Businesses, Charities, and Others Must Update Responsible Party Information Within 60 Days With the IRS

In IR-2021-161, released on July 30, 2021, the IRS is urging entities with Employer Identification Numbers (EINs) to update their on-file information if any changes in responsible party or contact information have transpired.      

Regulations require EIN holders to file a Change of Address or Responsible Party, Form 8822-B, with the IRS to make updates within 60 days.  It is critical that the IRS has accurate information in case of identity theft or other fraud-related issues.  

The IRS has begun to send letters to approximately 100,000 businesses, charities, partnerships, trusts, and estates where it appears the responsible party is outdated.  The IRS defines “responsible party” as the individual or entity who “controls, manages, or directs the applicant entity and the disposition of its funds and assets.”  Unless an applicant is a government entity, the responsible party must be an individual, not an entity. If there is more than one responsible party, the entity must list whichever party the entity wishes the IRS will recognize as the responsible party.

If you are looking to outsource your company’s tax form reporting services in TY2021 (including Forms 1099, 1098, 1042-S, 3921, 3922 and all Affordable Care Act forms), reach out today to schedule a demo of our system.  SPS/GZ provides complimentary TIN Matching service for our clients in advance of filing with the IRS.  Taxpayer’s Name and Tax ID Number (either the Social Security Number or the Employer Identification Number) is checked against IRS records to minimize filing errors.  Our user-friendly system allows clients to autonomously change any information or amounts in form fields by simply logging into our secure portal. SPS/GZ’s platform tracks all changes, providing an audit trail, and corrections are automatically e-filed with the IRS, so you don’t need to worry about amending forms that were previously filed. We do not charge any extra fees for the correction service unless a special data project is requested.  This process, including the 1099 e-file service for amendments, has helped many clients avoid or limit penalties imposed by the IRS.

SPS/GZ is a full-service tax reporting firm that provides personalized service and exceptional support, utilizing state-of-the-art technology to create and e-file Forms 1099, Affordable Care Act tax forms, and Forms 3921 and 3922.  Reach out today at sales@greenzapato.com or call at (888)375-3049. 

IRS “‘Dirty Dozen” List Series Wrap Up- Warning Issued About Abusive Arrangements

In the final segment of the “Dirty Dozen” List scheme and scam series, the IRS concludes with a warning to American taxpayers to watch out for scams and schemes by unscrupulous promoters who aggressively peddle false hopes with false claims while charging exorbitant fees.    

The IRS has recently created the Office of Promoter Investigations (OPI) to focus on both participants and promoters of abusive tax avoidance transactions. The OPI coordinates service-wide enforcement activities. A word to the wise- the best defense for any taxpayer who is approached by a new promoter is to show caution: if it sounds too good to be true, it probably is.  

These aggressively marketed abusive tax avoidance “deals” are broken down into the following categories:  

  • Syndicated conservation easements- Abusive arrangements are designed to game the system and generate inflated and unwarranted tax deductions, often by using inflated appraisals of undeveloped land and partnerships devoid of a legitimate business.
  • Abusive micro-captive arrangements- Scamming promoters, accountants, or wealth planners have been known to unlawfully persuade owners of closely-held entities to participate in schemes that lack many of the attributes of insurance, are often excessive and are being used to skirt tax laws in offshore captive insurance companies domiciled in Puerto Rico, Malta, and elsewhere. 
  • Improper claims of business credits- Improper claims for the research and experimentation credit generally involve failures to participate in, or substantiate, qualified research activities and/or satisfy the requirements related to qualified research expenses. To claim a research credit, taxpayers must adequately evaluate and appropriately document research activities over a certain period of time to establish the amount of qualified research expenses 
  • Improper monetized installment sales- Promoters find taxpayers seeking to defer the recognition of gain upon the sale of appreciated property and organize an abusive shelter through selling them monetized installment sales. These transactions occur when an intermediary purchases appreciated property from a seller in exchange for an installment note, which typically provides for payments of interest only, with principal being paid at the end of the term. In these arrangements, the seller gets a lion’s share of the proceeds but improperly delays the gain recognition on the appreciated property until the final payment on the installment note, often slated for many years later.

The IRS continues to pursue actions against promoters of these schemes as well as the taxpayers who participate in them. “We are stepping up our enforcement against abusive arrangements,” said IRS Commissioner Chuck Rettig. “Don’t be lulled into these shady deals. The IRS recommends that anyone who participated in one of these abusive arrangements should consult independent counsel about coming into compliance.”

SPS/GZ is a full-service tax reporting firm that provides personalized service and exceptional support, utilizing state-of-the-art technology to create and e-file Forms 1099, Affordable Care Act tax forms, and Forms 3921 and 3922.  Reach out today at sales@greenzapato.com or call at (888)375-3049. 

