Income Tax News

CALIFORNIA, USA — Tax season is once again upon us, but this year there’s a new free tool many Californians could use to file for free.

California is one of 12 states chosen to pilot a new program for the Internal Revenue Service. It’s a free, online filing system which more than 5 million qualifying Californians can start using Jan. 29. 

It’s also available in: Arizona, Massachusetts, New York, Washington, and states without a state income tax filing like Florida, Nevada, New Hampshire, South Dakota, Texas, Tennessee, and Wyoming. It’s a free, online filing system aiming to 

“Americans spend 1.7 billion hours, or about $31 billion, just to file their taxes and for the average family we are talking about 13 hours and $250 on average every single year,” he said. “This direct file pilot takes all that away.”

All people will have to do is go online to the IRS website and file electronically. Qualifying measures aren’t based on income, but rather the type of income.

“W-2 income qualifies, unemployment benefits qualify, there are also certain credits that qualify as well: earned income tax credit, child tax credit and some deductions,” said Volsky.

Direct File is launching as a limited-scope pilot in early 2024, and covers the following taxpayers in pilot states:

• Certain types of income:
  • W-2
  • Unemployment benefits
  • Interest up to $1,500 (no Schedule B)
  • Social Security (and Railroad Retirement) benefits
• Certain credits:
  • Earned Income Tax Credit
  • Child Tax Credit
  • Credit for Other Dependents
• Some deductions:
  • Standard deduction
  • Student loan interest deduction
  • Educator expenses subtraction

New this year, all income brackets have increased at both the federal and state level in response to inflation. The Howard Jarvis Tax Payer Association says there is a new concern this year and President Jon Coupal says California needs to make some changes.

“There had been a rate cap on disability insurance that is paid out of a payroll, but that cap is lifted so California’s previously high tax rate of 13.3% is now 14.3%,” said Coupal. 

California, once again, is the state with the highest income tax.

The new tax on those paid by third party apps like Venmo, Zelle, Paypal will also see some changes. If you exceeded $600 in transaction and use one of these apps as a small business, freelancer or for large transactions, you may receive a 1099-K form this year and be asked to list transactions.

Also in tax news, a bill to prevent victims of weather disasters from paying federal tax on relief funds is moving forward to the House of Representatives. Californians already don’t have to pay state taxes on their PG&E settlements, but this bill will protect those funds from federal taxes, too.

If passed as currently written, the bill could change how people all over the United States who received relief funds due to hurricanes and other disasters pay taxes on them.

Read more about the pilot program here. 

WATCH MORE: A look at the car insurance price increases

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Originally Appeared Here

Social Security recipients received the largest cost-of-living adjustment in four decades in 2023. But because those payments boosted their incomes, many of those beneficiaries could take a financial hit this tax season.

Retirees may know that the federal government will tax their Social Security, which can include monthly retirement, survivor and disability benefits if their total income exceeds certain amounts. But fewer may realize that some states also will levy a tax. 

Only about a dozen states are taxing Social Security benefits this year, and that number will drop further next year. While each state has different rules on what or how they will tax your Social Security money, age and income usually determine if you pay.

It’s best to check with your state’s rules, but here are general guidelines on what you can expect: 

Which states tax Social Security benefits? 

These dozen states tax benefits: 

• Colorado: If you’re 65 or older and your Social Security benefits included in you federal taxable income tops $24,000, you can subtract the full amount of those benefits from your Colorado tax returns. However, if you’re under 65 years old, only up to the first $20,000 isn’t taxed.
• Connecticut: Single Social Security recipients with adjusted gross income (AGI) below $75,000 and $100,000 for married joint filers aren’t taxed on their benefits. However, if your income tops those thresholds, 25% of your benefits may be taxed.
• Kansas: If your AGI tops $75,000, your benefits are taxed.
• Minnesota: Social Security benefits are fully or partially exempt from Minnesota’s income tax. Exemptions phase out at $105,380 if married and filing jointly or $82,190 for singles.
• Missouri: For one more year, if your AGI, excluding Social Security benefits, reaches $100,000 or more as a married couple filing jointly, or $85,000 as a single filer, you’ll have to pay some tax on your benefits unless the amount your AGI exceeds the threshold is less than your Social Security benefit amount. Beginning in tax year 2024, no one will have to pay tax on Social Security benefits.
• Montana: Your AGI will determine how much tax you pay on your Social Security benefits.
• Nebraska: For tax year 2023, 60% of your Social Security benefits are exempt from tax. Starting in 2024, you won’t have to pay any tax on Social Security checks.
• New Mexico: Only the very top earners must pay tax on their benefits. Most Social Security recipients don’t. Single taxpayers with incomes below $100,000, married filing jointly couples earning less than $150,000, and married filing separately couples below $75,000 are exempt from Social Security tax.
• Rhode Island: If your income exceeds $101,000 for single filers or $126,250 if you’re filing jointly, or if you’re younger than what Social Security considers full retirement age, you get no tax break. If you’re below those thresholds, up to $20,000 of your retirement income may be exempt.
• Utah: Your benefits will be taxed if your income is $45,000 or more, $75,000 or more if you’re head of household or married filing jointly, or $37,500 if married filing separately. Below those thresholds, you may be able to claim a nonrefundable credit for your benefits.
• Vermont: Single taxpayers with AGI below $50,000 and joint filers with AGI below $65,000 don’t pay any tax on their benefits. For all other filers, the income threshold for the full exemption is $50,000. The exemption phases out beyond those levels.
• West Virginia: Most lists don’t include West Virginia but if your income hits $100,000 or more for couples filing jointly or $50,000 or more for single filers, your benefits may be taxed.

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How do states tax Social Security? 

