IRS Launches Paperless Processing Initiative

"Taxpayers will have the option to go paperless for IRS correspondence by 2024 Filing Season, IRS to achieve paperless processing for all tax returns by Filing Season 2025.

IRS Paperless Processing Initiative will eliminate up to 200 million pieces of paper annually, cut processing times in half, and expedite refunds by several weeks.

Paper-based processes have long hampered the IRS and frustrated taxpayers. The challenges created by paper are two-fold: Taxpayers are unable to digitally submit many forms and correspondence beyond their annual 1040 tax return, and the IRS is unable to digitally process paper tax returns it receives. For decades, taxpayers had to respond to notices for things like document verification through the mail, and IRS employees had to manually enter numbers from paper returns into computers one digit at a time, creating significant delays for taxpayers and challenges for IRS staff.

The IRS receives about 76 million paper tax returns and forms, and 125 million pieces of correspondence, notice responses, and non-tax forms each year, and its limited capability to accept these forms digitally or digitize paper it receives has prevented the IRS from delivering the world-class service taxpayers deserve. The IRS also has more than 1 billion historical documents, which costs $40 million per year to store.

Thanks to Inflation Reduction Act resources, taxpayers are now able to respond to more notices online, and the IRS has made significant progress adopting new technology that automates the scanning of millions of paper returns. As the next phase of its modernization, the IRS is accelerating paperless processing efforts. Using IRA resources, the IRS is launching an ambitious plan to ensure that by Filing Season 2024, taxpayers will be able to go paperless if they choose to do so, and by Filing Season 2025, the IRS will achieve paperless processing digitizing all paper-filed returns when received. In effect, this means all paper will be converted into digital form as soon as it arrives at the IRS.."
IRS Paperless Initiative 

Mapping IRS Tax Return Filings Reveals Marked Differences in the Distribution of Income and Dependents

"Most Americans filed their taxes recently, not only providing the federal government with funds needed to operate but also providing the IRS (and ultimately the public) with data about the reported amounts and sources of income, their number of dependents, and other factors that shape the distribution of financial means across the country.

For the U.S. as a whole, the average adjusted gross income (AGI) reported on federal income tax returns filed in 2021 increased to $76,539. This reflects income received during 2020, the first year of the COVID-19 pandemic. Filings during 2021 showed AGI up only slightly from $75,758 during the previous year. This does not adjust for inflation.

Reported income, however, varied markedly across states and counties. Aside from D.C., Massachusetts had the highest average reported income at $101,863, followed by Connecticut at $101,589 and Washington State at $95,584. The lowest AGI with only half that of the top three states was Mississippi at $50,876. West Virginia had the second lowest income at $53,461 while New Mexico returns reported on average an AGI of $56,383 which was the next lowest.
 

AGI does not tell the whole story, of course. Income variation by county does not take into account the cost of living, which is considerably higher in places like New York City and Los Angeles than in rural areas. Nonetheless, mapping the distribution of AGI by county shows where concentrations of lower-income and higher-income tax filers reside..."
Tax Filings and Income Distribution 

Top 5 things to remember when filing income tax returns in 2022

"With filing season beginning January 24, the Internal Revenue Service reminded taxpayers about several key items to keep in mind when filing their federal income tax returns this year.

Given the unprecedented circumstances around the pandemic and unique challenges for this tax season, the IRS offers a 5-point checklist that can help many people speed tax return processing and refund delivery while avoiding delays.

1. File an accurate return and use e-file and direct deposit to avoid delays. Taxpayers should electronically file and choose direct deposit as soon as they have everything they need to file an accurate return. Taxpayers have many choices, including using a trusted tax professional. For those using e-file, the software helps individuals avoid mistakes by doing the math. It guides people through each section of their tax return using a question-and-answer format.

2. For an accurate return, collect all documents before preparing a tax return; make sure stimulus payment and advance Child Tax Credit information is accurate. In addition to collecting W-2s, Form 1099s and other income-related statements, it is important people have their advance Child Tax Credit and Economic Impact Payment information on hand when filing.

