Do you know your rights as a Taxpayer?

Taxpayer Rights 

The IRS explains your rights as a Taxpayer and the processes for examination, appeal, collection, and refunds in Publication 1.  This is a summary list of those rights:

1- Your rights to be informed.

2- The right to quality service

3- The right to pay no more than the correct amount of tax

4- The right to appeal an IRS decision

5- The right to finality

6- The right to privacy

7- The right to confidentiality

8- The right to retain representation

9- The right to a fair and just tax system

10- The right to challenge an IRS position

Click below for a copy of the IRS publication. 

file:///C:/Users/modesto/Desktop/Tax%20master%20folder/2020%20Newsletter%20articles/p1%20taxpayer%20rights%202020.pdf

Source: IRS.GOV

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Moving Expense Deduction

Who qualified to deduct moving expenses?

Individuals who are members' of the Armed Forces on active duty and you move because of a permanent change of active duty station. 

What is considered "Permanent Change of Station"?

• A move from one permanent post of duty to another, and 
• A move from your last post of duty to your home or to a nearer point in the United States. 

What moving expenses can be deducted?

• The taxpayer household goods and personal effects (including in-transit or foreign-move storage expenses).
• Any traveling (including lodging but not meals) to your new home, and
• You can't deduct any expenses for meals.

Is there any dollar limitation or restriction?

Yes, you can deduct only those expenses that are reasonable for the circumstances of your move. 

The move must occur within 1 year of ending your active duty or within the period allowed under the Joint Travel Regulations.

Please consult your CPA to determine how the regulations could benefit you.

Source: IRS.gov

  

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Credit Card Purchases

In dealing with credit card purchases, the year you made the purchase is the year that you get to take the deduction.  This rule applies generally for both individuals and businesses. 

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Taxpayers can view their tax account going to the IRS website. 

The first step is to set-up an account.  (Go to blue link below)  Under this step, you must provide key tax information to the IRS. That requires registration and providing the IRS with the information they are requesting. Along this process, you are required to identify yourself by providing unique information about you. 

Individual taxpayers can go to IRS.gov/account 

Second Step, you are logging in and can have access to the following:

• View their balance.
• See their payment history.
• Pay their taxes.
• Access tax records through Get Transcript.

It is very helpful for taxpayers to go here first Secure Access: How to Register for Certain Online Self-Help Tools 

CPAs and tax practitioners can be very helpful in helping you navigate on these sites.

Voluntary Classification Settlement Program (VCSP)

VOLUNTARY CLASSIFICATION SETTLEMENT PROGRAM (VCSP)

As Revised by the IRS on December 4, 2019.

What is the VCSP?

The VCSP is a voluntary program that provides an opportunity for taxpayers to reclassify their workers as employees for employment tax purposes for future tax periods with partial relief from federal employment taxes. Apply to a taxpayer who has consistently treated the workers as independent contractors or other nonemployees (who have filed all required Forms 1099) and want to reclassify these workers as employees.

How do you apply to participate in this program?

The taxpayer (TP) must apply to participate by filing Form 8952, "Application for Voluntary Classification Settlement Program", and enter into a closing agreement with the IRS.

The application should be filed at least 60 days prior to the date the taxpayer wants to begin treating its workers as employees. The IRS will make every effort to process Form 8952 with sufficient time to allow for the voluntary reclassification on the requested date. 

Along with the application, the taxpayer may provide the name of a contact or an authorized representative with a valid Power of Attorney (Form 2848).  However, the taxpayer, and not the taxpayer's representative, is required to sign Form 8952. The IRS will contact the taxpayer or authorized representative to complete the process after reviewing the application and verifying the taxpayer’s eligibility. 

Background and History:

The VCSP allows eligible taxpayers to obtain relief similar to that currently available through the Classification Settlement Program for taxpayers under examination.  Exempt organizations and government entities may participate in VCSP. 

