Cheryl A. Newton Tax & Accounting Services

Issue Number: COVID Tax Tip 2020-96 Dirty Dozen part 1: Taxpayers should be on the lookout for these scams All tax scams put taxpayers at risk. This is the first of two tips taking a closer look at the IRS Dirty Dozen tax scam list. This year, taxpayers should be especially, watchful for aggressive schemes related to COVID-19 relief, including Economic Impact Payments.... Here is a recap of the first six scams in this year's Dirty Dozen. Phishing: Taxpayers should be alert to potential fake emails or websites looking to steal personal information. The IRS will never initiate contact with taxpayers through email about a tax bill, refund or Economic Impact Payment. Don't click on links claiming to be from the IRS. Be wary of emails and websites they may be nothing more than scams to steal personal information. Fake charities: Criminals frequently target natural disasters and other situations, such as COVID-19, by setting up fake charities to steal from well-intentioned people trying to help in times of need. Fraudulent schemes normally start with unsolicited contact by phone, text, social media, email or in-person using a variety of tactics. Threatening impersonator phone calls: IRS impersonation scams come in many forms. A common one remains fake threatening phone calls from a criminal claiming to be with the IRS. The agency will never threaten a taxpayer or surprise them with a demand for immediate payment. Scam phone calls include those threatening arrest, deportation or license revocation if the victim doesn't pay a fake tax bill. Social media scams: Taxpayers need to protect themselves against social media scams, which frequently use events such as COVID-19 to try tricking people. Social media enables anyone to share information with anyone else on the Internet. Scammers use this information as ammunition for a wide variety of scams. These include emails where scammers impersonate someone's family, friends or co-workers. Economic Impact Payment or refund theft: This year, criminals turned their attention to stealing Economic Impact Payments. Many of these scams are identity theft-related. Criminals file false tax returns or supply false information to the IRS to divert refunds to wrong addresses or bank accounts. Senior fraud: Senior citizens, their friends and family need to be on alert for tax scams targeting older taxpayers. Their growing comfort with technology, including social media, gives scammers another means of taking advantage of them. Phishing scams linked to COVID-19 have been a major threat this year. Seniors should be on alert for a continuing surge of fake emails, text messages, websites and social media attempts to steal personal information. Share this tip on social media -- #IRSTaxTip: Dirty Dozen part 1: Taxpayers should be on the lookout for these scams. https://go.usa.gov/xfPGz

More extension news (03-20-20) New federal extensions The Treasury Secretary announced today that the April 15 filing deadline has been extended to July 15 for all taxpayers and businesses. This means taxpayers will no longer be required to file extensions on April 15th for federal purposes. They also have until July 15 to pay, so long as they fall below the thresholds of $10 million due for C corporations, and $1 million due for all other taxpayers.... The information released today did not address the March 15 filing deadline, second quarter estimate payments, payroll tax filing deadlines, or IRA contribution deadlines. We will update you on this information as it becomes available. New California extensions The FTB is postponing until July 15 the filing and payment deadlines for all individuals, trusts, and business entities for: 2019 tax returns; 2019 tax return payments; 2020 1st and 2nd quarter estimate payments; 2020 LLC taxes and fees; and 2020 Non-wage withholding payments. The FTB extended their initial extension period of June 15, 2020, to be more consistent with the IRS extension relief. Like the IRS extension, the FTB extension applies to both filing and payment deadlines, but does not limit the payment extension to those below $1 million ($10 million for corporations), and applies to estimated tax and withholding payments. Like the IRS, the FTB is also extending this relief to all taxpayers, not just those "affected by the COVID-19 pandemic."

IRS 90-day extension isn't a filing extension (03-18-20) The IRS has issued official guidance clarifying that the 90-day extension for payment of taxes does not apply to the March 15 or April 15 filing deadlines. (IRS Notice 2020-17) This means that even though the actual tax payment has been deferred until July 15, 2020, for most taxpayers, they must still file a timely extension request to avoid the late-filing penalty (or, in the case of the missed March 15 filing deadline..., request penalty abatement if late-filing penalties are imposed). Any person with a federal income tax payment due April 15, 2020, who is affected by the COVID-19 emergency is eligible for the following relief: Deferral of up to $1 million in aggregate for all taxpayers other than C corporations, regardless of filing status (so the $1 million limit applies to joint filers); or Deferral of up to $10 million in aggregate for C corporations (the $10 million limit applies at the consolidated group level if the corporation is part of a consolidated group). The relief only applies to: 2019 income tax payments due on April 15, 2020 (including self-employment taxes); and The April 15, 2020, estimated income tax payment due on April 15, 2020, for the 2020 taxable year (including self-employment taxes). This federal relief is granted under IRC 7508A, which California conforms to. As a result, we believe California conforms to the July 15 payment extension. We have reached out to the FTB for confirmation. The IRS notice may be viewed at: www.irs.gov/pub/irs-drop/n-20-17.pdf

Legislature passes individual health care mandate penalty and subsidies (06-27-19) The California Legislature has passed SB 78, which would require most California residents and their dependents to obtain minimum health care coverage by January 1, 2020, or pay a penalty similar to the penalty previously imposed by the federal government under the Affordable Care Act. The Governor is expected to sign the bill. The bill also provides for California tax-exempt subsidies to assis...t residents in obtaining health insurance if their income is below 600% of the federal poverty level ($74,940 for an individual; $154,500 for a household of four). The FTB will impose a penalty of up to $695 annually against individuals who fail to comply with the mandate. Employers must annually provide health care coverage information to the FTB by March 31 and will be subject to penalties for failure to comply. See more

Issue Number: Tax Tip 2019-83 Educators can claim deduction to get money back for classroom expenses Educators may be able to deduct unreimbursed expenses on their tax return. This deduction can put money right back in the pockets of eligible teachers and other educators.... Here are some things to know about this deduction: Educators can deduct up to $250 of trade or business expenses that were not reimbursed. As teachers prepare for the next school year, they should remember to keep receipts after making any purchase to support claiming this deduction. The deduction is $500 if both taxpayers are eligible educators and file their return using the status married filing jointly. These taxpayers cannot deduct more than $250 each. Qualified expenses are amounts the taxpayer paid themselves during the tax year. Examples of expenses the educator can deduct include: Professional development course fees Books Supplies Computer equipment, including related software and services Other equipment and materials used in the classroom Taxpayers claim the deduction on Form 1040 or Form 1040NR. The taxpayer should remember to complete and attach Form 1040, Schedule 1 to their return. To be considered an eligible educator, the taxpayer must be a kindergarten through grade 12 teacher, instructor, counselor, principal or aide. They must also work at least 900 hours a school year in a school that provides elementary or secondary education as determined under state law.