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Friday September 30, 2022

Washington News

Washington Hotline

Phone Lines Maxed Out - IRS Promotes Online Help

The Internal Revenue Service has recognized that phone calls from taxpayers and tax preparers are maxing out their capabilities. In IR-2022-35, the IRS reminded taxpayers to go to www.irs.gov for assistance. The online tools, applications and resources are particularly important during this filing season.

There are eight options or applications that will help taxpayers file their 2021 income tax returns.

1. Free File — The quick and easy way to file tax returns for most individuals will be through Free File. The IRS Free File program is a two-decade partnership with tax software providers. The tax software is available for individuals who have 2021 earned income of $73,000 or less. There are also Free File Fillable Forms that are available for taxpayers with any level of income. Members of the military may benefit from a similar program called MilTax. All of these programs facilitate electronic tax return filings and direct deposit of tax refunds.

2. Interactive Tax Assistant — With the phone support lines clogged, millions of taxpayers will turn to the Interactive Tax Assistant. This program continues to be improved each year by the IRS. It will answer many questions about tax credits and deductions. The Interactive Tax Assistant is updated each tax season to cover the latest tax changes.

3. Identity Protection PIN — Taxpayers have an option to obtain an Identity Protection PIN (IP PIN). This six-digit number is especially helpful for taxpayers who are victims of identity theft. It prevents the tax fraudsters from filing your tax return using your Social Security Number. Because the IP PIN is known only to the taxpayer and the IRS, it helps identify you when you file your income tax return.

4. Free Tax Preparation — The IRS operates two major programs to enable people with incomes of $58,000 or less to file with free tax assistance. The program is also available for taxpayers with disabilities or who use English as a second language. Volunteer Income Tax Assistance (VITA) program centers are available in most large cities. Individuals who are age 60 and older may seek assistance through the Tax Counseling for the Elderly (TCE) program. There is a VITA/TCE Site Locator on IRS.gov to help you find the nearest location. VITA/TCE sites are staffed by volunteers trained by the IRS.

5. Local Tax Professional — Many taxpayers continue to use professionals to prepare their returns. The IRS website (www.irs.gov) has a searchable directory to find tax preparers in your area. The list can be sorted based upon their credentials and qualifications. There are also IRS tips on how to avoid "ghost" return preparers and other unethical individuals.

6. Online Account — Taxpayers may create an Online Account with many functions. With your Online Account, you can review your Advance Child Tax Credit and Economic Impact Payment amounts. You may also find your adjusted gross income from a prior tax return. This may be needed in order to complete your electronic filing on tax software programs. If you have made estimated tax payments or need a tax transcript, these records or services are also available.

7. Payment Plan — If you have a tax obligation, you can use the IRS.gov/payment plan section to set up a plan. You may also wish to make an Offer in Compromise if you are hopeful to settle your tax debt for less than the stated amount. A special qualifier tool can be used to determine whether you are eligible for an Offer in Compromise to lower your tax payment.

8. Where's My Refund? — A helpful section of the IRS.gov website is "Where's My Refund?" This tool helps taxpayers receive the most up-to-date information on their tax refund and is available on both IRS.gov and the smartphone app IRS2Go.

New Spearphishing Scam for Tax Professionals

As the tax season gains momentum, the Internal Revenue Service (IRS) warns tax professionals that there are new email scams to be cautious of. The IRS Security Partners review current scams and publish warnings. Thieves continue to try to steal client data and your identity as a tax preparer. With the stolen client data and your key information, the fraudsters are able to file and obtain substantial numbers of tax refunds.

A successful spearphishing scam has the subject line, "Action Required: Your Account Has Now Been Put on Hold." The email notes, "Tax preparers are required to apply security features to their Tax Pro account towards 2021 tax return processing." The email threatens the tax preparer with loss of his or her business. It continues, "Failure to update your account within the next 24 hours will lead to your account being terminated and you will be barred from filing tax returns for the 2021 tax season. Your access will be restored once you have updated your details."

