An IRS CP2000 notice is mailed to a taxpayer when income reported from third-party sources such as an employer, bank, or mortgage company does not match the income reported on the tax return.
It is not a tax bill or a formal audit notification; it merely informs you about the information the IRS has received and how it affects your tax. It is, however, important to pay attention to what your CP2000 notice states because interest accrues on your unpaid balance until you pay it in full.
What to Do
If you receive a CP2000 notice in the mail, complete the response form. If your notice doesn’t have a response form, then follow the notice instructions. Generally, you must respond within 30 days of the date printed on the notice. However, you may request additional time to respond, and if you cannot pay the full amount that you owe, you can set up a payment plan with the IRS.
If the information on the CP2000 notice is not correct, then check the notice response form for instructions on what to do next. You also may want to contact whoever reported the information and ask them to correct it.
If the information is wrong because someone else is using your name and social security number, please contact the IRS and let them know. You can also use the link on the IRS Identity theft information web page to learn more about what you can do.
If you do not respond, the IRS will send another notice. If the IRS does not accept the information provided, it will send IRS Notice CP3219A, Statutory Notice of Deficiency, which includes information about how to challenge the decision in Tax Court.
Do I Need To Amend My Return?
If the information displayed in the CP2000 notice is correct, you don’t need to amend your return unless you have additional income, credits, or expenses to report. If you agree with the IRS notice, follow the instructions to sign the response page and return it to the IRS in the envelope provided.
If you have additional income, credits, or expenses to report, complete and submit a Form 1040-X, Amended U.S. Individual Income Tax Return. If you need assistance with this, please call the office.
How To Avoid Receiving an IRS CP2000 Notice:
Keep accurate and detailed records.
Wait until you receive your income statements before filing your tax return.
Check the records you receive from your employer, mortgage company, bank, or other sources of income (W-2s, 1098s, 1099s, etc.) to ensure they are correct.
Include all your income on your tax return, including that from a second job or fees derived from the sharing economy (e.g., renting a spare room out on Airbnb).
Follow the instructions for reporting income, expenses, and deductions.
File an amended tax return for any information you receive after you’ve filed your return.
Use a professional tax preparer who will help you avoid mistakes and find credits and deductions you may qualify for.
If you have questions about IRS notices, help is just a phone call away.
Are you approaching retirement age and wondering where you can retire to make your retirement nest egg last longer? Retiring abroad may be the answer. But first, it’s important to look at the tax implications — because not all retirement country destinations are created equal.
Taxes on Worldwide Income
Leaving the United States does not exempt U.S. citizens from their U.S. tax obligations. While some retirees may not owe any U.S. income tax while living abroad, they must still file a return annually with the IRS – even if all of their assets were moved to a foreign country. The bottom line is that you may still be taxed on income regardless of where it is earned.
Unlike most countries, the United States taxes individuals based on citizenship, not residency. As such, every U.S. citizen (and resident alien) must file a tax return reporting worldwide income (including income from foreign trusts and foreign bank and securities accounts) in any given taxable year that exceeds threshold limits for filing.
The filing requirement generally applies even if a taxpayer qualifies for tax benefits, such as the foreign earned income exclusion or the foreign tax credit, substantially reducing or eliminating U.S. tax liability.
These tax benefits are not automatic and are only available if an eligible taxpayer files a U.S. income tax return.
Any income received or deductible expenses paid in foreign currency must be reported on a U.S. return in U.S. dollars. Likewise, any tax payments must be made in U.S. dollars.
Also, retired taxpayers may have to file tax forms in the foreign country where they reside. You may, however, be able to take a tax credit or a deduction for income taxes you paid to a foreign country. These benefits can reduce your taxes if both countries tax the same income.
Nonresident aliens who receive income from U.S. sources must determine whether they have a U.S. tax obligation. The filing deadline for nonresident aliens is generally April 15.
FBAR Reporting
U.S. persons who own a foreign bank account, brokerage account, mutual fund, unit trust, or another financial account are required to file a Report of Foreign Bank and Financial Accounts (FBAR) by April 15 if they have:
Financial interest in, signature authority or other authority over one or more accounts in a foreign country, and
The aggregate value of all foreign financial accounts exceeds $10,000 at any time during the calendar year.
A foreign country does not include territories and possessions of the United States, such as Puerto Rico, Guam, the United States Virgin Islands, American Samoa, or the Northern Mariana Islands.
