The tax industry is a dynamic one. The number of changes, revisions, or new laws introduced by the IRS every year is arduous to track. Last year as well, the IRS inculcated numerous rules and regulations in the tax process.
Especially with the commencement of tax season 2020, there are some key pieces of information that the tax preparers and payers should be aware of.
Here is some top news of the tax industry from 2019 –
1. Updates in the procedure of changing the accounting method (November 8)
The IRS made some changes to the procedure by which the taxpayers can change their accounting method. They now need the consent of IRS, which they can obtain by filing Form 3115, which is Application for Change In Accounting Model. These changes will be effective for all forms filed on or after November 8, 2019.
2. The 2020 inflation adjustments and tax tables by IRS (November 7)
The tax season 2021 will see the standard deduction rates increase to $24800 for joint returns filed by married couples or surviving spouses, $12400 for unmarried taxpayers, and $18650 for heads of household. These adjustments are made in consideration of the inflation that is expected in 2020.
3. Taxpayers may elect to deduct disaster loss for preceding year (October 14)
The taxpayers that were affected by disasters can now deduct a disaster loss from the tax year before the year that the disaster happened. With the new regulations, the taxpayer can claim the loss on the previous year’s tax return in six months of the due date of filing the tax return of the disaster year.
For this, the IRS clearly defined the terms related to disasters, such as Federal Declared Disasters, Disaster Year, Federal Declared Disaster Area, and Preceding Year.
4. IRS issues new per-diem rates for 2019 to 2020 (September 26)
The new per-diem rates for business professionals traveling to away locations have been changed to $297 for high-cost locations and $200 for others within the Continental United States (CONUS). However, the rates for meals, i.e., $71 for meals at high-cost locations and $60 for others is unchanged from last year. These changes will be in effect for payment done to employees on or after October 1, 2019.
5. Draft of the revised W-4 Form issued for tax Season 2020 (June 1)
In light of the implementation of the Tax Cuts and Jobs Act, the revised W-4 Form (Employee’s Withholding Allowance Certificate) was released by the IRS with some essential revisions. The new draft eliminated the use of withholding allowances tied to the personal exemption amount.
However, the IRS informed the taxpayers that the current W-4 form would be used in tax season 2019.
6. Error in Schedule D worksheet (May 17)
The IRS identified an error in the Schedule D (Capital Gains and Losses) tax worksheet for 2018 and notified the concerned tax software companies. The major aberration was that the tax rates and brackets of taxpayers who had a 28% rate gain were not reflected in the tax calculation.
The IRS provided the correct worksheet along with the instructions and informed that all calculations done after May 15 should reflect the correct data.
7. IRS lowers the tax amount paid in 2018 (March 23)
The IRS lowered the amount of tax payment paid by the taxpayers in 2018 to prevent the underpayment of income tax penalty to 80 percent. Earlier, in January, this value was reduced from 90 percent to 85 percent. However, the taxpayers still showed concerns because they were having difficulty in filing taxes as per the Tax Cuts and Jobs Act.
8. IRS issues 2019’s Dirty Dozen (March 20)
Like every year, IRS issued the list of Dirty Dozen Scams for the year 2019. The scams, such as phishing, phone scams, and identity thefts, made to this year’s list as well. Other scams included inflated deductions, fake charitable contributions, false income declaration and documents.
These dirty dozen scams are guidelines to prevent tax scams during tax season 2020.
9. IRS can now charge a PTIN fee (March 5)
The federal appeals court on the 1st of March passed an order that gave IRS the authority to charge fees for allotting and renewing the PTIN (Preparer Tax Identification Number). In 2017, the charges for PTIN were suspended after the IRS lost the case in the court.
The court decided on the basis that resources were utilized by the IRS in order to provide PTINs to the preparer. Hence, it was considered as a service.
10. Paid Preparer’s Due Diligence Checklist Expands (January 24)
For 2018 income tax returns, the IRS expanded Form 8867 by including questions related to head of household and credit for other dependants in the Paid Preparer’s Due Diligence Checklist.
Under the Tax Cuts and Jobs Act, the penalty for not preparing the checklist has been increased to $2080 on one tax return.
Tax Season 2020 is Here
Since this year’s tax season has already started picking pace, the tax preparers should be in sync with all the developments of the last year. From PTIN charges to the dirty dozen, everything should be taken into consideration while filing.
Have we missed something? Please let us know in the comments section.
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