Scam warnings are something we are all weary with. Yet every year more and more complex tax scams surface. These con artists prey on people who are in desperate need and have debt they cannot afford to pay. Unfortunately, qualifying for an offer in compromise is much more difficult and, in many cases, not even possible. The IRS has very specific requirements to qualify for an offer in compromise.
When a firm offers to eliminate your tax debt without knowing anything about you a red flag should go up. The IRS calls these unsolicited offers to eliminate tax debt Offer in Compromise "mills". The IRS reports, "Offer in Compromise mills contort the IRS program into something it's not – misleading people with no chance of meeting the requirements while charging these people excessive fees, often thousands of dollars." "We're increasingly concerned that people having trouble paying their taxes are being duped into misleading claims about settling their tax debts for 'pennies on the dollar'," said IRS Commissioner Chuck Rettig. "The IRS urges people to take a few minutes to review information on IRS.gov to see if they might be a good candidate for the program – and avoiding costly promoters who advertise on radio and television." Taxpayers can go to IRS.gov and review the Offer in Compromise Pre-Qualifier Tool to see if they qualify for an OIC. This is a free tool that determines if you would qualify for an offer in compromise and then provides two payment options to satisfy the tax debt. The IRS reminds taxpayers that under the First Time Penalty Abatement policy, taxpayers can go directly to the IRS for administrative relief from a penalty that would otherwise be added to their tax debt. HONOLULU – The Hawaiʻi Department of Taxation (Department) is cautioning taxpayers about recent activity in Hawaiʻi involving tax-related scams, including phishing attempts in the form of text messages, mailed letters, social media messages, or emails.
The Department has issued a press release and sample "Distraint Warrant" scam letter to warn taxpayers. They may be viewed here: Department of Taxation Warns Taxpayers Regarding “Distraint Warrant” and Other Scams
The IRS reported again today that it continues to see the aggressive marketing of the Employee Retention Credit (ERC), also sometimes called the Employee Retention Tax Credit (ERTC), preying on innocent businesses and payroll professionals.
Aggressive promoters at ERC Mills present wildly misleading claims about this credit. They can pocket large fees while leaving taxpayers claiming the credit at risk of having the claims denied or facing scenarios where they need to repay it.
Remember the old adage says: If it sounds too good to be true, it probably is.
These ERC "Mills" make fraudulent claims for the credit and charge large fees. They are largely comprised of sales and marketing professionals purporting to be "ERC experts" or "consultants" and pushing tenuous, high-risk eligibility positions that taxpayers do not qualify for. If you are wondering why your accountant or payroll professional did not file a claim for you for an Employee Retention Credit think about whether you had a Payroll Protection Loan (PPP) that was forgiven. Employers cannot claim the ERC on wages that were reported as payroll costs in obtaining PPP loan forgiveness or that were used to claim certain other tax credits. In other words, there is no double dipping. For more information: IRS issues renewed warning on Employee Retention Credit claims; false claims generate compliance risk for people and businesses claiming credit improperly | Internal Revenue Service IRS alerts businesses, tax-exempt groups of warning signs for misleading Employee Retention scams; simple steps can avoid improperly filing claims | Internal Revenue Service
The IRS recently reminded homeowners who make improvements like replacing old doors and windows, installing solar panels or upgrading a hot water heater that they may qualify for home energy tax credits. This came with the IRS warning that homeowners "should know what these credits can do for them – and be careful of exaggerated claims (solar) companies trying to get their business may make."
