Don’t Believe the Myths

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The IRS has posted a list of common refund myths on its website. For example, if the online Where’s My Refund tool or automated hotline doesn’t specify when a refund will be approved, there’s no point in calling the IRS. The tax agency won’t have additional details yet.

Also, don’t assume that Where’s My Refund is wrong if the refund amount is less than anticipated. The IRS may have adjusted your refund. If so, it will send you a letter explaining the adjustment.

While most refunds are issued within 21 days, some may take longer because the IRS requires additional information. If so, the agency will contact you.

Wheeler has a dedicated team assigned to IRS correspondence. If you are a client and have additional questions, don’t hesitate to contact us!

408-252-1800

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Does the Corporate Transparency Act Apply to Your Business?

On March 1, 2024, the U.S. District Court for the Northern District of Alabama ruled that the CTA is unconstitutional. Does that mean that businesses no longer need to comply? Not necessarily. The federal government filed an appeal on March 11, 2024, in the U.S. Court of Appeals for the 11th Circuit. That same day, FinCEN announced that the law’s requirements are still in effect for those not involved in the court case.

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Erroneous Refund?

Mistakes happen. What if you receive a refund from the IRS that you’re not entitled to? Or what if you receive one that’s more than you’re entitled to? How you must handle it depends on the details. A paper check refund should be voided and returned within 21 days of receipt to the address in the link below. But suppose you cashed the check. In that case, submit a personal check within 21 days to that address.

If the refund was by direct deposit, contact your bank to have them return the deposit. Also contact the IRS at the phone number in the link. Be aware that if the IRS intentionally changed your refund amount from what was on the return you filed, it will mail you a notice of explanation.

You can find more information here: https://www.irs.gov/taxtopics/tc161

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ERC Voluntary Disclosure Program Available for a Limited Time

As part of an ongoing initiative to combat questionable Employee Retention Credit (ERC) claims, the IRS has launched a voluntary disclosure program. It allows eligible businesses to pay back money they received after filing ERC claims in error.

The disclosure program runs through March 22, 2024, and requires only 80% of the claim received to be repaid. It’s part of a larger IRS effort to stop aggressive marketing around the ERC that misled some employers into filing claims they were ineligible for.

The IRS has another program that allows employers to withdraw pending ERC claims with no interest or penalty. More than $100 million in withdrawals has already been received.

Withdrawing ERC Claims

Recently, the IRS halted processing of claims for the Employee Retention Credit (ERC), due to a high volume of fraudulent claims. The moratorium is through at least the end of 2023. ERC claims that were already filed are now subject to longer processing, including heightened scrutiny to weed out fraud.

Now the IRS is creating a path for businesses that are concerned they may be victims of aggressive ERC marketing schemes. Eligible businesses can opt to withdraw unprocessed claims that they now believe may be invalid. Among other things, to be eligible, the business must have made the claim on an adjusted employment return that included no other adjustments and must want to withdraw the entire amount of the ERC claim.

Withdrawing a claim can allow the business to avoid receiving a refund for which it’s ineligible (and that would have to be repaid) as well as interest and penalties. Businesses that aren’t eligible to use the withdrawal process may be able to reduce or eliminate their ERC claim by filing an amended return.

IRS Suspends Processing of New ERC Claims

The IRS is continuing to warn businesses about aggressive marketing by nefarious actors involving the Employee Retention Credit (ERC). It has suspended the processing of ERC claims until at least year end because of a spike in the number of fraudulent claims.

The IRS has now issued a series of red flags businesses should bear in mind. Warning signs include:

  • Unsolicited calls mentioning an “easy application process,”
  • Claims that a business qualifies for the ERC even before any discussion of the business’s tax situation, and
  • Large upfront fees and additional fees based on a percentage of the refund claim.

Eligible employers can claim the ERC on an original or amended employment tax return for qualified wages paid between March 13, 2020, and Dec. 31, 2021. But there are very specific eligibility requirements; careful review is required to determine eligibility. The IRS recommends businesses work with a trusted tax professional.