• Advance CTC letter 6419: In late December 2021, and continuing into January, the IRS started sending letters to people who received advance CTC payments. The letter says, "2021 Total Advance Child Tax Credit (AdvCTC) Payments" near the top and, "Letter 6419" on the bottom righthand side of the page. Here's what people need to know:
  • The letter contains important information that can help ensure the tax return is accurate.
  • People who received advance CTC payments can also check the amount of the payments they received by using the CTC Update Portal available on IRS.gov.
  • Eligible taxpayers who received advance Child Tax Credit payments should file a 2021 tax return to receive the second half of the credit. Eligible taxpayers who did not receive advance Child Tax Credit payments can claim the full credit by filing a tax return.
• Third Economic Impact Payment letter 6475: In late January 2022, the IRS will begin issuing letters to people who received a third payment in late January 2021. The letter says, "Your Third Economic Impact Payment" near the top and, "Letter 6475" on the bottom righthand side of the page. Here's what people need to know:
  • Most eligible people already received their stimulus payments. This letter will help individuals determine if they are eligible to claim the Recovery Rebate Credit (RRC) for missing stimulus payments.
  • People who are eligible for RRC must file a 2021 tax return to claim their remaining stimulus amount.
  • People can also use IRS online account to view their Economic Impact Payment amounts.

Both letters – 6419 and 6475 – include important information that can help people file an accurate 2021 tax return. If a return includes errors or is incomplete, it may require further review while the IRS corrects the error, which may slow the tax refund. Using this information when preparing a tax return electronically can reduce errors and avoid delays in processing.

3. Avoid lengthy phone delays; use online resources before calling the IRS. Phone demand on IRS assistance lines remains at record highs. To avoid lengthy delays, the IRS urges people to use IRS.gov to get answers to tax questions, check a refund status or pay taxes. There's no wait time or appointment needed — online tools and resources are available 24 hours a day.

Additionally, the IRS has several ways for taxpayers to stay up to date on important tax information:

• Follow the IRS' official social media accounts and email subscription lists to stay current on the latest tax topics and alerts.
• Download the IRS2Go mobile app, watch IRS YouTube videos, or follow the IRS on Twitter, Facebook, LinkedIn and Instagram for the latest updates on tax changes, scam alerts, initiatives, products and services.
• Taxpayers can also get information in their preferred language. The IRS translates tax resources into several languages and currently has basic tax information in 20 languages. People can also file Schedule LEP, Request for Change in Language Preference, to receive written communications from the IRS in their preferred language..."
  Income tax filing
  

IRS provides tax inflation adjustments for tax year 2022

"The Internal Revenue Service today announced the tax year 2022 annual inflation adjustments for more than 60 tax provisions, including the tax rate schedules and other tax changes. Revenue Procedure 2021-45 PDF provides details about these annual adjustments.

Highlights of changes in Revenue Procedure 2021-45:

The tax year 2022 adjustments described below generally apply to tax returns filed in 2023.

The tax items for tax year 2022 of greatest interest to most taxpayers include the following dollar amounts:

• The standard deduction for married couples filing jointly for tax year 2022 rises to $25,900 up $800 from the prior year. For single taxpayers and married individuals filing separately, the standard deduction rises to $12,950 for 2022, up $400, and for heads of households, the standard deduction will be $19,400 for tax year 2022, up $600.
   
• The personal exemption for tax year 2022 remains at 0, as it was for 2021, this elimination of the personal exemption was a provision in the Tax Cuts and Jobs Act. 
   
• Marginal Rates: For tax year 2022, the top tax rate remains 37% for individual single taxpayers with incomes greater than $539,900 ($647,850 for married couples filing jointly).

  The other rates are:
  35%, for incomes over $215,950 ($431,900 for married couples filing jointly);
  32% for incomes over $170,050 ($340,100 for married couples filing jointly);
  24% for incomes over $89,075 ($178,150 for married couples filing jointly);
  22% for incomes over $41,775 ($83,550 for married couples filing jointly);
  12% for incomes over $10,275 ($20,550 for married couples filing jointly).
  The lowest rate is 10% for incomes of single individuals with incomes of $10,275 or less ($20,550 for married couples filing jointly).
   

