Believe it or not, the IRS is still opening mail and processing tax returns that stacked up during the COVID-19 pandemic. Another IRS task that backed up over the last year is sending notices to taxpayers who have outstanding tax balances. If an IRS notice arrives in your mailbox, don’t panic. Open it right away, read it carefully, and verify the contents with your tax records.
Even if the notice is due to an IRS mistake, you need to respond to get your tax records corrected. But what if the notice is accurate and you do owe taxes to the IRS? How can you pay?
The IRS offers several payment options, depending on your situation:
- Pay Now – Paying the full balance online is free if you can have the balance due debited from the bank account of your choice. Paying by credit card is an option but the fees are high, so make sure that you read the fine print first before making your decision. https://www.irs.gov/payments/online-payment-agreement-application
- Short Term Payment Plan – If you can pay the amount due in 120 days or less and the total amount due is less than $100,000, this could be the best option for you. No set-up fee is charged, and you can pay via direct debit from the bank account of your choice. https://www.irs.gov/payments/online-payment-agreement-application
- Installment Agreement – If you need more than 120 days to pay, this option requires a set-up fee of between $31 and $225. Installment Agreements may require some financial information from you, depending on the amount due. https://www.irs.gov/payments/payment-plans-installment-agreements#costs
- Offer in Compromise – The IRS wants to collect all taxes due but does not want to create a financial burden on taxpayers. An Offer in Compromise allows you to settle your tax debt for less than the full amount owed if paying your full tax liability would create a financial hardship. See if you qualify at https://www.irs.gov/payments/offer-in-compromise.
Other considerations to keep in mind are:
- Payment plan applications are generally easier to get approved for lower tax liabilities due than for large balances.
- The application process differs based on the tax liability outstanding. For example, applications for $10,000 or less are automatically approved as a guaranteed Installment Agreement. Amounts over $50,000 require a more thorough review to determine if assets can be liquidated to pay the taxes due.
The IRS has been catching up with its pandemic backlog, including sending out notices to taxpayers who have outstanding tax balances. If an IRS notice arrives in your mailbox, check it against your records. Really owe what it says? Remember that the IRS offers several payment options, depending on your situation.
If you’ve ever called the IRS with a tax question, you know how challenging it can be. A recent report from the Taxpayer Advocate, an independent entity within the IRS, indicates that those challenges are not going to get better any time soon. Tax return processing delays and taxpayer call answer rates have gone from pretty darned bad in the pre-pandemic years to absolutely abominable now.
For example, at the end of the 2021 tax filing season, the IRS had a backlog of about 35 million tax returns. Pre-pandemic, at the close of the 2019 tax filing season, the IRS had a backlog of 7.4 million returns awaiting manual review. And trying to call the IRS is ridiculous! During the 2021 filing season, only nine percent of the 167 million calls received by the IRS were answered, but only after waiting on hold for an average of 20 minutes.
To help taxpayers get information without the wait, the IRS has updated its website and added features for taxpayers to get answers to general tax questions and to access taxpayer information. These three updates make it quicker and easier to get answers to your tax questions:
- The home page of the IRS website, www.irs.gov, has links to most of the information that taxpayers are looking for, from checking the status of your refund to learning about the latest Stimulus Payment. You can easily file your federal taxes for free, access forms and instructions, and find answers to your tax questions.
- The entire IRS website is available in multiple languages – Spanish, simplified and traditional Mandarin Chinese, Korean, Vietnamese, Russian, and Haitian Creole. Just navigate to www.irs.gov and use the drop-down at the top of the screen to adjust to your desired language.
- The IRS Online Account is an online portal that allows individual taxpayers to access their tax account information, including tax balances and payment history; set up payment plans for outstanding balances; and get copies of their tax transcripts. Access the portal and initiate your account at IRS.gov/View Your Account Information.
The IRS is working hard to make it easier for taxpayers to get answers to general tax questions, as well as for specific information about their tax balances and payments. Getting information online is common these days, so it makes sense for the IRS to take advantage of the opportunity to shift some of what would be telephone inquiries to the web.
So, the next time you have a tax question, you don’t have to wait on hold. Just go to www.irs.gov and get your questions answered more quickly than your call would be answered by an IRS representative.
In late June, the IRS announced its Dirty Dozen Top Tax Scams for 2021. Unfortunately, the top scams don’t change much from year to year. That’s why the IRS works hard annually to communicate the different illegal schemes perpetrated by scammers against millions of people.
