Democrats Raise Proposed IRS Bank YEARLY Reporting Threshold To $10,000 From $600
By David Lawder (Notes are by Gary L. Britt, CPA, J.D.)
WASHINGTON (Reuters) - Senior Democrats in Congress have agreed to raise their proposed tax reporting threshold for bank account inflows and outflows to $10,000 a year, with exemptions for wage income, from an earlier proposal of $600 that drew criticism for being too intrusive.
(NOTE: Since this is NOT $10,000 per transaction. It is a law requiring banks to report accounts and account detailed information to the IRS for any account that has more than $10,000 in deposits or withdrawals in total during the calendar year. This will mean every person who has any kind of small business income will be subject to a warrantless search by the IRS of their banking records. It is a direct attack on the entire lower and middle class in this country. It is NOT as the democrats claim aimed at billionaires. If this were aimed at Billionaires the threshold would need to be more than $100,000,000 dollars per year.)
U.S. Senate Finance Committee Chairman Ron Wyden on Tuesday said the new $10,000 Internal Revenue Service reporting threshold, to be included in Democrats' sweeping "reconciliation" social spending and tax hike legislation, was chosen after consultations with the U.S. Treasury because it is a level frequently used in other bank reporting requirements.
(NOTE: Here they deliberately try to confuse the reader into thinking this new law would be about reporting TRANSACTIONS of $10,000 or more. And that is just a lie by both democrat Senator Ron Wyden AND the news media making uncritical reports of this lie. This law says report bank accounts that have more than $10,000 in deposits or withdrawals IN TOTAL during the calendar year!!!)
These include requirements for banks to report daily aggregate cash transactions of $10,000 or more under anti-money laundering rules.
Democrats' initial proposal for banks to report inflows or outflows of bank accounts of more than $600 annually drew sharp criticism from Republicans for targeting tiny transactions and opposition from banking and other lobbying groups who charged it would raise financial privacy concerns.
The proposal does not identify individual transactions, but gross annual inflows or outflows to help the IRS identify where wealthy taxpayers who do not rely on regular "W2" wage income may be hiding opaque source of business or investment income.
(NOTE: The democrats and the media think wealth taxpayers are taxpayers who deposit more than or withdraw more than $10,000 in total during an entire calendar year. That is BS of course.)
Wyden and Senator Elizabeth Warren said the revised proposal would exclude W2 wage income from the inflows and outflows data reporting requirement. Many Americans have their paychecks automatically deposited into their bank accounts.
Wyden said the revised proposal would potentially raise "hundreds of billions of dollars" by catching tax evaders, but declined to provide a specific estimate.
"This is about wealthy business owners at the tippy top of the top. That's where the unpaid taxes are," he told reporters on a conference call.
'TAX GAP'
U.S. Treasury Secretary Janet Yellen on Tuesday endorsed the proposal, saying it would make it harder for wealthy Americans to hide sources of income from taxation, allowing the IRS to target them for audits.
The Treasury estimates that the cost of tax evasion among the top 1% of taxpayers exceeds $160 billion annually, part of a "tax gap" between taxes owed and those collected estimated at more than $7 trillion over a decade.
"Today's new proposal reflects the Administration's strong belief that we should zero in on those at the top of the income scale who don't pay the taxes they owe, while protecting American workers by setting the bank account threshold at $10,000 and providing an exemption for wage earners like teachers and firefighters," Yellen said in a statement.
In a new statement on tax compliance proposals, the Treasury said financial accounts with money flowing in and out that totals less than $10,000 annually are not subject to any additional reporting.
"Further, when computing this threshold, the new, tailored proposal carves out wage and salary earners and federal program beneficiaries, such that only those accruing other forms of income in opaque ways are a part of the reporting regime," the Treasury said.
The department also said that financial services firms could report the total aggregate inflows and outflows from accounts rounded to the nearest $1,000 to further protect data privacy.
(NOTE: More lies. It zeros in on the middle class NOT the top 1%).