Income From Social Security or Pensions
If Social Security is your only income, your benefits may not be taxable, and you may not need to file a federal income tax return. If you receive Social Security, you should receive a Form SSA-1099, Social Security Benefit Statement, showing the amount of your benefits. Likewise, you should receive a Form 1099-R for each distribution plan if you have pension or annuity income.
Retirement income is generally not taxed by other countries. As a U.S. citizen retiring abroad who receives Social Security, for instance, you may owe U.S. taxes on that income but may not be liable for tax in the country where you’re spending your retirement years.
However, if you receive income from other sources (either U.S. or country of retirement), from a part-time job or self-employment, for example, you may have to pay U.S. taxes on some of your benefits. Each country is different, and you may also be required to report and pay taxes on any income earned in the country where you retired.
Foreign Earned Income Exclusion
If you’ve retired overseas but take on a full or part-time job or earn income from self-employment, the IRS allows qualifying individuals to exclude all, or part, of their incomes from U.S. income tax by using the Foreign Earned Income Exclusion (FEIE). In 2023, this amount is $120,000 per person. If two individuals are married and work abroad and meet either the bona fide residence test or the physical presence test, each one can choose the foreign-earned income exclusion. Together, they can exclude as much as $240,000 for the 2023 tax year.
Income earned overseas is exempt from taxation only if certain criteria are met, such as residing outside of the country for at least 330 days over 12 months or an entire calendar year.
Tax Treaties
The United States has income tax treaties with many foreign countries, but these treaties generally don’t exempt residents from their obligation to file a tax return. Under these treaties, residents (not necessarily citizens) of foreign countries are taxed at a reduced rate or are exempt from U.S. income taxes on certain items of income they receive from sources within the United States. These reduced rates and exemptions vary among countries and specific items of income.
Treaty provisions are generally reciprocal and apply to both treaty countries. Therefore, a U.S. citizen or resident who receives income from a treaty country and is subject to taxes imposed by foreign countries may be entitled to certain credits, deductions, exemptions, and reductions in the rate of taxes of those foreign countries.
State Taxes
Many states also tax resident income, so even if you retire abroad, you may still owe state taxes unless you established residency in a no-tax state before you moved overseas. Some states honor the provisions of U.S. tax treaties; however, some states do not. Therefore it is prudent to consult a tax professional for advice.
Relinquishing U.S. Citizenship
Taxpayers who relinquish their U.S. citizenship or cease to be lawful permanent residents of the United States during any tax year must file a dual-status alien return and attach Form 8854, Initial and Annual Expatriation Statement. A copy of Form 8854 must also be filed with Internal Revenue Service by the tax return’s due date (including extensions).
Giving up your U.S. citizenship doesn’t mean giving up your right to receive social security, pensions, annuities, or other retirement income. However, the U.S. Internal Revenue Code (IRC) requires the Social Security Administration (SSA) to withhold nonresident alien tax from certain Social Security monthly benefits. Unless you qualify for a tax treaty benefit, as a nonresident alien receiving social security retirement income, SSA will withhold a 30 percent flat tax from 85 percent of those benefits. This results in a withholding of 25.5 percent of your monthly benefit amount.
Consult a Tax Professional Before You Retire
Don’t wait until you’re ready to retire to consult a tax professional. Call the office today and find out what your options are well in advance of your planned retirement date.
Many businesses hire part-time or full-time workers, especially in the summer. The IRS classifies these employees as seasonal workers, defined as employees performing labor or services on a seasonal basis (i.e., six months or less). Examples of this kind of work include retail workers employed exclusively during holiday seasons, sports events, or during the harvest or commercial fishing season.
Part-time and seasonal employees are subject to the same tax withholding rules that apply to other employees and all taxpayers should fill out a W-4 when starting a new job. Employers use this form to determine the amount of tax to be withheld from your paycheck. Taxpayers (including students) with multiple summer jobs will want to ensure all their employers withhold adequate taxes to cover their total income tax liability.
Changes To Withholding Under Tax Reform
The Tax Cuts and Jobs Act changed the tax law in 2018, and included increasing the standard deduction, eliminating personal exemptions, increasing the child tax credit, limiting or discontinuing certain deductions, and changing the tax rates and brackets. Taxpayers returning to the workforce, working part-time, or with seasonal jobs, may not be aware of the changes in tax law that could affect their paycheck.
