Blog

By in

Where's Your Tax Refund?

Still waiting on that Tax Refund? Unfortunately, you are not alone. National Taxpayer Advocate Erin Collins announced that as of the end of May, 21.3 million paper-returns are currently backlogged, which is up 1.3 million from this same time last year.  While this backlog is crushing the IRS, it is more importantly crushing the tax payers who rely on their refund to help get through difficult economic hardship.

The IRS has worked hard to get tax payers who typically paper-file returns to transition to electronic filing. There are still close to 17 million taxpayers who choose to file on paper. Some of them don’t have an option and have a tax form or schedule that the agency couldn’t process electronically. Prior to the Coronavirus Pandemic, paper-filers could expect their refund within four to six weeks. With the rare exception, the current expected refund is 10 months or longer.

In May of the current year, the IRS averaged processing 200,000 Forms 1040 taxes returns every week, but even with this effort, they are at a 8.2 million backlog of returns. This does not include the millions that still had to be classified or were expecting to arrive before the October 15 extended filing deadline. In order to catch up on this backlog, the IRS would have to average 500,000 Forms 1040 returns every week.  If that is not bad enough remember that this does not include business tax returns or amended tax returns that also paper -filed.

While paper- filing is a big hurdle to overcome, the IRS is also having challenges with correspondence processing delays. This is when a taxpayer gets a notice and is request to respond, or chooses to respond and typically happens so by mail. It is taking on average 251 days to complete this process. That is up three times the average processing time in 2019. Identify theft issues are currently waiting nearly a year on average to complete the required review of documentation to substantiate their identities.

The last major issue the IRS is having is the telephone overload. The IRS fielded about 73 million telephone calls during the 2022 filing season. Of those 73 million, on average, only one out of every 10 calls actually reached a human IRS employee. Thehold times have increased to 29 minutes, which is up from 20 minutes in 2021.

The IRS is looking for solutions to these backlog issues. One area of consideration Collins proposed was that the IRS uses 2-D bar coding or some other advanced scanning technology so the transcription of paper returns can be automated for future filing. Currently, IRS agents are manually key stroking these numbers in the system. Other areas of consideration include automating the processing of paper tax returns, reducing barriers to e-filing tax returns, improving the IRS hiring and training processes, and improving telephone services.

Here at Hunter CPA Group, we diligently work on our clients Tax Notices when they are brought to our attention. After completing the proper steps, we are more than happy to assist with contacting the IRS, but it is important to note that we are held to the same contact methods as everyone. We will work our hardest on their behalf when the IRS is able to communicate with us.

By in ,

2022 Mid Year Mileage Rate Increase

Did you hear the news? The IRS announced that starting July 1st 2022, the optional standard mileage rate would be increasing for the final six months of the year. Midyear increases in the optional mileage rates are rare; the last time the IRS made such an increase was back in 2011.

What does this mean?

The standard mileage rate for the business use of employees’ vehicles will be 62.5 cents per mile—the highest rate the IRS has ever published—up 4 cents from the 58.5 cents per mile rate effective for the first six months of the year, according to IRS Announcement 2022-13.

Why is this changing?

“The IRS is adjusting the standard mileage rates to better reflect the recent increase in fuel prices,” said IRS Commissioner Chuck Rettig. “We are aware a number of unusual factors have come into play involving fuel costs, and we are taking this special step to help taxpayers, businesses and others who use this rate.” 

While fuel costs are a significant factor in the mileage figure, other items enter into the calculation of mileage rates, such as depreciation and insurance and other fixed and variable costs. 

For a clearer breakdown of the changes, please see the chart below:

PurposeJan. 1 to June 30July 1 to Dec. 31
For Business Use58.5 cents/mile62.5 cents/mile
For Medical Care & Moving Active Duty Armed Forces18 cents/mile22 cents/mile
In Service of Charitable Organizations*14 cents/mile14 cents/mile
*The 14 cents/mile rate for charitable organizations remains unchanged as it is et by statue. Source: IRS (June 2022)

What do I need to do to?

If you use your vehicle for business use, it is very important when it comes to the 2022 tax season that you give your tax preparer the breakdown of your millage to make sure the correct rate is being applied to the time of year it reflects.

If you have any questions, please give Hunter CPA Group a phone call. We are here to help you achieve financial success in every aspect of your financial life.

