In Tax Season 2024, the Treasury Department, and the Internal Revenue Service (IRS) have introduced new regulations regarding the corporate stock repurchase excise tax. The stock repurchase excise tax applies to repurchases after Dec. 31, 2022. This move comes amidst increasing scrutiny of stock buybacks and their impact on corporate behavior and economic inequality. Understanding these regulations is essential for both corporations and investors alike, as they could have significant implications for corporate finance strategies and shareholder value.

Negative Impact of Stock Buybacks

Stock buybacks, or share repurchases, occur when a company purchases its outstanding shares from the market, effectively reducing the number of shares available to the public. This practice has become increasingly common in recent years, with corporations often using excess cash or borrowing funds to repurchase shares. Proponents argue that buybacks can signal confidence in a company’s prospects and enhance shareholder value by boosting earnings per share (EPS) and stock prices.

However, critics contend that stock buybacks primarily benefit executives and large shareholders while potentially short-changing investment in research and development, employee compensation, and long-term growth initiatives. Additionally, concerns have been raised about the market manipulation potential of buybacks, as companies may repurchase shares to artificially inflate stock prices.

New Regulations from Tax Season 2024

The new regulations announced by the Treasury and IRS in Tax Season 2024 aim to address some of these concerns by imposing an excise tax on certain corporate stock repurchases. Under these regulations, corporations engaging in substantial stock buybacks could face additional tax liabilities, particularly if the repurchases are deemed excessive or disproportionate relative to other corporate expenditures.

1. Excise Tax Rate

The Inflation Reduction Act has introduced a new excise tax on corporate stock repurchases, set at a rate of 1%. This tax applies to stock repurchases exceeding certain thresholds and is calculated based on the aggregate fair market value (FMV) of repurchased stock relative to the aggregate FMV of stock issued by the corporation during the tax year. While the excise tax rate remains fixed at 1%, it may vary depending on factors such as the size of the repurchase and the company’s financial performance. This measure aims to address concerns surrounding excessive stock buybacks by imposing a tax that corresponds to the extent of repurchase activities, promoting responsible corporate behavior and shareholder value.

2. Exemptions and Thresholds

Certain exemptions and thresholds may apply to smaller stock repurchases or those undertaken for specific purposes, such as employee stock ownership plans (ESOPs) or capital restructuring initiatives. These exemptions aim to avoid penalizing companies for legitimate use of buybacks.

3. Reporting and Compliance Requirements

Corporations will be required to accurately report their stock repurchase activities to the IRS and comply with any additional disclosure requirements. This transparency is crucial for ensuring the effectiveness and integrity of the regulations.

Implications for Corporations

The new regulations are likely to prompt corporations to reassess their stock buyback strategies and capital allocation decisions. Companies will need to weigh the potential tax implications of repurchasing shares against other uses of capital, such as investments in innovation, expansion, or dividends. Additionally, corporate boards and executives may face increased scrutiny from shareholders and regulators regarding the rationale behind stock buybacks and their alignment with long-term value creation. Transparent communication and accountability will be essential in navigating these expectations.

Implications for Investors

For investors, particularly institutional and activist shareholders, the new regulations offer greater transparency and oversight of corporate stock repurchase activities. Investors can use this information to evaluate management’s capital allocation decisions and assess the potential impact on shareholder value. Moreover, the excise tax on stock repurchases could influence investors’ perceptions of companies’ financial health and stewardship. Companies with excessive buyback activity may be viewed less favorably compared to those prioritizing investments in growth opportunities and sustainable value creation.

Compliance and Reporting

Corporations will be required to report their stock repurchase activities accurately to the IRS and comply with additional disclosure requirements. The stock repurchase excise tax must be reported on Form 720, Quarterly Federal Excise Tax Return, with Form 7208 attached. The final version of Form 7208 will be released before the first due date for reporting and payment of the tax.

The due date for Form 720, Quarterly Federal Excise Tax Return, depends on the specific quarter being reported. Generally, Form 720 is due by the last day of the month following the end of the calendar quarter. Here are the due dates for Tax Season 2024.

First Quarter (January – March): The due date is April 30th.

Second Quarter (April – June): The due date is July 31st.

Third Quarter (July – September): The due date is October 31st.

Fourth Quarter (October – December): The due date is January 31st of the following year.

The Treasury and IRS’s new regulations on corporate stock repurchase excise tax represent a significant development in the ongoing debate surrounding stock buybacks and their implications for corporate governance and shareholder value. To file proper excise tax and avoid IRS audits, it is recommended to engage any certified tax professionals that experience in tax implications.

IRS AUDIT GROUP

IRS Audit Group consists of tax professionals, CPAs, enrolled agents, and tax attorneys.  We are located in Los Angeles; California and our primary area of expertise is IRS Tax Audit Representation.  However, our certified professionals cooperate and work with all IRS offices across the country.  Please contact us for more information.  https://irsauditgroup.com/contact/

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Facing an IRS tax audit can be daunting for any business owner. However, understanding the process and being prepared can alleviate much of the stress. In this guide, we’ll delve into the intricacies of IRS tax audits for businesses, including what triggers them, the procedures involved, and potential outcomes.