Methods vary widely so check your state’s laws, but these are generally the ways states will tax Social Security: 

• Age-based. For example, Coloradans under 65 may owe taxes on Social Security benefits but older people generally don’t.  
• Income-based. For example, Missouri taxes Social Security benefits only if your income tops $85,000, or $100,000 for married couples, and New Mexico only with income above $100,000 for married couples filing jointly, surviving spouses and heads of household with more than $150,000, and married couples filing separately with more than $75,000 in income.
• Taxable income includes Social Security benefits. Minnesota taxes Social Security income that’s considered taxable by the federal government, but some recipients qualify for a Social Security income subtraction when filing their state tax return. 

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How much can you make from Social Security without having to pay taxes? 

The best way to avoid taxes on Social Security benefits is to limit your income by investing with a Roth IRA while saving. Roth IRA withdrawals aren’t counted as taxable income. They are tax-free. 

You can also hope your state eliminates its tax on Social Security benefits, which has been the trend. Missourians and Nebraskans won’t have to pay any tax on Social Security money beginning in tax year 2024.

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Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at mjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.   

Originally Appeared Here

RALEIGH — Ever since Republicans won control of the North Carolina General Assembly in 2010 and began reforming the state’s tax code, progressive critics have argued that taxes play little to no role in shaping economic outcomes. 

Indeed, they argue that the economic benefits of state expenditures outweigh any potential benefits from tax reduction. The logic of their argument is that North Carolina’s economy has grown more slowly over the past decade than it would have if state lawmakers had left taxes alone and spent each year’s revenue growth on current public services, new programs, and pay raises for public employees. 

I think the progressives’ view is mistaken, although I can understand why they believe it. Education, transportation, public safety, and other state programs do play a role in fostering growth and development over time. Few seriously dispute this proposition. 

The hitch is that, as with any other good or service in the economy, public services have diminishing returns. Up to a certain level of spending, their benefits exceed their costs (in taxes). Beyond that peak, the benefit from spending every additional dollar declines. Eventually it falls below the benefits to the economy of leaving the dollar in the hands of the household who originally earned it. 

The evidence is fairly strong, I submit, that North Carolina reached that point many years ago. We should absolutely spend more tax dollars on some areas of state government — compensation for correction officers and other public safety personnel is woefully inadequate, for example — but we should offset that by spending less in other areas. 

As to the economic effects of taxation, there’s new evidence. In the latest edition of the “Journal of Risk and Financial Management,” two professors from North Dakota State University and a colleague from Thailand’s Kasetsart University published the results of a study of a decade of tax and economic data from all 50 states.  

“The findings consistently demonstrate that taxes harm local economies,” they wrote, “although the magnitude of the impact varies depending on the specific type of tax.” 

Increases in income, sales, and property taxes all reduce employment rates, for example, but effect sizes differ. On another variable of interest, the number of patents per capita (a measure of innovation), income and sales taxes had negative effects but property taxes didn’t. And on gross domestic product per capita, income and property had negative effects but sales taxes didn’t. 

The researchers also found positive effects from government spending in some regressions, but they were smaller and less consistent. 

In another paper published last year, economist Richard Cebula compared state tax burdens to patterns of economic migration across the country. Published in the journal “Public Choice,” his study found “strong support” for the proposition that Americans tend to move away from highly taxed jurisdictions to lower-taxed ones. 

We can also draw useful conclusions from studies of the federal tax changes enacted by Congress in 2017. One recent paper found that lowering the corporate tax rate resulted in higher domestic investment. Another study concluded that “reductions in marginal income tax rates cause increases in sales, profits, investment, and employment, with responses driven by firms in capital-intensive industries.” 

The growth effects here aren’t so large that tax cuts pay for themselves. Conservatives who make such arguments are vastly overstating their case. But tax reduction does make a country, state, or locality a more attractive place to live, work, invest, and build a business.  

That doesn’t mean all or even most households and businesses will ever pick up and move to other places just so they can have a lower tax bill. Other variables matter, too: housing prices, job markets, weather, community ties, and proximity to valuable amenities. Still, as mounds of studies now document, tax burdens do matter. There are enough actors who are willing to relocate, or to modify their economic behavior in some other way, to make it worth our while to continue the process of reforming North Carolina’s tax code. 

John Hood is a John Locke Foundation board member. His latest books, Mountain Folk and Forest Folk, combine epic fantasy with early American history (FolkloreCycle.com). 

Originally Appeared Here

Decades-long sentences and close to $1 billion in ordered restitution handed out in federal court this week in a fraudulent charitable deductions and land rights case could finally put the brakes on a controversial tax transaction while making it easier for the IRS to win related cases in US Tax Court.

Jack Fisher, a 71-year-old real estate developer, was sentenced Tuesday to 25 years in prison and ordered to pay $458 million in restitution for cheating the IRS using inflated tax deductions in the US District Court for the Northern District of Georgia. His co-defendant, James Sinnott, was sentenced to 23 years in prison in addition to $444 million in restitution.

Fisher and Sinnott were involved in syndicated easements, involving promoters who organize partnerships to buy land, then donate away rights to develop the land to generate huge tax deductions. The government said at Fisher’s trial that he used inflated appraisals and forged documents, starting his scheme in 2008. The scale of the fraudulent deductions expanded in 2013, when Sinnott joined the scheme, the Justice Department said.

The Land Trust Alliance, a nonprofit that opposes syndicated easements, has said that investors claimed nearly $36 billion in unwarranted deductions from 2010 to 2018. President Biden signed bipartisan legislation to stop syndicated deals at the end of 2022.

Tuesday’s sentence was a rare victory for the government in a practice that it has long struggled to contain. And Fisher’s guilty verdict and long sentence could change the tide with other possible prosecutions and cases that the Internal Revenue Service is fighting in Tax Court.

“His criminal conviction and the confessions of his associates could make winning Tax Court cases against those deals a whole lot easier for the IRS, which has, in general, found dealing with syndicated conservation easement transactions difficult and enormously time-consuming,” said Russell Shay, a public policy consultant who has tracked syndicated conservation easements for over a decade.

