|The South Carolina Department of Revenue has announced another extension of temporary nexus and income tax withholding requirements for employers with workers who are teleworking because of the COVID-19 pandemic.|
Information Letter 21-22, dated August 25, extends the temporary relief — initially provided in May 2020 via Information Letter 20-11 — through December 31.
Under South Carolina law, businesses in the state are required under S.C. Code of Laws section 12-8-520 to withhold income tax on the wages of residents and nonresidents who work there. South Carolina residents who work out of state are not subject to withholding if their wages are subject to withholding in the state in which they work. (Tax Notes, 8/26/2021
.QUOTE (Compliments of NAEA) – “Tell me and I forget. Show me and I may remember. Involve me and I learn.” — Benjamin Franklin (1707 – 1790) Founding Father of the United States.
Important 2020 Filing Season Reminders
IR-2021-23, January 27, 2021. Following an unpredictable year with many changes and challenges, IRS shared important reminders for taxpayers who are about to file their 2020 federal tax returns. Following is a summary of reminders, read full announcement (IR-2021-23) for additional details.
Choose direct deposit — The safest, most accurate and fastest way to get a refund is to electronically file and choose direct deposit.
Earned Income Tax Credit — The Earned Income Tax Credit (EITC) can give qualifying workers with low-to-moderate income a substantial financial boost. IRS Tax Tip 2021-06, January 25, 2021. It not only reduces the amount of tax someone owes but may give them a refund even if they don’t owe any taxes or aren’t required to file a return. People must meet certain requirements and file a federal tax return in order to receive this credit.
Stimulus Money – Never mind the tax refund. Stimulus check money is why you should file early this year. Sure, you may get your federal tax refund quicker if you file as soon as the IRS started processing returns on Feb. 12. But this year, you have two more good reasons to start preparing now for tax season 2020. By setting up direct deposit with the IRS, you mostly likely will receive your third stimulus check sooner, especially if it happens during tax season. By filing as soon as you can, you’ll also be able to quickly recover any unpaid stimulus check money you’re owed. If you wonder if you’ll still get the stimulus money you’re missing if you file a tax extension, the answer is “Yes.” But you should know the only way you’ll get your missing stimulus money is by filing a Recovery Rebate Credit on your taxes — even if you’re not usually required to file taxes. So the longer you wait to file, the longer it’ll take to get your tax refund, which will include your missing stimulus payment.
Taxable unemployment compensation — Millions of Americans received unemployment compensation in 2020, many of them for the first time. In January 2021, unemployment benefit recipients should receive a Form 1099-G, Certain Government Payments PDF from the agency paying the benefits. This form will show the amount of unemployment compensation they received during 2020 in Box 1, and any federal income tax withheld in Box 4. Taxpayers report this information, along with their W-2 income, on their 2020 federal tax return.
Interest is taxable income — Many individual taxpayers who received a refund on their 2019 tax returns may have also received interest from the IRS. If so, you will receive Form 1099-INT, Interest Income, with reportable amounts in boxes 1, 3, and 8 of at least $10 (or at least $600 of interest paid in the course of your trade or business). Interest is still reportable income even if you don’t receive a Form 1099-INT.
Home office deduction — The Tax Cuts and Jobs Act (TCJA) suspended the home office deduction for employees for tax years 2018 to 2025. You can only take the home office tax deduction if you work from home and you’re self-employed, an independent contractor or working in the gig economy.
The gig economy — Any “activity where people earn income providing on-demand work, services or goods,” such as ride-sharing and delivery services, running errands, and selling products online. That means if you earned money from Uber, Lyft, Postmates, Instacart, Etsy, or a similar company, you may be on the hook for federal income taxes. Taxpayers must report income earned in the gig economy on their tax return. IRS is clear about when you have to pay self-employment taxes on your side gig: Once you make $400.
Charitable donation deduction for people who don’t itemize — Individuals who take the standard deduction generally cannot claim a deduction for their charitable contributions. However, the CARES Act permits these individuals to claim a limited deduction on their 2020 federal income tax returns for cash contributions made to certain qualifying charitable organizations and still claim the standard deduction.
Disasters such as wildfires, flooding or hurricanes — Special tax law provisions may help taxpayers and businesses recover financially from the impact of a disaster, especially when the federal government declares their location to be a major disaster area.
TAX NEWS FOR EMPLOYERS
New Law Extends COVID Tax Credit for Employers Who Keep Workers on Payroll
IR-2021-21, January 26, 2021. IRS urges employers to take advantage of the newly extended employee retention credit, designed to make it easier for businesses that, despite challenges posed by COVID-19, choose to keep their employees on the payroll.
IRS explains extended payroll tax due dates
The IRS has issued guidance (Notice 2021-11) to address how employers who elected to defer certain employees’ payroll taxes can withhold and pay the deferred taxes throughout 2021 instead of just the first four months of the year.