This year, the IRS began its “Dirty Dozen” list for 2021 with a warning to tax professionals, taxpayers, and financial institutions to be on the lookout for scams that fall into four categories:
- Pandemic-related scams
- EIP or Refund Theft: Refund fraud and theft remain an ongoing threat. Criminals this year also turned their attention to stealing Economic Impact Payments (EIP) provided by the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
- Unemployment Fraud: Taxpayers who lost their jobs because of the pandemic were eligible to receive unemployment benefits. Unclaimed unemployment benefits claimed by scammers using stolen personal information is reported as taxable income to the taxpayer, not the scammer.
- Personal information cons
- Phishing: Don’t click on links claiming to be from the IRS because it could be a fake email looking to steal personal information. Be wary of any emails with embedded links − they may be nothing more than scams to steal confidential financial information.
- Ransomware: Ransomware is malware that infects a victim’s computer, network or server and looks for and locks critical or sensitive data with its own encryption. In some cases, entire computer networks can be adversely impacted until the ransom is paid.
- Ruses focusing on unsuspecting victims
- Senior Fraud: Seniors are more likely to be targeted by scammers than other people. They are also becoming more comfortable with evolving technologies, such as social media. Unfortunately, that gives scammers another means of taking advantage.
- Threatening Impersonator Phone Calls: A common scam is a bogus threatening phone call from a criminal claiming to be with the IRS. The scammer attempts to instill fear and urgency in the potential victim.
- Schemes that persuade taxpayers into unscrupulous actions
- Unscrupulous Return Preparers: Most tax professionals provide honest, high-quality service, but dishonest preparers pop up every filing season. They commit fraud, harming innocent taxpayers, or talk taxpayers into doing illegal things, like inflating deductions.
- Offer in Compromise Mills: Misleading tax debt resolution companies can exaggerate the chance to settle tax debts for “pennies on the dollar” through an Offer in Compromise (OIC) for a hefty fee. Turns out, an OIC is only available to a small number of qualified taxpayers.
Don’t get caught by one of the IRS “Dirty Dozen” top tax scams. Read about how to protect yourself here – https://www.irs.gov/newsroom/irs-wraps-up-its-2021-dirty-dozen-scams-list-with-warning-about-promoted-abusive-arrangements.
Nonprofit Board responsibilities encompass many areas, including financial oversight to fulfill the stewardship role known as “Fiduciary Responsibility.” Understanding fiduciary responsibility is critically important because nonprofits collect and spend other people’s donated money. Failing to act with due care in the best interest of the nonprofit has serious consequences, such as loss of public trust. Lost trust equals lost donations.
One fiduciary activity is monitoring the nonprofit’s financial performance to ensure that funding requirements are met to support the mission. Board members, usually those serving on the Finance Committee, must receive complete periodic financial statements to oversee financial performance in relation to the budget, financial ratios, etc.
Even if the Finance Committee is made up of experienced financial professionals, they may not have experience with reading nonprofit financials, which are presented differently than “regular” financials. Getting all committee members up to speed on reading nonprofit financials is no small task. Many nonprofits need help.
Well, I have some good news for Nonprofit Boards to fulfill their fiduciary responsibility – two options for help with Understanding Nonprofit Financials:
- The Arlington Chamber of Commerce is hosting a virtual event, Nonprofit Forum: Understanding Your Nonprofit Organization’s Financial Health on Tuesday, July 20, from 11:00 a.m. to12:30 p.m. This educational event includes a dive deep into the details of financial statements, such as statements of financial position and cash flows to help nonprofit Boards understand and place value in these financial reports. Follow this link for details and registration – https://web.arlingtonchamber.org/events/Nonprofit-Forum-Understanding-Your-Nonprofit-Organizations-Financial-Health-3623/details
- BoardSource is an organization that provides resources for nonprofit governance and management, including financial oversight. Some resources are free, and others require paid membership. Check out their resources for Nonprofit Boards at https://boardsource.org/board-support/, including a free white paper describing how Boards can identify “yellow” and “red” flags in their financial statements. https://boardsource.org/financial-statement-flags/
Nonprofit Board responsibilities include financial oversight and fulfilling fiduciary responsibility. Understanding nonprofit financials, which are presented differently than “normal” financials, is critically important to making appropriate financial decisions and ensuring donated funds are used in support of the mission. Even experienced financial professionals serving on nonprofit Boards need help. Good news for them that BoardSource and the Arlington Chamber of Commerce have resources to help them understand their nonprofit financials.