Your 2024 Tax Season Cheat Sheet

Warning: This is a machine-generated transcript. As such, there may be spelling, grammar, and accuracy errors throughout. Thank you for your understanding!

Roger Harris: Hello, everyone. Welcome to a federal tax updates podcast. It's Annie and Roger and it's Happy New Year to everybody. So Annie happy New Year.

Annie Schwab: Thank you. Welcome to January. Welcome to tax season. Welcome to 2024. Here we are.

Roger Harris: Yeah. But we're going to talk about something we talked about all of 2023 because there has been some updates. We're here to talk [00:00:30] a little bit about primarily about the employee retention credit. And while you guys were hopefully taking some time off around the holidays and, uh, resting up for tax season, there were some significant updates on the IRC and there's actually some as we sit here and record today, there's some some current potential changes or activity. So it's we're going to talk. We're going to bring you up to speed on the old stuff. But there are actually some new [00:01:00] things that have happened since the last time we talked about IRC, which is like every time we do a.

Annie Schwab: Podcast, that's what it feels like. But we can certainly well, we won't go all the way back to the beginning, but we'll we'll bring you up to speed in the sense that this is something that started during the pandemic. Um, so you feel like it's it's always on our minds. We're always talking about it, but it's been around for a while. Um, and it was due to the pandemic, and the goal was to help businesses and help them fast. And so when you do anything that's super fast [00:01:30] and new and you're handing out money, um, there's wasn't a lot of guidance and it was fairly simple to claim the credit. Um, and there was a lot of money involved. So we saw that when big money's getting handed out, um, you know, you common common to have scammers and people trying to to beat the system. And so that's exactly what happened. We had, um, what we call IRC mills, which are these companies that would come in and aggressively, probably promote the [00:02:00] eligibility of businesses to claim the credit. Um, and as a result, we ended up with fraud. And then the IRS started audits. And, you know, we have the moratorium, which went into effect, I think it was in November. We had the moratorium, uh, sounds.

Roger Harris: Um, yeah, it sounds about right. Yeah.

Annie Schwab: Um, and then in December, we did get some guidance on how to withdraw claims. So if you had sent in a claim for IRC, um, there was a way to sort of withdraw it as long as you hadn't cashed [00:02:30] the money. Um, so to say. And so that it's just sort of been pure chaos. Can I say that, um, pretty chaotic, uh, like I said, a lot of money being passed around and moved around. Um, so we're kind of where we are today. Um, is the program is still available, right? It hasn't expired, so to say. So, I mean, people who maybe missed out on the IRC and do have valid claims can certainly submit the returns. [00:03:00] And by submit the returns that's filed, the 941 associated with the payroll for the period in which you paid employees during the pandemic.

Roger Harris: Yeah, but as we sit here today, the moratorium is still in place, so you can submit them. But, um, we're not really sure when they're going to begin processing them. So you can look back. This this started in theoretically, I guess you could say it was started in 2020. Mhm. Here we are starting 2024. We're still talking about it. We're still dealing [00:03:30] with it. Um it's been a problem for our, the practitioner community in terms of uh we had to first decide did we want to get involved with it and help our clients make the claims, uh, determine eligibility. And we thought if we didn't, we were kind of free and clear, and then all of a sudden, we were told that if we didn't know the validity of the claim or had a question about the accuracy of it, that we couldn't amend returns. And then we get into the [00:04:00] mills and the payback and all that. So it's been I don't know if it's a case study of how not to do something. When you pass a law or a case study of what a there's just a lot to learn from this. And maybe when it's all over and we'll talk about that, um. How to make sure these kind of things don't happen again, because we'll, we'll it's going to be a while before we know the, the real amount of money that has been distributed to people who, knowingly or [00:04:30] not knowingly, weren't entitled to it.

Roger Harris: And we're kind of still in the middle of it. And unless we talked about we had some, some changes. So just to kind of summarize and then we'll ask Annie to talk a little bit more about, uh, what came out there. But when someone comes to us now, um, as a taxpayer, small business taxpayer, I think the first thing we have to do is talk to them about, did you even receive or do you know anything about the employee retention credit? Because [00:05:00] if they didn't participate, there's still time theoretically to help them get it. So you might go down that path. If they say they received it, then you've got to decide, well, should they received it or should they not have received it? If they received it, then you've got amended returns to do. If they legitimately received it, you have amended returns to do if they. Didn't receive it legitimately. You now have two [00:05:30] choices to based on whether they receive the money or not receive the money if they have yet to receive the money. And we talked about this on an earlier podcast, but we'll touch on it again. There is a way to, uh, withdraw that claim.