If you’ve recently started a part-time seasonal job, now is an excellent time to perform a “paycheck check-up” using the Withholding Calculator, a special tool on the IRS website that can help taxpayers with part-year employment estimate their income, credits, adjustments, and deductions more accurately. It also checks to see whether a taxpayer is having the correct amount of tax withheld for their financial situation.
Using the Withholding Calculator
First, the calculator asks about a taxpayer’s employment dates and accounts for a part-year employee’s shorter employment rather than assuming that their weekly tax withholding amount would be applied to a full year.
Next, the calculator makes recommendations for part-year employees accordingly. If a taxpayer has more than one part-year job, the Withholding Calculator can also account for this.
Taxpayers should have a completed prior-year tax return and need their most recent pay stub before using the Withholding Calculator.
Calculator results depend on the accuracy of information entered. If a taxpayer’s circumstances change during the year, they should return to the calculator to check whether they should adjust their withholding. For taxpayers working for only part of the year, it’s best to do a “paycheck check-up” early in their employment period so their tax withholding is most accurate.
The Withholding Calculator does not request personally identifiable information, such as name, Social Security number, address, or bank account numbers. The IRS does not save or record the information entered on the calculator. As always, taxpayers should watch out for tax scams, especially via email or phone, and be alert to cybercriminals impersonating the IRS. Remember, the IRS does not send emails about the calculator or the information entered.
If You Need To Adjust Your Withholding
If the calculator results indicate a change in withholding amount, the employee should complete a new Form W-4 and submit it to their employer as soon as possible. Employees with a change in personal circumstances that reduces the number of withholding allowances should submit a new Form W-4 with corrected withholding allowances to their employer within ten days of the change.
As a seasonal or part-time worker, you may not be required to file a federal or state return if the wages you earn at a part-time or seasonal job are less than the standard deduction; however, if you work more than one job, you may end up owing tax.
As you can see, seasonal and part-time workers have unique tax situations. If you have any questions about your tax situation, don’t hesitate to call the office today.
Wheeler is thrilled to congratulate Linh Nguyen on passing her final CPA exam, closing out a daunting chapter in her path to CPA licensure.
Linh has spent the last 9 months committed to this CPA journey while dealing with 3 tax seasons (9/15, 10/15, and 4/15), which took an incredible amount of time and energy. Passing the last of her exams means no more 10-hours of studying on weekends! She’s looking forward to being available to spend more time with family and friends now that it’s behind her.
Linh Nguyen passes all CPA exams!
When asked about the toughest part, Linh shared that Audit was the most difficult exam because memorizing the materials by heart does not guarantee a pass. “We need to know how to apply the materials and make real judgments.” A tip for those looking to take this exam: “One effective way to prepare for the test better, [was] to do several sets of multiple-choice questions, write down the concepts I was not sure about and use them as review materials minutes before taking the exam.”
Linh’s best advice is to find a study method that works for you. A little background on her CPA journey: “I applied to sit for the exam in 2019 and was studying for the first exam on and off for 3 years but never took it because I never felt ready. Until I developed my own system of studying, [then] it took me 5-6 weeks to prepare for each exam and pass them on first try. So, if you ever have doubts in yourself, it is not that you are not good enough, it is just you haven’t found what works for you.”
Now that Linh is done with her CPA exams, she can’t wait to start her NEXT journey, the Master of Science in Taxation program at San Jose State University. This will give her the rest of her credits toward licensure and be a major accomplishment in and of itself. We’re proud to have Linh on the team and are cheering her on in her next season!
Taxpayers who reported certain state 2022 tax refunds as taxable income may need to file an amended tax return. Affected taxpayers include those who filed before February 10, 2023, and meet certain requirements. Taxpayers who used a tax professional should consult with them to determine whether an amended return is necessary.
Background
Details clarifying the federal tax status regarding special payments made to taxpayers by 21 states in 2022 were clarified by the IRS on February 10, 2023. During their review, it was determined that the IRS would not challenge the taxability of state payments related to general welfare and disaster relief in the interest of sound tax administration and other factors. As a result, taxpayers in many states did not need to report these payments on their 2022 federal tax returns.
Which Taxpayers are Affected?
Taxpayers in the following states do not need to report these state payments on their 2022 tax return: Alaska (applies only to the special supplemental Energy Relief Payment), California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Maine, New Jersey, New Mexico, New York, Oregon, Pennsylvania, and Rhode Island.
