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  1. IRS provides tax inflation adjustments for tax year 2021

    IR-2020-245, October 26, 2020

    WASHINGTON — The Internal Revenue Service today announced the tax year 2021 annual inflation adjustments for more than 60 tax provisions, including the tax rate schedules and other tax changes. Revenue Procedure 2020-45 PDF provides details about these annual adjustments.

    Highlights of changes in Revenue Procedure 2020-45

    The Consolidated Appropriation Act for 2020 increased the amount of the minimum addition tax for failure to file a tax return within 60 days of the due date. Beginning with returns due after Dec. 31, 2019, the new additional tax is $435 or 100 percent of the amount of tax due, whichever is less, an increase from $330. The $435 additional tax will be adjusted for inflation.

    The tax year 2021 adjustments described below generally apply to tax returns filed in 2022.

    The tax items for tax year 2021 of greatest interest to most taxpayers include the following dollar amounts:

    • The standard deduction for married couples filing jointly for tax year 2021 rises to $25,100, up $300 from the prior year. For single taxpayers and married individuals filing separately, the standard deduction rises to $12,550 for 2021, up $150, and for heads of households, the standard deduction will be $18,800 for tax year 2021, up $150.
       
    • The personal exemption for tax year 2021 remains at 0, as it was for 2020; this elimination of the personal exemption was a provision in the Tax Cuts and Jobs Act. 
       
    • Marginal Rates: For tax year 2021, the top tax rate remains 37% for individual single taxpayers with incomes greater than $523,600 ($628,300 for married couples filing jointly). The other rates are:
       
      • 35%, for incomes over $209,425 ($418,850 for married couples filing jointly);
      • 32% for incomes over $164,925 ($329,850 for married couples filing jointly);
      • 24% for incomes over $86,375 ($172,750 for married couples filing jointly);
      • 22% for incomes over $40,525 ($81,050 for married couples filing jointly);
      • 12% for incomes over $9,950 ($19,900 for married couples filing jointly).
      • The lowest rate is 10% for incomes of single individuals with incomes of $9,950 or less ($19,900 for married couples filing jointly).
         
    • For 2021, as in 2020, 2019 and 2018, there is no limitation on itemized deductions, as that limitation was eliminated by the Tax Cuts and Jobs Act.
       
    • The Alternative Minimum Tax exemption amount for tax year 2021 is $73,600 and begins to phase out at $523,600 ($114,600 for married couples filing jointly for whom the exemption begins to phase out at $1,047,200). The 2020 exemption amount was $72,900 and began to phase out at $518,400 ($113,400 for married couples filing jointly for whom the exemption began to phase out at $1,036,800).
       
    • The tax year 2021 maximum Earned Income Credit amount is $6,728 for qualifying taxpayers who have three or more qualifying children, up from a total of $6,660 for tax year 2020. The revenue procedure contains a table providing maximum Earned Income Credit amount for other categories, income thresholds and phase-outs.
       
    • For tax year 2021, the monthly limitation for the qualified transportation fringe benefit remains $270, as is the monthly limitation for qualified parking.
    • For the taxable years beginning in 2021, the dollar limitation for employee salary reductions for contributions to health flexible spending arrangements remains $2,750. For cafeteria plans that permit the carryover of unused amounts, the maximum carryover amount is $550, an increase of $50 from taxable years beginning in 2020.
       
    • For tax year 2021, participants who have self-only coverage in a Medical Savings Account, the plan must have an annual deductible that is not less than $2,400, up $50 from tax year 2020; but not more than $3,600, an increase of $50 from tax year 2020. For self-only coverage, the maximum out-of-pocket expense amount is $4,800, up $50 from 2020. For tax year 2021, participants with family coverage, the floor for the annual deductible is $4,800, up from $4,750 in 2020; however, the deductible cannot be more than $7,150, up $50 from the limit for tax year 2020. For family coverage, the out-of-pocket expense limit is $8,750 for tax year 2021, an increase of $100 from tax year 2020.
       
    • For tax year 2021, the adjusted gross income amount used by joint filers to determine the reduction in the Lifetime Learning Credit is $119,000, up from $118,000 for tax year 2020.
       
    • For tax year 2021, the foreign earned income exclusion is $108,700 up from $107,600 for tax year 2020.
       
    • Estates of decedents who die during 2021 have a basic exclusion amount of $11,700,000, up from a total of $11,580,000 for estates of decedents who died in 2020.
       
    • The annual exclusion for gifts is $15,000 for calendar year 2021, as it was for calendar year 2020.
       
