Thursday November 21, 2019
Last-Minute Tax Filing Help
The IRS offers five filing tips for last-minute taxpayers.
- View Your Account Information You can go online and log in to your IRS account. On that account, you can view your amount owed, pay online and even set up your online payment agreement. Go to IRS.gov/SecureAccess to view the authentication methods.
- IRS YouTube The IRS has extensive videos that explain how to file for an extension, how to avoid common filing errors and the different tax payment options. IRS videos have been viewed over 16 million times during the past decade.
- IRS Free File Taxpayers with modest or moderate incomes are permitted to use free tax software to complete their return. Search for "Free File" on IRS.gov. It also is possible to prepare your return on your phone using the IRS2Go mobile app.
- IRS Services Guide The IRS Services Guide explains many of the IRS's helpful online tools. These include the Interactive Tax Assistant, Tax Topics, Frequently Asked Questions, Tax Trails and IRS Tax Map.
- Tax Cuts and Jobs Act (TCJA) Due to the substantial changes made under the TCJA, you may want to refer to Publication 5307, Tax Reform: Basics for Individuals and Families and Publication 5318, Tax Reform: What's New for Your Business.
- Forms W-2 and 1099 Make certain that you have entered the numbers correctly. Many returns that are filed have omitted a required Form 1099, producing incorrect income and a tax that is lower than what should be paid.
- Social Security Numbers All dependents claimed on a return now must have a Social Security Number.
- Bank Account and Routing Number Double check your bank account and routing numbers. The routing number identifies the bank and your account number identifies your account. Because most tax refunds are directly deposited in your bank account, it is essential that you have the correct numbers. If you have an incorrect number, your refund could be delayed or deposited into another person's account.
- Adjusted Gross Income Many tax software products require you to enter the adjusted gross income from your prior return. This is part of the security process for electronic signatures. You will need to retain a copy of your return in order to file electronically. Prior year copies can be obtained using the Get Transcript Online tool on www.IRS.gov.
- Mailing Paper Return If you complete a paper return, you will need to mail it to the correct IRS location. Depending on your state of residence, there may be a specific IRS location for mailing your return.
- Tax Tables If you are using tax tables to calculate your tax, double check to make sure you are using the correct column and table for your filing status.
- Signing the Return All returns must be signed. If you file electronically, you may provide a qualified electronic signature.
IRS Successful in Reducing Fraud
In 2015, the IRS created the Security Summit. This coalition of federal and state government tax authorities and private tax preparation companies joined together to guard against criminals who are stealing billions of dollars through tax refund fraud.
IRS Commissioner Chuck Rettig reported major progress in reducing identity theft refund fraud. He stated, "The IRS and the Security Summit continue to make tremendous inroads in the battle against identity theft. In 2018, our partnership protected more taxpayers and more tax dollars from tax-related identity theft. At a time when many in the private sector continue to struggle with these issues, the tax community has made major progress working together to stop identity theft and refund fraud."
Rettig highlighted the successes of the Security Summit. Between 2015 and 2018 there were substantial improvements in four areas.
- Identity Theft Victims The 677,000 reports in 2015 of identity theft were down 71% in 2018 to 199,000.
- Identity Theft Returns The 1.4 million 2015 identity theft returns were reduced 54% to 649,000 in 2018.
- Fraudulent Refunds In 2015, fraudsters attempted to collect $8.7 billion in fraudulent refunds. The 649,000 fraudulent returns in 2018 attempted to collect $3.1 billion in refunds.
- Security Summit Partners Private members of the Security Summit were also active in fighting identity theft. They recovered approximately $1.4 billion in fraudulent refunds.
The Security Summit will continue to focus on reducing corporate identity theft refund fraud. Rettig concluded, "Despite these major successes, more work remains. Identity thieves are often members of sophisticated criminal syndicates, based here and abroad. They have the resources, the technology and the skills to carry on this fight. The IRS and the Summit partners must continue to work together to protect taxpayers as cyberthieves evolve and adjust their tactics."
IRS Fact Sheet on Sec. 199A
In FS-2019-8, the Service outlined the principal provisions of the Sec. 199A 20% deduction for qualified business income (QBI). The QBI deduction applies to passthrough entities and was passed by the Tax Cuts and Jobs Act. Because it applies after the December 31, 2017 calendar year, taxpayers will be using the QBI deduction for the first time in tax year 2018.
- QBI Components The deduction is 20% of QBI from a sole proprietorship, partnership, subchapter S corporation, trust or estate. For upper income taxpayers (over $315,000 filing a joint return or $157,000 for single individuals), the deduction is limited by the type of trade or business, W-2 wages paid by a qualified business or the unadjusted basis immediately after acquisition (UBIA) of qualified property.
- REIT/PTP Components There is a deduction for 20% of qualified REIT dividends or PTP income. The W-2 wages or UBIA limits are generally not applicable. However, for upper income taxpayers, the PTP income may be limited based on a specified service, trade or business (SSTB).
For taxpayers with incomes over $315,000 filing jointly or $157,000 filing as an individual, the deduction is limited if employed in an SSTB. The SSTB involves "the performance of services in the fields of health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, investing and investment management, trading, dealing in certain assets or any trade or business [where the] principal asset is the reputation or skill of one or more of its employees or owners."
An example of a reputation or skill business is one where the income is from endorsing a product or service or use of a person's image, likeness or voice in media.
There is a safe harbor for rental real estate. See Notice 2019-07. The American Institute of CPAs (AICPA) has expressed concerns about uncertainty in filing returns because the Notice did not permit commercial and residential property to be part of the same enterprise. The AICPA indicated in an April 9 letter to the IRS that it is difficult to segregate these properties in applying the safe harbor. The New York State Bar Association Tax Section stated, "For example, a residential apartment building will often have commercial rental space on lower floors. In addition, it's not clear how the proposed revenue procedure might apply to corporate housing, short-term and long-term vacation rental properties and similar real estate holdings."
Many items are excluded from QBI. Capital gains or losses, interest income not allocable to a trade or business, wage income, income not properly within the United States, commodities transactions, notional principal contract income or loss, most annuities, reasonable compensation from an S corporation, guaranteed payments from a partnership and partnership payments for services typically are not included in QBI.
Editor's Note: This is the first filing season for a fairly complex deduction for individuals over the threshold income limits. With all of the uncertainty, there will be a large percentage of tax returns taking the QBI deduction that extend until October 15, 2019.
Applicable Federal Rate of 3.0% for April -- Rev. Rul. 2019-8; 2019-14 IRB 1 (15 Mar 2018)
The IRS has announced the Applicable Federal Rate (AFR) for April of 2019. The AFR under Section 7520 for the month of April is 3.0%. The rates for March of 3.2% or February of 3.2% also may be used. The highest AFR is beneficial for charitable deductions of remainder interests. The lowest AFR is best for lead trusts and life estate reserved agreements. With a gift annuity, if the annuitant desires greater tax-free payments the lowest AFR is preferable. During 2019, pooled income funds in existence less than three tax years must use a 2.2% deemed rate of return.