2023 Tax News & Notes

1. Never use Bill Pay from your bank!!  The bank doesn't provide the IRS enough information to properly post this to your account.
2. If paying by mail, use a check as they are easier to track than Money Orders.
3. Never use Bill Pay from your bank!!
4. If paying online, only use the IRS website to initiate the payment from www.irs.gov/Payments.  Do not use a 3rd party website.
5. Never use Bill Pay from your bank!!
6. If you are married, use the SSN of the first person to appear on the last tax return.  If you make a payment using the spousal SSN, the IRS will NOT post it correctly and we'll have a nightmare fixing it later.
7. Never use Bill Pay from your bank!!
8. You can also establish an account online at www.eftps.com to pay any balance and schedule payments for estimated taxes well in advance.
9. Never use Bill Pay from your bank!!

Over the past several years, Congress and the IRS have several times changed the starting age for Required Minimum Distributions from IRAs, 401(k)s, 403(b)s, SEP-IRAs and SIMPLE-IRAs.  There was another change very late in 2022. Each one has delayed the mandatory starting age. Here are the current (as of December 2023) starting ages based on the year the recipient was born: 

Born in 1950 or earlier - Your RMDs should have already begun.  If they haven't, contact the account holder and get them started (including catch-ups for the missed years) immediately.  There are hefty penalties for failure to take an RMD.

Born in 1951-1959 - Your RMDs must start at age 73.

Born in 1960 and later - Your RMDs must start at age 75.  (Check on this as we get closer to 2035 because there's a good chance it will be extended again by then.)

Your first year of RMDs can be taken as late as April 1 of the following year, but I don't recommend this since you will then have to take two in that year, the delayed first year and the normal second year.

RMDs are not required from a ROTH IRA.

RMD rules for inherited IRAs remain unchanged.

For all of you concerned about Venmo, PayPal, StubHub, Ticketmaster and other third party collection services reporting sales of tickets and other revenue but also transfers to/from family and friends, the IRS has kicked the can down the road to 2024 keeping with the finest traditions in Washington.  So you have a one-year reprieve.  This was supposed to start for 2023, but now the IRS is NOT requiring 1099-Ks to be issued until the 2024 tax year (unless you get over $20,000 in payments and have over 200 transactions). 

 As the IRS has "modernized" its computer system (believe it or not they still use floppy disks for some data - for you young people, Google floppy disk), there are now more records available online that you may find interesting or helpful.    

To get the most complete and current information you'll need to set up an ID.me account, which can be established at www.irs.gov - Sign in to your Account. This is easier to do from your cell phone rather than a computer.  This account can also be used to access Social Security and VA records.

This will give you access to:

• Account Balances (for up to five years).
• Make a Payment.
• View Payments (including estimated taxes for the current year).
• Get Transcripts of returns, accounts, W2s and 1099s reported about you.
• Get Notifications of correspondence or changes to your account.

What you can do WITHOUT an online account:

• Make a Payment.
• Check on the status of a refund for up to three years.
• Check on the status of an amended tax return.

There’s an awful lot of hype in the media about “settling your tax debt for pennies on the dollar.” And the key word is “hype.” In the good old days, there was a bit of Let’s Make a Deal mentality. "I’ll offer $5,000 on the $50,000 tax bill I owe and pay in 30 days, take it or leave it." And sometimes they’d take it, just to close the case file. But not anymore. Here’s how the Offer in Compromise system works today.

The IRS wants fairly thorough financial information about your income, assets, family size and location and apply it all to a formulated worksheet. Without going into gory detail, the result is a figure called RCP - Reasonable Collection Potential. Barring exceptional circumstances (disability, illness, loss of job), this is pretty much the bottom line the IRS will accept. 

The IRS has a pre-qualifier tool at https://irs.treasury.gov/oic_pre_qualifier/if you want to play around with it.

I have my own pre-qualifier that consists of just a few questions without even going into your earnings:

1. How much do you owe the IRS?
2. How much equity do you have in your home?
3. How much do you have in retirement accounts?
4. How much do you have in the bank?

If you have more equity, cash or retirement vesting than you owe, it’s not going to happen.   About 99% of my clients are disqualified based on these four questions.

Each year the IRS identifies their Dirty Dozen – the top 12 tax scams out there.  I’ve picked from that list a few about which to be wary.  You’ll see that most of them have some slight truth to them which is what gets you hooked.
 

Fake Forms for Refunds – The scammer will alert you to a fake form for you to file promising a refund.  Usually, it’s a real form number but a quick Google search will show that it’s probably not relevant to you.  It's kind of like the “reparations” scams that keep floating around.
 

Offers In Compromise promising old taxes will be settled for pennies on the dollar – While these are possible (I’ve done only three of them in my 40 career), they aren't probable.  The qualification for an offer in compromise is very rigorous, formulated and fairly predictable as to the outcome.  The scam here is they charge a large retainer up front whether successful or not.
 

Employee Retention Credit Scams on Small Employers – Rarely does a week go by where I don’t get a letter or email that says I'm missing out on hundreds of thousands of dollars of tax credits from the COVID debacle – The problem and enticement here is twofold:

• The rules kept changing (and still are) on who can qualify.
• For 2020, most potential claims have some validity to them.  For 2021, it’s not nearly as likely.

Phishing emails or Smishing texts on setting up an IRS account – It looks like it’s a legitimate entity (may even look like the IRS) and wants you to set up an account login to access IRS records.  The irony here is that you’ll likely have to do this sooner or later this with the IRS via ID.me (see above), so it seems legitimate.  Of course, all they are trying to do is get your personal information for identity theft.  The IRS never makes initial contact with a taxpayer via email or text – never.
 

False Fuel Credit Claims – With electric vehicles, E-85 gas and hybrid vehicles, the possibility of a fuel tax credits seems plausible.  But this credit isn’t for us city-dwellers, it’s for farmers and off-highway uses for business (heavy equipment, forklifts, generators).
 

Fake Charities – This is a problem in a couple of ways:

• Scammers make up a great sounding charity name and promise a deduction.  Not only do you lose your money, but you can lose your deduction.  The charity's status can be verified with www.irs.gov - search for Exempt Organizations Business Master File.
• Non-Profit does NOT mean charity and therefore may not be deductible.  E.g., Many sports clubs that your kids and grandkids join are NOT registered as 501(c)3 organizations and any extra “contributions” to them are NOT deductible.  Some are, some are not – you have to verify with www.irs.gov.
• Go Fund Me accounts are RARELY deductible as charities.  They may be good causes, but they usually aren’t deductible.