Can’t Pay Your Taxes Due to COVID-19?

As the tax deadline for the 2019 filing year quickly approaches, many Americans who have lost income during the COVID-19 pandemic are in a difficult situation. Taxes are due on July 15, 2020, and the additional unemployment benefits are about to expire at the end of July. Many Americans fear if they pay all their taxes they will not be able to provide for their family.

Still File Your Taxes Even if You Can’t Pay in Full

Even if you cannot pay your taxes now, it is important that you still file or file for a tax extension. If you do not file your taxes, the penalty is 5% per month of your unpaid taxes versus if you do file your taxes with an installment agreement you only have to pay a 0.25% per month penalty of your unpaid taxes.

Tax Payment Options

The IRS offers a number of payment options that are explained in the Installment Agreement Request form. Although this may seem overwhelming, the key is to remain calm and consult a tax professional.

First Payment Option

The first is to pay the remaining balance in 120 days or less with no need to complete the form #9465. Because this method doesn’t require an installment agreement it does not involve an installment agreement set up fee. The 120-day one-time payment does require contact with the IRS but that is all that has to take place.

Second Payment Option

Another option is to file a form #9465 installment agreement request (or call to complete it on the phone with an IRS agent). The proposed payment term can be up to 72 months. Installment agreements have a one time set up fee of $105.00 and that can be reduced as low as $43.00. I am sorry but they did not tell me what the criteria for the reduction are for the $43.00, they will reduce it to $52.00 if the payments are set up as electronic funds transfers.

Third Payment Option

The third option is probably the least preferred and that would be not to contact them at all and to simply continue to send in payments without an “agreement”. The reason that it is the least preferred is because of interest rates. If there is NO agreement in effect the IRS will charge 3% per year on the unpaid balance until it is paid in full.

As long as there is an installment agreement in effect the IRS will charge .5% (half a percent) interest and .25% (quarter percent) penalty per month. In essence, having any payment agreement takes the rate from 3% to 3.75%.

Below is a detailed table of the different late payment fees.

User Fee CategoryFee as of
Jan. 1, 2017
Regular installment agreement 1$225
Regular installment agreement with direct debit (DDIA) 2$107
Low income installment agreement (regular or DDIA)$43
Online payment agreement — regular installment agreement 3$149
Online payment agreement — Direct debit installment agreement (DDIA) 4$31
Restructured/reinstated installment agreement$89
Restructured/reinstated low-income installment agreement (new fee)$43

To learn more about how ITP Taxes can help, Contact us Today.


The Shared Economy & Taxes… 5 Things You Need to Know!

A quickly growing area of our business economy is the online “on-demand!” sector.  On-demand entrepreneurs can offer a wide range of services in the shared economy. This is anything from a car ride such as Uber to a home for rent on Airbnb with the click of a button on a phone app. As the July 15 tax deadline approaches, there are several important things for these up and coming tycoons to keep in mind when they file:

  1. If you earn any income via the shared economy, whether it be cash-only, part-time, or full-time, it will most likely be taxable.
  2. The plus side is that most of your business expenses can be tax-deductible!  Some of these expenses include cell phones, tolls, and gas used towards your venture.
  3. Depreciation, or “wear and tear”, on your home and vehicles can be claimed for times when they are utilized for business needs.
  4. Take the time to determine whether you are considered an employee, self-employed, or an independent contractor.  It will make a difference in your taxes!
  5. Home rentals must be claimed on your income tax return.  Fortunately, that also allows for the possibility of more deductions in the forms of mortgage interest, maintenance, and utilities.

These tips are just a few of many provided by the IRS to those providing on-demand goods or services.  More helpful links and ideas can be found at Sharing Economy Tax Center .

ITP Taxes provides income tax preparation services for individuals and small businesses. Dave Shiley founded ITP Taxes after leaving one of the largest national tax preparation chains, with the goal of providing Central PA residents a friendlier and more personalized experience.

Proposed Relief in Troubled Times

When daily life is interrupted, one of the main concerns of the general public is how they are going to afford getting through certain roadblocks. Due to the COVID-19 virus sweeping throughout the nation, the government has proposed a plan of relief to help individuals through the most current block: The Coronavirus Aid, Relief, and Economic Security Act (CARES). Since most workplaces in Pennsylvania are closed, it is important to know the details of the proposed relief plan.

At its base, the act would provide a $1,200 check for individuals who make up to $75,000 a year. For couples that make up to $150,000, $2,400 is the base amount of the check, though an additional $500 is added per dependent. These payments would decrease for individuals making over $75,000, capping out at an income of $99,000 for an individual or $198,000 for couples, respectively.

In addition, under the CARES Act, unemployment insurance benefits would rise for the next four months. It would also extend these benefits to those such as gig economy workers and freelancers, people who normally do not qualify for unemployment insurance. The bill would increase the unemployment benefit by a maximum of $600 a week.

