Yen Ling Chen, CPA

01/01/2022

12/31/2021

What taxpayers can do now to get ready to file taxes in 2022:

There are steps people, including those who received stimulus payments or advance child tax credit payments, can take now to make sure their tax filing experience goes smoothly in 2022. They can start by visiting the Get Ready page on IRS.gov. Here are some other things they should do to prepare to file their tax return.

Gather and organize tax records

Organized tax records make preparing a complete and accurate tax return easier. They help avoid errors that lead to processing delays that slow refunds. Having all needed documents on hand before taxpayers prepare their return helps them file it completely and accurately.

This includes:
• Forms W-2 from employers
• 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
Taxpayers should also gather any documents from these types of earnings. People should keep copies of tax returns and all supporting documents for at least three years.
Income documents can help taxpayers determine if they're eligible for deductions or credits. People who need to reconcile their advance payments of the child tax credit and premium tax credit will need their related 2021 information. Those who did not receive their full third Economic Impact Payments will need their third payment amounts to figure and claim the 2021 recovery rebate credit.

Taxpayers should also keep end of year documents including:

• 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
• Form 1095-A, Health Insurance Marketplace Statement, to reconcile advance premium tax credits for Marketplace coverage
Confirm mailing and email addresses and report name changes
To make sure forms make it to the them on time, taxpayers should confirm now that each employer, bank and other payer has their current mailing address or email address. People can report address changes by completing Form 8822, Change of Address and sending it to the IRS. Taxpayers should also notify the postal service to forward their mail by going online at USPS.com or their local post office. They should also notify the Social Security Administration of a legal name change.

View account information online

Individuals who have not set up an Online Account yet should do so soon. People who have already set up an Online Account should make sure they can still log in successfully. Taxpayers can use Online Account to securely access the latest available information about their federal tax account.
Review proper tax withholding and make adjustments if needed
Taxpayers may want to consider adjusting their withholding if they owed taxes or received a large refund in 2021. Changing withholding can help avoid a tax bill or let individuals keep more money each payday. Life changes – getting married or divorced, welcoming a child or taking on a second job – may also be reasons to change withholding. Taxpayers might think about completing a new Form W-4, Employee's Withholding Certificate, each year and when personal or financial situations change.
People also need to consider estimated tax payments. Individuals who receive a substantial amount of non-wage income like self-employment income, investment income, taxable Social Security benefits and in some instances, pension and annuity income should make quarterly estimated tax payments. The last payment for 2021 is due on Jan. 18, 2022.

12/30/2021

IRS issues standard mileage rates for 2022

IR-2021-251, Dec. 17, 2021

WASHINGTON — The Internal Revenue Service today issued the 2022 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2022, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

• 58.5 cents per mile driven for business use, up 2.5 cents from the rate for 2021,
• 18 cents per mile driven for medical, or moving purposes for qualified active-duty members of the Armed Forces, up 2 cents from the rate for 2021 and
• 14 cents per mile driven in service of charitable organizations; the rate is set by statute and remains unchanged from 2021.

The standard mileage rate for business use is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.

It is important to note that under the Tax Cuts and Jobs Act, taxpayers cannot claim a miscellaneous itemized deduction for unreimbursed employee travel expenses. Taxpayers also cannot claim a deduction for moving expenses, unless they are members of the Armed Forces on active duty moving under orders to a permanent change of station. For more details see Moving Expenses for Members of the Armed Forces.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

Taxpayers can use the standard mileage rate but must opt to use it in the first year the car is available for business use. Then, in later years, they can choose either the standard mileage rate or actual expenses. Leased vehicles must use the standard mileage rate method for the entire lease period (including renewals) if the standard mileage rate is chosen.

Notice 22-03, contains the optional 2022 standard mileage rates, as well as the maximum automobile cost used to calculate the allowance under a fixed and variable rate (FAVR) plan. In addition, the notice provides the maximum fair market value of employer-provided automobiles first made available to employees for personal use in calendar year 2022 for which employers may use the fleet-average valuation rule in or the vehicle cents-per-mile valuation rule.

12/29/2021

IRS issues information letters to Advance Child Tax Credit recipients and recipients of the third round of Economic Impact Payments; taxpayers should hold onto letters to help the 2022 Filing Season experience

WASHINGTON — The Internal Revenue Service announced today that it will issue information letters to Advance Child Tax Credit recipients starting in December and to recipients of the third round of the Economic Impact Payments at the end of January. Using this information when preparing a tax return can reduce errors and delays in processing.