Consider Biden's proposals. As the year comes to an end, it is hard to predict what, if anything, that Mr. Biden has proposed will become law and take effect in 2021. Many believe that taxes will have to be raised after the economic effects of the pandemic are tamed, to pay for the increased federal spending caused by the pandemic. But enacting tax legislation of any sort is likely to be a slow process and could very conceivably not affect 2021 taxes.
In any case, here are some of Mr. Biden's most noteworthy tax proposals:
Tax increase proposals
Tax decrease proposals.
Solve underpayment of estimated tax/withheld tax issues.
Have an extra amount of withholding in order to solve an underpayment of estimated tax problem. Employees may discover that their prepayments of tax for 2020 have been too small because, for example, their estimate of income or deductions was off and they are underwithheld, or they failed to make estimated tax payments for unanticipated income, such as gains from sales of stock. Or they may have an underpayment of estimated tax because of the additional 0.9% Medicare tax and/or the 3.8% surtax on unearned income. To ward off or reduce an estimated tax underpayment penalty, employees can ask their employers to increase withholding for their last paycheck or paychecks to make up or reduce the deficiency. Employees can file a new Form W-4 or simply request that the employer withhold a flat amount of additional income tax. Increasing the final estimated tax payment for 2020 (due on Jan. 15, 2021) can cut or eliminate the penalty for a final-quarter underpayment only. It doesn't help with underpayments for preceding quarters. By contrast, tax withheld on wages can wipe out or reduce underpayments for previous quarters because, as a general rule, an equal part of the total withholding during the year is treated as having been paid on each quarterly estimated payment date.
Reference: See FTC 2d/FIN ¶ S-5248.
Take a retirement plan distribution in order to solve an underpayment of estimated tax problem. An individual can take an eligible rollover distribution from a qualified retirement plan before the end of 2020 if he or she is facing a penalty for underpayment of estimated tax and the extra withholding option described above is unavailable or won't sufficiently address the problem. Unless the taxpayer chooses no withholding, the withholding rate for a nonperiodic distribution (a payment other than a periodic payment) that is not an eligible rollover distribution is 10% of the distribution. The taxpayer can also ask the payer to withhold an additional amount using Form W-4P. The taxpayer can then timely roll over the gross amount of the distribution, as increased by the amount of withheld tax, to a traditional IRA. No part of the distribution will be includible in income for 2020, but the withheld tax will be applied pro rata over the full 2020 tax year to reduce previous underpayments of estimated tax.
Reference: See FTC 2d/FIN ¶ S-5248.
Charitable donations.
Use IRAs to make charitable donations. Taxpayers who have reached age 70½ by the end of 2020, own IRAs, and are thinking of making a charitable gift should consider arranging for the gift to be made by way of a qualified charitable contribution, or QCD—a direct transfer from the IRA trustee to the charitable organization. Such a transfer (not to exceed $100,000 for all such transfers for 2020) will neither be included in gross income nor allowed as a deduction on the taxpayer's return. But, since such a distribution is not includible in gross income, it will not increase AGI for purposes of the phaseout of any deduction, exclusion, or tax credit that is limited or lost completely when AGI reaches certain specified level.
Taxpayers who have reached age 72 by Dec. 31 normally must take required minimum distributions (RMDs) from their IRAs or 401(k) plans (or other employer-sponsored retired plans) by Dec. 31. However, there is no such requirement for 2020.
Nonetheless, a QCD before Dec. 31, 2020 is still a good idea for retired taxpayers who don’t need all of their as-yet undistributed RMD for living expenses. That’s because a 2020 QCD will reduce the taxpayer's retirement account balance and thus reduce the amount of the RMD that must be withdrawn in future tax years.
Reference: See FTC 2d/FIN ¶ H-12253.2 et seq.
Charitable donation by non-itemzers. Non-itemizers can deduct up to $300 of cash charitable donations that they make in 2020. While the Consoidated Appropriations Act, 2021 (CAA, 2021), if signed into law, provides for an additional charitable deduction in 2021 for non-itemizers, to get the $300 deduction for 2020, the donation must be made before year-end 2020.