Read More: Green Tax Promoter Gets 25 Years in $1.4 Billion Fraud Case

“Some of the Tax Court cases have dragged on for a decade, and they still have hundreds of them in the queue,” Shay said.

Giving Pause

Shay said the IRS needs to find a way to review returns, and win cases in Tax Court based on valuation. “They let syndicated conservation easements grow from a cottage industry to a significant drain on the Treasury over more than a decade after they first knew about them,” he said.

When asked for comment, an IRS spokesperson pointed to a statement from Jim Lee, the chief of IRS Criminal Investigation, who said Tuesday that agents will use their financial expertise to go after abusive tax shelters.

“As this complex investigation continues to evolve, today’s judicial actions illustrate our resolve to hold responsible every individual involved in tax evasion schemes,” Lee said.

The long prison sentences and the huge amounts of restitution money involved should give significant pause to those who have continued to promote syndicated transactions in other forms, said Nancy McLaughlin, a law professor at the University of Utah who focuses on easements and tax incentives.

“It also should give promoters being sued by investors pause, as the DOJ’s case against Fisher exposed the blatant valuation abuses involved in these transactions,” she said.

Sean Akins, an attorney for Covington & Burling, who represented EcoVest Capital Inc., a company that promoted syndicated easements, in a civil case brought by the government, said that some individuals have continued to sponsor syndicated deals or similar products.

The sentence and the restitution were a wake-up call to anyone still engaging in the activity following the passage of the bill to curb the transactions, Akins said.

The case against EcoVest was settled in March 2023 with the company agreeing not to promote easement deals without admitting to any wrongdoing. The government alleged in the case that the company reaped $3 billion in improper and over-valued tax deductions.

“These actors would be well-advised to seek competent and experienced legal representation sooner rather than later in order to avoid finding themselves in a position similar to Fisher and Sinnott,” Akins said.

The case is US v. Lewis, C.C.D. Ga., 21-cr-00231, sentencing 1/9/24

Originally Appeared Here

Analysis: income tax changes announced in Budget 2024 are now taking effect so here’s how they wlll impact your pay

By Natasha Caulfield, University of Galway

The Government’s budget day brings much anticipation, weeks of speculation, and expert debates. With each year, there is criticism and praise for measures and changes that are announced – and Budget 2024 was no different. That budget was introduced on October 10th last and the multiple tax measures which were announced then will have an impact on your take-home pay as we enter 2024.

The main changes which will affect the average worker are as follows:

• An increase of €2,000 in the income tax standard rate cut-off point for all earners
• €100 increase in the Personal Tax Credit
• €100 increase in the PAYE Tax Credit
• A reduction in the middle rate of Universal Social Charge (USC) from 4.5% to 4.0%
• An increase of €2,840 in the threshold at which the middle rate of USC is paid, from €22,920 to €25,760

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From RTÉ News, Budget 2024 tax changes to come into effect

As there was an increase of €2,000 announced for the income tax standard rate cut-off point for all earners, the amount of gross income taxed at the higher tax rate of 40% has reduced. In 2023, €5,000 of this employee’s salary would be taxed at 40%, however this has reduced to €3,000 for 2024.

Both the Personal Tax Credit and the PAYE Tax Credit have increased by €100 to €1,875 each. Tax credits reduce our tax liability. There has been some changes to PRSI rates for 2024. A detailed guide of the PRSI changes for 2024 is available here. Increases in Incapacitated Child Tax Credit, Single Person Child Carer Credit, Earned Income Credit and Home Carer Tax Credit were also announced.

According to the salary guide published by Morgan McKinley, the average salary in Ireland is approximately €45,000 so the various tax changes means the average worker will have an additional €722 per annum in their take-home pay.

Please note that the figures in this example are rounded to the nearest euro. You may be able to avail of additional tax credits and reliefs which have not been considered in the above illustration.

A number of changes have been made to USC rates and bands. In 2023, the first €12,012 of an employee’s salary would be taxed at 0.5% and this remains unchanged for 2024. The portion of an employee’s salary from €12,012 to €25,760 will be taxed at 2%, while the balance above €25,760 will be taxed at a rate of 4% in 2024. In comparison, in 2023, the balance above €22,920 would have been taxed at a rate of 4.5%.

The USC is often a controversial topic leading up to Budget Day. It was originally thought that the ‘charge’ was temporary when first announced by the late Brian Lenihan Jr in 2010. In 2016, Leo Varadkar tweeted that USC would be abolished “over the lifetime of the next Government”. However, USC remains in place for workers in Ireland.

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From RTÉ Radio 1’s Today With Claire Byrne, is the ‘dreaded’ USC tax here to stay?

A number of once-off cost of living supports were announced, including:

• €450 electricity credits, which will be given in three instalments of €150. It was planned that first instalments would be issued in December 2023, followed by a second instalment in January 2024, with the third and final payment in March 2024. These payments occur automatically and therefore there is no need to apply for them.
• Once-off payments relating to Child Benefit and Working Family Payments were made in November & December 2023.

A number of expenditure measures will provide benefit to qualifying persons during 2024:

• Free School Book Scheme for junior cycle students at post-primary level
• Restoration of maintenance grants to postgraduate students on a similar basis to undergraduates
• 20% fare reduction on public transport continued to the end of 2024
• €12 increase in the weekly social welfare rate for working age recipients
• €12 increase in weekly payments for pensioners
• €54 per week increase in the Working Family Payment threshold
• €4 increase in weekly rate for a qualified child
• National Childcare Scheme hourly subsidy increased from €1.40 to €2.14 from September 2024
• Extension of Child Benefit to 18 year olds in full time education
• The Help to Buy Scheme for first-time property purchasers is extended until December 31st 2025

Natasha Caulfield is a lecturer in Accountancy & Finance in the J.E. Cairnes School of Business and Economics at University of Galway.

