Author: Alan Mendelson

Now is an excellent time to check your withholding. Even if you are getting a refund on your 2021 taxes, changes in your life could impact your withholding and taxes due on your 2022 income.

You need to update your withholding when there is a change in your job, your income, and your life. These changes are pretty obvious: you bought a house, or got married, or got divorced, and you’re paying or collecting alimony, or you had a baby, or your “baby” is now an adult and is no longer your dependent.

You might also want to change your withholding because you need forced savings. It surprises me that some taxpayers feel this way and welcome a big refund check because there are better ways to have forced savings.

The IRS form to change your withholding at work is the W-4. Get the form from your employer or on the IRS.gov website.

If you require forced savings, ask your employer if there is a company savings plan or a company stock ownership plan, or an IRA or 401(k) plan that might get you an additional employer contribution.

As of April 1st, the IRS reported that the average refund for the 2021 tax year was $3,226. That’s better than $60 per week, which taxpayers could have used, saved, or invested during the course of 2021.

Maybe $60 per week doesn’t ring bells for you, but $3,226 does? Having too much withholding is one of those personal decisions you need to make.

More importantly, avoid being under-withheld because that could trigger penalties and a big headache when tax time comes around.

If you have a tax issue, get professional guidance. Legal Tax Defense offers a free consultation on tax issues. Call us now to be connected to a tax attorney for your free consultation.

Disclaimer: Alan Mendelson is a well-known TV consumer news reporter who reports on tax issues. You should seek professional advice if you have tax questions or issues. 

If you have an unfiled income tax return there is the possibility that the IRS might owe you money. If the IRS does owe you the money you have to file a tax return to get it. And you have only a few years to get that refund — otherwise, the money stays with the IRS.

The IRS says that Unclaimed income tax refunds totaling almost $1.5 billion may be waiting for an estimated 1.5 million taxpayers who did not file a 2018 Form 1040 federal income tax return, but people must act before the April tax deadline, according to the Internal Revenue Service.

“The IRS wants to help people who are due refunds but haven’t filed their 2018 tax returns yet,” said IRS Commissioner Chuck Rettig. “But people need to act quickly. By law, there’s only a three-year window to claim these refunds, which closes with this year’s April tax deadline. We want to help people get these refunds, but they need to file a 2018 tax return before this critical deadline.”

The IRS estimates the midpoint for the potential refunds for 2018 to be $813 — that is, half of the refunds are more than $813 and half are less.

In cases where a federal income tax return was not filed, the law provides most taxpayers with a three-year window of opportunity to claim a tax refund. If they do not file a tax return within three years, the money becomes the property of the U.S. Treasury. For 2018 tax returns, the window closes on April 18, 2022, for most taxpayers. Taxpayers living in Maine and Massachusetts have until April 19, 2022. The law requires taxpayers to properly address, mail, and ensure the tax return is postmarked by that date.

The IRS reminds taxpayers seeking a 2018 tax refund that their checks may be held if they have not filed tax returns for 2019 and 2020. In addition, the refund will be applied to any amounts still owed to the IRS or a state tax agency and may be used to offset unpaid child support or past due federal debts, such as student loans.

By failing to file a tax return, people stand to lose more than just their refund of taxes withheld or paid during 2018. Many low- and moderate-income workers may be eligible for the Earned Income Tax Credit (EITC). For 2018, the credit was worth as much as $6,431. The EITC helps individuals and families whose incomes are below certain thresholds. The thresholds for 2018 were:

• $49,194 ($54,884 if married filing jointly) for those with three or more qualifying children;
• $45,802 ($51,492 if married filing jointly) for people with two qualifying children;
• $40,320 ($46,010 if married filing jointly) for those with one qualifying child; and
• $15,270 ($20,950 if married filing jointly) for people without qualifying children.

The tax year 2018 returns must be filed with the IRS center listed on the last page of the current instructions. Current and prior-year tax forms (such as the tax year 2018 Form 1040, 1040-A, and 1040-EZ) and instructions are available on the IRS.gov Forms and Benefits page or by calling toll-free 800-TAX-FORM. However, taxpayers can e-file the tax year 2019 and later returns.