And, because CAA, 2021 does provide for a charitable deduction for non-itemizers for 2021, taxpayers should consider holding off in making contributions over $300 for 2020 and making those "excess contributions" in 2021.
Reference: See FTC 2d/FIN ¶ A-2630.
Higher limit on charitable contributions. In response to the Coronavirus (COVID-19) pandemic, the limit on charitable contributions of cash by an individual in 2020 was increased to 100% of the individual's contribution base. For previous years, the limit was 60% of the contribution base. The contribution base is a modification of adjusted gross income.
While this increased limit was extended to 2021 by the CAA, 2021, taxpayers should consider increasing 2020 contributions to take advantage of the increased limit.
Reference: See FTC 2d/FIN ¶ K-3672.4.
Retirement plans.
Establish a Keogh plan. A self-employed person who wants to contribute to a Keogh plan for 2020 must establish that plan before the end of 2020. If that is done, deductible contributions for 2020 can be made as late as the taxpayer's extended tax return due date for 2020.
Reference: See FTC 2d/FIN ¶ H-10017.
Relief with respect to withdrawal from retirement plans. A distribution from a qualified retirement plan is generally subject to a 10% additional tax unless the distribution meets an exception under Code Sec. 72(t).
2020 legislation provides that the Code Sec. 72(t) 10% additional tax does not apply to any coronavirus-related distribution, up to $100,000. A coronavirus-related distribution is any distribution made on or after January 1, 2020, and before December 31, 2020, from an eligible retirement plan, made to a qualified individual.
A qualified individual is an individual
Other relief also applies to coronavirus-related distributions, including the ability to recognize income over a 3-tax-year period.
Reference: See FTC 2d/FIN ¶ H-11119.
Other.
Make year-end gifts. A person can give any other person up to $15,000 for 2020 without incurring any gift tax. The annual exclusion amount increases to $30,000 per donee if the donor's spouse consents to gift-splitting. Anyone who expects eventually to have estate tax liability and who can afford to make gifts to family members should do so. Besides avoiding transfer tax, annual exclusion gifts take future appreciation in the value of the gift property out of the donor's estate, and they shift the income tax obligation on the property's earnings to the donee who may be in a lower tax bracket (if not subject to the kiddie tax).
A gift by check to a noncharitable donee is considered to be a completed gift for gift and estate tax purposes on the earlier of:
Thus, for example, a $15,000 gift check given to and deposited by a grandson on Dec. 31, 2020 is treated as a completed gift for 2020 even though the check doesn't clear until 2021 (assuming the donor is still alive when the check is paid by the drawee bank).
Reference: See FTC 2d/FIN ¶ Q-1916.
Watch out for the use-it-or-lose-it rule. Unused cafeteria plan amounts left over at the end of a plan year must generally be forfeited (use-it-or-lose-it rule). A cafeteria plan can provide an optional grace period immediately following the end of each plan year, extending the period for incurring expenses for qualified benefits to the 15th day of the third month after the end of the plan year. Benefits or contributions not used as of the end of the grace period are forfeited. Under an exception to the use-it-or-lose-it rule, at the plan sponsor's option and in lieu of any grace period, employees may be allowed to carry over up to $500 of unused amounts remaining at year-end in a health flexible spending account.
Taxpayers thus should make sure they understand their employer's plan and should make last-minute purchases before year end to the extent that not doing so will result in losing benefits. In most cases, a trip to the drug store, dentist or optometrist, for goods or services that the taxpayer would otherwise have purchased in 2021, can avoid "losing it."
Reference: See FTC 2d/FIN ¶ H-2417.
Paying by credit card creates deduction on date of credit card transaction. Taxpayers should consider using a credit card to pay deductible expenses before the end of the year. Doing so will increase their 2020 deductions even if they don't pay their credit card bill until after the end of the year.
Reference: See FTC 2d/FIN ¶ G-2436.
Renew ITINs that expire on Dec. 31. Any individual filing a U.S. tax return is required to state his or her taxpayer identification number on that return. Generally, a taxpayer identification number is the individual's Social Security number (SSN). However, IRS issues Individual Taxpayer Identification Numbers (ITINs) to individuals who are not eligible to be issued an SSN but who still have a U.S. tax filing obligation.
