Tax Updates
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9.20.2022
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Today the President signed the Inflation Reduction Act of 2022 into law, which includes new tax provisions, extensions, and expansions of tax benefits related to energy efficiency and healthcare.
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Here’s what’s included in the Inflation Reduction Act and what it can mean for you and your taxes.
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Energy Efficient Tax Benefits
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A portion of the tax bill will go to consumer home energy rebate programs and include the Clean Vehicle Credit, the Alternative Fuel Vehicle Credit, and energy credits for your home.
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Clean Vehicle Credit
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Before the Inflation Reduction Act people were able to claim a credit of up to $7,500 for the purchase of a new electric vehicle. Under the new law people still may be eligible for a tax credit up to $7,500 for purchasing a new electric vehicle under the renamed Clean Vehicle Credit, and for the first time, starting January 1, 2023 people purchasing used electric vehicles may be eligible for a tax credit up to the lesser of $4,000 or 30% of the sales price, depending on their income. Since credits are a dollar for dollar reduction of taxes you owe, you can lower your taxes by up to $7,500 and save money on gas.
Some of the changes related to the Clean Vehicle Credit include:
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The manufacturer limitation is eliminated for cars sold after December 31, 2022
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Requires final assembly in North America (Effective immediately on August 17, 2022, unless you have entered into a binding contract to purchase a new electric vehicle before August 16, 2022)
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Manufacturer must be a qualified manufacturer
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Manufacturer’s suggested retail price for vans, sport utility vehicles, and pick ups is limited to $80,000 and other cars are limited to $50,000
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For new cars, modified adjusted gross income cannot exceed $300,000 married filing jointly, $225,000 head of household, $150,000 single
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For used cars, modified adjusted gross income cannot exceed $150,000 married filing jointly, $112,500 head of household, $75,000 single
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Most of the changes are effective with electric vehicles purchased starting January 1, 2023. The only change in the law that is effective immediately starting on August 17, 2022 is that new electric vehicles must receive final assembly in North America. People who entered a binding contract to purchase a new electric vehicle before the Inflation Reduction Act passed can follow the previous rules in place.
For business owners, the Inflation Reduction Act also adds a tax credit of up to $7,500 for new commercial clean vehicles placed in service after December 31, 2022.
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Credit for Electric Chargers Installed at Your Home or Business
Prior to the Inflation Reduction Act a tax credit was available for electric charging stations put in place by businesses and main homes prior to January 1, 2022. The new law extends the credit for charging stations put in service before January 1, 2033.
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Energy Credits Available for Your Home
Before the Inflation Reduction Act people were allowed a credit up to 10% of the amount paid for nonbusiness energy property like windows, doors, and skylights and the amount of residential energy property placed in service before January 1, 2022. Now you may take the credit at an increased amount up to 30% if you place the property in service before January 1, 2033.
The provision also eliminates the lifetime credit limit that was previously in place and limits the credit per taxpayer per year.
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Credits for Solar Energy
Before the Inflation Reduction Act, if you purchased residential energy efficient property like solar panels and solar water heaters for your home, the tax credit was 26% of your purchase. Under the new law the credit increased to 30% if you purchase the energy efficient equipment January 1, 2022 through December 31, 2032.
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Healthcare Tax Benefits
The tax law extends healthcare subsidies if health insurance is purchased in the Health Insurance Marketplace, further extending benefits that were expanded for 2021 and 2022 under the American Rescue Plan. Healthcare subsidies can help lower the health insurance premiums you pay and can also show up as a premium tax credit when you file your taxes if you don’t receive enough subsidy based on your income when you purchase health insurance in the Health Insurance Marketplace. The Premium Tax Credit is generally available to people with households between 100% and 400% of the Federal Poverty Level, but under the American Rescue Plan individuals with income above 400% of the Federal Poverty Level were eligible for the Premium Tax Credit for tax year 2021 and 2022 only. Under the Inflation Reduction Act these benefits will continue.
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1.19.2022
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Tax Season is officially here IRS has started early on accepting tax returns ahead of the Jan 24th start date. Lots of changes to the taxes that include no income filing, Child tax Credit and using prior year income to file current year returns. Here is a link to the End of Year updates
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7.16.2021 Update to Unemployment
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Most taxpayers need not take any action and there is no need to call the IRS. However, if, as a result of the excluded unemployment compensation, taxpayers are now eligible for deductions or credits not claimed on the original return, they should file a Form 1040-X, Amended U.S. Individual Income Tax Return.
Taxpayers should file an amended return if they:
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did not submit a Schedule 8812 with the original return to claim the Additional Child Tax Credit and are now eligible for the credit after the unemployment compensation exclusion;
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did not submit a Schedule EIC with the original return to claim the Earned Income Tax Credit (with qualifying dependents) and are now eligible for the credit after the unemployment compensation exclusion;
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are now eligible for any other credits and/or deductions not mentioned below. Make sure to include any required forms or schedules.