The Taxpayer Certainty and Disaster Tax Relief Act of 2020, enacted December 27, 2020, made a number of changes to the employee retention tax credits previously made available under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), including modifying and extending the Employee Retention Credit (ERC), for six months through June 30, 2021. Several of the changes apply only to 2021, while others apply to both 2020 and 2021.
As a result of the new legislation, eligible employers can now claim a refundable tax credit against the employer share of Social Security tax equal to 70% of the qualified wages they pay to employees after December 31, 2020, through June 30, 2021. Qualified wages are limited to $10,000 per employee per calendar quarter in 2021. Thus, the maximum ERC amount available is $7,000 per employee per calendar quarter, for a total of $14,000 in 2021.
WHAT ELSE HAS CHANGED?
All Taxpayers Are Now Eligible for Identity Protection PINs
IRS Tax Tip 2021-07, January 26, 2021. IRS has expanded the Identity Protection PIN Opt-In Program to all taxpayers who can verify their identity. The Identity Protection PIN is a six-digit code known only to the taxpayer and to IRS. It helps prevent identity thieves from filing fraudulent tax returns using a taxpayers’ personally identifiable information.
Important Filing Season Dates
Friday, February 12. IRS begins 2021 tax season. Individual tax returns start being accepted, and processing begins.
Thursday, April 15 Due date for filing 2020 tax returns or requesting extension of time to file.
Thursday, April 15. Due date for paying 2020 tax owed to avoid owing interest and penalties.
Friday, October 15. Due date to file for those requesting an extension on their 2020 tax returns.
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If you have enrolled for health coverage through the Health Insurance Marketplace and receive advance payments of the premium tax credit in 2015, it is important that you report changes in circumstances, such as changes in your income or family size, to your Marketplace.
Advance payments of the premium tax credit (PTC) provide financial assistance to help you pay for the insurance you buy through the Marketplace. Having at least some of your credit paid in advance directly to your insurance company will reduce the out-of-pocket cost of the health insurance premiums you’ll pay each month.
However, it is important to notify the Marketplace about changes in circumstances to allow the Marketplace to adjust your advance payment amount. This adjustment will decrease the likelihood of a significant difference between your advance credit payments and your actual premium tax credit. Changes in circumstances that you should report to the Marketplace include, but are not limited to:
- An increase or decrease in your income
- Marriage or divorce
- The birth or adoption of a child
- Starting a job with health insurance
- Gaining or losing your eligibility for other health care coverage
- Changing your residence
For the full list of changes you should report, visit HealthCare.gov/how-do-i-report-life-changes-to-the-marketplace.
What to Know about Late Filing and Late Paying Penalties
April 15 was the tax day deadline for most people. If you are due a refund there is no penalty if you file a late tax return. But if you owe tax, and you failed to file and pay on time, you will usually owe interest and penalties on the tax you pay late. You should file your tax return and pay the tax as soon as possible to stop them. Here are eight facts that you should know about these penalties.
1. Two penalties may apply. If you file your federal tax return late and owe tax with the return, two penalties may apply. The first is a failure-to-file penalty for late filing. The second is a failure-to-pay penalty for paying late.
2. Penalty for late filing. The failure-to-file penalty is normally 5 percent of the unpaid taxes for each month or part of a month that a tax return is late. It will not exceed 25 percent of your unpaid taxes.
3. Minimum late filing penalty. If you file your return more than 60 days after the due date or extended due date, the minimum penalty for late filing is the smaller of $135 or 100 percent of the unpaid tax.
4. Penalty for late payment. The failure-to-pay penalty is generally 0.5 percent per month of your unpaid taxes. It applies for each month or part of a month your taxes remain unpaid and starts accruing the day after taxes are due. It can build up to as much as 25 percent of your unpaid taxes.
5. Combined penalty per month. If the failure-to-file penalty and the failure-to-pay penalty both apply in any month, the maximum amount charged for those two penalties that month is 5 percent.
6. File even if you can’t pay. In most cases, the failure-to-file penalty is 10 times more than the failure-to-pay penalty. So if you can’t pay in full, you should file your tax return and pay as much as you can. Use IRS Direct Pay to pay your tax directly from your checking or savings account. You should try other options to pay, such as getting a loan or paying by debit or credit card. The IRS will work with you to help you resolve your tax debt. Most people can set up an installment agreement with the IRS using the Online Payment Agreement tool on IRS.gov.
7. Late payment penalty may not apply. If you requested an extension of time to file your income tax return by the tax due date and paid at least 90 percent of the taxes you owe, you may not face a failure-to-pay penalty. However, you must pay the remaining balance by the extended due date. You will owe interest on any taxes you pay after the April 15 due date.
8. No penalty if reasonable cause. You will not have to pay a failure-to-file or failure-to-pay penalty if you can show reasonable cause for not filing or paying on time. There is also penalty relief available for repayment of excess advance payments of the premium tax credit for 2014.
