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IRS Voice Bots Get New Options

IRS Voice Bots Get New Options

The Internal Revenue Service started using voice bots on many of its toll-free telephone lines around the first of the year. The system has already helped more than 3 million taxpayers avoid wait times for simple questions about payments or notices, and the agency is adding more options.

Callers can set up or modify payment plans on the Automated Collection System (ACS) and Accounts Management toll-free lines. The system will even help create a personal identification number using information from a taxpayer’s most recent IRS bill and some additional personal information.

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Will the IRS add more voice bots in the future?

IRS voice bots use artificial intelligence software to route callers to the information they need based on voice responses. Initially designed to answer simple questions, the IRS plans to continue adding voice-bot features that will help callers avoid extended wait times—even during tax season.

Voice bots aren’t just being used to collect payments. They have already been deployed on the Economic Impact Payment (EIP) and Advance Child Tax Credit toll-free lines to answer frequently asked questions. And the IRS says planned upgrades will provide taxpayers with active PINs access to a number of newly automated services:

  • Account and return transcripts
  • Payment history
  • Current balance owed

While voice bots can quickly provide information for taxpayers, the agency says live phone representatives will still be available for English and Spanish speakers.

More information about self-service options is available on IRS.gov.

Self-service? How about self-study?

Our education specialists on DrakeCPE.com have designed self-study and on-demand continuing education courses that can help you earn CPE and prepare for the upcoming filing season. We offer a variety of courses, from selling your home and fringe benefits to amended returns and virtual currency. If you’re interested in learning more about our Annual Federal Tax Refresher Course, read our blog: “Now Available: Drake 2022 AFTR Course!

Source: IR-2022-127

Story provided by TaxingSubjects.com

Separation and Divorce Tax Issues to Consider

Separation and Divorce Tax Issues to Consider

Singer Neil Sadaka was right: breaking up is hard to do. For clients in the process of ending their marriage, there is more to consider than a simple separation of assets. Whether legally separating or divorcing, they could be facing big changes in their individual tax situations—and the Internal Revenue Service recently highlighted information that could help. 

One of the first issues is timing. The Internal Revenue Service considers a married couple to be wed until they get either a separate maintenance decree or a final divorce decree. So, until there is an official court ruling, they’ll still be viewed as a married couple for tax purposes.

Another early issue is withholding. When a taxpayer divorces or legally separates from their partner, they will normally need to modify their withholding setup at work. This means filing a new Form W-4 with their employer.

For some, the process may not be more complicated. Taxpayers who receive alimony payments, for example, may have to make estimated tax payments. However, help is available through the Tax Withholding Estimator tool on IRS.gov. This tool can determine whether current withholding amounts are correct for a specific situation.

What are the tax considerations of alimony and separate maintenance?

The IRS could view money “paid to a spouse or a former spouse under a divorce decree, a separate maintenance decree, or a written separation agreement may be alimony or separate maintenance payments for federal tax purposes.” Why is this important? Some payments are deductible for the payer and have to be included in income by the payee. However, there are exceptions.

“Individuals can’t deduct alimony or separate maintenance payments made under a divorce or separation agreement executed after 2018 or executed before 2019 but later modified if the modification expressly states the repeal of the deduction for alimony payments applies to the modification,” the IRS explains. “Alimony and separate maintenance payments received under such an agreement are not included in the income of the recipient spouse.”

What about child custody?

Figuring out which partner can claim a dependent child is often a hotly contested topic among those on the brink of a breakup. According to the IRS, “the parent who has custody of the child can [generally] claim the child on their tax return.” However, the situation gets murky if parents split custody 50-50 but can’t agree who gets to claim the child(ren).

In that situation, there are tie-breaker rules that can apply. Further, under this arrangement, the IRS says these “child support payments aren’t deductible by the payer and aren’t taxable to the payee.”

What filing statuses are available to separating or divorced couples?

