News For Your Week Ahead: July 22, 2022

3 all-inclusive days down by the shore, 10+ hours of CPE, and access to Maryland’s top talent in the accounting and tax field.

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IRS Encourages Tax Professionals to Inform Clients About IP PIN Opt-In Program | IR-2022-140

The IRS and the Security Summit Partners have encouraged tax professionals to inform their clients about the IRS Identity Protection (IP) PIN Opt-In Program to help protect taxpayers against tax related identity theft. The IP PIN Opt-In Program has been made available to all individuals capable of verifying their identity. The IRS has also highlighted key information that taxpayers need to know about the IP PIN Opt-In Program, namely:

• 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. Taxpayers must obtain a new IP PIN each year;
• Only taxpayers who can verify their identities may obtain an IP PIN; and
• 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.

Further, if taxpayers are unable to validate their identity and their income is less than $ 72,000, they can file Form 15227, Application for an Identity Protection Personal Identification Number, upon which the IRS will attempt to verify their identities over a telephonic call and assign them an IP PIN for next filing season. Additionally, taxpayers can also get their identity verified by making an appointment with Taxpayer Assistance Center and carry necessary identification documents with them. The IP PIN process for confirmed victims of identity theft remains unchanged. These victims will automatically receive an IP PIN each year.

What Businesses Need to Know About Reporting Nonemployee Compensation and Backup Withholding to the IRS | IRS Tax Tip 2022-109

When a business hires an independent contractor, the employer is generally not responsible for withholding income taxes, Social Security, or Medicare taxes from their compensation. However, by law, business taxpayers who pay nonemployee compensation of $600 or more must report these payments to the IRS. They do this using Form 1099-NEC, Nonemployee Compensation.

Generally, payers must file Form 1099-NEC by January 31. There is no automatic 30-day extension to file Form 1099-NEC. However, an extension to file may be available under certain hardship conditions.

Nonemployee compensation reportable on Form 1099-NEC is subject to backup withholding if a payee has not provided a Taxpayer Identification Number to the payer or the IRS notifies the payer that the payee provided a TIN that does not match their name in IRS records.

Continue reading here.

Tax Rules That Expired 12/31/2021 | via Bob Jennings of TaxSpeaker

At the end of 2021, many existing tax rules expired, awaiting the normal Congressional extender bills and long-drawn-out political posturing before retroactive rule changes. This year it does not look like Congress will be able to extend anything in the current political climate, so here is a special list of things that have already expired and that are no longer in effect for 2022.

Selected Expired Individual Tax Items:

• The 1 year only increase in the child credit expired at the end of 2021. This credit reverted back to $2,000 (from $3,000); reduced the age back to under 17 (from under 18); is no longer fully refundable ($1,400 max), and reverts back to lower income phaseouts.
• The 1 year only increase in the dependent care credit also expired at the end of 2021. It reverts back to 20% (from 50%); reverts back to a very low AGI phaseout (at $15,000 it begins reducing from 35% to 20%); and lowers qualified expenses back to $3,000 for 1 child ($6,000 for >1) from the one year only amounts of $8,000 and $16,000.
• The $600 non-itemizer charitable deduction amount expired at the end of 2021.
• The 2021 increase to the earned income credit for taxpayers without children and for older and younger Americans reverts back to 2020 rules.
• The 100% of AGI charity deduction for cash contributions reverted back to a 60% limit.
• The credits for nonbusiness energy property (insulation, storm windows, and doors, etc.) and alternative fuel refueling (electric car chargers) expired at the end of 2021.
• The deduction for mortgage insurance premiums as mortgage interest expired at the end of 2021.
• Required minimum distributions returned for taxpayers 72 and over 72 after 2018.

Selected Expired Business Tax Items:

• Full expensing of R&D costs changes from 2021 to a 5-year amortizing asset deduction in 2022.
• The business interest expense deduction goes from 30% of EBITDA in 2021 to 30% of EBIT in 2022.
• The 1099-K reporting threshold of $20,000 for 2021 has been dropped to $600 for 2022.
• The Employee Retention Credit for all businesses, including startups, expired at the end of 2021, although it may still be claimed on amended 941s for 2021 and 2020.
• The 3-year recovery period for racehorses two years old or younger also reverted back to 7 years for 2022

For more updates like this, subscribe to TaxSpeaker’s newsletter here.

