Anthony Sykes & Company

                 The tax season for this year has been established. As announced by the Internal Revenue Service ( IRS ), the first day tax returns will be accepted is January 23 . The deadline to file is April 18 . After reflecting on the past 3 years, the IRS has taken steps to make improvements in the service it provides to taxpayers.           As part of the Inflation Reduction Act passed in August 2022, the IRS has hired 5,000 new employees. They will answer phone inquiries and provide in-person assistance. The date of January 23 was chosen to allow for training and needed updates to the software so IRS systems will work smoothly. Tuesday, April 18, 2023 will be the tax filing deadline in observance of Emancipation Day in the District of Columbia. Since there is more help available this year than in previous years, our next post will discuss how to best use our time in preparation f...

             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.

              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, ...

            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 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.

           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. 

                 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.

                 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...

             There are simple steps all of us can take now to make the filing process in 2022 go as smoothly as possible. Let’s not overlook the fact that we are about a month away from this starting. Here are a few tips that might keep you from being caught off guard.           Organize your tax records. One of the most stressful parts of tax season is searching for documents. We can start to lessen that stress by gathering, or preparing to gather, forms like a W-2 from an employer, a 1099 from unemployment compensation or a pension. Also make sure to have any records related to digital currency transactions. Make it a habit to keep this documentation for at least 3 years.           Review your withholding. Make sure that your withholding is in the right place to start 2022. If there was a surprise tax bill this year, or a larger than expected refund, ...

             This is the busiest shopping season of the year, and most of it is being done online. This means that criminals are actively trying to find opportunities to steal your information. They often use it to try and get a fraudulent tax refund. This is our second post about how we can protect ourselves.           Beware of scammers using fake charities . This is a time of year when many want to give to organizations. Criminals know this and try to use it to their advantage. Never let anyone pressure you into donating without doing research first. Make sure the charity is real by confirming its exact name, website, and mailing address. If the name is similar to, but not the same, as a well-known charity, this is often a sign of fraud. Give donations by credit card or check, do not give gift cards or wire money.           Businesses need to learn b...

             This is the busiest shopping season of the year. As a result, criminals are doing their best to find ways to steal your sensitive personal information. Another time they try to do this is during tax filing season from January to April. However, according to a recent security report from the Internal Revenue Service ( IRS ), even if someone doesn’t file a tax return, their online interactions can reveal that same data and often it is used to try and get a fraudulent tax refund. How can we protect ourselves?           There are some basic steps that we can all take. Make sure that there is security software on all your devices and that it stays updated. Avoid the trap of phishing scams . These are the messages that seem to be from a legitimate source, but they ask for your personal information. They might claim to have information about Economic Impact Payments, Child Tax Credits, or oth...

            With filing season approaching very soon, it is important for every Taxpayer to know what their Filing Status is. The Internal Revenue Service ( IRS ) has five. They can have a strong impact on how much tax is owed, what the Standard Deduction is, or if a return is even needed. The marital status is determined by how things are as of December 31.           Those who choose Single must be unmarried, divorced, or legally separated. Married filing jointly allows for a joint tax return with a spouse. If one passes away, the one who is widowed can still file jointly for that year. Married filing separately allows for separate tax returns and may result in less tax owed. Head of household can be used by unmarried Taxpayers, but under certain conditions. For example, it must be proven that one paid more than half of the cost of keeping a home for themselves and another individual. Qualifying widow...

             For those who have filed a tax extension, the time to file will arrive soon. At this point, you may be considering hiring a Tax Preparer. The Internal Revenue Service ( IRS ) wants to make sure that you hire the most qualified individual to care for your needs in this area. This is especially important considering that the taxpayer is always responsible for what is in the tax return, no matter who files it.           Not all tax preparers are the same, pick one that fits your needs. There are a few things you can look for. Make sure your preparer offers the ability to e-file . This is the preferred method of the IRS and it makes filing so much simpler. Make sure the preparer includes their Preparer Tax Identification Number . All paid tax preparers must sign and put their PTIN on every tax return they work on. Ask about fees . Make sure they are clear about their fees. Stay away from t...

