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Extension Deadline Looming for 2020 Tax Returns
Time is running short for taxpayers who requested an extra six months to file their 2020 tax return. As a reminder, Friday, October 15, 2021, is the extension deadline for most taxpayers. Taxpayers who owe tax – even those who did not request an extension – and have yet to file a 2020 tax return can generally avoid additional penalties and interest by filing the return as soon as possible and paying any balance due.
Taxpayers with relatively simple returns should keep the following items in mind regarding the extension deadline and taxes:
- Taxpayers can still e-file returns. Filing electronically is the easiest, safest, and most accurate way to file taxes.
- For taxpayers owed a refund, the fastest way to get it is to combine direct deposit and e-file.
- Taxpayers who owe taxes should consider using IRS Direct Pay, a simple, quick, and free way to pay from a checking or savings account using a computer or mobile device. There are also other online payment options. Please call the office if you need details about other payment options.
- Members of the military and those serving in a combat zone generally get more time to file. Military members typically have until at least 180 days after leaving a combat zone to both file returns and pay any tax due.
- Taxpayers should always keep a copy of tax returns for their records. Keeping copies of tax returns can help taxpayers prepare future tax returns or assist with amending a prior year’s return.
Taxpayers with complicated tax returns should contact the office immediately for assistance. Many tax preparers and accounting professionals are extremely busy due to the complexity of tax regulations brought about by the COVID-19 pandemic.
Reminder: Protect Yourself From Scammers
Understanding how the IRS communicates can help taxpayers protect themselves from scammers who pretend to be from the IRS with the goal of stealing personal information. For example, the IRS typically does not call a taxpayer, but if the IRS does call, it should not be a surprise because the agency will have sent a notice or letter first to alert the taxpayer of their intent.
As a reminder, taxpayers should always protect themselves from scammers. One of the ways they can do this is by understanding how the IRS communicates with them. With this in mind, let’s take a look at some of the other ways the IRS communicates with taxpayers:
- The IRS doesn’t normally initiate contact with taxpayers by email. As such, never reply to an email from someone who claims to be from the IRS because the IRS email address could be spoofed or fake. Emails from IRS employees will end in irs.gov.
- The agency does not send text messages or contact people through social media. Fraudsters will impersonate legitimate government agents and agencies on social media and try to initiate contact with taxpayers.
- When the IRS needs to contact a taxpayer, the first point of contact is normally by letter delivered by the U.S. Postal Service. Taxpayers should be aware that debt relief firms send unsolicited tax debt relief offers through the mail. Fraudsters will often claim they already notified the taxpayer by U.S. mail.
- Depending on the situation, IRS employees may first call or visit with a taxpayer. In some instances, the IRS sends a letter or written notice to a taxpayer in advance, but not always. Many IRS notices are searchable on the IRS website; however, just because someone references an IRS notice in email, phone call, text, or social media, it does not mean the request is legitimate. If you have any doubts, don’t hesitate to contact the office.
- IRS revenue agents or tax compliance officers may call a taxpayer or tax professional after mailing a notice to confirm an appointment or to discuss items for a scheduled audit. The IRS encourages taxpayers to review, How to Know it’s Really the IRS Calling or Knocking on Your Door: Collection, found on the IRS website.
- Private debt collectors can call taxpayers to collect certain outstanding inactive tax liabilities, but only after the taxpayer and their representative have received written notice. Private debt collection should not be confused with debt relief firms who will call, send lien notices via U.S. mail, or email taxpayers with debt relief offers. Taxpayers should contact the IRS regarding filing back taxes properly.
- IRS revenue officers and agents routinely make unannounced visits to a taxpayer’s home or place of business to discuss taxes owed, delinquent tax returns, or a business falling behind on payroll tax deposits. IRS revenue officers will request payment of taxes owed by the taxpayer. However, taxpayers should remember that payment will never be requested to a source other than the U.S. Treasury.
- If the IRS visits a taxpayer, they should always ask for credentials; IRS representatives can always provide two forms of official credentials: a pocket commission and a Personal Identity Verification Credential.
Gross Receipts Safe Harbor for Employers Claiming ERC
Safe harbor is now available that allows employers to exclude certain items from their gross receipts solely for determining eligibility for the Employee Retention Credit (ERC). These amounts are:
- The amount of the forgiveness of a Paycheck Protection Program (PPP) Loan;
- Shuttered Venue Operators Grants under the Economic Aid to Hard-Hit Small Businesses, Non-Profits, and Venues Act; and
- Restaurant Revitalization Grants under the American Rescue Plan Act of 2021.
