Taxpayer Rights: Pay No More Than The Correct Amount

As a reminder, taxpayers have the right to pay only the amount of tax legally due, including interest and penalties. They also have the right to have the IRS apply all tax payments properly. This is one of 10 fundamental rights known collectively as the Taxpayer Bill of Rights.

Highlights of the American Rescue Plan Act

Signed into law on March 11, 2021, the American Rescue Plan Act (ARPA) contains several tax provisions affecting individuals and families. Let’s take a look:

TAX PREPARATION VS. TAX PLANNING

Many people assume tax planning is the same as tax preparation, but the two are quite different. Let’s take a closer look:

IT’S NEVER TOO EARLY TO CHECK TAX WITHHOLDING

While it might seem like tax season just ended, it is never too early to do a “Paycheck Checkup” to make sure the right amount of tax is withheld from earnings – and avoid a tax surprise next year when filing your 2020 tax return. As a reminder, because income taxes operate as a pay-as-you-go system, taxpayers are required by law to pay most of their tax as income is received.

SMALL BUSINESS UPDATE: PAYROLL TAX DEFERRAL

On August 8, 2020, the President of the United States issued a Presidential Memorandum allowing employers to defer withholding and payment of the employee’s portion of the Social Security tax if the employee’s wages are below a certain amount. Medicare taxes are not covered, only FICA taxes (i.e., the 6.2% portion of the federal payroll tax on employees). The deferral also applies to the employee portion of the Railroad Retirement Act Tier 1 tax. Let’s take a look at what this means:

FILING AN AMENDED TAX RETURN

If you discover a mistake on your tax return after you’ve already filed, don’t panic. In most cases, all you have to do is file an amended tax return. Here’s what you need to know:

Relief for Other Coronavirus-related Tax Issues

Relief for taxpayers facing the challenges of COVID-19-related tax issues is now available through the IRS People First initiative. The projected start date will be April 1 and the effort will initially run through July 15, 2020. During this period, to the maximum extent possible, in-person contact will be avoided; however, the IRS will continue to take steps where necessary to protect all applicable statutes of limitations.

Are Social Security Benefits Taxable?

Social Security benefits include monthly retirement, survivor, and disability benefits; they do not include Supplemental Security Income (SSI) payments, which are not taxable.

What To Do If You Are Missing Important Tax Forms

If you are ready to file your taxes but are missing important tax forms here’s what you should do:

Sign Up for The Lahrmer Letter

Would you like reminders about upcoming tax deadlines? How about knowing the latest tax news and changes? Curious about what’s happening at Lahrmer & Company? You can receive all of this and more right in your inbox every month. Just sign up for our newsletter at www.lahrmercpa.com and click on the subscribe link on the right side of our home page. Here’s a sample of what you might see each month: