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401(k) Contribution Limit Increases To $19,500 For 2020; Catch-Up Limit Rises To $6,500

IRS

The Internal Revenue Service announced that employees in 401(k) plans will be able to contribute up to $19,500 next year.

The IRS announced this and other changes in Notice 2019-59, posted today on IRS.gov. This guidance provides cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2020.

Highlights Of Changes For 2020

The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $19,000 to $19,500.

The catch-up contribution limit for employees aged 50 and over who participate in these plans is increased from $6,000 to $6,500.

The limitation regarding SIMPLE retirement accounts for 2020 is increased to $13,500, up from $13,000 for 2019.

The income ranges for determining eligibility to make deductible contributions to traditional Individual Retirement Arrangements (IRAs), to contribute to Roth IRAs and to claim the Saver’s Credit all increased for 2020. Read more

Self-Employed Independent Contractor Or Employee?

IRS LOGO

It is critical that business owners correctly determine whether the individuals providing services are employees or independent contractors.

Generally, you must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages paid to an employee. You do not generally have to withhold or pay any taxes on payments to independent contractors.

Select The Scenario That Applies To You:
  • I am an independent contractor or in business for myself
    If you are a business owner or contractor who provides services to other businesses, then you are generally considered self-employed. For more information on your tax obligations if you are self-employed (an independent contractor), see our Self-Employed Tax Center.
  • I hire or contract with individuals to provide services to my business
    If you are a business owner hiring or contracting with other individuals to provide services, you must determine whether the individuals providing services are employees or independent contractors. Follow the rest of this page to find out more about this topic and what your responsibilities are. Read more

About Form 3520, Annual Return To Report Transactions With Foreign Trusts And Receipt of Certain Foreign Gifts

IRS On Form 3520

U.S. persons (and executors of estates of U.S. decedents) file Form 3520 to report:

  • Certain transactions with foreign trusts.
  • Ownership of foreign trusts under the rules of sections Internal Revenue Code 671 through 679.
  • Receipt of certain large gifts or bequests from certain foreign persons.

Current Products

Recent Developments

Other Items You May Find Useful

Comment On Form 3520

Use the Comment on Tax Forms and Publications web form to provide feedback on the content of this product. Although we cannot respond individually to each comment, we do appreciate your feedback and will consider all comments submitted.

 

Farmers And Ranchers Affected By Drought Have Extra Time To Sell Livestock

IRS Announcement

Drought can be devastating to farmers and ranchers. Those who were forced to sell livestock due to drought may get extra time to replace the livestock. They may also have more time to defer tax on any gains from the forced sales.

Here are some facts to help farmers understand how the deferral works and if they are eligible.

  • The one-year extension gives eligible farmers and ranchers until the end of the tax year after the first drought-free year to replace the sold livestock.
  • The farmer or rancher must be in an applicable region. An applicable region is a county designated as eligible for federal assistance, as well as counties contiguous to that county.
  • The farmer’s county, parish, city or district included in the applicable region must be listed as suffering exceptional, extreme or severe drought conditions by the National Drought Mitigation Center. All or part of 32 states, plus Guam, the U.S. Virgin Islands and the Commonwealths of Puerto Rico and the Northern Mariana Islands, are listed. The list of applicable regions is in Notice 2019-54 on IRS.gov.
    Read more

Taxpayers Can Follow These Steps After A Disaster To Reconstruct Records

IRS Disaster Recovery

After a natural disaster, taxpayers may need records to help them prove their disaster-related losses. This may be for tax purposes, getting federal assistance or insurance reimbursement.

In many cases, these records may have been destroyed in the disaster. However, not all hope is lost as people can often reconstruct records or get copies of important documents after a disaster.

Tax Return Transcripts
Taxpayers can get free tax return transcripts by using Get Transcript on IRS.gov. They can also call 800-908-9946 to order them.

Financial Statements
People can gather past statements from their credit card company or bank. This helps if they bought items using a credit or debit card. If paper records were destroyed, statements may be available online. People can also contact their bank to get hard copies of these statements.

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Taxpayers Can Compare Eligibility And Benefits Of Two Education Credits

Education Tax Credit

There are two education credits that can help taxpayers with higher education costs: the American opportunity tax credit and the lifetime learning credit. There are several differences and some similarities between them. Taxpayers can claim both benefits on the same return, but not for the same student or same qualified expenses.

Here’s a comparison of these two credits:

What is the maximum credit or benefit?
American opportunity tax credit: Up to $2,5000 credit per eligible student
Lifetime learning credit: Up to $2,000 credit per tax return

Is it refundable or non-refundable?
American opportunity credit: Refundable for up to 40 percent of credit
Lifetime learning credit: Not refundable

Can taxpayers claim the credit if they file with the filing status married filing separately?
Both credits: No

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IRS Selects Nine New Members For The Electronic Tax Administration Advisory Committee

IRS Notice

The Internal Revenue Service has selected nine new members for the Electronic Tax Administration Advisory Committee (ETAAC).

