by Taxing Subjects | Jan 6, 2023 | Tax Tips and News
High gas prices have understandably made plug-in electric and fuel cell vehicles more attractive in recent years. While a provision in the Inflation Reduction Act of 2022 is designed to make the switch less of a financial burden, there is confusion surrounding some of the new requirements for the Clean Vehicle Credit.
Naturally, the Internal Revenue Service has been working to issue guidance for those new requirements. As part of that effort, the agency announced proposed regulations in Notice 2023-1 and updated webpages containing general information about the Clean Vehicle Credit and an index of qualified manufacturers and vehicles.
How does the Clean Vehicle Credit work for TY 2023?
The Clean Vehicle Credit can be worth up to $7,500 for qualifying EVs and FCVs purchased and put into service on or after January 1, 2023. For the purposes of the credit, “put into service” means “the date the taxpayer takes possession of the vehicle” (N 2023-1, 5).
(Note: The Clean Vehicle Credit was available for clean vehicles purchased prior to 2023, but those requirements are different.)
Like many individual tax credits, those who want to claim the Clean Vehicle Credit cannot have a modified adjusted gross income (AGI) that exceeds a specific threshold established for their filing status:
- $300,000 for married couples filing jointly
- $225,000 for heads of households
- $150,000 for all other filers
Further, qualifying vehicles have to meet a number of requirements, ranging from the location of final assembly to MSRP thresholds for specific vehicle classifications. Here is how the IRS breaks down the requirements:
- Have a battery capacity of at least 7 kilowatt hours
- Have a gross vehicle weight rating of less than 14,000 pounds
- Be made by a qualified manufacturer. See [the] index of qualified manufacturers and vehicles.
- FCVs do not need to be made by a qualified manufacturer to be eligible. See Rev. Proc. 2022-42 for more detailed guidance.
- Undergo final assembly in North America
- [MSRP doesn’t exceed] $80,000 for vans, sport utility vehicles, and pickup trucks
- [MSRP doesn’t exceed] $55,000 for other vehicles
Further, the vehicle must be purchased new, and the seller has to report all required information to the IRS at the time of sale. To ensure a vehicle meets the North America final assembly requirement, the IRS recommends using the Department of Energy VIN Decoder tool. (The rules for used vehicles are different.)
What about the mineral and battery component requirements?
Unfortunately, the notice does not explain the critical mineral and battery component percentage requirements, which are generally considered the most complicated aspect of the updated Clean Vehicle Credit. However, the agency promises that proposed regulations for those requirements are “forthcoming” (N 2023-1, 3).
Want to learn more about the Inflation Reduction Act?
Attend a Drake Software webinar exploring the Inflation Reduction Act that features Drake Software Chief Revenue Officer John Sapp, CPA; Drake Software Lead Tax Analyst Bob Nolan, CPA EA; and Drake Software Tax Software Trainer Ann Campbell, CPA CIA. Sign up for “Inflation Reduction Act: Panel Discussion” on DrakeCPE.com.
Sources: Notice 2023-1; “Manufacturers and Models of Qualified Used Clean Vehicles,” IRS.gov; “Manufacturers and Models for New Qualified Clean Vehicles Purchased in 2022 and Before,” IRS.gov; “Manufacturers and Models for New Qualified Clean Vehicles Purchased in 2023 or After,” IRS.gov; “Credits for New Clean Vehicles Purchased in 2023 or After,” IRS.gov
– Article provided by Taxing Subjects.
by Taxing Subjects | Dec 13, 2022 | Tax Tips and News
After the 2022 tax season found the Internal Revenue Service spread thinner than ever before, the agency is taking steps to ensure that the first few months of 2023 go far more smoothly.
How is the IRS working to get ahead of staffing issues in the upcoming tax season?
In addition to creating job openings in Taxpayer Assistance Centers, the IRS has already hired more than 4,000 new customer service representatives. The IRS is pushing to hire 5,000 customer service reps in total—leaving fewer than 1,000 hires left to go.
“Our phone lines have been simply overwhelmed during the pandemic,” says IRS Commissioner Chuck Rettig, “and we have been unable to provide the help that IRS employees want to give and that the nation’s taxpayers deserve. But help is on the way for taxpayers.”
How will these IRS hires affect taxpayers and tax preparers in 2023?
In practical terms, these new customer service hires translate to improved phone communication during the tax season.
In Rettig’s words, “The IRS is fully committed to providing the best service possible, and we are moving quickly to use new funding to help taxpayers during the busy tax season. As the newly hired employees are trained and move online in 2023, we will have more assistors on the phone than any time in recent history.”