Roger Harris: Uh, as.

Annie Schwab: Long as you're having cash, the check. So even if you're holding the check, you haven't.

Roger Harris: Cashed the check.

Annie Schwab: You can, you know, void the check. But as long as you haven't cashed the check, then technically. And even if you're under audit and it's not finalized, there is a way to withdraw [00:06:00] the claim, right?

Roger Harris: No you can't, you can't. If you're engaged in fraud or you've been notified by the IRS that there's problems. A lot of this stuff doesn't apply. It's not a I'll use this firm, not a get out of jail free card if you're in big trouble because you've committed fraud. But assuming that you legitimately have had a change of heart and you're not sure you're eligible as long as the money, I don't know how many people didn't cash the checks when they got them. I think in most cases they [00:06:30] probably haven't received the money yet, but you could withdraw the claim now that left open for a lot of us. Well, what about all the people who actually receive the money and cash the check, thinking I'm going to be kind to all these business owners, thinking that they were entitled to it, and then they come to you, the tax practitioner, and you ask the questions and determine, well, you know what? You really weren't entitled [00:07:00] to it. We were waiting for months to figure out what could we do with those folks and the service. Kept telling us they were going to come up with something. Recognizing the fees that were paid and all the challenges that were out there. Um, and they finally gave us that answer. So, Annie, this was right around Christmas, I think it was on the 21st of December when we actually got this. [00:07:30] So what did they tell them? What did they tell us we could do in that case?

Annie Schwab: So it was the 21st when the IRS came out with the announcement. And basically they put together what's called an IRC voluntary program. And what that means is you can basically raise your hand and say, I didn't deserve this money. I, you know, I would like, you know, please forgive me. And here I will pay back 80%. So 80% of the money that would have been that was awarded through IRC claims [00:08:00] would need to be paid back. And I do think that's a fair number. Um, you know, the majority of people have probably spent the money, so paying back 80% of something you don't have anymore is doesn't sound so fair. I guess I should say. Yeah.

Roger Harris: Well, it's better than having to pay 100. That is true. That is.

Annie Schwab: True. Have. And we did see most of the mills. Um, they were, you know, charging about 20%, 25%. So the 80% to me seems reasonable. And then [00:08:30] of course, there are installment options available for taxpayers who who have spent the money. Um, yeah.

Roger Harris: Yeah, I was going to say, you know, and some people let's, you know, there can be winners in this. Let's say you did it yourself and you didn't pay a fee. Um, you still get the 80% correct. So that's just the service was trying to find a number. They didn't want to have to negotiate individually with each individual person. And, um, you know, if you paid 30, you lost. If you paid [00:09:00] ten, you win. So it's 80. That's that's.

Roger Harris: It.

Roger Harris: That's the number. It's not really tied to what the fee was that you paid. So that's, that's the that's the program 80%. So they'll be winners and losers. Um, but that's the way it is.

Annie Schwab: And in that guidance we did learn how to go ahead and, you know, raise your hand and voluntary pay voluntarily pay it back. Um, and it's something called form 15431. [00:09:30] So it's a form. It basically is an IRS one pager. It's a form that would get filed for each period it is filed. So that is something that can be done. Um, the big the big kicker here is that this program ends March 22nd. So there's what, two months ish of time that you have to talk to clients, um, kind of determine exactly where they fall in this. Um, and after March [00:10:00] 22nd, we'll have to see if they maybe they'll extend it. I, you know, I don't know, um, but they.

Roger Harris: Don't seem to be interested in extending it. This is your window.

Roger Harris: That's your window.

Roger Harris: That's coming during tax season. Not the best time of the world to have to do it.

Roger Harris: They gave you three months, though, from.

Annie Schwab: December 20th 1st to March 22nd basically. So.

Roger Harris: And that form is going to require you you know, you can put multiple quarters on it, but you don't just send in one lump sum. You have to go back and basically deal with each of the 940 [00:10:30] ones that you amended and, and basically show them pretty much what you put on the 941, uh, but reversing.

Annie Schwab: Right. And it does ask for, um, you know, they are collecting the names and contact information for the, you know, if you paid somebody to assist you with this, whether it be a mill or just something else. So they are obtaining information. Um, so perhaps we'll see additional audits and, and.

