Archive November 2021

IRS announces changes to retirement plans for 2022

IRS announces changes to retirement plans for 2022

Next year taxpayers can put an extra $1,000 into their 401(k) plans. The IRS recently announced that the 2022 contribution limit for 401(k) plans will increase to $20,500. The agency also announced cost‑of‑living adjustments that may affect pension plan and other retirement-related savings next year.

Highlights of changes for 2022

The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased to $20,500. Limits on contributions to traditional and Roth IRAs remains unchanged at $6,000.

Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If neither the taxpayer nor their spouse is covered by a retirement plan at work, their full contribution to a traditional IRA is deductible. If the taxpayer or their spouse was covered by a retirement plan at work, the deduction may be reduced or phased out until it is eliminated. The amount of the deduction depends on the taxpayer’s filing status and their income.

Traditional IRA income phase-out ranges for 2022 are:

  • $68,000 to $78,000 – Single taxpayers covered by a workplace retirement plan
  • $109,000 to $129,000 – Married couples filing jointly. This applies when the spouse making the IRA contribution is covered by a workplace retirement plan.
  • $204,000 to $214,000 – A taxpayer not covered by a workplace retirement plan married to someone who’s covered.
  • $0 to $10,000 – Married filing a separate return. This applies to taxpayers covered by a workplace retirement plan

Roth IRA contributions income phase-out ranges for 2022 are:

  • $129,000 to $144,000 – Single taxpayers and heads of household
  • $204,000 to $214,000 – Married, filing jointly
  • $0 to $10,000 – Married, filing separately

Saver’s Credit income phase-out ranges for 2022 are:

  • $41,000 to $68,000 – Married, filing jointly.
  • $30,750 to $51,000 – Head of household.
  • $20,500 to $34,000 – Singles and married individuals filing separately.

The amount individuals can contribute to SIMPLE retirement accounts also increases to $14,000 in 2022.

More information:
Notice 2021-61
Roth IRAs
Traditional IRAs
Traditional and Roth IRAs — A comparison chart
Publication 590-A, Contributions to Individual Retirement Arrangements
COLA Increases for Dollar Limitations on Benefits and Contributions

 

Common tax scams and tips to help taxpayers avoid them

Common tax scams and tips to help taxpayers avoid them

In recent years, tax schemes and scams have been on the rise. Con artists work year-round which means taxpayers must remain vigilant to avoid being victimized. Here are some tips to help people recognize and avoid some of the most common tax-related scams.

Email phishing scams

The IRS does not initiate contact with taxpayers by email to request personal or financial information. Generally, the IRS first mails a paper bill to the person who owes taxes. In some special situations, the IRS will call or come to a home or business.

Taxpayers should report IRS, Treasury or tax-related suspicious phishing scams by saving the email and then sending that file as an attachment to phishing@irs.gov. They should not open any attachments, click on any links, reply to the sender, or take any other actions that could put them at risk.

Phone scams

The IRS generally first mails a bill to the taxpayer who owes taxes. There are specific ways to pay taxes. The agency and its authorized private collection agencies will not:

• Leave pre-recorded, urgent, or threatening messages on an answering system.• Threaten to immediately bring in local police or other law enforcement groups to arrest the taxpayer for not paying, deport them or revoke their licenses.• Call to demand immediate payment with a prepaid debit card, gift card or wire transfer.• Ask for checks to third parties.• Demand payment without giving the taxpayer an opportunity to question or appeal the amount owed.

Criminals can fake or spoof caller ID numbers to appear to be anywhere in the country. Scammers can even spoof an IRS office phone number or the numbers of various local, state, federal or tribal government agencies.

If a taxpayer receives an IRS or Treasury-related phone call, but doesn’t owe taxes and has no reason to think they do, they should:

• Not give out any information. Hang up immediately.• Contact the Treasury Inspector General for Tax Administration to report the IRS impersonation scam call.• Report the caller ID and callback number to the IRS by sending it to phishing@irs.gov. The subject line should include “IRS Phone Scam.”• Report the call to the Federal Trade Commission.

If a taxpayer wants to verify what taxes they owe the IRS, they should:

• View tax account information online at IRS.gov.• Review their payment options.

More information:IRS Dirty Dozen Tax ScamsAvoiding Social Engineering and Phishing Attacks – Department of Homeland SecuritySecurity Awareness for Taxpayers

Year-end giving reminder: Special tax deduction helps most people give up to $600 to charity, even if they don’t itemize

WASHINGTON – The Internal Revenue Service today reminded taxpayers that a special tax provision will allow more Americans to easily deduct up to $600 in donations to qualifying charities on their 2021 federal income tax return.

Ordinarily, people who choose to take the standard deduction cannot claim a deduction for their charitable contributions. But a temporary law change now permits them to claim a limited deduction on their 2021 federal income tax returns for cash contributions made to qualifying charitable organizations. Nearly nine in 10 taxpayers now take the standard deduction and could potentially qualify.

Under this provision, individual tax filers, including married individuals filing separate returns, can claim a deduction of up to $300 for cash contributions made to qualifying charities during 2021. The maximum deduction is increased to $600 for married individuals filing joint returns.

