ASK THE CALIFORNIA EMPLOYMENT TAX AND PAYROLL TAX ATTORNEY – TAX FILING AND TAX REFUND MYTHS AND FACTS
By Robert S. Schriebman
On April 11, 2023, the IRS issued a press release disclosing common myths associated with filing your tax return and obtaining an IRS refund (IR-2023-76). In addition to giving you the IRS point of view, I am going to throw in my two cents worth of advice. This article will set forth common myths about filing your federal income tax return and obtaining your refund. Even though these deal with the 2023 filing season, there are golden nuggets of truth that apply today and into the future.
Myth: Taxpayers Don’t Need to Report Income If They Didn’t Receive 1099-K this Year
The most fundamental provision in the entire IRS code is Section 61. Any student studying the theory of American taxation will start by reviewing Section 61. Except as otherwise provided, gross income means all income from whatever source derived, including such things as compensation for services, property transactions, interest, dividends, royalties, and spousal support. Whether you receive a 1099 or not, does not change the law, and does not exempt you from reporting all taxable income. The IRS press release goes onto list the following:
- Goods created and sold on online platforms.
- Investment income.
- Part-time or seasonal work.
- Self-employment or other business activities.
- Services provided through mobile apps.
Monies received as a result of gifts, inheritances, or loan proceeds are not considered taxable income.
Myth: If you request an extension, you don’t need to do anything until the mid-October filing season.
Getting an extension does not relieve the payment of a tax or is not an extension to pay your estimated taxes. If you cannot pay in full in April, pay what you can. My motto is – if you can’t do the best, do the best you can.
Myth: You can speed up your refund by calling the IRS or visiting an IRS Visitor Center.
The quickest and best way to check the status of your refund is through the “Where’s My Refund?” tool at IRS.gov or via the IRS2Go mobile app. It’s no secret that the IRS remains backlogged, but the goal is to try to get a refund out within 21 days. Those taxpayers with limited internet access can reach “Where’s My Refund?” by calling the automated refund line 800-928-1954. Taxpayers should call the IRS tax help line (800.829.1040) about refund status.
Myth: Tax transcripts are a secret way to get a refund deposit date.
The IRS has several types of transcripts. The most common is the account transcript and I believe that this type of transcript addresses this myth. Account transcripts can be very useful. For example, they will inform you if and when a tax return has been filed and the date of filing. The transcript will also tell you if the IRS has received a payment and how that payment has been applied. Finally, the transcript will inform you if and when a refund has been issued. However, you cannot use a request for transcript to rush any refund.
Myth: Taxpayers don’t need to adjust withholding for 2023 if a refund was received this year.
If you are the type of person who arranges your withholdings so that you receive a nice refund every year, don’t change a thing. However, if you do not want the government to use your money and pay you interest at 1% lower than is charged to those who owe taxes, you may need to increase the number of exemptions on your W4. If you owe the IRS or California, the IRS will take your refund and apply it to your IRS debt. Also, California and the IRS have agreements where refunds can be taken to apply to tax debts whether owed to the IRS or California. If you do not want your refund to be applied to back taxes, you may need to adjust your withholdings to minimize or even eliminate the refund. Adjusting tax withholding with an employer is easy and using the Tax Withholding Estimator tool on IRS.gov can help taxpayers determine if they’re withholding the right amount.
Robert Schriebman has a successful practice in the Rolling Hills Estates area of Los Angeles County serving clients throughout California and the United States. He has successfully dedicated more than 50 years to helping individual taxpayers, business owners, CPAs, Enrolled Agents, and tax attorneys navigate the complicated tax systems of the federal and state governments. Mr. Schriebman is in private practice. He is not affiliated in any way with the EDD, and he is not employed by the EDD or any other agency of the State of California.
Robert Schriebman has written the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See “California Tax Collection Practice and Procedures” and “California Taxation Practice and Procedure,” both published by Commerce Clearing House.
Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, “IRS Tax Collection Procedures – A Manual for Practitioners” published by Commerce Clearing House in addition to the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See “California Tax Collection Practice and Procedures” and “California Taxation Practice and Procedure,” both published by Commerce Clearing House.
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