by MEA Tax Advisors | Aug 29, 2020 | Tax Tips and News
The Internal Revenue Service has approved the use of e-signatures on certain forms that can’t be filed electronically. The move comes in response to the coronavirus pandemic, in order to protect the health of taxpayers and tax professionals alike.
The change helps reduce in-person contact while lessening the risks to taxpayers and tax professionals by allowing them to work remotely and file forms in a timely manner.
“We take the health and safety of the nation’s taxpayers, the tax professional community and our employees very seriously,” said IRS Commissioner Chuck Rettig. “Expanding the use of digital signatures is an important step during COVID-19 to help tax professionals. We understand the importance of digital signatures to the tax community, and we will continue to review our processes to determine where long-term actions can help reduce burden for the tax community, while appropriately balancing that with critical security and protection against identity theft and fraud.”
The Form 1040, U.S. Individual Income Tax Return, already uses an electronic signature when filed electronically, either by using a taxpayer self-selected PIN if self-prepared, or a tax-preparer selected PIN if using a tax professional.
More than 90% of Form 1040s are filed electronically. The IRS recommends taxpayers consider e-filing forms this year whenever possible due to COVID-19.
Which forms will temporarily accept e-signatures?
At least 10 forms have been earmarked to take a digital signature if mailed by or on Dec. 31, 2020:
- Form 3115, Application for Change in Accounting Method;
- Form 8832, Entity Classification Election;
- Form 8802, Application for U.S. Residency Certification;
- Form 1066, U.S. Income Tax Return for Real Estate Mortgage Investment Conduit;
- Form 1120-RIC, U.S. Income Tax Return For Regulated Investment Companies;
- Form 1120-C, U.S. Income Tax Return for Cooperative Associations;
- Form 1120-REIT, U.S. Income Tax Return for Real Estate Investment Trusts;
- Form 1120-L, U.S. Life Insurance Company Income Tax Return;
- Form 1120-PC, U.S. Property and Casualty Insurance Company Income Tax Return; and
- Form 8453 series, Form 8878 series, and Form 8879 series regarding IRS e-file Signature Authorization Forms.
These forms cannot be e-filed and are generally printed and mailed. The IRS will not specify which digital signature product tax pros have to use.
The IRS also assures it will monitor this temporary option for e-signatures and determine if additional steps are needed.
– Story provided by TaxingSubjects.com
by MEA Tax Advisors | Aug 27, 2020 | Tax Tips and News
Some 50,000 individuals who had a portion of their Economic Impact Payment diverted to pay their spouse’s past-due child support will soon get a check to make up the difference.
The Internal Revenue Service says the catch-up payments are due to be issued in early-to-mid-September. They will be mailed as checks to eligible spouses who submitted Form 8379, Injured Spouse Allocation, along with their 2019 federal income tax return, or in some cases, their 2018 return.
These spouses do not need to take any action to get their money, since the IRS will automatically issue the portion of the EIP that was applied to the other spouse’s debt.
The IRS says it understands that some individuals didn’t file Form 8379 and didn’t get their portion of the Economic Impact Payment for the reasons mentioned. These individuals also don’t need to take any further action and don’t need to submit Form 8379.
The IRS stresses that while it doesn’t have a timeframe, the agency will automatically issue the portion of the EIP that was applied to the other spouse’s debt at a later date.
To check the status of their payment, affected taxpayers can go online to the IRS’ Get My Payment Tool, which is available only on the IRS.gov website.
Taxpayers can also get more information in the Receiving My Payment section of the Frequently Asked Questions in the Economic Payment Information Center on IRS.gov.
– Story provided by TaxingSubjects.com
by MEA Tax Advisors | Aug 26, 2020 | Tax Tips and News
IRA owners, beneficiaries and workplace retirement plan participants who got a Required Minimum Distribution (RMD) this year have until Aug. 31 to rollover or repay the distribution in order to avoid being taxed on the payments.
The Coronavirus Aid, Relief, and Economic Security Act – also known as the CARES Act – waives RMDs during 2020 for IRAs and other retirement plans. It does the same for beneficiaries with inherited accounts.
The CARES Act waiver includes RMDs for individual who turned age 70 1/2 in 2019 and took their first RMD in 2020. Roth IRAs, however, don’t require withdrawals until after the death of the owner.
RMDs are eligible for rollover.
Individuals who took a Required Minimum Distributions in 2020 – including those who turned 70 1/2 during 2019 – have the option of putting their distribution back into the original account, or some other qualified plan.
Thanks to suspension of the RMD rule, RMDs taken during 2020 are considered eligible for rollover. So RMDs can be rolled over to another IRA, another qualified retirement plan, or returned to the original plan. But the rollover, no matter to what account, must be done by Aug. 31 to avoid paying taxes on the distribution.
IRS Notice 2020-51 also provides that the one-rollover-per-12-month-period limitation and the restriction on rollovers to inherited IRAs don’t apply to this repayment.