What Prompts IRS Audits for Businesses?

There are several reasons why IRS audits are initiated for businesses, which can range from random selection to specific indicators that draw the attention of IRS agents. These triggers are commonly observed.

• Red Flags: The IRS uses computer algorithms to flag returns that deviate from statistical norms, such as unusually high deductions or inconsistencies in reported income.
• Random Selection: Some tax audits are random, chosen by computer selection to ensure compliance across a broad spectrum of taxpayers.
• Industry Standards: Certain industries may face higher scrutiny due to historically higher rates of non-compliance or specific tax issues prevalent in those sectors.
• Large Variances: Significant changes in income or deductions compared to previous years may raise red flags.
• Information Matching: Discrepancies between a business report and what third parties (like clients or financial institutions) report can trigger an audit.

Understanding the Audit Process

The IRS audit process can be complex and intimidating, but understanding the steps involved can help alleviate some of the stress. A simplified overview of the audit process includes the following.

• Notification: The IRS will notify the business either by mail or in person of the audit, specifying the tax year(s) under examination and the documents required.
• Preparation: Gathering relevant financial records, receipts, invoices, and other documentation is crucial. It’s advisable to seek tax professionals’ help from a tax audit representation firm experienced in handling IRS audits.
• Examination: The audit may be conducted via mail correspondence, at the IRS office, or even at the business premises. The IRS examiner will review the records and may request additional documentation or explanations.
• Resolution: After the examination, the IRS will propose adjustments if necessary. The business can agree to the changes, request an appeal, or challenge the findings in tax court.

Potential Outcomes of an IRS Tax Audit

• No Change: In some cases, the IRS may conclude that the business’s return is accurate, resulting in no changes or adjustments.
• Additional Taxes Owed: If discrepancies are found, the IRS may assess additional taxes, penalties, and interest. IRS provided alternatives for taxpayers through its Payment Plans. In case of financial burden, those taxpayers unable to immediately pay their tax debt in full can adopt such IRS Payment Plans.
• Refund: Occasionally, an audit may result in the discovery of overpaid taxes, leading to a refund for the business.
• Settlement: In some instances, the business and the IRS may negotiate a settlement to resolve the audit findings.
• Criminal Investigation: In cases of suspected tax evasion or fraud, an audit may escalate into a criminal investigation, potentially leading to severe penalties or even imprisonment.

Tips for Businesses Facing an IRS Audit

• Stay Organized: Maintain meticulous records of all financial transactions and keep them organized and easily accessible.
• Seek Professional Guidance: Enlist the help of tax professionals who understand the complexities of IRS audits and can represent the business effectively.
• Cooperate with the IRS: Be cooperative and responsive throughout the audit process, providing requested documentation promptly and accurately.
• Know Your Rights: Familiarize yourself with your rights as a taxpayer, including the right to representation and appeal.
• Learn from the Experience: Use the audit as an opportunity to review and improve your business’s tax compliance processes to avoid future issues.

IRS AUDIT GROUP

IRS Audit Group consists of tax professionals, CPAs, enrolled agents, and tax attorneys.  We are located in Los Angeles; California and our primary area of expertise is IRS Tax Audit Representation.  However, our certified professionals cooperate and work with all IRS offices across the country.  Please contact us for more information.  https://irsauditgroup.com/contact/

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As the Tax Season 2024 is here, so are potential scams and fraudulent activities, prompting the IRS to issue warnings about common schemes. Here’s a compilation of important facts about various scams and advice by the IRS for Tax Season 2024.

False Fuel Tax Credit Claims

Taxpayers should be highly cautious of false Fuel Tax Credit claims, as warned by the IRS in its Dirty Dozen list for Tax Season 2024. Scammers often target individuals with promises of significant refunds through illegitimate claims for this credit, exploiting unawareness of its eligibility criteria. Vigilance, verification of information, and reliance on official IRS resources are crucial to avoid falling prey to these scams, emphasizing the importance of a thorough review process to ensure accurate and lawful tax filings.

Untrustworthy Tax Preparers (Ghost Preparers)

Taxpayers must remain vigilant against untrustworthy tax preparers, a prominent warning from the IRS’s Dirty Dozen list for Tax Season 2024. The term “ghost preparers” refers to individuals who may not sign tax returns they prepare, leaving taxpayers vulnerable to potential fraud and identity theft. These preparers often promise inflated refunds or charge exorbitant fees, exploiting unsuspecting individuals. Taxpayers must verify the credentials of their tax preparers, ensuring they are qualified, registered, and reputable. Relying on certified tax professionals and maintaining awareness of red flags can help protect against financial losses and legal complications during tax filing.

Fake Charities Exploiting Taxpayer Generosity

The IRS’s inclusion of fake charities in its “Dirty Dozen” list underscores the risks taxpayers face during tax season. These scams prey on people’s goodwill, using deceptive tactics to extract money without benefiting genuine charitable causes. IRS advises to beware of scammers who might use email communications or manipulate caller IDs to deceive people into donating funds to charities. These fraudsters often target groups such as seniors and those with limited English proficiency. Taxpayers must remain vigilant, verifying the legitimacy of charities before donating.

