After a rigorous tax season, the tax and financial planning experts at KRD share post-tax season highlights from the IRS and state of Illinois. We’ve also included suggestions for creating your online account with the IRS, in addition to some helpful links.
Post- tax Season Update for Businesses
As a reminder, Q2 estimates for Federal (calendar year entities and individuals) as well as most state estimates are due June 15, 2022. Even if your returns are on extension, be sure to pay your Q2 estimates, if required. The June 15, 2022 also applies to the newly enacted Illinois Pass-Through Entity (“PTE”) Tax.
New K-2 & K-3 Forms
The Federal and state governments added a couple wrinkles to all CPA firms this past season. For partnerships and S corporations, the IRS added a new K-2 and K-3 form to report all international activity.
Initially, the IRS stated that only entities with foreign activity needed to report on these forms. Then they changed their minds and said if any owners on their individual returns have international filings (foreign tax credit), entities are then required to report additional information.
As we approached the March 15 deadline, the IRS changed their mind again and provided some exceptions to this filing. Unfortunately, many of our clients did not qualify for these exceptions and are still required to file the K-2 and K-3. Thus, KRD, as well as many CPA firms nationwide, extended many business income tax returns. Our blog post explores this update further.
New Pass-Through Entity (“PTE”) Tax
Another update several states around the country threw at CPA firms was the PTE tax. Illinois, in addition to about 20 other states, enacted a new PTE tax (some states already had a PTE in place). The purpose of this tax was to allow business owners to obtain an above-the-line deduction and circumvent the $10,000 itemized deduction limitation placed on state and local taxes (“SALT”).
In addition, each state at the individual level treats the PTE differently. Thus, for multistate businesses, the complexity for filing increased substantially. Some differences include: when to adopt new provisions, how to elect the PTE, when to pay the PTE, whether the individual receives a credit in that state, and whether the state recognizes another states’ PTE.
Those who receive K-1s from pass-throughs will also now have more complexity in their filings. For some states, such as California, the PTE election is required to be made for 2022 no later than June 15, 2022.
Post- tax Season Update for Individuals
While the stock market may be down, it does present potential opportunities for financial planning. One consideration would be to convert your traditional IRA to a Roth while the value is lower. However, please be sure to discuss with your tax advisor prior to doing so. Also, you should discuss tax loss harvesting within your taxable portfolio with your financial advisor.
Access Your Tax History Online
The IRS recommends individuals create an online account to view your records and history with the IRS. KRD also recommend you do this to allow access to tax records the IRS may have including your tax payments, and even obtain transcripts of filings with the IRS. This may eliminate notices or allow you to understand the status of certain items you have filed with the IRS.
For Illinois residents, you can also create your own account to view your account or pay taxes online. If you are located outside of Illinois, most states also have a way for you to pay your tax liabilities online. You can contact your team at KRD should you need assistance locating where to create your account.
Protect Your Tax Information with an IP-PIN from the IRS
Finally, to protect your tax information, we recommend obtaining an IP-PIN with the IRS (a 6-digit code that they assign). Click here to create your pin.
Note, should you obtain an IP-PIN, annually you will be required to receive a new IP-PIN (this PIN will be created for you). You’ll have to provide this PIN to KRD in order for us to e-file your tax returns.
As of now, there is no way to “opt-out” of the program once you opt-in. The IP-PIN applies to all returns filed during a calendar year no matter for what year you are filing.
If you happen to have been a victim of identity theft, the IRS has outlined steps taxpayers should take if their personal information has been compromised. Click here to learn more.
If you need to pay taxes to the IRS, you may do this online. Click here to access their payment portal.
Contact the Tax and Financial Planning Experts at KRD Today
Should you have any further questions, feel free to reach out to our office at 847-240-1040 or contact us online.