What are the latest tax updates for 2023

As the year winds down, the Internal Revenue Service (IRS) has introduced several important updates and changes that your clients should be aware of. These updates are aimed at optimizing the tax filing experience and warn tax payers of potential risks. In this blog article, we will explore the recent changes introduced by the IRS.

End of Unannounced Revenue Office Visits

The IRS has made a significant policy change, ending the practice of unannounced visits to taxpayers by agency revenue officers. This change aims to reduce public confusion and increase overall safety. For decades, IRS Revenue Officers, unarmed agency employees, would visit households and businesses to collect unpaid taxes. However, effective immediately, these unscheduled visits will cease, with only a few unique circumstances exempted. This update underscores the IRS's commitment to enhancing taxpayer experience and streamlining its operations.

Special Mailings for Taxpayers in Disaster Areas

Taxpayers in certain disaster areas, including California and seven other states, will receive special assistance from the IRS. Due to disaster declarations, these taxpayers were initially given CP14 notices with a 21-day payment deadline. To address the confusion and provide relief, the IRS is sending a follow-up mailing, CP14CL, to inform affected taxpayers that they have extra time to file and pay taxes under the disaster relief provisions. The extension has already been automatically granted, and taxpayers do not need to contact the IRS to avail it. This proactive approach is part of the IRS's new Strategic Operating Plan, focusing on being more taxpayer-focused during challenging times.

Combating Misleading Employee Retention Credit Scams

The IRS is alerting businesses and tax-exempt groups to be cautious of misleading claims about the Employee Retention Credit (ERC). Some aggressive promoters are misrepresenting and exaggerating who can qualify for the credit. While the ERC is real, taxpayers should be wary of false advertisements, direct mail solicitations, and online promotions that may lead to fraudulent claims. Staying informed and seeking advice from qualified tax professionals will help taxpayers understand their eligibility and benefits under the Employee Retention Credit.

It’s important to advise your clients of potential scams to ensure their safety. Here’s what you can advise clients to safeguard them from scammers: 

Warning Signs of Aggressive ERC Marketing:

• Beware of Promotions: Your clients should be cautious of unsolicited communications and aggressive marketing techniques such as online ads, phone calls, etc., that promise an easy application process or instant eligibility for the ERC. Scammers have a tendency to be particularly aggressive on these fronts. 
• Unethical Practices: Advise your clients to be wary about promoters who demand large upfront fees or charge based on a percentage of the refund from the ERC. 
• Misleading Claims: Inform clients about promoters who make hasty qualification claims without thorough discussion or omit key details regarding ERC eligibility and computation. The credit entails detailed review due to its varied factors.
• Scam Tactics: Caution clients against non-existent groups sending fake letters resembling official IRS correspondence urging immediate action - a common strategy used by scammers to manipulate victims.

Potential Dangers of ERC Scams:

• Repayment Obligations: Emphasize to clients that improperly receiving the ERC may lead to repayment obligations, along with substantial interest and penalties. Scammers who encourage clients to "submit claims with nothing to lose" may be setting them up for significant financial liabilities.
• False Eligibility Claims: Explain that some promoters may lie about eligibility requirements to entice unsuspecting clients. It is crucial for businesses to rely on credible tax professionals for accurate information.
• Identity Theft Risks: Highlight the risk of identity theft associated with ERC scams. Unscrupulous individuals might exploit the ERC as a ploy to steal taxpayers' identities or claim a share of fraudulently obtained credits.

Inflation Reduction Act Strategic Operating Plan

The IRS has unveiled its Strategic Operating Plan, an effort to transform the agency and improve service to taxpayers and the nation over the next decade. This plan follows funding from the Inflation Reduction Act and aims to make fundamental changes to enhance taxpayer experience and improve overall efficiency. The IRS says taxpayers can expect better communication, streamlined processes, and a focus on taxpayer support throughout the coming years.

Updates on Long-Term Capital Gains Tax Rates

For the 2023 tax year, the tax rates on long-term capital gains remain unchanged. However, the income thresholds to qualify for the various rates have been adjusted for inflation. Individual taxpayers can benefit from the 0% rate on long-term capital gains if their taxable income is up to $44,625 on single returns, $59,750 for head-of-household filers, and $89,250 for joint returns. The 20% rate for 2023 starts at higher income levels for singles, heads of households, and joint filers. Additionally, the 3.8% surtax on net investment income remains unchanged for high-income individuals.

Updated Standard Deduction Amounts

The standard deduction amounts have been increased for 2023 to account for inflation. Married couples filing jointly can claim $27,700, while singles can claim $13,850. Head-of-household filers get a standard deduction of $20,800. For each spouse age 65 or older, an additional amount of $1,500 is added to the standard deduction for married couples and $1,700 for singles and head-of-household filers. Blind individuals can also claim additional amounts based on their filing status. Staying informed about these updated standard deduction amounts will help taxpayers accurately calculate their taxable income and deductions.

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