How soon will these new hires be ready for tax season?
Onboarding is underway for the new customer service representatives, including service and taxpayer experience various trainings over the course of several weeks. Hiring has been staggered, but many of these reps will be ready for action in early 2023 for tax season. The remainder will join as they complete preliminary training, and most will be actively answering phones by the time the IRS sees the highest call volumes (usually around Presidents’ Day).
How are these new positions and hires being funded?
Expansion of IRS call centers is a benefit of the Inflation Reduction Act, which was approved in August of this year. Improvement efforts do not end there: The IRS is also seeking new employees in information technology and compliance, taking a holistic approach to improving taxpayer services overall.
All that’s left now is to wait and see if these aspirations can be met. Still, the tax-filing landscape for 2023 looks promising; 4,000 new customer service hires certainly call for celebration.
Sources: IR-2022-197; IR-2022-191
– Article provided by Taxing Subjects.
by Taxing Subjects | Dec 8, 2022 | Tax Tips and News
In this series, learn about a few popular Drake Tax features and navigation tools that help you save time and stay productive.
Loss of taxpayer information during the filing process due to technical difficulties is a sure way to fast-track frustration during tax season. Fortunately for Drake Tax users, today’s highlighted feature is an info life saver.
The Backup and Restore Tool at a glance
The Backup and Restore Tool does exactly what it says on the tin, and not just for tax return files: Any file can be backed up with this handy feature. You can perform manual, one-time backups or establish automatic backups to run in the background as needed.
How do I access the Backup and Restore Tool?
From the Drake Tax Home window:
- Click Tools.
- Click File Maintenance from the drop list.
- Select Backup.
The Backup and Restore window will pop up, and you can work your magic from there.
How do I make a one-time backup?
To make a one-time backup:
- Navigate to the Backup and Restore window using the instructions above.
- From the Manual One-Time Backup section of the window, choose the location where you want to back up your files.
- Click Selective Backup.
- Select Backup.
It’s that simple!
How do I make a custom backup?
To make a custom backup:
- Navigate to the Backup and Restore.
- Select Create Selective Backup.
From there, you can choose to either back up all Drake Tax files or individual ones—and these can be anything from folders to photo albums.
See how the Backup and Restore Tool saves time with a Drake Tax free trial
Ready to explore Drake Tax and the Backup and Restore Tool for yourself? Download the free trial today by clicking the button below.
– Article provided by Taxing Subjects.
by Taxing Subjects | Nov 18, 2022 | Tax Tips and News
Don’t forget to protect your data during the holiday season (or ever)
Thanksgiving traditions are not one size fits all. Whether roasting turkey or preparing something completely different, families put their unique spin on the holiday. The Security Summit celebrates by kicking its annual National Tax Security Awareness Week on Cyber Monday, and this year marks the seventh anniversary of the event. (Their secret ingredient is practical tips for keeping taxpayer data safe.)
A collaboration between the Internal Revenue Service, state departments of revenue, and private members of the tax industry, the Security Summit has focused on helping tax professionals and taxpayers safeguard personally identifiable information (PII) since its formation in 2015. From November 28 – December 2, the Summit will share daily data security advice.
The Security Summit chooses to host its annual data security awareness event during the week of Cyber Monday, in part, to highlight the risks that tax professionals and taxpayers face during the busiest shopping season of the year. After all, identity thieves will deploy a flood of phishing scams to capitalize on the consumerism feeding frenzy. Knowing the telltale signs of scams and how to develop good cybersecurity hygiene can help protect you and your clients from identity theft.
What will the Security Summit cover during National Tax Security Awareness Week 2022?
This year, the Security Summit is sharing tips for shopping online, donating to charity, reviewing written data security plans, acquiring an Identity Protection PIN, and protecting small businesses. Here is the detailed daily itinerary shared by the IRS in a recent news release:
- Day 1 – Cyber Monday: Protect personal and financial information online
- Use security software for computers and mobile phones – and keep it updated.
- Make sure anti-virus software for computers has a feature to stop malware, and that there is a firewall enabled that can prevent intrusions.
- Use strong and unique passwords for all accounts.
- Use multi-factor authentication whenever possible.
- Shop only secure websites; look for the “https” in web addresses and the padlock icon; avoid shopping on unsecured and public Wi-Fi in places like coffee shops, malls or restaurants.
- Day 2 – Giving Tuesday: Beware of scammers using fake charities
- Individuals should never let any caller pressure them into giving a donation without allowing time for them to do some research.