IRS ‘Dirty Dozen’ List Continued- Senior Citizens and Immigrants Are Often Targeted

The IRS issues additional warnings and details regarding 2021 tax fraud schemes and scams.  Encouraging senior citizens and immigrants to beware of fake charities impersonating IRS authorities and imposters who often charge exorbitant fees for Offers in Compromise, Unemployment Compensation Insurance fraud, or tax form preparation.  

Tips to remember when approached by a fake charity follow:

  • Individuals should never let any caller pressure them. A legitimate charity will be happy to get a donation at any time, so there’s no rush. Donors are encouraged to take time to do the research.
  • Potential donors should ask the fundraiser for the charity’s exact name, web address and mailing address, so it can be confirmed later. Some dishonest telemarketers use names that sound like large well-known charities to confuse people.
  • Be careful how a donation is paid. Donors should not work with charities that ask them to pay by giving numbers from a gift card or by wiring money. That’s how scammers ask people to pay. It’s safest to pay by credit card or check — and only after having done some research on the charity.

Offer in Compromise mills contort IRS programs and mislead people with no chance of meeting requirements or lowering penalties while charging excessive fees, often thousands of dollars. American taxpayers need to be wary of anyone who claims they can obtain larger offer settlements than others or who make misleading promises that the IRS will accept an offer for a small percentage fee. Companies advertising on radio or TV frequently are not able to do anything for taxpayers that they can’t do for themselves.  Contact the IRS directly.

Tips to remember when dealing with unscrupulous tax return preparers follow: 

  • Require payment in cash only and will not provide a receipt.
  • Invent income to qualify their clients for tax credits.
  • Claim fake deductions to boost the size of the refund.
  • Direct refunds into their bank account, not the taxpayer’s account.

Tips to remember with unemployment fraud red flags follow:

  • Unemployment payments are coming from a state other than the state in which the customer reportedly resides or has previously worked.
  • Multiple state unemployment payments are made within the same disbursement timeframe.
  • Unemployment payments are made in the name of a person other than the account holder or in the names of multiple unemployment payment recipients.
  • Numerous deposits or electronic funds transfers (EFTs) are made that indicate they are unemployment payments from one or more states to people other than the account holder(s).
  • A higher amount of unemployment payments is seen in the same timeframe compared to similar customers and the amount they received.

While a high percentage of tax preparers are honorable, ethical, and trustworthy, nefarious IRS impersonators and other tax preparation promoters are known to target vulnerable groups and are almost always threatening in nature. Those people who care about older Americans and immigrants need to also be on the alert for scams. An increased number of Americans have been known to receive telephone calls threatening penalties, jail time, deportation, or revocation of a driver’s license from someone claiming to be with the IRS. Recent immigrants should ignore these threats and not engage the scammers.  

SPS/GZ will continue to post Dirty Dozen List information as the IRS makes it available SPS/GZ is a full-service tax reporting firm that provides personalized service and exceptional support, utilizing state-of-the-art technology to create and e-file Forms 1099, Affordable Care Act tax forms, and Forms 3921 and 3922.  Reach out today at sales@greenzapato.com or call at (888)375-3049. 

IRS Issues E-mail, Social Media, and Phones Warnings – ‘Dirty Dozen’ Series Continues

In its continued “Dirty Dozen” scheme and scam series, Americans are being warned by the IRS to watch out for unexpected contact from unscrupulous individuals preying on taxpayers, businesses, and tax preparers through e-mails, text and social media messaging, or phone calls. If in doubt, don’t click, respond, or hang up.  

  • The IRS generally first contacts people by mail – not by phone – about unpaid taxes.
  • The IRS may attempt to reach individuals by telephone but will not insist on payment using an iTunes card, gift card, prepaid debit card, money order or wire transfer.
  • The IRS will never request personal or financial information by e-mail, text, or social media.

Con artists try to entice and convince recipients to disclose personal information using malicious software that captures, collects, or mines personal data to be used for nefarious purposes.  Links are often used to collect or mine personal data, such as Social Security Numbers, banking, or credit card information, and even passwords.  After gathering information online, criminals will pose as someone that the recipient knows or interacts with.  “Friends” or social media contacts are used to fool recipients into thinking that they are dealing with someone that they know. 

SPS/GZ has noticed posts on popular sites that pose to be innocent.  However, all too often, personal information is being furnished that can be used in scams.  Recent examples include name of the hospital you were born in, name of your best friend growing up, your first car, your first dog’s name, favorite drink, mountain or lake, favorite “anything”. The list goes on.  We recommend that you don’t fall prey by responding with answers that give away secret or security answers.

