IRS Issues Guidance on Renewable Energy Projects, Retirement Withholding

by | May 29, 2020 | Tax Tips and News

The Internal Revenue Service has issued rules and guidance covering two disparate tax areas: renewable energy and retirement payments.

New rules give relief for taxpayers developing renewable energy projects and producing energy through renewable means. The IRS also issued proposed regulations that update the tax withholding rules for periodic retirement and annuity payments made after Dec. 31, 2020.

There will be a bigger window on renewable energy.

The new relief measures help not only those who develop renewable energy projects but those who use renewable strategies to produce electricity. The acceptable sources include wind, biomass, landfill gas, trash, and hydropower. There’s also a safe harbor for taxpayers using solar panels, fuel cells, micro-turbines and combined heat-and-power systems.

This latest guidance is spelled out in Notice 2020-41.

The IRS admits that the effects of the COVID-19 pandemic has caused delays in the supply chain for the components that are needed to complete renewable energy projects that would otherwise be eligible for important tax credits.

For certain projects that began construction in 2016 or 2017, Notice 2020-41 adds an extra year to the four-year “Continuity Safe Harbor” provided in existing guidance. If these projects are placed in service within five years construction will be considered to be continuous. 

Notice 2020-41 also provides a measure of comfort for those taxpayers who started construction and incurred at least 5% of the project costs and made payments for services or property that was expected to be delivered within 3 1/2 months.  the IRS now considers these taxpayers to be considered “incurred” under economic performance rules.

The notice says if the services or property are received by Oct. 15, 2020, the taxpayer’s expectations at the time of the 2019 payment are considered reasonable.

IRS documents say these changes were all made necessary by the pandemic.

“Extending the Continuity Safe Harbor and providing a 3½ Month Safe Harbor will provide flexibility for taxpayers to satisfy the beginning of construction requirements and limit the impact of COVID-19-related delays on the ability to claim tax credits,” the IRS writes.

What are the new rules for payments?

Accounting Today reports that the IRS and the Treasury Department have also proposed new regulations updating income tax withholding rules for periodic retirement and annuity payments made after Dec. 31, 2020.

The rules for withholding on these kinds of payments were set up for change by the Tax Cuts and Jobs Act in 2017.

Before that time, if no withholding certificate was in effect for a taxpayer’s periodic retirement and annuity payments, withholding was determined by treating the taxpayer as a married individual claiming three withholding exemptions.

The 2017 tax reform measure changed that, saying instead that when no certificate was present, rules set out by Treasury would be the determining factor. But that hasn’t been as simple as it sounds.

The IRS issued Notice 2020-3 earlier this year that basically said the default rate of withholding on periodic payments with no certificate present would continue to be based on that of a married taxpayer with three exemptions.

Now, Accounting Today reports, this new proposal means another iteration of regulations will once again be coming from the IRS and Treasury for 2021 and beyond. The rules and procedures will hopefully determine the default rate of withholding on periodic payments when a taxpayer has no withholding certificate.

Accounting Today, though, advises that more rule changes may yet be on the horizon. Most of the individual tax provisions of the Tax Cuts and Jobs Act will expire in 2025.

– Story provided by TaxingSubjects.com

Delayed Deadline Lets Tax Filings Lag

by | May 28, 2020 | Tax Tips and News

When the Internal Revenue Service moved the 2020 deadline for filing individual income tax returns from April 15 to July 15, it apparently also gave millions of taxpayers a green light to wait until the last minute to file their taxes.

CNBC reports that the IRS is behind last year’s number by almost 9.5%, with 128 million individual returns filed so far in 2020 compared to 141.5 million filed by this time last year. The network reports the number of refunds also lags behind last year’s levels, down nearly 14%.

Refund amounts, however, are up, with the average refund putting $2,779 in the bank — up some $50 from 2019.

Are taxpayers working the system?

Tax professionals don’t seem all that surprised that taxpayers are taking advantage of a much larger window to file and pay their taxes.