Also, many people in Georgia, Massachusetts, South Carolina, and Virginia will not include special state 2022 tax refunds as income for federal tax purposes if they meet certain requirements. For these individuals, state payments will not be included for federal tax purposes if the payment is a refund of state taxes paid and the recipient either claimed the standard deduction for tax year 2022 or itemized their tax year 2022 deductions but did not receive a tax benefit.
Taxpayers can also view a listing of individual states and the federal tax treatment of their special state refunds or rebates listed on this State Payments chart at IRS.gov.
What Taxpayers Should Do Next
Before filing an amended return, taxpayers who filed before February 10 in these areas and met these requirements should check their tax return to make sure they paid tax on a state refund. If an amended return is needed, taxpayers who submitted their original 2022 tax return electronically can also file their amended return electronically and may select direct deposit for any resulting refund. Electronic filing cuts out the mail time, and including direct deposit information on an electronically submitted form provides a convenient and secure way to receive refunds faster.
Taxpayers also have the option to submit a paper version of Form 1040-X, Amended U.S Individual Income Tax Return, and receive a paper check. Direct deposit is not available on amended returns submitted on paper, however. Taxpayers should follow the instructions for preparing the paper form and mail the amended return to:
Department of the Treasury Internal Revenue Service Austin, TX 73301-0052
As always, don’t hesitate to contact the office if you have questions about this or any other tax topics affecting your tax situation.
When choosing a payroll service provider to handle payroll and payroll tax, employers should choose a trusted payroll service to help them avoid missed deposits for employment taxes and other unpaid bills. Typically, these clients remain legally responsible for paying the taxes due, even if the employer sent funds to the payroll service provider for required deposits or payments.
Employers are encouraged to enroll in the Electronic Federal Tax Payment System (EFTPS) and make sure the payroll service provider uses EFTPS to make tax deposits. EFTPS is free and gives employers safe and easy online access to their payment history, provided they make deposits under their Employer Identification Number (EIN). Using the EFTPS enables them to monitor whether their payroll service provider meets its tax deposit responsibilities.
Employers have two options when finding a trusted payroll service provider:
A certified professional employer organization (CPEO). Typically, CPEOs are solely liable for paying the customer’s employment taxes, filing returns, and making deposits and payments for the taxes reported related to wages and other compensation. An employer enters into a service contract with a CPEO, and then Form 8973, Certified Professional Employer Organization/Customer Reporting Agreement, is submitted to IRS. Employers can find a CPEO on the Public Listings page of IRS.gov.
Reporting agent. A reporting agent is a payroll service provider that informs the IRS of its relationship with a client using Form 8655, Reporting Agent Authorization, that the client signs. Reporting agents must deposit a client’s taxes using the Electronic Federal Tax Payment System (EFTPS) and can exchange information with the IRS on behalf of a client if issues arise. They are also required to provide clients a written statement reminding the employer that it, not the reporting agent, is ultimately responsible for the timely filing of returns and payment of taxes.
Employers should contact a tax professional about any bills or notices received, especially payments managed by a third party. They can also call the phone number on the bill, write to the IRS office that sent the bill, or contact the IRS business tax hotline at 800-829-4933.
Most payroll service providers provide quality service, but some don’t. Each year, a few payroll service providers don’t submit their client’s payroll taxes, close down abruptly, and leave employers on the hook.
Don’t get caught short. Choose a payroll service provider you can count on – and don’t hesitate to call the office with any questions about payroll and other business-related taxes.
Taxpayers can start checking their tax refund status within 24 hours after receiving an e-filed return. The easiest and most convenient way to do this is by using the “Where’s My Refund?” tool on the IRS website. The tool also provides a personalized refund date after the return is processed and a refund is approved.
There are two ways to access the “Where’s My Refund?” tool – visiting IRS.gov/refunds or downloading the IRS2Go app. To use the tool, taxpayers will need the following information:
Their Social Security number or Individual Taxpayer Identification Number
Tax filing status
The exact amount of the refund claimed on their tax return
The tool displays progress in three phases: when the return was received, when the refund was approved, and when the refund was sent. When the status changes to approved, it means that the IRS is preparing to send the refund as a direct deposit to the taxpayer’s bank account or directly to the taxpayer in the mail, by check, to the address used on their tax return.