The IRS warns that phishing schemes are cleverly disguised to look like they are from legitimate sources such as a government agency or financial institution.  Cybercriminals usually send these phishing communications by cleverly disguising e-mail messages,  so be on guard with text or social media messaging.  Taxpayers should not open attachments or click on links that look like they are from the IRS or those promising big refunds, missing stimulus payments or threatening penalties.  

Tax professionals are not immune to these scams.  The IRS reminds tax professionals to protect themselves against scams from “new client” communications that contain attachments and those involving verification of the Electronic Filing Identification Numbers (EFIN) and Centralized Authorization File (CAF) numbers. An uptick in these kinds of scams have been seen by the IRS, along with offers to buy and sell EFINs and CAFs.  Tax professionals have reported receiving scam e-mails from the fictitious “IRS Tax E-Filing“.  Report all scams to the Treasury Inspector General for Tax Administration.

SPS/GZ is a full-service tax reporting firm that provides personalized service and exceptional support, utilizing state-of-the-art technology to create and e-file Forms 1099, Affordable Care Act tax forms, and Forms 3921 and 3922.  Reach out today at sales@greenzapato.com or call at (888)375-3049. 

IRS Is Dedicated to Stop Fraud. Issues Strong Warning in a 2021 “Dirty Dozen” List

The 2021 “Dirty Dozen” list warns of  “nefarious schemes and scams”.  Taxpayers, tax professionals, and financial institutions are urged to not only look to their own interests, but to safeguard vulnerable people close to them.  

This year’s list is divided into four categories: 

  1. Pandemic-related scamslike Economic Impact Payment theft. 
  2. Personal information consincluding phishing, ransomware, and phone ‘vishing’. 
  3. Ruses focusing on unsuspecting victimslike fake charities and senior/immigrant fraud. 
  4. Schemes that persuade taxpayers into unscrupulous actionssuch as Offer In Compromise mills and syndicated conservation easement.

“We continue to see scam artists use the pandemic to steal money and information from honest taxpayers in a time of crisis,” said IRS Commissioner Chuck Rettig. “We provide this list to alert taxpayers about common scams that fraudsters use against their victims. At the IRS, we are dedicated to stopping these criminals, but it’s up to all of us to remain vigilant to protect ourselves and our families.”

SPS/GZ is a full-service tax reporting firm that provides personalized service and exceptional support, utilizing state-of-the-art technology to create and e-file Forms 1099, Affordable Care Act tax forms, and Forms 3921 and 3922.  A breakdown of each category will be shared in future blog articles. Reach out today at sales@greenzapato.com or call at (888)375-3049. 

2021 IRS “Dirty Dozen” Tax Scam List

The IRS announced that the 2021 “Dirty Dozen” Tax Scam List will be detailed in a four-part series.  The IRS is encouraging all taxpayers to be extra vigilant this year, as 2021 is expected to be a peak “season” for schemers and scammers. 

This year’s “Dirty Dozen” will be separated into the following categories:

  • Pandemic-related scams- Economic Impact Payment theft example.
  • Personal information cons including phishing, ransomware, and phone ‘vishing’.
  • Ruses focusing on unsuspecting victims like fake charities and senior citizen or immigrant fraud scenarios.
  • Schemes that promote abusive structures – like syndicated conservation easements.

SPS/GZ is a full-service tax reporting firm that provides personalized service and exceptional support, utilizing state-of-the-art technology to create and e-file Forms 1099, Affordable Care Act tax forms, and Forms 3921 and 3922.  Reach out today at sales@greenzapato.com or call at (888)375-3049. 

Stock Plan Solutions/Green Zapato Celebrates Its 20th Anniversary

Stock Plan Solutions/Green Zapato (“SPS/GZ”) announced its 20th anniversary as a national, comprehensive stock plan and tax form reporting firm. SPS/GZ was formed as a merger of two firms, Stock Plan Solutions and Green Zapato Consulting, with the desire to offer the best-of-breed stock plan administration, accounting, and financial reporting services of both legacy firms. SPS/GZ has been continuously finding ways to meet the needs of its clients.  In 2010, when the IRS adopted IRC 6039 for reporting income related to certain equity compensation awards, SPS/GZ developed a leading-edge, secure portal, spsgzXchange, to offer a reliable tax reporting service to clients.  Satisfied clients began requesting assistance with other tax form reporting needs, such as Forms 1099 and the tax forms required under the Affordable Care Act. So, SPS/GZ expanded to become a full-service tax reporting provider.