“Part of it is people taking advantage of the July 15 deadline, and I bet some of that has to do with CPA firms as well,” said Matt Rosenberg, CPA and member of the American Institute of CPAs’ Financial Literacy Commission.

But Rosenburg sounded a cautionary note to CNBC, saying it’s a much smarter idea to take stock of your tax situation now while there’s still time.

“It’s nice to have the extra time, but I still encourage people to calculate their tax liability right now,” Rosenberg said. “If you’re able to claim a refund, you can take it. If you owe, you have an opportunity to budget and pay for it.”

What are strategies for the extra time to file?

CNBC has a few ideas on what taxpayers can do to improve their tax picture while waiting for the July 15 deadline:

• Put away more savings if they can. Taxpayers have until July 15 to save up to $6,000 in an IRA and have the contributions count for 2019. If the taxpayer is 50 or over, the limit is $7,000.
• Put more money into an HSA and have it count for 2019. Taxpayers can save on a tax-deductible or pre-tax basis in an HSA and have the cash grow tax-free. Money withdrawn to pay for qualified medical costs come out tax-free. (CAUTION: Taxpayers can only fund an HSA if they have a high-deductible health plan.)
• Search for additional deductions and credits. Taxpayers can look over their statements to see if they qualify for tax extenders — tax breaks that have to be renewed by lawmakers every year.
• Know your state date. While most states have also pushed their tax-filing deadlines back, not all of them have. The American Institute of CPAs has a handy list of states and their deadlines.

Finally, CNBC advises not to play games with taxes. If you have the money to pay your 2019 tax bill, you’re better off just doing it. Taxpayers who invest the money that could be better used paying their tax due are walking a razor’s edge.

“Investing the money if you don’t have to pay it right away is risky,” Rosenberg said. “The rate of return you get is low on anything that’s safe and probably  isn’t even worth the headache.” 

Our thanks to CNBC and reporter Darla Mercado for the original article.

– Story provided by TaxingSubjects.com

IRS Updates Economic Impact Payment Statistics

by | May 23, 2020 | Tax Tips and News

The Treasury Department has issued an additional $41 billion in Economic Impact Payments since May 8, 2020.

The Internal Revenue Service announced the latest Economic Impact Payment statistics in a Friday press release. To provide a clear picture of how the $257 billion in payments has been distributed, the agency updated its recent state-by-state breakdown. In an accompanying statement, IRS Commissioner Chuck Rettig said that this data highlights the agencies’ ability respond quickly during a crisis.

Rettig also noted that some non-filers may still need to report qualifying information to the IRS: “We also continue to urge those who don’t normally have a filing requirement, including those with little or no income, that they can quickly register for the payments on IRS.gov.” Specifically, non-filers who don’t receive Railroad Retirement, Social Security, Survivor or Disability, Supplemental Security Income, or Veterans Affairs benefits can use the Non-Filers: Enter Payment Info Here tool to ensure they receive a payment.

Which state received the most Economic Impact Payments?

California ($27 billion), Texas ($21 billion), Florida ($17 billion), New York ($15 billion), and Pennsylvania ($10 billion) are the states that have received the most money from Economic Impact Payments, while South Dakota ($759 million), North Dakota ($632 million), Alaska ($580 million), Vermont ($555 million), and Wyoming ($488 million) have received the fewest payments. 

Since the number of EIPs issued by the Treasury neatly maps onto the number of residents in each state, we added a column to the IRS chart containing estimated 2019 population data from the US Census Bureau. To make it easier to read, we sorted the data by the number of payments issued:

Sources: IR-2020-101; State Population Totals and Components of Change: 2010-2019

– Story provided by TaxingSubjects.com

Five Indicted in Nationwide Fraud Scheme

by | May 22, 2020 | Tax Tips and News

Five Connecticut men have been indicted in a series of fraud schemes that targeted the elderly, bilking them out of more than $4 million. The five men were indicted by a federal grand jury on 11 counts for their alleged participation in lottery and romance scams.

