Taxpayers who earn or receive income that is not subject to tax withholding such as self-employed people or independent contractors should pay their taxes quarterly to the IRS.
In addition, people who owed tax when they filed their current year tax return often find themselves in the same situation again when they file the next year, so they may want to consider making estimated tax payments. Taxpayers in this situation often include:
- Those who itemized in the past but are now taking the standard deduction
- Two wage-earner households
- Employees with non-wage sources of income such as dividends
- Those with complex tax situations
- Those who didn't increase their tax withholding
The penalty for underpaying estimated taxes is a non-deductible interest charge for the amount of the underpayment, up until the date the underpayment is paid - generally when the 1040 is filed. The current interest rate for individuals is 7%.
The traditional way to make quarterly estimates is with a 1040-ES voucher by mail. Considering current IRS issues in handling paper, it may be safer to bypass the postal service:
The fastest and easiest way taxpayers can make an estimated tax payment is to do so electronically using IRS Direct Pay. Taxpayers can schedule a payment before the January 17 deadline. They can also make a payment through their IRS Online Account or the Electronic Filing Tax Payment System.
More information on other payment options is available at Pay Online.
If you are paying by mail, you can find the proper address here.
Crypto Donations Must Be Appraised for Charitable Deduction - Chandra Wallace, Tax Notes ($):
In a January 10 chief counsel advice memorandum (ILM 202302012) released January 13, the IRS provided a non-taxpayer-specific determination about how taxpayers must substantiate the value of cryptocurrency donations over $5,000 for purposes of the charitable contribution deduction under section 170(a). The agency advised that a qualified appraisal of the cryptocurrency is required, and it clarified that cryptocurrency doesn’t fit into any other statutory exceptions to the appraisal requirement.
Cryptocurrency “is not cash, a publicly traded security, or any other type of property listed” in section 170 and regulations as excepted from the appraisal requirement, according to the chief counsel advice.
When a taxpayer donates property that must be appraised, they must strictly follow the rules for appraisals in Form 8283. Among other requirements, the appraiser must be independent and all information required on the Form 8283 needs to be carefully disclosed.
New Catch-Up Law Forces Decision For Plans Lacking Roth - David van den Berg, Law360 Tax Authority ($):
Nonprofits, schools and governments that offer their workers certain retirement plans that lack Roth contribution options will face a decision about whether to add them to allow affluent employees to make catch-up contributions starting in 2024 to meet requirements under a new law.
Legislation to fund the federal government through September that President Joe Biden signed into law late last month includes a mandate that workers 50 and older whose incomes exceed $145,000, indexed to inflation, must make catch-up contributions to their retirement plans on a Roth basis. The provision is expected to raise nearly $17 billion over a decade, according to the Joint Committee on Taxation.
Under a "Roth" option, a contribution is not deductible or excludible from income, but earnings can be withdrawn tax free. This treatment pushes much of the revenue loss of the provision past the 10-year period used by Congress to determine the revenue cost of a tax provision.
Tax relief bill gets Minnesota governor’s 1st signature - Steve Karnowski, AP. "The bill brings Minnesota’s tax code into conformity with federal tax rules. It’s one of several that legislative leaders have fast-tracked since convening last week with Democrats now controlling both chambers of the Legislature. Bills on issues from abortion rights to unemployment benefits for laid-off miners are also expected to hit the governor’s desk soon."
IRS Formalizes Amended Return Research Credit Claims Process - Caitlin Mullaney, Tax Notes ($). "The draft instructions for Form 6765, “Credit for Increasing Research Activities,” published January 12, make official a process that was addressed in less formal guidance released over the past two years."
U.S. Supreme Court Will Hear Minnesota Takings Clause Case - Christopher Jardine, Tax Notes ($):
In a January 13 order in Tyler v. Hennepin County, the Supreme Court granted Geraldine Tyler's August 2022 cert petition, agreeing to review whether Hennepin County’s property tax forfeiture scheme violates the takings clause of the U.S. Constitution.
