The IRS shared a reminder for tax-exempt organizations that have a filing deadline of May 16, 2022. Filing is mandatory, so if you need more time, you should request an extension as soon as possible.
Which Form should tax-exempt organizations file?
Tax-exempt organizations would file one of four tax forms for a return:
Form 990-series annual information returns (Forms 990, 990-EZ, 990-PF)
Form 990-N, Electronic Notice for Tax-Exempt Organizations Not Required to File Form 990 or Form 990-EZ
Form 990-T, Exempt Organization Business Income Tax Return (other than certain trusts)
Form 4720 Return of Certain Excise axes Under Chapters 41 and 42 of the Internal Revenue Code
Electronic filing for tax-exempt organizations
You should e-file to save time on processing and to avoid inevitable delays that occur when filing by paper. E-filing also reports your compliance with the IRS.
However, for tax-exempt organizations filing a Form 990, 990-EZ, 990-PF or 990-T for 2021, it’s mandatory to file electronically.
For organizations filing Form 990-N, the IRS website states, “organizations eligible to submit Form 990-N must do so electronically and can submit it through Form 990-N (e-Postcard) on IRS.gov.”
Requesting an extension for tax-exempt organizations
The end of tax season was officially April 18, 2022, which means the IRS is diving into enforcements and catching up on notices. What should you do, and what should you expect if you missed the filing deadline?
One-Time Penalty Relief
For late filers who have a history of filing and making payments on-time, you may qualify for one-time penalty relief. One-time penalty relief could reduce your owed balance by removing penalties such as interest. It’s also referred to as penalty abatement.
What Happens to Your Refund When You File Late?
Although your return is late, you should still file your taxes as soon as possible. If you are expecting to receive a return, but you filed late, you may have some of the balance offset and receive a smaller refund.
If you qualify for one-time penalty relief, you will not owe a balance and you can expect to receive the full refund.
Because you filed late, your refund will likely be late as well. The IRS has a huge backlog and the returns that are e-filed on time are top priority. Filing by paper and filing late will increase the likelihood of delays.
Penalties for Filing Your Taxes Late
Penalties for late filing range based on how late you file. Filing a few days late could result in interest on your balance. You will continue to accrue interest daily until you file, or the IRS will take more serious enforcement action.
Some of these more serious actions include levies and account liens, or even garnishing your wages to pay the balance owed.
Tax Debt Relief
Cases of tax returns that are years behind, or accounts that have been levied may benefit from professional assistance. Tax debt relief is available for many cases, in the form of payment agreements, offer in compromise, penalty abatement, and innocent spouse relief.
Call Optima for a free consultation today at (800) 536-0734. Our tax professionals may be able to assist you with your case.
Working with a qualified tax preparer can lessen the likelihood of delays and mistakes when you file. What makes a tax preparer qualified? Lead Tax Attorney Philip Hwang and CEO David King discuss tips for choosing your tax preparer. The Tax Show hosts cover types of tax professionals, credentials, minimum requirements, and red flags to look out for. Tune in to learn how to choose the best tax preparer for your tax situation.
From the start, the COVID-19 pandemic has been the biggest setback for the IRS. Millions of Americans have been waiting for tax returns and refunds from previous years, causing even more delay for 2022. If your returns from last year are still pending, then your return will be delayed this year as well.
How to avoid delayed or rejected tax returns
Electronic filing of your taxes is a great way to lessen the likelihood of delays. You can also validate your return with last year’s adjusted gross income so it doesn’t get rejected.
What to do if last year’s tax return is pending
National Taxpayer Advocate Erin Collins recommends entering $0 for your 2020 adjusted gross income when you file online.
If you collected the advanced child tax credit or your stimulus via the non-filer tool in 2021, the IRS recommends entering $1 for last year’s adjusted gross income.
There’s a possibility of the IRS rejecting your electronic return if you do not follow these steps. A tax software would typically send you a rejection email if your return shows conflicts with your adjusted gross income.
Missing tax return notice CP80
Receiving a CP80, or notice of a missing tax return could also leave your return in a pending status. If you received this notice and your return is still pending, you should also enter $0 for your 2020 adjusted gross income.