From its inception in 2001, SPS/GZ has partnered with E*TRADE Financial Corporate Services to offer clients the best-in-class platform for managing the complexities of their equity compensation programs.  Clients of all sizes, both public and private, benefit from the deep expertise of SPS/GZ’s certified professionals.  The combination of robust technology with exceptional client service has made SPS/GZ a market leader in third-party stock plan administration services.

“Rick Zatz and I take great pride in what we’ve been able to accomplish over the past 20 years,” said Mary Pat Wood, Co-Founder and Principal.  “We consider all of our clients as friends and value the relationships we develop with them. Hitting the 20-year mark reflects the commitment that SPS/GZ has shown to its clients over the past two decades.  We are fortunate to not only have experienced continued year-over-year growth, but also to have maintained client loyalty that has generated multiple referrals throughout the years.”

Over the past 11 years, SPS/GZ has grown its tax form reporting segment to include nearly all information returns required by the IRS. Its solution includes a user-friendly corrections portal that interfaces with the IRS and knowledgeable professionals supporting the entire process, from form creation to printing, mailing, and e-filing with the IRS. A client recently remarked, “We really aren’t used to working with organizations who provide the level of customer service that you’ve provided throughout this process.”  SPS/GZ thinks this sums up the core value of its business model.

About SPS/GZ: 

Stock Plan Solutions/Green Zapato LLC (SPS/GZ), is a leading provider of stock plan outsourcing and tax form reporting solutions.  Our experienced professionals work closely with clients to ensure they are fully satisfied and compliant. For more information on SPS/GZ and our full-service solution, please contact us at (888) 375-3049 or visit our website, www.spsgz.com

ACA Affordability Threshold for 2021

Only a few months ago, there were hearings on what the future of the Affordable Care Act (“ACA”) would be and whether the legislation would be considered unconstitutional and struck down.  Although the Supreme Court decision on the fate of the ACA is not expected until late June, legal scholars summarize the November 2020 oral arguments as almost certainly in favor of keeping the ACA in place.  Additionally, as our country is dealing with a pandemic and the Biden administration is expanding access to affordable health insurance, we do not see ACA going anywhere.  

One of the significant components of ACA legislation is that health insurance is affordable. Under the Employer Mandate, Applicable Large Employers (“ALEs”) must offer full-time employees, and their dependents, affordable minimum essential coverage that provides minimum value. Every year the IRS adjusts the affordability percentage to determine if health insurance premiums are considered affordable under ACA regulations.  The affordability threshold for 2021 is 9.83%, which is a slight increase from the 2020 affordability rate of 9.78%.   

Employers need to take into account the cost to their employees for health coverage when determining the health plan options.   To avoid possible penalties, a company must offer single-only health insurance coverage that is below the affordability threshold.  To determine whether a plan is affordable, according to ACA regulations, the IRS has established three safe harbors to calculate if the employee contribution to obtain coverage is considered affordable.  

  1. W- 2 Wages Safe Harbor – To determine if insurance cost is affordable using the W-2 calculation, multiply the employee’s gross income by the affordability rate of 9.83% and divide by 12 to obtain the monthly cost the premium should not exceed (e.g., for gross income of $32,000 a year, the calculation would be:  ($32,000 x .0983)/12 = $262.13).  In this scenario, if the employer offers a plan to the employee that costs less than $262.13 per month for single-only coverage, the employer meets the affordability standard.
  2. Rate of Pay Safe Harbor –To determine if insurance cost is affordable using the hourly rate of pay calculation, multiply the employee’s hourly rate by 130 (130 is the minimum monthly hours an employee must work to be considered a full-time employee). Then multiply by the affordability rate of 9.83% (e.g., for an hourly pay rate of $15.00 an hour, the calculation would be: $15 x 130 X .0983 = $191.69).  In this scenario, if the employer offers a plan to the employee that costs less than $191.69 per month for single-only coverage, the employer meets the affordability standard.
  3. Federal Poverty Level Safe Harbor – To use the Federal Poverty Level (“FPL”) Safe Harbor to determine affordability, multiply the applicable  tax year’s FPL (for TY2020, the FPL is $12,760), by the affordability rate of 9.83% and divide by 12 (e.g., ($12,760 x .0983)/12 = $104.53). In this scenario, if the employer offers a plan to the employee that costs less than $104.53 per month for single-only coverage, the employer meets the affordability standard.

It is important to use the proper safe harbor to avoid the possibility of penalties.  When working with your broker to choose a health plan for your organization, you should determine the best option to measure affordability and meet the requirements of the ACA.   Now more than ever, it is prudent for ALEs to utilize certified professionals and robust solutions for their ACA reporting needs. Please contact SPS/GZ at sales @greenzapto.com with any questions you may have about ACA reporting or to learn more about our tailored solutions.