Offer in Compromise Mills

Another scam for Tax Season 2024 is pricey offer-in-compromise (OIC) “mills” that falsely claim their services are necessary to resolve IRS debt. The OIC program offered by the IRS is a beneficial avenue for taxpayers struggling to settle their federal tax debts, and reputable companies are providing legitimate assistance. However, the IRS advises individuals to invest a few moments in reviewing the resources provided on IRS.gov to ascertain if they qualify for the OIC program. This step helps individuals avoid costly promoters and ensures they understand the eligibility criteria thoroughly before seeking assistance.

Helpful Scammers Offering to Set Up Online Accounts

The IRS warns against scammers offering to set up online accounts. The IRS Online Account serves as a convenient tool for individuals to access their tax information. However, it has also become a target for identity thieves who exploit it to file fraudulent tax returns and claim hefty refunds in the victim’s name. Taxpayers should avoid sharing sensitive personal data over the phone, email, or social media to protect themselves and avoid getting caught up in these scams.

Aggressive Promoters Making Questionable ERC Claims

The IRS’s “Dirty Dozen” for tax season 2024 list includes a warning about aggressive promoters who entice taxpayers into making questionable claims for the Employee Retention Credit (ERC). This scam targets small businesses, urging them to engage in activities that could lead to tax non-compliance and penalties. Taxpayers are advised to exercise caution and seek reliable tax professionals’ advice to avoid falling victim to these deceptive practices. As the IRS is continuing tax audits and investigations for false claims of ERC, it emphasizes the availability of a special withdrawal program for businesses to rectify erroneous claims and ensure compliance with tax regulations.

Phishing And Smishing Scams

The IRS has launched its annual “Dirty Dozen” campaign with a strong warning about phishing and smishing scams. These deceptive tactics involve fraudulent emails (phishing) and text messages (smishing) that appear to be from legitimate sources, such as the IRS or financial institutions, but are designed to steal sensitive information like Social Security numbers or financial details. The IRS doesn’t initiate contact with taxpayers by email, text messages, or social media channels to request personal or financial information.

High-Income Filers: Targeted by Illegal Tax Schemes

The improper art donation deductions, charitable remainder annuity trusts (CRATs), and monetized installment sales are all illegal tax schemes targeting high-income filers. These schemes exploit loopholes or misinterpretations of tax laws, posing significant risks of tax evasion and penalties for those involved.

Beware of Spear phishing and “New Client” Scams

In the ongoing spear phishing attacks targeting tax professionals and businesses, these attacks typically involve fraudulent emails or messages designed to deceive recipients into disclosing confidential information, such as login credentials or financial data, under the guise of legitimate communication. Moreover, the surge in “new client” scams adds another layer of vulnerability, as fraudsters exploit the trust between tax professionals and their clients to gain access to sensitive information or perpetrate financial fraud. Tax professionals and businesses must exercise caution, implement robust cybersecurity measures, and educate employees about the signs of phishing attempts to mitigate the risk of falling victim to these malicious schemes.

Social Media Tax Advice: Risks and Pitfalls for Taxpayers

Taxpayers should be wary of relying on social media platforms like TikTok for tax advice, as these channels can be rife with inaccurate or misleading information. Scammers frequently exploit these platforms to propagate fraudulent schemes, encompassing both common tax documents like Form W-2 and more obscure ones like Form 8944. One prevalent scam circulating on social media advises individuals to manipulate income details on Form W-2 and file electronically, falsely promising substantial refunds. Similarly, misinformation surrounding Form 8944 misleads taxpayers into believing they can use it to secure refunds from the IRS, irrespective of their actual tax liabilities. However, Form 8944 is exclusively designated for tax professionals seeking waivers to file paper returns and is inapplicable to individual taxpayers. Falling prey to such scams can lead to severe penalties and legal consequences for filing fraudulent tax returns. Therefore, taxpayers must exercise vigilance, seek guidance from reputable sources, and avoid succumbing to scams on social media platforms to safeguard their financial interests.

Bogus Tax Avoidance Strategies and International Schemes

As the annual taxpayer awareness campaign ends, it’s crucial to highlight the threat posed by bogus tax avoidance strategies and schemes with international elements. These schemes often promise unrealistic or exaggerated tax savings through intricate structures or offshore accounts, luring taxpayers into non-compliance with tax laws and risking severe penalties or legal consequences. With globalization and advancements in technology, scammers exploit cross-border transactions and offshore entities to conceal income, evade taxes, and exploit loopholes in tax regulations. Taxpayers must remain vigilant, seek advice from tax professionals, and ensure compliance with tax laws to avoid falling victim to these deceptive schemes and safeguard their financial well-being.

IRS is highlighting various scams through its “Dirty Dozen” campaign for Tax Season 2024. This list will be updated to include all dozen scams as and when the IRS publishes about these scams. By remaining vigilant, reporting suspicious activities, and engaging certified tax professionals, taxpayers can protect themselves from financial losses, identity theft, and legal complications during tax filing season.