Unlike SSNs, ITINs expire if not used on a return for three consecutive years or after a certain period. For example, ITINs issued in 2012 and 2013 (i.e., those with middle digits 90, 91, 92, 94, 95, 96, 97, 98 or 99) expire on December 31, 2020.
Anyone whose ITIN is expiring at the end of 2020 needs to file a complete renewal application, Form W-7, Application for IRS Individual Taxpayer Identification Number.
Reference: For the ITIN program, see FTC 2d/FIN ¶S-1582.1 et seq.
Increase 2020 itemized deductions via a "bunching strategy." Many taxpayers who claimed itemized deductions in prior years will no longer be able to do so. That’s because the standard deduction has been increased and many itemized deductions have been cut back or abolished. Paying some otherwise-deductible-in-2021 itemized deductions in 2020 can decrease taxable income in 2020 and will not increase 2021 taxable income if 2021 itemized deductions would otherwise have still been less than the 2021 standard deduction. For example, a taxpayer who expects to itemize deductions in 2020 but not 2021, and usually contributes a total of $1,500 to charities each year, should consider making a total of $3,000 of charitable contributions before the end of 2020 (and skipping charitable contributions in 2021).
Reference: See FTC 2d/FIN ¶ G-243
For help with your legal needs contact a business, tax, and health care law attorney at the offices of AttorneyBritt.
From renting spare rooms and vacation homes to car rides or using a bike…name a service and it’s probably available through the sharing
economy.
Taxpayers who participate in the sharing economy can find helpful resources in the IRS Sharing Economy Tax Center on IRS.gov.
Here are six things taxpayers should know about how the sharing economy might affect their taxes:
1. The activity is taxable.
Sharing economy activity is generally taxable. It is taxable even when:
2. Some expenses are deductible.
Taxpayers who participate in the sharing economy may be able to deduct certain expenses. For example, a taxpayer who uses their car for business may qualify to claim the standard mileage rate, which
is 58 cents per mile for 2019.
3. There are special rules for rentals.
If a taxpayer rents out their home or apartment, but also lives in it during the year, special rules generally apply to their taxes. Taxpayers can use the Interactive Tax Assistant tool, Is My Residential Rental Income Taxable and/or Are My Expenses Deductible? to determine if their residential rental income is
taxable.
4. Participants may need to make estimated tax payments.
The U.S. tax system is pay-as-you-go. This means that taxpayers involved in the sharing economy often need to make estimated tax payments during the
year. These payments are due on April 15, June 15, Sept. 15 and Jan. 15. Taxpayers use Form 1040-ES to figure these payments.
5. There are different ways to pay.
The fastest and easiest way to make estimated tax payments is through IRS Direct Pay. Alternatively, taxpayers can use the Electronic Federal Tax Payment System.
6. Taxpayers should check their withholding.
Taxpayers involved in the sharing economy who are employees at another job can often avoid making estimated tax payments by having more tax withheld from their paychecks. These taxpayers can use
the Withholding Calculator on IRS.gov to determine how much tax their employer should withhold. After determining the amount of
their withholding, the taxpayer will file Form W-4 with their employer to request the additional withholding.
IRS YouTube Videos:
Your Taxes in the Sharing Economy – English | ASL
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AttorneyBritt.
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Many people claim the child tax credit to help offset the cost of raising children. Tax reform legislation made changes to that credit for 2018 and later.
Here are some important things for taxpayers to know.
Credit amount. The new law increases the child tax credit from $1,000 to $2,000. Eligibility factors for the credit have not changed. As in past years, a taxpayer can claim the
credit if all of these apply:
Credit refunds. The credit is refundable, now up to $1,400. If a taxpayer doesn’t owe any tax before claiming the credit, they will receive up to
$1,400 as part of their tax refund.
Earned income threshold. The income threshold to claim the credit has been lowered to $2,500 per family. This means a family must earn a minimum of $2,500 to claim the credit.
