IRS reminds U.S. taxpayers living and working abroad to file their 2022 tax return by June 15

The Internal Revenue Service today reminded American taxpayers living and working outside the U.S. to file their 2022 federal income tax return by Thursday, June 15. This deadline applies to both U.S. citizens and resident aliens abroad, including those with dual citizenship.

Qualifying for the June 15 extension
A taxpayer qualifies for the June 15 filing deadline if:

• Both their tax home and abode are outside the United States or Puerto Rico, or
• They are serving in the military outside the U.S. and Puerto Rico on the regular due date of their tax return.

Qualifying taxpayers should attach a statement to the return indicating which of these two situations applies.

File to claim benefits
Many taxpayers living outside the U.S. qualify for tax benefits, such as the Foreign Earned Income Exclusion and the Foreign Tax Credit, but they are available only if a U.S. return is filed.

In addition, the IRS encourages families to check out expanded tax benefits, such as the Child Tax Credit, Credit for Other Dependents and Credit for Child and Dependent Care Expenses, and claim them if they qualify. Though taxpayers abroad often qualify, the calculation of these credits differs depending upon whether they lived in the U.S. for more than half of 2022. For more information, see the instructions to Schedule 8812, Credits for Qualifying Children and Other Dependents, and the instructions to Form 2441, Child and Dependent Care Expenses.

Reporting required for foreign accounts and assets
Federal law requires U.S. citizens and resident aliens to report any worldwide income, including income from foreign trusts and foreign bank and securities accounts. In most cases, affected taxpayers need to complete and attach Schedule B, Interest and Ordinary Dividends, to their Form 1040 series tax return. Part III of Schedule B asks about the existence of foreign accounts such as bank and securities accounts and usually requires U.S. citizens to report the country in which each account is located.

In addition, certain taxpayers may also have to complete and attach to their return Form 8938, Statement of Specified Foreign Financial Assets. Generally, U.S. citizens, resident aliens and certain nonresident aliens must report specified foreign financial assets on this form if the aggregate value of those assets exceeds certain thresholds. For details, see the instructions for this form.

Reporting foreign financial accounts to Treasury
Certain foreign financial accounts, such as bank accounts or brokerage accounts, must be reported by electronically filing Form 114, Report of Foreign Bank and Financial Accounts (FBAR), with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN).The FBAR requirement applies to anyone with an interest in, or signature or other authority over foreign financial accounts whose aggregate value exceeded $10,000 at any time during 2022.

The IRS encourages taxpayers with foreign assets, even relatively small ones, to check if this filing requirement applies to them. The form is available only through the Bank Secrecy Act E-Filing System. The deadline for filing the annual FBAR was April 15, 2023. However, FinCEN grants those who missed the April deadline an automatic extension until Oct. 15, 2023. There’s no need to request this extension. See FinCEN’s website for further information.

Report in U.S. dollars
Any income received or deductible expenses paid in foreign currency must be reported on a U.S. tax return in U.S. dollars. Likewise, any tax payments must be made in U.S. dollars.

Both FINCEN Form 114 and IRS Form 8938 require the use of a Dec. 31 exchange rate for all transactions, regardless of the actual exchange rate on the date of the transaction. Generally, the IRS accepts any posted exchange rate that is used consistently. For more information on exchange rates, see Foreign Currency and Currency Exchange Rates.

Making tax payments
To ensure tax payments are credited promptly, the IRS urges taxpayers to consider the speed and convenience of paying their U.S. tax obligation electronically. The fastest and easiest way to do that is via their IRS Online Account, IRS Direct Pay and the Electronic Federal Tax Payment System (EFTPS). These and other electronic payment options are available at IRS.gov/Payments.

Reporting for expatriates
Taxpayers who relinquished their U.S. citizenship or ceased to be lawful permanent residents of the U.S. during 2022 must file a dual-status alien tax return and attach Form 8854, Initial and Annual Expatriation Statement. A copy of Form 8854 must also be filed with the IRS by the due date of the tax return (including extensions). See the instructions for this form and Notice 2009-85, Guidance for Expatriates Under Section 877A, for further details.

Extensions beyond June 15
Taxpayers who can’t meet the June 15 due date can request an automatic six-month extension by filing Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. The IRS encourages anyone needing the additional time to make their request electronically. Several electronic options are available at IRS.gov/Extensions.

Businesses that need more time must file Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information and Other Returns.

Extensions for military personnel
Members of the military stationed abroad or in a combat zone during tax filing season may qualify for an additional extension of at least 180 days to file and pay taxes. More information, like who qualifies, can be found by reading Extension of Deadline – Combat Zone Service Q&As.

Spouses of individuals who served in a combat zone or contingency operation are generally entitled to the same deadline extensions with some exceptions. Extension details and more military tax information is available in IRS Publication 3, Armed Forces’ Tax Guide.

