WHAT’S THE BUZZ, TELL ME WHAT’S A HAPPENNIN’?

* Congratulations to Professor Annette Nellen on the“13th Anniversary of the 21st Century Taxation Blog”!

* A warning from Sharon Epperson at CNBC - “Beware: Your coronavirus unemployment benefits will be taxed. How to avoid a huge hit”.

Unemployment benefits are taxed on the Form 1040, and maybe on your state tax return as well.

* Kelly Phillips Erb, the FORBES.COM TaxGirl, explains “Nursing Homes & Assisted Living Facilities Are Not Entitled To Your Stimulus Check” –

“ . . . nursing homes and assisted living facilities can’t take that money from residents just because they’re on Medicaid.”

  

* Click here and here for my advice to college graduates.

TTFN

WHAT’S THE BUZZ, TELL ME WHAT’S A HAPPENNIN’?

The BUZZ is a bit late this week.  But better late than never.

* Not really a tax issue, but something worth sharing from Penelope Wang at CONSUMER REPORTS - “Making Sense of the New Student Loan Rules”.

* A reminder from Matthew Erskine at ACCOUNTING TODAY – “Selling art? Don't forget the taxes”.

* From the NATP BLOG – “TIGTA announces creation of web page and reporting form for coronavirus relief scams” -

“With the new financial implications that arose from the COVID-19 pandemic comes new, potential scams. The Treasury Inspector General for Tax Administration (TIGTA) now has a website regarding the IRS-related coronavirus scams, providing up-to-date information and a call to action for taxpayers to report any suspicious activity.”

Go here for the IRS-Related Coronavirus Scam webpage.

  

* Over at the JOURNAL OF ACCOUNTANCY Sally P. Schreiber reports “IRS allows midyear changes to health coverage, dependent care elections” -

“As part of its response to the coronavirus pandemic, the IRS announced Tuesday in Notice 2020-29 that it is permitting increased flexibility for midyear elections under a Sec. 125 cafeteria plan during calendar year 2020 for employer-sponsored health coverage, health flexible spending arrangements (FSAs), and dependent care assistance programs.”

* The TAX FOUNDATION has several resources to analyze “Tax Policy And The Coronavirus”.

TTFN

ANSWERS

{NOTE - UPDATED MAY 24th}

I have received several emails from clients asking about their 2019 refunds and 2020 stimulus payments, and I expect many taxpayers have similar questions.  So here are the answers.

 (1) The offices of the Internal Revenue Service were closed at the end of March due to the pandemic.  Mail sent to the IRS was not opened and manual returns were not processed.  As a result, refunds requested on manual returns were not issued.  The Service reopened its offices on April 27 and called back some employees to handle what it called “mission-critical functions” such as opening the piles of mail and processing manual returns.  However, subsequent virus-related issues indicate that the delay in processing returns, current and amended, and issuing refunds will continue. 

(2) In many cases when inquiring about the status of your 2020 stimulus payment at the IRS website you will need to enter information from your 2018 tax return.  Unless you filed your 2019 return in February or early March the information from your 2019 return is not in the IRS system.

(3) Just because the IRS cashed your check for payment of a balance due sent with your 2019 manually filed return does not mean your 2019 return has been processed.  Manual returns with payments are sent to bank lock-boxes.  The check is promptly deposited and the return is sent to the IRS for processing. 

(4) If you are receiving Social Security benefits that are directly deposited this does not mean your 2020 stimulus payment will automatically be directly deposited to your bank account.  This only applies if you are a “non-filer” – for example your only source of income is Social Security and you do not have to file a federal tax return.  The IRS will only directly deposit these payments for those who file federal income tax returns if it has the direct deposit information for a refund requested on the 2019, or more probably 2018, return.

(5) The date of mailing, or direct deposit, of your 2020 stimulus payment is based on the Adjusted Gross Income (AGI) on your 2019, or more likely 2018, tax return.  The greater your AGI the later your payment will be issued.