The views expressed here are those of the author and do not represent or reflect the views of RTÉ

Originally Appeared Here

PADUCAH — Despite W-2s not coming out until late January, tax experts urge taxpayers to prepare for the upcoming season.

Samantha Floyd owns Egners Tax Service in Paducah and has been doing taxes for 20 years. Floyd already services 740 tax filers but expects 400 more in the coming tax season.

Samantha Floyd 

Jeremiah Hatcher

Floyd said every tax season is different, but this year may be like no other.

“I do expect the season to be busy,” said Floyd.

She mentioned that she has witnessed an increase in extensions in the past, indicating that people either wait until the last minute to file their taxes or are made aware of what they need to bring to appointments.

“A lot of things that you can do to prepare for tax season is to access your prior tax return; it will help you,” Floyd said. “Things like a map to determine what you have the prior year. And then you can just pick the things off it and see that you had this W2 or social security.”

Floyd said that considering the previous year, it is crucial to reflect on any new opportunities that may come up in 2023.

Floyd suggests considering if there have been any significant events in the current year, such as you serving as the executor of an estate, starting a business, or receiving an inheritance.

According to Floyd, taxes will see significant changes this year, and those factors make a difference in how taxpayers determine what to include on tax returns.

The Corporate Transparency Act introduced beneficial ownership information that taxpayers must now report.

“Those are subjected to huge penalties if you ignore it,” she said. “So that’s going to be corporations, partnerships, and LLCs have to all do that. Unless you’re exempt–there are always gray areas within the IRS.”

There are also Residential Energy Credits, and in Floyd’s tax professional career, she said that it is a better break than she has seen in years past.

“So if you put in windows, doors, insulation, geothermal, or anything, you need to let your preparer know. There are also vehicle credits for the same type of thing.”

Floyd said bonus depreciation is reduced to 80% when it was initially 100%.

According to the IRS, Bonus depreciation enables business taxpayers to claim extra depreciation for the cost of qualifying business property over and above regular depreciation allowances.

“So, for instance, let’s say I bought a desk for $5,000,” she said. “So I could take the total $5,000 off in one year before, now bonus depreciation is down 80%. So now I can only take 4000 of it off, and the remaining 1000 will have to be carried over the years.”

The Internal Revenue Service (IRS) has recently launched the Direct File System, a new tool that enables taxpayers to file their tax returns directly with the agency. Although the system is currently in its pilot stage, tax expert Dean Owen assumes that it has the potential to replace the traditional way of filing taxes.

“We suspect by the end of this decade, 90% of people in America will be getting their taxes done by the IRS for free automatically,” he said. “Everything that’s going to be on your tax return has already been reported to the IRS,” Owen said. “The IRS has everything they need to file your taxes.”

He said the system might work well for some people than others, especially those who might own a business.

“If you have rental properties or small businesses,” he said. “If you have investments where your basis or cost is not reported, you had an unconventional investment, capital gains; if you invest in land, and you’re going to go to sell, the IRS doesn’t have the information to file your tax returns. So it’s by no means something they can do for everyone.”

According to Owens, filing taxes before the deadline is advisable to avoid penalties. Early tax filing can also impact eligibility for the Direct File System; Kentucky is waiting to implement this.

Owens also reminded taxpayers that they have up to three years from the initial tax year to file unclaimed funds.

“Every year in America, about $40 billion was lost because taxpayers had refunds coming and didn’t claim them,” he said. “That’s a two-edged sword. Granted, you lose the right to ask for your money back after three years, but they lose the ability to come after you for any money you owe them. So the three years cuts both ways. But get the taxes done, and we won’t have any problems.

The deadline to file is April 15, 2024.

Originally Appeared Here

TDS on Fixed Deposits: With the financial year drawing to a close, a lot of investors will be rushing to make last-minute investments. Fixed deposits (FD) are one of the most popular investment tools with public and private sector banks and NBFCs offering attractive interest rates. Though FDs are considered as a low-risk, high-return investment tool, one should note that tax is levied on the final interest amount. It is to be noted that the tax is levied only on the interest amount not on the principal amount. 

The interest earned from FDs is a taxable income and is subject to tax deductions. This deduction of tax is known as Tax Deducted at Source (TDS). It is deducted before making the final payment. In the case of fixed deposits, whether it is with a bank, post office, or NBFC, TDS is deducted in accordance with the income tax regulations set by the government. 

Section 194A of the Income Tax Act states that tax should be deducted at the time of payment or credit of interest to the account holder, whichever occurs earlier. This means that the tax is deducted from the interest amount before it is credited or paid out to the account holder. 

This ensures that the tax liability is fulfilled by the person or entity responsible for making the payment, thus relieving the account holder from the burden of paying tax separately on their interest income. Overall, TDS on fixed deposit interest serves as a mechanism to ensure the collection of income tax in a timely and efficient manner.

How is TDS calculated?

TDS on FD schemes is currently deducted at a rate of 10 per cent. If the total interest earned on FDs for a financial year exceeds Rs. 40,000. However, if the investor’s PAN is not available, TDS is deducted at the rate of 20 per cent.

For joint account holders, fixed deposit TDS is deducted against the primary account holder’s PAN information. The secondary account holder is not liable for any deductions relating to TDS on FD.

As per the Income Tax Act, the exemption limit for TDS deduction on FD is Rs 40,000 for individuals (excluding senior citizens) and Rs. 50,000 for senior citizens.

Also, individuals with a total taxable income of less than Rs. 2.5 lakh are eligible for exemption from paying TDS on their FDs.

The exemption limits for senior age groups are Rs 3 lakh for senior citizens aged 60 to 79, and Rs 5 lakh for those aged 80 or above.