Taxpayers who are missing Forms W-2, 1098, 1099, or 5498 for the years 2018, 2019, or 2020 should request copies from their employer, bank, or other payers. Taxpayers who are unable to get missing forms from their employer or other payers can order a free wage and income transcript at IRS.gov. Alternatively, they can file Form 4506-T to request a wage and income transcript.

A wage and income transcript shows data from information returns received by the IRS, such as Forms W-2, 1098, 1099, Form 5498, and IRA contribution information. Taxpayers can use the information from the transcript to file their tax returns.

Surprisingly, many taxpayers who have unfiled returns actually get a refund. Call us here at Legal Tax Defense if you have unfiled returns or other tax problems. We offer free consultations. Call now to speak to a tax attorney.

Disclaimer: Alan Mendelson is a well-known TV consumer news reporter who reports on tax issues. You should seek professional advice if you have tax questions or issues. 

The IRS has announced that it has sent out Letter 6475. Did you get yours? Letter 6475 will help you file your IRS return for 2021, and it could help you avoid costly delays with your tax return.  With the completion of special mailings of all Letters 6475 to recipients of the third-round of Economic Impact Payments, the Internal Revenue Service reminds people to accurately claim any remaining third-round stimulus payment on their 2021 income tax return as the 2021 Recovery Rebate Credit.

Through December 31, 2021, the IRS issued more than 175 million third-round payments totaling over $400 billion to individuals and families across the country. Most of the third-round payments were issued in the spring and early summer of 2021. The IRS continued to send plus-up payments through December if, after their 2020 tax return was processed last year, the taxpayer was eligible for additional amounts.

As required by law, the IRS is no longer issuing first-, second-, or third-round Economic Impact Payments. Instead, people who are missing a stimulus payment or got less than the full amount may be eligible to claim a Recovery Rebate Credit on their 2020 or 2021 federal tax return.

Most eligible people already received the full amount of their credit in advance and didn’t need to include any information about this payment when they filed their 2021 tax return. This includes the additional payments – called “Plus-Up” Payments – the IRS issued to individuals who initially received a third-round Economic Impact Payment based on information on their 2019 tax return and were later eligible for a larger amount based on information on their 2020 tax return.

Individuals may securely access their IRS Online Account to view the total amount of the third-round Economic Impact Payment issued to them. This information became available on January 15, 2022, under the Tax Records page in Online Account. For married individuals filing a joint return, each spouse will need to log into their own Online Account or review their own Letter 6475 for their portion of their total joint payment.

Individuals are encouraged to double-check their bank accounts – especially in the early spring and summer of 2021 – to see whether they received a third-round payment in advance last year.

If an individual did not receive a third-round payment – and their IRS Online Account shows a payment amount greater than $0, or they received Notice 1444-C or Letter 6475 indicating that payment was issued to them – they should contact the IRS as soon as possible to see if a payment trace is needed. Note that Online Account shows the most current EIP information, so if a payment was issued and returned to the IRS, the amount shown in Online Account might be less than what is shown in their Letter 6475.

Individuals do not need to wait until their trace is complete to file their 2021 tax return. When completing the Recovery Rebate Credit Worksheet or answering EIP questions in the tax software, taxpayers have two options:

• Use the amount on the Letter 6475 (or EIP 3 Amount from Online Account) to calculate the RRC amount on line 30. Contact the IRS to trace the EIP amount. Once the EIP trace is completed, the IRS and the taxpayer will receive notification of the results of the EIP trace (the account it was sent to and the amount or a copy of the cashed check).
  • If the trace indicates the taxpayer received the EIP amount, no further action is necessary.
  • If the EIP amount was not received by the taxpayer, the IRS will adjust the RRC amount on the tax return and issue a refund.
• Use the amount of EIP the taxpayer believes they received to calculate the RRC amount on line 30. If the taxpayer’s calculation does not match the IRS calculation, the processing of the tax return will be delayed, the RRC amount will be adjusted to match IRS records, and the taxpayer will receive a notice that includes a telephone number to contact if they disagree with the change to the tax return. If the taxpayer contacts the IRS and disagrees with the changes made, IRS will conduct a trace of the EIP, if necessary. Once the EIP trace is completed, the IRS and the taxpayer will receive notification of the results of the EIP trace (the account it was sent to and the amount or a copy of the cashed check).
  • If the trace indicates the taxpayer received the EIP amount, no further action is necessary.
  • If the EIP amount was not received by the taxpayer, the IRS will adjust the RRC amount on the return and issue a refund.