The indictment includes charges of conspiracy to commit mail and wire fraud, mail fraud, conspiracy to commit money laundering, and money laundering.

They had dreams of love or money.

The alleged ring had two frauds they used to scam their victims out of money. One involved convincing the victim that he or she had won a lottery, but needed to pay fees for taxes, shipping and processing in order to claim the prize. In such schemes, once a victim sends a small amount of money, the scammer asks for larger sums with a promise of more winnings. The victims, however, never receive any winnings.

In a romance scam, scammers take advantage of people looking for companionship by pretending to be prospective companions. Scammers create fake online profiles on dating websites that include false personal details. Once they gain the victim’s trust, the scammers ask the victims for money, falsely claiming to need money for medical or business emergencies, for travel to see the victim, or for other purposes.

Prosecutors say the scams started in 2015 and ran until federal officers descended on their operation in March of 2020. While it’s alleged that the conspiracy defrauded numerous victims across the country of more than $4 million, one Connecticut victim alone lost more than $1 million.

“The financial victimization of seniors is as reprehensible as it is cruel, and the Justice Department has made it a priority to root out those who commit these crimes,” said U.S. Attorney John Durham.  “Numerous victims in this scheme gave thousands of dollars to these alleged predators.  I urge all to think twice, and then to think again, before providing any money to individuals who they have never met in person.  As soon as you are asked for money, call your local police department, or 833-FRAUD-11, for assistance.”

Durham says members of the alleged fraud ring were identified as:

• Farouk Fasasi, 25, of New Haven, Conn.
• Rodney Thomas Jr., 29, of New Haven, Conn.
• Montrell Dobbs Jr., 27, of New Haven, Conn.
• Ralph Pierre, 30, of New Haven, Conn.
• Stanley Pierre, 32, of Bridgeport, Conn.

Officers arrested Fasasi, Thomas, Dobbs and Ralph Pierre shortly after the indictment was handed down in March. At that time, Stanley Pierre was still being sought by law enforcement officers. Federal officials say Stanley Pierre later turned himself in and is currently out on $100,000 bond.

Fasasi, Thomas and Ralph Pierre were ordered jailed after their arrest; Dobbs also was released on bond.

Fasasi is a Nigerian citizen who is in the U.S. legally as a permanent resident.

The case was investigated by the U.S. Postal Inspection Service, Treasury Inspector General for Tax Administration (TIGTA), U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI), U.S. Secret Service, U.S. Army-CID, and New Haven Police Department.

J. Russell George, the Treasury Inspector General for Tax Administration, said the indictment of the five men was due to excellent teamwork by law enforcement.

“These charges demonstrate the commitment of the Treasury Inspector General for Tax Administration to investigate and bring to justice those that victimize the American taxpayer,” George said.  “These defendants are alleged to have engaged in schemes resulting in millions of dollars in fraud, often targeting the most vulnerable members of society.  The success of this investigation is the result of a collaborative effort between multiple federal law enforcement agencies and the dedicated staff at the U.S. Attorney’s Office.”

– Story provided by TaxingSubjects.com

IRS Undercover Travel Expenses Audited

by | May 21, 2020 | Tax Tips and News

The Internal Revenue Service’s Criminal Investigation unit needs to do a better job of accounting for its cash earmarked for undercover investigation expenses. That’s the bottom line from the Treasury Inspector General for Tax Administration (TIGTA).

Undercover operations are, of course, part of what IRS CI does. To pay the costs of an investigation, CI uses cash funds (called “imprest” funds) to pay some of the travel costs. These cash funds are used to pay expenses during an undercover operation while concealing an agent’s identity.

In fiscal year 2018, the IRS spent more than $1.3 million from imprest funds on confidential undercover operations. The Inspector General performed the audit to ensure these cash funds were being spent efficiently and properly, while conforming to existing federal regulations.

What did the TIGTA audit examine?

