	$18,650	$18,800

*Standard Deduction increases if taxpayer is age 65 or older, or blind.

Claiming the standard deduction makes the taxpayer’s process much easier and quicker, which is one of reason that most taxpayers claim the standard deduction instead of itemized deduction.

Itemized Deduction

On the other hand, Itemized deductions have a list of eligible expenses and taxpayer can take for various expenses they incurred during the tax year. It sometimes exceed the standard deduction, which means that itemizing allows taxpayers to reduce their taxable income. Most common itemizing expenses:

Medical expenses
Charitable contributions
Mortgage interest
Property Taxes
Student loan interest
Child and dependent care tax credit
American Opportunity tax credit
State and local taxes
Gambling losses
IRA contributions
401 (k) contribution
Educator expenses

And, more deductions available.

Which to take?

If your standard deduction is less than itemized deduction, you should itemized to reduce your taxable income.

More information available at IRS-Itemized Deduction and IRS-Standard Deduction

12.30 2020

Standard Mileage Rates for 2021

The Internal Revenue Service (IRS) issued the standard mileage rate for 2021 to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purpose.

Standard Mileage Rates for the beginning on January 1, 2021 for the uses of car, vans, pickups or panel truck will be:

Period	Business	Charity	Medical Moving
2021	56	14	16
2020	57.5	14	17

56 cents per mile driven for business use, down 1.5 cents from the rate for 2020
14 cents per mile driven in service of charitable organizations, the rate is set by statute and remains unchanged from 2020
16 cents per mile driven for medical or moving purposes for qualified active duty members of the Armed Forces, down 1 cent from the rate for 2020

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

Important Note:

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

12.29 2020

Form 1099-MISC

What is Form 1099-MISC?

Form 1099-MISC is to report payments made in course of a trade or business to non-employee. Although the 1099–MISC is still in use, contractor payments made in 2020 and beyond will be reported on the new form 1099-NEC.

Form 1099-Misc and Instructions

Rents (Box 1)

Enter amounts of $600 or more for all types of rents

Other Income (Box 3)

Enter other income of $600 or more required to be reported on Form 1099-MISC that is not reportable in one of the other boxes on the for

Gross Proceeds Paid to an Attorney (Box 10)

Enter gross proceeds of $600 or more paid to an attorney in connection with legal services (regardless of whether the services are performed for the payer)

Fishing Boat Proceeds (Box 5)

Enter the individual’s share of all proceeds from the sale of a catch or the FMV of a distribution in kind to each crew member of fishing boats with normally fewer than 10 crew members. A fishing boat has normally fewer than 10 crew members if the average size of the operating crew was fewer than 10

Medical Payments (Box 6)

Enter payments of $600 or more made in the course of your trade or business to each physician or other vendor or provider of medical or health care services. Include payments made by medical and health care insurers under health, accident, and sickness insurance programs. If payment is made to a corporation, list the corporation as the recipient rather than the individual providing the services. Payments to persons providing health care services often include charges for injections, drugs, dentures, and similar items. In these cases, the entire payment is subject to information reporting. You are not required to report payments to pharmacies for prescription drugs

Direct Sales (Box 7)

Enter an “X” in the checkbox for sales by you of $5,000 or more of consumer products to a person on a buy-sell, deposit-commission, or other commission basis for resale (by the buyer or any other person) anywhere other than in a permanent retail establishment. Do not enter a dollar amount in this box. The report you must give to the recipient for these direct sales need not be made on the official form. It may be in the form of a letter showing this information along with commissions, prizes, awards, etc.

Substitute Payments in lieu of dividends or interest (Box 8)

Enter aggregate payments of at least $10 of substitute payments received by a broker for a customer in lieu of dividends or tax-exempt interest as a result of a loan of a customer’s securities. Substitute payment means a payment in lieu of (a) a dividend, or (b) tax-exempt interest to the extent that interest (including original issue discount) has accrued while the securities were on loan. For this purpose, a customer includes an individual, trust, estate, partnership, association, company, or corporation.

Crop Insurance Proceeds (Box 9)

Enter crop insurance proceeds of $600 or more paid to farmers by insurance companies unless the farmer has informed the insurance company that expenses have been capitalized under section 278, 263A, or 447 of Instructions for Forms 1099-MISC and 1099-NEC.

Excess Golden Parachute (Box 13)

Enter any excess golden parachute payments. An excess parachute payment is the amount over the base amount (the average annual compensation for services includible in the individual’s gross income over the most recent 5 tax years). Find additional detail on page 11 of the Instructions for Forms 1099-MISC and 1099-NEC.

Federal tax withheld (Box 4)

Enter backup withholding. For example, persons who have not furnished their TINs to you are subject to withholding on payments required to be reported in box 1. For more information on backup withholding, including the rate, see Instructions for Forms 1099-MISC and 1099-NEC

05.10 2016

IRS Workshops for Non-profits

In an effort to provide better access to popular workshops, the Internal Revenue Service (IRS) has posted virtual versions of workshops on their website. The most recent installment focuses on tax compliance for exempt organizations including small to medium-sized 501(c)3 organizations.

Lessons include topics such as how to apply for 501(c)3 status, 990 overview course, and hiring employees. They are designed to help both new and pre-existing organizations. The IRS also offers certificates of attendance to encourage comprehensive education around a variety of topics.