Stay informed on the latest tax news and developments, including legislation and rule changes, for effective tax planning and compliance.
With a fresh round of compliance letters, the IRS targets wealthy "non-filers"
The IRS is initiating a campaign targeting high-income individuals who have not submitted federal tax returns since 2017, focusing initially on those earning between $400,000 and $1 million. Dubbed previously as CP-59 notices, the IRS will dispatch letters to 20,000 to 40,000 non-filers weekly, urging immediate action to prevent further penalties and enforcement actions. IRS Commissioner Danny Werfel emphasized the importance of rectifying non-filing status, especially amid sporadic enforcement since 2016 due to staffing challenges. Penalties for non-filing include a 5% charge of the owed amount monthly, with a maximum of 25%, alongside interest penalties.
This move is part of broader IRS efforts to enhance audit rates for high earners and large entities, which have seen a significant decline; audit rates for those earning over $1 million dropped from 7.2% in 2011 to 0.7% in 2019. The initiative aims to recover potentially hundreds of millions in unpaid taxes, addressing the substantial amounts uncollected due to lower enforcement in recent years. The IRS advises consulting a tax professional to address any outstanding returns and associated financial obligations.
The IRS is preparing for a "tidal wave" of inquiry about cryptocurrency taxes. What prospective buyers should understand
The IRS is intensifying its focus on cryptocurrency, designating digital assets as a key priority and bolstering its team with former crypto executives to enhance service, compliance, and enforcement. This development signals a forthcoming surge in digital currency scrutiny, according to tax professionals and attorneys familiar with the matter. With substantial funding from the Inflation Reduction Act, the IRS aims to rectify the decline in audit rates of affluent individuals and entities, alongside escalating investigations into digital currency transactions by its criminal division. The focus includes unreported gains, mining income, and a rise in civil cases via "John Doe summonses" compelling the disclosure of crypto transaction data. A question on Form 1040 requiring taxpayers to report digital asset holdings further underlines the IRS's commitment to increasing reporting transparency. Additionally, proposed tax regulations targeting cryptocurrency and digital assets for 2025 transactions, part of efforts to narrow the tax gap, underscore the shift towards stricter compliance and reporting standards, with nearly $28 billion in revenue expected over ten years from digital currency brokerage reporting initiated by President Biden's infrastructure deal.
This tax season, the IRS may be able to provide free tax preparation to 19 million people
The IRS's free tax filing program, Direct File, has launched in 12 pilot states, with the Treasury Department estimating 19 million taxpayers are eligible this season. Limited to simple tax situations, such as W-2 employees taking the standard deduction, Direct File could serve one-third of federal income tax filers. Eligibility and process details can be checked online, aiming for 100,000 filings from the eligible group, or about 0.5%. Additionally, the IRS Free File program, a partnership with the Free File Alliance, offers free tax filing for those with a 2023 adjusted gross income of $79,000 or less, benefiting around 70% of taxpayers or 100 million Americans. Despite low usage rates last season, Free File returns have increased nearly 15% through March 8 compared to the previous year. Other free filing options include Volunteer Income Tax Assistance, Tax Counseling for the Elderly, and private software, catering to various taxpayer needs.
A free IRS tax filing program is introduced in 12 trial states. What you should know?
The IRS Direct File, a free tax filing program, has expanded to 12 pilot states after a trial with 1,500 returns, aiming to simplify tax filing for roughly 19 million eligible taxpayers with straightforward tax situations. The program, which is anticipated to include a Spanish version, is part of the Treasury Department's effort to provide free direct filing options, akin to services available in other countries. The initiative could potentially save filers an average of $160 annually, reducing overall tax preparation costs by $11 billion each year. Direct File targets taxpayers with W-2 income, Social Security benefits, unemployment earnings, and limited interest income, requiring users to claim standard deductions and supporting select tax credits. Despite being restricted to federal returns and facing scrutiny from the private tax industry and some lawmakers, Direct File and other free filing options like the IRS Free File program aim to offer diverse solutions for fulfilling tax obligations efficiently.