Taxpayers do not need to file an amended return if they:
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already filed a tax return and did not claim the unemployment exclusion; the IRS will determine the correct taxable amount of unemployment compensation and tax;
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have an adjustment, because of the exclusion, that will result in an increase in any non-refundable or refundable credits reported on the original return;
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did not claim the following credits on their tax return but are now eligible when the unemployment exclusion is applied: Recovery Rebate Credit, Earned Income Credit with no qualifying dependents or the Advance Premium Tax Credit. The IRS will calculate the credit and include it in any overpayment;
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filed a married filing joint return, live in a community property state, and entered a smaller exclusion amount than entitled on Schedule 1, line 8.
Taxpayers will generally receive letters from the IRS within 30 days of the adjustment, informing them of what kind of adjustment was made (such as refund, payment of IRS debt payment or payment offset for other authorized debts) and the amount of the adjustment.
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Update- Advanced Premium Tax Credit
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On April 9, 2021, the IRS released guidance on returns that were previously filed with an advanced premium tax credit repayment included on line 29 of Form 8962. Per IR-2021-84, "Taxpayers who have already filed their 2020 tax return and who have excess APTC for 2020 do not need to file an amended tax return or contact the IRS. The IRS will reduce the excess APTC repayment amount to zero with no further action needed by the taxpayer. The IRS will reimburse people who have already repaid any excess advance Premium Tax Credit on their 2020 tax return. Taxpayers who received a letter about a missing Form 8962 should disregard the letter if they have excess APTC for 2020. The IRS will process tax returns without Form 8962 for tax year 2020 by reducing the excess advance premium tax credit repayment amount to zero." Also see the IRS Factsheet for details.
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Update – Unemployment Exclusion
The Internal Revenue Service has announced that it will take steps to automatically refund money this spring and summer to people who filed their tax return reporting unemployment compensation before the recent changes made by the American Rescue Plan.
The IRS states:
“There is no need for taxpayers to file an amended return unless the calculations make the taxpayer newly eligible for additional federal credits and deductions not already included on the original tax return.”
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IRS to Handle Unemployment Returns, Don't Amend
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Returns filed with unemployment benefits prior to the $10,200 exclusion should not be amended. The IRS has indicated it will refigure taxes on these returns and adjust the taxpayer's account accordingly. The IRS will then send any refund amount directly to the taxpayer.
The IRS has not yet communicated a timeline for making adjustments and sending refunds.
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Look for an official news release in the coming days:
https://www.irs.gov/newsroom
1.22.2021 - Second Stimulus Update
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We continue to have regular discussions with IRS leadership about the re-processing status of stimulus payments that were initially sent to the wrong/closed accounts earlier in January. Our communication with the IRS on January 21 confirms that they still intend to re-issue payments at the end of January. Here are some additional notes:
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The IRS will re-issue payments to the millions of filers affected by this issue.
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Deposits should hit around the end of next week (Jan 29) and middle of the following week (Feb 3).
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If the IRS is able to determine that a taxpayer’s ultimate bank account (UBA) on file no longer exists (for example, the taxpayer closed their personal account), the IRS will send a check instead.
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Checks will be prepared for distribution next week; the timeframe for printing and mailing checks was not provided.
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Once the IRS has re-issued all payments, the Get My Payment (GMP) Tool will be updated with the last 4 digits of the correct account number. In addition, if the IRS intends to send a check, this will be reflected in the GMP Tool. We expect GMP to be updated around January 29.
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Important: If a re-issued deposit fails for any reason, the stimulus money should be claimed through the Recovery Rebate Credit when filing the 2020 tax return
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We have had a number of calls about the message on the IRS Payment tool stating the stimulus was mailed on Jan 6th. This is not correct, no one has received a mailed stimulus as of the time of this article.
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If we receive any additional information about the timing of these re-issued payments, we will pass it along.
PATH Act Update (unrelated to stimulus payments): Refunds on filed tax returns that fall under the PATH Act will be released starting February 16, with anticipated refund deposit dates no earlier than February 27.
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1.11.2021
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Second Stimulus Payment Update
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The IRS released another statement late in the evening on 1.10.2021. Click here to read. Key information from this IRS statement:
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The IRS will reissue payments for taxpayers who did not receive the second Economic Impact Payment in instances where the bank account identified has been closed.
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The payments will be sent later this month - taxpayers should receive at the end of January or first few days in February.
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This impacts taxpayers whose tax preparation providers followed initial IRS guidance and are now waiting for the IRS to re-process payments related to these accounts.
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Payments will be issued directly from the government later this month (software companies and their bank partners are not in possession of these funds).
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We, in collaboration with other affected preparation companies and banks, have done everything we can to impress upon the IRS the importance of this matter. As mentioned in the IRS statement, our bank partners followed IRS guidance regarding these payments. Nonetheless, some of your clients will now have to wait for the IRS to re-issue the payments.
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Affected taxpayers will receive their stimulus payment around the end of January/first of February, which means they'll receive it much sooner than if they had to wait to claim it on their tax return. Please watch your bank account and mailbox for a stimulus payment later this month.
