Federal Tax News for Individuals

Tax season is long over, but tax scams are thriving. The IRS is warning taxpayers about emails and text messages that promise refunds and credits but that actually result in identity theft.  

Tax Scams Are Year-Round

Many current schemes involve the third Economic Impact Payment (originally made in 2021). Messages may also reference the Employee Retention Credit, assert that the taxpayer is owed a refund, or say there's a problem with a return that must be fixed.

They encourage recipients to click links that download malware. The fake messages usually contain misspellings and typos and come from a suspicious-looking email address. If you receive one like this, don't click on anything! Report it to phishing@irs.gov.

Help for Post-High School Costs

For many students, classes have already begun, while others are getting ready to head off to college or trade school now. Higher education is expensive, but taxpayers who take post-high school coursework in 2023 (or who have dependents taking such courses) may qualify for one of two tax credits that can reduce their tax bills.

The American Opportunity Tax Credit is worth up to $2,500 per eligible student for the first four years at an eligible school. The Lifetime Learning Credit tops out at $2,000 per tax return for any number of years. Income-based limits and additional rules apply. For more information and a link to a tool to find out if you qualify.

Uncle Sam Wants Some of Your Gambling Winnings

Have you recently won playing the lottery or slot machines? Or perhaps that horse you bet on finally came in first place? If so, congratulations! Now, don't forget that Uncle Sam generally requires a cut of your earnings. Indeed, certain gambling winnings are considered taxable income.

Taxpayers who have gambling winnings must report all such income on Form 1040, U.S. Individual Income Tax Return, or Form 1040-SR, U.S. Tax Return for Seniors. And, depending on the amount, the payor may be required to issue you Form W-2G, Certain Gambling Winnings. Contact us if you have questions regarding the tax reporting requirements of your gambling winnings. See more from the IRS.

Take IRS Deadlines Seriously

Timing is everything, especially with tax filing deadlines. Taxpayers who have active cases with the U.S. Tax Court may be able to use the IRS e-filing system known as DAWSON to quickly upload documents.

One taxpayer had 90 days to file a petition to challenge a proposed tax. But he waited until the evening of the last day. Using his phone, he logged onto DAWSON, but had to switch to his computer to complete the filing. That delayed the receipt of his filing, and his petition was dismissed as untimely, by 11 seconds.

The Tax Court can allow extra time for issues such as a power outage or inclement weather. However, this extra time doesn't apply to situations unique to a taxpayer such as waiting until the last minute and encountering a problem. (Sanders, 160 T.C. No.16, 6/20/23)

Tax Treatment of Cryptocurrency

Questions surrounding the tax treatment of cryptocurrency are complex. According to new IRS Revenue Ruling 2023-14, the process of verifying ownership of cryptocurrency is called "staking." And when a taxpayer has successfully staked his or her units of cryptocurrency, he or she may also receive "staking rewards" consisting of additional units. 

When does the taxpayer have to include those staking rewards in gross income? A cash-basis taxpayer is said to "gain dominion" over staking rewards received when he or she can sell, exchange or dispose of them. In the year that the taxpayer gains dominion over the rewards, the fair market value of the rewards must be included in gross income. Have questions? Reach out to our team at TMA accounting for answers.

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