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IRS Suspends Automatic Collection Notices

Per IRS News Release IR-2022-31, February 9th, 2022

It’s widely known that the IRS is experiencing difficulties processing tax returns from last year. In fact, it was recently reported that several million taxpayers are still waiting for the IRS to process their 2020 tax returns, with some refunds held up for 10 months or more. Because of this, the IRS will suspend the mailing of more than a dozen letters, including the mailing of automated collection notices normally issued when a taxpayer owes additional tax and the IRS has no record of the taxpayer filing a tax return.

Be aware that some people may still receive these notices during the next few weeks. The IRS has advised that there’s no need to respond to them. Click this link to read more on the suspension of these letters from the IRS.  Contact us with any questions regarding this backlog.

 

 

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Helpful Articles Tax

Help Safeguard Your Personal Information by Filing Your 2021 Tax Return Early

The IRS announced it is opening the 2021 individual income tax return filing season on January 24. (Business returns are already being accepted.) Even if you typically don’t file until much closer to the April deadline (or you file for an extension until October), consider filing earlier this year. Why? You can potentially protect yourself from tax identity theft — and there may be other benefits, too.

How tax identity theft occurs: In a tax identity theft scheme, a thief uses another individual’s personal information to file a bogus tax return early in the filing season and claim a fraudulent refund. The actual taxpayer discovers the fraud when he or she files a return and is told by the IRS that it is being rejected because one with the same Social Security number has already been filed for the tax year. While the taxpayer should ultimately be able to prove that his or her return is the legitimate one, tax identity theft can be a hassle to straighten out and significantly delay a refund.

Filing early may be your best defense: If you file first, it will be the tax return filed by a potential thief that will be rejected — not yours. Note: You can still get your individual tax return prepared by us before January 24 if you have all the required documents. But processing of the return will begin after IRS systems open on that date.

Your W-2s and 1099s: To file your tax return, you need all of your W-2s and 1099s. January 31 is the deadline for employers to issue 2021 W-2 forms to employees and, generally, for businesses to issue Form 1099s to recipients for any 2021 interest, dividend or reportable miscellaneous income payments (including those made to independent contractors). If you haven’t received a W-2 or 1099 by February 1, first contact the entity that should have issued it. If that doesn’t work, you can contact the IRS for help.

Other benefits of filing early: In addition to protecting yourself from tax identity theft, another advantage of early filing is that, if you’re getting a refund, you’ll get it sooner. The IRS expects most refunds to be issued within 21 days. However, the IRS has been experiencing delays during the pandemic in processing some returns. Keep in mind that the time to receive a refund is typically shorter if you file electronically and receive a refund by direct deposit into a bank account. Direct deposit also avoids the possibility that a refund check could be lost, stolen, returned to the IRS as undeliverable or caught in mail delays.

If you were eligible for an Economic Impact Payment (EIP) or advance Child Tax Credit (CTC) payments, and you didn’t receive them or you didn’t receive the full amount due, filing early will help you to receive the money sooner. In 2021, the third round of EIPs were paid by the federal government to eligible individuals to help mitigate the financial effects of COVID-19. Advance CTC payments were made monthly in 2021 to eligible families from July through December. EIP and CTC payments due that weren’t made to eligible taxpayers can be claimed on your 2021 return.

Contact us if you have questions or need to make an appointment with your tax preparer.

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Financial Institutions and Banking Helpful Articles

Keeping Branch Banking Profitable in the Digital Age

The COVID-19 pandemic has led to an increase in online banking; however, the transition to virtual banking was already well underway. As community banks look to the future, they need to re-imagine branch banking for the digital age. This means strengthening what’s working and getting rid of what isn’t. Direct banking at branches can still be vital to community banks’ financial health as long as they measure branch performance and correct as necessary.

Customer location

A significant challenge in measuring branch performance is assigning customers to particular locations. Traditional measures (such as new accounts opened or teller activity) no longer suffice. Just because a customer opened an account at a branch doesn’t necessarily mean that account should count toward the branch’s performance.

What if the customer relocated? What if he or she uses more than one branch? What if the customer does everything online and doesn’t visit branches at all? There are no easy answers to these questions. To get an accurate picture of branch performance, banks need to develop models that better reflect a branch’s interactions with customers and its contribution to the bank’s overall performance.