There is a chance that the IRS processed last year’s return after sending the notice. In which case, your adjusted gross income of $0 will be rejected. Should this happen, you can refile your 2021 return with the correct adjusted gross income.
How to check the status of your 2020 return
It helps to have a transcript to check the status of your 2020 return if you aren’t sure.
If you have a delinquent tax liability and need assistance with your 2020 return, call Optima for a free consultation at (800)536-0734.
You’re self-employed, which means that you no longer have to punch a clock or make that daily commute to spend the day in a cubicle. However, along with the freedom to set your own schedule comes the responsibility to make sure Uncle Sam gets his cut – and receives what you owe in a timely fashion.
That means either setting aside funds from your earnings to cover your tax obligation next April, or paying quarterly estimated taxes. Regardless of which strategy you take, the IRS has developed a worksheet to use to calculate how much you should set aside – IRS Form 1040-ES: Estimated Tax for Individuals.
Using IRS Form 1040-ES: Estimated Tax for Individuals
The IRS makes it easy (or at least as easy as paying taxes can be) to satisfy your federal income tax obligations by making quarterly estimated income tax payments. To begin making estimated payments, first download IRS Form 1040-ES, Estimated Tax for Individuals from the IRS website. For more details on how to complete the form, download Publication 505, Tax Withholding and Estimated Tax. The form is a PDF document that you can fill in and save with your information at any point.
Expected Wages
To calculate your expected wages for the coming year, obtain a copy of your prior year’s tax returns and locate the figure for your adjusted gross income to use as a starting point to estimate your income for the coming year. Subtract either your itemized deductions from your return or the standard deduction (whichever is larger) from your adjusted gross income. If the resulting amount is negative, adjust the total to zero. The result is an estimate of your wages for the coming year.
Calculate Estimated Tax
Once you’ve finished this calculation, use the included Tax Rate Schedule to calculate your estimated tax and enter the figure on the appropriate line of IRS Form 1040-ES. If you are subject to Alternative Minimum Tax (AMT), include the amount generated from IRS Form 6251 on IRS Form 1040-ES as additional tax. Subtract any credits you’re entitled to, such as the Earned Income Credit or deductions for use of your vehicle for business, medical or charitable purposes. The result is your estimated tax.
Self-Employment Taxes
Use the resulting figure as the starting point to estimate your self-employment taxes. First, multiply your expected wages for the coming year by 92.35%, or .9235, and enter the result on line 3 of IRS Form 1040-ES. Multiply the figure on line 3 by 2.9% or .029 and enter the result on line 4 of IRS Form 1040-ES. Subtract your expected wages for the coming year from $113.700 (the maximum income subject to Social Security taxes). If the result is zero or less, enter 0 on line 9 of IRS Form 1040-ES, and skip to line 10 on the form. If the result is zero or greater, compare this figure to the figure on line 3, and multiply the smaller result by 12.4% or .124 and enter the result on line 9 of Form 1040-ES. Add the figures from line 4 and line 9 together and enter the result on line 10. Multiply the figure on line 10 by 50% or .50 to obtain your estimated self-employment tax.
After you’ve completed all these calculations, add the estimated tax to the estimated self-employment tax. If the result is $1,000 or more, divide the total by four to determine your quarterly estimated payments. If the figure is less than $1,000, the IRS does not require you to make quarterly estimated payments. But before you throw your calculator across the room in frustration for having wasted so much time, consider this: you’ve generated a good estimate of how much you should set aside to cover your tax obligations.
Set Aside Funds
Whether or not you are obliged to make quarterly tax payments, you will still need to set aside funds to cover your income tax obligations. If you have a paid-wage job in addition to self-employment, you can ask your employer to deduct more from each paycheck to make the process automatic. If not, set up a “pay yourself first” account with your financial institutions, and commit to making regular deposits into the account until you collect the funds you need for each quarter.
By following this strategy, you’ll be far less stressed when you file next year’s federal income tax returns. If you still need assistance, feel free to give us a call.
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