The IRS lists four basic filing statuses available for individuals who are divorced or separating:

  • Married filing jointly. On a joint return, married people report their combined income and deduct their combined allowable expenses. For many couples, filing jointly results in a lower tax than filing separately.
  • Married filing separately. If spouses file separate tax returns, they each report only their own income, deductions, and credits on their individual return. Each spouse is responsible only for the tax due on their own return. People should consider whether filing separately or jointly is better for them.
  • Head of household. Some separated people may be eligible to file as head of household if all of these apply:
    • Their spouse didn’t live in their home for the last six months of the year.
    • They paid more than half the cost of keeping up their home for the year.
    • Their home was the main home of their dependent child for more than half the year.
  • Single. Once the final decree of divorce or separate maintenance is issued, a taxpayer will file as single starting for the year it was issued, unless they are eligible to file as head of household or they remarry by the end of the year.

See Publication 504, Divorced or Separated Individuals, and Topic No. 452, Alimony and Separate Maintenance, for more information on tax issues for divorcing or separating couples.

Helping a client plan for the future?

Easily compare clients’ current tax situation to customizable tax scenarios—like a change in filing status—with the Drake Tax Planner. Since it’s accessed directly within Drake Tax, you have the tools you need to efficiently help clients plan for the future. Sign up for the free trial to see for yourself!

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Source: IRS Tax Tip 2022-92

Story provided by TaxingSubjects.com

2022 Mileage Rates Increasing

2022 Mileage Rates Increasing

Due to rising gasoline prices, the Internal Revenue Service has taken the rare step of increasing its optional standard mileage rates for the last six months of the 2022 tax year. These rates are significant since taxpayers use them to calculate the deductible costs of operating a vehicle for business purposes.  

Typically, the IRS tweaks mileage rates for the upcoming tax year in the fall. However, record fuel prices pushed the agency to act now for the current year. The last time the IRS made a midyear adjustment was 2011.

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What are the new mileage rates for 2022?

The IRS issued Announcement 2022-13 to make the new rates official, setting forth the associated legal language, guidance, and limitations for the new rates. Here is a short breakdown from the agency:

  • The standard mileage rate for business travel will be 62.5 cents per mile
  • The new rate for deductible medical or moving expenses (available for active-duty members of the military) will be 22 cents per mile
  • The 14 cents per mile rate for charitable organizations remains unchanged as it is set by statute
  • These new rates become effective July 1, 2022

Moving expenses are only available to active-duty service members “pursuant to a military order and incident to a permanent change of station” (Announcement 2022-13). Taxpayers who traveled prior to this update—from January 1 to June 30, 2022—should use Notice 2022-03 to calculate their mileage rates.

What are the limits on who can claim a deduction?

Announcement 2022-13 states that the Tax Cuts and Jobs Act (TCJA) passed in 2017 limits which taxpayers are eligible to claim a deduction. The TCJA suspends all miscellaneous itemized deductions that are tied to the 2% of adjusted gross income floor until 2026, including unreimbursed employee travel expenses.

So, how do reservists, some state or local government officials, and some performance artists get to claim the mileage rate whereas other taxpayers do not? They are paid on a fee basis, and the IRS considers the deduction in these cases to be an adjustment to income.

What is the big picture?

Fuel costs are, no doubt, a significant factor for determining mileage rates, but other factors also play a part, such as depreciation, insurance, and other costs. Taxpayers can use the optional business standard mileage rate to help calculate the deductible costs of operating a vehicle for business purposes, instead of keeping track of the actual cost.

In addition, the federal government and some businesses use the rate to reimburse employees for their mileage. The IRS notes that taxpayers always have the option to use their vehicle’s actual costs rather than the optional standard mileage rates.

We can help you stay up to date!

Here are just a few recent IRS updates we covered:

Sources: IRS increases mileage rate for remainder of 2022; Announcement 2022-13 

Story provided by TaxingSubjects.com

Prior-Year Info Added to Where’s My Refund

Prior-Year Info Added to Where's My Refund

The Internal Revenue Service continues to add functionality to its online tools, now putting more muscle behind its Where’s My Refund? feature. Used more than 776 million times in 2021, it is one of the agency’s most popular online offerings—and it can reduce client questions about refund status.