Measurement strategies

Some banks are developing point systems to measure the value of products sold, customer service and retention. For example, core accounts like checking accounts generally are more valuable than CDs, which often constitute “hot money” — that is, funds frequently transferred between financial institutions in an attempt to maximize returns. The analysis might be different, however, if a checking account has a small average monthly balance or if a CD has a relatively long term.

For services, one set of point values might be assigned to transaction processing — such as cashing checks or accepting deposits — with higher values assigned to loans or consultative services.

According to financial services technology provider Fiserv, customers with one banking product stay with a bank around 18 months on average. The average relationship increases to four years for customers with two products and to almost seven years for customers with three products. So, branches with more customers purchasing multiple products tend to contribute more value, and transfers of funds among branches affect branch profitability.

Differences in markets

Too often, banks’ business development plans fail to reflect the differences among their branches’ local markets, which can be dramatic. Many simply allocate their budgets uniformly among locations and demand that each branch achieve similar profitability and growth goals.

There are two problems with this approach. First, it establishes unachievable goals for branches in some markets, while allowing other locations to coast. Second, it may cause a bank to miss opportunities to enhance branch performance.

A better approach is to benchmark the bank’s performance against that of its peers. After identifying areas in which performance is falling short, the bank can examine individual branches, analyze their local markets and develop strategies for enhancing performance.

It’s important to analyze each branch’s current customer base as well as the various commercial and consumer segments that make up its local market. Armed with this information, you can develop marketing strategies that make the most of each location’s unique profitability and growth opportunities.

For example, a branch in an area with a lot of high-income consumers might target those consumers and also focus on cross-selling to existing customers. (Of course, it’s important to keep in mind fair lending exposure and Community Reinvestment Act considerations.) As noted above, providing multiple products to customers improves retention rates. On the commercial side, analyzing local markets may reveal opportunities to serve previously untapped commercial sectors or business niches.

Analysis and measurement are key

Your community bank will thrive if its branches thrive. Understanding your local customers and their banking preferences has never been more challenging — or more important. Closing branches if they’re no longer profitable is one solution, but developing them in ways that make them more useful to customers might be the best strategy over the long run.

© 2022

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Helpful Articles Tax

New Reporting Guidelines for Third-Party Payment Services

As a result of the American Rescue Plan Act of 2021, sellers that receive at least $600 in a calendar year for goods and services transactions through a Third-Party Settlement Organization (TPSO) such as PayPal or Venmo will be required to report this income to the IRS when filing taxes for 2022. This reporting threshold was significantly lowered from 2021’s threshold of $20,000 in payments and 200 transactions. 

This is not a tax change, it is a reporting change. The new regulations make it possible for the IRS to verify the income business owners receive through TSPOs. No extra tax will be applied to these amounts.

These guidelines are not applicable to:

  • Amounts sent as a gift
  • Amounts from selling personal items at a loss
  • Amounts sent as reimbursements

Several TSPOs, including Venmo, allow users to mark a payment as a goods and services transaction, making it easier for sellers to keep records of their income. 

At the end of the calendar year, TSPOs will send Form 1099-K to users that received more than $600. This form will be provided to the user’s tax preparer when filing a 2022 tax return in 2023. These guidelines will not affect 2021 tax returns. 

Business owners and independent contractors should be prepared to provide their employer identification number (EIN), individual tax identification number (ITIN), or Social Security number to TSPOs in order to continue utilizing the services and to receive their 1099-K.

For more information regarding this reporting change, contact your ATA representative today.

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Helpful Articles Tax

Key Q1 Tax Deadlines

Here are some of the key tax-related deadlines affecting businesses and other employers during the first quarter of 2022. Keep in mind that this list isn’t all-inclusive, so there may be additional deadlines that apply to you. Contact your tax preparer to ensure you’re meeting all applicable deadlines and to learn more about the filing requirements.

January 17 (The usual deadline of January 15 is a Saturday)
-Pay the final installment of 2021 estimated tax.

-Farmers and fishermen: Pay estimated tax for 2021.