The IRS updates the “Where’s My Refund?” tool once a day, usually overnight, so taxpayers don’t need to check the status more often than that. Calling the IRS won’t speed up a tax refund. The information available on “Where’s My Refund?” is the same information available to IRS telephone assistors.
Taxpayers should remember to allow time for their financial institution to post the refund to their account or for the refund to be delivered by mail. As always, please contact the office with any questions about tax refunds, tax returns, or other tax matters.
One of the most important questions you face when changing jobs is what to do with the money in your 401(k) because making the wrong move could cost you thousands of dollars or more in taxes and lower returns.
Let’s say you work five years at your current job. For most of those years, you’ve had the company take a set percentage of your pretax salary and put it into your 401(k) plan. Now that you’re leaving, what should you do?
The first rule of thumb is to leave it alone. You have 60 days to decide whether to roll it over or leave it in the account. Resist the temptation to cash out. The worst thing an employee can do when leaving a job is to withdraw the money from their 401(k) plans and put it in their bank account. Here’s why:
If you decide to have your distribution paid to you, the plan administrator will withhold 20 percent of your total for federal income taxes, so if you had $100,000 in your account and wanted to cash it out, you’re already down to $80,000.
Furthermore, if you’re younger than 59 1/2, you’ll face a 10 percent penalty for early withdrawal come tax time. Now you’re down another 10 percent from the top line to $70,000.
If you separate from service during or after the year you reach age 55 (age 50 for public safety employees of a state, or political subdivision of a state, in a governmental defined benefit plan), there is an exception to the 10 percent early withdrawal tax penalty. This rule only applies to 401(k) plans. IRA, SEP, SIMPLE IRAs, and SARSEP Plans do not qualify for the exception.
In addition, because distributions are taxed as ordinary income, at the end of the year, you’ll have to pay the difference between your tax bracket and the 20 percent already taken out. For example, if you’re in the 32 percent tax bracket, you’ll still owe 12 percent, or $12,000, which lowers the amount of your cash distribution to $58,000.
But that’s not all. You also might have to pay state and local taxes. Between taxes and penalties, you could end up with little over half of what you saved, short-changing your retirement savings significantly.
What Are the Alternatives?
If your new job offers a retirement plan, the easiest course of action is to roll your account into the new plan before the 60-day period ends. A “rollover” is relatively painless to do. Contact The 401(k) plan administrator at your previous job should have all the necessary forms.
The best way to roll funds over from an old 401(k) plan to a new one is to use a direct transfer. With the direct transfer, you never receive a check, you avoid all the taxes and penalties mentioned above, and your savings will continue to grow tax-deferred until you retire.
Many employers require that you work a minimum length of time before you can participate in a 401(k). If that is the case, one solution is to keep your money in your former employer’s 401(k) plan until the new one is available. Then you can roll it over into the new plan. Most plans let former employees leave their assets several months in the old plan.
60-Day Rollover Period
If you have your former employer make the distribution check out to you, the Internal Revenue Service considers this a cash distribution. The check you get will have 20 percent taken out automatically from your vested amount for federal income tax.
But don’t panic. You have 60 days to roll over the lump sum (including the 20 percent) to your new employer’s plan or into a rollover individual retirement account (IRA). Then you won’t owe the additional taxes or the 10 percent early withdrawal penalty.
If you’re not happy with the fund choices your new employer offers, you might opt for a rollover IRA instead of your company’s plan. You can then choose from hundreds of funds and have more control over your money. But again, to avoid the withholding hassle, use direct rollovers.
Leave It Alone
If your vested account balance in your 401(k) is more than $5,000, you can usually leave it with your former employer’s retirement plan. Your lump sum will keep growing tax-deferred until you retire.
However, if you can’t leave the money in your former employer’s 401(k) and your new job doesn’t have a 401(k), your best bet is a direct rollover into an IRA. The same applies if you’ve decided to go into business for yourself.
Once you turn 59 1/2, you can begin withdrawals from your IRA without penalty, and your withdrawals are taxed as ordinary income. The IRS “Rule of 55” allows you to withdraw funds from your 401(k) or 403(b) without a penalty at age 55 or older.
With both a 401(k) and an IRA, you must begin taking required minimum distributions (RMDs) when you reach age 73, whether you’re working or not. As a reminder, beginning in 2023, the SECURE 2.0 Act raised the age that you must begin taking RMDs to age 73. If you reach age 72 in 2023, the required beginning date for your first RMD is April 1, 2025, for 2024.