Individuals who made a mistake calculating the Recovery Rebate Credit and claimed an amount on line 30 for the 2021 Recovery Rebate Credit should not file an amended return. The IRS will correct the amount of the 2021 Recovery Rebate Credit and send a notice identifying the changes made.

If a correction is needed, there may be a delay in processing the return. If the taxpayer agrees with the changes made by the IRS, no response or action is required to indicate they agree with the changes. If the taxpayer disagrees, they can call the toll-free number listed on the top right corner of their notice.

For eligible individuals who didn’t claim a Recovery Rebate Credit on their 2021 tax return (line 30 is blank or $0) and IRS records do not show the issuance of an Economic Impact Payment, they will need to file a Form 1040-X to claim the remaining amount of stimulus money for which they are eligible. This includes individuals who may not have received the full amount of their third-round Economic Impact Payment because their circumstances in 2021 were different than they were in 2020.

Taxpayers who need to file an amended return to claim the 2021 Recovery Rebate Credit – even if they don’t usually file taxes – should use the worksheet in the tax return booklet to determine the amount of the credit. Enter the amount on the Refundable Credits section of Form 1040-X and include “Recovery Rebate Credit” in the Explanation of Changes section. Call us now to speak to a tax attorney.

Disclaimer: Alan Mendelson is a well-known TV consumer news reporter who reports on tax issues. You should seek professional advice if you have tax questions or issues. 

The tax circle never ends, and you can take that to the bank or, more correctly, send some money to the IRS.

April 18 marks the date that 2021 IRS tax returns are due for most taxpayers, and April 18 marks the date that the cycle begins all over again for 2022.

The Internal Revenue Service has sent out word that those who make estimated tax payments, such as self-employed individuals, retirees, investors, businesses, corporations, and others that the payment for the first quarter of 2022 is due Monday, April 18.

This will be their first quarterly tax payment.

Income taxes are a pay-as-you-go process. This means, by law, taxes must be paid as income is earned or received during the year. Most people pay their taxes through withholding from paychecks, pension payments, Social Security benefits, or certain other government payments, including unemployment compensation.

So those who are self-employed or in the gig economy need to make their own estimated quarterly tax payments.

Similarly, investors, retirees, and others often need to make these payments because a substantial portion of their income is not subject to withholding. Other income generally not subject to withholding includes interest, dividends, capital gains, alimony, and rental income. Paying quarterly estimated taxes will usually lessen and may even eliminate any tax penalties.

Exceptions to the penalty and special rules apply to some groups of taxpayers, such as farmers and fishers, casualty and disaster victims, those who recently became disabled, recent retirees, and those who receive income unevenly during the year.

If you have questions about your tax return. Call now to consult with a tax professional.

A tax professional can also help you understand how certain tax deductions are changed for 2022.

If you have a tax issue, Legal Tax Defense offers a free consultation. Call now to speak to a tax attorney.

Disclaimer: Alan Mendelson is a well-known TV consumer news reporter who reports on tax issues. You should seek professional advice if you have tax questions or issues. 

Here are the very simple step-by-step instructions to file for an automatic 6-months extension on your IRS paperwork.

Remember that this is an extension on your paperwork only and not an extension on any money you owe.

Also, remember you don’t have to file for an extension on your paperwork if you are “ten thousand percent absolutely positive no chance ever sure” that you will get a refund from the IRS for your 2021 taxes.

But just in case you are not “ten thousand percent absolutely positive no chance ever sure” that you will get a refund, send in the automatic extension form anyway so you can avoid some very expensive penalties.

The extension form is form 4868. You can download it from www.irs.gov and mail it in. But you can also have it sent online to the IRS through any number of online tax filing software companies at no charge and without a postage stamp.