Roger Harris: Yeah. I mean, they want to know. One of the [00:11:00] questions on the form is who prepared the original 941 x. And certainly what they're looking for is if they get millions of these forms from one person, uh, or highlighting one firm or one group of people who did it, and then they're probably going to go find those people and have a discussion with them.

Roger Harris: I'll sit down.

Roger Harris: And he mentioned it's electronic. Now, this is not going to be something you're going to find in your tax software. And you don't e-file it like you do tax returns. You [00:11:30] have to submit it through a portal with some attachments. I mean, the rules are all on the IRS website.

Roger Harris: The instructions are pretty clear.

Roger Harris: Yeah, I mean, it's if you have now some of the practical problems is that we don't know what the Mills gave taxpayers in terms of copies of what they did. And you're going to need those original 941 X's to complete the form. So if for whatever reason, your client [00:12:00] wants to take advantage of this program but doesn't have access, you're going to have to while you're turning the mill in on the form, you're going to have to go back to the mill.

Roger Harris: If they're their copies of.

Roger Harris: Yeah, hopefully they're still around. Uh, though I got an email, I think, today. Asking me if I had gotten my IRC. I got a.

Roger Harris: Phone call last week. Yeah. They're still after us. Still out there?

Roger Harris: That's true. Still out there. So? So it's it's. I don't know any. What do you think? I think 80 I [00:12:30] think the program, all in all is pretty. Yeah.

Annie Schwab: And so they did spell out a couple of other important, uh, tips about it. And that's that they're not going to calculate interest and penalties so that you're not doing some sort of calculation on 80%, but then you got to owe an extra. Blah blah blah blah, blah. So it's just the 80%, um, they're telling you, you do not need to go back to the income tax returns associated with those periods and adjust wages so you don't have to go back and amend 2020 and 2021.

Roger Harris: Which [00:13:00] even though.

Roger Harris: You only gave back 80, well, 80% of it, that other 20%, you don't have to amend the return.

Roger Harris: Because no, no.

Annie Schwab: It is not. The 20% will not be considered taxable income. And so there are steps to be, like we said, steps to follow. The instructions are out there on the website. The biggest thing is, you know, don't put your head down in the middle of tax season and think come April 15th, I can start handling these kind of claims, these voluntary claims, because it does end on March 22nd.

Roger Harris: Yeah. [00:13:30] And again, I think that's going to be a firm date. Uh, I think in the IRS's eyes they think that, you know, we're we're just forgiving 20%, I'll say out of the kindness of their heart, though, I think they're they're trying to be responsive to to the concerns that practitioners brought up during this process is, you know, you want us to get these people to come forward, and yet they paid these huge fees to third parties. And so, um. You [00:14:00] know, it's not fair to make them pay back money and then have to go chase down. So I think the service tried to to be accommodating of that fact. And again, there's going to be winners and losers. The 80% is going to be a home run for some. Now you mentioned installment agreements. These aren't automatic like we're used to in certain cases. Um, you're going to have to to they want the money back. It's basically what it comes down. Yeah.

Annie Schwab: You have to request the installment plan, [00:14:30] so to say. But but the collection of the funds, they're going to collect the 80%.

Roger Harris: Yeah. Yeah, they they really want you to. This is designed to work for those people who can send the 80% in, uh, with the form, though, they will accommodate and recognize the fact that, uh, if you don't have the money, that you've spent it somewhere. And again, a lot's going to depend on how long ago did you actually get this money, right? I mean, if you got this money back in [00:15:00] 2021 or 2022, if you really needed it, it's probably gone now.

Roger Harris: That's the unfortunate thing. I mean.

Annie Schwab: The program was designed to keep people afloat during the pandemic by keeping people working, paying wages. And so there was good intention there. Um, and it's and like you said, there there are probably some that knew what they were doing was kind of iffy or maybe skirting this or that, but a lot [00:15:30] of people truly believed what the mills were saying, and, you know, filed these returns and got the money and didn't think much about it until the money was spent. And here we are. So it's it's hard it's hard to have that conversation with your clients to, um.

Roger Harris: And there's going to be situations. I mean, it's also funny. Well, it's not funny. But as you see how this has evolved, you realize why the, uh, [00:16:00] withdrawal announcement came first, because you're going to sit there and have a client come to you and say, well, you told me to withdraw my claim, but if I had waited and let them pay it, I could have turned right around and given 80% of it back, I would have made 20%. Well, yeah, that's that's true.

