From an internet article posted by Erica York with the Tax Foundation Data from the Internal Revenue Service (IRS) shows us who pays federal income taxes. As illustrated below, higher-income taxpayers are responsible for paying a significantly higher share of the tax, and this trend has increased over the past three decades. For instance, in 2016, the top 1 percent of taxpayers paid about 37 percent of federal income taxes, more than twelve times the tax burden of the bottom half of taxpayers. The bottom 90 percent of taxpayers accounted for about 45 percent of the overall tax burden in 1986, compared to approximately 31 percent in 2016. Conversely, the top 10 percent of taxpayers have seen an increase in their tax burden over the same period, from 55 percent of total income taxes in 1986 to almost 70 percent in 2016. Average tax rates, which are income tax liabilities divided by income, are another way to illustrate the current tax system. Using IRS data, we see that the top 1 percent of taxpayers paid a rate much higher than the average taxpayer, while the remaining 99 percent of taxpayers paid below the average rate. The top 1 percent paid … Read More
Tax professionals, as well as taxpayers, who call the IRS will be asked to verify their identity. Being ready to verify identity before a call or visit can save taxpayers and tax professionals time by avoiding having to make multiple calls. Before calling, taxpayers and tax professionals should instead consider using IRS.gov to access resources like the IRS Service Guide to get faster answers to their tax questions. If a taxpayer decides to call, they should know that IRS phone assistors take great care to only discuss personal information with the taxpayer or someone the taxpayer authorizes to speak on their behalf. To make sure that taxpayers do not have to call back, the IRS reminds taxpayers to have the following information ready: Social Security numbers (SSN) and birth dates for those who were named on the tax return An Individual Taxpayer Identification Number (ITIN) letter if the taxpayer has one in lieu of a SSN Filing status – single, head of household, married filing joint or married filing separate The prior-year tax return. Telephone assistors may need to verify taxpayer identity with information from the return before answering certain questions A copy of the tax return in question Any … Read More
The Internal Revenue Service is reminding taxpayers who need their prior-year tax records to either complete their 2018 tax return or to validate their income can use Get Transcript Online or Get Transcript by Mail. Taxpayers often call or visit the IRS seeking their prior-year tax transcript, which is a record of their tax return. But the days around Presidents Day mark the busiest time of the year for the IRS. Taxpayers can avoid the rush by using online options that are faster and more convenient. It’s always a good idea to keep copies of previously-filed tax returns. That recommendation is more important this year because, for some taxpayers, certain data from the 2017 tax return – the adjusted gross income — will be required to validate their electronic signature on their 2018 tax return due April 15 for most filers. This is especially true for taxpayers who have switched tax software products this year. Generally, for returning users, the commercial tax software product will carry over the prior-year information and make for an easy, seamless validation process. However, taxpayers using a new tax software product for the first time may be required to enter the information manually. Here’s the … Read More
IRC section 6654 requires that the lesser of 90% of the tax shown on the return for the tax year, or 100% of the tax shown on the prior year tax return (110% if prior year AGI is above $150,000) must be paid through withholding and/or estimated tax payments throughout the year. A taxpayer is subject to the underpayment of estimated tax penalty for failing to meet these requirements. The penalty does not apply if the taxpayer owes less than $1,000 in tax when filing the tax return. After the enactment of the Tax Cuts and Jobs Act (TCJA), the IRS issued a new version of Form W-4 and updated the withholding calculator on www.irs.gov and encouraged taxpayers to check their withholding and revise their estimated tax payments to reflect changes under the new law. The IRS recognizes that taxpayers may have been unable to accurately calculate the amount of their required estimated income tax payments for the 2018 tax year. Accordingly, the IRS is providing additional relief by waiving the penalty if the taxpayer meets the conditions set forth in IRS Notice 2019-11. Notice 2019-11 relief: The penalty under IRC section 6654 does not apply for the estimated income tax … Read More
The 2019 tax filing season started on Monday, January 28. That’s when the Internal Revenue Service started accepting and, more importantly, processing tax returns. Mark your calendars for this year’s key filing dates: January 28, 2019: Filing season 2019 begins. If a taxpayer filed early, either using Free File, tax software on their own or with the help of a paid tax preparer, the returns have been on hold and should now be sent and enter the IRS processing system. January 31, 2019: This is the deadline for employers to mail their workers the Forms W-2 and for 1099 forms to be issued with details of contract payments, investment income and retirement plan distributions. Today also is important if a taxpayer did not make their last 2018 tax year estimated tax payment by January 15. If they file the full tax return for the year by January 31 and pay any tax due with the filing, they will avoid any penalty for late payment of the last installment. This is a little less pressing this year, since the IRS has announced it’s granting some underpayment leeway due to confusion created by the changes under the Tax Cuts and Jobs Act. February 15, 2019: For financial institutions, this … Read More
Revenue Procedure 2018-27 provides relief for taxpayers with family coverage under high deductible health plans (HDHPs) concerning the annual deductible contributions limit for their 2018 health savings accounts (HSAs) under Internal Revenue Code section 223. The maximum for family coverage was originally issued as $6,900 on May 4, 2017. On March 2, 2018, the limit was reduced to $ 6,850 for taxpayers with family coverage under HDHPs pursuant to Tax Reform legislation that changed the calculation for 2018 and future years. This guidance allows taxpayers to continue to treat the 2018 limit as $6,900. It also provides clarifications on how taxpayers who already received a distribution from an HSA of an excess contribution based on the $6,850 deduction limit may treat the distribution as a mistake and repay the HSA without any tax or reporting consequences. It also clarifies how to treat a distribution of an excess contribution (and earnings) based on the $6,850 deduction limit.