Discovery Professional Services

Potentially Taxable Events Did You Know? In addition to traditional income sources like employee wages and business profits, there are a number of other activities and transactions that the IRS classifies as potentially taxable. It is important to consider all of these taxable events for your tax return. The most commonly overlooked taxable events include:... - Investment income, including receiving stock dividends or cashing in bonds - Converting a traditional IRA to a Roth IRA - Forgiveness (discharge) of a loan or other debt, including student loans - Sale of assets such as vehicles, musical instruments, or a home at a gain (that is, for more than you paid to purchase the assets) - Sale or exchange of cryptocurrency (like Bitcoin), or making purchases with cryptocurrency - Withdrawing funds from a retirement plan (or from the cash value of a life insurance policy if you withdraw more than you have paid in premiums) - Gifts and inheritances A tax professional can advise you about which events in your life may have tax implications, and how to properly report those events. For example, in some cases, you may only need to declare the event to the IRS if the amount of money involved exceeds a minimum threshold, known as an exclusion.

Other Dependent Tax Credit Did You Know? If you have a dependent who does not meet the criteria for the Child Tax Credit (CTC), you may still qualify for a $500 credit called the Other Dependent Credit. Examples of qualifying dependents include children of age 17 or 18 (or up to age 23 if they are full-time students), and adult relatives who are unable to support themselves due to a disability. Your claimed dependents must be US citizens, resident aliens, or nationals, and ...must have a taxpayer ID number (SSN or ITIN). Children must not have been claimed for the CTC by you or anyone else, must rely on you for at least half of their financial support, and generally must live with you for over half the year. Claimed adult dependents (called qualifying relatives by the IRS) must have a gross income of less than $4,300 for 2020, and must either be your true relative or live with you full time. The term true relative covers a broad range of relationships, including in-laws and stepchildren. A qualified tax advisor can help you determine your eligibility for the Other Dependent Credit. If you have more than one qualifying dependent, you may be able to take the credit for each of them.

IRS Warns of Unemployment Benefits Scam and Gives Instructions for Those Affected Many Americans applied for unemployment benefits in 2020 due to job loss or reduced hours resulting from the COVID-19 (coronavirus) pandemic. Unfortunately, scammers also took advantage of the high number of unemployment applications to fraudulently collect benefits. In the most common scam, an identity thief applied for and received unemployment benefits using someone else's social security num...ber (SSN). Generally, the person whose identity was stolen did not know that a bogus application was filed in their name. Now, many of these scam victims have received a Form 1099-G from their state governments, incorrectly stating that they received unemployment benefits payments during 2020. In reality, the payments went to the scammer. If you receive an inaccurate 1099-G, you will not be responsible for paying taxes on any incorrectly reported benefits. The IRS advises you to take the following steps: - Contact the state agency that issued the 1099-G and explain that you did not receive the benefits shown on the form. Request that a revised, correct 1099-G be sent to you. - If the state agency cannot provide a corrected 1099-G in a timely manner, you may file your tax return and report only income that you actually received, regardless of what the inaccurate 1009-G shows. Note that requesting a revised 1099-G is a critical action to take, as it will help prevent complications caused by an incorrect IRS tax or penalty assessment. Even if the corrected form does not reach you before you file your return, the revised information will eventually reach the IRS and your tax bill should be adjusted accordingly.

IRS Projects Delivery Schedule for 2020 Tax Refunds & Tracking With the processing of 2020 federal tax returns now underway, the IRS has issued information about the likely timetable for refunds to be issued. Here are some key points to keep in mind: - The IRS began processing returns on February 12, 2021.... - The fastest way to receive your refund is to have your return filed electronically and request the refund by direct deposit to your bank account. - The IRS expects about 90% of taxpayers who file electronically with direct deposit to receive their refunds within 21 days, provided there are no problems with their returns. - Many taxpayers who file promptly and qualify for the Earned Income Tax Credit (EITC) or the Additional Child Tax Credit (ACTC) will receive their refunds in early March. - Those who file paper returns and/or request their refunds by check may experience longer wait times for their refunds. - Refunds will also be delayed if the IRS must request additional information from taxpayers due to issues with their returns. Typically, as soon as 24 hours after your federal return is e-filed, you may track the status of your refund by using the IRS Where's My Refund portal, at http://irs.gov/refunds. In many cases, the portal can provide a personalized refund delivery date.

