On August 27, the Internal Revenue Service (IRS) reminded taxpayers to use this end-of-summer opportunity to review their withholdings or tax payments. The IRS recognizes that most taxpayers receive a refund during the filing season. However, some taxpayers unexpectedly end up owing taxes. The individuals who owe taxes are frequently gig economy workers, individuals with a "side hustle" or anyone who earns income but does not pay withholding.
The IRS suggests that taxpayers go to IRS.gov and use the Tax Withholding Estimator to calculate what amounts should be paid during the year. The IRS also offered the following tips:
Finally, the IRS reminds taxpayers to check their withholding if there are five circumstances that apply. These changes are if the taxpayer has a new job or other employment that produces income, has received a substantial bonus or an increase in income, gets married, has a child or adopts a child or purchases a home. With any of these changes, a taxpayer should update their tax withholding.
In IR-2024-227 the Internal Revenue Service (IRS) reminded employers that there is an additional component for educational assistance programs that is scheduled to expire on December 31, 2025.
Many employers offer educational assistance programs. The programs usually pay for books, equipment, supplies, fees, tuition and other qualified educational expenses. The Consolidated Appropriations Act of 2020 expanded Section 127 to allow an additional benefit for employees. The employer is permitted to repay up to $5,250 each year toward an employee's student loans. Any amount over that limit would be taxable income.
According to an educational survey, the average federal student loan debt in America is $37,717. This is a substantial obligation and may require payments for many years by younger workers. According to a 2022 employee benefits survey, Generation X employees with student debt indicated that a student loan repayment assistance program would be important in encouraging them to remain with an employer. Millennials had a similar opinion that a student loan payment program would be a great employment benefit.
Not all student loans are qualified. To be eligible for the assistance, federal law requires that the loan was for the employee, a spouse or a dependent and must be paid within a reasonable time. The loan must be for the education of a student who was enrolled at least half-time in a degree-seeking program.
There are three specific requirements for an employer to consider with a student loan repayment program.
Editor’s Note: While the student loan payment benefit is scheduled to terminate at the end of 2025, many of these types of benefits may be extended by future legislation. With the number of tax provisions scheduled to terminate at the end of 2025, it is very likely that there will be major tax legislation next year.
On August 27, 2024, the Internal Revenue Service (IRS) and the Security Summit concluded a summer awareness campaign. In the final installment of the "Protect Your Clients; Protect Yourself" series, the IRS strongly encouraged tax professionals to use best practices to protect client information.
IRS Commissioner Danny Werfel stated, "Tax professionals remain a tempting target for identity thieves and cybercriminals. They face countless attacks from those hoping to harvest valuable personal and financial information that can be used to file an authentic-looking tax return and slip through the tax system’s defenses. By taking some basic steps, tax professionals at firms both large and small can protect their clients and protect themselves from these relentless security threats."
The IRS acknowledges that the scam artists have steadily become more sophisticated. There are organized groups who have diligently studied the psychology of tax professionals and the most effective methods for gaining entry to their computer systems. The organized scammers have been successful with thousands of victims and tax professionals must be aware of the skill and expertise of these fraudsters.
Tax professionals are reminded to make certain that their staff are following the Security Six: anti-software, firewalls, backup software or services, encrypted drives, multi-factor authentication and virtual private networks. If your clients obtain an IRS Identity Protection PIN, they should be cautioned to share that only with their tax preparer. Tax professionals should be careful not to store any client IP PINs on their computer systems. The IRS reminds tax professionals that it will not call, email or text taxpayers or tax professionals to request an IP PIN. If you receive this request, it is from a fraudster.
Any security breaches should be reported to the IRS Stakeholder Liaison. With immediate reporting, the IRS is frequently able to block fraudulent returns filed with your client names. The IRS will also assist the tax professional in the recovery procedure.
The tax professional should also contact the appropriate state tax agency if fraud is suspected. In addition, it is important to understand the FTC data breach response requirements. A helpful document is IRS Publication 5293, Data Security Resource Guide for Tax Professionals.
The IRS has announced the Applicable Federal Rate (AFR) for September of 2024. The AFR under Sec. 7520 for the month of September is 4.8%. The rates for August of 5.2% or July of 5.4% also may be used. The highest AFR is beneficial for charitable deductions of remainder interests. The lowest AFR is best for lead trusts and life estate reserved agreements. With a gift annuity, if the annuitant desires greater tax-free payments the lowest AFR is preferable. During 2024, pooled income funds in existence less than three tax years must use a 3.8% deemed rate of return. Charitable gift receipts should state, “No goods or services were provided in exchange for this gift and the nonprofit has exclusive legal control over the gift property.”
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