Roger Harris: But you don't have a crystal ball.

Roger Harris: Yeah. I mean, but at the time we're doing the withdrawal, um, [00:16:30] we didn't know these rules, so. Yeah, all of us, if we had hindsight. And so now somebody's going to say, how do I withdraw the withdrawal? So I get the money.

Roger Harris: Oh, I don't think.

Annie Schwab: That's an option.

Roger Harris: On the plate.

Roger Harris: I can tell you they have they have not given us any guidance on how to withdraw the withdrawal. So I can get the money and then then send 80% of it back and say, thank you very much, because in some cases, a lot of money. Um, now remember, all of these cases [00:17:00] are not ways if you just fraudulently did.

Roger Harris: This knowingly, uh.

Roger Harris: Knowingly did it, that this works. And and it's also, I mean, if you think about it now, when someone comes to you and that got the IRC, you still are not going to have probably the answer that some people want. Because number one, if it was legitimate, we have to amend the returns that's in the law hasn't changed. If you are iffy about [00:17:30] it and say, I haven't got it yet, you've got withdrawal. If you got the money, you got the 80% payback. And then there's the person who says, well, I just want to kind of put my head in the sand and see what happens. That's not an option. And remember and remind them. And this is where this, um, new program is. And the deadline is helpful that if you sit around and ignore and contemplate and think about taking my chances, that maybe I won't get [00:18:00] caught, and then eventually you do get caught if it's after March 22nd or they think you did that intentionally, that program is not going to be available for you.

Annie Schwab: You're now back at 100% instead of 80%, with.

Roger Harris: Penalties and penalties and penalties and with penalties.

Roger Harris: And interest. So so it's we have tools. We don't we're still going to have a few people who aren't going to want to comply. They're going to want to try to do things their way and take their chances. And like I said, [00:18:30] the bills are still out there promoting. And, um, there is one interesting update that came this week because I was getting ready to say, and if you have legitimate claims, you should go ahead and file them. And there's still a lot of claims sitting at the IRS.

Roger Harris: There's a backlog waiting.

Roger Harris: To be processed. But as we sit here and record this podcast today, we're getting close to, I think it's next week that the government theoretically runs out of money. And every time that happens, Congress has all these, you [00:19:00] know, battles with each other on how to fund the government and how to pay for the government. And, um, two things that have come up during these negotiations that impact us. One's not related to Ercs, but that the first thing that happened is in the first agreement. And I say agreement until something's signed. It's not an agreement, but at least.

Roger Harris: A draft.

Roger Harris: On theory they've agreed to. It is, if you remember, the IRS got a lot of money in the Inflation Reduction Act, which [00:19:30] was passed primarily by the Democrats. Um, that made the Republicans angry. So when the Republicans took over the House, they wanted to claw back some of that money the IRS got. So they did they were successful in getting 10 billion in the current year and 10 billion in next year. In this current agreement, they get the whole 20 in the first year. That was one of the things that they negotiated. Now there's some discussion. This is all on the House side. And the Senate, uh, there's a couple of senators, [00:20:00] and it's bipartisan, by the way, but there's a couple of senators talking to the article I read said, uh, Commissioner Werfel was involved in the discussions, and they're looking at ways of, I guess, terminating the IRC, uh, to, uh, save money. Now, I don't know. First of all, I don't know if that'll be included. I don't know if that's really what they're talking about. But there the article said they're looking at the IRC program and the fraud and and [00:20:30] in Washington, they'd get all these savings if all of a sudden I don't know if that means they wouldn't process the forms that are sitting there or they won't process any new forms or what, but they're looking for savings by canceling the employer retention credit or modifying the employee doing something to it, doing something to it.

Roger Harris: Now again, that's just talk as we sit here today. But anytime you get. Well, first of all, you have Republicans and Democrats [00:21:00] on the Senate. So that's that's a positive sign if you want something to happen. But then you have to go to the house and it can be completely different. So everything we're saying could dramatically change if they make another change that that wasn't contemplated. So that's kind of an update on where we are. Uh, before we move into something that I know you want to talk about, uh, and explaining about protective claims, is there anything in the voluntary program that we. I'm trying to make sure we haven't forgot every forgotten anything [00:21:30] about?

Roger Harris: We said about.