The amount in that the CARES Act would provide through the check is dependent on the information from your most recent tax returns. For those who have already filed for 2019, the rebates would be calculated for using those returns. If you haven’t yet filed for last year, 2018’s information will be substituted in. For those relying on Social Security benefits, your benefit information may be used.

The IRS encourages anyone with a tax-filing obligation who hasn’t filed a tax return for 2018 or a previous year to act now. This includes certain potential credits and rebates for those who have filed a return for 2018 and/or 2019. Those without 2018 tax filings on record could potentially affect mailings of stimulus checks. And more than 1 million people who haven’t filed tax returns for Tax Year 2016 and are owed a refund still face an April 15, 2020, deadline to file their return. This deadline hasn’t been extended. Current law requires the 2016 return to be filed by April 15, 2020.

The IRS is encouraging non-filers to consider contacting a tax professional to consider various available options since the time to receive such refunds is limited by statute. Once delinquent returns have been filed, most taxpayers have the opportunity to resolve any outstanding liabilities by entering into an Installment Agreement or an Offer in Compromise with the IRS to obtain a “Fresh Start

Remember, ITP Taxes LLC is with you all the way, even if social distancing means that face-to-face meetings aren’t ideal. You are always free to reach out through phone call or email if there is anything that we can do to help you.

Tax Return Due Date Extension

With the COVID-19 crisis among us, taxes are probably one of the least of everyone’s concerns. In order to give taxpayers more time to file their tax forms, the IRS has extended the due date of April 15th to July 15th this year. This three month extension is due to the virus altering many normal aspects of life for Americans.

There will be no penalties as long as you file for your personal and/or business taxes before this new due date. With this alteration, there is now more time to focus on the well-being of yourself and your family during these events.

We at ITP Taxes LLC will be sure to work with you remotely in these times with electronic filing and signing. Remember that we are always here for you. Be sure to stay safe and healthy in these unsure times. Thank you for working with us in this situation, and may you make the best of the circumstances.

Budgeting 101

While it is unfortunate, there’s only so much money to go around in a household. This of course means that it is necessary to budget your money in order to ensure you have enough to do everything you need to do at the end of the day. Also, a little extra money to save up for a holiday or vacation is nice. Budgeting can be a difficult task, especially with larger families. Even so, there are numerous resources and tips that exist in order to help the task go faster and more smoothly for you.

First and foremost, it is best to start out with your goals. How much money should that water bill be? What about grocery money? Once all those necessities are subtracted from the equation, there remains the money that can be used for anything else. Do you have a long-term goal for that money? Maybe your daughter needs money for a softball game, or perhaps you want to save for retirement or a dream vacation. As long as you research how much money you want to have beforehand, it should be simple to calculate how much you need to set aside every paycheck to save up for whatever event you want the extra money for.

That’s all great, but nothing is going to happen if it isn’t written down. Make sure to write down all the information you need, whether it is with a pencil and paper or an online spreadsheet. Simplicity is key, here. You want to be sure you are able to easily follow everything you write down for future reference. For the computerized option, an Excel type spreadsheet might be a good choice for the task. Any place where you can keep your expenditures neat and tidy is a good place to begin.

Once everything is set up, it is imperative to keep track of money coming in and going out. You don’t want to accidentally forget to pay a bill or anything. At this point, you can begin allotting your extra money towards whatever you wish to save up for. Do not feel discouraged if there is a rough month where you cannot set aside that money, though. From medical expenses to needing a window repair, there are always circumstances that might stand in the way of any goals. Despite all that, following in a plan can be incredibly rewarding in the end, allowing you to do what you want as the future comes.

2020 Standard Mileage Rates

Now that it is 2020, there are changes occurring everywhere, even in the tax world. One of these changes involves mileage. More specifically, there are new optional standard rates for deductible costs of operating vehicles for the purposes of business, charity, or medical events. In certain cases, these mileage deductions also apply for moving purposes. 

For business use, the standard mileage rate  has decreased from the 2019 rate of 58 cents per mile. It now lies at 57.5 cents, down half of a cent. Similarly, the mileage rate for medical purposes has also decreased. Last year, the rate stood at 20 cents per mile, but 2020 finds these rates at 17 cents instead. These 17 cents also apply to certain moving expenses this year. This only applies to members of the Armed Forces on active duty that are moving under orders. Normal taxpayers cannot claim deductions for moving expenses. Like every year, the charitable rate stays at 14 cents per mile.

The business standard mileage rate may not be used in certain cases, such as if depreciation methods under the Modified Accelerated Cost Recovery System (MACRS) are used. In addition, claiming a Section 179 deduction for the vehicle also voids the ability to use these rates. The standard mileage rates for businesses can only be used for five vehicles at one time.

While there always is the option of simply calculating actual costs rather than using these rates, it is still nice to know what is going on in the world around you. The charitable standard mileage rate stays the same every year, but the other rates remain fluid and therefore fluctuate from year to year.