    • The maximum credit allowed for adoptions for tax year 2021 is the amount of qualified adoption expenses up to $14,440, up from $14,300 for 2020.


  2. Your rights as a tax payer


  3. Interest Rates Remain the Same for the First Quarter of 2015
    • IR-2014-111, Dec. 4, 2014
      WASHINGTON – The Internal Revenue Service today announced that interest rates will remain the same for the calendar quarter beginning Jan. 1, 2015. The rates will be:
      • three (3) percent for overpayments (two (2) percent in the case of a corporation);
      • three (3) percent for underpayments;
      • five (5) percent for large corporate underpayments; and
      • one-half (0.5) percent for the portion of a corporate overpayment exceeding $10,000.

    • Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.

    • Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.

    • The interest rates announced today are computed from the federal short-term rate determined during October 2014 to take effect Nov. 1, 2014, based on daily compounding.


  4. The Affordable Care Act (ACA) Tax Provisions


  5. Dec 2014: Michigan voters will be asked to approve a 1 cent increase in the 6 percent sales tax as part of a road funding plan Gov. Rick Snyder and legislative leaders are expected to announce late Thursday morning.(Photo: Brandy Baker / The Detroit News)

    • Lansing — Lawmakers prepared to vote late Thursday night on a road funding plan that would ask voters to raise Michigan's 6 percent sales tax to 7 percent in a deal that would boost aid for highways, bridges, local roads and public schools.

    • Gov. Rick Snyder and legislative leaders from both parties backed a complex plan that would increase annual road spending $1.2 billion, provide $260 million in tax relief to low-income residents and raise $1.34 billion in taxes on purchases if voters approve a 7 percent sales tax.


  6. IRS Warns of Pervasive Telephone Scam
    • Oct. 31, 2013WASHINGTON — The Internal Revenue Service today warned consumers about a sophisticated phone scam targeting taxpayers, including recent immigrants, throughout the country.

    • Victims are told they owe money to the IRS and it must be paid promptly through a pre-loaded debit card or wire transfer. If the victim refuses to cooperate, they are then threatened with arrest, deportation or suspension of a business or driver’s license. In many cases, the caller becomes hostile and insulting.

    • “This scam has hit taxpayers in nearly every state in the country. We want to educate taxpayers so they can help protect themselves. Rest assured, we do not and will not ask for credit card numbers over the phone, nor request a pre-paid debit card or wire transfer,” says IRS Acting Commissioner Danny Werfel. “If someone unexpectedly calls claiming to be from the IRS and threatens police arrest, deportation or license revocation if you don’t pay immediately, that is a sign that it really isn’t the IRS calling.” Werfel noted that the first IRS contact with taxpayers on a tax issue is likely to occur via mail.

    • Other characteristics of this scam include:
      • Scammers use fake names and IRS badge numbers.
      • They generally use common names and surnames to identify themselves.
      • Scammers may be able to recite the last four digits of a victim’s Social Security Number.
      • Scammers spoof the IRS toll-free number on caller ID to make it appear that it’s the IRS calling.
      • Scammers sometimes send bogus IRS emails to some victims to support their bogus calls.
      • Victims hear background noise of other calls being conducted to mimic a call site.

    • After threatening victims with jail time or driver’s license revocation, scammers hang up and others soon call back pretending to be from the local police or DMV, and the caller ID supports their claim.
    • If you get a phone call from someone claiming to be from the IRS, here’s what you should do:
    • If you know you owe taxes or you think you might owe taxes, call the IRS at 1.800.829.1040.
    • The IRS employees at that line can help you with a payment issue – if there really is such an issue.If you know you don’t owe taxes or have no reason to think that you owe any taxes (for example, you’ve never received a bill or the caller made some bogus threats as described above), then call and report the incident to the Treasury Inspector General for Tax Administration at 1.800.366.4484.
    • If you’ve been targeted by this scam, you should also contact the Federal Trade Commission and use their “FTC Complaint Assistant” at FTC.gov.
    • Please add "IRS Telephone Scam" to the comments of your complaint.
    • Taxpayers should be aware that there are other unrelated scams (such as a lottery sweepstakes) and solicitations (such as debt relief) that fraudulently claim to be from the IRS.
    • The IRS encourages taxpayers to be vigilant against phone and email scams that use the IRS as a lure. The IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels. The IRS also does not ask for PINs, passwords or similar confidential access information for credit card, bank or other financial accounts. Recipients should not open any attachments or click on any links contained in the message. Instead, forward the e-mail tophishing@irs.gov.
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