Are you subject to backup withholding on payments you receive? The IRS requires the payer of certain non-payroll amounts to withhold 24% backup tax, under specific conditions. Generally, the payers just report amounts they paid on information returns such as Form 1099s, but they don't need to withhold tax. Tax payment is the duty of the recipient.
However, in some situations, such as when the payment recipient hasn't provided the payer with a legitimate taxpayer ID number, the payer must withhold taxes, to ensure the IRS receives the tax due. Examples of payment that could be subject to withholding include interest, dividends, and some gambling winnings. Here's more: http://bit.ly/2SZNmmF
A federal appeals court has held that a married couple couldn't discharge in bankruptcy their multimillion-dollar tax liability. Chapter 7 debtors receive a general discharge from all debts that arose before they filed a bankruptcy petition. However, there's no discharge for a tax debt if a debtor "willfully attempted in any manner to evade or defeat such tax." In this case, the IRS argued the couple willfully attempted to evade and defeat their tax liability by deliberately submitting low-ball "offers in compromise." (Feshbach, 11th Cir. Ct. of Appeals, 9/9/2020)
According to the court, the offers in compromise:
1.Only served to delay the collection of the couple's past-due taxes and
2.Obfuscated their true financial status.
The Social Security wage base increases to $142,800 for 2021, up from $137,700. Wages and self-employment income above this threshold aren't subject to Social Security tax. The Federal Insurance Contributions Act (FICA) imposes Social Security tax and a Medicare tax on employees, employers, and the self-employed. There's no threshold for Medicare tax; all wages and self-employment income are subject to the tax.
The FICA tax rate for employees and employers is 7.65%: 6.2% for Social Security and 1.45% for Medicare. The self-employed pay both the employee and employer portions. Wages or self-employment income above $200,000 ($250,000 for joint filers, $125,000 for separate filers) are subject to an additional 0.9% Medicare tax.
The Financial Crimes Enforcement Network (FinCEN) has made two announcements about filing Reports of Foreign Bank and Financial Accounts (FBARs). First, FinCEN announced that victims of recent natural disasters have until December 31, 2020, to file FBARs for the 2019 calendar year. FinCEN is offering this expanded relief to areas designated by FEMA as qualifying for individual assistance as a result of the California and Oregon wildfires, the Iowa derecho, and Hurricanes Laura and Sally.
Second, FinCEN announced that misleading information posted on its website caused many taxpayers to miss an important due date. In early October, FinCEN made the above announcement that victims of natural disasters had until December 31, 2020, to file this year's FBARs. However, a subsequent incorrect message on FinCEN's website stated that this extension applied to all FBAR filers, causing many taxpayers to miss the usual October 15 deadline. For those taxpayers, FinCEN and the IRS have extended their due dates for the 2019 calendar year to October 31, 2020.
U.S. taxpayers who have a financial interest in foreign financial accounts, such as bank or securities accounts in a foreign country, must file FBARs if the aggregate value of those foreign financial accounts exceeds $10,000 at any time during the calendar year.
The IRS is still sending out Economic Impact Payments (EIPs) to those who haven't received them yet. Do you know someone who isn't required to file a tax return and hasn't yet received an EIP? The IRS announced that the deadline to register for an EIP is now November 21, 2020. This new date provides an additional five weeks beyond the original deadline.
EIPs are being sent by the federal government to eligible Americans to help mitigate the effects of the COVID-19 pandemic. The IRS urges people who don't typically file a tax return (perhaps because they don't have enough income), and who haven't received an EIP, to register soon. To register, go to http://bit.ly/2SznNsu
The IRS also announced that people experiencing homelessness may be eligible for EIPs, but they also need to register by November 21, 2020. And a recent federal district court ruled that the IRS can't deny EIPs to incarcerated individuals if they satisfy the criteria for receiving an EIP. In an earlier IRS posting on its website, incarcerated individuals were among those listed as ineligible for an EIP. The website has been updated in light of the court ruling. (Scholl, DC CA 9/24/20)