Individualized Systems

Lower $600 1099-K Filing Threshold for Payment Processors – Did You Know?

A new IRS rule may affect millions of taxpayers who receive payments through third-party processors like PayPal, Venmo, Zelle and Square. The rule applies to payments for goods and services, including payments for independent contract, freelance and gig economy work.

Beginning in 2022, the annual threshold for filing a 1099-K form is $600 in gross payments for goods and services, with no minimum number of transactions. Payment processors must submit the form to the IRS and provide a copy to the recipient of the payments.

In most cases, you must report payments shown on a Form 1099-K as income on your tax return. Note that the form shows gross payment amounts, which may include processing fees. You generally must report the gross amount on your return, but you may be able to deduct processing fees and other charges as business expenses. A tax professional can help you properly figure your gross income and any deductions you are entitled to claim.

IRS Enhances “Where's My Refund” Tool – Did You Know?

The IRS has added a new feature to the “Where's My Refund?” tool, available online (link below) and in the IRS2Go mobile app. Previously, you could only use the tool to check your refund status for your most recently filed return, and only if that return covered one of the last two tax years. However, the tool can now provide information on refunds from any of the last three tax years (2019, 2020 and 2021).

To use the tool, you will need your filing status, taxpayer ID number (SSN or ITIN) and expected refund amount for that tax year.

IRS Where's My Refund? Tool: https://www.irs.gov/refunds

IRS Raises Standard Mileage Rate for Second Half of 2022 – Did You Know?

In recognition of the recent rise in gas prices, the IRS has announced an increase to the optional standard mileage rate for the second half of 2022. For January 1 through June 30 of this year, the rate is set at 58.5 cents per mile. The rate will then rise to 62.5 cents per mile for the period from July 1 through December 31.

Note that the standard rate of 14 cents per mile for eligible charitable activities will not change.

Quarterly Estimated Tax Payments & Overseas Filing Deadlines - Reminder

If you are making quarterly estimated tax payments to the IRS, the due date for the April 1 – May 31 quarter of the year is June 15th, 2022.

If you are a U.S Citizen or Green Card Holder living abroad or in active military service and have not filed your taxes yet, the deadline is also on June 15th.

For payments made using IRS Direct Pay, you can make payments until 8PM EST, and for payments using a credit or debit card, payments can be made up to midnight on the due date.

IRS Issues Answers to FAQ About 2021 Child Tax Credit (3/3)

Q: What happens if two different taxpayers claimed the CTC for the same qualifying child?

A: In some cases, a child meets all the IRS tests to be a qualifying child for multiple taxpayers. Generally, however, only one taxpayer may claim the child for the CTC. As a result, the IRS may reject a return because the taxpayer claimed the CTC for a child already listed on a return filed earlier by someone else. If this situation arises with your return, you will need to submit a paper return instead of filing electronically. You will then receive an IRS notice detailing next steps, so that IRS personnel can determine which taxpayer may actually claim the credit.

IRS Issues Answers to FAQ About 2021 Child Tax Credit (2/3)

Q: How do I respond to a notice saying that the IRS changed the CTC amount on my return?

A: If you agree with the change made, you do not need to respond at all. However, if you believe the IRS made a mistake, you can call the number shown on the letter you received. Remember, you have the right to appeal any IRS decision.

IRS Issues Answers to FAQs About 2021 Child Tax Credit (1/3)

The maximum credit amounts and income limits for the Child Tax Credit differed in 2021 from other years. In addition, many taxpayers received advance CTC payments, and had to reconcile these payments with their actual credit amount on their 2021 tax returns. The IRS recently provided information to help taxpayers who still have questions about their 2021 CTC.

Q: I filed my return electronically but made a mistake reconciling my CTC. What should I do?

A: Wait to hear from the IRS, and understand that the processing of your return may be delayed. DO NOT file an amended return. In most cases, IRS personnel will simply correct your CTC amount and adjust your refund amount or amount of tax you owe accordingly. You will receive an official IRS notice by mail that explains the change.