Please contact us if you have any questions:

San Jose: (408) 252-1800
Watsonville: (831) 726-8500

Tax Season Is Ending, but Tax Scams Are Thriving

The IRS is warning taxpayers about emails and text messages that promise refunds and credits, but that actually result in identity theft. Many current schemes involve the third Economic Impact Payment (originally made in 2021). Messages may also reference the Employee Retention Credit, assert that the taxpayer is owed a refund or say there’s problem with a return that must be fixed. They encourage recipients to click links that download malware.

The fake messages usually contain misspellings and typos and come from a suspicious-looking email address. If you receive one like this, don’t click on anything! Report it to phishing@irs.gov.

What Certain IRS Notices Mean

What does it mean if a business receives a Notice CP2100 or CP2100A from the IRS? These notices tell recipients that the Form 1099 information returns they’ve submitted contain missing or incorrect Taxpayer Identification Numbers, names or both.

To respond, payers need to compare accounts listed on the notice with their own records and make corrections, if necessary. They may also need to amend backup withholding for payments made to payees. Typically, the IRS sends these notices twice a year, in April and in either September or October. As always, you should promptly respond to any IRS communication. Contact the office with questions.

San Jose: (408) 252-1800
Watsonville: (831) 726-8500

Verifying Your Identity When Calling the IRS

Sometimes, taxpayers must call the IRS about a tax matter. As part of the IRS’s ongoing efforts to keep taxpayer data secure from identity thieves, IRS phone assistors take great care to discuss personal information with the taxpayer or someone the taxpayer has authorized to speak on their behalf. Therefore, the IRS will ask taxpayers and their representatives to verify their identity when they call.

Calling the IRS About Your Own Tax Matter

You should have the following information ready before calling the IRS:

  • Social Security numbers (SSNs) and birth dates for those who were named on the tax return
  • An Individual Taxpayer Identification Number (ITIN) letter if you have one instead of an SSN
  • Your filing status: single, head of household, married filing jointly, or married filing separately
  • Your prior-year tax return, because phone assistors may need it to verify taxpayer identity with information from the return before answering certain questions
  • A copy of the tax return in question
  • Any IRS letters or notices you have received

Legally Designated Representatives

By law, IRS telephone assistors will speak only with the taxpayer or to the taxpayer’s legally designated representative. In other words, a taxpayer can grant authorization to a third party to help with federal tax matters. Depending on the authorization, the third party can be a family member, friend, tax professional, attorney, or business. The different types of third-party authorizations include:

  • Power of Attorney – Allow someone to represent you in tax matters before the IRS. This is different from a power of attorney for property who you authorize to manage your financial affairs. It must be an individual authorized to practice before the IRS.
  • Tax Information Authorization – Appoint anyone to review and receive your confidential tax information for the type of tax and years/periods you determine.
  • Third Party Designee – Designate a person on your tax form to discuss that specific tax return and year with the IRS.
  • Oral Disclosure – Authorize the IRS to disclose your tax information to a person you bring into a phone conversation or meeting with the IRS about a specific tax issue.

Note: Taxpayers must meet all of their tax obligations even when authorizing someone to represent them.

Calling on Behalf of Someone Else

If you are calling the IRS about someone else’s account, you should be prepared to verify your identity and provide information about the person you represent. Before calling about a third party, you should have the following information available:

  • Verbal or written authorization from the taxpayer to discuss the account
  • The ability to verify the taxpayer’s name, SSN or ITIN, tax period, and tax forms filed
  • Identity Protection PIN (IP PIN)
  • One of these forms, which is current, completed, and signed: Form 8821, Tax Information Authorization or Form 2848, Power of Attorney and Declaration of Representative

Keep in mind that if your tax professional is calling the IRS on your behalf, your tax pro will need to have this information about you, except generally a Preparer Tax Identification Number (PTIN) instead of an IP PIN.

Questions or Concerns?

If you have any questions or concerns about verifying your identity before calling the IRS, do not hesitate to contact the office for assistance.

San Jose: (408) 252-1800
Watsonville: (831) 726-8500

What To Do if You Receive an IRS CP2000 Notice

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.

San Jose: (408) 252-1800

Watsonville: (831) 726-8500