An employer elects to apply the safe harbor by excluding these amounts solely for determining whether it is an eligible employer for a calendar quarter for purposes of claiming the ERC on its employment tax return.
The safe harbor should be applied consistently to determine eligibility for the ERC. Employers must exclude the amounts from their gross receipts for each calendar quarter in which gross receipts are relevant to determining eligibility to claim the ERC. Furthermore, the employer claiming the credit must also apply the safe harbor to all employers treated as a single employer under the aggregation rules.
Employers claim the ERC on their employment tax return, generally Form 941, Employers Quarterly Federal Tax Return, or adjusted employment tax return, generally Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund.
Please note that an employer is not required to apply this safe harbor, and the safe harbor does not permit the exclusion of these amounts from gross receipts for any other federal tax purpose.
Further changes may be forthcoming pending legislation; however, if you have any questions or would like more information about the latest guidance regarding the ECR, don’t hesitate to call the office now.
How To Get an Identity Protection Pin
An Identity Protection PIN is a six-digit number eligible taxpayers get to help prevent their Social Security number or Individual Taxpayer Identification Number from being used to file fraudulent federal income tax returns. This number helps the IRS verify a taxpayer’s identity and accept their tax return. The Get An IP PIN tool enables anyone with an SSN or ITIN to get an IP PIN after verifying their identity through a rigorous authentication process. For security reasons, tax pros cannot get an IP PIN on behalf of clients.
Facts taxpayers should know about the IP PIN:
- It’s a six-digit number known only to the taxpayer and the IRS.
- The opt-in program is voluntary.
- The IP PIN should be entered onto the electronic tax return when prompted by the software product or onto a paper return next to the signature line.
- The IP PIN is valid for one calendar year.
- For security reasons, enrolled participants get a new IP PIN each year.
- Spouses and dependents are eligible for an IP PIN if they can verify their identities.
- IP PIN users should never share their number with anyone but the IRS and their trusted tax preparation provider. The IRS will never call, email, or text a request for the IP PIN.
Currently, taxpayers can get an IP PIN for 2021, which should be used when filing any federal tax returns during the year, including prior year returns. New IP PINs will be available starting in January 2022.
Taxpayers Unable to Validate Identity Online
Taxpayers who are unable to validate their identity online and have income of $72,000 or less, can file Form 15227 (EN-SP), Application for an Identity Protection Personal Identification Number. The IRS will call the phone number the taxpayer provided on Form 15227 to validate the taxpayer’s identity. However, for security reasons, the IRS will assign an IP PIN for the next filing season, and the taxpayer cannot use the IP PIN for the current filing season.
Taxpayers who cannot validate their identity online, or by the phone, or who are ineligible to file a Form 15227 can make an appointment at a Taxpayer Assistance Center. Please call the office if you need assistance locating a center. Before arriving at their appointment, taxpayers will need to bring one current government-issued picture ID and another identification document to prove their identity. Once verified, the taxpayer will receive an IP PIN in the mail, usually within three weeks.
Tax Planning: Facts About Credits and Deductions
Tax credits and deductions can mean more money in a taxpayer’s pocket. Here are a few facts about credits and deductions that help taxpayers with their year-round tax planning:
- Taxable income is what’s left over after someone subtracts any eligible deductions from their adjusted gross income. This includes the standard deduction ($12,5550 in 2021 for single filers; $25,100 for married filing jointly). Most individual taxpayers take the standard deduction. On the other hand, some taxpayers may choose to itemize their deductions because it could lower their taxable income.
- As a general rule, if a taxpayer’s itemized deductions are larger than their standard deduction, they should itemize. Also, in some cases, taxpayers may even be required to itemize.
- For a quick overview of what expenses they may be able to itemize, taxpayers with less complicated returns may be able to use the Interactive Tax Assistant found on the IRS website.
- Tax credits are subtracted from the total amount of tax owed. To claim a credit, taxpayers should keep records that show their eligibility for it.
- The American Rescue Plan changed several valuable tax credits, including the child and dependent tax credit, the childless earned income tax credit, the childless earned income tax credit, and the child tax credit. It’s important for taxpayers to understand how these changes may affect the 2021 tax return.
- Properly claiming tax credits can reduce taxes owed and boost refunds. Some tax credits, like the Earned Income Tax Credit (EITC), are even refundable, which means a taxpayer can get money refunded to them even if they don’t owe any taxes.
To learn more about how you can save money on your 2021 tax return by planning ahead, please call the office today.