Here’s an easy way:

1. Go to the IRS website www.irs.gov and on the home page, click on “file your taxes for free.”
2. On the page for “file your taxes for free,” click on the link for “ask for an extension to file.”
3. You’ll now be taken to a page that says, “everyone can file an extension for free.” This page is for free filing services that are restricted by income. But no matter what your income, you can still use it to file a free tax extension.
4. You will now see links to six companies offering free tax filing software. Choose a company. Register — and then follow their links to file the extension. You are under no further obligations.
5. You do not sign the extension form. You will receive a confirmation your extension was sent in. Keep the confirmation on your computer.

That’s it.

Your state government may have its own tax extension. Check with your state or ask your tax professional.

Always consult with a tax professional.

By the way, many people who waited for one, two, or three years to file a return have found out they were due a refund.

If you failed to file your tax return or owed the IRS money, call now to speak with a tax attorney.

Disclaimer: Alan Mendelson is a well-known TV consumer news reporter who reports on tax issues. You should seek professional advice if you have tax questions or issues. 

The Internal Revenue Service is reminding teachers and other educators planning ahead for 2022 that educators will be able to deduct up to $300 of out-of-pocket classroom expenses when they file their federal income tax return in 2023.

This is the first time the annual limit has increased since the special educator expense deduction was enacted in 2002. For tax years 2002 through 2021, the limit was $250 per year. This means that for people currently filing their 2021 tax returns due this year, the deduction is limited to $250. The limit will rise in $50 increments in future years based on inflation adjustments.

For 2022, an eligible educator can deduct up to $300 of qualifying expenses. If they are married and file a joint return with another eligible educator, the limit rises to $600. But in this situation, not more than $300 for each spouse.

Educators can claim this deduction, even if they take the standard deduction. Eligible educators include anyone who is a kindergarten through grade 12 teacher, instructor, counselor, principal, or aide in a school for at least 900 hours during the school year. Both public- and private-school educators qualify.

Here’s what’s deductible:

• Books, supplies, and other materials are used in the classroom.
• Equipment, including computer equipment, software, and services.
• COVID-19 protective items to stop the spread of the disease in the classroom. This includes face masks, disinfectant for use against COVID-19, hand soap, hand sanitizer, disposable gloves, tape, paint or chalk to guide social distancing, physical barriers, such as clear plexiglass, air purifiers, and other items recommended by the Centers for Disease Control and Prevention (CDC).
• Professional development courses related to the curriculum they teach or the students they teach. For these expenses, it may be more beneficial to claim another educational tax benefit, especially the lifetime learning credit.

Qualified expenses don’t include expenses for homeschooling or for nonathletic supplies for courses in health or physical education. As with all deductions and credits, the IRS reminds educators to keep good records, including receipts, canceled checks, and other documentation.

With the tax deadline just around the corner, the IRS reminds any educator still working on their 2021 return that they can claim any qualifying expenses on Schedule 1, Line 11. For 2021, the deduction limit is $250. If they are married and file a joint return with another eligible educator, the limit rises to $500. But in this situation, not more than $250 for each spouse.

Whether a return is self-prepared or prepared with the assistance of a tax professional or trained community volunteer, the IRS urges everyone to file electronically and choose direct deposit for any refund.

In addition, the IRS urges anyone with tax due to choosing the speed and convenience of paying electronically, such as with IRS Direct Pay, a free service available only on IRS.gov.

If you are unable to file your return on time remember you can file an extension form. Remember that this year the tax deadline dates are:

• Monday, April 18 for most taxpayers.
• Tuesday, April 19 for residents of Maine and Massachusetts.
• Wednesday, June 15 for most Americans who live abroad.

Educators who need help filing deductions for classroom expenses can call Legal Tax Defense now to connect with a Tax Attorney to resolve a tax problem.

Disclaimer: Alan Mendelson is a well-known TV consumer news reporter who reports on tax issues. You should seek professional advice if you have tax questions or issues. 

It’s time to start making arrangements to file for an automation extension if you’re unable to file your tax return by this year’s April 18 deadline. And there’s an easy, online option to file that extension and get more time to complete their return.

