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Three ways investors can minimize their tax payments
  + stars: | 2024-04-15 | by ( Nicole Goodkind | ) edition.cnn.com   time to read: +8 min
It’s particularly difficult for investors, he said, who have to report their earnings and losses from the market to the IRS. As an alternative, Harris, who currently heads financial services firm Evergreen Money and recently authored a book about reducing tax burdens, shared his three biggest tax tips for investors with Before the Bell. So for tax purposes, selling securities that have lost value can offset the taxes due on gains from successful investments. If your losses exceed your gains, you can carry the net loss (total losses minus total gains) into the next tax year, potentially reducing future tax burdens. If you have three children and two parents, that’s $108,000 in tax free money a year, Harris said.
Persons: They’ll, , Bill Harris, It’s, Harris, , Roth, hasn’t, “ you’re, Laura, Anna Cooban, Brent, Germany’s DAX, Read, Tempore Mike McGuire Organizations: New, New York CNN, National Taxpayers Union Foundation, Paypal, CNN, Evergreen Money, Bell, Investments, Brent, Traders, CAC, FTSE, Nikkei, International Energy Agency, ANZ, Google, California Journalism, Meta, California, Pro, Tempore, Locations: New York, United States, Israel, Iran, Tehran, Syria, Shanghai, Paris, California, America
Al Drago | Bloomberg | Getty ImagesAfter vowing to "substantially" reduce audits on a low-income tax credit in September, the IRS confirmed it's taking steps to address the inequity. "We also are testing changes in the audit selection algorithm," that could "remediate the disparate impact that has been occurring," he said. The report pointed to a faulty software algorithm used by the agency that selects who gets audited and noted the earned income tax credit contributed to this disparity. The credit has a high 'improper payments rate'In 2022, about 23 million filers received $57 billion from the earned income tax credit, and the tax break averaged $2,541. For tax year 2023, the credit is worth up to $7,430 for a household with three or more children, according to the IRS.
Persons: Danny Werfel, Al Drago, We've, Werfel, Erin Collins Organizations: Washington , D.C, Bloomberg, Getty, IRS, Stanford University, University of Michigan, U.S . Department of, Treasury, University of Chicago, Senate Finance Locations: Washington ,
But everyday filers could still face an audit — and certain issues are more prone to IRS scrutiny, experts say. Audit rates of individual income tax returns decreased for all income levels from tax years 2010 to 2019, largely due to lower IRS funding, according to a report from the Government Accountability Office. Here are some of the biggest IRS audit red flags. Unreasonable tax breaksAnother red flag could be excessive deductions compared to what's considered normal for your income level, according to Losi. Earned income tax creditThe earned income tax credit, a tax break for low- to moderate-income workers, has historically been scrutinized "because the refundable part attracts certain bad actors," said Steber.
Persons: Ryan Losi, Mark Steber, Jackson Hewitt, Steber, what's, Losi, Erin Collins Organizations: Getty, IRS, Office, NEC, lotto, Center, filers Locations: Syracuse, U.S
US President Donald Trump and China's President Xi Jinping attend a business leaders event inside the Great Hall of the People in Beijing on November 9, 2017. The Washington Post first reported the Trump campaign was weighing a theoretical 60% Chinese tariff plan. Her disapproval echoes the concerns of Wall Street investors who worry that another China trade war would disrupt markets again. At the time, Deutsche Bank estimated that the trade war was causing the stock market to hemorrhage trillions. Trump has attacked Biden for appeasing China while simultaneously expressing cozy sentiments toward China's authoritarian president, Xi Jinping.
Persons: Donald Trump, Xi Jinping, Trump, Nikki Haley, Trump's, Donald Trump's, Haley, Joe Biden, Biden, Xi, Fox News's Sean Hannity Organizations: China's, of, People, GOP, Washington Post, UN, National Taxpayers Union, Wall Street, China, U.S, American Action, U.S ., China Business Council, Deutsche Bank, appeasing Locations: Beijing, U.S, China, appeasing China
Here's how to pick the best free tax filing option this season
  + stars: | 2024-02-04 | by ( Kate Dore | Cfp | ) www.cnbc.com   time to read: +4 min
IRS Free FileA public-private partnership between the IRS and Free File Alliance, a nonprofit comprised of tax software companies, IRS Free File offers free guided tax prep software for eligible filers. If you're comfortable with tax software, Free File has eight partners this season, with varying income eligibility — and some offer free linked state filings. Volunteer tax prep from IRS programsIf you're looking for more guidance, you may also qualify for free tax prep from IRS programs with trained volunteers. The Volunteer Income Tax Assistance, or VITA, program offers free tax prep for taxpayers typically making up to $64,000, in addition to filers with disabilities and limited English proficiency. AARP Foundation Tax-Aide also offers free tax prep for low- to moderate-income older adults.