Annie Schwab: Penalties and interests. March 22nd, 80%. Um. The 20% is not taxable income. You don't have to amend the returns. I would just go just read the instructions carefully as to submitting that form the 14. I'm sorry, the 15 for 31 for each period through the online portal. Um, I do know that there were 20,000 letters denied um, claims [00:22:00] and those were just, you know, sent out for people who, for example, were not even in business during the pandemic and somehow thought they could claim the IRC. So I know that is in, in the works. Um, so you might get a client or see one of those. There's also, I think it's $100 million in withdrawals, um, that have already been processed and that is at least two weeks old. So, um, that number is that number has grown. So we'll have to wait and see what the stats [00:22:30] look like. Um, how many, you know, voluntarily do this and what the numbers actually come out to be. And like you said, I don't think we're going to see the real impact or effect that this program has, has had, um, for several years. I don't think we'll see it.

Roger Harris: Yeah. Because, you know, there's going to be well, again, you've got people who don't know about it, who aren't aware of it, maybe would have done it had they been aware of it. You've got some people who consciously aren't going to to do it. Um, [00:23:00] you mentioned the $20,000 letters. If you've gotten one of those letters that basically the IRS has determined that you aren't eligible, uh, because they're finding businesses that had no employees.

Roger Harris: Right? They're finding or not in business or.

Roger Harris: Ein numbers that, you know, businesses didn't even exist back when.

Roger Harris: This was a good try, though. So if you.

Roger Harris: Get one of those, yeah, this program doesn't qualify if you're in that group there. So they're trying to be, uh, proactive. [00:23:30] And that's one of the reasons that it's taking longer now to uh, well, one of the questions let me let me step back. You've got to furnish some documentation with this. Obviously, uh, one of the questions was when we ask about, uh, if and when they. Except new returns in during the moratorium. Would they require more information? And they decided not to require it on the application, but they are [00:24:00] going back to businesses for more information based on the claim. If they see something there that they think is.

Annie Schwab: Yeah, this is going to go on and on and on, I.

Roger Harris: Feel oh yeah.

Roger Harris: Yeah, no, it's going to go on and on and on. Because now you would assume every audit that is going to, to come, uh, for a business, if they got IRC, that's going to be a big part of the, uh, the audit process is to examine the IRC, [00:24:30] which is a slick little intro into our next topic, because let's think about this situation that we're all probably sitting there thinking, okay, I get the money. I think I'm, I'm entitled to it. Uh, and I have, in fact, amended my returns and given you some of the money back. Right. Then I get an audit and you determine I wasn't eligible for it at all. So first of all, now I got to give you 100% of the money [00:25:00] back.

Roger Harris: And I've.

Roger Harris: Got to pay penalties and.

Roger Harris: Interest and.

Roger Harris: And and what about amending those, those returns that I've amended? Maybe the statutes run out. Oh, and that's another thing, uh, in the current discussion, is to extend the statute that the IRS can use to audit IRC claims that's going on right now. So that might change. But going back to the original problem. So I've amended these returns thinking I was entitled to the credit. [00:25:30] I now get an audit. I have to pay all the money back. Plus penalties plus interest. And now I want to go back and amend the returns and get the tax I paid on the returns back. But the statute has run out. Where am I?

Annie Schwab: You're stuck. Unless you prepared a protective claim. And this is not something new. Protective claims have been around. This is not the result of IRC. This is not part of any sort of pandemic relief, so to say. But you have a right [00:26:00] if you have a right to a refund that's contingent on future events, something that's you can't determine by filing a protective claim, um, it allows you to basically preserve the right to go back to that. And it's a very simple I mean, it's a piece of paper. It's something in writing that is signed, that has name contact information, ein, and briefly identifies what the situation is, what the contingencies are. Um, basically alerting the IRS of, hey, [00:26:30] the nature of this claim is as such that something in the future determination and the future decision or ruling or something of the future could change what I have previously recorded. Um, you do have to say the years, but you don't have to do any calculations or put like dollar amounts or anything like that. And so if you're, if you're unsuccessful, like Roger said, with an IRC audit, it does get filing a protective claim for refund to reverse that expense disallowance. It's basically the only way to preserve [00:27:00] your right to go back and get a refund for the reduction of wages that you did on the amended return. So all of that. So if I'm.

Roger Harris: Doing.

Roger Harris: So, if I'm doing an amended return and I'm kind of questioning the accurate, well, not the accuracy, the validity of the claim because I would do this when I'm amending those returns.

Roger Harris: Correct.

