Anthony Sykes & Company

                 As the Internal Revenue Service ( IRS ) continues to catch up with its backlog of paperwork, there is a problem that is emerging. They have determined that a growing number of Paycheck Protection Program ( PPP ) loans have been improperly granted forgiveness. These loans were first established to assist small businesses that were adversely affected by the COVID-19 pandemic in paying certain expenses.           To have these loans forgiven, three criteria had to be met and that would allow the amount to be excluded from total income. For example, the loan had to be used to pay eligible expenses like rent, payroll, and utilities. However, upon further review, many of those who had their loans forgiven really do not meet those criteria. In situations like this, the loan amount is added to the total income for that year. This would require filing an amended tax return for that y...

           Many plan on making charitable donations this time of year, especially for Giving Tuesday. Before doing so, it is always best to know if the gift is tax-deductible. It is also a good practice to research the organization to make sure it is tax-exempt and get a written acknowledgement of a donation greater than $250. Usually, a gift of cash or property given to a charity can be deducted when itemized on a tax return. However, some donations do not qualify for a tax deduction. For example, a donation carried forward from a prior year, a donation made to a supporting organization, or donations made to most private foundations will not be eligible for a tax deduction. Take time now to plan your gift and understand how it may affect your taxes.

             The Internal Revenue Service ( IRS ) provides resources to meet the needs of different groups of people. That is especially true of active members of the military, veterans, and their families. Certain benefits relate to the taxpayer’s military status. There are different rules that apply to those who are serving abroad, or in combat zones.           Depending on their situation, they may qualify for automatic deadline extensions, and the ability to claim certain moving expenses. Military members and veterans often have some of the most uniquely complex tax situations. The IRS recognizes that. If you fall into this category, take time now to be prepared before January arrives.

                 When being employed by a family member, things can get complicated. That is especially true when it comes to tax responsibilities. Often, it depends on the relationship and the type of business. For example, a spouse is considered an employee if the first spouse makes the management decisions. Then their income is subject to income tax withholding, Social Security, and Medicare taxes.           When children are employed by their parents in a Sole Proprietorship or partnership, the wages are always subject to income tax withholding. However, only after the children turn 18 does Medicare and Social Security come into play. This changes when the business is a corporation or an estate. At that point, all wages are subject to withholding, Medicare, and Social Security. It does not matter how old the child is. If you are planning on starting a business and employing family member...

               For those who requested an extension to file their 2021 tax return, the deadline is Monday, October 17 . The Franchise Tax Board ( FTB ) follows the lead of the Internal Revenue Service ( IRS ) in this area. The time to file is now. However, there is no need to wait until the last minute of the last day. If you are ready before October 17, get your return filed then. When you have your information, there is no need to wait. If something unexpectedly comes up, and you file after the deadline, there will be a late filing penalty.           In some cases, there are some who are given extra time. Members of the military serving in a combat zone have extra time. They usually have up to 6 months after they leave the combat zone to file. Taxpayers who live in a declared disaster area will have extra time. In these situations, the filing date can continue to change, so those affected need ...

                 October is National Cybersecurity Awareness month. But we don’t want to wait for a particular time to check how secure our systems and our habits are. That gives the criminals more opportunities.           The scams are constantly changing, and that is especially true in our industry. It is very common for a criminal to send a phishing email or a text message to try and trick someone into giving up their personal information. They could send it to a taxpayer pretending to be the Internal Revenue Service ( IRS ), or to a Tax Professional pretending to be a potential client. Don’t click on strange links or download files from people you do not know! It could allow malware to be downloaded and from there passwords are stolen and computer networks are compromised. They might even hold the data for ransom.           There are steps w...

                 The Franchise Tax Board ( FTB ) has announced state tax relief for individuals and businesses impacted by Hurricane Ian. This means that there is a postponement for required payments and an automatic extension given to file a return. The FTB automatically follows the Internal Revenue Service ( IRS ) lead when it comes to postponement periods for presidentially declared disasters.           This means that for those who have been affected by the hurricane, the October 17 tax filing deadline has been moved to February 15, 2023. Taxpayers can also deduct a loss related to a disaster. Instructions must be closely followed in this process.

             Taxpayers and Tax Professionals alike must continue to be vigilant against security threats. This is a year-round concern. Criminals involved in identity theft will always be one step ahead and willing to try new tactics, but they usually involve similar methods. Being familiar with these methods goes a long way to keep you and your information safe.           They will attempt to phish the information they want through emails or text messages. The goal is to get you to give up passwords, bank account numbers, credit card numbers, and Social Security numbers. This is accomplished in two ways. The first is making you feel that the message is coming from someone or some entity that you trust. The second is that a false sense of urgency is created to make a person open a link or attachment, or in some other way give up their sensitive information.       ...