While it's not a dollar-for-dollar tax refund, these credits can have a significant impact on tax liability. From 2022 to 2032 homeowners qualify for a federal credit worth 30% of the cost of qualifying solar equipment and qualifying energy efficient additions. The Energy Efficient Home Improvement Credit is only for improvements, additions or renovations to an existing home up to a lifetime maximum of $500 for improvements, additions or renovations to an existing home such as energy efficient doors, windows, skylights, and air conditioners. The Residential Clean Energy Credit is for qualifying solar equipment installed on either an existing home or a newly constructed home. It is worth 30% of the cost of solar systems installed. The catch is that the credit (30% of the cost) can be claimed up to the tax liability on the tax return. As such it reduces the tax, but it is not a refundable credit. Any unused credit will carry forward year-to-year until it is used up. The state of Hawaii Renewable Energy Technologies Income Tax Credit offers a credit of 35% of the cost (maximum credit $5,000) for each solar system. As with the IRS credit, this credit can be claimed up to the tax liability on the tax return. As such it reduces the tax, but it is not a refundable credit. Any unused credit will carry forward year-to-year until it is used up. However, in fairness to retired and lower income taxpayers, unlike the IRS, the state does offer a refundable credit. A taxpayer claiming that options will lose 30% of the overall credit and will be refunded the remainder of the credit that is in excess of the current year tax liability. This is a nice option for retires and other who may have little to no tax liability and want to get what they can refunded right away. For those with higher tax liability it pays more in the long run to let the unused credit carry forward each year until it is used. For more information visit: IRS highlights information and free resources in recognition of National Small Business Week4/28/2023
As part of National Small Business Week, April 30 to May 6, the Internal Revenue Service is highlighting tax benefits and resources to help those looking to start a business. They provided lots of information, two of which we will highlight here:
Business Structure Taxpayers must decide what form of business entity to establish when starting a business. This helps determine which income tax return form must be filed. The most common business structures are:
Understand Business Taxes By law, everyone must pay taxes as they earn income. For small business owners and self-employed people, that usually means making quarterly estimated tax payments as their business earns or receives income during the year. The form of business being operated determines what taxes must be paid and how to pay them. The four general types of business taxes are:
Before starting a new business, become familiar with these taxes. Planning from the beginning and paying taxes on time as you go can save a lot of headaches in the long run. To learn more about small businesses, see IRS highlights information and free resources in recognition of National Small Business Week | Internal Revenue Service. Standard mileage rates have increased for 2023. They are as follows:
Reminders:
For more information: 2023 Standard Mileage Rates (irs.gov) The Internal Revenue Service today announced the tax year 2023 annual inflation adjustments for more than 60 tax provisions, including the tax rate schedules and other tax changes.
New for 2023The Inflation Reduction Act extended certain energy related tax breaks and indexed for inflation the energy efficient commercial buildings deduction beginning with tax year 2023. For tax year 2023, the applicable dollar value used to determine the maximum allowance of the deduction is $0.54 increased (but not above $1.07) by $0.02 for each percentage point by which the total annual energy and power costs for the building are certified to be reduced by a percentage greater than 25 percent. The applicable dollar value used to determine the increased deduction amount for certain property is $2.68 increased (but not above $5.36) by $0.11 for each percentage point by which the total annual energy and power costs for the building are certified to be reduced by a percentage greater than 25 percent. Highlights of changes in Revenue Procedure 2022-38The tax year 2023 adjustments described below generally apply to tax returns filed in 2024. The tax items for tax year 2023 of greatest interest to most taxpayers include the following dollar amounts:
Revenue Procedure 2022-38 provides details about these annual adjustments. 401(k) limit increases to $22,500 for 2023, IRA limit rises to $6,500
WASHINGTON — The Internal Revenue Service announced today that the amount individuals can contribute to their 401(k) plans in 2023 has increased to $22,500, up from $20,500 for 2022. The IRS today also issued technical guidance regarding all of the cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2023 in Notice 2022-55, posted today on IRS.gov. Highlights of changes for 2023 The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan is increased to $22,500, up from $20,500. The limit on annual contributions to an IRA increased to $6,500, up from $6,000. The IRA catch up contribution limit for individuals aged 50 and over is not subject to an annual cost of living adjustment and remains $1,000. The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased to $7,500, up from $6,500. Therefore, participants in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan who are 50 and older can contribute up to $30,000, starting in 2023. The catch-up contribution limit for employees aged 50 and over who participate in SIMPLE plans is increased to $3,500, up from $3,000. The income ranges for determining eligibility to make deductible contributions to traditional Individual Retirement Arrangements (IRAs), to contribute to Roth IRAs, and to claim the Saver’s Credit all increased for 2023. Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If during the year either the taxpayer or the taxpayer’s spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income. (If neither the taxpayer nor the spouse is covered by a retirement plan at work, the phase-outs of the deduction do not apply.) Here are the phase out ranges for 2023:For single taxpayers covered by a workplace retirement plan, the phase-out range is increased to between $73,000 and $83,000, up from between $68,000 and $78,000.
The income phase-out range for taxpayers making contributions to a Roth IRA is increased to between $138,000 and $153,000 for singles and heads of household, up from between $129,000 and $144,000. For married couples filing jointly, the income phase-out range is increased to between $218,000 and $228,000, up from between $204,000 and $214,000. The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains between $0 and $10,000. The income limit for the Saver’s Credit (also known as the Retirement Savings Contributions Credit) for low- and moderate-income workers is $73,000 for married couples filing jointly, up from $68,000; $54,750 for heads of household, up from $51,000; and $36,500 for singles and married individuals filing separately, up from $34,000. The amount individuals can contribute to their SIMPLE retirement accounts is increased to $15,500, up from $14,000. Details on these and other retirement-related cost-of-living adjustments for 2023 are in Notice 2022-55, available on IRS.gov. |
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