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Archive for December, 2020

2021 Standard Mileage Rates

Monday, December 28th, 2020

The IRS recently released the information on how much you can deduct for mileage for 2021. The mileage rates apply to operating an automobile for business, charity, medical or moving purposes.

Starting on Jan. 1, 2021, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

• 56 cents per mile driven for business use, down 1.5 cents from the rate for 2020,
• 16 cents per mile driven for medical or moving purposes for qualified active duty members of the Armed Forces, down 1 cent from the rate for 2020, and
• 14 cents per mile driven in service of charitable organizations, the rate is set by statute and remains unchanged from 2020.

Please consult your tax advisor on all the above information.

Recovery Rebate Credit

Wednesday, December 23rd, 2020

Taxpayers may be able to receive a Recovery Rebate Credit when they file their 2020 taxes if they were eligible for the Economic Impact Payment and didn’t receive it or didn’t receive the full amount they were entitled to. You may be eligible to receive the Recovery Rebate Credit if meet the eligibility requirements and one of following applies:

– You didn’t receive an Economic Impact Payment in 2020.
– You are single and your payment was less than $1,200.
– You are married, filed jointly for 2018 or 2019 and your payment was less than $2,400.
– You didn’t receive $500 for each qualifying child.

You want to make sure to save your Notice 1444 that you received in the mail because you will need this to determine if you are eligible for the Recovery Rebate Credit when you file your 2020 tax return. The IRS gives a further explanation on their website:

https://www.irs.gov/coronavirus/economic-impact-payments

please consult your tax advisor on all the above information.

New Notice for your 2020 Tax Return Regarding Economic Impact Payments

Monday, December 21st, 2020

If you received an Economic Impact Payment in 2020 you will receive a Notice 1444 which states the amount of the payment you received. You want to save this notice to refer to it once you go to file your 2020 tax return. This notice specifically provides information about the amount of the payment, how the payment was made, and how to report any payment that wasn’t received.

Saving this notice is also important because when you file your tax return you may be eligible for a Recovery Rebate Credit. People who didn’t receive an Economic Impact Payment in 2020 may qualify for the Recovery Rebate Credit.

This form should be kept with all your 2020 tax documents and submitted to your tax preparer when you go to file your 2020 tax return.

Please consult your tax advisor on all the above information.

Covid Text Message Scam

Wednesday, December 9th, 2020

The IRS has issued a warning for yet another new scam going around, this one involves text messages. The endgame for the scammers in this new scam is to ultimately get your bank account information and they are using the $1,200 Economic Impact Payment to facilitate this scam.

The scammers will send you a text message that says you “have received a direct deposit of $1,200 from COVID-19 TREAS FUND. Further action is required to accept this payment…Continue here to accept this payment”. The text will then provide a link that sends you to a phishing website where the scammer tries to get you to enter your personal and bank information so they can steal it. The fake website does look like a real IRS website. DO NOT CLICK ON THE LINK OR ENTER ANY OF YOUR PERSONAL INFORMATION.

The following instructions are directly from the IRS if you receive this text:

Anyone who receives this scam text should take a screenshot and include the screenshot in an email to phishing@irs.gov with the following information:

• Date/time/time zone that they received the text message
• The phone number that received the text message

The IRS doesn’t send unsolicited texts or emails. The agency will never demand immediate payment using a gift card, prepaid debit card or wire transfer or threaten to have a taxpayer arrested.

Please consult your tax advisor on all the above information.

2020 Standard Deduction Amounts

Monday, December 7th, 2020

Standard deductions usually increase every year due to inflation. Below are the updated tax year 2020 standard deduction amounts:

• Married filing jointly: $24,800 — up $400 from 2019 tax returns
• Married filing separately: $12,400 — up $200 from 2019 tax returns
• Head of household: $18,650 — up $300 from 2019 tax returns
• Single: $12,400 — up $200 from 2019 tax returns

Please consult your tax advisor on all the above issues.

IRS is Making it Easier for Installment Agreements

Wednesday, December 2nd, 2020

Due to Covid-19, the IRS has recently made changes to help ease the burden to taxpayers who owe money. The IRS is trying to give more options to people to make their payments. The IRS is expanding their payment plan options and added new tools to assist taxpayers:

• If you qualify for a short term payment plan you now have 180 days to resolve the tax liability instead of 120 days.

• The IRS is offering flexibility for taxpayers who are currently unable to meet their obligations with their Offer in Compromise.

• The IRS will automatically add certain new tax balances to existing Installment Agreements, for individual and out of business taxpayers. This taxpayer-friendly approach will occur instead of defaulting the agreement, which can complicate matters for those trying to pay their taxes.

• Certain qualified taxpayers who owe less than $250,000 may setup an installment agreement without providing proof, such as a financial statement, that their proposed monthly payments are sufficient enough.

• Some people who only owe a 2019 tax and its under $250,000 may qualify to setup an installment agreement without a notice of federal tax lien filed by the IRS.

• Qualified taxpayers with existing Direct Debit Installment Agreements may now be able to use the Online Payment Agreement system to propose lower monthly payment amounts and change their payment due dates.

Please consult your tax advisor on all the above issues.