Gambling Winnings & Losses - How does it work?
By in

Gambling Winnings & Losses - How does it work?

The Tax Cuts and Jobs Act (TCJA), enacted at the end of 2017, suspended certain deductions for 2018 through 2025. For example, you can’t currently deduct any miscellaneous expenses, including unreimbursed employee business expenses and production-of-income expenses. But one other type of expense that is sometimes thought to be a miscellaneous expense is still deductible by itemizers: gambling losses.

That being said, a special limit applies to gambling loss deductions. Furthermore, you must keep detailed records to back up your claims.

There’s no AGI limit on gambling loss deductions. However, your annual losses are deductible only up to the amount of your winnings.  For example, say that you incur $10,000 in gambling losses and pull down $7,500 in winnings in 2022. In that case, your gambling loss deduction is limited to $7,500. Conversely, if you have $5,000 in losses, you can write off the entire $5,000.

The IRS takes a broad view of what constitutes a gambling activity. This isn’t restricted to betting on the racetrack or dog track or high stakes at the casinos, although those count, too. It also encompasses lotteries, raffles, keno, poker games, sports wagering and the like—even bingo at the local church!

What sort of records do you have to keep? This may vary slightly, depending on the type of gambling activity, but generally the IRS expects you to keep track of the following:

  • The date & type of gambling you engage in;
  • The name & address of the places where you gamble;
  • The individuals you gambled with; and, most important;
  • The amount of your winnings & loses.

The supporting documentation for gambling loss deductions may include Form W-2G; Form 5754; wagering tickets; canceled checks or credit card statements; and receipts from the gambling source.

Of course, you can write off gambling losses only if you itemize deductions. In other words, if you opt for the standard deduction instead, you get no deduction, regardless of the amount of income and losses. Note that gambling income may also be subject to state and local taxes.

Finally, you might have an ace up your sleeve. If gambling is legitimately your livelihood, you can report winnings and losses from such activities on Schedule C as a self-employed individual, but you can’t claim an overall loss. And you may also be entitled to write-offs for certain travel expenses and other costs (e.g., subscriptions to gambling magazines) as ordinary and necessary business expenses. Plus, the value of complimentary rooms, vacations, and other gifts from casinos is treated as taxable income, but may be offset by losses from gambling activities.

Caution: The IRS is often suspicious of such claims, so tread carefully. Only play this card when you have a winning hand.

By in

2021 Recovery Rebate Credit FAQs

If you didn’t get the full amount of the third Economic Impact Payment, you may be eligible to claim the 2021 Recovery Rebate Credit and must file a 2021 tax return – even if you don’t usually file taxes – to claim it. Your 2021 Recovery Rebate Credit will reduce any tax you owe for 2021 or be included in your tax refund.

Q: How does the 2021 Recovery Rebate Credit differ from the 2020 Recovery Rebate Credit?

A: 2020 Recovery Rebate Credit: The first two rounds of Economic Impact Payments were advance payments of 2020 Recovery Rebate Credits claimed on a 2020 tax return. The IRS issued the first and second rounds of Economic Impact Payments in 2020 and in early 2021.

2021 Recovery Rebate Credit: The third round of Economic Impact Payments, including the plus-up payments, were advance payments of the 2021 Recovery Rebate Credit claimed on a 2021 tax return. The IRS began issuing the third round of Economic Impact Payments in March 2021 and continued through December 2021. In addition, the third payments differ from the earlier payments in several respects:

  • Payment amounts are different. The maximum credit is $1,400 per person, including all qualifying dependents claimed on a tax return. Typically, this means a single person with no dependents will have a maximum credit of $1,400, while married taxpayers who file a joint return that claims two qualifying dependents will have a maximum credit of $5,600.
  • Qualifying dependents expanded. Unlike the 2020 Recovery Rebate Credits and first two rounds of Economic Impact Payments, the 2021 Recovery Rebate Credit and third round of Economic Impact Payments include additional amounts for all dependents, not just children under 17. Eligible individuals will get up to $1,400 for each qualifying dependent claimed on their return, including older relatives like college students, adults with disabilities, parents, and grandparents.
  • Income thresholds changed. The credit amount begins to be reduced at the same income thresholds as the 2020 Recovery Rebate Credits, for example with adjusted gross income of more than $75,000 if filing as single or $150,000 if filing as married filing jointly. However, the 2021 Recovery Rebate Credit amount is fully reduced to $0 more quickly. For example, individuals can’t claim any credit with adjusted gross income of $80,000 or more if filing as single or $160,000 or more for if filing as married filing jointly. Due to these new income limitations, some individuals won’t be eligible to claim the 2021 Recovery Rebate Credit even if they received a 2020 stimulus payment.