“Previously, Where’s My Refund? only displayed the status of the most recently filed tax return within the past two tax years,” the IRS explains. Now, users can view information for any of the last three tax years on their status report.

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While this additional information will undoubtedly be more convenient for taxpayers with Internet access, it also marks a reduction in phone service that available to callers. The agency notes that those who call the refund hotline will only receive information related to their 2021 return.

Punctuating this shift, the IRS says, “There’s no need to call the IRS to check on refund status unless it has been more than 21 days since the return was filed or the tool says the IRS can provide more information.”

How do taxpayers access Where’s My Refund?

Where’s My Refund? is accessed through IRS.gov or IRS2Go, the agency’s mobile app. The identification verification process requires their Social Security Number or ITIN, filing status for the requested tax year, and amount of the refund they’re checking on, using the original filed return.

The IRS says validated online users of Where’s My Refund? can get the status of a refund within:

  • 24 hours after e-filing a tax year 2021 return
  • Three or four days after e-filing a tax year 2019 or 2020 return
  • Four weeks after mailing a return

For details on a taxpayer’s adjusted gross income, a balance due, or other account information, taxpayers should check their Online Account.

Speeding up 2021 returns

IRS Commissioner Chuck Rettig says the upgrade to Where’s My Refund? can help speed up the processing of TY 2021 returns—especially for taxpayers who chose to request an extension of time to file.

“We encourage those who expect a refund, but requested an extension, to file as soon as they’re ready. We process returns on a first-in basis, so the sooner the better,” said Rettig. “There’s really no reason to wait until October 17 if filers have the relevant information to file now.”

Rettig reminds that electronic filing is available 24 hour per day and his agency is actively taking in returns, processing and issuing refunds.

More improvements to come

If taxpayers are happy with this latest round of upgrades, Rettig said, more improvements are in the works.

“The IRS is committed to identifying opportunities to make improvements in real time for taxpayers and the tax professional community,” said Rettig. “This enhancement to Where’s My Refund? is just one of many.”

SourceIRS updates feature on Where’s My Refund?

Story provided by TaxingSubjects.com

How to handle market volatility

Keeping your cool can be hard to do when the market goes on one of its periodic roller-coaster rides. It’s useful to have strategies in place that prepare you both financially and psychologically to handle market volatility. Here are 11 ways to help keep yourself from making hasty decisions that could have a long-term impact on your ability to achieve your financial goals.

1. Have a game plan

Having predetermined guidelines that recognize the potential for turbulent times can help prevent emotion from dictating your decisions. For example, you might take a core-and-satellite approach, combining the use of buy-and-hold principles for the bulk of your portfolio with tactical investing based on a shorter-term market outlook. You also can use diversification to try to offset the risks of certain holdings with those of others. Diversification may not ensure a profit or protect against a loss, but it can help you understand and balance your risk in advance. And if you’re an active investor, a trading discipline can help you stick to a long-term strategy. For example, you might determine in advance that you will take profits when a security or index rises by a certain percentage, and buy when it has fallen by a set percentage.

2. Know what you own and why you own it

When the market goes off the tracks, knowing why you originally made a specific investment can help you evaluate whether your reasons still hold, regardless of what the overall market is doing. Understanding how a specific holding fits in your portfolio also can help you consider whether a lower price might actually represent a buying opportunity.

And if you don’t understand why a security is in your portfolio, find out. That knowledge can be particularly important when the market goes south, especially if you’re considering replacing your current holding with another investment.

3. Remember that everything is relative

Most of the variance in the returns of different portfolios can generally be attributed to their asset allocations. If you’ve got a well-diversified portfolio that includes multiple asset classes, it could be useful to compare its overall performance to relevant benchmarks. If you find that your investments are performing in line with those benchmarks, that realization might help you feel better about your overall strategy.