Table

FD interest gained over Rs 5 lakh or 10 lakh is eligible for extra tax deductions of 10% and 20% respectively in addition to TDS as per the Income Tax Act, 1961.

Who Deducts TDS on Fixed Deposit?

Banks and NBFCs where you have a fixed deposit account automatically deduct TDS on FD at the end of each fiscal year.

How is the TDS calculated?

Rate of Average Income Tax = Income Tax Payable (computed with slab rates) / Estimated income for the financial year.

How to avail TDS waiver on Fixed Deposit?

In situations where TDS is levied unnecessarily, or, the income is below the taxable limit, a taxpayer can utilise Form 15 G or 15 H to get rid of the deduction. Forms 15 G and 15 H are submitted for this purpose.

Form 15 G is for individuals below the age of 60 years with no taxable income, while Form 15H is for senior citizens (aged 60 years or more) with no taxable income. 

In situations where TDS is levied unnecessarily, or, the income is below the taxable limit, a taxpayer can utilise Form 15 G or 15 H to get rid of the deduction. Forms 15 G and 15 H are submitted for this purpose.

Form 15 G is for individuals below the age of 60 years with no taxable income, while Form 15H is for senior citizens (aged 60 years or more) with no taxable income.

“Declaration in Form No. 15G/15H can be made, if the annual interest does not exceed the exemption limit (i.e. Rs.2,50,000 or Rs. 3,00,000 or Rs. 5,00,000, as the case may be). However, this condition is not applicable in case of a senior citizen (i.e. resident individual of at least 60 years of age) i.e. a resident senior citizen can furnish a declaration in form 15H even if annual interest likely to be paid to him exceeds the exemption limit of Rs. 2,50,000 or Rs. 5,00,000, as the case may be, provided the tax payable on his total income after considering the rebate under section 87A is nil,” said the I-T department. 

Also read: IT Returns 2024: New Income Tax rules introduced in 2023 that would affect you in 2024

Also read: Income tax returns 2024: Top 5 points to note while selecting New Tax Regime for FY2024-25

Originally Appeared Here

Introduction

On December 26, 2023, the Department of the Treasury (Treasury) and the Internal Revenue Service (IRS) issued proposed regulations (Proposed Regulations) pertaining to the clean hydrogen production credit (Clean Hydrogen Production Credit) under section 45V of the Internal Revenue Code (Code). The Proposed Regulations clarify several aspects of the Clean Hydrogen Production Credit by, among other things:

• Proposing definitions of several key operative terms used by section 45V of the Code, including: (i) “facility”; (ii) “most recent GREET model”; and (iii) “emissions through the point of production (well-to-gate)”;
• Providing that the coordination rule under section 45V(d)(2) of the Code, which generally disallows the Clean Hydrogen Production Credit for a facility that includes carbon capture equipment for which a credit is allowed to any taxpayer under section 45Q of the Code, generally would not apply to retrofitted carbon capture equipment meeting the 80/20 rule requirements under Treasury Regulation section 1.45Q-2(g)(5) if no section 45Q credit has been allowed to any taxpayer for such equipment;
• Establishing a facts and circumstances anti-abuse rule that would apply to taxpayers attempting to exploit the Clean Hydrogen Production Credit under wasteful circumstances, such as the production of qualified clean hydrogen that the taxpayer knows or has reason to know will be vented, flared, or used to produce hydrogen;
• Providing procedures that apply in determining lifecycle greenhouse gas emissions rates resulting from hydrogen production;
• Allowing energy attribute certificates (EACs), such as renewable energy certificates, to be considered under certain conditions in documenting purchased electricity inputs and assessing emissions impacts of electricity used in the production of hydrogen;
• Providing procedures for verification of qualified clean hydrogen production and sale or use required to claim the Clean Hydrogen Production Credit; and
• Elaborating on the impact of a modification or retrofitting of an existing facility.

Background

The Clean Hydrogen Production Credit is a technology-neutral credit for the production of clean hydrogen by a taxpayer at a qualified facility. The credit may be claimed during the ten-year period beginning on the date the facility is placed in service. To qualify for the credit, the production process must result in lifecycle greenhouse gas emissions not greater than 4 kilograms of CO2 equivalent per kilogram of hydrogen produced. For hydrogen production processes below that ceiling, the credit varies from $0.12 to $0.60 per kilogram of hydrogen produced, depending on the lifecycle greenhouse gas emissions resulting from the hydrogen production process through the point of production (well-to-gate). As with other IRA credits, the Clean Hydrogen Production Credit increases, up to $3 per kilogram of hydrogen produced, for taxpayers that meet prevailing wage and apprenticeship requirements. Section 45V of the Code requires that lifecycle greenhouse gas emissions must generally be determined for this purpose under the most recent Greenhouse gasses, Regulated Emissions, and Energy use in Transportation (GREET) model, developed by Argonne National Laboratory, or a successor model as determined by the Secretary of the Treasury.

Highlights of the Proposed Regulations

I. Proposed Definitions:

Proposed Regulation section 1.45V-1 would define several operative terms used within
section 45V of the Code. Notably, the term “facility” would be defined to mean a “single production line” used to produce qualified clean hydrogen. The phrase “single production line” would in turn be defined to include all components of property that function interdependently to produce qualified clean hydrogen. The Proposed Regulations would clarify that a facility would not include equipment used to condition or transport hydrogen beyond the point of production, or electricity production equipment used to power the hydrogen production process, including any carbon capture equipment associated with the electricity production process. This definition of the term facility should be helpful in applying the coordination rule under section 45V(d)(2), discussed below.