Q: What were Plus-Up Payments?

A: Some eligible individuals received more than one third Economic Impact Payment. The IRS sent additional or plus-up payments to people who:

  • Received a third Economic Impact Payment based on a 2019 tax return or information received from the Social Security Administration, Railroad Retirement Board, or the Department of Veterans Affairs, and
  • Filed a 2020 tax return which allowed a greater third Economic Impact Payment but only if the 2020 return was processed by Dec 1, 2021.

For example, you may have gotten a plus-up payment if your income was less in 2020 compared to 2019 or you added a dependent on your 2020 return.
The IRS automatically evaluated your eligibility for plus-up payments after they processed your 2020 return. The IRS sent plus-up payments separately from your 2020 tax refund and previous Economic Impact Payments. They issued weekly plus-up payments to eligible taxpayers until December 31, 2021, the deadline set by law to make Economic Impact Payments. Individuals who did not receive the full amount of the third Economic Impact Payment, including the plus-up payments, may be eligible to claim the 2021 Recovery Rebate Credit on their 2021 tax return.

Q: Will I receive a letter or notice from the IRS about the third Economic Impact Payment?

A: Yes, the IRS mailed Notice 1444-C, Your Third Economic Impact Payment, at the address they had on file for you. The IRS sent separate letters to people who received a plus-up payment.
The IRS will send Letter 6475, Your 2021 Economic Impact Payment(s), in early 2022 to confirm the total amount of the third Economic Impact Payment and any plus-up payments you received for tax year 2021.
Please keep any IRS notices/letters you receive related to the third round of Economic Impact Payments with your tax records and refer to it when you file your 2021 tax return.

Q: I used the Non-Filers tool last year and don’t usually file a tax return. What should I do to claim a 2021 Recovery Rebate Credit?

A: If you’re eligible – and either didn’t qualify for a third Economic Impact Payment or got less than the full amount – you’ll need to file a 2021 tax return to claim the Recovery Rebate Credit even if you otherwise are not required to file a tax return. The best way to file a complete and accurate 2021 tax return is to file electronically. Your CPA or the tax preparation software will ask questions about your income, credits and deductions and will help you figure your 2021 Recovery Rebate Credit.

Please Note: Avoid processing delays that can slow your refund by filing a complete and accurate tax return. You will need the total amount of your third Economic Impact payment and any plus-up payments to claim the 2021 Recovery Rebate Credit, which you can find in your Online Account. Any third Economic Impact Payments you received will reduce the amount of the credit you claim on your tax return. If the information on your return is not accurate it will delay the processing of your return.

Advance 2021 Child Tax Credit FAQs
By in

Advance 2021 Child Tax Credit FAQs

The advance child tax credit payments ended in December, but there’s still more money coming to eligible families in 2022. Now that tax season has arrived, the final enhanced child tax credit payment for 2021 — including any money you didn’t receive in advance — will arrive with your tax refund. Families who received the advance child tax credit in 2021 (the money went out from July through December) must reconcile what they received last year with what their financial situation is this year, and file a Schedule 8812.

To help taxpayers reconcile and receive 2021 CTC, the IRS is sending Letter 6419, Advance Child Tax Credit Reconciliation. A married couple filing a joint return will receive two letters. Taxpayers should keep this, and any other IRS letters about advance CTC payments, with their tax records.

Families who received advance payments must:
• File a 2021 tax return
• Compare the advance payments received in 2021 with the CTC amount they can claim for 2021

This letter contains helpful information for preparing tax returns. Taxpayers who received advance payments can also check amounts using the CTC Update Portal and Online Account on IRS.gov.
Eligible families who didn’t receive advance child tax credit payments can claim the full amount of the child tax credit on their 2021 federal tax return. This includes families who don’t normally need to file a tax return.

For more detailed information please read the FAQs below:

Q: What is the 2021 Child Tax Credit?