January 31
-File 2021 Forms W-2, “Wage and Tax Statement,” with the Social Security Administration and provide copies to your employees.

-Provide copies of 2021 Forms 1099-NEC, “Non-employee Compensation,” to recipients of income from your business where required.

-File 2021 Forms 1099-NEC, reporting non-employee compensation payments in Box 7, with the IRS.

-File Form 940, “Employer’s Annual Federal Unemployment (FUTA) Tax Return,” for 2021. If your undeposited tax is $500 or less, you can either pay it with your return or deposit it. If it’s more than $500, you must deposit it. However, if you deposited the tax for the year in full and on time, you have until February 10 to file the return.

-File Form 941, “Employer’s Quarterly Federal Tax Return,” to report Medicare, Social Security and income taxes withheld in the fourth quarter of 2021. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the quarter in full and on time, you have until February 10 to file the return. (Employers that have an estimated annual employment tax liability of $1,000 or less may be eligible to file Form 944, “Employer’s Annual Federal Tax Return.”)

-File Form 945, “Annual Return of Withheld Federal Income Tax,” for 2021 to report income tax withheld on all non-payroll items, including backup withholding and withholding on accounts such as pensions, annuities and IRAs. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the year in full and on time, you have until February 10 to file the return.

February 28
-File 2021 Forms 1099-NEC with the IRS if: 1) they’re not required to be filed earlier and 2) you’re filing paper copies. (Otherwise, the filing deadline is March 31.)

March 15
-If a calendar-year partnership or S corporation, file or extend your 2021 tax return and pay any tax due. If the return isn’t extended, this is also the last day to make 2021 contributions to pension and profit-sharing plans. © 2022

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Helpful Articles Henderson, KY Jackson, TN Martin, TN Murray, KY Nashville, TN Owensboro, KY Paris, TN Union City, TN

Tornado Relief Resources

Eastern Arkansas
Monette, AR: Mail monetary donations to Centennial Bank c/o City of Monette Community Relief Fund, 302 West Drew Ave., Monette, Arkansas 72447

Western Kentucky
United Way of Southern Kentucky

Team Western KY

Mayfield, KY: Mail monetary donations to First Kentucky Bank c/o Mayfield Community Foundation, 223 S 6th St., Mayfield, KY 42066

Shop Local Kentucky: purchase a “Kentucky Strong” T-shirt and 100% of the proceeds will go to the Western Kentucky Tornado Relief Fund

Middle & West Tennessee
United Way of West TN

United Way of Obion County: Mail monetary donations to P. O. Box 484, Union City, TN 38281

Samburg, TN: Mail monetary donations to Reelfoot Rural Ministries, 6923 Minnick Elbridge Rd., Obion County, TN 38240

Samburg, TN immediate needs: AA & AAA batteries, flashlights & lanterns, Hot Hands, diapers, wipes, blankets, toilet paper, paper towels, laundry supplies, dog & cat food (drop off at 605 S Main St, Troy)

Dresden, TN immediate needs: cleaning supplies, toiletries, new undergarments, new/ gently used clothing (preferably on hangers), new/ gently used toys to replace Christmas gifts, heaters, tables (drop off at at 8250 TN Hwy. 22, Dresden)

Kenton, TN: Mail monetary donations to First Baptist Church, 204 S Poplar St., Kenton, TN 38233

Kenton, TN immediate needs: cleaning supplies, laundry supplies, toiletries, diapers, wipes, & shoes (drop off at 204 S Polar St., Kenton)

General Disaster Relief
Send Relief/ Southern Baptist Disaster Relief

Salvation Army

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Helpful Articles Tax

Claiming Available Tax Credits for Businesses

The U.S. offers a variety of tax credits and other incentives to encourage employment and investment, often in targeted industries or areas such as innovation and technology, renewable energy and low-income or distressed communities. Many states and localities also offer tax incentives. Businesses should make sure they are claiming all available tax credits for 2021 and begin exploring new tax credit opportunities for 2022.

