​IRS Statement on the Mailing of Balance Due Notices to California Taxpayers

The IRS reassures California taxpayers that they continue to have an automatic extension until later this year to file and pay their taxes for those covered by disaster declarations in the state.

The current mailings being received by some taxpayers, the IRS Notice CP-14, are for taxpayers who have a balance due, and they are sent out as a legal requirement. While the notice received by taxpayers says they need to pay in 21 days, most California taxpayers have until later this year to pay under the disaster declaration. These letters include a special insert that notes the payment date listed in the letter does not apply to those covered by a disaster declaration, and the disaster dates remain in effect.

The IRS apologizes to taxpayers and tax professionals for any confusion as we continue to review the situation. Taxpayers receiving these letters do not need to call the IRS or their tax professional.

Thinking about buying an electric vehicle?  The Inflation Reduction Act provides new incentives for purchasing electric vehicles beginning on January 1, 2023.  A credit of up to $7500 will be available to taxpayers who purchase certain new electric vehicles and hybrids. A credit of up to $4000 will be available to taxpayers purchasing a used electric vehicle.  Which taxpayers and which vehicles qualify is complicated and will remain uncertain until the Treasury Department issues proposed rules later this year.

What is known is that in order to qualify for the credit a new electric sedan cannot have a price above $55,000 and pickup trucks, SUVs and vans cannot have a price over $80,000.  Vehicles must be purchased from a dealer, not a private party.  There are also requirements  related to where the vehicle is made and where the batteries are produced.  Additionally, the credit for new electric vehicles will only be available to taxpayers with adjusted gross income below certain levels - $150,000 for single taxpayers, $300,000 for those filing jointly and $225,000 for those filing as head of household.

Used electric vehicles must cost less than $25,000, must be at least two years old and must be purchased from a dealer, not a private party, to qualify for the credit.  There are no requirements related to where the vehicle was made or where the batteries were produced.  Eligibility for the credit is also based on adjusted gross income below certain levels - $75,000 for single taxpayers, $150,000 for those filing jointly and $112,500 for those filing as head of household.

For new cars purchased in 2023 the credit is based on the make and model and will be claimed on 2023 tax returns filed in 2024.  Starting in 2024 the credit can be transferred to a dealership to lower the vehicle purchase price but eligibility for the credit will be reconciled on the 2024 tax return in 2025.

For used cars the credit will be 30% of the purchase price, up to a limit of $4000. For used cars purchased in 2023 the credit will be claimed on 2023 tax returns filed in 2024.  Starting in 2024 the credit can be transferred to a deanship to lower the vehicle purchase price but eligibility for the credit will be reconciled on the 2024 tax return.

THESE ARE NON REFUNDABLE CREDITS.  That means the credit is used to reduce the amount of tax owed in the year the vehicle is purchased.  If the credit is greater than the tax owed, the balance does not carry forward into the next year.

Until the Treasury Department issues regulations later this year, taxpayers should be cautious about purchasing a vehicle to take advantage of these credits as there are still so many unknowns.

Hundreds of thousands of wage earners began working from home last March as the efforts to combat COVID-19 ramped up.  As those folks begin to prepare their 2020 income tax returns, they have begun to question whether they can claim the cost of a home office as a federal tax deduction.  The answer is no.

Prior to Tax Year 2019 and the passage of the Tax Cuts and Jobs Act (TCJA), wage earners who itemized deductions could claim various miscellaneous deductions, including a home office if one was required by their employer and the office was used solely and exclusively for business.  The TCJA eliminated the ability to claim all miscellaneous deductions, including a home office.

Some states, such as California, still allow wage earners to claim a home office required by their employer and used solely and exclusively for business.  The space doesn't have to be a separate room but it can't be a space used for other things.  Be sure to check with your tax preparer to see if your state allows a home office deduction and, if so, what requirements must be met in order to claim the deduction.  

For your safety and the safety of my staff and me, the 2020 tax season will start with no face-to-face appointments.  Instead, tax preparation will be done remotely, as it was for much of the 2019 tax season.  You will drop off your tax materials in our outside drop box or mail them to our PO box, draft returns will be prepared and transmitted to you for review, you will call with any questions and once the returns are prepared to your satisfaction, you will sign the necessary forms to electronically submit your returns.

There are numerous changes to tax rules and regulations for 2020 so it is imperative that we gather complete information from you in order to accurately prepare your returns.  Normally, information is shared with us during a face-to-face meeting.  Since that meeting cannot happen, please submit the annual organizer that will be mailed to you in early January with your tax materials with at least the first three pages completed.  Returns will not be prepared until that organizer has been provided to us.