IRS AUDIT GROUP

IRS Audit Group consists of tax professionals, CPAs, enrolled agents, and tax attorneys.  We are located in Los Angeles; California and our primary area of expertise is IRS Tax Audit Representation.  However, our certified professionals cooperate and work with all IRS offices across the country.  Please contact us for more information.  https://irsauditgroup.com/contact/

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In this tax season 2024, the IRS sets deadlines for taxpayers to pay their taxes, including estimated tax payments not subject to withholding. The first quarter estimated tax payment deadline for 2024 is April 15. This blog delves into the details of this deadline, its significance, who it affects, why it exists, penalties for non-compliance, exemptions, tools for estimation, required forms, and IRS support.

When is the Deadline?

April 15 is the deadline for tax season 2024 to submit first quarter estimated tax payments to the IRS. This deadline is crucial for individuals and businesses with income sources that do not have taxes withheld, such as self-employment income, interest, dividends, and rental income.

Who Needs to File?

This deadline primarily affects self-employed individuals, freelancers, independent contractors, sole proprietors, partners in partnerships, and shareholders in S corporations. It also includes individuals who receive income from sources where taxes are not automatically withheld.

Reason for Quarterly Payments

Taxpayers are required to make estimated tax payments quarterly because of the pay-as-you-go system in the U.S. tax system. This system ensures that taxes on income earned during the year are paid throughout the year, rather than waiting until the following year. This helps in avoiding large tax bills at the end of the year and ensures a steady flow of revenue for the government.

Types of Income

When estimating quarterly tax payments, taxpayers need to ensure they include all forms of earned income, encompassing regular employment income, part-time work or side jobs, earnings from selling goods or services (typically reported on Form 1099-K), and various other sources like interest, dividends, capital gains, alimony, and rental income. It’s crucial to incorporate all income, including those not subject to withholding, to accurately calculate and fulfill tax obligations, thereby avoiding penalties or underpayment issues.

Penalties for Late Filing

Failure to file estimated tax payments by April 15 can result in penalties. The penalty amount varies depending on factors like the amount of tax owed and the duration of the delay. Taxpayers can use IRS penalty calculators or consult IRS publications to understand the potential penalties they might face.

Estimation and Required Documentation

To report and pay estimated taxes, individuals and businesses to file Form 1040-ES. This form includes worksheets for calculating the estimated tax amount and payment vouchers for submitting payments to the IRS. Additionally, there are online calculators and tax preparation software that can assist in accurately estimating tax liabilities based on income and deductions. It is also advisable to engage certified tax professionals to avoid any tax disputes, penalties, or IRS audits in the future.

Exemptions and Due Date Extensions

Certain groups of taxpayers, including farmers and fishers, recent retirees, individuals with disabilities, those receiving irregular income and victims of disasters are eligible for exceptions to penalties and special regulations.

Following recent disasters, eligible taxpayers in Tennessee, Connecticut, West Virginia, Michigan, California, and Washington have an extended deadline for tax season 2024 for estimated tax payments until June 17, 2024. Similarly, eligible taxpayers in Alaska, Maine and Rhode Island have until July 15, 2024, and eligible taxpayers in Hawaii have until Aug. 7, 2024. For more information, visit Tax Relief in disaster situations.

In addition, taxpayers who live or have a business in Israel, Gaza, or the West Bank, and certain other taxpayers affected by the terrorist attacks in the State of Israel, have until Oct. 7, 2024, to make estimated tax payments.

IRS Support and Assistance

The IRS provides various resources and support for taxpayers regarding estimated tax payments. This includes to include the Interactive Tax Assistant, tax topics and frequently asked questions, and assistance through phone or in-person support at IRS offices or tax assistance centers.

IRS AUDIT GROUP

IRS Audit Group consists of tax professionals, CPAs, enrolled agents, and tax attorneys.  We are located in Los Angeles; California and our primary area of expertise is IRS Tax Audit Representation.  However, our certified professionals cooperate and work with all IRS offices across the country.  Please contact us for more information.  https://irsauditgroup.com/contact/

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As the tax season 2024 approaches, the Internal Revenue Service (IRS) is actively reminding taxpayers across the country about the valuable opportunity to claim the COVID-era Recovery Rebate Credit for the tax years 2020 and 2021. This specific credit is designed as a refundable credit, targeting individuals who did not receive one or more of the Economic Impact Payments (EIPs) that were distributed in 2020 and 2021 as part of the government’s COVID-19 relief. For those who qualify and have not yet filed a tax return for those years, it’s important to act swiftly, as time is running out to claim the money that is rightfully yours.

When is the Deadline?

The Deadline for the 2020 Recovery Rebate Credit is Tax Season 2024. To claim the 2020 Recovery Rebate Credit, file a tax return by May 17, 2024. For the 2021 Recovery Rebate Credit, file a tax return by April 15, 2025. Filing by these deadlines is essential, as it ensures that you receive the financial assistance you qualify for, helping to alleviate any financial burdens you may be facing.

How Much Taxpayer Can Claim?

The credit’s amount varies based on individual circumstances but could reach up to $1,200 for the first EIP and up to $1,400 for the third EIP, with additional amounts available for qualifying dependents. This credit aims to provide much-needed financial assistance to those who missed out on the direct payments distributed in 2020 and 2021. It serves as a crucial resource for individuals and families facing financial hardships, offering relief during these challenging times.