  • The Employee Retention Credit (ERC) is a refundable payroll tax credit for qualifying employers that have been significantly impacted by COVID-19. Employers that received a Paycheck Protection Program (PPP) loan can claim the ERC but the same wages cannot be used for both programs. The Infrastructure Investment and Jobs Act signed by President Biden on November 15, 2021, retroactively ends the ERC on September 30, 2021, for most employers.
  • Businesses that incur expenses related to qualified research and development (R&D) activities are eligible for the federal R&D credit.
  • Taxpayers that reinvest capital gains in Qualified Opportunity Zones may be able to defer the federal tax due on the capital gains. An additional 10% gain exclusion also may apply if the investment is made by December 31, 2021. The investment must be made within a certain period after the disposition giving rise to the gain.
  • The New Markets Tax Credit Program provides federally funded tax credits for approved investments in low-income communities that are made through certified “Community Development Entities.”
  • Other incentives for employers include the Work Opportunity Tax Credit, the Federal Empowerment Zone Credit, the Indian Employment Credit and credits for paid family and medical leave (FMLA).

There are several federal tax benefits available for investments to promote energy efficiency and sustainability initiatives. In addition, the Build Back Better Act proposes to extend and enhance certain green energy credits as well as introduce a variety of new incentives. The proposals also would introduce the ability for taxpayers to elect cash payments in lieu of certain credits and impose prevailing wage and apprenticeship requirements in the determination of certain credit amounts.

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Helpful Articles Tax

Traditional vs Roth IRAs

People often ask, “Should I invest in a traditional or Roth IRA when planning for retirement? What’s the difference?” To answer this question, let’s discuss the basics.

Traditional vs. Roth

An IRA is an individual retirement account that is not associated with your employer. When opening an IRA, you will have to choose either traditional or Roth. This is not to say that you are limited to one account for your lifespan. Depending on your income and the stage of your career, both types can be beneficial. 

Generally, Roth IRAs are best suited for younger individuals because they have a long working life before they retire, and that large time-frame gives their investments time to increase substantially. This increase will not be taxable when drawn out during retirement. Roth IRAs also come with an income limit, so it is ideal for those at entry-level or mid-level in their careers.

Traditional IRAs are best suited to those who are in a higher tax bracket. These individuals will save significant tax dollars immediately through tax-deductible contributions and will likely be in a lower tax bracket when they retire because their income will be reduced. This usually describes mature individuals who are in their later years of working and usually have higher incomes. Therefore, the tax savings now are greater, and the time for investments to increase in value is shorter. 

Withdrawing Your Savings

When you decide to put money in a retirement account, it is ideal to leave that investment untouched until you are retired. Traditional IRAs have stricter rules about early withdrawals than Roth accounts. The penalty for early withdrawal (before age 59.5) from a Traditional IRA is 10%, and you pay income tax on the amount you withdraw. Roth IRA withdrawals are tax and penalty free if you withdraw upon reaching age 59.5 and the account has been established for five or more years.

Traditional IRAs impose Required Minimum Distributions (RMDs) when you turn 72; this is a minimum amount that you must withdraw each year from your account. These withdrawals are considered taxable income. To find your RMD, use this worksheet from the IRS.

Roth IRAs do not impose RMDs, and the withdrawals are not considered taxable income. 

Both Traditional and Roth IRAs have contribution limits and due dates that vary year-to-year. You can find those amounts and dates in the graphic below.

For more information and consultation about IRAs and retirement planning, contact industry leader Gabrielle Lorbiecki or visit https://ata.net/ata-retirement.

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Financial Institutions and Banking Helpful Articles

CFPB Issues Guidance on Unauthorized EFTs

The Consumer Financial Protection Bureau (CFPB) has issued guidance — in the form of answers to FAQs — on unauthorized electronic fund transfers (EFTs). Here are some of the highlights:

  • Unauthorized EFTs include situations in which a third party fraudulently induces a consumer into sharing account access information that’s used to initiate an EFT from the consumer’s account. And subsequent EFTs initiated using that information are not excluded from the definition of unauthorized EFTs as transfers initiated by “a person who was furnished the access device to the consumer’s account by the consumer.”
  • Banks can’t consider a consumer’s negligence when determining liability for unauthorized EFTs under Regulation E.
  • In determining whether an EFT was unauthorized and whether any liability protections apply, a bank can’t rely on a consumer agreement that “includes a provision that modifies or waives certain protections granted by Regulation E, such as waiving Regulation E liability protections if a consumer has shared account information with a third party.”