A: The Child Tax Credit is a fully refundable tax credit for families with qualifying children. The American Rescue Plan expanded the Child Tax Credit for 2021 to get more help to more families. The credit increased from $2,000 per child in 2020 to $3,600 in 2021 for each child under age 6. Similarly, for each child age 6 to 16, it’s increased from $2,000 to $3,000. It also provides the $3,000 credit for 17-year-olds. Under the American Rescue Plan, the IRS disbursed half of the 2021 Child Tax Credit in monthly payments during the second half of 2021.

The advance Child Tax Credit payments disbursed by the IRS from July through December of 2021 were early payments from the IRS of 50 percent of the amount of the Child Tax Credit that the IRS estimated you may properly claim on your 2021 tax return during the 2022 tax filing season.

Important: You don’t need to have income or a permanent address to claim this tax credit if you’re eligible.

Q: What is the amount of the Child Tax Credit for 2021?

A: For tax year 2021, the Child Tax Credit is increased from $2,000 per qualifying child to:

  • $3,600 for each qualifying child who has not reached age 6 by the end of 2021, or
  • $3,000 for each qualifying child age 6 through 17 at the end of 2021.

Note: The $500 nonrefundable Credit for Other Dependents amount has not changed. For more information about the Credit for Other Dependents, see the Instructions for Schedule 8812 (Form 1040).

Q: How much of the Child Tax Credit can I claim on my 2021 tax return?

A: This amount will depend on the following factors:

  1. You received advance Child Tax Credit payments for a qualifying child. You may have received a portion of your Child Tax Credit through advance Child Tax Credit payments during 2021. Generally, the total amount of advance payments for each of your qualifying children equaled 50 percent of the amount of the credit that the IRS estimated you would be eligible to claim on your 2021 tax return for those children.
  2. You didn’t receive advance Child Tax Credit payments for a qualifying child. If you didn’t receive one or more monthly advance Child Tax Credit payments in 2021 for a qualifying child, you can still receive those payments – and the remaining amount of your credit – by claiming the Child Tax Credit for that child when you file a 2021 tax return during the 2022 tax filing season. This includes families who don’t normally need to file a return.
  3. Your family experienced life changes during 2021. Changes throughout 2021, such as a change in filing status, change in the number of your qualifying children, or a change in your income could increase or decrease the amount of Child Tax Credit you are eligible to claim on your 2021 tax return. Families who received advance Child Tax Credit payments will need to compare the advance Child Tax Credit payments that they received in 2021 with the amount of the Child Tax Credit that they can properly claim on their 2021 tax return.

Q: How did the IRS determine the amount of my advance Child Tax Credit payments?

A: The IRS determined your advance Child Tax Credit payment amounts by estimating the amount of the Child Tax Credit that you may properly claim on your 2021 tax return filed during the 2022 tax filing season. The estimate was based on information shown on your processed 2020 tax return (including information you entered in the Child Tax Credit Non-filer Sign-up Tool in 2021). If the IRS hadn’t processed your 2020 tax return when they determined the amount of your advance Child Tax Credit payment for any month, they estimated the amount of your 2021 Child Tax Credit based on information shown on your 2019 tax return (including information you entered in the Non-Filer Tool on IRS.gov in 2020). Generally, once the IRS processed your 2020 return, they recalculated your advance Child Tax Credit payments and adjusted any remaining monthly payments. You may claim the remaining amount of your 2021 Child Tax Credit when you file your 2021 tax return during the 2022 tax filing season.

Q: Will the amount of my Child Tax Credit be reduced if my 2021 income is too high?

A: Yes, if your 2021 income is high enough, the amount of Child Tax Credit you can claim will be reduced. The amount of your Child Tax Credit will not be reduced if your 2021 modified adjusted gross income (AGI) is at or below:

  • $150,000 if you are married and filing a joint return, or if you are filing as a qualifying widow or widower;
  • $112,500 if you are filing as a head of household; or
  • $75,000 if you are a single filer or are married and filing a separate return.

Q: How does my 2021 modified adjusted gross income (AGI) reduce the amount of my Child Tax Credit?

A: The Child Tax Credit is reduced (“phased out”) in two different steps, which are based on your modified adjusted gross income (AGI) in 2021.

The first phaseout can reduce the Child Tax Credit down to $2,000 per child.

  • That is, the first phaseout step can reduce only the $1,600 increase for qualifying children age 5 and under, and the $1,000 increase for qualifying children age 6 through 17, at the end of 2021.