This program, originally released in Announcement 2011-64, was later modified in Announcement 2012-45 including:

• Permit a taxpayer under IRS audit, other than an employment tax audit, to be eligible to participate in the VCSP
• Clarify the current eligibility requirement that a taxpayer who is a member of an affiliated group within the meaning of section 1504(a) is not eligible to participate in the VCSP if any member of the affiliated group is under employment tax audit
• Clarify that a taxpayer is not eligible to participate if the taxpayer is contesting in court the classification of the class or classes of workers from a previous audit by the IRS or Department of Labor; and
• Eliminate the requirement that a taxpayer agrees to extend the period of limitations on assessment of employment taxes as part of the VCSP closing agreement with the IRS.

Announcement 2012-45 (2012-51 I.R.B. 724) provides notice and information about the revised program.

Who are not eligible/are eligible to participate under this program?

Additionally, the taxpayer cannot currently be under employment tax audit by the IRS and the taxpayer cannot be currently under audit concerning the classification of the workers by the Department of Labor or by a state government agency.

If the IRS or the Department of Labor has previously audited a taxpayer concerning the classification of the workers, the TP will be eligible only if the taxpayer has complied with the results of that audit and is not currently contesting the classification in court.

What the TP agrees to do:

A taxpayer participating in the VCSP will agree to prospectively treat the class or classes of workers as employees for future tax periods. In exchange, the taxpayer will:

• Pay 10 percent of the employment tax liability that would have been due on compensation paid to the workers for the most recent tax year, determined under the reduced rates of section 3509(a) of the Internal Revenue Code. See VCSP FAQ 15, for information on how payment under the VCSP is calculated. Also, see Instructions to Form 8952;
• Not be liable for any interest and penalties on the amount; and
• Not be subject to an employment tax audit with respect to the worker classification of the workers being reclassified under the VCSP for prior years. 

Eligible taxpayers accepted into the VCSP will enter into a closing agreement with the IRS to finalize the terms of the VCSP and will simultaneously make full and complete payment of any amount due under the closing agreement.

IRS Expands Voluntary Worker Classification Settlement Program; Relief From Past Payroll Taxes Available to More Employers Who Reclassify Their Workers As Employees

Consult your CPA or the IRS.


More information is available on IRS.gov, keyword “VCSP



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What else (other than cash), you can contribute to your favorite charitable organization?

•  You can contribute your time (e.g., Volunteer Services)...
•  Volunteer with out-of-pocket expenses...
•  Publicly and non-publicly traded stocks...
•  Artwork...
•  Autos, boats, and planes...
•  Patents and other intellectual property, and
•  Non-cash donations.

The form of the written documentation acknowledging your varies by amount and type of donations. You may be required to attach with your 1040, IRS Form 8283, and/or Form 1098-C, or any other statement(s) as prescribed by the IRS. Sometimes you are required to obtain an appraisal in the form prescribed by the IRS. 

The IRS had established the definitions of the following terms:  "Written Records",  "Acknowledgement", and what is a "Pledge Card". 

Please consult with your tax professional or the IRS.gov.



Health Savings Accounts 

Annual contribution limitation. For the calendar year 2019, the annual limitation on deductions under § 223(b)(2)(A) for an individual with self-only coverage under a high deductible health plan is $2,250. 

For the same calendar year, the annual limitation on deductions under § 223(b)(2)(B) for an individual with family coverage under a high deductible health plan is $4,500.

There is an additional contribution of $1,000 for people over 55-year-olds.

Please consult the IRS or your tax professional for more information and applicability. 

Source: IRS.gov

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How long should a Taxpayer keep their tax records and any other related documents?

The general answer is.

It may depend on the action, expense, or event or the type of document and/or records. 

As a general rule, a taxpayer (TP) must keep records that support an item of income, deduction or credit shown on your tax return until the period of limitations for that tax return runs out.

