Whidden's Tax Service - Jackson

04/15/2025

IRS marks 70th anniversary of April 15 tax filing deadline
WASHINGTON – On this Tax Day, the Internal Revenue Service marks a major milestone: the 70th Anniversary of the April 15 federal income tax filing deadline. Since 1955, April 15 has been a consistent annual deadline for millions of Americans to file their federal income tax returns, becoming a fixture in the nation’s financial calendar.
The deadline was moved to April 15 from March 15,1955 to give taxpayers and the IRS more time to prepare and process increasingly complex returns. Since then, innovations in technology and customer service have transformed the tax filing experience from hand-prepared paper forms to modern e-filing and online tools that make the process faster, more secure, and more accessible. In 2024, more than 144 million individual tax returns were filed with more than 96% submitted electronically.
Despite the changes, one thing has remained the same: the importance of meeting the annual filing deadline. Most taxpayers must file by midnight tonight. Those who need more time can still request an extension until Oct. 15 – though any taxes owed must be paid by April 15 to avoid penalties and interest.

04/11/2025

More than $1 billion in 2021 tax refunds still unclaimed – Taxpayers should act now to see if they are eligible
WASHINGTON ― The Internal Revenue Service reminded the 1.1 million people who didn’t file their tax year 2021 federal tax returns that they may be eligible for a refund if they file by the April 15 deadline.
The IRS estimates that more than $1 billion in refunds remain unclaimed because taxpayers have not yet filed their 2021 tax returns.
There is no penalty for failure to file if a refund is due. However, a return claiming a refund must be filed within three years of its due date for a refund to be allowed. After the expiration of the three years, the refund statute generally prevents the issuance of a refund check and the application of any credits, including overpayments of estimated taxes or withholding amounts, to other tax years that are underpaid. If a taxpayer does not file within the three-year window, the money goes to the U.S. Treasury.
It's important to remember that tax year 2021 refunds may be held if taxpayers have not filed returns for 2022 and 2023. In addition, any refund amount for 2021 will be applied to amounts still owed to the IRS or a state tax agency and may be used to offset unpaid child support or other past-due federal debts, such as student loans.
Many taxpayers who did not file may be eligible for more
Taxpayers stand to lose more than just their refund of taxes withheld if they fail to file their 2021 tax return. They could also miss out on money from any refundable tax credits, including the Earned Income Tax Credit (EITC), the Recovery Rebate Credit, or other applicable credits.
Many low-to-moderate-income workers may be eligible for EITC. For 2021, the EITC was worth as much as $6,728 for taxpayers with qualifying children.
The IRS previously reminded those who may be entitled to the Recovery Rebate Credit in 2021 that time is running out to file a tax return and claim their money. The Recovery Rebate Credit is a refundable credit for individuals who did not receive one or more Economic Impact Payments, also known as stimulus payments, distributed in 2021.
Plan to file? IRS offers options to get key documents
Gathering all the necessary documents and forms to file a return for 2021 may take some time. Taxpayers should start as soon as possible to make sure they have enough time to file before the April 15 deadline for 2021 refunds. Here are some options:
• IRS Online Account. Individual taxpayers can create or access their IRS Online Account on IRS.gov at Online Account for Individuals. In addition to Forms W-2, 1095-A, and 1099-NEC, people can view key details from their most recent tax return, such as adjusted gross income.
• Request copies of key documents. Taxpayers who are missing Forms W-2, 1098, 1099, or 5498 for the years 2021, 2022, or 2023 can request copies from their employer, bank, or other payers.
• Current and prior years’ tax forms: Tax year 2021 Forms 1040 and 1040-SR and instructions are available on the IRS.gov Forms, Instructions, and Publications page or by calling toll-free 800-TAX-FORM (800-829-3676).

The IRS estimated the number of individuals in Alabama to be 18,100 and the median potential refund a filer may be entitled to receive is $743. The total potential for all refunds is $16,048,100. The actual refund amount will vary based on a household’s tax situation.

04/03/2025

Filing on Tax Day is fine, but it can make taxes more stressful. Get started ASAP to be sure you’re taking advantage of all of the tax breaks available to you. https://bit.ly/4hSSj9I

01/28/2025

The IRS and partners in the “Coalition of Scam and Scheme Threats” have released changes for the 2025 filing season, to help protect taxpayers from becoming victims of a scam or scheme.
The changes include:
• A new form involving the Fuel Tax Credit, designed to make it harder for promoters to mislead well-meaning taxpayers into claiming the credit.
• Increased review of various “other withholding” claims on Form 1040 that have been targets of scammers and schemers.
• Reaching out to taxpayers potentially using “ghost preparers” to prepare tax returns. These preparers don’t identify themselves on the tax return, which, is a red flag for taxpayers to be misled into a scam or scheme.

