Tax Deductions for Teachers

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. 

When to File for a Tax Extension

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. 

IRS Payment Plans

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. 

Do You Want $3 To Go To The Candidates?

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. 

IRS Appeals – Not On Your Own

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. 

Errors That Delay Tax Refunds

The IRS is understaffed and overworked which is why the IRS is pushing these reminders to speed the processing of tax returns. They’ll also speed up your refund.

File electronically. Taxpayers can use their computer, smartphone, or tablet to file their taxes electronically. Tax software guides people through each section of their tax return using a question-and-answer format. Enter information carefully. This includes any information needed to calculate credits and deductions. Using tax software should help prevent math errors, but taxpayers should always review their tax returns for accuracy.

Use the correct filing status. Tax software, including IRS Free File, also helps prevent mistakes when selecting a tax return filing status.

Answer the virtual currency question. The 2021 Form 1040 and 1040-SR ask whether at any time during 2021, a person received, sold, exchanged, or otherwise disposed of any financial interest in any virtual currency. Taxpayers should not leave this field blank but should check either “Yes” or “No.” See our Blog on this subject.

Report all taxable income. Underreporting income may lead to penalties, interest, delays, and possibly an audit. See our Blog on this.

Include unemployment compensation. The IRS says it is seeing situations where people are not including unemployment compensation they received in 2021 on their tax returns. Although a special law allowed taxpayers to exclude unemployment compensation from taxes in 2020, it was only for that year. Unemployment compensation received in 2021 is generally taxable, so taxpayers should include it as income on their tax returns.

Double-check name, birth date, and Social Security number entries. Taxpayers must correctly list the name, Social Security number (SSN), and date of birth for each person they claim as a dependent on their individual income tax return. Enter each SSN and individual’s name on a tax return exactly as printed on the Social Security card. This is a common error.

Double-check routing and account numbers. Requesting a direct deposit of a federal refund into one, two, or even three accounts is convenient and allows the taxpayer access to their money faster. Make sure the financial institution routing and account numbers entered on the return are accurate. Incorrect numbers can cause a refund to be delayed or deposited into the wrong account.

Mail paper returns to the right address. Paper filers should confirm the correct address but taxpayers and tax professionals are encouraged to file electronically if possible.

Sign and date the return. If filing a joint return, both spouses must sign and date the return. E-filers can sign using a self-selected personal identification number (PIN).

Keep a copy. When ready to file, taxpayers should make a copy of their signed return and all schedules for their records.

Request an extension, if needed. Taxpayers who cannot meet the April 18 deadline can easily request a six-month filing extension to October 17 and prevent late filing penalties Use Free File or Form 4868. But keep in mind that, while an extension grants additional time to file, tax payments are still due April 18 for most taxpayers. See our Blog on this.

Remember that Legal Tax Defense offers a free consultation if you have tax issues. Call now to speak to a tax attorney for FREE!

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 First Sign Of Identity Theft

This is the time of year when many consumers find out that they’re a victim of identity theft. And they find out that they’re a victim from the IRS.

Unfortunately, many ID crooks use a stolen identity to file for IRS tax refunds. But fortunately, the IRS does have “checks” that can stop these identity theft attempts.

Here’s how the IRS could alert you that someone is trying to steal your identity:

  • You get a letter from the IRS inquiring about a suspicious tax return that you did not file.
  • You can’t e-file your tax return because of a duplicate Social Security number.
  • You get a tax transcript in the mail that you did not request.
  • You get an IRS notice that an online account has been created in your name.
  • You get an IRS notice that your existing online account has been accessed or disabled when you took no action.
  • You get an IRS notice that you owe additional tax or refund offset, or that you have had collection actions taken against you for a year you did not file a tax return.
  • IRS records indicate you received wages or other income from an employer you didn’t work for.
  • You’ve been assigned an Employer Identification Number but you did not request an EIN.

If you receive any of these letters or notices respond to them immediately. Also, alert the major credit reporting agencies as they provide free services to stop unauthorized applications for credit in your name.

In addition to notices from the IRS that might indicate identity theft, look for letters from your state unemployment insurance department about benefits you didn’t apply for or applications in your name that you didn’t make. The various special unemployment insurance benefits paid during the pandemic opened the door to many crooks stealing benefits.

In fact, I was a victim of identity theft during the pandemic when an ID crook tried to steal my unemployment benefits for self-employed persons. Luckily I caught it right away, and I double-checked my income statement from the state unemployment insurance department to be sure it was correct.

If you received a 1099G for pandemic unemployment insurance benefits give it a double check to be sure your form doesn’t represent money paid to an identity crook.

And remember, if you have any tax problems call the tax attorney at Legal Tax Defense for a free consultation. Call now to speak to a tax professional who can give you the best solutions.

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. 

IRS Is Targeting Virtual Currency Transactions

The IRS is very serious about getting its share of profits on virtual currency transactions and it has just posted another reminder to taxpayers about it. In a new press release, the IRS reminds taxpayers that there is a virtual currency question at the top of Form 1040, Form 1040-SR, and Form 1040-NR. It asks: “At any time during 2021, did you receive, sell, exchange, or otherwise dispose of any financial interest in any virtual currency?”

