Michael T Burgett CPA

Taxpayer Bill of Rights - Did You Know?

As a taxpayer, you have a set of ten fundamental rights that the IRS is obligated to protect:

1. The Right to be Informed.
2. The Right to Quality Service.
3. The Right to Pay No More Than the Correct Amount of Tax.
4. The Right to Challenge the IRS's Position and Be Heard.
5. The Right to Appeal an IRS Decision in an Independent Forum.
6. The Right to Finality.
7. The Right to Privacy.
8. The Right to Confidentiality.
9. The Right to Retain Representation.
10. The Right to a Fair and Just Tax System.

The Taxpayer Bill of Rights ensures that the IRS must fairly review any objections a taxpayer raises to an IRS decision. Before objecting to an IRS letter, taxpayers should remember that tax refunds may also be adjusted for a variety of non-tax reasons, such as past-due child support. If you feel strongly that an IRS adjustment to your tax return is incorrect or unfair, a tax professional can review your return with you to determine whether you may have a basis for appealing the decision.

More information can be found in IRS Publication 1: Your Rights as a Taxpayer, available here: https://www.irs.gov/pub/irs-pdf/p1.pdf.

Credits and Deductions Changes This Filing Season – Did You Know?

As the April 15th filing deadline approaches, the IRS recently reminded taxpayers of several key tax law changes that took effect in 2023. Taxpayers should review these changes to avoid making errors on their returns.

Standard deduction amounts increased significantly from 2022 to 2023, up to $13,850 for single and married filing separately status, $20,800 for heads of household, and $27,700 for joint filers and qualifying surviving spouses. The maximum Additional Child Tax Credit, which is the refundable part of the Child Tax Credit (CTC), also increased to $1,600 for 2023.

Congress is considering legislation that would retroactively enhance the CTC itself. However, there is no need to wait for the result of those discussions to file your return. If a law change entitles you to a larger 2023 CTC than you have claimed, the IRS will automatically adjust your return, and send you a refund for the added credit amount.

A tax professional can help you determine how the 2023 credit and deduction rules affect your taxes, and file your return electronically to get your refund as rapidly as possible.

Non-deductible Wellness Expenses – Did You Know?

The IRS recently issued a reminder that personal expenses for general health and wellness usually do not qualify as medical expenses for tax purposes. These costs typically cannot be claimed as itemized deductions, and are not eligible for reimbursement through a health flexible spending arrangement (FSA), health savings account (HSA) or similar tax-advantaged account.

Examples of non-deductible, non-reimbursable health and wellness purchases include healthy foods for weight or blood sugar management. Dishonest companies aggressively market food and wellness products, claiming that these items become eligible for FSA/HSA reimbursement when the seller provides a doctor's note to the buyer. In reality, a doctor's note generally does not change an ineligible expense into an eligible one.

Requests for FSA reimbursement based on these bogus marketing claims typically get denied, and may jeopardize the tax advantages of FSAs and similar plans. If you are unsure whether a particular health expense qualifies for reimbursement, check with your workplace benefits plan administrator before making the purchase.

Common Tax Filing Errors – Did You Know? (2/2)

Every year, many taxpayers may make mistakes on their returns that cause IRS processing delays. Be sure to also check for the following:

Math Mistakes:
Even mathematicians sometimes make errors in simple addition and subtraction, and some of the calculations required for 1040 schedules can be complicated. Thoroughly double-check every bit of math on your return.

Incorrect Filing Status (Single, Married Filing Jointly, etc.):
The IRS will not accept a return showing a filing status that you are not eligible to claim. If you qualify for more than one status (for example, filing jointly or separately if you are married), the option you choose may significantly change your tax.

Incorrectly Figuring Credits or Deductions:
Once you determine that you qualify for a tax deduction or credit, you must carefully compute the amount that you can claim. Many taxpayers fail to take into account income limitations (including the calculations that must be made if your income falls within a “phase-out” range) and other restrictions. Others claim less than they could, or miss out on deductions and credits entirely by not filing the required forms and schedules.

Expired ITIN:
Those who file their IRS returns using individual tax identification numbers (ITINs) must keep in mind that ITINs periodically expire. Although a return filed with an expired ITIN may be accepted, the IRS generally will not allow any of the exemptions or tax credits claimed. The taxpayer must renew their ITIN in order to obtain the full refund that they are owed.

To avoid costly mistakes, a tax professional can help prepare or check your return and file it electronically. A tax pro might also help you claim deductions and credits that you would otherwise miss.

Common Tax Filing Errors – Did You Know? (1/2)

Every year, many taxpayers may make mistakes on their returns that cause IRS processing delays. Some common errors may also result in paying too much or too little tax. A miscalculation in either direction can be costly, since the IRS may assess penalties for underpayment.

The following mistakes may not change your tax, but they can cause processing problems. The IRS may even withhold your refund until the errors are corrected. Be sure to check for the following:

Missing or Inaccurate Social Security Number (SSN):
Even when filing electronically, many people mistype their SSNs and do not catch the error. If the SSN on your return does not match the number on your Social Security card, the IRS may not be able to process your return.

Misspelled Name:
Take your time when filling in every blank on your return, even your name. A misspelling or illegible writing can prevent proper processing.

Incorrect Bank Account or Routing Number:
Getting your return filed electronically and requesting direct deposit is the fastest way to get your refund, IF you provide accurate information. An error in your banking info can cause big headaches.

Missing Signature:
Remember that in most cases, couples filing jointly must both sign their return.

To avoid costly mistakes, a tax professional can help prepare or check your return and file it electronically. A tax pro might also help you claim deductions and credits that you would otherwise miss.

Discounted Repayment Program for Invalid ERC Claims

Between now and March 22, 2024, businesses that received employee retention credit (ERC) funds but did not qualify for the credit may apply to repay the credit at a discounted rate. While the ERC program gave vital assistance to many employers during the pandemic, it also became a target of scammers, who lured ineligible business owners into falsely claiming the credit.

Under this new voluntary disclosure program, taxpayers whose applications are approved by the IRS will only have to pay back 80% of the credit amount. The remaining 20% will be forgiven without penalty, since many businesses lost a percentage of their credit to ERC promoters. Note that if a business uses a third-party payroll management service, that third party must submit the application to participate in the discounted repayment program.

The IRS also reminds businesses to act quickly to withdraw pending questionable ERC claims. Taxpayers whose ERC applications have not yet been processed, or who received an ERC refund check but not cashed it, may be able to withdraw their applications (and return the check) without penalty. A business tax professional can help determine whether an ERC claim was valid, and if not, what steps can be taken to try to resolve the issue.