Treasury and the IRS would also clarify the meaning of two phrases that are critical to determining the applicable lifecycle greenhouse gas emissions rate. First, the Proposed Regulations stipulate that the phrase “most recent GREET model,” as used by section 45V of the Code, would be defined to generally mean the latest version of 45VH2-GREET developed by Argonne National Laboratory that is publicly available on the first day of the taxpayer’s taxable year in which the qualified clean hydrogen was produced. Additionally, the Proposed Regulations would define “emissions through the point of production (well-to-gate)” to mean the aggregate lifecycle greenhouse gas emissions related to hydrogen produced at a hydrogen production facility during the taxable year through the point of production. This phrase would include both (i) emissions associated with feedstock growth, gathering, extraction, processing, and delivery to a facility and (ii) emissions associated with the production process, inclusive of the electricity used by the facility and the capture and sequestration of carbon dioxide.

II. Coordination with Section 45Q:

Section 45V(d)(2) of the Code prohibits a taxpayer from claiming the Clean Hydrogen
Production Credit for clean hydrogen produced at a facility that includes carbon capture equipment for which the taxpayer also claims the carbon capture and sequestration credit under section 45Q of the Code (Coordination Rule). Section 1.45V-1(a)(7)(i) of the Proposed Regulations would define the term “facility” for purposes of section 45V to exclude equipment used to condition or transport hydrogen beyond the point of production, or electricity production equipment used to power the hydrogen production process. Accordingly, carbon capture equipment associated with conditioning, transportation, and electricity production can qualify for the section 45Q credit without impacting the section 45V credit for a clean hydrogen production facility.

Also in connection with the Coordination Rule, Proposed Regulation section 1.45V-2(a) would clarify that, if the 80/20 rule set forth in Treasury Regulation section 1.45Q-2(g)(5) is satisfied with respect to carbon capture equipment, and no new carbon capture and sequestration credit has been allowed for such equipment, then the unit of carbon capture equipment for which the 80/20 rule is satisfied will not trigger the Coordination Rule.

III. Anti-Abuse Rule:

In the preamble to the Proposed Regulations, Treasury and the IRS articulate a concern that if the cost of producing qualified clean hydrogen is less than the value of the Clean Hydrogen Production Credit, taxpayers may have an incentive to produce such hydrogen solely to exploit the credit, rather than for a productive use. To mitigate this concern, Proposed Regulation section 1.45V-2(b)(1) would make the Clean Hydrogen Production Credit unavailable if, under all of the facts and circumstances, the primary purpose of the production and sale or use of such hydrogen is to obtain the benefit of the credit in a manner that is wasteful.

Proposed Regulation section 1.45V-2(b)(2) would provide an example illustrating such wasteful production. In this example, the taxpayer produces qualified clean hydrogen at a cost that is less than the value of the Clean Hydrogen Production Credit, and intends to sell the hydrogen for a below-market price to a customer who the taxpayer knows or reasonably expects will vent or flare such hydrogen. Under these circumstances, Treasury and the IRS conclude that the primary purpose of the taxpayer’s production and sale of qualified clean hydrogen is to obtain the Clean Hydrogen Production Credit in a manner that is wasteful, and the credit should be disallowed.

IV. Emissions Rate Procedures & Provisional Emissions Rate:

The Proposed Regulations reiterate that the lifecycle greenhouse gas emissions rate for
purposes of the Clean Hydrogen Production Credit is determined using the “most recent GREET model,” as discussed above. Under Proposed Regulation section 1.45V-4(b), this determination must be made separately for each production facility, is to be made following the close of each taxable year, and must include all hydrogen production during the taxable year.

If the hydrogen produced by the taxpayer is produced at a facility that uses a production pathway not included in the most recent GREET model, the taxpayer may petition the Secretary of the Treasury for a provisional emissions rate (PER). Proposed Regulation section 1.45V-4(c) sets forth further guidance on this topic, including how to apply for a PER and the effect of obtaining a PER.

V. Use of EACs to Document Impact of Electricity Usage:

The Proposed Regulations would permit taxpayers to rely upon EACs with certain
specified attributes to determine and substantiate the impact of electricity used in the hydrogen production process on the taxpayer’s lifecycle greenhouse gas emissions rate.

Under section 45V of the Code, the lifecycle greenhouse gas emissions associated with electricity the taxpayer uses in the hydrogen production process impacts the taxpayer’s Clean Hydrogen Production Credit.1 If a clean hydrogen producer is connected to an electricity grid or to a specific source of generation that previously supplied other consumers, assessment of the taxpayer’s grid-related lifecycle greenhouse gas emissions can be difficult. EACs represent an exclusive claim to the attributes of a unit of energy, and verify that a certain unit of electricity was generated by a specific entity and has specific attributes. Purchasers of EACs can retire EACs to claim in a regulatory context that their electricity use was generated with the attributes associated with the EACs.

In determining its lifecycle greenhouse gas emissions rate, the taxpayer would be permitted under the Proposed Regulations to use certain EACs from low-greenhouse-gas electricity generators to account for the impact of the taxpayer’s electricity use under the most recent GREET model or in a PER. Notably, this would permit the taxpayer to identify the applicable facility’s use of electricity as being from a specified electric generating facility rather than from the regional electricity grid (which, in many cases, might increase the facility’s emissions beyond the 4-Kilogram-CO2e –per-Kilogram-of-hydrogen ceiling permitted under section 45V of the Code).

Taxpayers could only use EACs with certain specified attributes for this purpose under the Proposed Regulations. Such EACs would be required meet incrementality, temporal matching, and deliverability requirements set forth under Proposed Regulation section 1.45V-4(d)(3) to qualify. Renewable energy certificates meeting these requirements would qualify under the Proposed Regulations.

VI. Verification Regime:

Proposed Regulation 1.45V-5 would implement a verification regime to claim the Clean Hydrogen Production Credit. Among other requirements, the taxpayer would need to attach a verification report to its From 7210 (or successor form(s)) and include such report with its return for each qualified clean hydrogen production facility for each year in which it claims the Clean Hydrogen Production Credit. The verification report must be prepared by a “qualified verifier” under penalties of perjury. A qualified verifier must, among other things, generally be unrelated to the taxpayer and meet the active accreditation requirements under the Proposed Regulations.