- Confirm the charity is real by asking for its exact name, website and mailing address.
- Before making a donation, use the IRS Tax-Exempt Organization Search tool (TEOS) to verify it’s an IRS-recognized charity.
- Be careful about how a donation is made. After researching the charity, pay by credit card or check and not by gift card or wiring money.
- Day 3 – Tax professionals should review their security protocols
- Deploy basic security measures.
- Use multi-factor authentication to protect tax software accounts.
- Create a Virtual Private Network if working remotely.
- Create a written data security plan as required by federal law.
- Know about phishing and phone scams.
- Create data security and data theft recovery plans.
- Day 4 – Get an Identity Protection PIN
- The Identity Protection PIN or IP PIN is a six-digit code known only to the individual and the IRS. It provides another layer of protection for taxpayers’ Social Security numbers on tax returns.
- Use the Get an Identity Protection PIN (IP PIN) tool at IRS.gov/IPPIN to immediately get an IP PIN.
- Never share the IP PIN with anyone but a trusted tax provider.
- Day 5 – Businesses should watch out for tax-related scams and implement safeguards
- Learn about best security practices for small businesses.
- IRS continues protective masking of sensitive information on business transcripts.
- A Business Identity Theft Affidavit, Form 14039-B, is available for businesses to report theft to the IRS.
- Beware of various scams, especially the W-2 scam that attempts to steal employee income information.
- Check out the “Business” section on IRS’s Identity Theft Central.
The IRS also recommends tax professionals read Publication 4557, Safeguarding Taxpayer Data and Small Business Information Security: The Fundamentals. Those who are interested in sprucing up (or creating) their written information security plan (WISP) can review the sample published this year by the Security Summit.
Source: IR-2022-202
– Article provided by Taxing Subjects.
by Taxing Subjects | Nov 3, 2022 | Tax Tips and News
Victims receive extended deadlines, deferred taxes, and more
When disaster strikes, the government’s disaster-declaration process can help victims recover from financial losses. Governors in affected states submit a major disaster area request to the president through the Federal Emergency Management Agency (FEMA); if granted, one benefit victims receive is tax relief.
Generally, this relief allows taxpayers to claim disaster-related losses on their prior-year return and provides additional time to meet filing or payment deadlines. In 2022, several states have been granted the disaster area designation. Below is an overview of federally declared disasters, their affected areas, and tax relief granted.
What recent natural disasters have been federally recognized in 2022?
Recent disasters in 2022 include Hurricane Ian, Hurricane Fiona, and severe storms in Alaska. States affected by these storms have received major disaster declarations, granting tax relief to individuals and businesses residing within affected locations.
Residents and businesses in North Carolina, South Carolina, and Florida qualify for tax relief due to Hurricane Ian, including a penalty waiver for anyone who “sells or uses dyed diesel fuel for highway use” in the state of Florida between September 28, 2022, and October 19, 2022. For more information, see our blog posts on tax relief for North Carolina, South Carolina, and Florida.
In Puerto Rico, victims of Hurricane Fiona in all municipalities qualify for tax deadline extensions. According to the IRS, residents and businesses in Puerto Rico “have until February 15, 2023, to file various federal individual and business tax returns and make tax payments.”
In Alaska, residents and businesses affected by the severe storms that cause landslides and flooding qualify for relief, too. Deadlines for paying taxes and filing individual and business returns that fall after September 15, 2022 have been extended to February 15, 2023. This relief applies to the Regional Education Attendance Areas of Bering Strait, Kashunamiut, Lower Kuskokwim, and Lower Yukon.
Other disasters include severe storms, wildfires, and flooding. For more information, see the list of affected states below.
Which states and territories contain federally declared disaster areas?
Certain counties, municipalities, and islands of the following states and territories have been granted disaster area status in 2022:
Did farmers receive disaster relief in 2022?
Farmers in 44 states and other regions who were affected by droughts in 2022 qualify for special disaster relief. According to the IRS, “farmers and ranchers in applicable regions forced to sell livestock because of drought conditions … have more time to replace their livestock and defer tax on any gains from the forced sales.” For more information, see Notice 2022-43.
Where can I learn more about disaster relief in 2022?
The IRS regularly updates the Tax Relief in Disaster Situations page on IRS.gov. You can also visit the Around the Nation page, which lists tax relief by state.
Sources: Disaster Assistance and Emergency Relief for Individuals and Businesses; IR-2022-177; IR-2022-161; IR-2022-166; Tax Relief in Disaster Situations; Notice 2022-43; Around the Nation
– Article provided by Taxing Subjects.