• For 2022, as in 2021, 2020, 2019 and 2018, there is no limitation on itemized deductions, as that limitation was eliminated by the Tax Cuts and Jobs Act.
   
• The Alternative Minimum Tax exemption amount for tax year 2022 is $75,900 and begins to phase out at $539,900 ($118,100 for married couples filing jointly for whom the exemption begins to phase out at $1,079,800). The 2021 exemption amount was $73,600 and began to phase out at $523,600 ($114,600 for married couples filing jointly for whom the exemption began to phase out at $1,047,200).
   
• The tax year 2022 maximum Earned Income Tax Credit amount is $6,935 for qualifying taxpayers who have three or more qualifying children, up from $6,728 for tax year 2021. The revenue procedure contains a table providing maximum EITC amount for other categories, income thresholds and phase-outs.
   
• For tax year 2022, the monthly limitation for the qualified transportation fringe benefit and the monthly limitation for qualified parking increases to $280.
   
• For the taxable years beginning in 2022, the dollar limitation for employee salary reductions for contributions to health flexible spending arrangements increases to $2,850. For cafeteria plans that permit the carryover of unused amounts, the maximum carryover amount is $570, an increase of $20 from taxable years beginning in 2021.
   
• For tax year 2022, participants who have self-only coverage in a Medical Savings Account, the plan must have an annual deductible that is not less than $2,450, up $50 from tax year 2021; but not more than $3,700, an increase of $100 from tax year 2021. For self-only coverage, the maximum out-of-pocket expense amount is $4,950, up $150 from 2021. For tax year 2022, for family coverage, the annual deductible is not less than $4,950, up from $4,800 in 2021; however, the deductible cannot be more than $7,400, up $250 from the limit for tax year 2021. For family coverage, the out-of-pocket expense limit is $9,050 for tax year 2022, an increase of $300 from tax year 2021.
   
• The modified adjusted gross income amount used by joint filers to determine the reduction in the Lifetime Learning Credit provided in § 25A(d)(2) is not adjusted for inflation for taxable years beginning after December 31, 2020. The Lifetime Learning Credit is phased out for taxpayers with modified adjusted gross income in excess of $80,000 ($160,000 for joint returns).
   
• For tax year 2022, the foreign earned income exclusion is $112,000 up from $108,700 for tax year 2021.
   
• Estates of decedents who die during 2022 have a basic exclusion amount of $12,060,000, up from a total of $11,700,000 for estates of decedents who died in 2021.
   
• The annual exclusion for gifts increases to $16,000 for calendar year 2022, up from $15,000 for calendar year 2021.
   
• The maximum credit allowed for adoptions for tax year 2022 is the amount of qualified adoption expenses up to $14,890, up from $14,440 for 2021.."
  Tax inflation adjustments 

Get Transcript

"WHAT'S NEW?

There is a new transcript format that better protects your data. This new format partially masks your personally identifiable information. Financial data will remain fully visible to allow for tax preparation, tax representation or income verification. Learn more at About the New Tax Transcript and the Customer File Number.

Caution: The Get Transcript Service is for individual taxpayers to retrieve their own transcripts for their own purposes. Use by any other entities is prohibited.

You can get various Form 1040-series transcript types online or by mail. If you need your prior year Adjusted Gross Income (AGI) to e-file, choose the tax return transcript type when making your request. To find out how much you owe or to verify your payment history, you can view your tax account.

The method you used to file your tax return, e-file or paper, and whether you had a balance due, affects your current year transcript availability. Note: If you need a photocopy of your return, you must use Form 4506.

 

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To register and use this service, you need:

• your SSN, date of birth, filing status and mailing address from latest tax return,
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• a mobile phone linked to your name (for faster registration) or ability to receive an activation code by mail.

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What You Need

To use this service, you need your:

• SSN or Individual Tax Identification Number (ITIN),
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• Return or Account transcript types delivered by mail
• Transcripts arrive in 5 to 10 calendar days at the address we have on file for you.."
  IRS transcript 

Federal Individual Income Tax Terms: An Explanation

"This report describes the terms most commonly used when discussing the federal individual income tax. Most of these tax terms are explained in the order that they occur in the process of determining one’s income tax on the Form 1040.