On What 1099 Form should Attorney’s Fees be Reported?

Form 1099 reporting is oftentimes straightforward, but there can be gray areas as to how to report certain payments and which form should be used.  SPS/GZ has had many clients ask, “Where should I report payments made to an attorney, Form 1099-NEC or Form 1099-MISC?”  Prior to 2020, attorney fees aggregating $600 or more were reported on Form 1099-MISC in Box 7, non-employee compensation.  In tax year 2020, the Internal Revenue Service resurrected Form 1099-NEC, which was discontinued in 1982, to replace Box 7 on the 1099-MISC form.  This change did cause some confusion since now many companies had to use two separate forms depending on the type of payments that were made.  When reporting attorney fees here are some things to consider

  • Generally, corporations including LLCs that are taxed as C or S corporations, do not need to receive a 1099 form.  However, attorney fees that are paid to a law firm that is incorporated are an exemption to this rule and should receive a 1099 form.
  • Attorney fees, over $600, that are paid as part of services they performed in the course of an entity’s trade or business should be reported on Form 1099-NEC in Box 1.
  • In contrast, gross proceeds paid to an attorney as part of a settlement agreement are reported on Form 1099-MISC in Box 10.
  • If an attorney makes a payment to a client as part of a settlement, the attorney would not need to report the payment on a 1099.  Actually, the defendant in the lawsuit would have the obligation to report the settlement payment to the client.

An example of gross proceeds paid to an attorney would be payments made by an insurance company, or other organization, in the full amount to an attorney to settle a claim.  In this case, the insurance company/organization would file two forms: a 1099-MISC reporting the amount paid to the attorney in Box 10 as part of a settlement and a 1099-MISC to the attorney’s client in the full amount of the settlement reported in Box 3. The attorney who received the settlement payment and paid the client directly for the settlement would not need to file a 1099 to report the payment.  

The major reason the IRS brought back the Form 1099-NEC was to alleviate confusion with the varying filing deadlines based on type of payments being reported on Form 1099-MISC.  Prior to 2020, the 1099-MISC had a different deadline for Box 1 payments, non-employee compensation, versus other payment types being reported on the same form.  Now the 1099-NEC form that reports non-employee compensation payments has a filing deadline of January 31st, while the other payment types being reported on Form 1099-MISC have a filing date of March 31st.  

It is important that companies and attorneys, know the rules for 1099 reporting to avoid costly penalties.  The IRS heavily audits these forms and are quick to issue penalties for forms that are filed incorrectly or late.  Now that the IRS has separate forms with specific filing deadlines, it will make it much easier for the IRS to track late filings and issue penalties.  The late filing penalty is $50 per form if you file within 30 days of the deadline.  After 30 days but before August 1st, the penalty increases to $110 per form.  After August 1st, the penalty is $270 per form.  If a company blatantly disregards their reporting requirement, a penalty of $560 per form penalty can be accessed. 

SPS/GZ is a full-service tax reporting firm that provides personalized service and exceptional support, utilizing state-of-the-art technology to create and e-file Forms 1099, Affordable Care Act tax forms, and Forms 3921 and 3922.  Reach out today at sales@greenzapato.com or call at (888)375-3049.  

Phishing Scam Targeting Emails Ending With “.edu”

The IRS released a notice on March 30, 2021 warning students and staff that they have received many complaints regarding recent emails, impersonating the IRS, targeted at educational institutions.  The emails use the IRS name and logo, with a subject line indicating the recipient may be owed a tax refund. 

The bogus emails are asking the recipient to provide sensitive information such as Name, Address, Social Security Number, Date of Birth, Driver’s License, and income.  This information then can be used to steal a person’s identity or file for a tax refund under the victim’s name.  If you believe you are owed a refund, the IRS recommends you go to the “Where’s My Refund” page on their website, www.IRS.gov.

The IRS advises anyone who receives such an email to NOT click on the link in the email, but instead to report it to the IRS.  To report such emails to the IRS, save the email using “save as” or forward the email as attachment to phishing@irs.gov.   

To prevent identity theft, individuals can apply for an Identity Protection PIN, which helps prevent identity thieves from filing fraudulent tax returns under the victim’s name.

Since this scam seems to be targeted at educational institutions, students and staff should be on high alert for these types of emails to prevent possible identity theft.  If you are concerned that your personal data has been compromised, you can go to, https://www.irs.gov/identity-theft-central to determine what steps should be taken.

SPS/GZ is a full-service tax reporting firm that provides personalized service and exceptional support, utilizing state-of-the-art technology to create and e-file Forms 1098-T, various 1099s and Affordable Care Act tax forms 3921 and 3922.  For more information, reach out to us at sales@greenzapato.com or call at (888)375-3049.  Our complete and affordable solution allows administrators to simply upload their tax form data file to our secure portal in a few easy steps and we handle everything else to keep your organization compliant. Contact us today!