                 Criminals are often adjusting their tactics to confuse people about what they are really after. Other times, they will stick to what works. This is the case with scams related to the pandemic. Here are a few of the more common frauds that have been used in the past 2 years and continue to be seen. Your personal information is like cash, don’t just give it away to anyone.           Fake charities. This has always been a problem, but it grows when there is a crisis or tragedy. Criminals play on a person’s desire to help. Keep in mind that a legitimate charity will never pressure you into giving a donation. They will be happy to receive one at any time and will expect you to do your research. A legitimate charity will not ask for payment by gift card or by wire transfer. This is a hallmark of how scammers operate.           Fake ...

             Phone scams are nothing new and we have all experienced a variation of this at some point. The idea is that there is a prerecorded message, or even an actual person calling, who pretends to be someone they are not. Criminals can use apps to fake their Caller ID number to make it seem like they are calling from the actual institution.           In this case they impersonate someone from the Internal Revenue Service ( IRS ). The messages are urgent and threatening in tone. They claim that law enforcement agencies will soon act unless the taxpayer follows their instructions. This is not how the IRS , or its collection agencies operate.           They will never demand immediate payment. Especially with methods like wire transfer, gift cards, or prepaid debit cards. They will never threaten to use law enforcement to arrest you for lack of tax p...

             Criminals never take a break, so we must always be vigilant and stay aware of their changing tactics. Each year the Internal Revenue Service ( IRS ) releases a Dirty Dozen list of the top 12 scams and abusive tax arrangements that taxpayers should be aware of and avoid. This post will look at text message scams.           These are messages sent to phones that claim to be from the IRS . Many of them reference COVID-19 or stimulus payments. They will also contain links to fake websites in the goal of stealing your personal information or loading a virus.           Always remember that the IRS will never send a surprise text to discuss tax matters, and they never send messages on social media. As a rule, it is best to not open attachments or links in suspicious or unexpected text messages. Make sure to independently verify that the source is ...

              If you have not filed your 2021 tax return yet, you do not need to wait until October and the extension filing deadline. However, if you are having some difficulties, it might be the time to hire a tax professional. There are different types of preparers, and your needs will determine who you hire.           There are some basic points to keep in mind. Ask about fees . Make sure you have a clear understanding about the fees you will be charged. Avoid preparers who promise to get greater refunds than competitors, or who base their fee on how much of a tax refund you get. This is an incentive for fraud. E-file . Make sure that your tax professional will use e-file to file your tax return with the Internal Revenue Service ( IRS ). It is much more efficient than using the mail.           Understand the preparer’s credentials . Enrolled Agents, Certif...

           Even with a large backlog, the Internal Revenue Service ( IRS ) still sends out letters and notices to Taxpayers at all times of the year. They could be for several reasons including, the tax return being changed by the IRS , the taxpayer being due a larger or smaller refund, a question about the tax return, or even the need to verify an identity.           There can be an increase in mail sent out in the weeks after Tax Season has finished. If you receive mail from the IRS , please remember some simple things. Do not ignore it . Reading the letter will explain the reason for the contact and what, if anything, should be done. Do not panic. The IRS normally contacts people by mail. The letter or notice will explain what is needed. Read carefully and completely. Everything you need to know is usually in the letter. If a response is needed, the date required will be there. You can always ask your Qua...

                 The tax filing deadline has passed. However, there are some common issues that come up that have relatively simple solutions. If a taxpayer expects a refund, they are usually processed in 21 days. Keep in mind that the Internal Revenue Service ( IRS ) will take longer to release a refund if the tax return is claiming a credit, has errors, or is affected by identity theft.           If you are not receiving a refund and are surprised by that development, then checking your withholding should be done. This will make sure that the correct amount of tax is being withheld from your paycheck.           Sometimes after filing their return, a taxpayer will realize that they made an error or forgot to attach a form. A common reaction is to amend their return. This should only be done to fix errors like filing status, income, deductions, ...

               Monday April 18 is approaching with certainty. The time left to file is reduced. If you are waiting until the very last minute, here are some things you should keep in mind.           File online. Those who file online tend to have fewer errors. Common errors will be picked up and needed information will be asked for. Additionally, any paper mail will take months to be processed. That will lead to penalties and interest. Filing online is the most practical option.           Consider an extension. This allows extra time to file a tax return, not to pay any taxes due. Any estimated tax liability must be paid by April 18 to be considered on time.           Extra information. When dealing with something like the Advance Child Tax Credit payment or trying to claim the Recovery Rebate Credit ...