The period of limitations is the period of time in which you can amend your tax return to claim a credit or refund, or the IRS can assess additional tax. The information below reflects the periods of limitations that apply to income tax returns. 

Caveats: Unless otherwise stated, the years refer to the period after the return was filed. Returns filed before the due date are treated as filed on the due date.   Keeping copies of your filed tax returns help you in preparing future tax returns and making computations if you file an amended return.

Period of Limitations that apply to income tax returns:

1. Keep records for 3 years if situations (4), (5), and (6) below do not apply to you.
2. Keep records for 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later, if you file a claim for credit or refund after you file your return.
3. Keep records for 7 years if you file a claim for a loss from worthless securities or bad debt deduction.
4. Keep records for 6 years if you do not report income that you should report, and it is more than 25% of the gross income shown on your return.
5. Keep records indefinitely if you do not file a return.
6. Keep records indefinitely if you file a fraudulent return.
7. Keep employment tax records for at least 4 years after the date that the tax becomes due or is paid, whichever is later.

What about tax records connected to a property?

Generally, keep records relating to property until the period of limitations expires for the year in which you dispose of the property. You must keep these records to figure any depreciation, amortization, or depletion deduction and to figure the gain or loss when you sell or otherwise dispose of the property.

If you received property in a nontaxable exchange, your basis in that property is the same as the basis of the property you gave up, increased by any money you paid. You must keep the records on the old property, as well as on the new property until the period of limitations expires for the year in which you dispose of the new property.  Example: Your residence.

What should I do with my records for nontax purposes? (e.g., your insurance company, creditors, financial planning, etc.)

After they are no longer needed for tax purposes, you may need them for other purposes.  When in doubt, consult your tax advisor CPA.

Source IRS.gov

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Taxpayers may consider paying your taxes electronically or by phone.

The IRS suggests EFTPS; it claims the following: The system is secure, convenient, and improve accuracy.

What is the EFTPS?

• It is a government website that allows register users to make federal tax payments electronically.
• Every user must have a secure Internet browser (e.g., Microsoft Explorer.) with 128-bit encryption in order to access the site. 
• To log on, an enrolled user must be authenticated with three pieces of unique information: Taxpayer Identification Number (EIN or SSN), EFTPS® Personal Identification Number (PIN) and an Internet Password. The combination of these three pieces of identification adds to the security of the site and the privacy of taxpayer data.
• The IRS claims the system is available 24/7.

Some of the available features

• You are able to keep track of your payments by opting in for email notifications when you enroll or update your enrollment for EFTPS. An email notification you will receive will contain the confirmation number you receive at the end of a payment transaction. 
• Businesses and Individuals can schedule payments up to 365 days in advance. 
• Scheduled payments can be changed or canceled up to two business days in advance of the scheduled payment date.
• You can use the system to make all your federal tax payments, including income, employment, estimated and excise taxes.
• You can check up to 16 months of your payment history online or by calling Customer Service.
•  Using your bank account, you submit payment instructions to move funds to the Treasury's account for payment of your federal taxes. Funds will not move from your account until the date you indicate. 
• You will receive an immediate acknowledgment of your payment instructions, and your bank statement will confirm the payment was made. 

Word of caution: You will only receive an email from EFTPS if you've requested the service.

To enroll in the government payment system

To enroll, or for more information on enrollment, visit EFTPS® or call EFTPS® 

Customer Service to request an enrollment form:

1-800-555-4477 

1-877-333-8292 (Federal Agencies)

1-800-733-4829 (TDD Hearing-Impaired)

1-800-244-4829 (Español)

Source: IRS.gov

Last updated by the IRS was Nov 19, 2018, as of Feb. 6, 2019

Trump Calls For Review Of Rule Requiring RMDs At 70 1/2

Trump Calls For Review Of Rule Requiring RMDs At 70 1/2: His executive order may lead to money staying longer in tax-deferred retirement accounts.

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