Top of Form

Who is Eligible?

To qualify for the Recovery Rebate Credit, certain criteria need to be met. You must be either a U.S. citizen or a resident alien, and you cannot be claimed as a dependent by another taxpayer. Additionally, you must have a Social Security number issued before the due date of the tax return. It’s important to note that the 2020 Recovery Rebate Credit can also be claimed for someone who passed away in 2020 or later. These eligibility requirements ensure that the credit is provided to those who truly need it, offering financial support to individuals and families facing economic challenges due to the pandemic.

How to Claim?

To claim the Recovery Rebate Credit, it is necessary to file a tax return for the respective year, regardless of whether your income was minimal or non-existent. This filing requirement ensures that you can receive the credit you are entitled to, even if you did not receive any income during the year. For the 2020 tax year, the deadline to file your tax return and claim the credit is May 17, 2024. Similarly, for the 2021 tax year, the deadline is April 15, 2025. It is important to meet these deadlines to ensure that you receive any refund owed to you through the Recovery Rebate Credit.

What Assistance Does the IRS Provide?

The IRS provides valuable assistance to taxpayers through the Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs, offering free tax preparation services. These programs are specifically designed to aid eligible taxpayers in filing their tax returns accurately and claiming any credits or refunds they may be entitled to receive. The VITA Locator Tool and the hotline at 800-906-9887 can be utilized to easily locate the nearest VITA site, ensuring that individuals have access to the assistance they need. This support is invaluable, especially for those with limited income or resources, helping them navigate the tax filing process effectively.

IRS Audit Group

IRS Audit Group consists of tax professionals, CPAs, enrolled agents, and tax attorneys.  We are located in Los Angeles; California and our primary area of expertise is IRS Tax Audit Representation.  However, our certified professionals cooperate and work with all IRS offices across the country.  Please contact us for more information.  https://irsauditgroup.com/contact/

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The Employee Retention Credit (ERC), or the Employee Retention Tax Credit (ERTC), is a tax credit scheme available to eligible businesses and tax-exempt organizations. Its purpose was to encourage businesses to retain their employees amidst the challenges posed by the COVID-19 pandemic.

Who is eligible?

Employers who qualify can access the credit if they have paid qualified wages to their employees between March 12, 2020, and January 1, 2022. The eligibility criteria and the amount of credit that can be claimed depend on the timing of the business impacts. It’s important to note that the Employee Retention Credit (ERC) is specifically designed for businesses and is not available to individuals.

How much is the credit?

The ERC for Tax Season 2024 is determined by taking a percentage of the qualified wages disbursed to employees. To calculate the credit, the maximum limit for qualified wages per employee is set at $10,000 for each calendar quarter. This means that any wages exceeding this amount will not be considered when determining the credit.

New Changes in ERC Claims for Tax Season 2024

• Businesses that initially received Paycheck Protection Program (PPP) loans were not eligible for the Employee Retention Credit (ERC). However, new legislation now permits these businesses to retroactively claim the ERC for wages not covered by forgiven PPP loan funds.
• Originally, the ERC was limited to businesses facing operational suspensions or revenue declines. Recent changes now allow businesses affected by COVID-19-related closures or reduced hours to qualify for the credit.
• The credit limit for each employee has been raised to a higher amount.

IRS Issues 7 Warnings For Incorrect Claims

Despite its initial intent to offer essential economic support to employers facing financial challenges due to COVID-19, the IRS found itself overwhelmed with applications. A considerable number of these claims were either from ineligible applicants or sought an unreasonably high amount of Employee Retention Credit. The surge in misleading promotions by third-party entities further contributed to the erroneous claims. In response to this influx of questionable claims, the IRS is taking decisive action. This includes tax audits of ERC claims, imposing a temporary halt on the processing of new claims, and initiating criminal investigations into both promoters and businesses associated with improper claims.

To find whether the business is eligible or not, The IRS has an interactive ERC Eligibility Checklist that tax professionals and taxpayers can use to check potential eligibility for ERC.

If already claimed or applied, the IRS issues the below seven key warning signs that help businesses identify if their ERC claim may be ineligible.

1. Too many quarters are being claimed.
2. Government orders that don’t qualify.
3. Too many employees and wrong calculations
4. Business citing supply chain issues.
5. Businesses claiming ERC for too much of a tax period.
6. Businesses didn’t pay wages or didn’t exist during the eligibility period.
7. The promoter says there’s nothing to lose.

Voluntary Disclosure Program in Tax Season 2024

To resolve and avoid penalty or interest, the IRS advises businesses to assess their eligibility for the ERC claim. Some businesses, unintentionally misled by promoters, may have filed incorrect claims for the ERC. To rectify this, businesses that received the credit but do not meet the ERC rules should consider participating in the ERC Voluntary Disclosure Program before the March 22 deadline in Tax season 2024. This program enables taxpayers to repay only 80% of the mistakenly received ERC, avoiding certain penalties and interest, while also providing protection against future tax audits of the relevant employment returns.