Persons: Tim Hugo, Hugo, Steven Hamilton Organizations: U.S . Bureau of Labor Statistics, Taxpayers, IRS, Alliance, National Taxpayer, Volunteer, Internal Revenue, The George Washington University, Social Locations: Arizona , California, Florida , Massachusetts, Nevada , New Hampshire , New York, South Dakota , Tennessee , Texas, Washington and Wyoming
Laylabird | E+ | Getty ImagesTens of millions of Americans file tax returns every year — and many are missing a "valuable credit," according to the IRS. In 2022, roughly 23 million filers received $57 billion from the earned income tax credit, or EITC, a tax break for low- to moderate-income workers. But nearly 1 in 5 eligible taxpayers don't claim the EITC, which averaged $2,541 in 2022, IRS Commissioner Danny Werfel told reporters during a press call last week. How the earned income tax credit works"The credit is reasonably complex," said Steven Hamilton, assistant professor of economics at The George Washington University. There's a 'high improper payments rate'"Millions of eligible taxpayers fail to claim the EITC, while other taxpayers claim amounts for which they are not eligible, leading to a high improper payments rate," National Taxpayer Advocate Erin Collins wrote in the 2023 Purple Book of legislative recommendations.
Persons: Danny Werfel, you've, Steven Hamilton, Hamilton, There's, Erin Collins Organizations: The George Washington University, IRS, Center, Black, Stanford University Locations: U.S
Nikki Haley drew a sharp line Monday between her views on trade and the tariffs proposed by her rival, Republican front-runner Donald Trump. Think about that for a second," Haley said on CNBC's Squawk Box. "It's going to raise the cost of anything from baby strollers to appliances, under Donald Trump," she added. Over the weekend, Trump suggested tariffs were the way to force automobile manufacturers to build cars in the United States. This, and Trump's proposed tariffs if he were elected to a second term have left many Wall Street investors deeply concerned about what the global economy would look like in a second Trump administration.
Persons: Nikki Haley, Donald Trump, Haley, Trump, Donald Trump's, Michael Every, Reid Hoffman, Ken Langone, Stanley Druckenmiller Organizations: South Carolina Gov, Republican, National Taxpayers Union, The Washington Post, Rabobank, CNBC, Trump, U.S ., China Business Council, Wall, LinkedIn, South Carolina Locations: China, The, United States, America, U.S, New Hampshire, Iowa, New York City
Ronda Churchill | Bloomberg | Getty ImagesWith the opening of tax season only days away, the IRS has unveiled a plan to simplify the millions of complicated notices sent to taxpayers every year. As part of the agency's multibillion-dollar modernization efforts, the IRS has started to review and redesign hundreds of IRS notices — such as letters about unfiled returns, taxes owed or filing errors — aiming to help resolve issues faster and boost compliance. Known as the "Simple Notice Initiative," the program will eventually cover the roughly 170 million notices sent to taxpayers every year, according to the IRS. The agency aims to "review, redesign, and deploy" the majority of IRS letters received by taxpayers by 2025. The program builds on the agency's paperless processing initiative announced in August, which now allows taxpayers to respond to IRS notices online.
