AN EASING FOR PEOPLE WANTING TO SETTLE TAX DEBTS FOR LESS THAN WHAT THEY OWE.
Beginning with offers in compromise accepted by IRS after Oct. 31, 2021, the Service is no longer recouping a taxpayer’s refund for the calendar year in which an OIC agreement is reached to offset tax debts covered by that agreement. For example, assume IRS accepts a man’s offer to settle his 2017 and 2018 tax debts on Dec. 10, 2021. Under the new policy, IRS won’t grab the man’s 2021 refund, shown on his 2021 Form 1040 that he files next year, and apply it as a payment to his 2017 and 2018 tax liabilities, which are subject to the OIC agreement.
THE TAX BURDEN ON HIGH-INCOMERS HAS GONE DOWN, ACCORDING TO IRS STATISTICS.
The top 1% of individual filers paid 38.77% of all U.S. income taxes for 2019, the most recent year IRS has analyzed. That’s a drop from 2018’s figure of 40.08%. They reported 20.14% of total adjusted gross income, lower than the year before. Filers needed AGIs of at least $546,434 to earn their way into the top 1% category. The highest 5% paid 59.44% of total income tax and accounted for 35.93% of adjusted gross income. Each filer in this group had an AGI of $221,572 or more. The top 10%, those with AGIs of at least $154,589, bore 70.81% of the burden, while bringing in 47.30% of all individuals’ total adjusted gross income for the year. The bottom 50% of filers paid 3.06% of the total federal income tax take. Their share is so low because the figures don’t include Social Security tax payments and because many of them get substantial income tax relief through refundable credits. Filers in this bottom half of all individual taxpayers have AGIs below $44,269.
IN BUSINESS TAXES, THE STANDARD MILEAGE ALLOWANCE FOR BUSINESS DRIVING IS RISING FOR 2022.
The rate will increase to 58.5¢ per mile, up two and a half cents from 2021. If you use the standard mileage rate, you must reduce the basis of the vehicle by the depreciation component…26¢ per mile. Keep a contemporaneous and detailed log of the miles you drive for business. Business vehicle write-offs are an IRS audit red flag. The rate for 2022 medical travel and military moves is 18¢ a mile, up 2¢. The rate for charitable driving will stay put at 14¢ a mile. It is fixed by law. You also can claim the cost of parking and tolls. But you can’t add the cost of fuel or repairs. Nor can you use the rates if you depreciated or expensed the car. Expenses incurred before business starts aren’t deductible right away. An engineer bought vacant land with the intent to eventually farm and develop it. Although he spent time and money working on the land, began constructing a barn, and even came up with a business plan, he never got past the preparatory stage. All his pre-opening costs must be capitalized (Antonyan, TC Memo. 2021-138). Firms can elect to deduct up to $5,000 of their start-up costs in the first year that they actively engage in business, with the remainder amortized over 180 months.
A SPOUSE’S FORGED SIGNATURE DOESN’T NEGATE THE FILING OF A VALID JOINT RETURN, THE TAX COURT SAYS.
The husband and his son controlled the family’s finances. The wife viewed her marriage as traditional and stayed out of all financial matters. Her son routinely forged her signature on tax returns. IRS audited the couple’s 1040 and nixed a large loss deduction from one of the husband’s pass-through businesses. The wife claimed she never signed the 1040, so the jointly filed return isn’t valid and she shouldn’t be held liable for the additional tax due on her husband’s income. Tacit consent is sufficient here. The failure of one spouse to actually sign doesn’t always negate the intent to file a joint return by the non-signing spouse if the non-signor otherwise acquiesces or tacitly approves the document’s filing. The Court decided the wife was aware of her tax obligations and never objected to filing jointly. She just chose not to engage in tax matters (Soni, TC Memo. 2021-137).
CALLBACK TECHNOLOGY COULD BE COMING TO IRS’S PHONE LINES IN THE NEXT YEAR OR SO.
This would allow callers to leave their phone numbers for an operator to call them back, instead of waiting on hold. The president’s executive order on improving federal customer service mandates that IRS make callbacks available.
THE REVENUE SERVICE EXTENDS A TEMPORARY CORONAVIRUS-RELATED EASING:
Allowing electronic signatures on 43 paper-filed forms for which e-filing is not available. These forms may be mailed in with digital signatures. The relief was set to expire on Dec. 31, 2021, but IRS chose to extend it through Oct. 31, 2023. Filers can use most technologies to provide electronic or digital signatures.
IT’S NOT TOO SOON TO START THINKING ABOUT THIS YEAR’S TAX FILING SEASON.
2021 individual tax returns are generally due April 18. Individuals get three more days to file because of D.C.’s Emancipation Day and the weekend. Calendar-year regular corporations (C corps) also must file by April 18. The deadline for calendar-year S corporations and partnerships is March 15. Tornado victims in Ky., Ill. and Tenn. have until May 16 to file returns and pay taxes, including estimated tax payments otherwise due in Jan. and April. We hope the 2022 filing season won’t be as problematic as 2021. But don’t count on it. IRS still has millions of unprocessed 2020 returns.