The IRS urged people receiving these letters to make sure they hold onto them to assist them in preparing their 2021 federal tax returns in 2022.

Watch for advance Child Tax Credit letter

To help taxpayers reconcile and receive all of the Child Tax Credits to which they are entitled, the IRS will send Letter 6419, 2021 advance CTC, starting late December, 2021 and continuing into January. The letter will include the total amount of advance Child Tax Credit payments taxpayers received in 2021 and the number of qualifying children used to calculate the advance payments. People should keep this and any other IRS letters about advance Child Tax Credit payments with their tax records.

Families who received advance payments will need to file a 2021 tax return and compare the advance Child Tax Credit payments they received in 2021 with the amount of the Child Tax Credit they can properly claim on their 2021 tax return.

The letter contains important information that can make preparing their tax returns easier. People who received the advance CTC payments can also check the amount of their payments by using the CTC Update Portal available on IRS.gov.

Eligible families who did not receive any advance Child Tax Credit payments can claim the full amount of the Child Tax Credit on their 2021 federal tax return, filed in 2022. This includes families who don't normally need to file a tax return.

Economic Impact Payment letter can help with the Recovery Rebate Credit

The IRS will begin issuing Letter 6475, Your Third Economic Impact Payment, to EIP recipients in late January. This letter will help Economic Impact Payment recipients determine if they are entitled to and should claim the Recovery Rebate Credit on their tax year 2021 tax returns that they file in 2022.

Letter 6475 only applies to the third round of Economic Impact Payments that was issued starting in March 2021 and continued through December 2021. The third round of Economic Impact Payments, including the “plus-up” payments, were advance payments of the 2021 Recovery Rebate Credit that would be claimed on a 2021 tax return. Plus-up payments were additional payments the IRS sent to people who received a third Economic Impact Payment based on a 2019 tax return or information received from SSA, RRB or VA; or to people who may be eligible for a larger amount based on their 2020 tax return.

Most eligible people already received the payments. However, people who are missing stimulus payments should review the information to determine their eligibility and whether they need to claim a Recovery Rebate Credit for tax year 2020 or 2021.
Like the advance CTC letter, the Economic Impact Payment letters include important information that can help people quickly and accurately file their tax return.

More information about the Advance Child Tax Credit, Economic Impact Payments and other COVID-19-related tax relief may be found at IRS.gov.

As the 2022 tax filing season approaches, the IRS urges people to make sure an accurate tax return and use electronic filing with direct deposit to avoid delays.

06/11/2021

New FAQs available to aid families and small business under the American Rescue Plan

*Child and dependent care credit*

For 2021, the ARP increased the maximum amount of work-related expenses for qualifying care that may be taken into account in calculating the credit, increased the maximum percentage of those expenses for which the credit may be taken, modified how the credit is reduced for higher earners, and made it refundable.
For 2021, eligible taxpayers can claim qualifying work-related expenses up to:
• $8,000 for one qualifying person, up from $3,000 in prior years, or
• $16,000 for two or more qualifying persons, up from $6,000 in prior years.
Taxpayers are also required to have earnings; the amount of qualifying work-related expenses claimed cannot exceed the taxpayer’s earnings.
Combined with the increase to 50% in the maximum credit rate, taxpayers with the maximum amount of qualifying work-related expenses would receive a credit of $4,000 for one qualifying person, or $8,000 for two or more qualifying persons. When calculating the credit, a taxpayer must subtract employer-provided dependent care benefits, such as those provided through a flexible spending account, from total work-related expenses.
A qualifying person generally is a dependent under the age of 13, or a dependent of any age or spouse who is incapable of self-care and who lives with the taxpayer for more than half of the year.
As in prior years, the more a taxpayer earns, the lower the percentage of work-related expenses that are taken into account in determining the credit. However, under the new law, more taxpayers will qualify for the new maximum 50% credit rate. That's because the ARP increased to $125,000 the adjusted gross income level at which the credit rate starts to be reduced. Above $125,000, the 50% credit percentage goes down as income rises. Taxpayers with adjusted gross income over $438,000 are not eligible for the credit.
The credit is fully refundable for the first time in 2021. This means an eligible taxpayer can receive it, even if they owe no federal income tax. To be eligible for the refundable credit, a taxpayer (or the taxpayer’s spouse if filing a joint return) must reside in the United States for more than half of the year. However, special rules apply to military personnel stationed outside of the United States.
To claim the credit for 2021, taxpayers will need to complete Form 2441, Child and Dependent Care Expenses, and include the form when filing their tax returns in 2022. In completing the form to claim the 2021 credit, those claiming the credit will need to provide a valid taxpayer identification number (TIN) for each qualifying person. Generally, this is the Social Security number for the qualifying person. For more information about completing the form and claiming the credit, see the instructions to Form 2441. In addition, those claiming the credit are required to identify all persons or organizations that provided care for the qualifying person. This requires providing the care provider’s name, address, and TIN.

