In FAQs just posted on their website, the IRS answered many the questions regarding the July 15 filing and payment extension announced in IRS Notice 2020-18. Note the following highlights:
The FAQs are available at:
The IRS has issued Notice 2020-18, which clarifies some provisions for extended returns, but leaves other questions unanswered.
Here are the questions that were answered:
I will continue to keep you posted as additional filing and payment information is released
At a press conference held today, U.S. Treasury Secretary Mnuchin announced the following extensions for federal income tax payments:
A Kiplinger-Barclays poll shows that most Americans aren't feeling a financial boost from the tax overhaul.
By THE EDITORS OF KIPLINGER'S PERSONAL FINANCE
February 6, 2020
From Kiplinger’s Personal Finance
A majority of Americans surveyed in a new poll conducted by Kiplinger in partnership with Barclays Bank say their taxes stayed about the same after the 2017 Tax Cuts and Jobs Act, with remaining respondents almost equally split between higher and lower taxes.
SEE ALSO: 20 IRS Audit Red Flags
The tax overhaul lowered tax rates and expanded income thresholds, but employers also reduced withholding for many wage earners. That may have reduced refunds or inflated balances due with the returns of many taxpayers—and given the impression that savings under the new law were less generous. In addition, the law scaled back itemized deductions. Some 15% of respondents report being affected by the new $10,000 cap on deducting state and local taxes. Some 20% said they felt the impact of no longer being able to claim miscellaneous itemized deductions to write off items such as tax preparation and investment fees and unreimbursed business expenses.
Other highlights: Nearly 40% of respondents say they switched from itemizing deductions to taking the standard deduction, which increased to $12,000 for individuals and $24,000 for married couples filing jointly for the 2018 tax year (higher for taxpayers age 65 or older). Nonitemizers can’t deduct charitable contributions, and roughly 20% of respondents report reducing donations. But about two-thirds of those surveyed say they give to charity regardless of any tax break.
About three-fourths of respondents got a refund on their last return. Nearly two-thirds say they’d rather get a refund than a bigger paycheck throughout the year.
The poll surveyed a national sampling of 852 taxpayers between December 3 and 13, 2019. The median age was 49 years old, and the median household net worth was $203,850 (excluding a primary residence).
We’ve included highlights here (figures are medians unless otherwise indicated).
Which of these tax changes affected you?
I CAN NO LONGER TAKE MISCELLANEOUS ITEMIZED DEDUCTIONS: 20%
I CAN’T DEDUCT STATE AND LOCAL TAXES THAT EXCEED $10,000: 15%
I CAN ONLY DEDUCT INTEREST ON A MORTGAGE OF UP TO $750,000 (DOWN FROM $1 MILLION): 8%
NOW I CAN ONLY DEDUCT CASUALTY LOSSES IF THEY OCCURRED IN A FEDERALLY DECLARED DISASTER AREA: 7%
I CAN NO LONGER DEDUCT MOVING EXPENSES WHEN RELOCATING FOR A JOB: 4%
I CAN NO LONGER DEDUCT ALIMONY PAYMENTS: 1%
NONE OF THESE 58%
Has your charitable giving changed?
NO, I GIVE REGARDLESS OF ANY TAX BREAK: 66%
YES, I HAVE DECREASED THE AMOUNT I DONATE TO CHARITY: 20%
YES, I COMBINED TWO OR MORE YEARS OF CHARITABLE GIVING INTO A SINGLE YEAR TO QUALIFY FOR THE TAX DEDUCTION: 8%
I’M OVER 70 AND NOW GIVE TO CHARITY DIRECTLY FROM MY IRA: 3%
YES, I OPENED A DONOR-ADVISED FUND: 1%
I CAN NO LONGER DEDUCT ALIMONY PAYMENTS: 3%
Do you usually hire someone to prepare your tax return?
If you prepare your own return, do you use tax software?
Which tax software do you use?
H&R BLOCK: 17%
TAX ACT: 13%
Did you receive a refund after filing your last tax return?
SEE ALSO: 10 Tax Breaks for the Middle Class
Would your rather get a tax refund or have less tax withheld throughout the year and receive bigger paychecks?
BIGGER PAYCHECK: 37%
The median tax refund for 2018 was $2,154. What did you do with your refund?