You can find the complete FAQs by visiting consumerfinance.gov and typing “EFT FAQs” in the search box.

Federal Reserve tool simplifies CECL implementation

For most community banks, the current expected credit loss (CECL) accounting standard will take effect in 2023, and many banks are concerned about the complexity involved in complying with the updated standard. In an effort to simplify the process, the Federal Reserve in July unveiled its Scaled CECL Allowance for Losses Estimator (SCALE), a spreadsheet-based tool that “draws on publicly available regulatory and industry data to aid community banks with assets of less than $1 billion in calculating their CECL allowances.”

Your advisors can help you determine whether the SCALE is appropriate for your institution. For more information, visit supervisionoutreach.org/cecl.

OCC will rescind 2020 CRA rule

In July, the OCC announced its intent to rescind its May 2020 final rule, which was designed to modernize and strengthen the regulatory framework for implementing the Community Reinvestment Act (CRA). Notably, neither the Federal Reserve nor the FDIC joined the OCC in advancing the final rule. In a statement, acting comptroller Michael Hsu said: “To ensure fairness in the face of persistent and rising inequality and changes in banking, the CRA must be strengthened and modernized.” He went on to observe that “the disproportionate impacts of the pandemic on low- and moderate-income communities, the comments provided on the [Fed’s] Advanced Notice of Proposed Rulemaking, and our experience with implementation of the 2020 rule have highlighted the criticality of strengthening the CRA jointly with the [Fed] and FDIC.”

©2021

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Helpful Articles Tax

Planning for Year-End Gifts

As we approach the holidays, many people plan to donate to their favorite charities or give money or assets to their loved ones. Here are the basic tax rules involved in these transactions.

Donating to charity

Normally, if you take the standard deduction and don’t itemize, you can’t claim a deduction for charitable contributions. But for 2021 under a COVID-19 relief law, you’re allowed to claim a limited deduction on your tax return for cash contributions made to qualifying charitable organizations. You can claim a deduction of up to $300 for cash contributions made during this year. This deduction increases to $600 for a married couple filing jointly in 2021.

What if you want to give gifts of investments to your favorite charities? There are a couple of points to keep in mind.

First, don’t give away investments in taxable brokerage accounts that are currently worth less than what you paid for them. Instead, sell the shares and claim the resulting capital loss on your tax return. Then, give the cash proceeds from the sale to charity. In addition, if you itemize, you can claim a full tax-saving charitable deduction. The second point applies to securities that have appreciated in value. These should be donated directly to charity.

The reason: If you itemize, donations of publicly traded shares that you’ve owned for over a year result in charitable deductions equal to the full current market value of the shares at the time the gift is made. In addition, if you donate appreciated stock, you escape any capital gains tax on those shares. Meanwhile, the tax-exempt charity can sell the donated shares without owing any federal income tax.

Donating from your IRA

IRA owners and beneficiaries who’ve reached age 70½ are allowed to make cash donations of up to $100,000 a year to qualified charities directly out of their IRAs. You don’t owe income tax on these qualified charitable distributions (QCDs), but you also don’t receive an itemized charitable contribution deduction.

Gifting assets to family and other loved ones

The principles for tax-smart gifts to charities also apply to gifts to relatives. That is, you should sell investments that are currently worth less than what you paid for them and claim the resulting tax-saving capital losses. Then, give the cash proceeds from the sale to your children, grandchildren or other loved ones. Likewise, you should give appreciated stock directly to those to whom you want to give gifts. When they sell the shares, they’ll pay a lower tax rate than you would if they’re in a lower tax bracket.

In 2021, the amount you can give to one person without gift tax implications is $15,000 per recipient. The annual gift exclusion is available to each taxpayer. So if you’re married and make a joint gift with your spouse, the exclusion amount is doubled to $30,000 per recipient for 2021.

Make gifts wisely Whether you’re giving to charity or loved ones this holiday season (or both), it’s important to understand the tax implications of gifts. For more guidance about year-end giving and tax planning, contact one of our experts today.

© 2021