June is Busting Out All Over!
Congratulations to everyone who survived one of the most grueling tax seasons ever! (at least - Phase 1)
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It's TaxQuips time from TaxMama.com® - today TaxMama® wants to give you some strategies or recommendations about how to deal with the retroactive changes from the American Rescue Act.
[Note: You can listen to the audio podcast here]
Dear Family,
When Congress passed the American Rescue Act, they included some tax provisions that affected tax returns that had already been filed by millions of people. At the time, there was a great deal of confusion on what to do for those who had already filed; and how to handle these benefits for those who had not yet filed.
What should you do?
The IRS says, about both of these retroactive provisions to DO NOTHING.
They have started to issue refunds to anyone who has already filed tax returns.
These changes may affect many other areas of the tax return when adjusted gross income drops and tax liability drops.
Is that a good idea – to just sit and wait?
Actually yes.
Wait for the IRS to finish processing all those refunds, since they are going to be doing this anyway. Give them a couple of months for their computers to spew out their version of the recalculations on these retroactive revisions.
THEN…consider amending. Why?
The unemployment issue: There are a few considerations that might increase the refund, beyond what the IRS sent to you.
a) Married couples, living in community property states who filed jointly are entitled to take 2 of those $10,200 reductions (up to the amount of total unemployment benefits received), even if only one of them received the unemployment income.
Again, why? Because in a community property state, each person owns one-half of all the income of the other spouse. This is one of those times when this rule really works in favor of the couple.
- b) The law limits this $10,200 tax-free benefit to tax returns with less than $150,000 of adjusted gross income. So couples whose joint income was higher than that? No refund being issued. BUT, if the couple filed an extension (even after filing their tax return), they are now permitted to file a set of “superseded returns,” where each person files as married filing separately. This way, perhaps one or both spouses can bring their incomes below the $150,000 threshold to qualify to exclude the $10,200.
Oh…you know that you cannot go from MFJ to MFS? That’s very true. The only way to do that is by filing a superseded return. A superseded return totally replaces the original tax return as if it had never been filed at all. (But it will take a long time to process and to replace the original return, since it has to be filed on paper.) The superseded return must be filed by the due date (including extensions) of that year’s tax return. That’s why this will only work for someone who put their return on extension, even after filing.
The Excess Premium Tax Credit that doesn’t need to be repaid: Many taxpayers filed tax returns showing this balance due on their Schedule 2, line 2. If they paid the tax, the IRS is sending them refunds. If they didn’t pay the tax, but this is the only reason they have a balance due, the IRS is sending them letters reversing that balance due.
Does filing an amended return change any of this? Not really. Since the penalty (or fee) is being waived entirely, it makes no difference how low you bring your adjusted gross income. Or does it?
Yes, it does. Because when you file your superseded return to adjust for the unemployment issues, you might bring your adjusted gross income down low enough to end up with a refund on Form 8962. In that case, including this form in your superseded return is well worth while, isn’t it?
These strategies won’t necessarily work for everyone. You’re probably going to need the help of an experienced tax professional to handle this. If they apply to you, the tax savings could be enormous.
And remember, you can find answers to all kinds of questions about taxes and business issues, and EA Education, free. Where? Where else? At http://iTaxMama.com/AskQuestion
To make comments please drop into the TaxQuips Forum.
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The Enrolled Agents Examination – PLEASE JOIN US
The new 2021-2022 exam will include all the CARES Act
laws, the PPPs, and the tax laws in the latest 5.593 page
Consolidated Appropriations Act!
The class is up and running in full swing.
We just started Part 2 - so come join us NOW
https://irsexams.school/signup/
Incidentally, if you are presently unemployed, check with your unemployment office or business insurance coverage – they just might be able to pay your tuition.
This is a great time to improve (or develop) your skills as a tax professional.
Everything You Wanted to Know About the 2021-2022 Enrolled Agent Exam.
Get all the information you need about this year's Special Enrollment Examination here.
https://taxmama.com/tax-quips/everything-you-want-to-know-about-the-ea-exam/
Watch this before you ask me questions, please.
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Michael Rozbruch, CPA, is at again. He's hearing that we are facing the biggest influx of Tax Resolution cases in 11 years!
Michael is kicking off a complimentary 5 Day - $5K Tax Resolution Challenge on Friday, June 11th where he’s going to coach you live on how to land your first (or next) $5,000 paying client in 5 days or less from your current book of business (without spending any money on marketing)
Go here now to join the Tax Resolution FaceBook Challenge event of the year and find out why YOU have the chance of a lifetime to get in on a white hot market - even (especially) amidst these unprecedented times!
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Meanwhile, I will be posting various updates and webinars that I am teaching, on this Events page - https://irsexams.school/events-and-webinars/ (yes, it does need to be updated - LOTS going on!)
And remember, you can find answers to all kinds of questions about taxes and business issues, and EA Education, free. Where? Where else? At http://iTaxMama.com/AskQuestion
To make comments please drop into the TaxQuips Forum.
Hugs
Eva
Reminder – Some Helpful IRS Links
IRS CoronaVirus updates
https://www.irs.gov/coronavirus
Which IRS services are open and available – keep an eye on this link
https://www.irs.gov/newsroom/irs-operations-during-covid-19-mission-critical-functions-continue
IRS Electronic Options
https://www.irs.gov/newsroom/irsgov-helps-taxpayers-get-tax-information-they-need-find-tools-for-filing-paying-checking-accounts-and-answering-questions
IRS Online Assistance Available
https://www.irs.gov/newsroom/irs-urges-taxpayers-to-use-electronic-options-outlines-online-assistance
Dealing with audit or collections issues – IRS is keeping this page up to date
https://www.irs.gov/newsroom/irs-unveils-new-people-first-initiative-covid-19-effort-temporarily-adjusts-suspends-key-compliance-program
Of course, all the filing and paying deadlines - including taxpayers overseas whose June 15th filing deadline has been pushed back to July 15th.
https://www.irs.gov/newsroom/filing-and-payment-deadlines-questions-and-answers?
And a great chart: How to Use the Tools on IRS.gov to Get Your Economic Impact Payment https://www.irs.gov/newsroom/how-to-use-the-tools-on-irsgov-to-get-your-economic-impact-payment
There are lots more things going on – watch the information in the IRS Newsroom - https://www.irs.gov/newsroom and TaxMama.com
Incidentally, I don't know if you know - TaxMama.com® is a free resource for people to get answers to tax questions BEFORE they make major, costly moves.
To make comments please drop into the TaxQuips Forum.
Small Business T axes Made Easy
Well, my friends, the book is out and healthy.
The Kindle and audio versions are available.
You can get the audio book wherever audiobooks are sold - http://iTaxMama.com/4thEdition_Audio
I would really appreciate it if you have the book and like it –
to please post a review at Amazon.com .
This is the best version of the book ever.
And for those people in business, or starting a business, or with clients who operate a business, we have completed the 12-week course based on the book, at CCH CPE Link.
It turned out really well and people found the information extremely helpful!
The course follows each chapter of the book – but also provides help to deal with your business issues during this COVID19 shutdown and quarantine. Who knows, it might help you save your business – or your finances!
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