The IRS recently reported that they have received over 101 million tax returns so far, on pace to meet their estimate of over 128.7 million individual tax returns to be filed by Tax Day. Despite the increase in the number of returns, the number of refunds issued this year is lower compared to last year. Anecdotally, many taxpayers and tax professionals have noticed fewer refunds and more checks that need to be written, which could be due to adjusting to pre-Covid rules and confusion over the revamped W-4.
For taxpayers who missed Tax Day, filing late isn’t the end of the world, but the sooner they file, the better, as failure-to-file penalty is based on time. Those who missed the deadline automatically get extra time, such as those who are out of the country, but they may have additional filing obligations. It is advised to pay what can be paid if taxes have not been paid in full, as the failure-to-pay penalty is also calculated based on time, and interest will accrue on the balance due.
Business owners are still waiting for their Employee Retention Credit refund, with the Taxpayer Advocate Service being a resource for help in navigating through the process. Employers are reminded of their responsibility to keep excellent payroll records, as some may withhold taxes from employee paychecks but not remit them to the authorities, which could lead to penalties. The IRS has been increasing their scrutiny of payroll taxes using technology to examine data.
IRS Commissioner Danny Werfel has deemed this tax season as “one of the best tax seasons the nation has seen in years,” with improvements in taxpayer service levels and increased hours at walk-in sites. However, he acknowledges that there is still more work to be done at the IRS. Taxpayers are still adjusting to changes from the 2017 tax reform laws, and the Congressional Budget Office predicts a gloomy outlook for deficit and debt forecasts for the next decade.
In a deeper dive into retirement accounts, the IRS has issued guidance related to required minimum distributions for inherited IRAs, allowing relief through 2024. Americans are concerned about potential higher taxes on future distributions from traditional IRAs and 401(k)s, highlighting the importance of effectively managing taxes on retirement income. Additionally, downsizing could be a smart financial move, but careful consideration of tax changes is necessary. Forbes has released their inaugural list of America’s Top 200 CPAs, recognizing the finest CPAs active in public practice.