IRS Expands Allowed Items for 2020 Educator Expense Deduction Did You Know? Qualifying educators may claim a tax deduction of up to $250 for unreimbursed classroom expenses, even if they do not itemize deductions. If both members of a couple filing jointly work as educators, they may each deduct up to $250, for a maximum possible deduction of $500. Ordinarily, allowed expenses are limited to standard classroom supplies such as paper, writing utensils, computers, rulers and... art supplies. For 2020, however, eligible educators may also include in their deduction certain expenses incurred due to the COVID-19 pandemic. Examples include the cost of personal protective equipment, sanitizer and cleaning agents purchased after March 12, 2020 to prevent the spread of coronavirus. Note, however, that the per-educator deduction limit remains at $250. Eligible educators generally include K-12 teachers, counselors, principals and aides who worked for at least 900 hours at an elementary and/or secondary school in 2020. The allowed deduction may be reduced for a variety of reasons, including taking tax-free withdrawals from a Coverdell education savings account. A tax professional can help you determine whether you qualify for the Educator Expense Deduction, and the allowed amount of your deduction if so.

Tax Filing Season Start - Did You Know? The IRS has announced that the individual tax filing season will start on Friday, February 12, 2021 and the current deadline to file 2020 tax returns and pay any taxes owed is Thursday, April 15, 2021. Although the IRS systems open for processing on February 12, you do not have to wait until then to begin preparing for your tax return.

Quarterly Estimated Tax Payments - Reminder If you are making quarterly estimated tax payments to the IRS, the due date for the September 1st - December 31st quarter of the year is January 15th. You may be able to skip the January 15 payment if you file your 2020 return by February 1, 2021 and pay all tax due. For payments made using IRS Direct Pay, you can make payments until 8PM EST, and for payments using a credit or debit card, payments can be made up to midnight on the due date.

IRS & Treasury Delivering Second Round of Stimulus Payments Did You Know? Under the Coronavirus Response and Relief Supplemental Appropriations Act, the federal government has authorized a second round of 2020-2021 Economic Impact Payments (EIPs, also called stimulus payments) for many Americans. The IRS has already begun sending these new EIPs by direct deposit and mailed checks. In most cases, individuals with an adjusted gross income (AGI) of $75,000 or below will receiv...e a new EIP of $600. Joint filers with a combined AGI of $150,000 or less will generally get $600 apiece. In addition, many households may receive additional payments of $600 per qualifying child. Those with higher incomes may receive a smaller EIP or no payment at all. Note that dependents age 17 or older are not eligible for EIPs. The vast majority of eligible Americans, including everyone who received a previous 2020 EIP, should receive these new stimulus payments automatically. There is no need to call the IRS or your bank. Simply watch for a direct deposit to your bank account, an IRS check in the mail or, in some cases, a prepaid debit card in a white envelope bearing an official U.S. Treasury seal. For various reasons, some people who qualify for these EIPs may not receive automatic payments. If you believe you are entitled to a payment but do not receive one, a tax professional may help you claim the amount you are owed as a credit on your 2020 tax return.

Some Employees May Still Qualify to Deduct Business Expenses Did You Know? The Tax Cuts and Jobs Act (TCJA) of 2017 eliminated the tax deduction for business expenses for most workers classified as employees. However, some employees may still qualify for a deduction by filing the proper form with their federal tax returns. Eligible school employees may claim the Educator Expense Deduction for up to $250 of unreimbursed expenses necessary for their work, such as classroom su...pplies. Qualifying for this deduction generally requires working for at least 900 hours a year as a teacher, principal, counselor or classroom aide at an elementary or secondary school. In addition, employees in the following categories may qualify to deduct business expenses: - Armed Forces reservists, that is, members of the Army and Air National Guards, along with members of the Army, Navy, Air Force, Marine Corps and Coast Guard Reserves - Qualified performing artists classified as employees, such professional dancers, actors and musicians employed by professional companies - State and local government officials categorized as fee-basis workers (typically, these officials must pay self-employment tax) - Employees with work expenses related to a physical or other impairment These employees may be eligible to deduct unreimbursed ordinary and necessary costs related to carrying on their business as employees. Qualifying expenditures might include travel, costumes, workspace adaptations or office supplies. A professional tax advisor can help you determine whether you qualify to deduct business expenses as an employee, and which forms you must file in order to do so.

'Tis the Season for Important Tax Paperwork Keeping your records organized will help make sure you don't miss out on valuable deductions when it is time to file. Some documents to be on the lookout for:... - Wage and income statements (like W-2 or 1099-MISC) - Health Insurance statements (like Form 1095) - Proof of qualifying educational expenses (like Form 1098-T) - Mortgage interest statements - Retirement distribution statements - Investment account statements - Charity donation receipts