Higginbotham Companies, Inc.

This month, the Internal Revenue Service Center (IRS) has become aware of a substantial increase in several impersonation, fraud, and scam schemes compared to previous years.  Be aware, IRS will not call you, text you, or email you to obtain any personal information or inform you of any collection or filing requirements. They always communicate by printed and mailed correspondence.  Next, it has been confusion for taxpayers this year when dealing with the child tax credit and receiving an advance payments last year.  You should receive the Letter 6419, or maybe two of them, reflecting the total child tax credit paid.  You need the amount to properly complete the Form 8812, when filing your tax return.  In my December, 2021, article, I detailed the procedure for you to establish your portal access to obtain information from your tax account with IRS.  You can review again by going to our website, higginbothamcosinc.com and clicking on the “Monthly News Article” tab IRS, Get a IP PIN for Your Security (December-2021) or go to IRS.gov website and create your account.  You will need an email, drivers’ license, and your cell phone for the authorization process.  Oh, this should be the only time you will receive an e-mail from IRS and this will only confirm your identity for the website.  Another alert for you, watch for scammers who are sending emails, with links, to create your account and are actually phishing to your information.  Never click on any link to access IRS.gov.  Now some good news, there’s nothing bad to getting extra money.  For 2021, the Earned Income Credit (EIC) will be available for taxpayers from ages of 19, not a dependent of another taxpayer, and even taxpayers over 65, are permitted to claim this tax credit. This will help some young independent parents’, under the age of 25 years old, and taxpayers over 65 years old or older, who have some part time jobs.  Please review the instructions for the EIC to see if your situation permits you this credit.  Another reminder, Form 8867, is a due diligence form everyone has to include with their tax return if claiming the EIC, Child Tax Credit, Additional Child Tax Credit, Other Dependent Tax Credit, American Opportunity Education Tax Credit, or Head of Household.  Not including this form could result in a penalty of $520 or more.  This is very important.  In addition, another due diligence form, now required for sole proprietors when filing Schedule C for small businesses.  The Form 11652, Questionnaire and Supporting Documentation Form 1040 Schedule C, is now being required for all tax preparers who prepare the Schedule C for taxpayers.  It specifically reflects all income records and expenses are now requiring documents to support the information on the Schedule.  This means bank statements, account records, ledgers, invoices, receipts, mileage logs, credit card statements, electronic payment records or any other records to substantiate the amounts reflected.  And, for S-Corporations, the Form 7203, S Corporation Shareholder Stock and Debt Basis Limitations, is required to claim losses from any S-Corporation you have an interest in.  Wow, IRS has went overboard on forcing due diligence substantiation on taxpayers and taxpreparers.  Again, this is important.  That’s it for this month.  More good tax stuff next month.  Remember, this is a very brief overview.  It is your responsibility to discuss any tax and financial changes with your professional advisor for assistance in evaluating your situation.  For details and specific assistance in applying the general information in this article, you may contact our office at your earliest convenience or contact your advisor.   Provided by Tracey C. Higginbotham, E.A., (321) 632-5726, a member of the National Society of Accountants.