Persons: Janet Yellen, Ronda Churchill, unfiled, Yellen, Danny Werfel, Werfel, filers Organizations: Treasury, International Brotherhood of Electrical Workers, Bloomberg, Getty, IRS, National Taxpayer, Congress Locations: Las Vegas, Ronda
As the start of tax season approaches, experts are warning filers about tax-related identity theft, an issue that often halts returns and delays refunds. Tax identity theft happens when criminals use your personal information to file a return in your name and claim your refund — and "it continues to be a huge problem," said Eva Velasquez, president and CEO of the Identity Theft Resource Center. The IRS' Identity Theft Victim Assistance program had 294,138 individual case receipts during fiscal 2023, up from 92,631 in 2019, according to the National Taxpayer Advocate's annual report to Congress released last week. More from Personal Finance:Government shutdown could disrupt upcoming tax season, IRS commissioner says'Fraud is at a crisis level,' says expert: 5 financial scams to watch out forHow to figure out your timeline to student loan forgivenessTax-related identity theft has diminished since the early days of electronic filing. There are signs of tax identity theft listed on the IRS website, including a letter from the agency about a "suspicious tax return," the inability to e-file, tax transcripts by mail you didn't request and more.
Persons: Eva Velasquez, Velasquez, Erin Collins Organizations: Theft Resource Center, IRS, National Taxpayer, Finance, Government
It's a tradition known as a "death gratuity" that's been in place for at least 140 years. They were also handing over $174,000 to Katherine Feinstein, the daughter of the late Sen. Dianne Feinstein. But Katherine Feinstein, a former judge in San Francisco and the only child of the recently-deceased California Democrat, almost certainly does not need that money. AdvertisementIn 2021, NTUF calculated that gratuity payments have cost taxpayers more than $5.1 million since 2000. AdvertisementBusiness Insider reached out to Katherine Feinstein via her lawyers but did not receive a response.
Persons: Dianne Feinstein's, It's, that's, , Katherine Feinstein, Sen, Dianne Feinstein, Joe Biden, Katherine Anne Feinstein, Katherine —, National Taxpayers Union Foundation —, Alfred Lay, Republican Sen, John McCain of, Democratic Sen, Ted Kennedy of Massachusetts, Richard Shelby, Feinstein, Frank Lautenberg, Bill Posey, Posey Organizations: Service, Treasury, State of, California Democrat, National Taxpayers Union Foundation, Rep, Missouri Democrat, Republican, Democratic, ABC News Locations: State, State of California, San Francisco, California, , Missouri, John McCain of Arizona, New Jersey, Florida
DjelicS | GettyIf you filed a tax extension for more time on your 2022 return, the deadline is fast approaching. The federal tax-extension deadline on Oct. 16 is the last chance to avoid a late filing penalty, according to the IRS. Here are three things to know if you still haven't filed your 2022 return, according to financial experts. The failure-to-file penalty is 5% of unpaid taxes for each month or part of month until filing, capped at 25%, she said. You may be eligible for IRS Free FileRoughly 70% of taxpayers qualify for IRS Free File but only 2% used it during the 2022 filing season, according to the National Taxpayer Advocate.
Persons: Chris Cybulski, Kassi, Judy Brown Organizations: Financial, Artica Financial Services, IRS, National Taxpayer, SC, H, Washington and, CNBC, Scott Bishop, Presidio Wealth Partners Locations: Austin , Texas, manila, Anchorage , Alaska, Washington, Washington and Baltimore, Houston
There's a staffing shortage in the accounting industry, and it's not too early to lock in a tax preparer for next season. "Buyer beware," said April Walker, lead manager for tax practice and ethics with the American Institute of CPAs. "Truly, anybody can call themselves a tax preparer." In her 2022 annual report to Congress, National Taxpayer Advocate Erin Collins highlighted the "absence of minimum competency standards for return preparers" as a top problem. When a preparer makes a mistake, the filer is ultimately responsible for their return and can face IRS enforcement action, she wrote.
Persons: it's, Walker, Roth, there's, Erin Collins Organizations: American Institute of CPAs, Finance, IRS, National
Chip Somodevilla | Getty ImagesIRS scrutiny of the employee retention creditThe plan is part of the agency's elevated focus on employee retention credit claims, according to April Walker, lead manager for tax practice and ethics with the American Institute of CPAs. A pandemic-era tax break, the employee retention credit, or ERC, was designed to support small businesses that kept employees on payroll during shutdowns or revenue declines in 2020 and 2021. He included the earned income tax credit, a tax break claimed by low- to moderate-income filers, which has been prone to mistakes due to complex eligibility requirements. While IRS audit rates have dropped overall, the rates have declined more slowly for filers claiming the earned income tax credit than higher earners. "The IRS audits a higher percentage of taxpayers with the earned income tax credit than any other taxpayers, except those with at least $5 million of total positive income," National Taxpayer Advocate Erin Collins wrote in her 2022 report.
