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Archive for August, 2021

Get an IP Pin to help prevent against identity theft

Tuesday, August 31st, 2021

The pin is a six digit number that eligible taxpayers receive from the IRS which is needed to file your tax return. This will help prevent against thieves trying to file a false tax return with your information in order to claim the fake refund they create. This pin numbers helps verify a taxpayers identity and accept their tax return. Taxpayers can apply for an IP Pin at the following address:

https://www.irs.gov/identity-theft-fraud-scams/get-an-identity-protection-pin

Tax pros cannot get a pin number on behalf of a client for security reasons.

The IRS outlines the following information regarding these pin numbers:
• 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.

If you are having trouble validating your identity online when applying for a pin number you can file Form 15227 or make an appointment with the Taxpayer Assistance Center.

The information provided in this blog does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available in this article are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information. Please consult your tax advisor on all the above issues.

Managing your advanced child tax credit payments

Wednesday, August 25th, 2021

Eligible individuals recently started receiving advanced child tax credit payments. New in 2021, the IRS determined if you are eligible for the child tax credit based on your prior year tax return and instead of waiting to receive this credit as part of your refund when you file your tax returns the IRS is giving you the money ahead of time. If the IRS has deemed you eligible for the credit they just started sending out monthly payments automatically to you, usually the 15th of the month. The good news is that the IRS has created a portal where you can manage or stop these payments:

https://www.irs.gov/credits-deductions/child-tax-credit-update-portal

Some functions of the portal include:

• Switching from a paper check to direct deposit – If the IRS does not have your bank account information on file they will send you a paper check. You can use the portal to enter your bank account information to begin receiving the payments via direct deposit.
• Stopping the payments – If you do not want to receive these advance payments you can unenroll on the portal. If you qualify for the credit it will factor in as a lump sum when you file your tax return if you unenroll. For married couples, each spouse needs to unenroll in order to completely stop the payments. If only one spouse unenrolls then the IRS will send half the payment to the other spouse that did not unenroll.

One reason you would want to stop the payments is if you do not qualify for the child tax credit in the current year (you did qualify in the prior year which is what the IRS is basing the qualification on). Children no longer qualify for the credit once they turn 18. So if at the end of the year your child is 18 years old, that person no longer qualifies for the credit in the year the person turned 18.

It is also very important to keep track of all the payments you received during the year, you will need to give that amount to your accountant when you go to file your 2021 tax return.

The information provided in this blog does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available in this article are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information. Please consult your tax advisor on all the above issues.

Tips if you get an IRS letter in the mail

Wednesday, August 18th, 2021

The IRS offers the following tips if you receive a letter/notice from them:

• Do not ignore it. Some people feel if they do not address the letter it will go away but the IRS will follow up on the issue even if you do not respond.
• Keep a copy of the letter. Always make sure to save a copy of the letter, you may need to reference it later or need it for your tax return prep.
• Do not reply unless you are instructed to. Make sure to read exactly what the IRS is looking for, in many cases you will need to respond.
• Respond in a timely manner. The notice will give you a deadline to respond, make sure to address the notice before that deadline.
• Review the information closely. You should not just pay a notice without finding out if the changes made by the IRS are correct or not, in some cases the IRS is not correct. A perfect example is if you forgot to include stock sales of $10,000 on your return the IRS will send you a bill taxing you on the full $10,000, they fail to factor cost basis in. You may have paid $8,000 for those stocks so you should only be paying taxes on the $2,000 gain, not the full $10,000 sale. You would need to amend your tax return in this example to add the stock sale with the cost.
• Do not be afraid to dispute the notice, the IRS is not always correct with their changes.
• Avoid scams. There are plenty of IRS scams out there so do you research on any correspondence from the IRS to make sure it is legit. A good way to verify the notice is legit is by calling the IRS directly, 800-829-1040.

The information provided in this blog does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available in this article are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information. Please consult your tax advisor on all the above issues.

Information you will need when calling the IRS

Wednesday, August 11th, 2021

A situation may come up in the near future where you will need to call the IRS for some clarification or information, such as you may have just received a notice from the IRS and you want to call to find out what the notice is about. The IRS is doing their best to keep taxpayers personal information out of the hands of identity thieves so they normally require some information from you, up front, before they will discuss anything with you. So before you call the IRS, you should have the following items ready to give them when they ask for it:

• Birthdates and social security numbers for the people listed on the tax return.
• An Individual Taxpayer Identification Number letter if you have that instead of a SSN.
• Your filing status: single, head of household, married filing joint or married filing separate.
• Prior year tax return. You may have to verify some of the figures from the return with the IRS agent.
• A copy of your tax return that you are questioning.
• The IRS letter or notice that you received.

By law the IRS is only going to speak with the taxpayer of the taxpayer’s legally designated representative.

The information provided in this blog does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available in this article are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information. Please consult your tax advisor on all the above issues.

The IRS is continuing to issue unemployment compensation adjustment refunds

Tuesday, August 3rd, 2021

The IRS recently announced that another 1.5 million taxpayers will receive refunds as a result of the first $10,200 unemployment compensation not being taxable for certain qualified taxpayers. Many people who had unemployment compensation filed their tax returns before this was signed into law so they didn’t get the benefit. The IRS does not want people to amend their returns for this, they are making the adjustments and sending out any refunds due. Please keep in mind that not everyone qualifies for this benefit, it only applies to individuals and married couples whose modified adjusted gross income was less than $150,000 in 2020.

This round of refunds started on July 28 for direct deposit and paper checks began to be mailed out on July 30th. If you have an outstanding balance with the IRS, they may apply your refund to that instead of giving the money to you.

The IRS does give a few situations where you should amend your tax return instead of having the IRS correct it for you:

• did not submit a Schedule 8812 with the original return to claim the Additional Child Tax Credit and are now eligible for the credit after the unemployment compensation exclusion;
• did not submit a Schedule EIC with the original return to claim the Earned Income Tax Credit (with qualifying dependents) and are now eligible for the credit after the unemployment compensation exclusion;
• are now eligible for any other credits and/or deductions not mentioned below. Make sure to include any required forms or schedules.

The IRS will send a letter to the taxpayer within 30 days of the adjustment explaining what change was made.

The information provided in this blog does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available in this article are for general informational purposes only.  Information on this website may not constitute the most up-to-date legal or other information. Please consult your tax advisor on all the above issues.