If you need more time to complete your return can request an automatic six-month extension to file. There is now a free online service for filing an extension form — and you can do it with the IRS website IRS.gov. An extension allows for extra time to gather, prepare and file paperwork with the IRS; however, you should be aware that:

• An extension to file a return doesn’t grant you an extension to pay their taxes — it’s on the paperwork only,
• You should estimate and pay any owed taxes by the regular deadline (it’s April 18th this year) to help avoid possible penalties and
• You must file the extension no later than the regular due date of their return, which again is April 18.

Individual tax filers, regardless of income, can use IRS Free File to electronically request an automatic tax-filing extension. The fastest and easiest way to get an extension is through the IRS Free File section on IRS.gov. Taxpayers can electronically request an extension on Form 4868. Filing this form gives taxpayers until October 17 to file their tax returns. To get the extension, taxpayers must estimate their tax liability on this form and should timely pay any amount due.

The IRS reminds taxpayers that a request for an extension provides extra time to file a tax return, but not extra time to pay any taxes owed. Payments are still due by the original deadline. Taxpayers should file even if they can’t pay the full amount. By filing either a return on time or requesting an extension by the April 18 filing deadline, they’ll avoid the late-filing penalty, which can be 10 times as costly as the penalty for not paying.

Taxpayers who pay as much as they can by the due date, reduce the overall amount subject to penalty and interest charges. The interest rate is currently four percent per year, compounded daily. The late-filing penalty is generally five percent per month and the late-payment penalty is normally 0.5 percent per month.

The IRS will work with taxpayers who cannot pay the full amount of tax they owe. Other options to pay, such as getting a loan or paying by credit card, may help resolve a tax debt. Most people can set up a payment plan on IRS.gov to pay off their balance over time. See our blog about this topic.

Certain eligible taxpayers get more time to file without having to ask for extensions. These include:

• S. citizens and aliens who live and work outside of the United States and Puerto Rico get an automatic two-month extension to file their tax returns. They have until June 15 to file. However, tax payments are still due on April 18 or interest will be charged.
• Members of the military on duty outside the United States and Puerto Rico also receive an automatic two-month extension to file. Those serving in combat zones have up to 180 days after they leave the combat zone to file returns and pay any taxes due.
• When the President makes a disaster area declaration, the IRS can postpone certain deadlines for residents and businesses in the affected area. People can find information on the most recent tax relief for disaster situations on the IRS website.

The deadline to submit 2021 tax returns or an extension to file and pay the tax owed this year falls on April 18, instead of April 15, because of the Emancipation Day holiday in the District of Columbia. Taxpayers in Maine or Massachusetts have until April 19, 2022, to file their returns due to the Patriots’ Day holiday in those states.

For anyone who needs help filing for a tax extension can contact Legal Tax Defense now to connect with a Tax Attorney to resolve your tax problem.

Disclaimer: Alan Mendelson is a well-known TV consumer news reporter who reports on tax issues. You should seek professional advice if you have tax questions or issues. 

Let’s get down to the nitty-gritty. The IRS does offer payment plans. Before we tell you about the payment plans be sure you discuss your options with a tax professional. Remember Legal Tax Defense offers a free consultation. Call 800-231-3321 for your free consultation with a tax professional.

Now, the nitty-gritty on the payment plans.

Most individual taxpayers qualify to set up an online payment plan with the IRS, and it only takes a few minutes to apply. Applicants are notified immediately if their request is approved. No need to call or write to the IRS. The IRS notes that online are processed more quickly than requests submitted with electronically-filed tax returns. If a taxpayer just filed their return and knows that they’ll owe a balance, they may be able to set up a payment plan online before they even receive a notice or bill.

There are two types of plans.

• Short-term payment plan– The payment period is 180 days or less and the total amount owed is less than $100,000 in combined tax, penalties, and interest. There’s no fee for setting one up, though interest and the late-payment penalty continue to accrue.
• Long-term payment plan– Payments are made monthly, and the amount owed must be less than $50,000 in combined tax, penalties, and interest. If the IRS approves a long-term payment plan, also known as an installment agreement, a set-up fee normally applies. But low-income taxpayers may qualify to have the fee waived or reimbursed. In addition, for anyone who filed their return on time, the late-payment penalty rate is cut in half while an installment agreement is in effect. This means that the penalty accrues at the rate of one-quarter-of-one percent (0.25%) per month, instead of the usual one-half-of-one percent (0.5%) per month.