The EITC is a major tax benefit for millions of low- and moderate-income workers

 The EITC is a major tax benefit for millions of low- and moderate-income workers

The EITC helps workers who earned $59,187 or less when they file their tax return. Unfortunately, many people risk missing out on the credit because they don't know they’re eligible — especially people who had a major life change and may qualify for the first time this year.

Other workers at risk for overlooking the EITC include those:

Living in non-traditional homes, such as a grandparent raising a grandchild.
Whose earnings declined or whose marital or parental status changed.
Without children.
With limited English skills.
Who are veterans.
Living in rural areas.
Who are Native Americans.
With earnings below the filing requirement.
Taxpayers can check their eligibility and how much they qualify for at IRS.gov/EITC.

The EITC is a tax credit for certain people who work and have low to moderate income. A tax credit usually reduces tax owed and may also result in a refund.

How to claim the EITC
To get the EITC, qualified workers must file a tax return and claim the credit. Eligible taxpayers should file a tax return to claim the credit even if their earnings were below the income requirement to file.

Most EITC refunds deposited by late February
Although the IRS began accepting 2022 returns on Jan. 23, 2023, the IRS can’t issue a refund that includes the EITC before mid-February. This is due to the 2015 PATH Act, which provides this additional time to safeguard against fraudulent refunds.

Employers: Beware of third parties promoting improper employee retention credit claims

Employers: beware of third parties promoting improper employee retention credit claims

Our office receives significant inquires regarding the ERTC.  Not al business may qualify.  Please beware with dealing with 3rd parties who charge large up-front fees.

Employers should be wary of third parties advising them to claim the employee retention credit when they may not qualify. Some third parties are taking improper positions related to taxpayer eligibility for and computation of the credit.

These third parties often charge large upfront fees or a fee that is contingent on the amount of the refund. They may also fail to inform taxpayers that wage deductions claimed on the business' federal income tax return must be reduced by the amount of the credit.

If the business filed an income tax return deducting qualified wages before it filed an employment tax return claiming the credit, the business should file an amended income tax return to correct any overstated wage deduction.

Businesses should be cautious of schemes and direct solicitations promising tax savings that are too good to be true. Taxpayers are always responsible for the information reported on their tax returns. Improperly claiming the ERC could result in taxpayers being required to repay the credit along with penalties and interest.

What is the employee retention credit?
The ERC is a refundable tax credit for businesses who continued paying employees while shutdown due to the COVID-19 pandemic or had significant declines in gross receipts from March 13, 2020 - December 31, 2021. Eligible taxpayers can claim the ERC on an original or amended employment tax return for a period within those dates.

To be eligible for the ERC, employers must meet one the following conditions:

• They sustained a full or partial suspension of operations due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings due to COVID-19 during 2020 or the first three quarters of 2021
• The business experienced a significant decline in gross receipts during 2020or a decline in gross receipts during the first three quarters of 2021
• The employer qualified as a recovery startup business for the third or fourth quarters of 2021.

Only recovery startup businesses are eligible for the employee retention credit in the fourth quarter of 2021.

Eligible employers cannot claim this credit on wages reported as payroll costs to get PPP loan forgiveness or that they used to claim certain other tax credits at any time.

To report tax-related illegal activities relating to ERC claims, taxpayer should submit Form 3949-A, Information Referral They should also report instances of fraud and IRS-related phishing attempts to the Treasury Inspector General for Tax Administration by calling 800-366-4484.

To requet an appoitnemnt to determine eligibility for the ERTC please contact your Staten Island CPA at 718-227-6035

Please make sure to bring all of your documents to Your CPA

 Taxpayers should be sure to have all their info before going to a CPA

Taxpayers using a professional tax preparer (CPA) should make sure they have all their information readily available before their appointment. Collecting their information and getting copies of any missing documents before taxpayers sit down to prepare their return is critical to filing an accurate tax return. Having organized records and information in hand helps prevent filing errors and will likely create a smoother filing experience.

Here’s a list of information taxpayers may need. Not all information applies to all taxpayers.

• Social Security numbers of everyone listed on the tax return.
• Bank account and routing numbers for direct deposit or information to make a tax payment.
• Forms W-2 from employer(s).
• Forms 1099 from banks, issuing agencies and other payers including unemployment compensation, dividends, distributions from a pension, annuity or retirement plan.
• Form 1099-K, 1099-MISC, W-2 or other income statement for workers in the gig economy.
• Form 1099-INT for interest received.
• Other income documents and records of virtual currency transactions.
• Form 1095-A, Health Insurance Marketplace Statement.
• Letter 6419, 2021 Total Advance Child Tax Credit Payments, to reconcile advance child tax credit payments.
• Letter 6475, Your 2021 Economic Impact Payment, to determine eligibility to claim the recovery rebate credit.
• Information to support claiming other credits or deductions, such as receipts for child or dependent care, college expenses or donations.

