Category: FATCA

Individuals are encouraged to take important actions this month to help them file their federal tax returns in 2022, including special steps related to Economic Impact Payments and advance Child Tax Credit payments. A special page, updated and available on IRS.gov, outlines steps your clients can take now to make tax filing easier in 2022.

Excerpt from IRS issue 2021-49

The IRS reminds taxpayers there are things they should do before the current tax year ends on Dec.31.

Donate to charity
Taxpayers may be able to deduct donations to tax-exempt organizations on their tax return. As people are deciding where to make their donations, the IRS has a tool that may help. Tax Exempt Organization Search on IRS.gov allows users to search for charities. It provides information about an organization’s federal tax status and filings.

The law now permits taxpayers to claim a limited deduction on their 2021 federal income tax returns for cash contributions they made to certain qualifying charitable organizations even if they don’t itemize their deductions. Taxpayers, including married individuals filing separate returns, can claim a deduction of up to $300 for cash contributions to qualifying charities during 2021. The maximum deduction is $600 for married individuals filing joint returns.

Most cash donations made to charity qualify for the deduction. However, there are some exceptions. Cash contributions include those made by check, credit card or debit card as well as unreimbursed out-of-pocket expenses in connection with volunteer services to a qualifying charitable organization.

Check Individual Taxpayer Identification Number
An ITIN only needs to be renewed if it has expired and is needed on a U.S. federal tax return.

If an Individual Taxpayer Identification Number was not included on a U.S. federal tax return at least once for tax years 2018, 2019 and 2020, the ITIN will expire on Dec. 31, 2021.

As a reminder, ITINs with middle digits 70 through 88 have expired. In addition, ITINs with middle digits 90 through 99, if assigned before 2013, have expired. Individuals who previously submitted a renewal application that was approved, do not need to renew again.

Find information about retirement plans
IRS.gov has end-of-year tax information about retirement plans. This includes resources for individuals about retirement planning, contributions and withdrawals.

Contribute salary deferral
Taxpayers can make a salary deferral to a retirement plan. This helps maximize the tax credit available for eligible contributions. Taxpayers should make sure their total salary deferral contributions do not exceed the
$19,500 limit for 2021.

Get banked and set up direct deposit
Direct deposit gives taxpayers access to their refund faster than a paper check. Those without a bank account can learn how to open an account at an FDIC-Insured bank or through the National Credit Union Locator Tool.

Veterans should see the Veterans Benefits Banking Program for access to financial services at participating banks.

Connect with the IRS
Taxpayers can use social media to get the latest tax and filing tips from the IRS. The IRS shares information on things like tax changes, scam alerts, initiatives, tax products and taxpayer services. These social media tools are available in different languages, including English, Spanish and American Sign Language.

Think about tax refunds
Taxpayers should be careful not to expect getting a refund by a certain date. This is especially true for those who plan to use their refund to make major purchases or pay bills. Just as each tax return is unique to the individual, so is each taxpayer’s refund. Taxpayers can take steps now to Get Ready to file their federal tax return in 2022.

Excerpt from: IRS COVID Tax Tip 2021-175

As people begin to file their 2020 tax returns, taxpayers are reminded to avoid unethical ghost tax return preparers.

A ghost preparer is someone who doesn’t sign tax returns they prepare. Unscrupulous ghost preparers often print the return and have the taxpayer to sign and mail it to the IRS. For e-filed returns, the ghost will prepare but refuse to digitally sign as the paid preparer.

By law, anyone who is paid to prepare or assists in preparing federal tax returns must have a valid Preparer Tax Identification Number. Paid preparers must sign and include their PTIN on the return. Not signing a return is a red flag that the paid preparer may be looking to make a quick profit by promising a big refund or charging fees based on the size of the refund.

Ghost tax return preparers may also:

• Require payment in cash only and not provide a receipt.
• Invent income to qualify their clients for tax credits.
• Claim fake deductions to boost the size of the refund.
• Direct refunds into their bank account, not the taxpayer’s account.