                 The National Taxpayer Advocate is required to issue a report to Congress on how the Internal Revenue Service ( IRS ) is functioning. This would include positive points and where they need to improve. How do you think the IRS did in the tax filing season of 2021?           The IRS completed 136 million income tax returns and issued 96 million refunds. This is very similar to what was done in 2019. (The year 2019 is used as a comparison because nothing can ever compare to 2020.) These efforts are made more impressive by the fact that the IRS also issued 3 rounds of Economic Impact Payments within 15 months. With this encouraging news, there are some areas that are in need of improvement.           There is currently a backlog of 35 million individual and business tax returns that need to be processed. Almost half of them are o...

          There is a 3 year window to claim a Tax Refund. For those who did not file a 2017 Tax Return, that window will soon be closing. The Internal Revenue Service ( IRS ) says that the last day to claim any of the $1.3 billion is May 17. After this, it will belong to the Treasury Department. It’s estimated that the median amount of the refunds is $865. For a state like California, there is the potential for over $120 million in refunds for that Tax Season. All that is needed is to file that 2017 Tax Return. There is no penalty for filing late, if you are receiving a refund. This can be the key to getting an Economic Impact Payment ( EIP ) if you did not get one last year and you qualify. However, that refund might be held back if you have not filed for 2018 or 2019. The refund may also be applied to any outstanding federal or state tax debts, unpaid child support, or student loans.           Those who have not filed the...

When the American Rescue Plan ( ARP ) Act was enacted last month, it allowed for up to $10,200 of Unemployment income to be untaxed. However, for weeks prior, Taxpayer’s had been filing their Tax Returns and paying the full tax on all of their income, including Unemployment benefits. The Internal Revenue Service ( IRS ) stated that amended returns did not need to be filed at that time. Now they have presented the solution to this paradox. Starting this month, the IRS will automatically reexamine Tax Returns that were filed before the new rules went in place. They will determine the correct taxable amount and if there is an overpayment it will be refunded, or it will go toward any taxes owed. For most, there will be no need to file an amended return. The exception would be if the new taxable amount allowed you to qualify for a new tax credit or deduction. At that point an amended Tax Return must be filed. The new refunds are scheduled to be sent out in May. Make sure to speak with yo...

          One feature of the recently passed 2021 American Rescue Plan ( ARP ) is the ability to have up to $10,200 of Unemployment Income from 2020 be exempted from tax. This is certainly something that many Taxpayer’s would want to make use of. However, this was enacted after Tax Season had begun. Tax returns were already being filed and tax refunds issued without this credit being applied. The Internal Revenue Service ( IRS ) was very clear in saying that they did not want amended returns to be filed.           It has now become clear why they did not want this to happen. The IRS will automatically issue refunds for the tax paid on the Unemployment Income, if you qualify. They are also updating their software and sending out new worksheets for those who have not filed. This is might be one of the reasons why the tax filing deadline for individuals has moved to May 17 . As we have stated in a previous post , ...

             At this point the Internal Revenue Service ( IRS ) has not released the date when it will start to accept Tax Returns. However, we do know about many of the changes coming this Tax Season. As a reflection of what happened in 2020, there are some different things to consider when filing in 2021.           Recovery Rebate Credit. This would apply to those who never received their Economic Impact Payment ( EIP ) in 2020, or what they got was less than what they qualified for. Refund Interest Payments. If you filed on time and got your Tax Refund after April 15, 2020 it was late, and the IRS paid interest for the delay in sending the refund. That interest is also income that must be declared. The appropriate form will be sent soon. Another point to keep in mind is that you should never depend on a Tax Refund to arrive at a particular time. It usually takes 3 weeks, but certain credit cl...