As tax season progresses, there may be additional changes that occur to federal and state rules and regulations.  Our ability to offer face-to-face appointments may also change as vaccines for COVID 19 become available.  Please check this website regularly and like us on Facebook for updates.

 IRS.gov feature helps people who normally don’t file get payments. A second tool next week provides taxpayers with payment delivery date and allows entry of direct deposit information

Today the Treasury Department and the Internal Revenue Service launched a new web tool allowing quick registration for Economic Impact Payments for those who don’t normally file a tax return.  The non-filer tool provides a free and easy option designed for people who don’t have a return filing obligation, including those with too little income to file. The feature is available only on IRS.gov, and users should look for Non-filers: Enter Payment Info Here to take them directly to the tool.

Economic Impact Payments will be distributed automatically to most people starting next week. Eligible taxpayers who filed tax returns for 2019 or 2018 will receive the payments automatically. Automatic payments will also go to those receiving Social Security retirement or disability benefits and Railroad Retirement benefits in the near future.

How do I use the Non-Filers: Enter Payment Info tool?
For those who don’t normally file a tax return, the process is simple and only takes a few minutes to complete. First, visit IRS.gov, and look for “Non-Filers: Enter Payment Info Here.” Then provide basic information including Social Security number, name, address, and dependents. The IRS will use this information to confirm eligibility and calculate and send an Economic Impact Payment. Using the tool to get your payment will not result in any taxes being owed. Entering bank or financial account information will allow the IRS to deposit your payment directly in your account.  Otherwise, your payment will be mailed to you.

Who should use the Non-Filers tool?
This new tool is designed for people who did not file a tax return for 2018 or 2019 and who don’t receive Social Security retirement or disability benefits or Railroad Retirement benefits.  You should also use the tool is you fall into one of the following groups.

Low Income - Those who haven’t filed a 2018 or 2019 return because they are under the normal income limits for filing a tax return. This may include single filers who made under $12,200 and married couples making less than $24,400 in 2019.

Veterans beneficiaries and Supplemental Security Income (SSI) recipients - The IRS continues to explore ways to see if Economic Impact Payments can be made automatically to SSI recipients and those who receive veterans disability compensation, pension or survivor benefits from the Department of Veterans Affairs and who did not file a tax return for the 2018 or 2019 tax years. People in these groups can either use Non-Filers: Enter Payment Info option now or wait as the IRS continues to review automatic payment options to simplify delivery for these groups.
 
Social Security, SSDI and Railroad Retirement beneficiaries with qualifying dependents - These groups will automatically receive $1,200 Economic Impact Payments. People in this group who have qualifying children under age 17 may use Non-Filers: Enter Payment Info to claim the $500 payment per child.

WARNING - If someone else claimed you on their tax return, you will not be eligible for the Economic Impact Payment and should not use the Non-Filer system.
 
Automatic payments begin next week
Eligible taxpayers who filed tax returns for either 2019 or 2018 and chose direct deposit of their refund will automatically receive an Economic Impact Payment of up to $1,200 for individuals or $2,400 for married couples and $500 for each qualifying child if their adjusted gross income is below certain levels. Individuals who receive Social Security retirement or disability benefits, SSDI or who receive Railroad Retirement benefits but did not file a return for 2019 or 2018 will automatically receive a payment in the near future.

Starting next week Get My Payment will show Economic Impact Payment date and help with direct deposit
To help everyone check on the status of their Economic Impact Payments, the IRS is building a second new tool expected to be available for use by April 17. Get My Payment will provide people with the status of their payment, including the date their payment is scheduled to be deposited into their bank account or mailed to them.
An additional feature on Get My Payment will allow eligible people a chance to provide their bank account information so they can receive their payment more quickly rather than waiting for a paper check. This feature will be unavailable if the Economic Impact Payment has already been scheduled for delivery.

Notices are coming daily from the IRS and Turner's Tax Service will continue to update you as information becomes available. 

Yesterday the IRS issued a notice that the federal estimated payment due on June 15th will now be due by July 15th.  The April 15th estimated payment had already been moved to July 15th.  Most states, including California,  had already moved the due date for June 15th estimated payments to July 15th.  

BOTTOM LINE - If you make estimated payments to the IRS, you now have until July 15th to make the first two payments for 2020.  That's also true for those making estimated payments to California and many other states.