(6) In many cases the economic stimulus payment you received, or will receive. is calculated based on your 2018 AGI, because your 2019 Form 1040 or 1040-SR, if filed, had not been processed when the amount of the checks was calculated.  The IRS offices were closed down from the end of March until the end of April and 2019 returns were not being processed.  So, your check may be less than the actual amount to which you are entitled.  However, according to the IRS website, as of this writing, “The IRS is not able to correct or issue additional payments at this time and will provide further details on IRS.gov on the action people may need to take in the future.”

(7) The economic stimulus payment is administered via new Internal Revenue Code Section 6428.  IT IS NOT TAXABLE INCOME.  The payment will be treated as an “advance credit”, like the Obamacare advance premium credit, and must be reconciled based on 2020 information when preparing your 2020 tax return next year.  If you are entitled to more of a credit than you actually received in 2020 you can claim the additional credit on your 2020 Form 1040 or Form 1040-SR.  If you received more than you should have you do not have to pay back the excess.  

(8) As of this writing the deadline for filing your 2019 federal and state income tax returns, and paying any balance due, is July 15, 2020.  This has not been further extended to September, October or December.

(9) Perhaps most important – there is absolutely nothing your tax preparer can do to expedite the processing of your 2019 tax return or 2020 stimulus payment or the issuance of your 2019 refund or 2020 stimulus payment check.  Do not ask your tax preparer why you have not received your stimulus payment yet, or when you will get it.  If you want to find out about your stimulus payment go here.

Now when I receive an email question from a client, I can simply provide a link to this post.

TTFN

LIGHT READING

       

Since we are all stuck at home - how about 3 suggestions for some light reading.

These items will be delivered as a pdf email attachment.

1. THE JOY OF AVOIDING NEW JERSEY TAXES

Most NJ taxpayers concentrate on their federal tax return and spend minimal time on their NJ return, simply taking numbers from the 1040 and putting them on the NJ-1040.  As a result, they are paying more NJ state tax than necessary, often paying tax on income that is not even taxed by NJ.  By becoming informed on NJ state tax law and using proper tax planning you can make sure that you pay the absolute least amount of NJ Gross Income Tax possible for your particular situation.

I have been preparing NJ-1040s for as long as there has been a NJ-1040, and federal income tax returns for even longer.  I share my knowledge and experience from almost 50 years as a professional tax preparer in my new book THE JOY OF AVOIDING NEW JERSEY TAXES to help you to learn how to pay the absolute least amount of NJ Gross Income Tax possible.

This book has been updated for tax year 2019. 

Cost = $10.95

2. TAX SMARTS

As a veteran tax professional who has been preparing 1040s for individuals in all walks of life since 1972, I am often asked by friends, family, clients, readers, and cocktail party guests, “What is your best tax advice?”

As an answer I have written a compilation of my best tax advice to share wisdom accumulated from my almost 50 years of preparing 1040s.

This book does not discuss specific deductions (well, I do talk about gambling losses and IRA contributions), credits and “loopholes”, which are revised, changed, deleted and reinstated frequently at the whim of whichever political Party is in power.  And it is not specific to 2018 or 2019 or any individual year’s tax returns.  It is concerned with universal tax planning and preparation concepts and advice that remain constant year after year.

Cost = $8.95

3. MORTGAGE INTEREST GUIDE

With home equity debt interest no longer deductible, thanks to the GOP Tax Act, it is more important than ever to keep separate track of acquisition debt and home equity debt, going back to the original purchase of your home.  With lots of free time available during this situation now is a good time to work on this task.

In this guide I explain the various types of mortgage debt and the deduction limitations, and go into detail on how refinancing an acquisition debt mortgage can result in home equity debt.  I include two worksheets – one for Acquisition Debt Activity and one for Home Equity Debt activity – and provide a detailed example of how to use the worksheet.

Cost = $2.00

Special- $1.00 from the price of each item purchased during the shut-down will be donated to Dessin Animal Shelter in Honesdale.

Send your check or money order payable to TAXES AND ACCOUNTING, INC, and your email address, to –

TAXES AND ACCOUNTING, INC

STUCK AT HOME

POST OFFICE BOX A

HAWLEY PA 18428

TTFN

WHAT’S THE BUZZ, TELL ME WHAT’S A HAPPENNIN’?