It’s important for taxpayers to choose their tax return preparer wisely. The Choosing a Tax Professional page on IRS.gov has information about tax preparer credentials and qualifications. The IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications can help identify many preparers by type of credential or qualification.

No matter who prepares their return, taxpayers should review it carefully and ask questions about anything that’s not clear before signing. They should verify their routing and bank account number on the completed tax return for any direct deposit refund. Taxpayers should watch out for ghost preparers putting their bank account information on the returns.

Taxpayers can report preparer misconduct to using IRS Form 14157, Complaint: Tax Return Preparer. If a taxpayer suspects a preparer filed or changed their tax return without their consent, they should file Form 14157-A, Tax Return Preparer Fraud or Misconduct Affidavit.

From IRS Tax Tip 2020-20

Most people with gross income of $12,400 or more must file a federal tax return. Some people with a lower income are not required to file. However, these individuals should still consider filing for a refund of federal income tax withheld. They may also be eligible for certain tax credits, like the earned income tax credit, the recovery rebate credit and others.

How to decide whether to file a tax return
In most cases, income, filing status and age determine if a taxpayer must file a tax return. Other rules may apply if the taxpayer is self-employed or can be claimed as a dependent of someone else. There are other reasons a taxpayer must file. The Interactive Tax Assistant can help someone determine if they the need to file a return.

If the answer to any of these questions is yes, a person might be due a refund, but they must file a tax return to get their money.

• Did an employer withhold federal income tax from their pay
• Did the person make estimated tax payments?
• Did they overpay taxes in 2019, and have their refund applied to 2020 taxes?

Some individuals may qualify for the recovery rebate credit
Most people who are eligible have already received the full amount for the recovery rebate credit as Economic Impact Payments. Some people may be eligible to claim the recovery rebate credit if they didn’t get Economic Impact Payments or received less than they were entitled. People must file a tax return to claim the recovery rebate credit even if they aren’t normally required to file. Those who don’t normally file taxes can use IRS Free File to claim this credit. The maximum Economic Impact Payments for qualifying individuals were:

• $1,200 per person and $500 per qualifying child for the first payment
• $600 per person and $600 per qualifying child for the second payment

If they’re eligible for the recovery rebate credit, people will need the amount of any EIPs they received to calculate their credit amount using the RRC worksheet or tax preparation software. Individuals with an account on IRS.gov can view the amounts of the Economic Impact Payments they received.

Choose e-file with direct deposit to avoid delays
The IRS strongly encourages people to file electronically and choose direct deposit to avoid pandemic-related paper delays.

Excerpt IRS COVID Tax Tip 2021-13

Early January 2021, the Treasury Department and the IRS started sending the second round of Economic Impact Payments to millions of Americans as part of the implementation of the Coronavirus Response and Relief Supplemental Appropriations Act.

Taxpayers don’t need to take any action to receive these payments. Economic Impact Payments are automatic for eligible taxpayers who filed a 2019 tax return and those who receive Social Security retirement, survivor or disability benefits (SSDI), Railroad Retirement benefits, Supplemental Security Income (SSI) and Veterans Affairs beneficiaries who didn’t file a tax return.

These second round of payments follow the successful delivery of more than $270 billion in CARES Act Economic Impact Payments to about 160 million Americans in 2020.

Eligible individuals who did not receive an Economic Impact Payment – either the first or the second payment – can claim a Recovery Rebate Credit when they file their 2020 taxes this year. The IRS urges taxpayers who didn’t receive an advance payment to review the eligibility criteria when they file their 2020 taxes; many people, including recent college graduates, may be eligible for a credit.

Eligible individuals who didn’t receive the full amount of both Economic Impact Payments should claim the missing amount as a credit. Anyone who did receive the full amount for both Economic Impact Payments should not include any information about their payment when they file their taxes – they’ve already received the full amount of the Recovery Rebate Credit as advance payments.

For the latest IRS forms and instructions, visit the IRS website at IRS.gov/forms.

You can visit IRS.gov for the latest information about the Economic Impact Payments and filing your 2020 tax return.

Excerpt from IR-2021 Bulletin 12 Jan. 2021