Taxpayers who do not qualify for an online payment agreement may still be able to arrange to pay in installments.

There are other payment options.

If the IRS determines a taxpayer is unable to pay, it may delay collection until their financial condition improves. However, the total amount owed will still increase because penalties and interest are charged until paid in full. Taxpayers can request a delay by calling 800-829-1040.

Some taxpayers qualify to have their late-filing or late-payment penalties reduced or eliminated. This can be done on a case-by-case basis.

Some taxpayers qualify to settle their tax bill for less than the full amount due, through an offer in compromise.

I’ll always recommend talking to a tax attorney to discuss these and other options. Your free consultation with Legal Tax Defense is a great start. Call now to be connected!

Disclaimer: Alan Mendelson is a well-known TV consumer news reporter who reports on tax issues. You should seek professional advice if you have tax questions or issues. 

For many taxpayers paying taxes to the IRS can be very frustrating because you may not know where your tax dollars are going and you might be opposed to certain spending programs enacted by Congress.

For example, you might be opposed to having your tax dollars spent on National Parks and you’d rather have your tax dollars spent on school lunch programs. Unfortunately, you cannot choose where your taxes go when you file your tax return — with one exception.

That one exception is this: you can choose if you want $3 of your tax dollars to go to Presidential candidates for their campaigns. If you’re married filing a joint return you and your spouse have control over a total of $6.

So, do you want to divert $3 from the government’s general fund to Presidential candidates? The latest figures show only about 4% of taxpayers do want $3 sent to the candidates.

Years ago — many years ago — about 30% of taxpayers wanted money to go to the candidates. But that was decades before Facebook and Twitter and YouTube and I’m guessing the participation of taxpayers sending money to the candidates has dropped because we now have too much politics to deal with.

Anyway… you have that choice and that decision to make. Check the box on your tax form. It’s your only chance to tell Uncle Sam what to do with your money.

And here’s a choice that won’t cost you any money: call now and the tax attorney at Legal Tax Defense for a free consultation regarding your tax problems. Vote for a fair tax appraisal: call Legal Tax Defense now.

Disclaimer: Alan Mendelson is a well-known TV consumer news reporter who reports on tax issues. You should seek professional advice if you have tax questions or issues. 

The IRS has an appeals process. Here’s how it works. You can use the appeals process if:

• You received a letter from the IRS explaining your right to appeal the IRS’s decision
• You do not agree with the IRS’s decision
• You are not signing an agreement form sent to you

If those conditions are met then you can ask for the appeal conference or hearing.

In your appeal you must believe and then be able to do the following:

• IRS made an incorrect decision based on a misinterpretation of the law, check the publications discussing your issue(s)
• IRS didn’t properly apply the law due to a misunderstanding of the facts, be prepared to clarify and support your position
• IRS is taking inappropriate collection action against you or your offer in compromise was denied and you disagree with that decision, be prepared to clarify and support your position
• Facts used by the IRS are incorrect, then you should have organized records or other evidence to support your position

In addition to the ordinary appeal process, the IRS offers a mediation process that can resolve disputed issues more quickly.

The appeals process isn’t for you if:

• The correspondence you received from the IRS was a bill and there was no mention of an appeal
• You didn’t provide all information to support your position to the examiner during the audit
• Your only concern is that you can’t afford to pay the amount you owe

If you don’t meet the conditions above for having your case enter the Appeals process, contact the IRS employee you have been working with and see what help you can get.

Sound complicated? It is. Which is why making a phone call to Legal Tax Defense should be your first step when you have a tax problem. Call 800-231-3321 to speak to a tax attorney for free.

Sometimes you can handle your IRS issues on your own and if that’s the case Legal Tax Defense will give you the free information for your need. But if you need more help with your tax issue, Legal Tax Defense has enrolled agents, CPAs, and tax attorneys that can help you immediately.

Should you do it on your own? Well, before you answer let me remind you of something my father who was an attorney told me:

A lawyer who represents himself has a fool for a client.

Disclaimer: Alan Mendelson is a well-known TV consumer news reporter who reports on tax issues. You should seek professional advice if you have tax questions or issues.