The Inspector General’s auditors looked at 49 vouchers from the 2018 fiscal year that included expenses from undercover travel. While CI’s undercover travel expenses were generally supported by adequate documentation, there were shortcomings.

For example, CI procedures don’t require advance approval to book hotel rooms that exceed the federal per diem, or the use of luxury rental cars. TIGTA’s review found that 67% of the 49 vouchers showed one or more instances where agents had rented hotel rooms costing in excess of limits set forth by the General Services Administration.

The audit also found that agents had rented luxury vehicles without the documented approval of IRS management.

The audit also raises concerns about the security of IRS personnel.

More than half of the 49 vouchers TIGTA reviewed were supported by travel receipts for reservations that contained the agents’ actual names or mentioned that the travel was government-related.

The Inspector General says this raises a different kind of red flag. “This practice raises concerns that either agent safety was potentially compromised or the imprest fund may have been used unnecessarily,” the report states.

Lastly, the audit found that quarterly audits of these cash accounts weren’t always staffed and that compromised the effectiveness of the audit procedure.

What were the TIGTA audit recommendations?

TIGTA’s audit put forth a number of recommendations, all of which found IRS management agreeable:

• Require management approval for reserving hotel rooms exceeding the federal cost limit;
• Require management approval for use of luxury vehicles;
• Periodically assess undercover travel on a function-wide basis to identify potential areas for improved efficiency, to identify best practices to ensure agents’ safety, and to ensure that the investigative imprest fund is only used when needed to maintain the security of undercover operations;
• Clarify internal guidance to ensure that the audit team assigned to perform CI imprest fund audits rotates assignments in a way that maximizes independence.

IRS management agreed with all recommendations and says it has taken or plans to take corrective action.

– Story provided by TaxingSubjects.com

Treasury Sending Prepaid Debit Cards to Some EIP Recipients

by | May 21, 2020 | Tax Tips and News

Would you prefer to receive your Economic Impact Payment on a prepaid debit card? The Treasury Department said that will be a reality for almost 4 million Americans in a recent press release, which announced that “EIP Cards” will be issued by MetaBank as part of the US Debit Card Program.

Treasury Secretary Steven Mnuchin emphasized that convenience, security, and timeliness were chief considerations when developing the new EIP Card Program. Mnuchin said that EIP cards can be activated and used as soon as they arrive in the mail.

How do EIP Cards work?

“EIP Card recipients can make purchases, get cash from in-network ATMs, and transfer funds to their personal bank account without incurring any fees,” the Treasury explained. That fee-free use of EIP Cards also extends to checking your account balance—whether digitally or by phone.

Since EIP Cards work like standard credit or debit cards, the Treasury said “[they] can be used online, at ATMs, or at any retail location where Visa is accepted. This free, prepaid card also provides consumer protections available to traditional bank account owners, including protections against fraud, loss, and other errors.”

Who will receive EIP Cards?

If you’ve been following recent Economic Impact Payment announcements, you know that most payments were automatically issued to Americans who filed a tax year 2018 or 2019 return and certain government beneficiaries.

Shortly before the Treasury started mailing checks and depositing payments in designated bank accounts, recipients were able to designate how they preferred to receive their EIP with the Get My Payment tool on IRS.gov. “Prepaid debit card” was not an available option at that time, but qualifying government beneficiaries who received their benefits on a prepaid debit card also received their Economic Impact Payment on that same card.

It turns out that the Treasury will send the new EIP Cards to Economic Impact Payment recipients who did not supply direct deposit information to the IRS and had their tax return processed at the IRS Service Center in Andover, MA or Austin, TX. That said, keep in mind that an EIP Card is a separate prepaid debit card from those issued by relevant government benefits programs. Beneficiaries who elected to receive their EIP on an existing card or bank account will not receive an EIP Card.

When will EIP Cards be available?

EIP Cards—and instructions for activating and using them—are being mailed this week, according to the Treasury release.

Source: “Treasury is Delivering Millions of Economic Impact Payments by Prepaid Debit Card”

– Story provided by TaxingSubjects.com