VII. Modifications to Existing Facilities:

Generally, a qualified clean hydrogen production facility may generate Clean Hydrogen Production Credits during the 10-year period beginning on the date that the facility was originally placed in service. Section 45V(d)(4) of the Code enables taxpayers to modify facilities that are already placed in service to produce qualified clean hydrogen, and further permits such modified facilities to qualify for a new placed in service date under certain circumstances. Proposed Regulation section 1.45V-6 would, among other things, clarify that (i) the purpose of such modifications must be to enable the facility to produce qualified clean hydrogen, and (ii) a modification is made for such purpose if the facility could not, but for the modification, produce hydrogen with a lifecycle greenhouse gas emissions rate less than or equal to 4 kilograms of CO2e per kilogram of hydrogen.

Further, Proposed Regulation section 1.45V-6(b) would provide that an existing facility may establish a new placed in service date for purposes of section 45V of the Code if it is retrofitted to produce qualified clean hydrogen. To qualify, the fair market value of used property comprising the retrofitted facility must not be more than 20 percent of such facility’s total value (45V 80/20 Rule). The 45V 80/20 rule would apply to any existing facility, regardless of whether the facility previously produced qualified clean hydrogen, and regardless of when the facility was originally placed in service.

Next Steps

The Proposed Regulations would apply to taxable years beginning after December 26, 2023. Taxpayers may rely on the Proposed Regulations for taxable years beginning after December 31, 2022 and before the date final regulations are published in the Federal Register. Comments to the Proposed Regulations must be received by February 26, 2024.

1. As noted in the preamble to the Proposed Regulations, the U.S. Department of Energy has published a technical paper, Assessing Lifecycle Greenhouse Gas Emissions Associated with Electricity Use for  the Section 45V Clean Hydrogen Production Tax Credit, which was reviewed by Treasury and the IRS and informed development of the Proposed Regulations. This technical paper is available at Assessing Lifecycle Greenhouse Gas Emissions Associated with Electricity Use for the Section 45V Clean Hydrogen Production Tax Credit 508_EDITED (energy.gov).

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Originally Appeared Here

The Internal Revenue Service is not expected to meet the Treasury Department’s goal of scanning millions of tax returns by the end of the year, according to a new report, after having scanned less than 35,000 Form 1040 returns by the end of June.

The report, released Tuesday by the Treasury Inspector General for Tax Administration, pointed out that on Sept. 15, 2022, Treasury Secretary Janet Yellen set expectations for the 2023 filing season and the use of funds from the Inflation Reduction Act. Among those expectations was the IRS would automate the scanning of millions of individual paper tax returns.

The IRS has been pilot-testing various forms of scanning technology, including business tax returns, which seem to be further ahead than the 1040. The pilots are known as the Lockbox, Scanning as a Service (SCaaS), and Submission Processing Modernization (SPM).  The Lockbox initiative has scanned the most returns so far, according to the report: 503,988 of the Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Returns. That’s followed by 201,773 of the Form 941, Employer’s Quarterly Federal Tax Returns, in the Lockbox/SCaaS pilot, 34,826 of the Form 1040 individual income tax returns in SPM pilot, and 527 of the Form 709, Gift (and Generation-Skipping Transfer) Tax Returns, in the SCaaS pilot. But that still falls short of millions of returns, the report pointed out.

IRS headquarters in Washington, D.C.

Andrew Harrer/Bloomberg

“Even when considering the business tax returns that were scanned as part of the various pilots, the IRS still will not reach the Secretary’s expectation to scan millions of individual tax returns before the end of Calendar Year 2023,” said the report. “As of June 30, 2023, the IRS had scanned fewer than 35,000 paper-filed Forms 1040, U.S. Individual Income Tax Return.”

IRS officials told TIGTA they will start testing another scanning solution during the 2024 filing season, known as the Modernized Paper Processing System, which will combine artificial intelligence technology such as machine learning, with the IRS’s existing Service Center Recognition Image Processing System technology to scan tax returns directly into IRS tax processing systems.  

Centralized oversight of the IRS’s scanning efforts is crucial for selecting a scanning solution that will accomplish the IRS’s transformation goals, the report noted. Back in July 2020, when it set a digitalization strategy, the IRS recommended establishing a centralized office responsible for enterprise-wide governance, but as of this past June, the IRS has still not transitioned oversight of its digitalization efforts to this office. In July, IRS officials said a group within the Transformation and Strategy Office would be responsible for the digitalization efforts under the one of the agency’s strategic operating plan initiatives, which includes the digital processing of paper-filed tax returns. But the current tax return scanning pilots weren’t included as part of this initiative.   

TIGTA recommended in the report that the IRS’s chief transformation and strategy officer should evaluate the potential benefits, challenges and cost of each of the processes the IRS piloted when deciding which digital processing solution to implement for the 2025 filing season and beyond. Once a digital processing solution has been identified, the IRS should also develop a detailed plan with measurable milestones for implementing the solution before the start of the 2025 filing season, TIGTA suggested. The IRS agreed with both of TIGTA’s recommendations and plans to implement them prior to the start of the 2025 filing season. 

“We are committed to developing and adopting of technology in a results-driven environment,” wrote Kenneth Corbin, commissioner of the IRS’s Wage and Investment Division, in response to the report. “We continue to develop several scanning initiatives for modernization of individual tax return processing and digitalization of document storage. The IRS has cautiously limited the scale of scanning and digitalization projects to ensure the best long-term outcome for the agency and taxpayers.”

The rate of successful transmission to the electronic filing system among the various pilots has been close to 100%, he noted. Corbin is set to become the new chief of taxpayer service at the IRS under a new restructuring announced earlier this month by IRS Commissioner Danny Werfel.