Tax Scams: Knowing the Signs

Every year, thousands of people lose personal information as well as millions of dollars due to scammers posing as the IRS or other similar organizations. Whether it is over the phone, through emails, or even by going right to your door, this threat is present to anyone and everyone. In order to avoid these scams, there are a few telltale signs to know what it is you are dealing with.

First and foremost, you need to know what the IRS themselves do. They will never initiate contact through texting, social media, or emails. More often than not, the IRS also tends to send multiple mail notices to a person before going directly to a house. They also will never threaten to arrest you for not paying, revoke your driver’s license, or anything similar. They also will have official ID’s on them, a pocket commission and a HSPD-2 card, both of which you are legally allowed to ask to see. In addition, all owed payments should be made out to the United States Treasury. If someone claiming to be an IRS representative does not fit the criteria, there might be cause to worry.

There are many common scams to look for if you are wary. The first one is anything relating to Social Security Numbers. A scammer may threaten to cancel your SSN in order to scare you into giving up information. There are also possibilities of telephone calls demanding you pay owed money through gift cards or wire transfers, them claiming it is urgent. There are even emails that use tax transcripts to entice a person to open documents laced with malware. Even though these three instances are some of the most common, you should be on the lookout for anything suspicious.

If you have fallen victim to a scam such as these, the IRS says to report it here in order to get help. You can also go to law enforcement for assistance. It is much easier to avoid the scams in the first place, though. Know the signs, and avoid these life altering scam artists.

Cryptocurrency: Relevant to Taxes

As the tax season begins, people all around are starting to think of the event as well as how they are going to file the information. Most use a professional on the subject for help. Of course, these professionals always have to ask certain questions based on what the government wants to know. From whether you gamble to your housing arrangement, all of this information is vital to know. A new question is to enter that pool in the upcoming year: “Do you invest in bitcoin or other cryptocurrencies?”

            Some might wonder why that is important. Well, to explain that, one must first know what bitcoin itself is. In short, bitcoin is a digital currency with no direct group controlling it. Transactions using this currency are always final, and there is a limited amount of it. This limited number out there drastically increases the demand for it. If you want to get into the finer details, there are countless digital articles explaining the intricacies of these digital currencies, otherwise known as cryptocurrencies.

            Even with all of that, the big question still remains. Why does the government need to know whether or not someone has these digital currencies? Similarly to the gambling aspect, a person has to pay taxes on the amount of money gained. For the time being, no one needs to disclose how much cryptocurrency had, but simply whether or not it is invested in. As the tax world continuously changes, so does the relevant information surrounding it. Cryptocurrency is just another cog in the professional wheel of taxes.


Why Tax Professionals Exist

            There are many reasons why the common person may go to a tax professional to file their taxes. From being too busy to just not wanting to deal with it, the reasons are as numerous as the people themselves. One of the most common reasons, though, is simply because taxes can be difficult for a non-professional to understand.

            At face value, taxes are a scary thing. If you file too late, you get penalized. If you don’t give enough money, the same result occurs. Even if you do get those two factors right, there’s still the entire inner workings of the tax world to worry about. There are entire roadmaps, such as this one by the Taxpayer Advocate Service.

It depicts the intense journey it takes someone to file his or her taxes. Even though it may help some, it’s just a lot of information to take in.

            Due to this seemingly impossible information dump, tax experts exist. They make it their job to help you to in squaring away all your tax related needs. It becomes one more thing you don’t have to worry about, so you can focus on your daily lives. Professionals in this field are a necessary aspect of this society, and people continue to utilize them as the process grows

Taxes: A Family Matter?

All over, families are changing. Whether there is a child being born or a marriage going downhill, these matters can be very important for your taxes. Due to this, it is best to let a tax professional know if anything is happening to change your family situation. But you might wonder: Why are these things important?

First of all, if you are adding a child to the family, through either natural birth or adoption, there are certain impacts. It could affect your taxes or tax returns, for example. Also, if you are hiring a nanny for the kid, you’ll have to pay things such as Social Security and Medicare for them. If you are adopting, that is another deal on top of this. You could qualify for certain tax credits or exemptions. This is a possibility for both foreign and domestic adoptions. There are also assistance programs that an professional can help you learn about.

Similarly to children, marriage situations are also important to your taxes. If you are getting married, you could be put into a different tax bracket due to your partner’s income. You might want to adjust your withholding, and you need to know this information in order to take further steps. On the opposite side, if you are getting a divorce, there are different things to follow. For example, alimony no longer counts as income, and the ex-spouse who pays it cannot deduct that amount in taxes. There are multiple other factors that involve marriages and divorces, but it would be best to ask personally about them.

Family matters may seem personal at first, but they could adversely affect you if not factored into your taxes and such. It is wise to tell your tax expert anything new that happens with these things to prevent paying more than you have to and being proactive in your taxes.