               Criminals are especially active during this time of year. Their goal is to steal personal information, such as Social Security numbers, and file fraudulent tax returns. The Internal Revenue Service ( IRS ) scans tax returns for fraud, and when they find something, it is set aside for further review. The next steps are critical.           If the IRS determines there is fraud, they will send a letter to the taxpayer. Nothing will be processed until there is a response. The letter will notify them of potential identity theft and give specific instructions that must be followed. They might be online, over the phone, or even need to take place in person. Do not ignore these letters. Your Qualified Tax Professional can help guide you through the process.

            Every year there are millions of taxpayers who do not file a tax return. This leaves billions in unclaimed tax refunds. In 2018, there was an estimate of $1.5 billion in unclaimed money. A taxpayer usually has three years to claim their refund. This is assuming that they do not owe or have another issue with the Internal Revenue Service ( IRS ). If that is the situation, the IRS may apply some of the refund to any outstanding federal or state debts.           The deadline to claim any part of the waiting refunds from 2018 is April 18, 2022. That tax return must be mailed in. Given the current state at IRS mail sorting centers, it should be mailed as soon as possible. Other late tax returns can be e-filed. The refund amount might be delayed if there are other tax returns outstanding. Any money that goes unclaimed will become property of the US Treasury. A Qualified Tax Professional can help y...

     The tax filing deadline of April 18, 2022 is coming up soon. For those who need more time to gather their documentation and file a tax return, they can file an extension. That is much better than facing a failure to file penalty. However, from the point of view of the Internal Revenue Service ( IRS ), this does not mean that there is extra time to pay any taxes owed.      When payments are made late, penalties and interest are applied. So if a taxpayer were to wait until the extension date of October 17 to pay taxes that are due, there would be extra fines that could have been avoided. The filing date can be adjusted, but you must pay on time. If you need help, your Qualified Tax Professional can assist you in avoiding unnecessary penalties.

                 The Internal Revenue Service ( IRS ) is strongly encouraging all to remain vigilant in the face of ongoing and renewed scams and schemes. This would include having security software on phones, tablets, and computers. This along with understanding the basic trends of scams will protect taxpayers and tax professionals from identity theft.           Protect your personal information . This is more valuable than cash, or cryptocurrency if you’re into that. Never give it away to just anyone. Only share it when it is needed. A Social Security number, credit card number, bank or even utility account numbers can be used to steal money and create new accounts. Avoid phishing scams . The easiest way for criminals to get what they want is to ask for it. Internet ads don’t always come from companies that you can trust. Never download security software from a pop-up ad. It will say tha...

           At this point there is less than 1 month before the tax filing deadline. All needed documents should have been mailed or provided in electronic format. But what if something is missing? What if a form has a mistake? What should you do?           As soon as possible, contact your employer or the agency that issued the form and request a new one or inform them of the error. You might be able to receive a revised one soon. If not, the tax return must still be filed on time, or an extension must be filed before April 18, 2022 . Depending on what information is missing making an estimate is acceptable. When the form comes in later, an amended tax return can be filed.

          The Earned Income Tax Credit ( EITC ) is one of the largest tax credits. It has expanded for this year in a number of ways. For example, there is now no upper age limit for taxpayers to qualify for this credit. In addition, the EITC has expanded to include many who do not have children.           They must be at least 19 years old with income below certain limits. There are also provisions for those who are 18 and experiencing homelessness or who were in foster care. Overall, the amount of the credit has been raised and Economic Impact Payments or child tax credit payments do not count toward income when claiming this credit. Keep in mind that when claiming this credit, it will delay your tax refund by a few weeks by law as the Internal Revenue Service ( IRS ) checks to see if you truly qualify.

     The Internal Revenue Service ( IRS ) has decided to suspend the mailing of many notices to taxpayers and tax professionals. Many of these letters are automatically generated. The reason for stopping these letters is that IRS employees have a great backlog of mail to sort through. At this point, many of the letters being sent out do not accurately reflect the current situation.      Some may still be received over the next few weeks. The IRS cannot legally stop sending out all notices. However, there is often no need to respond because they are still working on last year’s tax returns. But if there is a problem for this year, interest and penalties will continue to accrue. So, it is in your best interest to take care of current tax responsibilities as soon as possible.

          The tactics of criminals and scam artists continue to adjust over time. To stay safe, we need to continue to learn about them. We may be familiar with the concept of phishing. This is when a message or email that seems to be from a legitimate source is sent out to hook as many as possible and get them to share confidential information. The activity of spearphishing targets a particular group. With tax season well under way, criminals are turning some of their attention to Tax Professionals and others who use tax software. Many are receiving emails that demand action be taken. They claim that online accounts have been frozen. However, clicking on any of the official icons or links will send you to a page that requires account information to be provided. At that point, the account is compromised.           Instead of clicking on links, go to the actual website. You can also call the support hotline for the governmen...