Werfel spoke last month during an AICPA & CIMA tax conference about the work that the IRS was doing to improve its scanning technology with the extra funding from the Inflation Reduction Act to reduce the mountains of paper that used to pile up in IRS cafeteria tables. 

“Most sophisticated organizations today are operating in a world in which they’ve moved past paper and they’re in a completely digital environment, and that’s where we need to be,” he said. “So what are we using these Inflation Reduction Act funds on? We’re spending it on things like new modern scanners. I went out and visited our submission processing centers. We have scanners, but we don’t have enough with them. They’re really slow. They’re old, and they create images that are not NIST [National Institute of Standards and Technology] compliant, so we still have to retain the paper. But we haven’t had the funds previously to invest in them. Now we’re procuring much quicker modern scanning systems that allow us to convert paper to machine readable format at entry in our mailroom, so that we can flow through a digital environment. Just like we’re ending the era of hours of elevator music [on the phone line], we want to end the era of paper filling our cafeterias and our hallways. That lead to errors, misplaced returns and can lead to backlogs and slow processing. With a fully digital environment, we’ll have much more security, and much more certainty, less variability and be able to process things a lot faster.”

Originally Appeared Here

The IRS will distribute the Christmas Bonus From IRS 2023 to eligible Americans. Payments for Holiday Stimulus Checks 2023 will be made to US citizens in December. When the Stimulus Check 2023 Update is released, make sure to periodically check this post. In 2023, a large number of Americans will get the Holiday Stimulus.

One should verify their eligibility for the New One-Time $2,000 Stimulus Check for Seniors before getting it. Started on December 4, 2023, those who are eligible for social assistance payments will receive a 100% Christmas Bonus. The Christmas Bonus will be paid to you between December 5, 2023, and December 22, 2023.

Christmas Bonus From IRS

New One-Time $2,000 Stimulus Check 2023 give seniors much-needed support who could be struggling financially as a result of the ongoing epidemic. The government of USA has taken steps to make sure that our older people receive the assistance they require because it understands how important it is to support them during these trying times.

The government is assisting seniors receiving VA, SSI, and SSDI benefits by giving them Christmas Bonus 2023 stimulus checks to help with some of the financial difficulties they may be bearing. In addition to offering prompt assistance, this support recognizes the significant contributions that older citizens have made to our society. As we move through these difficult times, it is imperative that we do not lose sight of the importance of our older folks’ financial stability and well-being.

$2200 Stimulus Checks on Christmas

Christmas 2023 Payments

Holiday Stimulus Checks

$1751 Food Stamps Checks

$2000 Christmas Bonus for Seniors 2024 Details

Article Topic	USD 2000 Christmas Bonus From
Country	America
Name of Department	Internal Revenue Service
Payment Schedule	December 5, 2023, to December 22, 2023
Beneficiaries Age	65 and above
Category	Government Aid
Amount	USD 2000
Official Website	irs.gov

Eligibility for Christmas Bonus December 2023

Monthly payouts under the Social Security Expansion Act would increase by $2,000 for those who are now receiving benefits or who will turn 62 in 2023. The Old Age Safety Net is a project designed to help older Americans who are struggling financially by offering much-needed financial support.

If a family’s adjusted gross income (AGI) is USD 150,000 for married couples filing jointly, USD 75,000 for single people, or USD 112,500 for heads of household, they are eligible for help. There is no need for action on the part of veterans, those 65 years of age or older, or those receiving social assistance as they are automatically qualified for the stimulus.

New One-Time $2,000 Stimulus Check for Seniors

In the US, stimulus checks 2023 have evolved into an essential lifeline for seniors receiving VA, SSDI, and SSI payments. The $2000 stimulus check payment 2023 is intended to give seniors in the US receiving SSI, SSDI, and VA benefits instant access to financial assistance. It also seeks to boost the economy as a whole by giving those over 65 direct access to much-needed capital.

The GDP has increased and the unemployment rate has decreased mostly as a result of stimulus checks. In light of the ongoing economic hardships, seniors around the country are currently eagerly anticipating further information regarding their eligibility for a $2000 stimulus grant. Due of rising living expenses and the financial challenges that many seniors confront, this has become a hot subject. 

Stimulus Check 2023 Update for Senior in USA

• For some, 2023 was a difficult year to be an elderly American citizen. Considering the COVID-19 pandemic’s financial pressure and growing inflation rates, further assistance for seniors might be quite beneficial. Housing, food, medical costs, and other necessities can be partially met with a USD 2000 contribution.
• A formal source, such as the IRS or Congressional leaders who are in charge of crafting and adopting the relevant legislation, would be the best place to get information on the real allocation of stimulus funding for seniors, even though the proposal has attracted political and public attention.
• It’s critical for those receiving VA, SSDI, and SSI payments to keep informed by visiting official government websites and reliable news sources. They should also be on the lookout for possible stimulus check frauds and other scams.

$3487 Snap Checks

$3,627 SSDI Checks

$248/Day Checks Approved in December

$1200 Monthly Stimulus Checks

Stimulus Check for Senior Americans in December 2023

• The corona epidemic in USA gave the the stimulus check idea. The government wanted to help its citizens specially seniors . The amount of money is determined by the child, family, joint filer, or single filer. Payments in cash in advance depend upon the beneficiaries’ compliance.
• The strategy for seniors on VA, SSDI, and SSI has been offered by Internal Revenue Service personnel. The applicants’ relevance will be taken into account by the officials based on their eligibility.
• If they are above 65, American citizens have begun receiving payments under the stimulus check program. Senior Citizens will get a $2000 monthly stimulus check, with direct deposits being accepted as payment method. You can find all the information about the Stimulus Check for Senior Citizens Payment Amount 2023 via this page. The Stimulus Check for Seniors residents Payment Amount will be disbursed to residents as a source of financial stability for the elderly via direct deposits.

Originally Appeared Here