Total income is the sum total of all income required to be reported for tax purposes. Total income does not include exclusions, items specifically excluded from determination of gross income. Total income may be reduced by certain adjustments to income for special types of expenses that Congress has determined should be considered in calculating gross income. These adjustments, often referred to as above-the-line deductions, can generally be claimed by all eligible taxpayers, not just those who itemize deductions. For 2020 and 2021, taxpayers who do not itemize their deductions can claim an additional deduction for charitable contributions.

Adjusted gross income (AGI) equals gross income less above-the-line deductions (i.e., qualifying adjustments to income). It is the income measurement before a taxpayer claims either the standard deduction or the sum of all their itemized deductions (whichever is greater). Itemized deductions are subtracted from AGI and are allowed for certain types of expenditures for which income taxation is deemed inappropriate or inadvisable. The standard deduction, by contrast, is a set amount that varies by filing status and may be subtracted from AGI if it is greater than a taxpayer’s itemized deductions. An additional standard deduction amount is available to certain individuals, for example the blind or elderly. Deductions function like adjustments and exclusions in their effect on tax liability.

Taxable income is adjusted gross income reduced by either the standard deduction (plus the additional standard deduction in some cases) or itemized deductions along with a deduction for qualified pass-through business income, when applicable. Taxable income is the base to which the income tax rates are applied to calculate income tax liability. Tax liability is calculated by applying the marginal tax rate and schedule to taxable income. Tax credits are then subtracted from gross tax liability to arrive at a taxpayer’s final tax liability. Hence, tax credits reduce tax liability directly, on a dollar-for-dollar basis. Tax credits are available to all qualifying taxpayers, whether they itemize deductions or not..."
Federal Individual Tax 

Tax Withholding Estimator

"Use your best estimates for the year ahead to determine how to complete Form W-4 so you don't have too much or too little federal income tax withheld..."

1

About You

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Income & Withholding

3

Adjustments

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Deductions

5

Tax Credits

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Results

Tax withholding

Congressional Access to the President’s Federal Tax Returns

"The Chair of the House Ways and Means Committee is reportedly preparing to send a request to the Treasury Department’s Internal Revenue Service (IRS) to obtain President Trump’s federal tax returns. This request appears prompted by the President’s departure from the past practice of sitting presidents and presidential candidates voluntarily disclosing their recent tax returns. This Sidebar analyzes the ability of a congressional committee to obtain the President’s tax returns under provisions of the Internal Revenue Code (IRC); whether the President or the Treasury Secretary might have a legal basis for denying a committee request for the returns; and, if a committee successfully acquires the returns, whether those returns legally could be disclosed to the public.

Congressional Committee Authority to Obtain Tax Returns

 In 1976, Congress amended Section 6103 of the IRC to establish that federal tax return information is confidential by default unless a statute expressly authorizes disclosure. Congress made these changes in part to curtail the President’s authority to acquire tax return information in response to revelations that President Nixon sought to use tax return information for improper purposes. Specifically, Section 6103(a) states that individual and business tax returns, and the information in tax returns, are confidential, and officers or employees of the federal government, among others, may not disseminate those returns or the Congressional Research Service 7-5700 www.crs.gov LSB10275 Congressional Research Service 2 information therein for unauthorized purposes without the taxpayer’s consent. Section 6103(b)2)(A) defines “return information” to include, among other things, “a taxpayer’s identity, the nature, source, or amount of his income, payments, receipts, deductions, exemptions, credits, assets, liabilities, net worth, . . . or tax payment.” This policy is bolstered by a series of statutes providing for criminal penalties and authorizing the taxpayer to bring a civil action for damages for unauthorized disclosures of return information. However, Congress has established a number of exceptions to this general proscription against disclosing taxpayer information, including certain disclosures for use in legitimate tax administration, criminal proceedings, audits conducted by the Government Accountability Office, and child support enforcement activities..."
President's tax returns

Updated Withholding Calculator, Form W-4 Released; Calculator Helps Taxpayers Review Withholding Following New Tax Law

"The Internal Revenue Service today released an updated Withholding Calculator on IRS.gov and a new version of Form W-4 to help taxpayers check their 2018 tax withholding following passage of the Tax Cuts and Jobs Act in December.