06/12/2024

Hobby or business: What people need to know if they have a side hustle
Hobbies and businesses are treated differently when it comes to filing taxes. The biggest difference between the two is that businesses operate to make a profit while hobbies are for pleasure or recreation.
Whether someone is having fun with a hobby or running a business, if they are paid through payment apps for goods and services during the year, they may receive an IRS Form 1099-K for those transactions. These payments are taxable income and must be reported on federal tax returns.
There are a few other things people should consider when deciding whether their project is a hobby or business. No single thing is the deciding factor. Taxpayers should review all the factors to make a good decision.
How taxpayers can decide if it's a hobby or business
These questions can help taxpayers decide whether they have a hobby or business:
• Does the time and effort they put into the activity show they intend to make a profit?

• Does the activity make a profit in some years, and if so, how much profit does it make?
• Can they expect to make a future profit from the appreciation of the assets used in the activity?
• Do they depend on income from the activity for their livelihood?
• Are any losses due to circumstances beyond their control or are the losses normal for the startup phase of their type of business?
• Do they change their methods of operation to improve profitability?
• Do they carry out the activity in a businesslike manner and keep complete and accurate books and records?
• Do the taxpayer and their advisors have the knowledge needed to carry out the activity as a successful business?
Whether taxpayers have a hobby or run a business, good recordkeeping throughout the year will help when they file taxes.

06/11/2024

The Internal Revenue Service has highlighted a number of options available to help taxpayers who missed the April deadline to file their 2023 federal income tax return.
To help struggling taxpayers, the IRS has important payment programs that can help those who have trouble paying the amount owed and special first-time penalty relief for those who qualify.
File and pay what they can to reduce penalties and interest
Taxpayers should file their tax return and pay any taxes they owe as soon as possible to reduce penalties and interest. An extension to file is not an extension to pay. An extension to file provides an additional six months with a new filing deadline of Oct. 15.The interest rate for an individual's unpaid taxes is currently 8%, compounded daily. The late-filing penalty is generally 5% per month and the late-payment penalty is normally 0.5% per month, both of which max out at 25%.
If a return is filed more than 60 days after the due date, the minimum penalty is either $485 or 100% of the unpaid tax, whichever is less. The failure to pay penalty rate is generally 0.5% of unpaid tax owed for each month or part of a month until the tax is fully paid or until 25% is reached. The rate is subject to change. For more information, see Penalties on IRS.gov.
However, taxpayers can limit late-payment penalties and interest charges by paying their tax electronically. The fastest and easiest way to do that is with IRS Direct Pay, a free service available only on IRS.gov. Several other electronic payment options are also available. Visit Make a Payment for details.
Some may qualify for penalty relief
Anyone who receives a penalty notice from the IRS should read it carefully and follow the instructions for requesting relief. Visit Penalty Relief for information on the types of penalties, requesting penalty relief and appealing a penalty decision.
Taxpayers who have filed and paid on time and have not been assessed any penalties for the past three years often qualify to have the penalty abated. See the First-Time Penalty Abatement page on IRS.gov. A taxpayer who does not qualify for this relief may still qualify for penalty relief if their failure to file or pay on time was due to reasonable cause and not willful neglect.
Having trouble paying? IRS has options to help
For those who owe federal taxes, the IRS has a number of payment options available.
Taxpayers that are unable to pay in full by the tax deadline should still file their tax return, pay what they can and explore a variety of payment options available for the remaining balance. The IRS offers several options to help them meet their tax obligation, including applying for an online payment plan.
Taxpayers can receive an immediate response of payment plan acceptance or denial without calling or writing to the IRS. Online payment plan options include:
• Short-term payment plan – The total balance owed is less than $100,000 in combined tax, penalties and interest. Additional time of up to 180 days to pay the balance in full.
• Long-term payment plan – The total balance owed is less than $50,000 in combined tax, penalties and interest. Pay in monthly payments for up to 72 months. Payments may be set up using direct debit (automatic bank withdraw) which eliminates the need to send in a payment each month, saving postage costs and reducing the chance of default. For balances between $25,000 and $50,000, direct debit is required.
Though interest and late-payment penalties continue to accrue on any unpaid taxes after April 15, the failure to pay penalty is cut in half while an installment agreement is in effect. Find more information about the costs of payment plans on the IRS’ Additional information on payment plans webpage.
Some taxpayers get automatic extensions
Some taxpayers automatically qualify for extra time to file and pay taxes due without penalties and interest, including:
• Taxpayers in certain disaster areas. There’s no need for these taxpayers to submit an extension; extra time is granted automatically due to the disaster. Information on the most recent tax relief for disaster situations is available on IRS.gov.
• U.S. citizens and resident aliens who live and work outside of the United States and Puerto Rico.
• Members of the military on duty outside the United States and Puerto Rico, and those serving in combat zones.
Adjust withholding to prevent tax ‘surprises’
Taxpayers should check their withholding every year to protect against having too little tax withheld and facing an unexpected tax bill or penalty at tax time next year.
The Tax Withholding Estimator helps individuals bring the tax they pay closer to what is owed. Wage earners can assess their income tax, credits, adjustments and deductions, and determine whether they need to change their withholding by submitting a new Form W-4, Employee's Withholding Allowance Certificate to their employer, not the IRS.