IRS Commissioner Chuck Rettig stated, "Scams continue to evolve, and this one is especially sinister since it threatens tax professionals' accounts. Tax professionals must remain vigilant in identifying and staying clear of these IRS impersonation emails. A little extra care can protect tax professionals and their clients."

Many fraudulent emails claim to be from a tax software provider. They often display the logos of the most popular tax software providers and encourage the tax professional to click on one of the logos. When the professional clicks on the logo, malware is uploaded on his or her computer. More seriously, the malware may be added to the entire network of the tax professional.

The IRS warns tax professionals not to click on attachments from emails if they are not certain about the identity of the sender. If a scammer is able to upload malware on the tax professional's computer, he or she will be able to file fraudulent returns for all of the clients of that tax preparer.

If you suspect an email is from a fraudster, save it as a file and send it as an attachment to phishing@irs.gov. You should also notify the Treasury Inspector General for Tax Administration at www.tigta.gov.

Nonprofits Urgently Need More Staff and Volunteers

A coalition of Washington associations and large nonprofits sent a letter on February 14, 2021, to President Biden and leaders of the House and Senate from both parties. The letter highlighted the critical needs of nonprofits. A major challenge for nonprofits is a severe shortage of workers.

The letter notes there is a hope for a return in the near future to "normalcy," but America will still have an urgent need for nonprofit services. Charitable organizations help individuals "recover through education and healthcare, social services designed to help rebuild lives and careers and cultural and faith engagements dedicated to restoring hope, inspiration and trust."

A major problem for charities is that there is a dramatic shortfall of both workers and volunteers. The shortcoming is a reflection of the larger problem in the nation.

Nonprofits employed 12 million individuals prior to COVID-19. This workforce is the third largest industry group in the nation. By December 2021, the nonprofit employee numbers were down by 450,000 individuals.

Nonprofits also have a major salary competition problem. Over 79% of nonprofit leaders indicated that they were not able to fill job openings in the current competitive job market. In addition, 23% of workers explained that they were unable to find childcare and therefore could not return to work.

The nonprofit coalition urges a retroactive restoration of the Employee Retention Tax Credit. This refundable payroll tax credit would enable many nonprofits to hire and retain staff.

The retention of qualified candidates is crucial for nonprofits. Women are 66% of the nonprofit workforce and they have been disproportionately impacted by the lack of childcare. Therefore, the coalition strongly urges Congress to provide "robust funding to expand access to high-quality childcare."

The other serious shortfall for nonprofits is fewer volunteers. With the concern about the number of COVID-19 infections and the lockdown rules during much of the pandemic, millions of volunteers stayed home. It is now essential for nonprofits to encourage volunteers to return and provide crucial services to individuals in need. Congress could increase the volunteer mileage rate from the current $0.14 per mile to the business rate of $.58½ cents per mile. It could also develop "capacity-building grants for volunteer management."

The letter concludes, "It is important to note that programs and funds that remain operative, such as the State and Local Physical Recovery Funds under the American Rescue Plan Act, are vital lifelines to communities that are enabling governments, businesses, and nonprofits to identify and address immediate and long-term needs exacerbated by the pandemic."

Editor's Note: The pandemic has caused huge problems with nonprofit staffing. Large numbers of individuals have retired and the total work force is now well below the needed level. Because nonprofit salaries are lower than the private sector, there is serious turnover and large worker shortfalls.

Applicable Federal Rate of 2.0% for March - Rev. Rul. 2022-4; 2022-10 IRB 1 (16 Feb 2022)

The IRS has announced the Applicable Federal Rate (AFR) for March of 2022. The AFR under Section 7520 for the month of March is 2.0%. The rates for February of 1.6% or January of 1.6% 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 2022, pooled income funds in existence less than three tax years must use a 1.6% deemed rate of return.

Published February 18, 2022
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