Persons: Daniel Werfel, Chip Somodevilla, April Walker, Werfel, Chuck Marr, Erin Collins Organizations: Senate, Getty, American Institute of CPAs, ERC, IRS, Budget, National Taxpayer, filers Locations: Worth
The recent tax season was relatively smooth compared with last year's. But national taxpayer advocate Erin Collins still sees room for improvement as the IRS rolls out funding plan changes. "Overall, the difference between the 2022 filing season and the 2023 filing season was like night and day," Collins wrote in her midyear report to Congress. This year, taxpayer experience "vastly improved" compared with 2022, she said. The reduction of amended returns — which require manual processing — declined by only 6% from April 2022 to April 2023.
Persons: Erin Collins, Collins Organizations: Finance
After a flood of business returns with a pandemic-era tax credit, the IRS is weighing guidance for those who wrongly claimed the tax break. The employee retention credit, or ERC, was created to support small businesses during the Covid-19 pandemic. There's still time to amend returns and claim the credit — worth up to $5,000 per employee for 2020 or $28,000 per employee in 2021. Experts say the opportunity has sparked a wave of specialist firms falsely promising business owners they qualify for the complicated tax break. As of March 3, just over 866,000 companies claimed and received employee retention credits totaling over $152.6 billion, according to the latest IRS Data Book.
Persons: Erin Collins Organizations: ERC, American Institute of Certified Public Accountants, Finance, Firms, IRS
But there's still work to do, according to National Taxpayer Advocate Erin Collins. However, despite customer service boosts, the agency is still working through a sizable backlog — including amended returns, filings in suspense and other correspondence, she said. Collins said the IRS is currently juggling 3.7 million amended returns, 6.8 million "in suspense" with missing information and 5.3 million pieces of correspondence. This season, the agency has prioritized phone service and answered more than 85% of calls from key phone lines in less than five minutes. "The problem is, we are now back to a backlog of paper correspondence and amended returns, similar to where we were a year ago," she said.
Persons: there's, Erin Collins, Collins Organizations: VEGAS, IRS, American Institute of Certified Public Accountants, Finance, Advocate Service Locations: Las Vegas
IRS Commissioner Danny Werfel on Wednesday fielded questions from the Senate Finance Committee about the agency's spending priorities, including research on the IRS direct e-file program. However, he admitted there are issues with the current IRS Free File program. A public-private partnership between the IRS and the Free File Alliance, IRS Free File offers free online guided tax prep software to taxpayers with an adjusted gross income of $73,000 or less for 2022. Warren said private companies "sabotaged the program" by making it harder for users to find free filing options to "keep raking in money." IRS free filing raises 'conflicts of interest'Throughout Inflation Reduction Act negotiations, many Republicans have been skeptical about the IRS creating its own free filing program, as well as the $15 million allocated for the study.
WASHINGTON, April 18 (Reuters) - The U.S. Internal Revenue Service declared on Tuesday that it is completing its first "normal" tax filing season since the COVID-19 pandemic struck in 2020, with a backlog of millions of unprocessed returns from previous years fully cleared. New IRS Commissioner Danny Werfel told reporters that the initial spending of $80 billion in new IRS funding helped purchase new scanning technology that has allowed paper returns to be digitized and quickly processed. The delays collided with staffing shortages to pile up a massive backlog of some 23.5 million individual and business tax returns by February 2022 that needed some form of manual processing, according to the National Taxpayer Advocate's office. A U.S. Treasury spokesperson said the IRS ended 2022 with a backlog of 1.4 million unprocessed individual and business returns and those were cleared by mid-March. Republicans in the U.S. House of Representatives have targeted the $80 billion in new IRS funding as part of their spending cut demands in exchange for raising the $31.4 trillion U.S. debt ceiling.
Most taxpayers, including this group, qualify for IRS Free File, which offers free online guided tax prep for federal returns and some state filings, to possibly claim "overlooked tax credits or refunds," according to the IRS. You can use IRS Free File if your 2022 adjusted gross income was $73,000 or less, and taxpayers at any income level can use it to file an extension. Roughly 70% of taxpayers qualify for Free File, but only 2% used it during the 2022 filing season, according to the National Taxpayer Advocate. However, they may still qualify for "refundable" tax credits, which can be claimed without a balance, such as the earned income tax credit for low- to moderate-income workers. How to use IRS Free FileTo get started with Free File, you'll need personal information like your Social Security number, dependent and spouse details, last year's adjusted gross income for verification and the necessary tax forms.