04/09/2024

Remember, an extension to file is not an extension to pay taxes

Taxpayers who can’t file by the deadline of April 15, 2024, should request an extension before that deadline. Remember, however, that an extension to file is not an extension to pay taxes. If they owe taxes, they should pay them before the due date to avoid potential penalties and interest on the amount owed.

04/26/2023

04/26/2023

BANANA PUDDING TACOS - with vanilla wafer taco shell, topped with whipped cream and crushed vanilla wafers.
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04/26/2023

Unscrupulous tax preparers and tax fraud promoters make big promises – and charge high fees – but taxpayers are legally responsible for what's on their return. Taxpayers should use only reputable tax professionals and know what is on their tax return. Although scammers are most active during filing season, they operate year-round, and taxpayers should always be on the lookout for these abusive schemes.
• Employee Retention Credit claims - Taxpayers should be aware of aggressive pitches from scammers who promote large refunds related to the Employee Retention Credit. With ads all over the internet, social media and radio, fraudulent promoters try to con ineligible people to claim the credit. These promotions have false information about who’s eligible and how the IRS calculates the credit. Some of these ads exist solely to collect fees from the taxpayer or to take the taxpayer's personal info and steal their identity.
• False fuel tax credit claims - The fuel tax credit is meant for off-highway business and farming use and is not available to most taxpayers. Unscrupulous tax return preparers and promoters are enticing taxpayers to inflate their refunds by erroneously claiming the credit.
• Schemes aimed at high-income filers - These include schemes like abusing charitable remainder trusts and monetized installment sales.
• Bogus tax avoidance strategies - This includes abusive micro-captive insurance arrangements and syndicated conservation easements.
• Schemes with international elements - These schemes include a variety of tax evasion strategies including things like:
o Hiding assets in offshore banks, brokerage accounts, digital asset accounts and nominee entities or in accounts holding digital assets, such as cryptocurrency.
o Attempting to avoid U.S. tax by contributing to foreign individual retirement arrangements in Malta or potentially other host countries. The participants in these transactions typically lack any local connection to the host country.
o Participating in a purported insurance arrangement with a Puerto Rican or other foreign corporation in which the U.S. business owner has a financial interest. These arrangements lack many of the attributes of legitimate insurance.
The IRS will challenge the purported tax benefits from these types of transactions and impose penalties. The IRS Criminal Investigation Division is always on the lookout for promoters and participants of these types of schemes. Taxpayers should think twice before including questionable arrangements on their tax returns.

04/24/2023

When an IRS letter arrives, taxpayers don’t need to panic, but they do need to read it
Getting a letter from the IRS can make some taxpayers nervous – but there’s no need to panic. The IRS sends notices and letters when it needs to ask a question about a taxpayer's tax return, let them know about a change to their account or request a payment.

When an IRS letter or notice arrives in the mail, here's what taxpayers should do:

Read the letter carefully. Most IRS letters and notices are about federal tax returns or tax accounts. Each notice deals with a specific issue and includes any steps the taxpayer needs to take. A notice may reference changes to a taxpayer's account, taxes owed, a payment request or a specific issue on a tax return. Taking prompt action could minimize additional interest and penalty charges.

Review the information. If a letter is about a changed or corrected tax return, the taxpayer should review the information and compare it with the original return. If the taxpayer agrees, they should make notes about the corrections on their personal copy of the tax return and keep it for their records. Typically, a taxpayer will need to act only if they don't agree with the information, if the IRS asked for more information or if they have a balance due.

Take any requested action, including making a payment. The IRS and authorized private debt collection agencies do send letters by mail. Taxpayers can also view digital copies of select IRS notices by logging into their IRS Online Account. The IRS offers several options to help taxpayers who are struggling to pay a tax bill.

Reply only if instructed to do so. Taxpayers don't need to reply to a notice unless specifically told to do so. There is usually no need to call the IRS. If a taxpayer does need to call the IRS, they should use the number in the upper right-hand corner of the notice and have a copy of their tax return and letter.

Let the IRS know of a disputed notice. If a taxpayer doesn't agree with the IRS, they should follow the instructions in the notice to dispute what the notice says. The taxpayer should include information and documents for the IRS to review when considering the dispute.

Keep the letter or notice for their records. Taxpayers should keep notices or letters they receive from the IRS. These include adjustment notices when the IRS takes action on a taxpayer's account. Taxpayers should keep records for three years from the date they filed the tax return.

Watch for scams. The IRS will never contact a taxpayer using social media or text message. The first contact from the IRS usually comes in the mail. Taxpayers who are unsure whether they owe money to the IRS can view their tax account information on IRS.gov.

Call Whidden’s Tax Service: 251-246-0034