American Rescue Plan Act of 2021

On Thursday, March 11, 2021, President Joe Biden signed a $1.9 trillion dollar bill, the American Rescue Plan Act of 2021 (ARP), into law. “This historic legislation is about rebuilding the backbone of this country and giving people in this nation, working people, middle class folks, people who built the country, a fighting chance,” President Biden said in the Oval Office before signing. “That’s what the essence of it is”. 

The legislation includes direct relief payments of up to $1,400 for individuals, major improvements to the affordability of healthcare coverage and access, funding for distribution of vaccines, and the reopening of schools and colleges.  Also included is an extension of Unemployment payments, an expanded Child Tax Credits program, as well as relief to states, local governments, veterans, farmers and foreign assistance.  

The president, vice president, first lady and second gentlemen, along with other members of the cabinet, are set to travel the country to explain ARP’s benefits to the public.  Governors, mayors, local community leaders and others will also help spread the word.  

ARP benefits include:

  • Giving $6 billion in the form of a $1,400 check to most Americans earning up to $75,000 
  • Extending a $300 weekly federal boost to unemployment benefits through August 2021 
  • Sending $350 billion to state and local governments whose revenue has declined because of COVID-19’s impact on their economies
  • Allocating $130 billion to assist in reopening schools and colleges
  • Allotting $30 billion to help renters and landlords weather economic losses 
  • Devoting $50 billion for small-business relief assistance 
  • Dedicating $160 billion for vaccine research, development and distribution needs 
  • Expanding the child tax credit up to $3,600 per child in 2021
  • Expanding 2021 premium subsidies for people who buy health insurance through the Affordable Care Act (“ACA”) on their own instead of getting it from an employer or a government program like Medicare or Medicaid

The changes to the Affordable Care Act provide significant funding to make premiums more affordable across the board.  Under the ARP, no one would have to pay more than 8.5% of income for a benchmark silver plan, which is the second cheapest plan available. 

As an example, those earning from 100% to 150% of the poverty line ($26,500 to $39,750 for a family of four) would go from a maximum premium of 4.14% to zero premium. Those earning twice the poverty threshold would move from a maximum outlay of 6.52% of income to 2%.

With every passing year, it appears more likely that the ACA will remain a part of America’s healthcare system, especially when improvements, such as through the ARP, continue to be passed.

SPS/GZ is a full-service tax reporting firm that provides personalized service and exceptional support, utilizing state-of-the-art technology to create and e-file Forms 1099, Affordable Care Act tax forms, and Forms 3921 and 3922.  Reach out today at sales@greenzapato.com or call at (888)375-3049.  

Tax Year 2020 Filing Tips

In COVID Tax Tip 2021-09, which was issued January 15, 2021, the IRS announced that it will begin accepting and processing 2020 tax year returns on Friday, February 12, 2021.  Tax Tip 2021-12 and COVID Tax Tip 2021-13 were issued in the first week of February 2021. In each update, the IRS encourages federal tax returns to be filed electronically and combined with direct deposit. Pandemic related delays associated with paper filing and a backlog are the main reasons given in all three statements.

Direct deposit is fast, secure, easy, and provides options, such as splitting refunds into more than one financial account. Checking, savings, health, education, and some retirement accounts are allowed.  U.S. Savings Bonds can also be purchased with refunds, up to $5,000.00, using IRS Form 8888.   

COVID Tax Tip 2021-13 covers a number of COVID-19 pandemic tax topics, including who should file a federal tax return, the Recovery Rebate Credit, the Unearned Income Credit, Unemployment Benefits, and two education credits.  

The majority of people with gross income of $12,400 or more are required to file federal tax returns.  Some with lower incomes aren’t required to file but should consider filing for a refund if they had federal income tax withheld because they may be eligible for tax credits.       

Millions of Americans are now receiving or have received taxable unemployment compensation during the pandemic. Taxable benefits include any of the special unemployment compensation authorized under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, enacted in spring, 2020.  Federal law allows recipients to choose to have a flat 10% withheld to help them avoid owing taxes on this income when they file. Form 1099-G should have been received in January 2021.   

Most eligible people have already received full Economic Impact payment amounts for the recovery rebate credit.  For those who are eligible and have not received the full amounts of the credits may be eligible to file a claim.  In order to file the claim, people must file a tax return, even if they are not normally required to file.    

