October 2021 Tax Tips and More
Tax Tips and More
October 2021
Upcoming dates:
October 15
- Filing deadline for extended 2020 individual and C corporation tax returns
October 31
- Halloween
With the 2021 tax filing season just a few months away from starting, the IRS is warning taxpayers to be on the lookout for signs that your identity has been stolen. This month’s newsletter alerts you to some of the common signs of identity theft and what you can do if you discover that you’re an identity theft victim.
Please call if you would like to discuss how this information could impact your situation. If you know someone who could benefit from this newsletter, feel free to send it to them.
IRS Warns of Identity Theft Signs
With identity thieves continuing to target the tax community, the IRS is urging you to learn the new signs of identity theft so you can react quickly to limit any damage.
The common signs of ID theft
Here are some of the common signs of identity theft according to the IRS:
In early 2022, you receive a refund before filing your 2021 tax return.
You receive a tax transcript you didn’t request from the IRS.
A notice that someone created an IRS online account without your consent.
You find out that more than one tax return was filed using your Social Security Number.
You receive tax documents from an employer you do not know.
Other signs of identity theft include:
Unexplained withdrawals on bank statements.
Mysterious credit card charges.
Your credit report shows accounts you didn’t open.
You are billed for services you didn’t use or receive calls about phantom debts.
What you can do
If you discover that you’re a victim of identity theft, consider taking the following action:
Notify creditors and banks. Most credit card companies offer protections to cardholders affected by ID theft. Generally, you can avoid liability for unauthorized charges exceeding $50. But if your ATM or debit card is stolen, report the theft immediately to avoid dire consequences.
Place a fraud alert on your credit report. To avoid long-lasting impact, contact any one of the three major credit reporting agencies—Equifax, Experian or TransUnion—to request a fraud alert. This covers all three of your credit files.
Report the theft to the Federal Trade Commission (FTC). Visit identitytheft.gov or call 877-438-4338. The FTC will provide a recovery plan and offer updates if you set up an account on the website.
Please call if you suspect any tax-related identity theft. If any of the previously mentioned signs of tax-related identity theft have happened to you, please call to schedule an appointment to discuss next steps.
Tips For Dealing With Common Accounts Payable Problems
The accounts payable process is typically very labor-intensive for many small business owners. While moving to a paperless environment may help alleviate some of your accounts payable headaches, there will be new problems you’ll have to successfully navigate.
Here are some of the most encountered accounts payable problems and several solutions to consider.
Common problems with accounts payable
Double payment. A vendor sends you an invoice for $100. Your company promptly pays this vendor $100, but a short time later another payment for $100 goes out to the vendor. Sometimes this can be the fault of the vendor sending an invoice in different ways (i.e. via fax and e-mail). Or the vendor moves to digital invoicing and emails more than one person in your company, effectively duplicating the invoice electronically. Or even worse, you print out a digital invoice twice.
Vanishing invoices. Your company could get an invoice from a vendor and have that invoice get misplaced, or the invoice accidentally gets destroyed before ever making it into your A/P system. With digital invoices, how do you know which one is the original and which one is a duplicate?
Sending payment prior to delivery. There are sometimes benefits to paying an invoice as soon as possible. However, if your company pays an invoice before a shipment arrives, that could lead to an awkward conversation with your vendor if any of the shipment arrives with damaged or missing items.
Matching errors. A manual investigation is often required if a discrepancy is discovered between purchase orders, invoices and other documents. This often happens when multiple invoices are paid with one check, and the breakout of the invoices does not fit on the check stub or other payment documentation. It gets more complicated if your supplier applies payments haphazardly creating a past due account, all while you continue to pay the bills.
What you can do
Update your internal controls. Have your A/P team help update internal processes and document how invoices should be handled. Pay special attention to separation of duties and full use of purchase orders to ensure invoices are accurate.
Have one inbox for A/P. All e-mails with invoices should go to one inbox. This will help reduce the chances that an invoice will be received or paid twice. Limit access to this billing address.
Limit access to cash accounts. It’s more important than ever for someone without authorization to your company’s cash accounts to review bank reconciliations. Not only will this help to potentially uncover erroneous payments, but it could also help to uncover potential fraud that is occurring in your company.
Track key performance indicators. Create a report each month of all unpaid invoices and another report that shows payments made. Explore bank security features to identify duplicate payments and allows you to control checks that are confirmed for payment. Use your accounting software help identify duplicate dollar amounts and duplicate invoice numbers.
Be cautious with ACH. Giving a vendor automatic access to your firm's checking account needs to be tightly controlled. Explore ways to ensure you are reviewing these auto payments on a timely basis and that you are receiving supporting invoicing of these payments.
Please call if you have any questions about improving your business’s accounts payable process.
IRS Backlog of Historical Proportions
What you need to know if one of your tax returns is stuck
The IRS is coping with a backlog of historical proportions and it is impacting millions of taxpayers. According to IRS sources, as of July 31, there are still over 13 million tax returns that are to be processed. The nearly unprecedented delay is being attributed to the COVID-19 pandemic, under staffing at the IRS, and a slew of recent tax law changes. The challenge is how to navigate the IRS notices if you are caught up in this mess.
Complicating your tax life
You’ve filed for an extension via mail, but the IRS says you haven’t filed your return yet and issues notices and penalties.
You keep getting letters from the IRS after responding to initial inquiries.
You filed your tax return on time, but the IRS says it doesn’t have your return, even though you may have received a confirmation.
What you can do
While you may not be able to get your tax return processed any faster, there are steps you can take to stay informed and make it easier for the IRS to work with your tax situation:
Track your refund status. The IRS has developed an online tool, “Where’s My Refund?” that can provide updates. Find it at https://www.irs.gov/refunds.
Check out IRS2Go. The agency also provides a mobile app called IRS2Go that checks your tax refund status. You can see if your return has been received, approved, and sent.
Stay calm and keep responding. If the IRS sends you notices, keep detailed records of the notices and your timely replies. Eventually, they will get caught up. So keep good records by leaving a digital footprint and back up electronic records with paper versions.
Prior correspondence is your friend. When you’re replying to IRS notifications, attach copies of prior correspondence with your latest letter. Make it easy for the IRS to follow your paper trail by dating each response and keeping the most recent response on top.
Keep proof of delivery. Use express delivery or certified mail to confirm that the IRS receives your responses in a timely manner.
Remember that the IRS is working as quickly as it can to clear this backlog. Please call if you have any questions about a tax return you believe to be stuck because of this situation.
As always, should you have any questions or concerns regarding your tax situation please feel free to call.
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