Phaseout. The income threshold at which the child tax credit begins to phase out is increased to $200,000, or $400,000 if married filing jointly. This means that more families with
children younger than 17 qualify for the larger credit.
New credit for other dependents. Dependents who can’t be claimed for the child tax credit may still qualify for the new credit for other
dependents. This is a non-refundable credit of up to $500 per qualifying person. These dependents may also be dependent children who are age 17 or older at the end of the tax year. It also
includes parents or other qualifying relatives supported by the taxpayer.
More information:
Tax Reform Basics for Individuals and Families
Tax Reform Small Business Initiative
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WASHINGTON –The Treasury Department and the Internal Revenue Service issued guidance that provides a safe harbor method for determining depreciation deductions for passenger automobiles that qualify for
the 100-percent additional first year depreciation deduction and that are subject to the depreciation limitations for passenger automobiles.
Under the Tax Cuts and Jobs Act (TCJA), the additional first year depreciation deduction applies to qualified property, including passenger automobiles, acquired
and placed in service after September 27, 2017, and before January 1, 2027.
In general, the section 179 and depreciation deductions for passenger automobiles are subject to dollar limitations for the year the taxpayer places the passenger automobile in service and for each
succeeding year. For a passenger automobile that qualifies for the 100-percent additional first year depreciation deduction, TCJA increased the first-year limitation amount by $8,000. If the depreciable basis of a passenger automobile for which the 100-percent
additional first year depreciation deduction is allowable exceeds the first-year limitation, the excess amount is deductible in the first taxable year after the end of the recovery period.
The guidance provides a safe harbor method of accounting for passenger automobiles. The safe harbor allows depreciation deductions for the excess amount during the recovery period subject to the
depreciation limitations applicable to passenger automobiles. To apply the safe-harbor method, the taxpayer must use the applicable depreciation table in Appendix A of IRS Publication
946. The safe harbor method does not apply to a passenger automobile placed in service by the taxpayer after 2022, or to a passenger automobile for which the taxpayer elected out of the
100-percent additional first year depreciation deduction or elected under section 179 to expense all or a portion of the cost of the passenger automobile.
Taxpayers adopt the safe harbor method of accounting by applying it to deduct depreciation of a passenger automobile on their return for the first taxable year following the placed-in-service
year.
For more information on the additional first year depreciation deduction, see TCJA, Depreciation. For information about other TCJA provisions, visit IRS.gov/taxreform.
For help with your legal needs contact a business, tax, and health care law attorney at the offices of AttorneyBritt.
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Taxpayers should choose their tax return preparer wisely.
This is because taxpayers are responsible for all the information on their income tax return. That’s true no matter who prepares the return.
Here are ten tips for taxpayers to remember when selecting a preparer:
More information:
Understanding Tax Return Preparer Credentials and Qualifications
Tax Topic 254 - How to Choose a Tax Return Preparer
How to Make a Complaint About a Tax Return Preparer
The December 2017 Tax reform legislation affects almost every taxpayer.
Taxpayers can continue to rely on the IRS, tax professionals and tax software programs when it’s time to file their returns.
As people prepare to file their 2018 tax returns this year, they can visit IRS.gov for answers to their questions about tax reform. Here are several of the resources that will help taxpayers find out how this law affects them:
Tax reform provisions that affect individuals
This is the main tax reform page with information for individual taxpayers. It includes dozens of links to more information on topics from withholding and tax credits to deductions and savings plans.
Tax reform basics for individuals and families
This publication provides information to help individual taxpayers understand the Tax Cuts and Jobs Act and how to comply with federal tax return filing requirements.
On this page, taxpayers can find helpful products including news releases, tax reform tax tips, revenue procedures, fact sheets, FAQs and drop-in articles.
Steps to take now to get a jump on next year’s taxes
This page has dozens of resources and tools that people can visit now or any time before they file their 2018 tax returns.
This page has information for people doing a Paycheck Checkup to see if they’re withholding the right amount of tax from their paychecks. Taxpayers can perform a Paycheck Checkup at the beginning of 2019 to make sure their withholding is correct for the rest of the year.
