Anyone can request an automatic tax-filing extension, but some people get extra time without asking, according to the Internal Revenue Service.
Due to the ongoing pandemic, this year the IRS postponed the usual April 15 deadline for filing individual income tax returns until May 17, 2021. Even so, as is the case every year, many Americans will still need more time to meet their tax-filing obligation.
The IRS estimates that more than 16 million taxpayers will get an automatic extension this filing season, either by filing a form or making an electronic tax payment. But some taxpayers, including disaster victims, those serving in a combat zone and Americans living abroad get more time, even if they don’t ask for it. Here are details on each of these special tax-relief provisions.
Victims of the February winter storms in Texas, Oklahoma and Louisiana have until June 15, 2021, to file their 2020 returns and pay any tax due.
The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in a federally declared disaster area when at least one area qualifies for FEMA’s Individual Assistance program. Ordinarily, this means that taxpayers need not contact the IRS to get disaster tax relief.
This relief also includes more time for making 2020 contributions to IRAs and other plans and making 2021 estimated tax payments. In some cases, relief is also available to people living outside the disaster area if, for example, they have a business located in the disaster area, have tax records located in the disaster area or are assisting in disaster relief.
Taxpayers outside the United States
U.S. citizens and resident aliens who live and work outside the U.S. and Puerto Rico have until June 15, 2021 to file their 2020 tax returns and pay any tax due.
The special June 15 deadline also applies to members of the military on duty outside the U.S. and Puerto Rico who do not qualify for the longer combat zone extension. Affected taxpayers should attach a statement to their return explaining which of these situations apply.
Taxpayers who don’t qualify for any of these three special situations can still get more time to file by submitting a request for an automatic extension. This will extend their filing deadline until Oct. 15, 2021. But because this is only a tax-filing extension, their 2020 tax payments are still due by May 17.
Another option is to pay electronically and get a tax-filing extension. The IRS will automatically process an extension when a taxpayer selects Form 4868 and makes a full or partial federal tax payment by the May 17 due date using Direct Pay, the Electronic Federal Tax Payment System EFTPS or a debit or credit card. Under this option, there is no need to file a separate Form 4868. Please note, you must register for EFTPS before using.
The Treasury Department and the Internal Revenue Service issued guidance allowing deductions for the payments of eligible expenses when such payments would result (or be expected to result) in the forgiveness of a loan (covered loan) under the Paycheck Protection Program (PPP).
Revenue Ruling 2021-02 reflects changes to law contained in the COVID-related Tax Relief Act of 2020, enacted as part of the Consolidated Appropriations Act, 2021 (Act), Public Law 116-260, which was signed into law on Dec. 27, 2020.
The COVID-related Tax Relief Act of 2020 amended the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) to say that no deduction is denied, no tax attribute is reduced, and no basis increase is denied by reason of the exclusion from gross income of the forgiveness of an eligible recipient’s covered loan. This change applies for taxable years ending after March 27, 2020.
Revenue Ruling 2021-02 obsoletes Notice 2020-32 and Revenue Ruling 2020-27. This obsoleted guidance disallowed deductions for the payment of eligible expenses when the payments resulted (or could be expected to result) in forgiveness of a covered loan.
The Internal Revenue Service today announced that interest rates will remain the same for the calendar quarter beginning Jan. 1, 2021. The rates will be:
Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.
Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.
The interest rates announced today are computed from the federal short-term rate determined during Oct. 2020 to take effect Nov. 1, 2020, based on daily compounding.
As taxpayers get ready to file their 2021 taxes, they may be thinking about hiring a tax preparer. People should choose a tax preparer wisely. This is important because taxpayers are responsible for all the information on their return, no matter who prepares it for them.
There are different kinds of tax preparers, and a taxpayer’s needs will help determine which kind of preparer is best for them. With that in mind, here are some quick tips to help people choose a preparer.
When choosing a tax professional, taxpayers should:
Las tarjetas de regalo son un regalo popular y conveniente para todas las ocasiones. También son una herramienta que usan los estafadores para robar dinero a las personas.
Los estafadores suelen atacar a los contribuyentes pidiéndoles que paguen una factura de impuestos falsa con tarjetas de regalo. También pueden usar una cuenta de correo electrónico comprometida para enviar correos electrónicos que solicitan compras de tarjetas de regalo para amigos, familiares o compañeros de trabajo. El IRS les recuerda a los contribuyentes que las tarjetas de regalo son para obsequios, no para pagar impuestos.