IRS Updates to CTC FAQs | via NATP

The IRS revised the FAQs (Fact Sheet 2022-32) for the 2021 child tax credit and advance child tax credit. The revisions removed question 7 and renumbered question 8 under “Topic B: Eligibility for Advance Child Tax Credit Payments and the 2021 Child Tax Credit.” Former question 7 was:

Q B7. How could I have checked to see if I was eligible for Advance Child Tax Credit payments? (updated Jan. 11, 2022)

A7. The Advance Child Tax Credit Eligibility Assistant allowed you to see if you were eligible for Advance Child Tax Credit payments.

The IRS removed the eligibility assistant from their website. If taxpayers need to check information regarding payments, they should use the online portal.

What To Do When the IRS Balance-Due Notice Arrives | via Jim Buttonow, Accounting Today

Much has been publicized about the IRS pausing some of its compliance and collection notices in 2022. Specifically, the IRS announced that it would suppress many balance-due reminder notices until the IRS caught up on processing paper returns, correspondence, and other backlogged items.

But tax professionals and their clients shouldn’t get too comfortable. The IRS can’t suppress about 9 million notices that go out every year. These notices are the first balance-due notice in a series of collection notices. In IRS terms, this notice is called the CP14 notice and demand for tax.

The CP14 notice is required by law (Internal Revenue Code Section 6303) to be issued within 60 days after the IRS assesses the tax. The bulk of CP14 notices show up in the beginning of June (for 2021 returns, this date was likely June 6, 2022), asking for payment within 21 days.

This notice and demand letter sets the stage for the IRS to enforce collection. If the taxpayer doesn’t respond to the CP14 notice with payment, the IRS can begin the process to collect the taxes by levy or by filing a notice of federal tax lien. Usually, the IRS will send a series of reminder notices, called the collection notice stream, to ask for payment before starting enforced collection.

For details on what to do if your client gets a CP14 notice, click here.

District of Columbia—Personal Income Tax: Earned Income Credit and Some Exclusions Expanded | via Wolters Kluwer IntelliConnect

The District of Columbia has enacted emergency legislation that makes changes to income tax provisions regarding:

• the earned income tax credits; and
• gross income exclusions.

What changes are made to the earned income tax credits?

The earned income tax credit is expanded for fiscal years beginning after December 31, 2022. A resident of the District who files a return, but who is not a citizen or resident alien of the United States, is allowed a credit against the personal income tax. Further, an individual can claim an earned income tax credit despite not having a social security number as required by IRC Sec. 32(m). An individual taxpayer identification number is allowed.

Which gross income exlcusions are changed?

As of January 1, 2022, the exclusion for cash assistance for excluded workers given pursuant to grants awarded by the Washington Convention and Sports Authority is extended through the end of 2023.

Further, exclusions are enacted for:

• grants to housing providers to cover the costs of past due rent of District residents who are tenants of those housing providers;
• grants awarded under § 1-328.04(x);
• funding received by a taxpayer from the District Department of the Environment or the District of Columbia Sustainable Energy Utility to incentivize solar installations benefiting low-income residents;
• grants issued under § 8-1774.10(c)(23);
• rebates issued pursuant to the Public Access to Automated External Defibrillator Act of 2000; and
• lump-sum payments an individual receives from the early educator pay parity program.

Act 24-470 (D.C.B. 845), Laws 2022, effective July 19, 2022, for a 90 day period that expires October 11, 2022

District of Columbia—Sales and Use Tax: Budget Bill Signed that Authorizes Sales Tax Apply to Sales in Federal Buildings and by Federal Organizations | via Wolters Kluwer IntelliConnect

District of Columbia Mayor Muriel Bowser has signed the Fiscal Year 2023 Budget Request Act of 2022 (Act), which includes changes to sales tax laws.

The Act provides that sales and use tax will be imposed on sales made in federal buildings and by government-sponsored enterprises, corporations, institutions, and organizations. Taxable sales include transactions made in federal buildings at:

• gift shops;
• souvenir shops;
• kiosks;
• convenience stores;
• food shops;
• cafeterias;
• restaurants; and
• similar establishments

Additionally, sales of goods and services by a government sponsored enterprise or corporation, institution or organization established by federal statute or regulation will be subject to tax. Examples include, but are not limited to the:

• Smithsonian Institution;
• National Gallery of Art;
• National Building Museum;
• Federal National Mortgage Association; and
• Federal Home Loan Mortgage Corporation.

Act 24-485 (D.C.B. 24-715), Laws 2022, approved July 19, 2022, effective after a 30-day congressional review period.

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