The second phaseout can reduce the remaining Child Tax Credit down to zero per child.

Q: How does the first phaseout reduce the 2021 Child Tax Credit to $2,000 per child?

A: The Child Tax Credit begins to be reduced to $2,000 per child if your modified adjusted gross income (AGI) in 2021 exceeds:

  • $150,000 if you are married and filing a joint return, or if you are filing as a qualifying widow or widower;
  • $112,500 if you are filing as head of household; or
  • $75,000 if you are a single filer or are married and filing a separate return.

The first phaseout reduces the Child Tax Credit by $50 for each $1,000 (or fraction thereof) by which your modified AGI exceeds the income threshold described above that applies to you.

Example: Your family has one 10-year-old qualifying child. The amount of income that reduces the $3,000 Child Tax Credit under the first phaseout depends on your family’s filing status. Specifically, the Child Tax Credit is reduced to $2,000 if modified AGI in 2021 exceeds:

  • $169,000 if you are married and filing a joint return, or if you are filing as a qualifying widow or widower;
  • $131,500 if you are filing as head of household; or
  • $94,000 if you are a single filer or are married and filing a separate return.

Q: How does the second phaseout reduce the Child Tax Credit amount remaining after the first phaseout?

A: The second phaseout won’t begin to reduce the remaining Child Tax Credit until your modified adjusted gross income (AGI) in 2021 exceeds:

  • $400,000 if married and filing a joint return; or
  • $200,000 for all other filing statuses.

The second phaseout reduces, down to zero, the Child Tax Credit by $50 for each $1,000 (or fraction thereof) by which your modified AGI exceeds the income threshold described above that applies to you.

Q: Is my Child Tax Credit refundable?

A: Yes, if you meet the main home requirement described below, your Child Tax Credit will be fully refundable even if you had no income during 2021.

Main Home Requirement: You — or your spouse, if you are married and filing a joint return — must have your main home in one of the 50 states or the District of Columbia for more than half of 2021.

Important Rules:

  • Your main home can be any location where you regularly live.
  • Your main home may be your house, apartment, mobile home, shelter, temporary lodging, or other location and doesn’t need to be the same physical location throughout the taxable year.
  • You don’t need a permanent address.
  • If you are temporarily away from your main home because of illness, education, business, vacation, or military service, you are generally treated as living in your main home.

Q: What does it mean to me if my Child Tax Credit is fully refundable?

A: It means that you do not need any income or need to owe any tax in 2021 to receive the full amount of the Child Tax Credit for which you are eligible.

Q: What does it mean to me if my Child Tax Credit is not fully refundable?

A: If you don’t meet the main home requirements outlined above, you may still qualify for a $3,000 or $3,600 Child Tax Credit for each qualifying child. However, the refundability of the credit is limited, similar to the 2020 Child Tax Credit and Additional Child Tax Credit. For more information, please discuss this with your tax preparer.

Q: Are advance Child Tax Credit payments taxable?

A: No. Advance Child Tax Credit payments are not taxable and will not be reported as income on your 2021 tax return. Advance Child Tax Credit payments are advance payments of your Child Tax Credit for tax year 2021.

Q: Will I need to repay the IRS any of the advance Child Tax Credit payments that I received during 2021?

A: Maybe. The total amount of advance Child Tax Credit payments that you received during 2021 was based on the IRS’s estimate of the amount of Child Tax Credit that you may properly claim on your 2021 tax return.
Important: If the total amount of your advance Child Tax Credit payments was greater than the Child Tax Credit amount that you may properly claim on your 2021 tax return, you may have to repay the excess amount on your 2021 tax return during the 2022 tax filing season – unless you qualify for repayment protection.
For example, if you received advance Child Tax Credit payments for two qualifying children properly claimed on your 2020 tax return, but you no longer have qualifying children in 2021, the advance Child Tax Credit payments that you received based on those children are added to your 2021 income tax unless you qualify for repayment protection. For more information regarding your eligibility for repayment protection, please discuss this with your tax preparer.

By in

Federal Income Tax Update 2021

Federal Income Tax 2021 Review Replay Video

Hosted by Daniel M. Krug, CEO and Senior Wealth Manager, Rocky Istvan, CCO and Associate Wealth Manager. Special Guest Speaker Brenda Hunter, CPA

Click to watch: