Taxpayers should be on the lookout for calls and email phishing attempts regarding the Coronavirus, or COVID-19 that could lead to tax-related fraud and identity theft. Because criminals take every opportunity to perpetrate a fraud on unsuspecting victims during times of need, taxpayers should also be skeptical about text messages received, websites, and social media attempts to request money or personal information.

Retirees Targeted

Seniors should be especially careful at this time. In most cases, the IRS will deposit economic impact payments (sometimes called recovery rebates or stimulus payments) into the direct deposit account taxpayers previously provided on tax returns. Taxpayers should not provide their direct deposit or other banking information for anyone to input on their behalf into the secure portal.

For retirees, the $1,200 payments are sent automatically. There is no additional action or information needed on their part to receive this. Retirees, including recipients of Forms SSA-1099 and RRB-1099, should also know they will not be contacted by the IRS via phone, email, mail or in person asking for any kind of information to complete their economic impact payment.

What to Watch Out For:

Scammers use a number of techniques including:

• Emphasizing the words “Stimulus Check” or “Stimulus Payment.” The official term is economic impact payment.
• Asking the taxpayer to sign over their economic impact payment check to them.
• Asking by phone, email, text or social media for verification of personal and/or banking information saying that the information is needed to receive or speed up their economic impact payment.
• Suggesting that they can get a tax refund or economic impact payment faster by working on the taxpayer’s behalf. This scam could be conducted by social media or even in person.
• Mailing the taxpayer a bogus check, perhaps in an odd amount, then tell the taxpayer to call a number or verify information online in order to cash it.

Unsolicited emails, text messages, or social media attempts to gather information that appear to be from either the IRS or an organization closely linked to the IRS, such as the Electronic Federal Tax Payment System (EFTPS), should be forwarded to phishing@irs.gov.

The Taxpayer First Act enacted July 1, 2019, requires tax-exempt organizations to electronically file information returns and related forms. Those that previously filed paper forms will receive a letter from the IRS informing them of the change.

The new law affects tax-exempt organizations in tax years beginning after July 1, 2019, and applies to the following IRS forms (filing deadlines vary by form type):

• Form 990, Return of Organization Exempt from Income Tax.
• Form 990-PF, Return of Private Foundation or Section 4947(a)(1) Trust Treated as Private Foundation.
• Form 8872, Political Organization Report of Contributions and Expenditures.
• Form 1065, U.S. Return of Partnership Income (if filed by a Section 501(d) apostolic organization).

Taxpayers should note that the required e-filing of Form 990-EZ has been postponed for one year, during which time optional e-filing continues to be available. Furthermore, although Forms 990-T (and 4720) will come under the e-filing requirement next year, the IRS will continue to accept these forms on paper pending conversion to electronic format.

Form 8872

The IRS will no longer accept paper Forms 8872 reporting on periods after 2019. Forms 8872 reporting information for periods starting on or after January 2020, will be due electronically by Section 527 organizations. These include political parties, political action committees and campaign committees of candidates for federal, state or local office.

Among other requirements, most tax-exempt political organizations have a requirement to file semiannual, quarterly or monthly reports on Form 8872. To file electronically, the organization must have the username and password it received from the IRS after electronically filing its initial notice (Form 8871). To replace a username or password, please contact the IRS, Attn: Request for 8872 Password, Mail Stop 6273, Ogden UT 84201; Fax (855) 214-7520. Organizations can file electronically using the IRS website.

Form 990 and 990-PF e-filing

Under the legislation, most e-filings won’t be due before December 15, 2020, from charities and other exempt organizations that generally file Form 990 or 990-PF by the 15th day of the fifth month after the tax year-end. In other words, Forms 990 and 990-PF with tax years ending July 31, 2020, and later MUST be filed electronically. Form 990 and 990-PF filings for tax years ending on or before June 30, 2020, may still be on paper. In the case of a short tax year or certain other circumstances detailed in the 990 or 990-PF Instructions, the IRS will continue to accept paper filing as its systems are yet unable to receive these forms electronically.

Due to COVID-19, Forms 990, 990-T, and 990-PF and payment of related tax due on or after April 1, 2020, and before July 15, 2020, are automatically extended to July 15th, 2020.

Transition Relief for Form 990-EZ

For small exempt organizations, the legislation specifically allowed a postponement (“transitional relief”). For tax years ending before July 31, 2021, the IRS will accept either paper or electronic filing of Form 990-EZ, Short Form Return of Organization Exempt from Income Tax. For tax years ending July 31, 2021, and later, Forms 990-EZ must be filed electronically. Generally, Form 990-EZ is for organizations with annual gross receipts less than $200,000 and total assets at tax year-end less than $500,000.

Paper Forms 990-T and 4720

In 2020, the IRS will continue to accept paper forms that are pending conversion into electronic format. These include Form 990-T, Exempt Organization Business Income Tax Return, and Form 4720, Return of Certain Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Code. The IRS plans to have these returns ready for e-filing in 2021 (reporting on tax year 2020).

The Taxpayer First Act aims to expand and strengthen taxpayer rights and to reform the IRS into a more taxpayer-friendly agency. The legislation requires the agency to develop a comprehensive customer service strategy, modernize its technology and enhance its cybersecurity. More information on the Taxpayer First Act is available at IRS.gov.