Why Some Taxpayers May Receive IRS Letters

If the IRS needs to contact a taxpayer, the agency will generally send a letter in the mail rather than emailing or calling. Taxpayers may receive IRS letters for many reasons, including:

- The taxpayer owes tax and did not pay it with their return or set up a payment plan.
- The IRS has a question about a tax return or needs more information to process it.
- The IRS has made an adjustment to a tax return or refund amount.
- The IRS needs to verify a taxpayer's identity.

If you receive an IRS letter in the mail, do not ignore it, but also do not panic. Some IRS notices do not require the taxpayer to take any action, while others advise the taxpayer of an issue that can be readily resolved. In many cases, you will not need to respond to the letter. For example, if an IRS notice simply informs you of a minor change made to your return or your refund amount, you can just file it with your tax records for future reference.

However, if the letter asks you to provide the IRS with additional information, you should respond as quickly as possible. Pay special attention to whether the notice includes a deadline to respond. Taxpayers who fail to reply to an IRS letter by a specified deadline may face penalties or forfeit their appeal rights.

You have the right to appeal any IRS decision about your tax return or the amount of tax you owe. If you do not understand an IRS notice or believe the IRS has made an error, a tax professional can help you figure out the situation and plan your next steps.

Missed the April 18 IRS Deadline? File Now to Reduce Penalties

The IRS due date for filing 2021 tax returns has passed, but taxpayers who missed the deadline still have many reasons to file as soon as possible. Both those who owe tax and those entitled to refunds will benefit from filing a 2021 return without further delay.

If you owe tax and did not request an automatic filing extension, filing your return now will minimize the late filing penalty. Even if you did request an extension, remember that the extension applies only to filing your return, not to paying your tax. By estimating how much tax you owe and paying now, you can reduce other IRS penalties and interest charges.

Some federal tax credits are also refundable, meaning that if you qualify, you may receive an IRS refund even if you owed no tax or had no tax withheld during the year. However, you generally must file a return to claim these credits and receive your refund. Common refundable credits include the Child Tax Credit (CTC), Earned Income Tax Credit (EITC), Recovery Rebate Credit, and Child and Dependent Care Credit.

Refund Scams - Did You Know?

As tax filing season ends and individuals start receiving their refunds, taxpayers should be aware of a refund scam that may be making the rounds.

The scammer starts by stealing taxpayer information through hacks, uses the stolen information to file a tax return, and then gets the refund deposited into the victim's account. They then contact the victim and pretend to be the IRS saying that it was a mistaken deposit and to return the money to them. The scammers may make threats for you to return the 'erroneous deposit' using a recorded call message, or pose as debt collection agency officials acting on behalf of the IRS.

The IRS has established procedures for taxpayers to follow in the genuine case of a mistaken refund that can be found here: https://www.irs.gov/taxtopics/tc161.

Possible Reasons for 2021 IRS Tax Refund Delays

Most taxpayers who file their returns electronically and request direct deposit generally receive their IRS refunds within 21 days. However, a variety of factors can result in longer return processing times. The IRS recently reminded taxpayers of the most common causes of tax refund delays, including:

- The return was mailed on paper instead of filed electronically. Filing a paper return typically doubles the expected wait time for a refund.
- The IRS needs more information to process the return. In this case, you will generally receive an IRS letter requesting the information.
- The return did not include banking information for direct deposit, so the IRS must mail a paper check.
- The return includes a request for an Injured Spouse refund allocation.

The IRS cannot provide information about refund status until at least 21 days after a return was electronically filed, or six weeks after a paper return was mailed.

IRS Where's My Refund Tool: https://www.irs.gov/refunds.

Filing Extensions and Minimizing Penalties – Did You Know?

Taxpayers who request an automatic extension to file their 2021 federal income tax returns may file anytime up until October 17th, 2022. Remember, however, that an IRS extension is only an extension to file tax returns, NOT an extension to pay any tax owed. Taxes not paid by the April 18th payment deadline may be subject to late penalties and interest charges.

Electronic payments may be made using the IRS online payment portal (link below). The IRS urges those who cannot pay what they owe at this time to pay whatever amount they can, and then apply for an installment plan to pay off the remaining balance.

You should still file your taxes, even if you can't pay, as the failure-to-file penalty may be 10 times more than the failure-to-pay penalty.

IRS Online Payment Portal: https://www.irs.gov/payments