The IRS urges taxpayers to use these tools to make sure they have the right amount of tax taken out of their paychecks.

“Following the major changes in the tax law, the IRS encourages employees to check their paychecks to help ensure they’re having the right amount of tax withheld for their personal situation,” said Acting IRS Commissioner David Kautter.

The Tax Cuts and Jobs Act made changes to the tax law, including increasing the standard deduction, removing personal exemptions, increasing the child tax credit, limiting or discontinuing certain deductions and changing the tax rates and brackets.

If changes to withholding should be made, the Withholding Calculator gives employees the information they need to fill out a new Form W-4, Employee’s Withholding Allowance Certificate. Employees will submit the completed W-4 to their employer.

“Withholding issues can be complicated, and the calculator is designed to help employees make changes based on their personal financial situation,” Kautter said. “Taking a few minutes can help taxpayers ensure they don’t have too little – or too much – withheld from their paycheck.”

The withholding changes do not affect 2017 tax returns due this April. However, having a completed 2017 tax return can help taxpayers work with the Withholding Calculator to determine their proper withholding for 2018 and avoid issues when they file next year..."

IRS withholding calculator

The Distribution of Asset Holdings and Capital Gains

"In 2010, more than 70 percent of families directly owned property designated under the Internal Revenue Code as capital assets—that is, assets that can be sold and that typically generate taxable capital gains or deductible losses when sold. Families’ capital assets included their homes, other real estate, privately owned businesses, stocks, corporate and government bonds (including Treasury bills and notes but excluding Treasury savings bonds), and mutual funds; those assets had a combined worth of $50 trillion. That amount does not include an additional $20 trillion of other family assets—such as the value of defined benefit and defined contribution retirement plans (for example, 401(k) plans) and balances in savings and checking accounts...
Asset holdings

IRS Criminal Enforcement Slides

"As Congress continues to reduce its overall support of the Internal Revenue Service (IRS), the chances that the IRS will at some point recommend a taxpayer for criminal prosecution have significantly declined — from 13.3 per million population in FY 2013 to 9.2 per million in FY 2015. This level is the lowest seen during the Obama Administration.

The reduction in the number of IRS matters referred to federal prosecutors appears to be directly related to the drop in the number of the agency's criminal investigators, which has been cut back 16 percent over the last five years..."

IRS

Directory of Federal Tax Return Preparers with Credentials and Select Qualifications

"Anyone with a Preparer Tax Identification Number (PTIN) can prepare a tax return for a client. However, tax return preparers have differing levels of skills, education and expertise. This searchable directory is intended to help you with your choice by providing a listing of preparers in your area who currently hold professional credentials recognized by the IRS or who hold an Annual Filing Season Program Record of Completion.

Understanding Tax Return Preparer Credentials and Qualifications can help you learn more about the different types of tax professionals.

Choosing a Tax Professional provides more guidance for making this important choice..."

Taxes

Free Tax Return Preparation for Qualifying Taxpayers

"The Volunteer Income Tax Assistance (VITA) program offers free tax help to people who generally make $53,000 or less, persons with disabilities, the elderly and limited English speaking taxpayers who need assistance in preparing their own tax returns. IRS-certified volunteers provide free basic income tax return preparation with electronic filing to qualified individuals.
In addition to VITA, the Tax Counseling for the Elderly (TCE) program offers free tax help for all taxpayers, particularly those who are 60 years of age and older, specializing in questions about pensions and retirement-related issues unique to seniors. The IRS-certified volunteers who provide tax counseling are often retired individuals associated with non-profit organizations that receive grants from the IRS.
Before going to a VITA or TCE site, see Publication 3676-B for services provided and check out the What to Bring page to ensure you have all the required documents and information our volunteers will need to help you. *Note: available services can vary at each site due to the availability of volunteers certified with the tax law expertise required for your return.
Find a VITA or TCE Site Near You

VITA and TCE sites are generally located at community and neighborhood centers, libraries, schools, shopping malls and other convenient locations across the country. To locate the nearest VITA or TCE site near you, use the VITA Locator Tool or call 800-906-9887..."