* FORBES.COM’s TaxGirl Kelly Phillips Erb explains “Working From Home Doesn’t Always Equal A Home Office Tax Deduction Even If You Have NoOther Option”.  

*  For NY State tax filers – the New York Department of Taxation and Finance has a Q+A page on “Tax Department response to novel coronavirus (COVID-19)”.

* Want to know how much your stimulus check will be?  KIPLINGER.COM has a “Stimulus Check Calculator”.

* And Russ Fox provides a chart to answer the question “When Will the Stimulus Checks be Mailed?" At TAXABLE TALK.  

This chart is from early in April, so I do not know if it has been updated.  Does anyone have a more recent timetable?

* Kay Bell warns us “May Day! Mayday! Don't fall for these 5 COVID-19 relief payment myths” at DON’T MESS WITH TAXES.

  

* And Kay has an excellent resource for detailed information on “Coronavirus (COVID-19) and Taxes”.

* KIPLINGER.COM answers “10 Questions Retirees Often Get Wrong About Taxes in Retirement”.

TTFN

THIS JUST IN

Here is an update on the situation at the IRS.

The IRS has recalled certain employees back to previously closed IRS offices to handle what it calls “mission-critical functions” . These employees will open mail that has been held for weeks, process paper tax returns that may offer refunds to taxpayers, work on returns with refundable credits, answer taxpayers' questions on the toll-free lines and perform “Income Verification Express Service” and certain lien/levy functions. 

There is no indication of how many employees have returned or which phone lines are now available and for what hours.

So, paper returns will be begin to be processed again.  But at a much slower pace than in normal times.

TTFN

BUZZ BUZZ – THE BUZZ IS BACK!

* I personally have not been following the rules for the PPL (Payroll Protection Program), as I have enough to do to keep up with actual 1040 tax law, but fellow tax professional blogger Jason Dinesen has, and provides information for Schedule C filers who could benefit from the program in two posts at DINSESN TAX TIMES -  “How Do Sole Proprietors Prove Usage of Funds for PPP Loan Forgiveness?” and “Sole Proprietors and PPP Loan Forgiveness: Beware”

* Yellow rose of taxes Kay Bell lists “6 ways to know your COVID-19 check is real” at DON’T MESS WITH TAXES.

One way is – “The COVID-19 payment checks will have a special note at the lower left side of the check, next to the Statue of Liberty image. It says ‘Economic Impact Payment President Donald J. Trump’."  It is certainly no surprise that despicable and deplorable and ignorant and incompetent malignant narcissist Trump wasted government money to have his name printed on the check.

* A reminder – please see my previous post “Where Is It?”.

* From FORBES.COM’s TaxGirl Kelly Phillips Erb – "Frustrated With The Stimulus Check Portal? IRS Says Try Again".

I had problems with Get My Payment the first time I attempted to use it when it first appeared, but last Thursday I was told that my check would be mailed out on April 24^th.

* According to the CARES Act you do not have to take a “Required Minimum Distribution” (RMD) from an IRA or other retirement account in calendar year 2020.  But this was announced on March 27^th.  What if you had already taken your 2020 RMD?

All is not lost, as Ed Slott explains in Q+A article from AARP "IRA Expert Answers More Questions On Required Minimum Distributions" (highlight is mine) –

“However, on April 9, the IRS issued Notice 2020-23, indirectly providing limited relief by allowing an extension of the 60-day rollover period. Any distribution (including unwanted RMDs) taken between Feb. 1, 2020, and May 15, 2020, can still be rolled over if done by July 15, 2020.”

So if you took an RMD in February or March before the waiver was announced you can put it back.  But you must put the entire amount back.  If there was any tax withheld you must return these amounts as well or you will be taxed on the withholding.  If the RMD was $100,000 and you had $25,000 in federal and state tax withheld so that you only got $75,000 "in pocket" you MUST rollover $100,000.

If you took the RMD in January you are screwed.

TTFN