*Paid sick and family leave credits*

The paid sick and family leave credits reimburse eligible employers for the cost of providing paid sick and family leave to their employees for reasons related to COVID-19, including leave taken by employees to receive or recover from COVID-19 vaccinations. Self-employed individuals are eligible for similar tax credits.
The paid sick and family leave tax credits under the ARP are similar to those put in place by the Families First Coronavirus Response Act (FFCRA), as extended and amended by the COVID-related Tax Relief Act of 2020, under which certain employers could receive tax credits for providing paid leave to employees that met the requirements of the Emergency Paid Sick Leave Act and the Emergency Family and Medical Leave Expansion Act (as added by FFCRA). The ARP amends and extends these credits, and provides that leave wages paid to an employee who is seeking or awaiting the results of a test for, or diagnosis of, COVID-19, or is obtaining immunizations related to COVID-19 or recovering from immunization, are leave wages that can be eligible for the credits. Additionally, under the ARP, eligible employers may now claim the credit for paid family leave wages for all the same reasons that they can claim the credit for paid sick leave wages.
The FAQs include information on how eligible employers may claim the paid sick and family leave credits, including how to file for and compute the applicable credit amounts, and how to receive advance payments for and refunds of the credits. Under the ARP, eligible employers, including businesses and tax-exempt organizations with fewer than 500 employees and certain governmental employers, may claim tax credits for qualified leave wages and certain other wage-related expenses (such as health plan expenses and certain collectively bargained benefits) paid with respect to leave taken by employees beginning on April 1, 2021, through September 30, 2021.
The ARP keeps the daily wage thresholds that previously existed for these credits under the FFCRA. The aggregate cap on qualified sick leave wages remains at two weeks (up to a maximum of 80 hours), and this aggregate cap reset with respect to leave taken by employees beginning on April 1, 2021. The aggregate cap on qualified family leave wages increases to $12,000 from $10,000, and this aggregate cap reset with respect to leave taken by employees beginning on April 1, 2021.
The paid leave credits under the ARP are tax credits against the employer's share of Medicare tax. The tax credits are refundable, which means that the employer is entitled to payment of the full amount of the credits to the extent it exceeds the employer's share of Medicare tax.
In anticipation of the credits to be claimed on the applicable federal employment tax return, eligible employers can keep the federal employment taxes that they otherwise would have deposited, including federal income tax withheld from employees, the employees' share of social security and Medicare taxes, and the employer's share of social security and Medicare taxes with respect to all employees up to the amount of the credit for which they are eligible. If the eligible employer does not have enough federal employment taxes on deposit to cover the amount of the anticipated credits, the eligible employer may request an advance of the credit by filing Form 7200, Advance Payment of Employer Credits Due to COVID-19.
Self-employed individuals may claim comparable credits on the Form 1040, U.S. Individual Income Tax Return.

04/08/2021

IRS extends additional tax deadlines to May 17
Following the extension of the filing and payment deadline for individuals to May 17, 2021, the IRS announced other tax deadline extensions to the same date.

Here’s what’s affected:

Contributions to IRAs and health savings accounts
People now automatically have until May 17, 2021, to make 2020 contributions to their:

• Individual retirement arrangements
• Health savings accounts
• Archer medical savings accounts
• Coverdell education savings accounts

The deadline for reporting and paying the 10% additional tax on amounts included in gross income from 2020 distributions from IRAs or workplace-based retirement plans is now May 17, 2021. Lastly, the due date for Form 5498 series returns related to these accounts is now June 30, 2021,

2017 unclaimed refunds The law provides a three-year window to claim a refund. Normally, April 15, 2021, is the deadline to claim a refund from tax year 2017 but, the IRS has extended it to May 17, 2021. To get the unclaimed refund, a taxpayer must properly address and mail the tax return, postmarked by May 17, 2021. If a taxpayer doesn’t file a return within three years, the money becomes property of the U.S. Treasury.

Foreign trusts and estates Foreign trusts and estates with federal income tax filing or payment obligations, who file Form 1040-NR, now have until May 17, 2021.
2021 Annual Filing Season Program application deadline Tax return preparers who’d like to participate in the Annual Filing Season Program for calendar year 2021 now have until May 17, 2021, to file their application with the IRS.