Free Tax Preparation

Choosing a Tax Professional

"A tax return preparer is trusted with your most personal information. They know about your marriage, your income, your children and your social security numbers – the details of your financial life.
Most tax return preparers provide outstanding service. However, each year, some taxpayers are hurt financially because they choose the wrong tax return preparer.
Anyone can be a paid tax return preparer as long as they have an IRS Preparer Tax Identification Number (PTIN) and they sign and enter it on all returns they prepare.  However, tax return preparers have differing levels of skills, education and expertise.
Choose wisely when selecting a paid tax return preparer. For assistance see:

• Directory of Federal Tax Return Preparers with Credentials and Select Qualifications -- NEW!
• Which tax preparer is right for me? Explaining enrolled agents, CPAs, attorneys, and others.
• Do some tax return preparers belong to professional organizations?
• IRS tips for choosing a tax preparer.
• Watch a video on choosing a preparer.
• When, and how, do I file a complaint about a tax preparer?.."

Tax Professionals

IRS Launches Directory of Federal Tax Return Preparers; Online Tool Offers New Option to Help Taxpayer

" The Internal Revenue Service today announced the launch of a new, online public directory of tax return preparers. This searchable directory on IRS.gov will help taxpayers find a tax professional with credentials and select qualifications to help them prepare their tax returns.


The directory is a searchable, sortable listing featuring:  the name, city, state and zip code of attorneys, CPAs, enrolled agents and those who have completed the requirements for the voluntary IRS Annual Filing Season Program. All preparers listed also have valid 2015 Preparer Tax Identification Numbers (PTIN).

Taxpayers may search the directory using the preferred credentials or qualifications they seek in a preparer, or by a preparer’s location, including professionals who practice abroad. Tax return preparers with PTINs who are not attorneys, CPAs, enrolled agents or Annual Filing Season Program participants are not included in the directory, nor are volunteer tax return preparers who offer free services..."

Directory of Federal Tax Preparers

Ten IRS Tips to Help You Choose a Tax Preparer

"Many people pay to have their taxes prepared. You need to be careful when you pick a preparer to do your taxes. You are legally responsible for all the information on the tax return even if someone else prepares it. Here are 10 IRS tax tips to help you choose a tax preparer:

Check the preparer’s qualifications.  All paid tax preparers are required to have a Preparer Tax Identification Number or PTIN. The IRS will soon offer a new Directory of Federal Tax Return Preparers with Credentials and Select Qualifications on IRS.gov. You will be able to use this tool to help you find a tax return preparer with the qualifications that you prefer. The Directory will be a searchable and sortable listing of certain preparers with a valid PTIN for 2015. It will include the name, city, state and zip code of:

• Attorneys.
• CPAs.
• Enrolled Agents.
• Enrolled Retirement Plan Agents.
• Enrolled Actuaries. 
• Annual Filing Season Program participants .."
• Tax preparers

Get Transcript (IRS)

"Get a record of your past tax returns, also referred to as transcripts. IRS transcripts are often used to validate income and tax filing status for mortgage applications, student and small business loan applications, and during tax preparation.
You can download and print your transcript immediately, or request the transcript be mailed to your address on record..."
Get-Transcript

Eight Tax-Time Errors to Avoid

 Tax errors from the U.S. Internal Revenue Service
Eight Tax-Time Errors to Avoid

Dirty Dozen Tax Scams for 2013

"The Internal Revenue Service today issued its annual “Dirty Dozen” list of tax scams, reminding taxpayers to use caution during tax season to protect themselves against a wide range of schemes ranging from identity theft to return preparer fraud.
The Dirty Dozen listing, compiled by the IRS each year, lists a variety of common scams taxpayers can encounter at any point during the year. But many of these schemes peak during filing season as people prepare their tax returns..."
Dirty Dozen Tax Scams 2013

Missing W-2

Discover how to get a missing W-2 form.
Missing W-2