SJS Tax & Consulting Inc.

'Tis the Season for Important Tax Paperwork Keeping your records organized will help make sure you don't miss out on valuable deductions when it is time to file. Some documents to be on the lookout for:... - Wage and income statements (like W-2 or 1099-MISC) - Health Insurance statements (like Form 1095) - Proof of qualifying educational expenses (like Form 1098-T) - Mortgage interest statements - Retirement distribution statements - Investment account statements - Charity donation receipts

IRS Warns of New Identity Theft Text Scam Related to COVID Stimulus Payments Ever since Congress authorized the U.S. Treasury to send Economic Impact Payments (EICs, also called stimulus payments) to millions of Americans during 2020, scammers have been seeking ways to use the program to steal EIPs and personal information. A new scam involves using text messages and a fake website to steal taxpayers' identities. Americans targeted in this scam receive a text message stating ...that they have received a direct deposit of $1,200 from COVID-19 TREAS FUND. Further action is required The message includes a link to a fake website that looks like the official IRS Get My Payment portal for EIPs. (A link to the legitimate IRS portal is included below.) Instead of going only to the IRS through an encrypted connection, any personal data entered into the bogus website (such as Social Security and bank account numbers) goes directly to the scammers. If you receive any text message similar to the one quoted above, it is a scam DO NOT RESPOND. The IRS does not send unsolicited text or email messages of this sort. To help the IRS and federal law enforcement track and close down this scam, you can take a screenshot of the text message and email it to [email protected]. Include the phone number where you received the text, the number that it came from, and the date and time of the incident (including your time zone) in your email message. In addition, federal agencies are reminding all Americans that the IRS does not and never has accepted gift cards as a form of payment for any tax-related purpose. Anyone claiming to represent the IRS who requests payment in gift cards is a scammer. Hang up immediately to stay safe and protect your personal data. Official IRS Get My Payment Portal for EIPs: https://www.irs.gov/coronavirus/get-my-payment

2020 Charitable Contributions Deduction Did You Know? Ordinarily, only taxpayers who itemize deductions may deduct charitable contributions on their federal tax returns. However, the CARES Act allows many people who do not itemize to claim a deduction for 2020 cash contributions to IRS-approved charities. Tax deductions lower a person's tax bill by reducing taxable income. In general, individuals and couples who do not itemize deductions may deduct up to $300 for cash contr...ibutions made to qualifying charitable organizations in 2020. Qualifying organizations include many nonprofits dedicated to educational, religious, literary, and disaster and hunger relief activities. The IRS provides an online search tool (link below) to help taxpayers determine whether a particular charity qualifies to receive tax-deductible donations. As a reminder for those who do itemize deductions, the CARES Act also sets the 2020 cash contributions itemized deduction limit at 100% of adjusted gross income (AGI) for most taxpayers, a temporary increase from the usual limit of 60% of AGI. Qualifying 2020 cash contributions in excess of the limit may be carried over as deductions for tax year 2021. A tax professional can help you determine whether your contributions qualify for these special rules, and how to claim your deduction if so. IRS Charitable Organizations Search Tool: https://www.irs.gov/charitie/tax-exempt-organization-search

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Giving Tuesday and Charitable Donations - Did You Know? Giving Tuesday is an annual event that highlights charitable giving after Thanksgiving. If you are considering charitable donations, you may be able to donate to a Donor-Advised Fund (DAF) every two or three years instead of every year. This may qualify you to receive tax benefits now, allow the amount to grow tax-free, and the decision on which qualified charity to fund can be made later.... If you are 70.5 years or older, you may also be able to make a qualified charitable distribution (QCD) directly from your IRA this year. QCDs may allow the donation to be deducted from your income. A tax advisor can help you structure your charitable giving. The IRS has released a tool to make it easier to get information about qualified charitable organizations. The Exempt Organizations Select Check tool can be found at: https://www.irs.gov/charitie/tax-exempt-organization-search.

Paying Estimated Tax to Avoid Penalties Did You Know? With more and more people deriving income from a variety of sources, including side jobs, self-employment and gig economy work, the IRS has reported a substantial increase in the number of Americans who underpay federal income tax during the year. Underpayment can lead to an unpleasant spring tax surprise, including substantial penalties and interest charges. If a significant portion of your income is not subject to pa...ycheck withholding, you may need to make quarterly estimated tax payments to avoid incurring an Estimated Tax Penalty for 2020. Common income types that may necessitate making estimated tax payments include: - Business income, which includes rental income, as well as income from self-employment and gig economy work (working for a rideshare service, mowing lawns, etc.) - Royalties and grants, including grants in support of artistic or educational endeavors - Interest, dividend and alimony payments - Unemployment Insurance (UI) and Social Security benefits It is critical for those who have received UI benefits in 2020 to learn whether they must make estimated tax payments before the year ends. Many state unemployment agencies have not withheld taxes from the federal $600-per-week federal UI benefit that was paid under the CARES Act from late March through July, or from the temporary $300 weekly federal UI payment recently implemented by Executive Order. Therefore, even those who had tax withheld from their UI benefits may not have paid enough in federal taxes to avoid penalties. The IRS encourages Americans who have received any form of non-employee income in 2020 to do a midyear tax checkup, and begin making estimated tax payments immediately if necessary. The third-quarter estimated tax payment deadline was September 15, 2020, but those who missed the deadline can minimize penalties by making a payment as soon as possible. Fourth-quarter estimated tax payments are due January 15, 2021, although taxpayers may generally skip the fourth-quarter payment if they file a 2020 return and pay all tax due by February 1, 2021. In most cases, taxpayers will avoid 2020 tax penalties if their paycheck withholding and/or estimated tax payments for the year add up to at least 90% of their 2020 tax, or 100% of their 2019 tax, whichever is lower. A tax professional can help you determine whether you need to make estimated tax payments this year, along with when and how much to pay. IRS online payment portal: https://www.irs.gov/payments

