As the tax filing deadline approaches, the IRS has announced extensions for taxpayers in Maine, Rhode Island, Alaska, California, Michigan, Washington, and West Virginia due to weather-related issues. Automatic extensions are also available for U.S. citizens living outside the U.S., military members, and others in hazardous zones. Despite a decline in tax return filings compared to last year, tax refunds are increasing. The IRS is testing a pilot program called DirectFile in 12 states to allow more taxpayers to file directly for free, providing valuable information for assessment.
Taxpayers should consider overlooked tax breaks like the qualified charitable distribution for those over 70 1/2 with charitable inclinations, or the Saver’s Credit for those over 18 and not claimed as a dependent. With many Americans living paycheck to paycheck, creating and sticking to a budget is essential for financial stability. Visa and Mastercard recently settled a 19-year federal court battle, allowing merchants to offer discounts for specific bank cards or payment methods that cost less.
Scammers are active during tax season, with phishing and smishing scams posing as legitimate IRS communications. The IRS recently launched its “Dirty Dozen” list of common scams, warning taxpayers and tax professionals to be vigilant. A Texas-based accounting firm learned the hard way about the risks of clicking on suspicious links. The U.S. Treasury is using AI to detect and prevent check fraud, which has increased by 385% since the pandemic, with over 680,000 SARs related to check fraud filed in 2022.
In the tax courts, decisions have been made regarding the economic substance doctrine, tax withholding on income connected with a U.S. trade, and challenges to IRS decisions on tax liabilities. The Supreme Court recently heard oral arguments in a case involving the valuation of stock using life insurance to pay for corporate stock redemption. Important dates for tax season include individual federal income tax returns due on April 15th, Taxpayer Assistance Centers open without appointments on April 13th, and the deadline for filing refunds for tax year 2020 on May 17th.
Financial advice from the team includes starting small, not betting on the Jets, automating savings, starting early, being conservative with retirement money, and not chasing speculative returns. In 2023, it was estimated that over 431,000 persons prepare tax returns for individuals or small businesses in the U.S. The trivia answer reveals that 14% of IRS-Criminal Investigation investigations in fiscal year 2023 were initiated based on Bank Secrecy Act data. Readers are encouraged to provide feedback to improve the newsletter.
