K & B Bookkeeping & Tax Services

New Tax Bill to Make Changes for This Tax Season

With 12 days until the official start of tax season, Congress has unveiled a bipartisan tax bill that, if passed, would include retroactive provisions that will affect how you prepare returns this year.

Proposed changes include:

1. Expansion of the child tax credit, including a larger refundable portion of the credit
2. Election of using prior year income for determining earned income for purposes of the child tax credit
3. Extension of the disaster-related personal casualty losses
4. Increase in threshold reporting for forms 1099-NEC and 1099-MISC
5. Deduction for research and experimental expenditures
6. Extension of 100% bonus deprecation
7. End of the employee retention credit program as well increase in due diligence requirements and penalties for ERTC promoters/material advisors

I am closely monitoring the details of this news and will be in communication with you as the proposed legislation becomes law, and how the IRS implements these changes during tax season.

2024 Article 9-A Deriving receipts thresholds
The Commissioner of Taxation and Finance annually reviews the thresholds at which a corporation is deemed to be deriving receipts from activity in New York State and in the Metropolitan Commuter Transportation District (MCTD) for purposes of imposing the Article 9-A franchise tax and metropolitan transportation business tax (MTA surcharge). The Commissioner adjusts the thresholds if the Consumer Price Index has changed by 10% or more since January 1, 2015, or since the date that the thresholds were last adjusted by the Commissioner.

The thresholds at which a corporation and a unitary group are deemed to be deriving receipts from activity in New York State and in the MCTD for purposes of imposing the Article 9-A franchise tax and MTA surcharge are:

$1,000,000 for tax years beginning on or after January 1, 2015, and before January 1, 2022;
$1,138,000 for tax years beginning on or after January 1, 2022, and before January 1, 2024; and
$1,283,000 for tax years beginning on or after January 1, 2024, and before January 1, 2025.
Additionally, when determining whether the deriving receipts thresholds are met for a unitary group, only total the receipts from corporations conducting a unitary business that meet the ownership requirements under Tax Law § 210-C (except for corporations that may not be included in a combined report due to the exclusions in Tax Law § 210-C.2(c)):

with at least $10,000 in New York receipts, for the franchise tax, and at least $10,000 in MCTD receipts, for the MTA surcharge, for tax years beginning on or after January 1, 2015, and before January 1, 2022;
with at least $11,000 in New York receipts, for the franchise tax, and at least $11,000 in MCTD receipts, for the MTA surcharge, for tax years beginning on or after January 1, 2022, and before January 1, 2024; and
with at least $12,000 in New York receipts, for the franchise tax, and at least $12,000 in MCTD receipts, for the MTA surcharge, for tax years beginning on or after January 1, 2024, and before January 1, 2025.

IRS Delays Form 1099-K Reporting Threshold

The IRS announced a delay in the new $600 reporting threshold for Form 1099-K for third-party organizations for the year 2023. The delay was enacted to reduce confusion among taxpayers, tax professionals and payment processors.

The IRS plans to treat 2023 as a transition year, wherein reporting will only be required if the taxpayer receives over $20,000 and has more than 200 transactions. The IRS also plans to implement a $5,000 threshold for tax year 2024, in phase with the $600 reporting threshold required by the American Rescue Plan Act. It aims to minimize burden and provide easier reporting requirements for taxpayers, working closely with third party groups, tax professionals and others to ensure compliance with the law.

The IRS begins accepting electronically filed tax returns and processing refunds next week on January 24th. However, you don't need to wait until then,.

Key filing season dates
There are several important dates taxpayers should keep in mind for this year's filing season:

January 14: IRS Free File opens. Taxpayers can begin filing returns through IRS Free File partners; tax returns will be transmitted to the IRS starting January 24. Tax software companies also are accepting tax filings in advance.

January 18: Due date for tax year 2021 fourth quarter estimated tax payment.

January 24: IRS begins 2022 tax season. Individual 2021 tax returns begin being accepted and processing begins

January 28: Earned Income Tax Credit Awareness Day to raise awareness of valuable tax credits available to many people – including the option to use prior-year income to qualify.

April 18: Due date to file 2021 tax return or request extension and pay tax owed due to Emancipation Day holiday in Washington, D.C., even for those who live outside the area.

April 19: Due date to file 2021 tax return or request extension and pay tax owed for those who live in MA or ME due to Patriots' Day holiday

October 17: Due date to file for those requesting an extension on their 2021 tax returns

Watch for IRS letters about advance Child Tax Credit payments and third Economic Impact Payments
The IRS started sending Letter 6419, 2021 advance Child Tax Credit, in late December 2021 and continues to do so into January. The letter contains important information that can help ensure the return is accurate. People who received the advance CTC payments can also check the amount of the payments they received by using the CTC Update Portal available on IRS.gov.