As always, don’t hesitate to call if you have any questions or would like more information.

Tax-related ID theft occurs when someone uses a taxpayer’s stolen personal information to file a tax return claiming a fraudulent refund. Thieves then use personal information like a stolen Social Security number. While the accounting profession and IRS work hard to prevent identity theft, taxpayers also play an important role.

Here are five tips to help taxpayers protect themselves against identity theft:

1. Always use security software. This software should have firewall and anti-virus protections.

2. Use strong, unique passwords. They should also consider using a password manager.

3. Learn to recognize and avoid phishing emails, threatening calls, and texts from thieves. These scammers pose as legitimate organizations such as banks, credit card companies, and even the IRS.

4. Do not click on links in unsolicited emails or messages from unknown senders. Also, people shouldn’t click on links or download attachments from emails that seem suspicious, even if they appear to be from senders they know.

5. Protect personal information and that of any dependents. For example, people shouldn’t routinely carry around their Social Security cards. They should also make sure tax records are secure.

You can use high-deductible health plans (HDHPs) to pay for 2019 Novel Coronavirus (COVID-19)-related testing and treatment, without jeopardizing their status and you may continue to contribute to a health savings account (HSA), retroactive to January 1, 2020.

Health plans that otherwise qualify as HDHPs will not lose that status merely because they cover the cost of testing for or treatment of COVID-19 before plan deductibles have been met. Furthermore, as in the past, any vaccination costs continue to count as preventive care and can be paid for by an HDHP.

Finally, the CARES Act signed into law in late March of 2020, amended legislation to allow HDHPs to cover telehealth and other remote care services without charging a deductible.

Please note that this information relates only to HSA-eligible HDHPs. Employees and other taxpayers in any other type of health plan with specific questions about their plan and what it covers should contact their plan administrator.

As tax-filing season gets underway, taxpayers may be anticipating receiving their refund by a certain date, especially if they plan on making major purchases or paying bills. While some tax returns are processed quickly, others may require additional review. As such, those refunds may take longer.

Just as each tax return is unique and individual, so is each taxpayer’s refund. Here is what taxpayers should keep in mind as they are waiting for their refund – especially if they hear about or see that other taxpayers on social media have already received theirs.

Factors affecting refund timing

Different factors can affect the timing of a refund, among them security reviews that help protect against identity theft and refund fraud. Even though the IRS typically issues most refunds in less than 21 days, a particular taxpayer’s refund may take longer. This is because some tax returns require additional review and take longer to process than others such as when a return that has errors, is incomplete or is affected by identity theft or fraud. If more information is needed to process a return, the IRS will contact taxpayers by U.S. mail – never by email or telephone.

Year-end bonus, holiday pay and temporary job may affect refund

Some financial transactions, especially those occurring late in the year, could have an unexpected impact on taxes and any potential refund. Examples include year-end and holiday bonuses, stock dividends, capital gain distributions from mutual funds and stocks, bonds, virtual currency, and real estate or other property sold at a profit.

Because the IRS is a pay-as-you-go system, taxes must be paid as income is earned or received during the year, either through withholding or estimated tax payments. This means that if the amount of tax withheld from salaries or pensions is not enough, the taxpayer may have to make estimated tax payments.

Taxpayers whose 2019 federal income tax withholding unexpectedly falls short of their tax liability for the year, can still make a quarterly estimated tax payment directly to the IRS using Form 1040-ES, Estimated Tax for Individuals. As a reminder, the deadline for making a payment for the fourth quarter of 2019 was January 15, 2020.

Taxpayers who pay too little tax during the year, either through withholding or estimated tax payments, may be charged a penalty when they file. In some cases, a penalty may apply if their estimated tax payments are late, even if they are due a refund when they file.

Refund Offsets: Certain past-due debt reduces refunds

By law, the Department of Treasury’s Bureau of the Fiscal Service (BFS) issues IRS tax refunds and conducts the Treasury Offset Program (TOP). Under TOP, BFS may reduce a taxpayer’s refund and offset all or part of the refund. This is done to pay past-due federal tax, state income tax, state unemployment compensation debts, child support, spousal support or other federal nontax debts, such as student loans.

BFS will reduce the refund to pay off the debt owed and send a notice to the taxpayer if an offset occurs. Any portion of the remaining refund after the offset is issued in a check or directly deposited to the taxpayer as originally requested on the return.

Separate from the TOP, refund amounts may also be adjusted due to changes the IRS made to the tax return. When that happens, the taxpayer will get a notice explaining the changes.

E-filing and direct deposit for a faster refund

The majority of taxpayers get their refunds faster by filing electronically and using direct deposit, which is easy, safe, and most of all, secure. This is the same electronic transfer system used to deposit nearly 98% of all Social Security and Veterans Affairs benefits into millions of accounts.

Refunds should only be deposited directly into accounts that are in the taxpayer’s name, their spouse’s name or both if it’s a joint account. No more than three electronic refunds can be deposited into a single financial account or prepaid debit card. Taxpayers who exceed the limit will receive an IRS notice and will be mailed a paper refund check. Whether a taxpayer files electronically or on paper, direct deposit gives them access to their refund faster than a paper check.

If you have any questions about tax refunds, please don’t hesitate to call.