5 ways to file your taxes for free this season
  + stars: | 2023-03-07 | by ( Kate Dore | Cfp | ) www.cnbc.com   time to read: +3 min
IRS Free FileIRS Free File offers free online guided tax preparation for your federal tax returns and some state filings if your adjusted gross income was $73,000 or less in 2022. It's a good option for those who have simple returns, don't need ongoing tax planning advice and could benefit financially from the free service. Although 70% of taxpayers qualify for IRS Free File, only 2% used it during the 2022 filing season, according to the National Taxpayer Advocate. Tax prep for older AmericansOlder Americans may also qualify for free in-person and virtual tax help through the AARP Foundation Tax-Aide program. The program works with VITA and Tax Counseling for the Elderly, or TCE, which also provides free tax preparation for those who qualify.
Bill Oxford | E+ | Getty ImagesThe tax season is underway, and the IRS has issued nearly 8 million refunds worth about $15.7 billion as of Feb. 3, the agency reported. The average refund amount was $1,963, down from last year's payment of $2,201 at the same point in the filing season. Of course, the average may change as the IRS processes millions more returns before the April 18 deadline. As of Feb. 3, the IRS processed more than 16.7 million returns, over 29% more than the previous year, according to the report released last Friday. The nearly 8 million refunds compare to around 4.3 million the previous year.
Roughly 70% of taxpayers qualify to use IRS Free File, but only 2% used it during the 2022 filing season, according to the National Taxpayer Advocate's annual report to Congress. A public-private partnership between the IRS and the Free File Alliance, the service offers free online guided tax preparation from partner companies for federal returns (and some state filings). You may qualify if your 2022 adjusted gross income was $73,000 or less. How Free File worksTo get started with Free File, you'll need last year's adjusted gross income for verification, your Social Security number and the necessary tax forms. Free File may not work for all taxpayersWhile Free File isn't widely used, some experts say it won't work for more complicated returns.
Tax season kicked off for individual filers Monday with a bigger IRS customer service team and enhanced technology as the agency begins to deploy its nearly $80 billion in funding. Over the past several months, the IRS has hired 5,000 new customer service staff, aiming to "significantly increase" the number of answered calls, Deputy Secretary of the Treasury Wally Adeyemo told reporters Friday. IRS service was flagged as one of the agency's "most serious problems" in the National Taxpayer Advocate's 2022 annual report, with only 13% of callers reaching live assistance during the 2022 filing season. The agency also plans to improve customer service through technology, including the ability for filers to respond to certain IRS notices online and for the IRS to scan paper returns. "These improvements showcase how we are modernizing both technology and customer service to bring the IRS into the 21st century and how the IRS plans to deploy [Inflation Reduction Act] resources in the years to come," Adeyemo said.
After another challenging year for the IRS in 2022, the agency may be primed for a better 2023 tax season — but improvements may take time. "The bad news is that taxpayers and tax professionals experienced more misery in 2022," wrote National Taxpayer Advocate Erin Collins. Based on this progress, the report finds the IRS is "poised to start the 2023 filing season in a stronger position." During the past two seasons, the IRS couldn't tackle current-year paper-filed returns until after the filing season ended. But the "significant reduction" of inventory in 2022 will allow the agency to process paper returns during the filing season, the report said.
Subversive Capital filed a Form N-1A on Sept. 15 to establish two ETFs that will follow exactly how Democrat and Republican members of Congress are trading. Subversive Capital is working with Unusual Whales — a retail trading tool for individual stocks, options and crypto — to provide data for the ETFs. Recently, the subject of congressional members trading stocks has raised questions regarding the potential for insider trading and conflicts of interest, leading to the introduction of legislation that would restrict those in Congress from being able to buy and sell individual stocks. Here's what you need to know about the political implications of Congressional stock trading and the new ETFs that are being created to track it. It's also unclear what will happen to the two new ETFs if the congressional stock trading ban does eventually pass.
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