Additionally, for employers who haven’t yet received the ERC refund from the IRS but now believe they are ineligible (or partially ineligible), the ERC Withdrawal Program offers an avenue to avoid potential penalties and interest. However, this option is only available if the employer’s claim has not been selected for an IRS Audit. Importantly, the ERC withdrawal program remains effective even after March 22, 2024.

If an employer determines their claim was ineligible or partially ineligible, it is better to consult with a tax professional about taking advantage of the ERC Voluntary Disclosure Program or the ERC Withdrawal Program as soon as possible.

IRS Audit Group

IRS Audit Group consists of tax professionals, CPAs, enrolled agents, and tax attorneys.  We are located in Los Angeles; California and our primary area of expertise is IRS Tax Audit Representation.  However, our certified professionals cooperate and work with all IRS offices across the country.  Please contact us for more information.  https://irsauditgroup.com/contact/

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In tax season 2024, the Internal Revenue Service (IRS) began to conduct thorough examinations on the utilization of corporate jets for personal reasons.  Chief Executive Officers (CEOs) and other top-level executives will fall under such IRS scrutiny.  This practice is a component of the IRS’s initiative to deter the misuse of corporate resources for individual benefits, as this could lead to inaccurate income reporting and tax fraud.

What is this Activity About?

IRS is actively targeting CEOs who utilize office jets for personal reasons as part of their ongoing endeavors to guarantee accurate reporting and taxation of all income, including additional benefits such as private jet usage. In instances where executives choose to employ corporate jets for personal travel, the value of this privilege is regarded as taxable income, ensuring fairness and compliance with tax regulations.

Who Should Be Aware of This?

It is crucial for CEOs, CFOs, and other high-ranking executives who possess the privilege of utilizing corporate jets to have a comprehensive understanding of the regulations and guidelines governing their usage. Equally important, accounting and tax professionals who bear the responsibility of documenting and reporting expenses associated with corporate jets should also possess a thorough knowledge of these rules. The rules and regulations pertaining to the utilization of corporate jets are of utmost importance for CEOs, CFOs, and other top executives who have the privilege of accessing these aircraft. It is imperative that they familiarize themselves with these guidelines to ensure compliance.

How to Keep Documentation on Private and Business Trips

It is crucial to have accurate documentation in order to differentiate between private and business trips. This involves keeping a comprehensive record of every flight, which should include the specific date, destination, purpose, and individuals who were on board. Furthermore, it is important to document and allocate any expenses associated with the flight, such as fuel, maintenance, and crew costs, in order to distinguish between business and personal use.

Is There a Penalty if the IRS Finds Misuse?

Should the IRS find that a CEO or any other executives have utilized a corporate jet for personal reasons inappropriately, there are potential penalties and tax implications that may follow. The executives would be required to include the value of the personal use of the jet as taxable income on their tax return. Failure to disclose this income could lead to penalties and interest accrual on the outstanding tax amount. In such cases, it is crucial for executives to accurately report any personal use of corporate assets, such as a jet, to avoid any legal repercussions.

The penalties and interest that may be imposed for failing to report personal use of a corporate jet can vary depending on the specific circumstances of the case. It is advisable for executives to seek tax professionals’ advice and guidance to ensure that they are fulfilling their tax obligations correctly and avoiding any potential legal issues. By being proactive and diligent in their tax reporting, executives can mitigate the risk of facing penalties and interest charges from the IRS.

Utilizing a private jet for personal use may result in notable tax consequences for chief executive officers and other top-level executives. Maintaining precise documentation and adhering to tax regulations are essential in order to steer clear of fines and investigations by the IRS. Consulting with a tax expert can provide valuable assistance in guaranteeing adherence to regulations and reducing the risk of tax obligations.

IRS Audit Group

IRS Audit Group consists of tax professionals, CPAs, enrolled agents, and tax attorneys.  We are located in Los Angeles; California and our primary area of expertise is IRS Tax Audit Representation.  However, our certified professionals cooperate and work with all IRS offices across the country.  Please contact us for more information.  https://irsauditgroup.com/contact/

Toll Free: (888) 300-6670

Emergency Number: (310) 498-7508

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IRS and Regulatory bodies update tax laws and regulations yearly. It is crucial to stay updated about the modifications that could affect your tax return and eligibility for tax credits as you gear up for the upcoming tax season 2024. Below are a few significant updates all taxpayers need to know.

Change in Standard Deductions

The standard deduction has been increased for the tax season 2024, which benefits all taxpayers. The revised deduction levels are as follows:

• $13,850 for single filers or married individuals filing separately,
• $20,800 for heads of households, and
• $27,700 for married couples filing jointly or qualified surviving spouses.

These changes are intended to give taxpayers improved tax savings and lower taxable income, thereby alleviating their financial burden.

Increased Additional Childcare Credit

The amount of the Additional Child Tax Credit (ACTC) has been raised. Now, the maximum additional child tax credit amount has been increased to $1,600 for every qualifying child.