Renewing ITINs - Did You Know? Individual Taxpayer Identification Numbers are used for taxpayers who are required for U.S. tax purposes to have a U.S. taxpayer identification number but do not qualify to get a social security number. If you use an ITIN, you should check if it expires this year. If it does, information about how to renew your ITIN can be found at: https://www.irs.gov/credits-deduct//how-do-i-renew-my-itin. Keeping your ITIN current helps avoid tax refund and... processing delays. Taxpayers who have not used their ITIN to file a federal return at least once in the last three years will see their number expire Dec. 31, 2020. ITINs with middle digits 90, 91, 92, 94, 95, 96, 97, 98 or 99, that were assigned before 2013 and have not already been renewed, will also expire at the end of the year.

Watch Out for Disaster-Related Charity and Tax Scams Did You Know? The IRS has warned taxpayers about new and ongoing scams targeting both people affected by natural disasters and those seeking to help disaster victims. In many of these fraudulent schemes, the scammers impersonate IRS representatives or charitable organizations. SCAMS INVOLVING BOGUS OFFERS OF TAX ASSISTANCE... Taxpayers impacted by federally declared disasters like hurricanes and wildfires may qualify for various forms of tax relief, such as deductions for casualty losses. Knowing this, some scammers are calling taxpayers in disaster-affected areas, claiming to represent the IRS. They may say that they can help people get tax refunds or file claims for their losses. DO NOT give any money or personal or financial information to these scam callers. The IRS generally does not call taxpayers out of the blue about tax relief programs. Hang up on any unknown callers who say they can offer you disaster-related tax assistance. What to DO: To learn whether you qualify for tax relief or to seek help with other disaster-related tax issues like reconstructing lost records, call the IRS disaster assistance line directly at 866-562-5227. SCAMS INVOLVING BOGUS CHARITIES Unfortunately, many scammers try to prey upon generosity by posing as representatives of charitable organizations that help people affected by disasters. These fake charities may have official-looking websites with names similar to legitimate charities, making it difficult for consumers to spot the scam. DO NOT make an over-the-phone contribution without first making sure that the charity is legitimate. Also do not donate using forms of payment that cannot be tracked, such as wire transfers, gift cards or signing over a tax refund or stimulus check. Most importantly, do not give out personal information like your Social Security Number (SSN) or bank account numbers. What to DO: Ask for more information so you can check up on the supposed charity. One of the best ways to determine whether the caller is a scammer is to ask for the charity's Employer Identification Number (EIN). You can then search IRS records of reputable charities by entering the EIN into the Tax Exempt Organization Search Tool (link below). If you determine that it is safe to donate, pay by check or credit card so you will have a record of the payment. You may also wish to ask the caller to direct you to the charity's website, so that you can donate through a secure online portal rather than over the phone. IRS Tax Exempt Organization Search Tool: https://apps.irs.gov/app/eos/.

Social Security Tax Deferral May Change Your Withholding Did You Know? An Executive Order issued in August allows U.S. employers the option to defer collection of the employee's share of Social Security tax between September 1, 2020 and December 31, 2020. The employee's share of this tax makes up the majority of paycheck withholding labeled as FICA on most worker pay stubs. Importantly, the Executive Order only authorizes DELAYED collection, rather than an actual reduction ...or temporary elimination of the tax. Most employers that choose not to withhold Social Security tax during the specified four-month period will need to collect the deferred tax through extra withholding after January 1, 2021. In other words, employees of these companies will have less money withheld from their paychecks this fall (resulting in increased net pay), but their net pay may decrease for several months after January 1 due to makeup withholding. For this reason, many employers have opted to continue withholding all FICA taxes as usual. The simplest way to determine whether your employer might be deferring Social Security tax collection is to save your pay stubs from August, and compare them to your pay stubs during the fall. If you see no significant change in your FICA withholding and net pay, then your employer has most likely opted out of delayed withholding. On the other hand, a decrease in the withholding amount and increase in your net pay may indicate that Social Security tax has not been withheld. You can check with your company's payroll department to make sure. Some companies may offer employees the choice to individually opt out of deferred withholding. However, under the Executive Order, deferred withholding may be mandatory for military and federal government employees with incomes below specified limits. If your Social Security tax withholding is delayed under this program, you may wish to take steps now to prepare for a potential increase in withholding and decrease in net pay during early 2021. For example, you could set aside the extra money you receive each pay period this fall as savings. A professional tax and financial advisor can help you explore other options to ensure that you are prepared for any possible upcoming changes to your net pay.