The maximum Economic Impact Payments for qualifying individuals were:

  • $1,200 per person and $500 per qualifying child for the first payment
  • $600 per person and $600 per qualifying child for the second payment

Taxpayers with children, who are eligible for Earned Income Tax Credit, may be given temporary relief if their income was higher in 2019 than in 2020.  The Taxpayer Certainty and Disaster Tax Relief Act of 2020 can be used to figure your EITC for 2020.  See Publication 596, EIC.  

People, who don’t owe taxes, but pay certain higher education expenses may qualify for one of two education credits: The American Opportunity Credit, and the Lifelong Learning Credit, which would both use Form 8863.  

SPS/GZ is a full-service tax reporting firm that provides personalized service and exceptional support, utilizing state-of-the-art technology to create and e-file Affordable Care Act tax forms, Forms 1099, and Forms 3921 and 3922.  Reach out today at sales@greenzapato.com or call at (888)375-3049.  Our solution allows companies to simply upload their data file to our secure portal in a few easy steps and we handle everything else.

The Supreme Court Suggests That ACA Fate Isn’t Their Decision to Make

On Tuesday, November 10th, the Supreme Court heard arguments in the controversial and closely watched case, California v. Texas (known as Texas v. U.S. in the lower courts). Several Republican led states have joined the Trump Administration In a challenge to the 10-year old legislation.This is the third time that the Affordable Care Act, aka “ACA,” or “Obamacare,” has come before the high court.  

It is not clear how the Supreme Court will respond, in what is probably the most controversial case to date, especially since the pandemic is still raging and healthcare is on everyone’s minds.  The decision to invalidate the law could impact at least 20 million people who participate in exchanges. In addition, low-income adults who became eligible with the expansion of Medicaid would be affected. Most Americans are in favor of protecting two popular ACA provisions: protecting those with preexisting conditions and allowing parents to keep their children on their health insurance plans until the age of 26. 

Mongan told the justices of the court that they “should not invalidate any more of Congress’ work than absolutely necessary.” It would seem that Chief Justice Roberts and Justice Kavanaugh may side with the three liberal justices to uphold the ACA.  Both remarked that it isn’t the Supreme Court’s role to invalidate the Affordable Care Act, whether or not any one or more of ACA’s provisions are deemed unconstitutional. Roberts went on to say that if President Trump and the Republicans wanted to strike the law, they should have done it when they had the opportunity to, rather than leaving it up to the courts.      

California Solicitor General, Michael Mongan’s closing argument defending ACA follows: “The plain intent of the 2017 amendment was to make 5000A inoperative and unenforceable, not to impose the very commands this court said would be unconstitutional. And the current statutory framework makes clear that Congress wanted every other ACA provision to remain in effect if 5000A were unenforceable, because that’s the precise situation Congress created.” 

States, lawmakers, insurers, brokers, and tax reporting firms (like SPS/GZ) are waiting to see what the outcome will be and if any changes will be made to impact the insurance market and the Applicable Large Employer’s insurance and reporting mandates.  The Supreme Court’s ruling on this latest ACA challenge is not expected until the end of June.   

President-elect Joe Biden responded, “These ideologues are once again trying to strip health coverage away from millions of people. We’re going to build a health-care system that puts you and your families first and that every American can be proud of.” 

SPS/GZ is a full-service tax reporting firm that provides personalized service and exceptional support, utilizing state-of-the-art technology to create and e-file Affordable Care Act tax forms, Forms 1099, and Forms 3921 and 3922.  Reach out today at sales@greenzapato.com or call at (888)375-3049.  Our solution allows companies to simply upload their data file to our secure portal in a few easy steps and we handle everything else.

IRS encourages early ITIN renewal to prevent refund delays as last round of ITINs are set to expire

The IRS released IR-2020-181 on August 17, 2020.  This issue notifies taxpayers of deadlines and considerations as they renew Individual Taxpayer Identification Numbers (“ITINs”).      

Since 1996, the IRS has issued ITINs to taxpayers and family members who are not eligible to receive a Social Security Number (SSN).  Prior to the 2015 Protecting Americans from Tax Hikes (PATH) Act, ITINs could be used indefinitely. ITINs assigned prior to 2013 are scheduled to expire. The PATH Act placed renewal requirement provisions into effect, starting in October 2016.  Since then, taxpayers using expired ITINs face refund delays and ineligibility for certain tax credits.  Renewals are being processed now.  ITINs that do not have a middle digit of 88, 90, 91, 92, 94, 95, 96, 97, 98 or 99 and not used on a tax return for tax years 2017, 2018 or 2019 will not expire in 2020.

Estimates total more than 1 million taxpayers hold potentially expiring ITINs. Expiring ITIN holders may have already received a letter from the IRS informing them of the December 31,2020 expiration date. Those not required to file a tax return are not required to renew the ITIN, however, if future reporting is expected, renewal consideration should be given.  