Even a diversified portfolio is no guarantee that you won’t suffer losses, of course. But diversification means that just because the S&P 500 might have dropped 10% or 20% doesn’t necessarily mean your overall portfolio is down by the same amount.

4. Tell yourself that this too shall pass

The financial markets are historically cyclical. Even if you wish you had sold at what turned out to be a market peak, or regret having sat out a buying opportunity, you may well get another chance at some point. Even if you’re considering changes, a volatile market can be an inopportune time to turn your portfolio inside out. A well-thought-out asset allocation is still the basis of good investment planning.

5. Be willing to learn from your mistakes

Anyone can look good during bull markets; smart investors are produced by the inevitable rough patches. Even the best investors aren’t right all the time. If an earlier choice now seems rash, sometimes the best strategy is to take a tax loss, learn from the experience, and apply the lesson to future decisions. Expert help can prepare you and your portfolio to both weather and take advantage of the market’s ups and downs. There is no assurance that working with a financial professional will improve investment results.

6. Stay on course by continuing to save

Even if the value of your holdings fluctuates, regularly adding to an account designed for a long-term goal may cushion the emotional impact of market swings. If losses are offset even in part by new savings, your bottom-line number might not be quite so discouraging.

If you’re using dollar-cost averaging — investing a specific amount regularly regardless of fluctuating price levels — you may be getting a bargain by buying when prices are down. However, dollar-cost averaging can’t guarantee a profit or protect against a loss. Also consider your ability to continue purchases through market slumps; systematic investing doesn’t work if you stop when prices are down. Finally, remember that the return and principal value of your investments will fluctuate with changes in market conditions, and shares may be worth more or less than their original cost when you sell them.

7. Use cash to help manage your mindset

Cash can be the financial equivalent of taking deep breaths to relax. It can enhance your ability to make thoughtful decisions instead of impulsive ones. If you’ve established an appropriate asset allocation, you should have resources on hand to prevent having to sell stocks to meet ordinary expenses or, if you’ve used leverage, a margin call. Having a cash cushion coupled with a disciplined investing strategy can change your perspective on market volatility. Knowing that you’re positioned to take advantage of a downturn by picking up bargains may increase your ability to be patient.

8. Remember your road map

Solid asset allocation is the basis of sound investing. One of the reasons a diversified portfolio is so important is that strong performance of some investments may help offset poor performance by others. Even with an appropriate asset allocation, some parts of a portfolio may struggle at any given time. Timing the market can be challenging under the best of circumstances; wildly volatile markets can magnify the impact of making a wrong decision just as the market is about to move in an unexpected direction, either up or down. Make sure your asset allocation is appropriate before making drastic changes.

9. Look in the rear-view mirror

If you’re investing long term, sometimes it helps to take a look back and see how far you’ve come. If your portfolio is down this year, it can be easy to forget any progress you may already have made over the years. Though past performance is no guarantee of future returns, of course, the stock market’s long-term direction has historically been up. With stocks, it’s important to remember that having an investing strategy is only half the battle; the other half is being able to stick to it. Even if you’re able to avoid losses by being out of the market, will you know when to get back in? If patience has helped you build a nest egg, it just might be useful now, too.

10. Take it easy

If you feel you need to make changes in your portfolio, there are ways to do so short of a total makeover. You could test the waters by redirecting a small percentage of one asset class to another. You could put any new money into investments you feel are well-positioned for the future, but leave the rest as is. You could set a stop-loss order to prevent an investment from falling below a certain level, or have an informal threshold below which you will not allow an investment to fall before selling. Even if you need or want to adjust your portfolio during a period of turmoil, those changes can — and probably should — happen in gradual steps. Taking gradual steps is one way to spread your risk over time, as well as over a variety of asset classes.


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Securities offered through Registered Representatives of Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC.  Advisory services offered through Cambridge Investment Research Advisors, a Registered Investment Advisor. DC Financial Advisors and Cambridge are not affiliated.