Established in 1998, the ETAAC is a public forum for the discussion of issues in electronic tax administration. Its aim is to prevent identity theft and refund fraud in support of paperless filing of tax and information returns. ETAAC members work closely with the Security Summit, a joint effort of the IRS, state tax administrators and the nation’s tax industry to fight identity theft and refund fraud.

Committee members include state tax officials, consumer advocates, cybersecurity and information security specialists, tax preparers, tax software developers and representatives of the payroll and financial communities.

The following individuals have been appointed to serve three-year terms on the committee beginning in September 2019:

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2 Million Individual Taxpayer Identification Numbers Set To Expire In 2019

IRS

Taxpayers with expiring Individual Taxpayer Identification Numbers (ITINs) can get their ITINs renewed more quickly and avoid refund delays next year by submitting their renewal    application soon, the Internal Revenue Service said today.

An ITIN is a tax ID number used by taxpayers who don’t qualify to get a Social Security number. Any ITIN with middle digits 83, 84, 85, 86 or 87 will expire at the end of this year. In addition, any ITIN not used on a tax return in the past three years will expire. As a reminder, ITINs with middle digits 70 through 82 that expired in 2016, 2017 or 2018 can also be renewed.

The IRS urges anyone affected to file a complete renewal application, Form W-7, Application for IRS Individual Taxpayer Identification Number, as soon as possible. Be sure to include all required ID and residency documents. Failure to do so will delay processing until the IRS receives these documents. With nearly 2 million taxpayer households impacted, applying now will help avoid the rush as well as refund and processing delays in 2020.

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Virtual Currency: IRS Issues Additional Guidance On Tax Treatment And Reminds Taxpayers Of Reporting Obligations

Cryptocurrency And IRS

As part of a wider effort to assist taxpayers and to enforce the tax laws in a rapidly changing area, the Internal Revenue Service today issued two new pieces of guidance for taxpayers who engage in transactions involving virtual currency.

Expanding on guidance from 2014, the IRS is issuing additional detailed guidance to help taxpayers better understand their reporting obligations for specific transactions involving virtual currency. The new guidance includes Revenue Ruling 2019-24 and frequently asked questions (FAQs).

The new revenue ruling addresses common questions by taxpayers and tax practitioners regarding the tax treatment of a cryptocurrency hard fork. In addition, a set of FAQs address virtual currency transactions for those who hold virtual currency as a capital asset.

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IRS Grants Relief For U.S. Persons Who Own Stock In Certain Foreign Corporations

IRS Grants Relief

The Department of the Treasury and the Internal Revenue Service  issued Revenue Procedure 2019-40 and proposed regulations that provides relief to certain U.S. persons that own stock in certain foreign corporations.

The Revenue Procedure limits the inquiries required by U.S. persons to determine whether certain foreign corporations are controlled foreign corporations (“CFCs”). The Revenue Procedure also allows certain unrelated minority U.S. shareholders to rely on specified financial statement information to calculate their subpart F and GILTI inclusions and satisfy reporting requirements with respect to certain CFCs if more detailed tax information is not available. It also provides penalty relief to taxpayers in the specified circumstances.

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IRS Releases New Schedule K-1 Form 1065 And Requests All Tax Professionals Review And Commentary

Form 1065 Schedule K-1

The IRS has released Partners Instructions for Schedule K-1 also known as Form 1065. They are asking for your review and comments on the new Form. Use the Comment on Tax Forms and Publications web form to provide feedback on the content of new Form 1065. Although the IRS cannot respond individually to each comment, they do appreciate your feedback and will consider all comments submitted.

Now is the time to provide your comments on the Form 1065 and suggest changes to this newly updated form.

Here Is The 1065 Form For Review

Here Are Form 1065 Instructions

We also appreciate your commentary below to help other tax practitioners.

 

Complimentary Webinars Cover Foreign Tax Credit And Taxes For People Working Abroad

FREE WEBINAR

IRS offers webinars to help small businesses and other employers answer their tax related questions. Taxpayers can visit IRS.gov anytime for a complete list of these webinars.

Below are the details about two of the agency’s upcoming webinars. These free one-hour webinars help taxpayers understand tax obligations for U.S. citizens working abroad and the Foreign Tax Credit:

An Overview of the Foreign Tax Credit
Date: October 17, 2019, 2 p.m. ET
Click here to register.

This webinar will cover:

  • The effect of residency status on U.S. taxation.
    Residency status under U.S. immigration law versus U.S. tax law.
  • How to determine an individual’s residency status for U.S. tax purposes.
  • Special tax rules that apply to dual-status aliens. Read more