Annie Schwab: So it does get filed with the amended 1040, um, or the amended business return, so to say. Um, and you would attach [00:27:30] that to the return. Um, there's several bullet points of basic information that needs to be that, like I've mentioned, um, and you would send this in to basically safeguard your the ability to go back and amend should the statutes run out.

Roger Harris: So the I need to be thinking about this when I'm doing those amended. Yes. In this case, we'll say ten 40s. Uh, and there's some reason to believe or some concern on I mean, I guess you could do it for everybody, [00:28:00] uh, because you don't know who's going to get.

Roger Harris: Right selected for audit. Yeah.

Annie Schwab: I at this point, I mean, I don't expect I know that there are people out there that still qualify, and there is still a window of opportunity to file these claims, and they certainly should. I mean, if you are eligible, you certainly should. I think adding a protective claim at this point to any of the ones you're doing is, is a good idea. I mean, it can't hurt. There's no harm in in doing it. So and like I said, it's fairly simple [00:28:30] to put pull together. So I would talk to your clients about that if you're.

Roger Harris: Yeah.

Roger Harris: And this has nothing to do with if about getting the money or this is only if at some point in the future your ERC claim or refunds are denied or credits are denied, and you have already amended that 1040 and paid that additional tax that was paid because you believed your ERC credits [00:29:00] were legitimate, now you find out they're not. Now the statute has run on, uh, the, uh, amended return. So it's a way to protect that for for certain people. It's again, it's not for every. No. First of all, everybody doesn't need to do it. Yeah. Uh.

Roger Harris: And I.

Roger Harris: Will. You did the claim and you're 100% certain they're accurate. I mean.

Roger Harris: It doesn't hurt.

Roger Harris: But you're never going to need it.

Annie Schwab: Yeah, and I will say, while we're talking about, you know, things that you can [00:29:30] do now that might be beneficial in the event of an audit. If you have clients that did use third parties or go to mills, have them reach out and get any documentation possible. Go back and get, you know, examples of how they calculated any any kind of statement or report or even engagement contract or so to say, because those mills are not going to be around forever. And so if a year from now you get an audit, make sure [00:30:00] that your clients are aware of the documentation that is needed. And it's, you know, it includes payroll reports and, you know, the copies of the 940 ones that were filed and the calculations, you know, whether you got a PPE loan or not. I mean, there are some specific things that they are looking at that they would want in order to verify that calculation. So, you know, if you come across a client who went elsewhere, you know, ask them to make sure they got all all the calculations, all the documents from [00:30:30] that mill as a just in case you don't want to have to be trying to find this stuff in a couple of years from now.

Roger Harris: No, because remember, the burden is still on you, the taxpayer, to to defend what's on your return, even though you engaged a third party. And, and I think I can say with some high degree of confidence that if Congress in this budget, uh, discussion kills the IRC program, it won't be long before the mills will disappear [00:31:00] and they'll be gone sooner than you can imagine. And moving on to whatever the next thing is that they'll try to show up under a different name with a different tax credit. So that Annie, that's really important advice. I think we've touched on this before, but if you have a client who got an IRC claim using one of these, third, I don't care who the third.

Roger Harris: Party, right.

Roger Harris: It doesn't have to be another. It can be anybody. Yeah. They need the documentation of [00:31:30] not just the calculation, but you got to have copies of if it's a government order, you know, all the things that that are necessary to qualify. And if you don't get them now, the chances of you digging those things up 18 months from now, 24 months from now, when your client gets an audit, uh, whether it's part of an IRC program or just part of a regular audit, and the IRC program comes up. I'm afraid you're never going to get it from these, [00:32:00] particularly the, the, the disreputable firms that are out there doing it. And I would hope that if they went to some legitimate other accounting firm to have it done, that they'd still be in business and they would furnish those to you. But just don't be don't ignore the fact, because the other thing is the engagement letter that a lot of these clients signed basically included language that the client was determining eligibility, not the third party mill. [00:32:30] So they're pretty much hooked.

Roger Harris: On both sides. Yeah.

Roger Harris: Yeah. So go ahead and go ahead and get that. So one of these days this PRC thing will end other than audits. So now I don't know that we're waiting on anything else. We know what to do. If it's legitimate. We know what to do if the money hasn't been paid yet. Now we have an option as to what to do if the money has been received. I guess there's always. [00:33:00] People can sue and do whatever they want to.

Roger Harris: I'm not expecting.

Annie Schwab: Much more at this point.

Roger Harris: Um.