The modifications made to the Child Tax Credit (CTC) under the American Rescue Plan Act of 2021 have now lapsed, signaling the end of those changes. Despite this, the IRS is actively keeping an eye on any new legislation related to the CTC that may be passed by Congress. The IRS is advising taxpayers who qualify for the Child Tax Credit not to delay filing their 2023 tax returns during this tax season 2024. If Congress alters the guidelines for the CTC, the IRS will automatically adjust the credits for individuals who have already submitted their tax returns, eliminating the need for any further action on the part of eligible taxpayers. Under the current law, the following conditions are applicable for the tax year 2023:

• The expanded tax credit for qualifying children under the age of 6 and the age of 18 is no longer in effect. For tax season 2024, the base amount of the CTC is set at $2,000 per qualifying child.
• The CTC begins to phase out for taxpayers with an Adjusted Gross Income (AGI) above $200,000 ($400,000 for joint filers).
• The refundable portion of the CTC remains limited, similar to the rules in 2020, with the ACTC maximum amount per qualifying child now increased to $1,500.

Changes to the Earned Income Tax Credit (EITC)

The provisions for taxpayers who do not have a qualifying child, as established by the American Rescue Plan Act of 2021, will not be in effect for the tax year 2023. To be eligible for the EITC without a qualifying child in 2023, taxpayers need to meet the age requirement of being at least 25 years old but under 65 years old by the end of 2023. For married taxpayers who are filing a joint return, at least one spouse must meet the age criteria of being at least 25 years old but under 65 years old by the end of 2023 to claim the EITC without a qualifying child. These age restrictions are put in place to ensure that taxpayers who are seeking this credit without a qualifying child meet certain age qualifications as outlined in the legislation. Taxpayers can find out if they are eligible to claim EITC through this official IRS link.

New Clean Vehicle Credit

The Clean Vehicle Credit, formerly known as the credit for new qualified plug-in electric drive motor vehicles, has changed in the tax season 2024. These changes include modifications to the maximum credit amount and the requirements for claiming the credit. Taxpayers may qualify for a credit of up to $7,500 for vehicles bought in the tax year 2023. For vehicles purchased before 2023, tax credits are calculated differently. Taxpayers can check for eligibility and corresponding tax credits here. To report the credit, taxpayers should use Form 8936, Qualified Plug-In Electric Drive Motor Vehicle Credit, and Form 1040, Schedule 3.

Health Savings Account (HSA) Limits

The contribution limits for HSAs have been raised for tax season 2024, benefiting those with high-deductible health plans. Individuals can contribute up to $4,150 in 2024, up $300 from 2023. The family contribution amount for 2024 rose to $8,300, a $550 increase compared with 2023. This increase allows individuals to save for medical expenses with tax advantages.

IRS Audit Group

IRS Audit Group consists of tax professionals, CPAs, enrolled agents, and tax attorneys.  We are located in Los Angeles; California and our primary area of expertise is IRS Tax Audit Representation.  However, our certified professionals cooperate and work with all IRS offices across the country.  Please contact us for more information.  https://irsauditgroup.com/contact/

Toll Free: (888) 300-6670

Emergency Number: (310) 498-7508

[email protected]

Every year, based on the Federal Emergency Management Agency’s (FEMA) federally declared disaster areas, the IRS will implement administrative disaster tax relief measures. For the Tax Season 2024, the IRS made special tax law provisions to provide affected individuals and businesses with additional time to file returns, pay taxes, and complete other time-sensitive tasks. This assistance is specifically tailored for taxpayers who are affected by a disaster declared at the federal level, guaranteeing that they receive essential assistance during difficult circumstances. It is important to note that certain conditions may need to be met in order to qualify for the tax relief and provisions offered by the IRS. By following the established procedures and guidelines, disaster victims can benefit from the assistance provided by the government to alleviate the financial burden caused by the disaster.

The relief for the tax season 2024 extends the deadlines for filing and paying taxes that fell between Sept. 10, 2023, and June 17, 2024. This means that individuals and businesses affected in the disaster regions will now have until June 17, 2024, to submit their returns and settle any outstanding taxes from this period.

Who Qualifies for the Extension in Tax Season 2024?

In order to be eligible for an extension on filing your taxes, it is required that you are a resident or business situated in a region identified by the Federal Emergency Management Agency (FEMA) as a federally declared disaster area. This encompasses not only the main area impacted by the disaster but also the surrounding areas that have been affected.

Furthermore, the IRS is prepared to collaborate with any taxpayer residing outside the disaster zone but whose essential records are required to comply with a deadline falling within the extension period are situated in the impacted region. Taxpayers eligible for assistance and residing beyond the disaster zone must reach out to the IRS at 866-562-5227 for further guidance and support. This provision also encompasses individuals who participated in relief efforts and are associated with a reputable governmental or charitable institution.

What is included in the Extension?

Extension generally encompasses a range of tax deadlines, which can include filing income tax returns, making quarterly estimated income tax payments, and submitting different business tax returns. Additionally, extension can be utilized for other tax-related tasks, like requesting an extension for an individual tax return or making contributions to an IRA. The June 17, 2024, deadline will now apply to the following activities.