Questions about IRA rollovers? Help is just a phone call away.
Estimated tax is the method used to pay tax on income not subject to withholding, such as income from self-employment, interest, dividends, alimony, and rent and gains from the sale of assets, prizes, and awards. You also may have to pay an estimated tax if the income tax being withheld from your salary, pension, or other income is insufficient. Here’s what you should know about estimated tax payments:
Filing and Paying Estimated Taxes
Both individuals and business owners may need to file and pay estimated taxes, which are paid quarterly. The first estimated tax payment of the year is ordinarily due on the same day as your federal tax return is due.
If you do not pay enough by the due date of each payment period, you may be charged a penalty even if you are due a refund when you file your tax return.
If you are filing as a sole proprietor, partner, S corporation shareholder, or self-employed individual, you generally have to make estimated tax payments if you expect to owe tax of $1,000 or more when you file your return. If you are filing as a corporation, you generally have to make estimated tax payments for your corporation if you expect it to owe tax of $500 or more when you file its return.
If you had a tax liability for the prior year, you might have to pay estimated tax for the current year, but if you receive salaries and wages, you can avoid having to pay estimated tax by asking your employer to withhold more tax from your earnings.
Special rules apply to farmers, fishermen, certain household employers, and certain higher taxpayers. Please call the office for assistance if any of these situations apply to you.
Who Does Not Have to Pay Estimated Tax
You do not have to pay estimated tax for the current year if you meet all three of the following conditions:
You had no tax liability for the prior year
You were a U.S. citizen or resident for the whole year
Your prior tax year covered a 12-month period
If you receive salaries and wages, you can avoid paying estimated tax by asking your employer to withhold more tax from your earnings. To do this, file a new Form W-4 with your employer. There is a special line on Form W-4 for you to enter the additional amount you want your employer to withhold. You had no tax liability for the prior year if your total tax was zero or you did not have to file an income tax return.
Calculating Estimated Taxes
To figure out your estimated tax, you must calculate your expected adjusted gross income, taxable income, taxes, deductions, and credits for the year. If you estimated your earnings too high, complete another Form 1040-ES, Estimated Tax for Individuals, worksheet to re-figure your estimated tax for the next quarter. If you estimated your earnings too low, again complete another Form 1040-ES worksheet to recalculate your estimated tax for the next quarter.
Try to estimate your income as accurately as possible to avoid penalties due to underpayment. Generally, most taxpayers will avoid this penalty if they owe less than $1,000 in tax after subtracting their withholding and credits or if they paid at least 90 percent of the tax for the current year or 100 percent of the tax shown on the return for the prior year, whichever is smaller.
When figuring out your estimated tax for the current year, it may be helpful to use your income, deductions, and credits for the prior year as a starting point. Use your prior year’s federal tax return as a guide, and use the worksheet in Form 1040-ES to figure your estimated tax. However, you must adjust to any changes in your situation as well as recent tax law changes.
Estimated Tax Due Dates
For estimated tax purposes, the year is divided into four payment periods, each with a specific payment due date. For the 2023 tax year, these dates are April 18, June 15, September 15, and January 16, 2024.
If you file your 2023 tax return by January 31, 2024, and pay the entire balance due with your return, you do not have to pay estimated taxes in January.
If you do not pay enough tax by the due date of each of the payment periods, you may be charged a penalty even if you are due a refund when you file your income tax return.
Electronic Federal Tax Payment System
The easiest way for individuals and businesses to pay their estimated federal taxes is to use the Electronic Federal Tax Payment System (EFTPS). Make ALL of your federal tax payments, including federal tax deposits (FTDs), installment agreements, and estimated tax payments, using EFTPS. If it is easier to pay your estimated taxes weekly, bi-weekly, monthly, etc., you can, as long as you have paid enough by the end of the quarter. Using EFTPS, you can access a history of your payments to know how much and when you made your estimated tax payments.
Don’t hesitate to call if you have any questions about estimated tax payments or need assistance setting up EFTPS.
Tuesday, April 18, 2023, was the deadline for most taxpayers to file their tax returns. If you haven’t filed a 2022 tax return yet, it’s not too late.