Eligible taxpayers who received advance Child Tax Credit payments should file a 2021 tax return to receive the second half of the credit. Eligible taxpayers who did not receive advance Child Tax Credit payments can claim the full credit by filing a tax return.

The IRS will begin issuing Letter 6475, Your Third Economic Impact Payment, to individuals who received a third payment in 2021 in late January. While most eligible people already received their stimulus payments, this letter will help individuals determine if they are eligible to claim the Recovery Rebate Credit for missing stimulus payments. If so, they must file a 2021 tax return to claim their remaining stimulus amount. People can also use IRS online account to view their Economic Impact Payment amounts.

Both letters include important information that can help people file an accurate 2021 tax return. If the return includes errors or is incomplete, it may require further review while the IRS corrects the error, which may slow the tax refund. Using this information when preparing a tax return electronically can reduce errors and avoid delays in processing.

The fastest way for eligible individuals to get their 2021 tax refund that will include their allowable Child Tax Credit and Recovery Rebate Credit is by filing electronically and choosing direct deposit.

Awaiting processing of previous tax returns? People can still file 2021 returns
Rettig noted that IRS employees continue to work hard on critical areas affected by the pandemic, including processing of tax returns from last year and record levels of phone calls coming in.

"In many areas, we are unable to deliver the amount of service and enforcement that our taxpayers and tax system deserves and needs. This is frustrating for taxpayers, for IRS employees and for me," Rettig said. "IRS employees want to do more, and we will continue in 2022 to do everything possible with the resources available to us. And we will continue to look for ways to improve. We want to deliver as much as possible while also protecting the health and safety of our employees and taxpayers. Additional resources are essential to helping our employees do more in 2022 – and beyond."

The IRS continues to reduce the inventory of prior-year individual tax returns that have not been fully processed. As of December 3, 2021, the IRS has processed nearly 169 million tax returns. All paper and electronic individual 2020 refund returns received prior to April 2021 have been processed if the return had no errors or did not require further review.

Taxpayers generally will not need to wait for their 2020 return to be fully processed to file their 2021 tax returns and can file when they are ready.

2022 tax filing season begins Jan. 24; IRS outlines refund timing and what to expect in advance of April 18 tax deadline

Other tools coming soon
The IRS has created a special Advance Child Tax Credit 2021 page at IRS.gov/childtaxcredit2021, designed to provide the most up-to-date information about the credit and the advance payments.

The page already features a link to the Non-filer Sign-up tool. In the next few weeks, it will also feature other useful new tools, including:

An interactive Child Tax Credit eligibility assistant to help families determine whether they qualify for the Advance Child Tax Credit payments.
Another tool, the Child Tax Credit Update Portal, will initially enable anyone who has been determined to be eligible for advance payments to see that they are eligible and unenroll/opt out of the advance payment program. Later, it will allow people to check on the status of their payments, make updates to their information and be available in Spanish.

Advance Child Tax Credit Payments in 2021 | Internal Revenue Service Find details about the advance Child Tax Credit payments, including how to get them or stop getting them.

IRS unveils online tool to help low-income families register for monthly Child Tax Credit payments
IR-2021-129, June 14, 2021

WASHINGTON — The Treasury Department and the Internal Revenue Service today unveiled an online Non-filer Sign-up tool designed to help eligible families who don't normally file tax returns register for the monthly Advance Child Tax Credit payments, scheduled to begin July 15.

This tool, an update of last year's IRS Non-filers tool, is also designed to help eligible individuals who don't normally file income tax returns register for the $1,400 third round of Economic Impact Payments (also known as stimulus checks) and claim the Recovery Rebate Credit for any amount of the first two rounds of Economic Impact Payments they may have missed.

Developed in partnership with Intuit and delivered through the Free File Alliance, this tool provides a free and easy way for eligible people who don't make enough income to have an income tax return-filing obligation to provide the IRS the basic information needed—name, address, and Social Security numbers—to figure and issue their Advance Child Tax Credit payments. Often, these are individuals and families who receive little or no income, including those experiencing homelessness and other underserved groups. This new tool is available only on IRS.gov.

"We have been working hard to begin delivering the monthly Advance Child Tax Credit to millions of families with children in July," said IRS Commissioner Chuck Rettig. "This new tool will help more people easily gain access to this important credit as well as help people who don't normally file a tax return obtain an Economic Impact Payment. We encourage people to review the details about this important new effort."

The Non-filer Sign-up tool is for people who did not file a tax return for 2019 or 2020 and who did not use the IRS Non-filers tool last year to register for Economic Impact Payments. The tool enables them to provide required information about themselves, their qualifying children age 17 and under, their other dependents, and their direct deposit bank information so the IRS can quickly and easily deposit the payments directly into their checking or savings account.