Organizations that meet specified requirements under Section 501(c) of the Internal Revenue Code may qualify for tax-exempt status. These include charities, social welfare organizations, civic leagues, social clubs, labor organizations and business leagues.
Most organizations are required to apply for recognition as tax-exempt.
Here are some key things that charities should know about the application process:
Posted in NONPROFIT ORGANIZATIONS
The Paycheck Protection Program is a loan designed to provide a direct incentive for small businesses to keep their workers on the payroll.
SBA will forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities.
You can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. You should consult with your local lender as to whether it is participating in the program.
The following entities affected by Coronavirus (COVID-19) may be eligible:
The loan will be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities (due to likely high subscription, at least 75% of the forgiven amount must have been used for payroll). Loan payments will also be deferred for six months. No collateral or personal guarantees are required. Neither the government nor lenders will charge small businesses any fees.
Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.
This loan has a maturity of 2 years and an interest rate of 1%.
The Paycheck Protection Program will be available through June 30, 2020.
Although the IRS often finds and corrects errors during processing, there are certain situations in which a taxpayer may need to file an amended return to make a correction. Here are some quick tips for anyone who discovered they made a mistake or forgot to include something on their tax return.
Don’t amend for math errors or missing forms. Taxpayers generally don’t need to file an amended return to correct math errors on their original return. The IRS may correct math or clerical errors on a return and may accept it even if the taxpayer forgot to attach certain tax forms or schedules. The IRS will mail a letter to the taxpayer, if necessary, requesting additional information.
Wait until receiving refund for tax year 2018 before filing. Taxpayers who are due refunds from their original tax year 2018 tax return should wait for the IRS to process the return and they receive the refund before filing Form 1040-X to claim an additional refund. It may take the IRS up to 16 weeks to process amended returns.
File Form 1040-X to amend. Taxpayers must file on paper using Form 1040-X, Amended U.S. Individual Income Tax Return, to correct their tax return. While taxpayers can use software to prepare Form 1040-X, they can’t file Form 1040-X electronically. Taxpayers should indicate the year of the original return and explain all changes made by attaching any forms or schedules. Taxpayers then sign and mail the Form 1040-X to the address listed in the instructions. Taxpayers filing Form 1040-X in response to an IRS letter should mail it to the address shown on the letter.
Amend to correct errors. Taxpayers should correct their return if they find that they should have claimed a different filing status or didn’t report some income. Taxpayers who claimed deductions or credits they shouldn’t have claimed or didn’t claim deductions or credits they could have claimed may need to file an amended return. Changes made on a federal return may also affect state taxes. The taxpayer should contact the state tax agency to see if this is so.
Pay additional tax. Taxpayers who will owe more tax should file Form 1040-X and pay the tax as soon as possible to avoid penalties and interest. They should consider using IRS Direct Pay to pay any tax directly from a checking or savings account for free.
File within three-year time limit. Taxpayers generally have three years from the date they filed their original tax return to file Form 1040-X to claim a refund. They can file it within two years of the date they paid the tax, if that date is later.
Use separate forms if amending more than one tax year. Taxpayers must file a Form 1040-X for each tax year and mail each year’s form in a separate envelope to avoid confusion. They should check the box for the calendar year or enter the other calendar year or fiscal year they are amending. The form’s instructions have the mailing address for the amended return.
The IRS warns taxpayers to avoid unethical tax return preparers, known as ghost preparers. By law, anyone who is paid to prepare or assist in preparing federal tax returns must sign the return and include their Preparer Tax Identification Number.
‘Ghost’ preparers, however, avoid signing the tax return. Instead, they often inflate any potential refund and print the return and instruct the taxpayer to sign and mail it to the IRS. Or, for e-filed returns, they prepare but do not digitally sign it as a paid preparer to avoid scrutiny.
Taxpayers can report abusive tax preparers to the IRS. Use Form 14157, Complaint: Tax Return Preparer. If a taxpayer suspects a tax preparer filed or changed their tax return without their consent, they should file Form 14157-A, Tax Return Preparer Fraud or Misconduct Affidavit.
Form 1099-MISC is due to the IRS and individuals by January 31 when reporting non-employee compensation payments in box 7.
Penalties for failure to file correct information returns or furnish correct payee statements have increased and are now subject to inflationary adjustments. These increased penalties are effective for information returns required to be filed after December 31, 2015.