Roger Harris: Unless Congress does something to to whatever they're contemplating to to cut the program off, whatever that means.

Roger Harris: Well, we'll probably.

Annie Schwab: Hear the moratorium get lifted.

Roger Harris: Um, yeah, I do think we'll get that. Have that date? Yeah. That's one date.

Roger Harris: We were promised it would be lifted, you know, in time for legitimate claims.

Roger Harris: To be filed.

Roger Harris: Filed? Because we have what, uh, the first [00:33:30] statute of limitations on 2020 is, uh, April.

Annie Schwab: 15th of 2024.

Roger Harris: So we do have some, some statutes running on those claims. So I'm sure we'll get we'll get that date and not announcement sometime soon. But I think now we're we're again that's not going to answer everybody's questions. But I think we're down to maybe facts and circumstances issues now like well I need an installment agreement. Well why what are the facts. How much can you pay. Yeah. So [00:34:00] those are going to be case by case. The IRS is not going to come out and tell you what that is. But I think we know all our options.

Roger Harris: I think so too.

Annie Schwab: I think the guidance on the 21st that came out, um, was pretty clear, pretty fair in my opinion. And I think I'm not, like I said, other than the moratorium date being lifted, I'm not expecting too much. We might get some stats and some figures and, um, you know, some articles about how many mills and how much money and how many withdrawals and how many voluntary claims. But [00:34:30] I don't expect, um, guidance that's going to change any of the process.

Roger Harris: Yeah. And the big thing is as as inconvenient as the March 22nd deadline may be as we begin to start a filing season. Um. It seems to be a firm date, so you really need. So you may want to communicate with your business clients. Because what if they don't show up in your office till March 23rd? So [00:35:00] you may want to put a.

Roger Harris: Client letter or.

Roger Harris: Something for your business clients or something to say, hey, if you got an ERC, you need to get in here. Uh, you don't want to come in on the 21st because there is some work to be done. But you want those. You want to prioritize those people in terms of trying to get them in your office. And, uh, again, if they got an ERC claim, it's a good way to get everybody.

Roger Harris: In because get them to show up on time. Yeah, exactly. Um, [00:35:30] well.

Annie Schwab: We've got a few.

Roger Harris: Minutes left.

Roger Harris: Yep. And there's other things going on in a filing season and a new year for that matter. Yeah.

Roger Harris: So.

Annie Schwab: So before we go, I do want you. I want to give you a few heads up. Um, we do know that tax season will begin on January 19th. It's usually the middle of January, so that date seems fairly normal to me. I wasn't shocked by that by that date. Um, and if you are in the business of preparing information returns like 1099 [00:36:00] and W-2s, just remember the deadline for those is the end of the month. And anyone who prepares or a client that needs to prepare ten or more, um, those need to be filed this year that is new for 2024. It came into effect the first of the year. So just keep that in mind. Um, if you're working on information.

Roger Harris: Returns and.

Roger Harris: That's aggregate, that's not ten W-2s and 1099. It's total.

Roger Harris: All together.

Roger Harris: Anything under that pretty low threshold.

Roger Harris: Very [00:36:30] low. Yes.

Annie Schwab: Yes for sure. Um, if you didn't catch this on a previous podcast, um, the 1099 K reporting, it's been extended and talked about and moved around and all kinds shifted in different ways. But for, for this year, um, for the 2023 filing season, we are still at that 20,000 or 200 transaction threshold. There was talk about moving it to 600. Uh, there's talks about all kinds of different [00:37:00] versions of this. But once again, um, we are still at our 20,002 hundred transactions for 2024. That threshold will drop to 5000. So just, you know, if clients are talking about, oh, I heard my Venmo is going to be sending me 1099 K or you know, I heard we're going to be getting all these, you know, 1099 from PayPal. And you know all of the above. You may I mean, you may they still may get.

Roger Harris: One get them. But the threshold this came [00:37:30] late in the year. Yeah it did. And a.

Roger Harris: Lot of the companies had already prepared all the.

Roger Harris: Work. Yeah.

Roger Harris: To prepare them. And you know they may say well to hell with it, I'll.

Roger Harris: Send it out anyhow. Yeah.

Roger Harris: So if that's the case, you need to acknowledge it and report it. And the IRS has told you what to do and to reconcile.

Roger Harris: Right. So yeah.

Roger Harris: So there's no requirement.

Roger Harris: But that doesn't mean you get one.