Use this link to find out what to do when your tax preparer won’t help or gives you an 800 # to call…
Save on Your Taxes and for Retirement with the Saver’s Credit
If you contribute to a retirement plan, like a 401(k) or an IRA, you may be able to claim the Saver’s Credit. This credit can help you save for retirement and reduce the tax you owe. Here are some key facts that you should know about this important tax credit:
• Formal Name. The formal name of the Saver’s Credit is the Retirement Savings Contribution Credit. The Saver’s Credit is in addition to other tax savings you get if you set aside money for retirement. For example, you may be able to deduct your contributions to a traditional IRA.
• Maximum Credit. The Saver’s Credit is worth up to $2,000 if you are married and file a joint return. The credit is worth up to $1,000 if you are single. The credit you receive is often much less than the maximum. This is due in part because of the deductions and other credits you may claim.
• Income Limits. You may be able to claim the credit depending on your filing status and the amount of your yearly income. You may be eligible for the credit on your 2014 tax return if you are:
o Married filing jointly with income up to $60,000
o Head of household with income up to $45,000
o Married filing separately or a single taxpayer with income up to $30,000
• Other Rules. Other rules that apply to the credit include:
o You must be at least 18 years of age.
o You can’t have been a full-time student in 2014.
o No other person can claim you as a dependent on their tax return.
• Contribution Date. You must have contributed to a 401(k) plan or similar workplace plan by the end of the year to claim this credit. However, you can contribute to an IRA by the due date of your tax return and still have it count for 2014. The due date for most people is April 15, 2015.
Call (803)470-4938 or email ([email protected]) to ask us which form to file with your income tax return.
C Fitts Tax Solutions | 141 S. Shandon St. Ste. E | Columbia, SC 29205 | http://www.cfittstaxsolutions.com.
File on Time Even if You Can’t Pay
Do you owe more tax than you can afford to pay when you file? If so, don’t fail to take action. Make sure to file on time. That way you won’t have a penalty for filing late. Here is what to do if you can’t pay all your taxes by the due date.
- File on time and pay as much as you can. You should file on time to avoid a late filing penalty. Pay as much as you can with your tax return. The more you can pay on time, the less interest and late payment penalty charges you will owe.
- Pay online with IRS Direct Pay. IRS Direct Pay is the latest electronic payment option available from the IRS. It allows you to schedule payments online from your checking or savings account with no additional fee and with an immediate payment confirmation. It’s, secure, easy, and much quicker than mailing in a check or money order. To make a payment or to find out about your other options to pay, visit IRS.gov/payments.
- Pay the rest of your tax as soon as you can. If it is possible, get a loan or use a credit card to pay the balance. The interest and fees charged by a bank or credit card company may be less than the interest and penalties charged for late payment of tax. For debit or credit card options, visit IRS.gov.
- Use the Online Payment Agreement tool. You don’t need to wait for IRS to send you a bill to ask for an installment agreement. The best way is to use the Online Payment Agreement tool on IRS.gov. You can even set up a direct debit installment agreement. When you pay with a direct debit plan, you won’t have to write a check and mail it on time each month. And you won’t miss any payments that could mean more penalties. If you can’t use the IRS.gov tool, you can file Form 9465, Installment Agreement Request instead. You can view, download and print the form onIRS.gov/forms anytime.
- Don’t ignore a tax bill. If you get a bill, don’t ignore it. The IRS may take collection action if you ignore the bill. Contact the IRS right away to talk about your options. If you face a financial hardship, the IRS will work with you.
In short, remember to file on time. Pay as much as you can by the tax deadline. Pay the rest as soon as you can.
Contact C Fitts Tax Solutions at (803)470-4938 to find out more.
141 S. Shandon St. Ste. E | Columbia, SC 29205 | [email protected]
“This is no April Fool’s joke. Everyone should be on the lookout for threatening calls from people faking IRS phone numbers and demands for immediate payment,” IRS Commissioner John Koskinen said. “These are scams. I urge taxpayers to stay vigilant and remain aware of the constantly changing tactics used by these criminals.”
They often leave “urgent” callback requests and sometimes prey on the most vulnerable people, such as the elderly, newly arrived immigrants and those whose first language is not English. Scammers have been known to impersonate agents from IRS Criminal Investigation as well.
Here are five things the scammers often do but the IRS will not do.
The IRS will not:
Call to demand immediate payment, nor will the agency call about taxes owed without first having mailed you a bill.
- Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
- Require you to use a specific payment method for your taxes, such as a prepaid debit card.
- Ask for credit or debit card numbers over the phone.
- Threaten to bring in local police or other law-enforcement groups to have you arrested for not paying.
IRS Issue Number: IR-2015-62
- Contact us at (803)470-4938 with questions or concerns.
- C Fitts Tax Solutions | 141 S. Shandon St. Ste. E | Columbia, SC 29205 | Corner of Rosewood Dr.
- [email protected]