All taxpayers filing Form 1040, Form 1040-SR, or Form 1040-NR must check one box answering either “Yes” or “No” to the virtual currency question. The question must be answered by all taxpayers, not just taxpayers who engaged in a transaction involving virtual currency in 2021.

Taxpayers who merely owned virtual currency at any time in 2021 can check the “No” box when they have not engaged in any transactions involving virtual currency during the year, or their activities were limited to:

  • Holding virtual currency in their own wallet or account.
  • Transferring virtual currency between their own wallets or accounts.
  • Purchasing virtual currency using real currency, including purchases using real currency electronic platforms such as PayPal and Venmo.
  • Engaging in a combination of holding, transferring, or purchasing virtual currency as described above.

The list below covers the most common transactions in virtual currency that require checking the “Yes” box:

  • The receipt of virtual currency as payment for goods or services provided;
  • The receipt or transfer of virtual currency for free (without providing any consideration) that does not qualify as a bona fide gift;
  • The receipt of new virtual currency as a result of mining and staking activities;
  • The receipt of virtual currency as a result of a hard fork;
  • An exchange of virtual currency for property, goods, or services;
  • An exchange/trade of virtual currency for another virtual currency;
  • A sale of virtual currency; and
  • Any other disposition of a financial interest in virtual currency.
  • If a taxpayer disposed of any virtual currency that was held as a capital asset through a sale, exchange or transfer, they must check “Yes” and use Form 8949 to figure their capital gain or loss and report it on Schedule D (Form 1040).

If a taxpayer received any virtual currency as compensation for services or disposed of any virtual currency that they held for sale to customers in a trade or business, they must report the income as they would report other income of the same type (for example, W-2 wages on Form 1040, 1040-SR, or 1040-NR, line 1, or inventory or services from Schedule C on Schedule 1).

You might have a situation similar to mine. In 2021 a company gave me $5 of Bitcoin as part of a promotion to get my email address. According to the IRS, I have to check “yes” on my 1040 because of that promotion. I haven’t sold the Bitcoin which, the last time I checked, was worth about $4. Since I still hold the Bitcoin I don’t have a transaction to report. Taking a free offer gets complicated these days.

Now here’s something simple. You can Call Legal Tax Defense to speak with a tax attorney for a free consultation about your tax issues. It really is free and there’s no obligation. It’s less complicated than taking $5 of Bitcoin from a company that wants to put you on its mailing list.

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. 

Do You Really Want A Tax Refund?

Each year about 70% of taxpayers look forward to getting a tax refund from the IRS. But do you really want a tax refund?

Consider this: a tax refund is actually extra money that you lent to Uncle Sam during the course of the year. Imagine what you could have done with that extra money? Instead of an expected refund, you could adjust the automatic withholding with your employer to increase your take-home pay.

This year the average tax refund is expected to be a bit more than $2100 and that’s about $40 a week. What would you do with that $40 a week?

You could put it in a savings account or use it to pay down credit cards. You could use it towards a night at the movies or maybe a manicure. Ideally, you could make regular contributions to an IRA which might lower your next tax bill.

If your employer offers a savings or 401k plan it becomes easier to lower your IRS withholding and automatically fund your savings or retirement option.

Getting a refund can also be viewed as forced savings and there’s nothing wrong with getting a “surprise payment” from the IRS once a year.

Just remember that a tax refund is your money. Then decide what’s the best way to get that money — week after week or in a lump sum.
Talk it over with your family or with an appropriate financial pro. Find out what plans your employer might offer. Some big employers offer employee stock ownership plans.

Remember, if you have unfiled tax returns Legal Tax Defense can help you file them and you might find you are owed money from those previous years. Don’t delay too long because after a while the IRS doesn’t have to pay you unclaimed refunds.

And call Legal Tax Defense now for a free consultation with a tax attorney about any tax issues including tax garnishments and audit notices. It really is a free call and there’s no obligation.

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 Think About IRS Extensions

IRS tax returns for most taxpayers are due April 18th. But because of storms, some taxpayers in disaster areas can file later. FEMA and the IRS have announced these later tax filing deadlines.

This year the tax deadline day is April 18th thanks to certain holidays. For those who don’t have all their tax information in order, and can’t file a complete return. you can use the automatic six-month extension. But you have to send in an extension form. That’s form 4868. You can get it from the IRS website IRS.gov and it’s simple to fill out.

By the way, you won’t find a signature line so don’t look for one. This lack of a signature line allows tax preparers to send in the forms for their clients.

Remember the extension is only on your paperwork and there is no extension on paying what you owe. Interest will accrue, but with an extension, you’ll avoid the biggest penalties. You should estimate and pay what you expect to pay.

There are also specials rules about extensions for taxpayers who are out of the country or in the military and in hazardous areas.

If your state collects income tax check its rules about extensions. Some states grant an automatic extension without the need to send in an extension form.

It’s always best to consult with a tax professional. And remember if you have a tax problem legal Tax Defense will give you a free consultation. Call now to discuss wage garnishments, audits, or notices from the IRS 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. 

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