In the case, Tyler stopped paying property taxes on a condominium she owned, which resulted in Hennepin County foreclosing on the property after the debt reached $15,000. The county then sold the property for $40,000 and retained the surplus of $25,000.
Tesla Cut Prices, but Some Buyers Won’t Get EV Tax Credit - Ashlea Ebeling, Wall Street Journal. "Taxpayers with a modified adjusted gross income of $150,000 for individuals, or $300,000 for joint filers, can no longer claim the tax credit. This limit can be based on either your modified AGI for the year that you drive the vehicle off the lot, or for the preceding year, according to the Internal Revenue Service."
Preparers should remind clients not to ignore 2022 Forms 1099-K - National Association of Tax Professionals. "This reminder may be necessary because the media coverage of the postponement of the $600 threshold may have left taxpayers confused or believing that they can simply ignore any Forms 1099-K they receive."
IRS Announces Details About Official Start of Tax Season - Rebekah Barton, TaxBuzz. "Americans who earn under $73,000 annually can use the IRS's free online e-file system today without waiting for January 23 to arrive."
National Taxpayer Advocate Optimistic About IRS Service Levels In 2023 - Amber Gray-Fenner, Forbes. "It seems things are improving at the IRS, at least with respect to backlogged paperwork and taxpayer service. Anecdotal reports on social media are even beginning to indicate service may be improving for tax professionals."
Ten Considerations for the 2023 Tax Filing Season - Kristine Tidgren, Ag Docket. "In 2022, only taxpayers who itemize deductions may take a charitable contribution deduction. The above-the-line charitable contribution deduction available in 2020 and 2021 was not extended. Additionally, for 2022, the contribution base for individuals has returned to 60 percent for cash contributions and 30 percent for noncash contributions"
Here Comes The FairTax … Again - John Buhl, TaxVox. "Keep in mind, this does not mean the national sales tax rate would be 23 percent. It’s a tax-inclusive rate, meaning every dollar paid on a purchase would include 23 cents that gets sent to the US Treasury. In the more traditional sense, the FairTax rate would be closer to 30 percent, and even that could fall well short of making this plan revenue neutral."
Abolish The IRS - Sort Of - Then What? - Peter Reilly, Forbes. "I find the lead somewhat disingenuous since under the act the IRS will be replaced by the Excise Tax Bureau. the Sales Tax Bureau and bureaus or offices or departments or whatever in as many of the fifty states as want to join in the fun of collecting on behalf of the federal government a 29.8 % sales tax on pretty much everything that people consume except for used property."
The OECD, UTPR, and the Fine Art of Working Around Rules - Alex Parker, Things of Caesar. "If all countries but one enact a tough new tax, that one is likely to see a lot of new business."
January 16, 2023, Martin Luther King, Jr. Day of Service - Erin Collins, NTA Blog:
One way the public can serve taxpayers in their own communities is by volunteering at a local Volunteer Income Tax Assistance (VITA) or Tax Counseling for the Elderly (TCE) site, assisting with free tax return preparation and electronic filing of basic tax returns for taxpayers who earn less than $60,000, taxpayers over age 60, persons with disabilities, and taxpayers with limited English proficiency.
If you are an attorney or tax practitioner, you may also be able to volunteer in other capacities using your specialized knowledge. Opportunities exist to volunteer with your local Low Income Taxpayer Clinic (LITC). You can find an LITC in your area by using the LITC locator tool or reviewing Publication 4134, Low Income Taxpayer Clinic List and reaching out to individual clinics for volunteer opportunities
Trump’s Company Gets Maximum Punishment for Evading Taxes - Jonah E. Bromwich, Ben Protess, and William K. Rashbaum, New York Times. "The tax fraud trial — which ended with the company’s conviction on 17 counts of tax fraud, a scheme to defraud, conspiracy and falsifying business records — hinged on whether Trump Organization executives who collected the off-the-books perks did so to help the company."
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