Taxpayers can get information about their Economic Impact Payments and advance child tax credit payments through their IRS online account.
Taxpayers who don’t have their letters about their Economic Impact Payment to claim missing stimulus payments and advance child tax credit payments to claim their full child tax credit have an online option. They can log in to their IRS online account and get the information from the Tax Records tab.

For taxpayers who are married filing jointly, each spouse will need to have their own Economic Impact Payment and advance child tax credit information.

What taxpayers should do if they’re missing other documents
Taxpayers who didn’t receive a W-2 or Form 1099 should contact the employer, payer or issuing agency and request the missing documents. This also applies for those who received an incorrect W-2 or Form 1099.

If they still can't get the forms, they can use Form 4852, Substitute for Form W-2, Wage and Tax Statement or Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. If a taxpayer doesn't receive the missing or corrected form in time to file their tax return, they can estimate the wages or payments made to them, as well as any taxes withheld. They can use Form 4852 to report this information on their federal tax return.

Call today to schedule a appointment. 718-227-6035. 

Self Employed List of Available Business Deduction

 It costs money to make money, and much of what business owners spend on their companies — their business expenses — can be deducted from their gross income to reduce their taxes. The list of deductible business expenses includes obvious ones like office rent, salaries and computers, but might also include water bills and window cleaning.

Read on to find information about deductions that can help your business save on taxes.

List of Business Expense Categories

The IRS says a business expense must be ordinary, necessary and directly related to running a company to be deductible. Most business expenses fall into specific categories. Schedule C, the IRS form which sole proprietors use to report their income, lists 20 broad business expense categories that include:

• Advertising
• Car and truck expenses
• Commissions and fees, contract labor
• Depletion
• Depreciation and section 179 expense deduction
• Employee benefit programs
• Insurance, interest
• Legal and professional services
• Office expense
• Pension and profit-sharing plans
• Rent or lease
• Repairs and maintenance
• Supplies
• Taxes and licenses
• Travel and meals
• Utilities
• Wages

Categorizing expenses is an important part of keeping good business records. The IRS wants business expenses accounted for and reported in the correct categories so it can determine if the deductions are legitimate. Categorizing expenses correctly will also mean a smaller bill from your accountant at tax time.

Time to Gather Your Tax Documents - 2021

 Tax filing step 1: Gather all year-end income documents

Tax Season 2021 is upon us.  Now is the time to start gathering your tax documents.

As taxpayers are getting ready to file their taxes, the first thing they should do is gather their records. To avoid processing delays that may slow their refund, taxpayers should gather all year-end income documents before filing a 2021 tax return.

It's important for people to have all the necessary documents before starting to prepare their return. This helps them file a complete and accurate tax return. Here are some things taxpayers need to have before they begin doing their taxes.

• Social Security numbers of everyone listed on the tax return. Many taxpayers have these numbers memorized. Still, it's a good idea to have them on hand to double check that the numbers on the tax return are correct. An SSN with one number wrong or two numbers switched will cause processing delays.
 
• Bank account and routing numbers. People will need these for direct deposit refunds. Direct Deposit is the fastest way for taxpayers to get their money and avoids a check getting lost, stolen or returned to IRS as undeliverable.

• Don't have a bank account? Learn how to open an account at an FDIC - Insured Bank or through the National Credit Union. Veterans can access the Veterans Benefits Banking Program.

• Forms W-2 from employer(s).

• Forms 1099 from banks, issuing agencies and other payers including unemployment compensation, dividends, distributions from a pension, annuity or retirement plan.

• Form 1099-K, 1099-MISC, W-2 or other income statement for workers in the gig economy.

• Form 1099-INT for interest received.

• Other income documents and records of virtual currency transactions.

• Forms 1095-A, Health Insurance Marketplace Statement. Taxpayers will need this form to reconcile advance payments or claim the premium tax credit.

• Letter 6419, 2021 Total Advance Child Tax Credit Payments, to reconcile advance child tax credit payments.

• Letter 6475, Your 2021 Economic Impact Payment, to determine eligibility to claim the recovery rebate credit.

Forms usually start arriving by mail or are available online from employers and financial institutions in January. Taxpayers should review them carefully. If any information shown on the forms is inaccurate, the taxpayer should contact the payer ASAP for a correction.

For more on this, please contact your accountant.

IDA Tax Relief

 

Tax relief now available to victims of Hurricane Ida; Oct. 15 deadline, other dates extended to Jan. 3

Victims of Hurricane Ida that began on Aug. 26 now have until Jan. 3, 2022, to file various individual and business tax returns and make tax payments, the Internal Revenue Service announced today.

The IRS is offering this relief to any area designated by the Federal Emergency Management Agency (FEMA) as qualifying for individual or public assistance. Currently this includes the entire state of Louisiana, but taxpayers in Ida-impacted localities designated by FEMA in neighboring states will automatically receive the same filing and payment relief. The current list of eligible localities is always available on the disaster relief page on IRS.gov.