Sales and registrations of electric vehicles (EVs) have increased dramatically in the U.S. in 2022, according to several sources. However, while they’re still a small percentage of the cars on the road today, they’re increasing in popularity all the time. If you buy one, you may be eligible for a federal tax break. The tax code provides credit to purchasers of qualifying plug-in electric drive motor vehicles including passenger vehicles and light trucks. The credit is equal to $2,500 plus an additional amount, based on battery capacity, that can’t exceed $5,000. Therefore, the maximum credit allowed for a qualifying EV is $7,500. Be aware that not all EVs are eligible for the tax break, as we’ll describe below. The EV definition for purposes of the tax credit, a qualifying vehicle is defined as one with four wheels that’s propelled to a significant extent by an electric motor, which draws electricity from a battery. The battery must have a capacity of not less than four-kilowatt hours and be capable of being recharged from an external source of electricity. The credit may not be available because of a per-manufacturer cumulative sales limitation. Specifically, it phases out over six quarters beginning when a manufacturer has sold at least 200,000 qualifying vehicles for use in the United States (determined on a cumulative basis for sales after December 31, 2009). For example, Tesla and General Motors vehicles are no longer eligible for the tax credit. And Toyota is the latest auto manufacturer to sell enough plug-in EVs to trigger a gradual phase-out of federal tax incentives for certain models sold in the U.S. Several automakers are telling Congress to eliminate the limit. In a letter, GM, Ford, Chrysler, and Toyota asked Congressional leaders to give all-electric car and light truck buyers a tax credit of up to $7,500. The group says that lifting the limit would give buyers more choices, encourage greater EV adoption and provide stability to auto workers. The IRS provides a list of qualifying vehicles on its website, and it recently added some eligible models. You can access the list here: https://www.irs.gov/businesses/irc-30d-new-qualified-plug-in-electric-drive-motor-vehicle-credit . Here are some additional points about the plug-in electric vehicle tax credit: It’s allowed in the year you place the vehicle in service. The vehicle must be new. An eligible vehicle must be used predominantly in the U.S. and have a gross weight of fewer than 14,000 pounds. These are only the basic rules. There may be additional incentives provided by your state. If you want more information about the federal plug-in electric vehicle tax break, contact us. © 2022
Individual taxpayers get extra time to file their 2020 tax returns and pay their taxes because of the pandemic. The IRS announced that the federal income tax filing and payment due date has been extended from April 15 to May 17, 2021.
The automatic extension applies to individuals, including those who pay self-employment tax. No penalties or interest will be added if all taxes due are paid by May 17. Even so, the IRS urges taxpayers to consider filing as soon as possible, especially those who expect refunds.
This relief doesn’t apply to corporate returns or estimated tax payments due on April 15, 2021. It also doesn’t apply to state tax payments or deposits or payments of any other types of federal tax.
For any additional guidance, speak to your ATA representative.
The IRS announced it is opening the 2020 individual income tax return filing season on February 12. (This is later than in past years because of a new law that was enacted late in December.) Even if you typically don’t file until much closer to the April 15 deadline (or you file for an extension), consider filing earlier this year.
Why? You can potentially protect yourself from tax identity theft — and there may be other benefits, too.
How is a person’s tax identity stolen? In a tax identity theft scheme, a thief uses another individual’s personal information to file a fraudulent tax return early in the filing season and claim a bogus refund. The real taxpayer discovers the fraud when he or she files a return and is told by the IRS that the return 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 get your individual tax return prepared by us before February 12 if you have all the required documents. It’s just that processing of the return will begin after IRS systems open on that date.
When will you receive 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 2020 Form W-2 to employees and, generally, for businesses to issue Form 1099s to recipients of any 2020 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.
How else can you benefit by filing early? In addition to protecting yourself from tax identity theft, another benefit of early filing is that, if you’re getting a refund, you’ll get it faster. The IRS expects most refunds to be issued within 21 days. The time 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 haven’t received an Economic Impact Payment (EIP), or you didn’t receive the full amount due, filing early will help you to receive the amount sooner. EIPs have been paid by the federal government to eligible individuals to help mitigate the financial effects of COVID-19. Amounts due that weren’t sent to eligible taxpayers can be claimed on your 2020 return.
Do you need help? If you have questions or would like to discuss your return in more detail, please contact us via our website or call your local office. We can help ensure you file an accurate return that takes advantage of all of the breaks available to you. © 2021