The CARES Act provisions apply to most retirement plans. This includes traditional IRAs, SEP IRAs, SIMPLE IRAs, 401(k) plans, 403(b) plans, 457(b) plans, profit sharing plans and other defined contribution plans.
The RMD suspension, however, doesn’t apply to qualified defined benefit plans.
Find more information on the CARES Act and retirement plans – including FAQs – visit the IRS’s Coronavirus-related relief for retirement plans and IRA questions and answers page.
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– Story provided by TaxingSubjects.com
by MEA Tax Advisors | Aug 19, 2020 | Tax Tips and News
Receiving a tax refund might be the only thing people like about filing their return, and it looks like some taxpayers are about to get just a little more money from the Department of Treasury.
The Internal Revenue Service today announced that it “will send interest payments to about 13.9 million individual taxpayers who timely filed their 2019 federal income tax returns and are receiving refunds.” As with seemingly everything else in 2020, this is a direct result of the coronavirus pandemic.
Why are 13.9 million taxpayers receiving a tax refund interest payment?
Federal law requires the IRS issue interest payments to taxpayers who file on time after a disaster postpones the filing deadline. In this case, the obvious culprit is COVID-19 pushing Tax Day back to July 15, 2020. But before people start exchanging socially distanced air high fives, there are a few things they’ll need to know:
- Interest payments will not be issued to businesses nor taxpayers who received their refund before April 15
- The interest payment will in most cases not arrive at the same time as the refund payment
- The average interest payment is $18
- The interest payment is taxable if it’s $10 or more
The longer it takes for a timely filed tax refund to arrive after the original deadline (April 15, 2020), the more interest the IRS will owe. And since the interest is calculated using the adjusted quarterly rate (compounded daily), that can sometimes result in using a blended rate for refunds that “span quarters.”
Here are the rates specifically cited by the IRS:
- 5% for the second quarter
- 3% for the third quarter
Interest payments affected by the blended rate will be calculated using “the number of days falling in each calendar quarter.” Perhaps making it a little easier to report a taxable interest payment, the IRS will send letters containing Form 1099-INT at the beginning of next year.
How are these tax refund interest payments being issued?
Taxpayers should generally expect to receive their tax refund interest payment the same way they received their tax refund: “In most cases, taxpayers who received their refund by direct deposit will have their interest payment direct deposited in the same account …. [and] everyone else will receive a check.”
As you well know, many people plan their finances based on the assumption that they will receive a tax refund every year. When everything feels like it’s up in the air, a little good news is welcome—even if it requires some paperwork.
Source: IR-2020-183
– Story provided by TaxingSubjects.com
by MEA Tax Advisors | Aug 15, 2020 | Tax Tips and News
The Internal Revenue Service is reminding owners of most heavy highway vehicles to timely file their Form 2290, Heavy Highway Vehicle Use Tax Return.
The highway use tax applies to those motor vehicles with a taxable gross weight of 55,000 pounds or more. Generally, this includes large trucks, truck tractors and buses. The tax is based the weight of the vehicle.
A variety of special rules apply, but they are spelled out in the instructions for Form 2290.
The deadline for filing Form 2290 and paying the tax is Aug. 31 for vehicles used on the road during July.
If a taxpayer is unsure whether they have a requirement to file Form 2290, the IRS offers an online tool, “Do I Need to Pay the Heavy Highway Vehicle Use Tax?” The tool features a question-and-answer format that helps owners determine if they have to pay the highway use tax.
How does e-filing make it easier?
The IRS is encouraging all heavy highway vehicle owners to take advantage of the speed and convenience of e-file and to pay any tax due electronically.
Some taxpayers have an option of filing Form 2290 on paper, but those with 25 or more taxed vehicles must file Form 2290 electronically.
With Form 2290 e-filed and any tax due paid online, here’s no need to visit an IRS office. Visit IRS.gov for a list of IRS-approved e-file providers and to find an approved provider for Form 2290 on the IRS 2290 e-file partners page.
What are the payment methods?
There are two ways to pay the highway use tax electronically:
- Electronic funds withdrawal; authorize a direct debit as part of the e-file process.
- Electronic Federal Tax Payment System; allow five to seven business days for new accounts.
For now, the IRS says they cannot accept payment payment of the Heavy Highway Vehicle Use Tax by credit card or debit card.
To pay the use tax by mail, send a completed Form 2290 and a check or money order with Form 2290-V, Payment Voucher, to:
Internal Revenue Service
P.O. Box 932500
Louisville, KY 40293-2500
When Form 2290 is filed electronically, e-filers generally get their IRS-stamped Schedule 1 electronically, just minutes after filing and paying any Heavy Highway Vehicle Use Tax due online. They can then print the Schedule 1 and provide it to their state department of motor vehicles – all without having to visit an IRS office.
In 2019, the IRS received about 941,000 Heavy Highway Vehicle Use Tax Returns.
For more information about the highway use tax, check out the Trucking Tax Center at IRS.gov/trucker.
Source: IR-2020-179
– Story provided by TaxingSubjects.com
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