No extension for estimated tax payments April 15, 2021 is still the deadline to make first quarter estimated tax payments. Withholding is automatic for most employees, but some taxpayers’ income isn't subject to income tax withholding. These taxpayers must generally make quarterly estimated tax payments. Income that may require estimated tax payments includes:

• Self-employment
• Interest
• Dividends
• Alimony
• Rentals

Taxpayers should review IRS Notice 2021-21 for more information about these extensions.

03/26/2021

IRS Criminal Investigation pledges continued commitment to investigating COVID-19 fraud as CARES Act reaches one-year anniversary

WASHINGTON — The Internal Revenue Service’s Criminal Investigation Division (IRS-CI) marks the one-year anniversary of the Coronavirus Aid, Relief and Economic Security (CARES) Act by pledging its continued commitment to investigating COVID-19 fraud.

Over the last year, IRS-CI has been combatting COVID-19 fraud related to the Economic Impact Payments, Paycheck Protection Program (PPP) and Employee Retention Credit. The agency has investigated more than 350 tax and money laundering cases nationwide totaling $440 million. These investigations covered a broad range of criminal activity, including fraudulently obtained loans, credits and payments meant for American workers, families, and small businesses.

“Criminals have tried funding their lavish lifestyles with money intended to provide Americans relief during one of the most difficult times in recent history”, said Jim Lee, Chief of IRS Criminal Investigation. “We have investigated cases of criminals flaunting stolen money to buy fancy cars, boats and pay for luxury apartments while families and businesses struggle to make ends meet. IRS-CI special agents have done an extraordinary job identifying millions in stolen money and our work is far from over. We will not cease until every fraudulently obtained dollar is accounted for and the individuals behind the schemes are prosecuted to the fullest extent of the law.”

IRS-CI encourages the public to share information regarding known or suspected fraud attempts against any of the programs offered through the CARES Act. To report a suspected crime, taxpayers may visit IRS.gov.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law on March 27, 2020, to provide emergency financial assistance to millions of Americans suffering the economic effects of the COVID-19 pandemic. One source of relief provided by the CARES Act was the authorization of up to $349 billion in forgivable loans to small businesses for job retention and certain other expenses, through the Paycheck Protection Program. In April 2020, Congress authorized over $300 billion in additional funding, and in December 2020, another $284 billion.

02/25/2021

Taxpayers should beware of ghost preparers
As people begin to file their 2020 tax returns, taxpayers are reminded to avoid unethical ghost tax return preparers.
A ghost preparer is someone who doesn’t sign tax returns they prepare. Unscrupulous ghost preparers often print the return and have the taxpayer to sign and mail it to the IRS. For e-filed returns, the ghost will prepare but refuse to digitally sign as the paid preparer.
By law, anyone who is paid to prepare or assists in preparing federal tax returns must have a valid Preparer Tax Identification Number. Paid preparers must sign and include their PTIN on the return. Not signing a return is a red flag that the paid preparer may be looking to make a quick profit by promising a big refund or charging fees based on the size of the refund.
Ghost tax return preparers may also:
• Require payment in cash only and not provide a receipt.
• Invent income to qualify their clients for tax credits.
• Claim fake deductions to boost the size of the refund.
• Direct refunds into their bank account, not the taxpayer's account.
No matter who prepares their return, taxpayers should review it carefully and ask questions about anything that’s not clear before signing. They should verify their routing and bank account number on the completed tax return for any direct deposit refund. Taxpayers should watch out for ghost preparers putting their bank account information on the returns.
Taxpayers can report preparer misconduct to using IRS Form 14157, Complaint: Tax Return Preparer. If a taxpayer suspects a preparer filed or changed their tax return without their consent, they should file Form 14157-A, Tax Return Preparer Fraud or Misconduct Affidavit.