• Individual income tax returns and payments normally due on April 15, 2024.
• 2023 contributions to IRAs and health savings accounts for eligible taxpayers.
• 2023 quarterly estimated income tax payments normally due on Sept. 15, 2023, and Jan. 16, 2024.
• Quarterly payroll and excise tax returns normally due on Oct. 31, 2023, and Jan. 31 and April 30, 2024.
• Calendar-year partnership and S corporation returns normally due on March 15, 2024.
• Calendar-year corporation and fiduciary returns and payments normally due on April 15, 2024.
• Calendar-year tax-exempt organization returns normally due on May 15, 2024.

How to Claim the Extension?

Taxpayers residing in a federally declared disaster area who qualify for the extension do not have to take any action to receive it. The IRS will recognize individuals located in the designated disaster zone and grant them an extension on their tax deadlines without requiring any additional steps. In the event that you receive a penalty notification from the IRS due to late filing or payment of taxes, you have the option to contact the phone number provided on the notice to request a waiver of the penalty.

The tax relief measures have been implemented as a component of a well-coordinated federal initiative aimed at addressing the extensive harm inflicted by these calamities. These measures have been devised after careful evaluation of the local damage assessments conducted by FEMA, ensuring that the relief efforts are targeted toward the areas most affected by the disasters.

IRS Audit Group

IRS Audit Group consists of tax professionals, CPAs, enrolled agents, and tax attorneys.  We are located in Los Angeles; California and our primary area of expertise is IRS Tax Audit Representation.  However, our certified professionals cooperate and work with all IRS offices across the country.  Please contact us for more information.  https://irsauditgroup.com/contact/

Toll Free: (888) 300-6670

Emergency Number: (310) 498-7508

[email protected]

The Employer-Provided Childcare Credit is a tax credit that is specifically designed for employers who offer childcare assistance to their employees.  This assistance can be provided in different ways, including the provision of onsite childcare facilities, financial support for childcare expenses, or the distribution of vouchers for childcare services.  The main purpose of this tax credit is to assist employers in covering the expenses associated with providing these valuable benefits while promoting their commitment to supporting working parents in their workforce.  By providing childcare services to employees, businesses can take advantage of this credit and potentially reduce their tax liability.  This credit aims to support employers in their efforts to offer a family-friendly work environment and promote work-life balance for their employees.

What is the Credit?

Taxpayers are encouraged to offer childcare services to their employees through the employer-provided childcare credit.  For the tax season 2024, the maximum limit of $150,000 per year is allowed.  This credit is calculated as 25% of the qualified childcare facility expenditures, along with an additional 10% of the qualified childcare resource and referral expenditures that are paid or incurred during the tax year.  By providing this credit, the government aims to incentivize employers to support their employees with childcare options.

Eligible Expenditures

In order to qualify for the credit, an employer must have made payments or accrued expenses for childcare that meet the criteria during the tax year 2023 which is basically filed on Tax Season 2024.  These expenses should be specifically intended to provide childcare services to the employees.  Eligible expenditure includes the below.

• The expenses related to obtaining, building, renovating, or extending a property that is utilized as a qualified childcare facility by the taxpayer.
• The taxpayer’s qualified childcare facility costs encompass operational expenses, such as payments made to support childcare workers through training, scholarship programs, and offering higher compensation to employees with advanced childcare training.
• Qualified resource and referral expenses consist of payments made or expenses incurred under a contract with a qualified childcare facility to provide childcare services to the taxpayer’s employees.

How To Claim the Employer-Provided Childcare Credit

1. Calculate the Credit: Calculate the overall amount of eligible childcare expenses that were accrued throughout the tax year 2023.  These expenses might include running childcare facilities on-site, supporting childcare costs, or issuing vouchers for childcare services.
2. Complete Form 8882: While filing for the tax season 2024, fill in the required fields on Form 8882, specifically designed for claiming the “Credit for Employer-Provided Childcare Facilities and Services.” This involves providing accurate information on the total childcare expenses that qualify and the number of employees who have benefited from the childcare assistance.
3. Attach Form 8882 to Tax Return: Ensure that you include Form 8882 along with your business tax return, such as Form 1120 for corporations, Form 1065 for partnerships, or Form 1040 for sole proprietors.
4. Include the Credit Amount on Tax Return: On your tax return, make sure to input the credit amount from Form 8882 on the designated line.  This credit will effectively lower the liability for the tax season 2024.
5. Maintain Records: It is important to maintain precise records of eligible childcare expenses, along with any relevant documents like invoices, receipts, and payroll records.  These records might be necessary in the event of an audit.

Consult with a Tax Professional:  To ensure that you are correctly claiming and maximizing the benefits of the Employer-Provided Childcare Credit, it is recommended to seek guidance from a tax professional due to the intricate nature of tax laws related to this credit.

IRS Audit Group

IRS Audit Group consists of tax professionals, CPAs, enrolled agents, and tax attorneys.  We are located in Los Angeles; California and our primary area of expertise is IRS Tax Audit Representation.  However, our certified professionals cooperate and work with all IRS offices across the country.  Please get in touch with us for more information.  https://irsauditgroup.com/contact/

Toll Free: (888) 300-6670

Emergency Number: (310) 498-7508

[email protected]