July + August 2023 tax updates
July 31st, 2023
IRS to wind down pop-up visits
The IRS has indicated that they plan to wind down the practice of pop-up visits. In place of the unannounced drop-ins, Revenue Officers will instead make contact with taxpayers through an appointment letter, known as a 725-B, and schedule a follow-up meeting. This move is aimed at protecting taxpayers from scammers and enhancing the safety of Revenue Officers. Unannounced visits may still occur to serve summons, subpoenas, and to perform asset seizure. On an annual basis, limiting surprise visits to those happy occasions will substantially reduce the number of unplanned in-person encounters between the IRS and taxpayers.
FinCEN to soon require BOI report
Starting in January 2024, the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) will require most businesses to file a Beneficial Ownership Information (BOI) report for FinCEN records. These reports (courtesy of the Corporate Transparency Act) will be available for distribution to law enforcement and other governing bodies. There is no fee to file the form and limited exemptions to filing apply. Willful failure to file or purposefully filing false information may result in fines up to $10,000 or two years in the slammer.
Family members + payroll advice to consider
Taxpayers who are planning to add family members to payroll should consider the following fun facts:
- Payments for a child's services are subject to income tax withholding.
- Payments for the services of a child under age 18 are not subject to social security and Medicare taxes
- Payments for the services of a child under age 21 are not subject to Federal Unemployment Tax (FUTA). Payments to children over 20 are.
- When a parent works for their child's sole proprietorship, the parent's services are subject to income, social security and Medicare tax, but not FUTA tax.
Philadelphia Wage and BIRT Tax Decrease as of July 1
As of July 1, 2023, Philadelphia implemented a reduction in business income and wage tax rates. The BIRT (Business Income and Receipts Tax) dropped to 5.81% and the Wage Tax (for residents) was reduced to 3.75%. The new effective rate of 5.81% is effective for 2023 returns and taxes owed in 2024. Philadelphia’s Wage Tax has decreased to 3.75% from 3.79% for residents and the non-resident rate remains 3.44%. The Wage Tax applies to salaries, wages, commissions, and other compensation. The wage tax is withheld and remitted by the employer.
Student Loan Repayment on Ramp
On June 30, 2023 the Department of Education issued a press release detailing assistance for student loan borrowers. This new support includes a 12-month “on-ramp” (one-year leniency) that stretches from October 1, 2023 to September 30, 2024. This program ensures that “ financially vulnerable borrowers who miss monthly payments during this period are not considered delinquent, reported to credit bureaus, placed in default, or referred to debt collection agencies.” Borrowers don’t need to take action to qualify for the “on-ramp”. As the terms of recent student loan assistance have historically been subject to change, additional guidance may be forthcoming.