One way taxpayers can do a Paycheck Checkup is to use the Withholding Calculator. Checking withholding can help taxpayers protect against having too little tax withheld and facing an unexpected tax bill or penalty at tax time.
The Taxpayer Advocate Service’s Tax Reform Changes website, available in English and Spanish, explains what is changing and what is not this year for individuals. Its interactive information can be reviewed by tax topic or line by line using a Form 1040 example and is updated to show the new 2018 Form 1040 references.
The main tax reform webpage on IRS.gov features information for individuals, but also takes users directly to info for people who are self-employed. It is also a great resource for anyone who does taxes or accounting for a business or charity.
For help with your legal needs contact a business, tax, and health care law attorney at the offices of AttorneyBritt.
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List Of 2018 Expired IRS Federal Tax Provisions
As we enter tax season, here is a listing of those federal IRS tax provisions, that, as noted in a recent report by the Joint Committee on Taxation (JCT), have not been extended to 2018.
Background. The Code contains dozens of temporary tax provisions—i.e., provisions with a fixed termination date. Often, these expiring
provisions are temporarily extended for a short period of time (e.g., one or two years).
Many of these extender provisions would have been extended through the end of 2018 by a the Retirement, Savings, and Other Tax Relief Act of 2018 and the Taxpayer First Act of 2018 (H.R. 88). However, on Dec. 10, 2018, that bill was revised so as to not include those extensions.
On January 15, Charles Grassley (R-IA), Chairman of the Senate Finance Committee stated that his goal is to guide extenders legislation to final enactment. However, he acknowledged that he does not have a specific plan and that no hearings on the subject have been scheduled.
List of extenders that haven't been extended to 2018. On January 19, the JCT released its annual report on the temporary individual, business, and energy tax extender provisions. This report contains a section that serves as a reminder of the extender provisions that expired at the end of 2017.
The provisions can be fit into three categories—those primarily affecting individuals, those primarily affecting businesses, and being energy-related provisions.
The expired individual provisions are:
The expired business provisions are:
The expired energy provisions are:
Tax forms and instructions. A sampling of the relevant 2018 tax forms/instructions, as they existed at the time we went to press, indicates that those forms/instructions reflect the fact that the above extenders do not apply for 2018 tax years.
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The Treasury Department and the Internal Revenue Service issued final regulations and three related pieces of guidance, implementing the new qualified business income
(QBI) deduction (section 199A deduction).
The new QBI deduction, created by the 2017 Tax Cuts and Jobs Act (TCJA) allows many owners of sole proprietorships, partnerships, S corporations, trusts, or estates to deduct up to 20 percent of
their qualified business income. Eligible taxpayers can also deduct up to 20 percent of their qualified real estate investment trust (REIT) dividends and publicly traded partnership
income.
The QBI deduction is available in tax years beginning after Dec. 31, 2017, meaning eligible taxpayers will be able to claim it for the first time on their 2018 Form 1040.
The guidance, released today includes:
The proposed revenue procedure, included in Notice 2019-07, allows individuals and entities who own rental real estate directly or through a disregarded entity to
treat a rental real estate enterprise as a trade or business for purposes of the QBI deduction if certain requirements are met. Taxpayers can rely on this safe harbor until a final revenue
procedure is issued.
The QBI deduction is generally available to eligible taxpayers with 2018 taxable income at or below $315,000 for joint returns and $157,500 for other filers. Those with incomes above these levels,
are still eligible for the deduction but are subject to limitations, such as the type of trade or business, the amount of W-2 wages paid in the trade or business and the unadjusted basis immediately
after acquisition of qualified property. These limitations are fully described in the final regulations.
The QBI deduction is not available for wage income or for business income earned by a C corporation.
For details on this deduction, including answers to frequently-asked questions, as well as information on other TCJA provisions, visit IRS.gov/taxreform.
For help with your legal needs contact a business, tax, and health care law attorney at the offices of AttorneyBritt.
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