02/24/2021

Taxpayers must report gig economy income on their tax return

In 2020, many people joined the gig economy to help make ends meet during the pandemic. Whether it’s a side business or a primary source of income, all taxpayers need to understand how their gig work affects their taxes. The bottom line is taxpayers must report gig economy income on their tax return.
Here's a quick overview of the gig economy:
The gig economy is also referred to as the on-demand, sharing or access economy. People involved in the gig economy earn income as a freelancer, independent worker or employee. They use technology known as online platforms to connect them with customers to provide goods or services. This includes things like renting out a home or spare bedroom and providing delivery services.
Here are some things taxpayers should know about the gig economy and taxes:
• Money earned through this work is usually taxable.
• There are tax implications for both the company providing the platform and the individual performing the services.
• This income is usually taxable even if the:
- Taxpayer providing the service doesn't receive an information return, like a Form 1099-NEC, Form 1099-MISC, Form 1099-K, or Form W-2.
- Activity is only part-time or side work.
- Taxpayer is paid in cash.
• People working in the gig economy are generally required to pay:
- Income taxes.
- Federal Insurance Contribution Act or Self-Employment Contribution Act tax.
- Additional Medicare taxes.
• Independent contractors may be able to deduct business expenses. These taxpayers should double check the rules around deducting expenses related to use of things like their car or house. They should remember to keep records of their business expenses.
• Special rules usually apply to rental property also used as a residence during the tax year. Taxpayers should remember that rental income is generally fully taxable.
• Workers who do not have taxes withheld from their pay have two ways to pay their taxes in advance. Here are these two options:
- Gig economy workers who have another job where their employer withholds taxes from their paycheck can fill out and submit a new Form W-4. The employee does this to request that the other employer withholds additional taxes from their paycheck. This additional withholding can help cover the taxes owed from their gig economy work.
- The gig economy worker can make quarterly estimated tax payments. They do this to pay their taxes and any self-employment taxes owed throughout the year.
For more information on the gig economy, taxpayers can visit the Gig Economy Tax Center.

05/27/2020

Here’s why some people’s Economic Impact Payment is different than expected

As people across the country receive their Economic Impact Payments, some might receive a different amount than they expected.

Eligible individuals receive a payment for $1,200. Two eligible individuals filing a joint return receive $2,400. And, eligible individuals receive up to an additional $500 for each qualifying child who meets the conditions outlined on the Qualifying Child Requirements page.

The Economic Impact Payment is automatic for eligible people who filed a tax return in 2018 or 2019. They’re also automatic for those who aren’t required to file a tax return but who receive:
• Social Security retirement, survivor or disability benefits.
• Railroad Retirement benefits.
• Supplemental Security Income.
• Veterans Affairs benefits.

People who receive less than expected can go to IRS.gov and review this chart to check the payment they should receive. It has examples that use filing status and income to calculate the payment amount.

Here are some common things that help explain what may have happened:
• The taxpayer hasn’t filed a 2019 tax return, and their payment was based on the 2018 return. This could also be the case if the IRS has not finished processing the 2019 return.

• The qualifying child is not under the age of 17. For purposes of the payment, the child’s age is how old they are at the end of the year for the tax return on which the IRS bases the payment amount. If a dependent is 17 or older, they don’t qualify for the additional $500. This includes a parent or other relative, and college students.

• The Economic Impact Payment was offset by past-due child support. While this is the only offset that can affect the payment amount, federal law allows creditors to garnish a payment once it’s deposited into a bank account.

In many instances, eligible taxpayers who received a payment that was smaller than expected may get an additional amount early next year when they file their 2020 federal income tax return.

Anyone with questions about the payment can visit the Economic Impact Payments Information Center. It has answers to questions about eligibility, payment amounts, what to expect, and when to expect it.

Share this tip on social media -- : Here’s why some people’s Economic Impact Payment is different than expected. https://go.usa.gov/xvzA3

COVID Tax Tip 2020-59, May 20, 2020

05/27/2020

Millions of people will get their Economic Impact Payment by prepaid debit card

Nearly four million people are being sent their Economic Impact Payment by prepaid debit card, instead of paper check. The determination of which taxpayers receive a debit card was made by the Bureau of the Fiscal Service, another part of the Treasury Department that works with the IRS to handle distribution of the payments.
These Economic Impact Payment Cards arrive in a plain envelope from Money Network Cardholder Services. The Visa name will appear on the front of the card; the back of the card has the name of the issuing bank, MetaBank®, N.A. Information included with the card will explain that the card is an Economic Impact Payment Card.
Those who receive Economic Impact Payment by prepaid debit card can do the following without any fees:
• Make purchases online and at any retail location where Visa is accepted
• Get cash from in-network ATMs
• Transfer funds to their personal bank account
• Check their card balance online, by mobile app, or by phone
This free, prepaid card also provides consumer protections available to traditional bank account owners, including protection against fraud, loss, and other errors.
The card will come with instructions on how to activate and use it. Learn more at www.eipcard.com.

More information:
Economic Impact Payments by Prepaid Debit Card
Economic Impact Payment Card
Economic Impact Payment Information Center

Your Economic Impact Payment (EIP) Card contains the money you are receiving as a result of the CARES Act. Here’s how to activate and start using it.