Roger Harris: Some won't show.

Roger Harris: Up.

Annie Schwab: So you may get some questions because that was on the media. And I know I know Venmo app has a spot now where you say if it was for services [00:38:00] or goods or whatnot. So I wouldn't be shocked if you didn't get a couple of questions about that this tax season. Um, and then obviously let them know that that threshold is dropping to 5000 for 2024.

Roger Harris: Right. And this will bring up one other thing that we all need to be a little more apparent. A lot of our, particularly our older clients like me, um, are used to getting everything in paper, and a lot of documents that are being distributed now aren't being mailed. They're being put up on a website where you have to go in, grab it, download it yourself. [00:38:30] So when people say, I didn't get the form or I don't, you know, you've been getting something for ten years. Um, you may need to tell them to go check a website or do something like that, because there could be a 1099 case sitting in a in a portal. Use Venmo. I'm not saying they're doing it, but, you know, there may have issued one and it's sitting somewhere up in a, uh, in your Venmo account. And the IRS got it. And they don't know to go look for it. So that's true. As a general rule, documents that have historically been distributed in paper, [00:39:00] uh, may not be sent by mail. They'll be posted somewhere for you to go download. And some people probably I'm sure they all got a letter telling them that or all got an email telling them that, but that doesn't mean they read it or paid attention to it.

Roger Harris: So a.

Roger Harris: Little tip to avoid a problem when they say I never got the.

Roger Harris: Form. That is a good tip. Good tip.

Annie Schwab: Um, so and one other thing I just want to mention, um, this boy reporting beneficial owner, um, reporting [00:39:30] requirement. We've spent some time on this. We're actually going to do a podcast. Um, our next podcast is going to be on this requirement, but it is something new for this year, and it's still kind of up in the air about how practitioners and clients should proceed and who needs to file this report. This is a report that's filed with FinCEN. It's not actually through the IRS. Um, so if you're hearing about this for the first time, it will affect, um, small business owners. [00:40:00] So tune in to our next podcast and we'll kind of give you a better understanding of what this is. Uh, and, and. Yeah. Roger, I think yeah.

Roger Harris: Because the rules are there. I mean, I've been there. The law is in force. There has been no delay, though. There's still problems with it. Uh, so we're all trying to figure out how to deal with something that, honestly is not designed to work well in our normal relationship with our small business clients. It's not [00:40:30] work. It's it's asking us to do things that we just historically have didn't have to worry about. So tune in to our next podcast. We'll get into more details, but you should should make sure you're aware of and at least be having a discussion with your client. Exactly. And, um, not let them get caught because it's a $500 a.

Roger Harris: Day penalty penalties.

Annie Schwab: Are steep. There is, um, and there's already some fraud associated with this. Um, FinCEN has come out to say make sure that you're working with a reputable company if you're [00:41:00] going to have them assist you with these filings. Um, so here come the fraudsters again. So probably.

Roger Harris: The same people.

Roger Harris: Just a different name. Probably. It could.

Roger Harris: Be fraud du.

Roger Harris: Jour. Exactly. Yeah, exactly.

Roger Harris: There's scam du jour, so. Well all right.

Roger Harris: Anything else? That's all I've.

Annie Schwab: Got for today. Um, that was a lot of information. Again, if IRC is not something that you are familiar with, we have talked about this on numerous podcasts. Um, so you can go look at, look us up, um, get gather some [00:41:30] more information and, and if you like us, share it. Tell your friends we're here to help. Yeah.

Roger Harris: Help us get some more listeners. Yeah. And, um, again, if you want more on the BOE reporting, it won't be up today if this podcast is up. But watch for the next one.

Roger Harris: Sounds good.

Roger Harris: We'll be back with. All right, Annie, thanks as always. My pleasure. Happy New Year again.

Annie Schwab: Happy tax season. Right.

Roger Harris: Yes. Yes everybody good luck with [00:42:00] tax season. And, um, we'll make it through this one just like we've probably made it through many more before. And as Annie said, if you like the federal Tax Updates podcast, tell your friends about it, like us, and tune back in next time for another federal tax update podcast.

Roger Harris: Thank you.

Roger Harris: Bye bye everybody.

Creators and Guests

Annie Schwab, CPA
Annie Schwab, CPA
Franchisee Operations Manager at Padgett Business Services
Roger Harris, EA
Roger Harris, EA
President at Padgett Business Services
Your 2024 Tax Season Cheat Sheet
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