First, gather any information related to income and deductions for the tax years for which a return is required to be filed, then call the office. If you are owed money, the sooner you file, the sooner you will get your refund. If you owe taxes, file and pay as soon as you can, which will stop the interest and penalties you owe.
Some taxpayers filing after the deadline may qualify for penalty relief. Those charged a penalty may contact the IRS by calling the number on their notice and explaining why they couldn’t file and pay on time.
For 2022 tax returns due April 18, 2023, some taxpayers automatically qualify for extra time to file and pay taxes due without penalties and interest, including:
Some disaster victims. Individuals living or working in a federally declared disaster area have more time to file and pay what they owe.
Taxpayers outside the United States. U.S. citizens and resident aliens who live and work outside the U.S. and Puerto Rico, including military members on duty who don’t qualify for the combat zone extension, may qualify for a two-month filing and payment extension.
Members of the military who served or are currently serving in a combat zone may qualify for an additional extension of at least 180 days to file and pay taxes.
Support personnel in combat zones or a contingency operation in support of the Armed Forces may also qualify for a filing and payment extension of at least 180 days.
The military community can also file their taxes using MilTax, a free tax resource offered through the Department of Defense. Eligible taxpayers can use MilTax to file a federal tax return electronically and up to three state returns for free.
If You Don’t File, You May Miss Out on a Refund
Every year, more than 1 million taxpayers choose not to file a return and miss out on receiving a refund due to potential refundable tax credits. The most common examples of these refundable credits are the Earned Income Tax Credit and Child Tax Credit. For example, the IRS estimates nearly 1.5 million people did not file a tax return for 2019 and missed out on an estimated average median refund of $893 (i.e., half of the refunds are more than $893, and half are less).
Taxpayers usually have three years to file and claim their tax refunds. If they don’t file within three years, the money becomes the property of the U.S. Treasury. However, the three-year window for 2019 unfiled returns was postponed to July 17, 2023, due to the COVID-19 pandemic emergency.
How To Make a Payment
If you owe money but cannot pay the IRS in full, pay as much as possible when you file your tax return to minimize penalties and interest. The IRS will work with taxpayers suffering financial hardship. Taxpayers with a history of filing and paying on time often qualify for administrative penalty relief. A taxpayer usually qualifies if they have filed and paid promptly for the past three years and meet other requirements. However, if you continue to ignore your tax bill, the IRS may take collection action.
There are several ways to make a payment on your taxes: credit card, electronic funds transfer, check, money order, cashier’s check, or cash. If you pay your federal taxes using a major credit card or debit card, there is no IRS fee for credit or debit card payments, but processing companies may charge a convenience or flat fee. It is important to review all your options. The interest rates on a loan or credit card could be lower than the combination of penalties and interest imposed by the Internal Revenue Code.
What To Do if You Can’t Pay in Full
Taxpayers who cannot pay the full amount owed on a tax bill are encouraged to pay as much as possible. By paying as much as possible now, the interest and penalties owed will be less than if you pay nothing. Based on individual circumstances, a taxpayer could qualify for an extension of time to pay, an installment agreement, a temporary delay, or an offer in compromise. Don’t hesitate to call if you have questions about these options.
Direct Pay. For individuals, IRS Direct Pay is a fast and free way to pay directly from your checking or savings account. Taxpayers who need more time to pay can set up either a short-term payment extension or a monthly payment plan.
Payment Plans. Most people can set up a monthly payment plan or installment agreement that gives taxpayers more time to pay. However, penalties and interest will continue to be charged on the unpaid portion of the debt throughout the duration of the installment agreement/payment plan. You should pay as much as possible before entering into an installment agreement.
Cash Payments. Individual taxpayers who do not have a bank account or credit card and need to pay their tax bill using cash can make a cash payment at participating PayNearMe Company payment locations (places like 7-Eleven). Individuals wishing to take advantage of this payment option should visit the IRS.gov payments page, select the cash option in the “Other Ways You Can Pay” section, and follow the instructions.
What Happens if You Don’t File a Past Due Return
It’s important to understand the ramifications of not filing a past-due return and the steps that the IRS will take. Taxpayers who continue not to file a required return and fail to respond to IRS requests for a return may be considered for various enforcement actions, including substantial penalties and fees.
Need Help Filing Your 2022 Tax Return?
If you haven’t filed a tax return yet, don’t delay. Call the office today to schedule an appointment as soon as possible.