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12.23.20
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Second COVID Relief Package Passed
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Stimulus checks could mail as early as next week
Both houses of Congress voted to pass the latest COVID relief legislation and all indications are that the president will sign it into law. We know that more guidance will be provided as this rolls out, but here are the highlights as we know them:
PPP and small business support: Business expenses paid for with the proceeds of PPP loans are tax deductible, consistent with Congressional intent in the CARES Act. In addition, the loan forgiveness process is simplified for borrowers with PPP loans of $150,000 or less. Unspent funds totaling $138 billion will be reinvested in the PPP program.
Economic impact payments (EIP): The bill includes a second round of EIPs for qualifying Americans.
The IRS will use the data it already has in its system to begin making payments at the end of December through the first two weeks of January. If the IRS has your direct deposit information, you will receive a payment that way. If it does not, you will receive your payment as a check or debit card in the mail. If you are eligible but don’t receive your check for any reason, you can claim the payment when you file your 2020 taxes in the spring of 2021.
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Under the CARES Act, joint returns of couples where only one member of the couple had an SSN were ineligible for a rebate. This latest round of relief changes that provision. These families will now be eligible to receive payments for the members of the family who have SSNs. This change is retroactive, meaning those who fall under this category who missed out on the first round of EIPs can claim that money when filing 2020 tax returns in the spring of 2021.
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The full credit amount is $600 per individual, $1,200 per couple and $600 for children. It is available for individuals with AGI at or below $75,000 ($112,500 for heads of household), and couples with AGI at or below $150,000. If you have children, you will receive an additional $600 per child.
For those above this income level, your tax rebate amount will be reduced by $5 for each $100 your AGI exceeds the above thresholds.
This means:
• An individual without children will not receive any rebate if their AGI exceeds $87,000.
• A couple without children will not receive any rebate if their AGI exceeds $174,000.
• A family of four will not receive any rebate if their AGI exceeds $198,000.
The IRS will use the same methodology for calculating payments as it did for the first round of economic impact payments.
Unemployment assistance: For those who are unemployed, the pandemic unemployment insurance program will be extended by 16 weeks. Supplemental federal unemployment benefits of $300 per week will continue into April 2021 instead of ending in December.
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Rental assistance: The current CDC eviction moratorium will be extended until Jan. 31, 2021.
Student loans: Extension of student loan forbearance provisions created in CARES and extended by executive order, from the current expiration date of Jan. 31, 2021 through April 1, 2021.
Other tax provisions: This act also includes several provisions related to disaster relief, tax extenders, net operating loss changes and more.
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Tax Centers is closely reviewing the 5,000+ page act and will be in communication with our members with additional guidance and resources.
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Economic Impact Payments (EIP) Update:
IRS to Mail Checks
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April 21, 2020
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Last night the IRS made an update to its Get My Payments website, confirming customers will receive their Economic Impact Payments (EIP) by mail to their addresses on file. This is the correct and updated payment status message. The IRS only updates once a day at night, and all records are not updated yet.
Contrary to this weekend’s update, the IRS does NOT intend to send payments back to the same temporary refund transfer accounts from where those payments were returned. This message was an error and is being corrected by the IRS.
In yesterday’s update, we said the messaging on the Get My Payment website telling customers their payments are scheduled to be distributed back to the same temporary refund transfer account at the end of this week (April 24) was posted in error. We asked the IRS to correct and clarify that answer with more information about the check distribution. The IRS has now confirmed that this message was given in error and are updating the Get My Payments website each day at night. Below is an example of the new message.
Thank you, again, for your partnership and patience as we work through these challenges presented to us all.
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Update Concerning Economic Impact Payments (EIP)
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April 20, 2020
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We were very concerned to learn over the weekend that the messaging on the Get My Payment website is now telling customers their payments are scheduled to be distributed back to the same temporary refund transfer accounts at the end of this week (April 24), with no option to take any action. This is NOT the direction that the IRS has given us. We believe the messaging was posted in error and we have communicated as such to the IRS.
We, along with other banks in the industry, are trying to get clarification from the IRS, and requesting changes are made to this update as soon as possible. We will update our customers and partners as soon as we get clarification from the IRS.
Here is the most recent language on the IRS site regarding the returned direct deposits being redistributed as a check:
Source: IRS Economic Impact Payment Information Center:
Q30. I requested a direct deposit of my Payment. Why are you mailing it to me as a check?
A30. It is possible we do not have the correct bank account information for you, or your financial institution rejected the direct deposit. In either case, your Payment will be mailed to the address we have on file for you.
Last week, the IRS erroneously sent a portion of the Economic Impact Payments (EIPs) to temporary refund transfer accounts. These accounts only process standard tax refunds owed to taxpayers as a result of a tax filing. As we are required, and by request of the IRS, any EIPs sent to these accounts are being immediately sent back to the IRS so that the IRS can distribute directly to consumers.
We are deeply concerned that this error will delay consumers from receiving EIP payments during this difficult time. The IRS has verbally committed to all refund transfer banks that they will not be sending any more EIPs to temporary refund transfer accounts going forward.
Resources:
The IRS is maintaining two pages with answers to EIP questions. We have been told these sites will be updated on a regular basis.
Thank you again for your partnership and patience as we work through this challenging and uncertain time.
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