Three groups of taxpayers who need to renew follow:

  • ITINs that have not been used on a tax return for tax years 2017, 2018 or 2019 will expire December 31, 2020. 
  • ITINs with middle digits 88 (For example: 9NN-88-NNNN) will expire December 31, 2020. 
  • ITINs with middle digits 90, 91, 92, 94, 95, 96, 97, 98 or 99, that were assigned before 2013 and have not already been renewed, will also expire at the end of this year. Even if the ITIN has been used in the last three years, if a filing requirement is expected in 2021, renewal is required. CP-48 Notice, informing taxpayers they need to renew their ITINs, will be sent in the coming months to inform taxpayers.  

What should you do if you need to renew your ITIN? To renew an ITIN, the taxpayer should complete Form W-7, “Application for IRS Individual Taxpayer Identification Number,” along with the required documentation. If you fall into one of the above categories, you do not need to wait to receive a CP-48 Notice to renew your ITIN. 

  • Three methods taxpayers can use to submit Form W-7 application package to renew their ITIN follow:
  1. IRS-authorized Certified Acceptance Agents or Acceptance Agents around the country 
  2. Form W-7 is to be completed and mailed, along with original identification documents or certified copies of the documents from the issuing Agency, to the IRS address listed on the form (identification documents will be returned within 60 days). A federal tax return is not required, however, a note explaining why an extension is being requested is required.   
  3. Schedule an appointment at an IRS Taxpayer Assistance Center to present documents to the IRS in-person rather than mailing documents.

The ITIN assignment date can be found on the CP565 ITIN Assignment notice.  If you no longer have your CP565, call the IRS at 1-800-829-1040 within the U.S., or 1-267-941-1000 (not a toll-free number) if you are outside the U.S.

SPS/GZ is a full-service tax reporting firm that provides personalized service and exceptional support, utilizing state-of-the-art technology to create and e-file Forms 1099, Affordable Care Act tax forms, and Forms 3921 and 3922.  Reach out today at sales@greenzapato.com or call at (888)375-3049.  Our solution allows companies to simply upload their 1099 data file to our secure portal in a few easy steps and we handle everything else.

Things to Know about Affordability rules for ACA Reporting in 2020

Although there have been attempts by the Trump administration to repeal the Affordable Care Act (“ACA”), it is still in effect and there is important information you should be aware of for 2020 ACA reporting.  As always, healthcare costs need to be affordable under the new 2020 guidelines.

If you are an Applicable Large Employer (“ALE”), which is a company that employs 50 or more full-time, or full-time equivalent employees, healthcare cost for single-only coverage cannot exceed 9.78% of household income for 2020.   There are three ways to measure affordability under the ACA. If an employer satisfies affordability under one of these three safe harbors, their insurance is considered affordable.

  1. The Federal Poverty Level (“FPL”) Safe Harbor:  The federal poverty level for 2020 is $12,760 for the continental U.S.  The federal poverty level safe harbor is calculated by multiplying $12,760 by .0978 and dividing by 12.  To use the federal poverty level safe harbor, the monthly cost for single-only coverage should not exceed $103.99 per month, (12,760 x .0978)/12).
  2. W-2 Safe Harbor:  This is based on household income for Box 1 – Wages, from the W-2 Form.  For example, if an employee had an annual salary of $45,000 a year, you would check affordability by multiplying their salary by .0978 and dividing by 12 to get the maximum amount the employee should pay for single-only coverage per month.  In this scenario, the employee should not pay more than $366.75 per month, ((45,000 x .0978)/12)
  3. Rate of Pay Safe Harbor: This is most useful for hourly employees. To utilize the Rate of Pay safe harbor, you should multiply an hourly worker’s lowest rate of pay by 130 hours (for rate of pay employer assumes 130 hours per month regardless of the number of hours worked) and the cost should not be more than 9.78% for single-only coverage. For example, an employee earning $15/hour should not pay more than $190.71 per month, ((130 x $15) x .0978). 

If insurance premiums are not considered affordable, the employer can be penalized.  The penalty for 2020 is $3,860.00 per employee per year.  This is applied to all employees and not just the employees who were not offered affordable coverage.  Typically, this penalty is discovered when an employee, who is classified as full-time, has received a premium tax credit, or has gone onto the Marketplace for coverage.  These penalties can be significant, so it is important that companies evaluate their workforce and healthcare plans to determine which safe harbor makes the most sense for their organization when it comes to ACA reporting.

To learn more about ACA compliance and what affordability safe harbor might best fit your needs, please contact SPS/GZ at sales@greenzapato.com or call (888)375-3049.

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