       The Internal Revenue Service ( IRS ) has finished issuing the third round of Economic Impact Payments ( EIP ). This means that if you qualified, but did not receive the full amount, you must claim the 2021 Recovery Rebate Credit on your tax return. This also applies to those who do not normally file a tax return. Families that added a new dependent in 2021 may be eligible for a greater amount.      The IRS will send a letter confirming what was sent in 2021, so taxpayers must carefully look at the information and determine what amount, if anything, they can claim as a credit. Doing this will help avoid processing delays. Careful review is needed in this matter. Having a Qualified Tax Professional would be helpful.

           With the start of the new filing season, the Internal Revenue Service ( IRS ) is strongly encouraging as many as possible to file taxes electronically and choose direct deposit for any tax refunds. What are some benefits of using direct deposit?           It is fast, especially when filing electronically. Trying to use a paper tax return will only delay the process since there is a considerable IRS mail backlog. There is no need to wait for a check that you hope does not get lost in the mail. It’s easy to set up and it can be split into different accounts if that is what you want. Make sure it goes into a US bank account that you control. 

               Now that tax season has officially started, you need to make sure that you have everything that the Internal Revenue Service ( IRS ) will be looking for. This means that we need to be organized with our documents that are arriving in the early portion of the year. Do not file early without supporting details from a W-2 or 1099. This can lead to mistakes and cause processing delays.           At this point, the necessary material is already available online, or has been mailed. Make sure to review it carefully for any mistakes. Something new this year is a letter called Advanced Child Tax Credit Reconciliation. This is needed to claim the amount of Child Tax Credit that was not advanced last year. Carefully check to make sure the calculations are correct. Most refunds are issued in 21 days, but some can take longer. However, paper tax returns and paper checks will take longer than e...

                 While most people do, there are some who do not normally file a tax return. There are good reasons to check and see if you should file this year. For example, to claim any tax credit like the Child Tax Credit or the Earned Income Tax Credit ( EITC ) a tax return must be filed. This will determine if the taxpayer qualifies.           Something that is still relatively new is the Recovery rebate credit. This is a result of the Economic Impact Payments. If you qualified but did not receive your third stimulus payment last year, it can be claimed as a credit. This can only happen if you file a tax return and provide your income for 2021. This credit can reduce any taxes that you might owe, or it will be included in your total refund.

                 With a new Tax Season set to begin, we need to remember to take steps to protect ourselves from scam artists and criminals. For a certainty, they are adjusting and preparing to attempt to capture your personal information. We need to be aware of their current tactics and remain vigilant. Here are some basic points to keep in mind.           One common trick that they use is to make a phone call and impersonate a Franchise Tax Board ( FTB ) or Internal Revenue Service ( IRS ) employee demanding a tax payment. If these agencies need to confirm details with you, the first step is always a letter mailed through the United States Postal Service. If a call is necessary, the employee will identify themselves, be courteous, and never demand immediate payment. They will never threaten to call the police, ask for gift cards, or try to find out your banking information. These are th...

                 We now know that the filing season for 2022 will officially start in less than 2 weeks. What can we expect? We should be prepared for many challenges and frustrations, delays and difficulties. Why?           For one reason, it is no secret that the Internal Revenue Service ( IRS ) has had customer service issues and shortages for years. For example, last tax season the IRS was only able to answer about 10% of phone calls. That is not expected to improve. In fact, things can get worse due to budget cuts related to the current pandemic. They are also still to trying deal with some requirements like processing Economic Impact Payments ( EIP ) and advanced child tax credits.           As of November, the IRS still had almost 9 million tax returns left to process. That backlog is far greater than a normal year. It usually takes 3 w...

             It is now official that the Internal Revenue Service ( IRS ) will begin to accept and process tax returns on January 24, 2022 . To make this tax season go as smoothly as possible, it is strongly recommended that Taxpayers have all of their documents gathered ahead of time. This will allow them to file a complete return the first time and avoid processing delays.           Your Qualified Tax Professional can help you determine what documents are needed. With the stimulus and child credit payments in 2021, there is a greater need for keeping good records than before. Another important note is that the deadline for filing an individual tax return is April 18,  2022,  because Emancipation Day is observed in Washington D.C.

             Every year some are surprised by a large tax bill. It can often be resolved by adjusting the withholding on paychecks with the Internal Revenue Service ( IRS ) to avoid the same thing happening the next year. However, there are some who choose to pay their income tax on an estimated quarterly basis. Taxes are paid as you go during the year so either method works.           If that was the situation last year, and no action was taken, you can expect the same results. There may also be a penalty that comes with underpaying taxes. But there is a chance to avoid this. The last day to make a payment for the fourth quarter is January 18, 2022 . Making a payment by this date can cover a missed payment from 2021 and might lessen a possible penalty. Do not confuse this with the 2021 tax return, it’s too early for that. If you need to make a quarterly payment, don’t wait. It will reduce the stress...