Included in the Coronavirus Aid, Relief, and Economic Security (CARES) Act, enacted in March 2020, a more limited version of this temporary tax benefit originally only applied to tax-year 2020. The Taxpayer Certainty and Disaster Tax Relief Act of 2020, enacted last December, generally extended it through the end of 2021.

Cash contributions include those made by check, credit card or debit card as well as amounts incurred by an individual for unreimbursed out-of-pocket expenses in connection with their volunteer services to a qualifying charitable organization. Cash contributions don’t include the value of volunteer services, securities, household items or other property.

The IRS reminds taxpayers to make sure they’re donating to a recognized charity. To receive a deduction, taxpayers must donate to a qualified charity. To check the status of a charity, they can use the IRS Tax Exempt Organization Search tool.

Cash contributions to most charitable organizations qualify. But contributions made either to supporting organizations or to establish or maintain a donor advised fund do not. Contributions carried forward from prior years do not qualify, nor do contributions to most private foundations and most cash contributions to charitable remainder trusts.

In general, a donor-advised fund is a fund or account maintained by a charity in which a donor can, because of being a donor, advise the fund on how to distribute or invest amounts contributed by the donor and held in the fund. A supporting organization is a charity that carries out its exempt purposes by supporting other exempt organizations, usually other public charities.

Keep good recordsSpecial recordkeeping rules apply to any taxpayer claiming a charitable contribution deduction. Usually, this includes obtaining an acknowledgment letter from the charity before filing a return and retaining a cancelled check or credit card receipt for contributions of cash.

For details on the recordkeeping rules for substantiating gifts to charity, see Publication 526, Charitable Contributions, available on IRS.gov.

Remind families about the Child Tax CreditBesides  the special charitable contribution deduction, the IRS also encourages employers to help get the word out about the advanced payments of the Child Tax Credit because they have direct access to many employees and individuals who receive this credit. In particular, remind low-income workers, especially those who don’t normally file returns, that the deadline for signing up for these payments is now Nov. 15, 2021. More information on the Advanced Child Tax Credit is available on IRS.gov.

For more information about other Coronavirus-related tax relief, visit IRS.gov/Coronavirus.

People can stay connected to the IRS through social media and e-news subscriptions

People can stay connected to the IRS through social media and e-news subscriptions

Taxpayers can stay in the know on all things tax-related by following the IRS verified social media accounts and subscribing to the agency’s e-news services. Here are some details about these valuable information resources.

IRS social media platforms

• TwitterTaxpayersbusinesses and tax professionals can follow the IRS handles for up to the minute announcements, tips and alerts in English and Spanish.• Facebook: News and information for everybody. Also available in Spanish.• Instagram: The IRS Instagram account shares taxpayer-friendly information.• YouTube: The IRS offers three video channels — EnglishMultilingual and American Sign Language.• LinkedIn: The IRS shares key agency communications and job opportunities.

The agency continues to increase multilingual outreach on social media. For example, IRS has created individual Twitter Moments in six languages, highlighting key messages in SpanishVietnameseRussianKoreanHaitian Creole and Simplified Chinese.

The IRS also has a free mobile app, IRS2Go, where taxpayers can check their refund status, pay taxes, find free tax help, watch IRS YouTube videos, and get daily tax tips. The IRS2Go app is available from the Google Play Store for Android devices, or from the Apple App Store for Apple devices. It is available in both English and Spanish.

Taxpayers should not reply to an IRS direct message on social media asking for personal or financial information. These are common scams that try to lure taxpayers on social media platforms or with unsolicited emails, texts, or calls.

Get automatic updates by emailThe IRS e-News subscription service issues tax information by email for many different audiences. It provides tips, tools, and helpful materials of interest to taxpayers and organizations. The IRS offers subscription services tailored to tax exempt and government entities, small and large businesses as well as individuals. The service is easy to use. Anyone can sign up by visiting IRS e-News Subscriptions.

IRS e-news options include:

• IRS Outreach Connection − This subscription offering delivers up-to-date materials for tax professionals and partner groups inside and outside the tax community. The material for Outreach Connection is specifically designed so subscribers can share the material with their clients or members through email, social media, internal newsletters, e-mails or external websites.

• IRS Tax Tips – These brief, concise tips in plain language cover a wide-range of topics of general interest to taxpayers. They include the latest on tax scams, tax reform, tax deductions, filing extensions and amending returns. IRS Tax Tips generally come out each weekday. • IRS Newswire − Subscribers to IRS Newswire receive news releases the day they are issued. These cover a wide range of tax administration issues ranging from breaking news to details related to legal guidance. • IRS News in Spanish – Noticias del IRS en Español − Readers get IRS news releases, tax tips and updates in Spanish as they are released. Subscribe at Noticias del IRS en Español. • e-News for Tax Professionals − Includes a weekly roundup of news releases and legal guidance specifically designed for the tax professional community. Subscribing to e-News for Tax Professionals gets tax pros a weekly summary, typically delivered on Friday afternoons.