SAVED IT: 38%
SPENT A PORTION; SAVED THE REST: 23%
CREATED AN EMERGENCY FUND: 6%
INVESTED IT: 10%
PAID CREDIT CARD BILLS: 25%
PAID STUDENT LOANS: 3%
BOUGHT GIFTS FOR FRIENDS OR FAMILY: 3%
BOUGHT MYSELF A GIFT: 6%
SPLURGED ON A VACATION: 7%
SPENT IT ON EVERYDAY ITEMS: 7%
After filing your last tax return, did you make changes to your W-4 to adjust your withholding?
NO, I’M FINE WITH THE WAY IT IS: 88%
YES, I HAD MORE TAXES TAKEN OUT OF MY PAYCHECK: 8%
YES, I HAD FEWER TAXES WITHHELD: 4%
On December 20, 2019, Congress and the President agreed on a tax extender package as part of the “Taxpayer Certainty and Disaster Tax Relief Act of 2019”.
The Act reinstates many expired tax provisions RETROACTIVE to the 2018 tax year through 2020. An amended return for 2018 must be filed to take advantage of these extenders IF you qualify.
These are the provisions:
The House, Senate and White House have reached a deal on dozens of tax extenders ( many retroactive to 2018) as well as the all new SECURE ACT, which makes significant changes to various retirement-related provisions impacting taxpayers and their employers. The President is expected to sign the bill.
A few highlights of these changes include:
The IRS and the Treasury Inspector General for Tax Administration continue to hear from taxpayers who have received unsolicited calls from individuals demanding payment while fraudulently claiming to be from the IRS.
Based on the 90,000 complaints that TIGTA has received through its telephone hotline, to date, TIGTA has identified approximately 1,100 victims who have lost an estimated $5 million from these scams.
“There are clear warning signs about these scams, which continue at high levels throughout the nation,” said IRS Commissioner John Koskinen. “Taxpayers should remember their first contact with the IRS will not be a call from out of the blue, but through official correspondence sent through the mail. A big red flag for these scams are angry, threatening calls from people who say they are from the IRS and urging immediate payment. This is not how we operate. People should hang up immediately and contact TIGTA or the IRS.”
New Pub 5172 – Facts about Health Coverage Exemptions Available on IRS.gov
New IRS Publication 5172, Facts about Health Coverage Exemptions, provides information for taxpayers who qualify for and may claim exemption from minimum essential coverage so that they do not need to make individual shared responsibility payments when they file their federal tax returns.
Publication 5156, Facts about the Individual Shared Responsibility Payment, an exemption chart, IRS You Tube video Individual Shared Responsibilities – Overview and Questions and Answers contain more information.
Form 1098 (you receive this from the lender) will be different starting in 2016 ( tax filing year 2017). The 1098 will include the amount of mortgage principal at the start of the year, the mortgage origination date, and the address of the property securing the loan.
Estates and Trusts:
Effective for Tax form 706 filed after July 31, 2015, heirs are now required to use the value of an inherited asset as shown on the Form 706 as the basis for the asset or the value as adjusted by IRS or court ruling. If you use a basis higher than reported, you may be hit with a 20% substantial understatement penalty.
FILING DUE DATES ARE CHANGING FOR BUSINESS RETURNS:
Beginning in 2016, partnerships are due 2 ½ months after the year end, March 15 for calendar year partnerships. That represents a month earlier than now. This makes partnerships and S Corporations due at the same time. This gives preparers time to transfer the data from the K1 to the 1040 in time for April 15. C Corporations will be due 3 ½ months after the year end., except for fiscal year corporations (June 30 as example). Partnerships can request a six month extension; Corporations 5 months.
Unmarried filers who jointly buy a home get a tax break on the mortgage interest. The $1 million loan cap on home mortgages applies on a PER-TAXPAYER basis and no longer on a PER-RESIDENCE basis. Also applies to the $100,000 home equity debt.
Firms that legally sell marijuana can now deduct the State excise Tax fees on the marijuana sales. They are still not allowed to deduct business expenses except the cost of the marijuana.
Sal Censoprano is a Certified Public Accountant (CPA) and tax practice owner for over 40 years. He was born and raised in Brooklyn, New York and earned his master’s degree in taxation.