Love Letter from the IRS? Don’t Panic!

Are you one of the lucky tens of thousands of American taxpayers who received a letter in error from the IRS?  If so, don’t panic!  According to Richard Neal (House Ways and Means Committee chairman, D-Mass), there were roughly 12 million pieces of unopened mail in IRS offices across the country.  This was the result of many IRS workers working from home during the pandemic.  In those enormous piles of mail are paper tax returns, correspondence, and (you guessed it!) tax payments.

The IRS has started sending out letters to address unpaid balances.  The problem is that many of those tax payments were mailed, they just remain unopened.  As taxpayers receive these letters, they panic.  However, there is no need to panic!  If you mailed a check to the IRS the first thing you should do is check your bank account.  Has the payment cleared?  If not, then there is nothing for you to do but wait.  Clarification letters are being sent out as payments are processed.  If your check has cleared and you still received the letter, we recommend calling the IRS to discuss the payment with a representative.  It may be a clerical error or the letter may have been sent before the payment was processed.

Have you received a letter from the GA Department of Revenue or another state’s taxing authority?  The first step is to call and request an explanation of the penalty.  There are two likely causes:

  1. Your payment was received after the typical April 15th deadline but before the July 15th deadline.  If the state’s system was not updated to recognize the new filing deadline this year, you may have been assessed a penalty even though your payment was not late.
  2. You had a sizeable balance due and are being penalized for failure to make estimated payments.

Why would you be penalized for not making estimated payments?  Remember that our tax system is a pay-as-you go system meaning tax is due when it is earned.  This is why W-2 employees have taxes withheld from each paycheck.  If your balance due at filing is greater than $1,000, both the IRS and state taxing authorities reserve the right to calculate a penalty for failure to make estimated payments.  For more information on estimated payments, check out our previous blog post.

Were you owed a refund that you have not yet received?  The IRS has announced that it will pay refund interest on any return filed before the July 15th deadline and that interest will be calculated from April 15th.

Tax Season 2019: Important Dates and Deadlines

Tax season is here!  The IRS has announced that they will begin accepting electronically filed and paper returns for TY 2019 beginning January 27th.  Generally, most states follow the IRS’s schedule and will begin accepting electronic returns on the same day.  Even though we’re still a few weeks away from filing returns, you don’t have to wait until the 27th to submit your tax documents to us.  In fact, it would make our day if you got things to us early!  We will go ahead and prepare your state and federal returns and hold them in our system until efile opens on the 27th.

When deciding how to file your return, keep in mind that electronic filing is the fastest and most secure option.  Not only does it drastically speed up processing time, but it also better protects your personal data. The same is true for direct deposit: DD refunds are processed much more quickly than paper checks and the risk of interception (a common tax season scam) is eliminated.  At Levesque & Associates, we always file returns electronically if it’s allowable (there are some situations which require paper filing) and we always encourage clients to take advantage of direct deposit for refunds.

Remember, the personal filing deadline will be April 15th, which falls on a Wednesday this year.

Other deadlines:

  • 4th quarter 2019 estimated payments – January 15
  • 1099s and W-2s – January 31
  • Partnerships and S-Corps – March 16 (the 15th is a Sunday)
  • Trusts, Estates, and C-Corps – April 15
  • Non-profits – May 15

Extension deadlines:

  • Partnerships and S-Corps – September 15
  • Personal, Trusts, Estates, and C-Corps – October 15
  • Non-profits – November 16 (the 15th is a Sunday)

 

Important Reminder: if you cannot file your return by the deadline, be sure to file an extension.  The penalties for not filing can be very high.  Additionally, if you are not able to pay your balance due, you should still file your return.  The penalties on late payment are not as steep as those on failure to file.

 

Learn more about managing your balance due and available payment plan options in our previous blog post, “Struggling with Tax Debt?  Here are Some Tips.”

 

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New Tax Brackets – Tax Years 2019 and 2020

Most years, slight changes are made to tax rates.  These updates are generally minor and reflect changes in inflation.  Major tax code revisions, like those that went into place for 2018 under the new tax law (TCJA), are rare.

For tax years 2019 and 2020, the IRS has made tweaks to roughly 60 tax provisions.  Below are a few highlights that will affect the largest percentage of taxpayers.  If you have specific questions related to your tax situation, be sure to consult with your tax professional.

New Tax Brackets: 

Other changes:

1) Standard Deductions: For tax year 2019 (i.e. the returns you will file over the next few months), the standard deduction for single filers rises to $12,200.  For married/joint filers, it will be $24,400.  For tax year 2020, the amounts will increase again to $12,400 and $24,800 respectively.  For heads of households, the standard deduction increases from $18,000 in 2018 to $18,350 (2019) and $18,650 (2020).  Remember, you take whichever is higher when comparing the standard deduction to your itemized deductions.

2) Earned Income Credit (EIC): 

2019 (investment income must be $3600 or less for the year)


2020 (investment income must be $3650 or less for the year)


3) Adoption Credit: Taxpayers can receive a credit of up to $14,080 for qualified adoption expenses of a special needs child paid in 2019.  For tax year 2020, the credit increases to $14,300.

4) Healthcare coverage: The penalty for not having the minimum healthcare coverage was $695 on your 2018 return.  For 2019 and beyond, there is $0 penalty.

5) SALT Cap: For the time being, the cap on the deductible portion of State and Local Tax (SALT) will remain unchanged at $10,000 annually.  Repealing the $10,000 cap has been discussed in the House so changes may be coming down the line.

Questions about changes to these or other tax provisions?  Get in touch with Levesque & Associates!