What happens when a tax refund gets deposited into the wrong bank account?

posted Sep 27, 12:09 pm (7 days ago), permalink

What happens when a tax refund gets deposited

What happens when a tax refund gets deposited into the wrong bank account?

QUESTION: What happens when a tax preparer enters incorrect Direct Deposit information, and the tax refund gets deposited into the wrong bank account?

ANSWER: It becomes a civil issue between the bank, the client, and the preparer. This is the biggest drawback to direct deposit! If the tax preparer makes an error on the bank account number then it becomes a civil issue, and the IRS essentially washes its hands of the matter. By contrast, a lost or misrouted IRS refund check is easy to replace. Source: https://www.irs.gov/faqs/irs-procedures/refund-inquiries/refund-inquiries-18


SOLUTION: ALWAYS have the client double-check and initial their direct deposit information. Every. Single. Year.

 

How To Grow Your Professional Network With Free Social Media Business Pages

posted Sep 21, 4:41 pm (13 days ago), permalink

Create Your Own Social Media Network

If you have a business as a tax preparer or a bookkeeper, (even if it's just a side gig) we suggest setting up Social Media pages for your business (separate from your personal page). Where you can post tax-related content that will engage your clients and potential new customers. These social media pages are all free to create. We suggest Canva to help you create easy images and templates for your social media content, (free accounts are available). 

Here are links to PassKey's Social Media pages, so you can get an idea of what we mean. Free accounts can be made on all these platforms to help promote your business. 

Follow us, and join the conversation!

User Question: Understanding the Estate Tax and the Aggregate Limit

posted Jul 31, 6:03 pm (65 days ago), permalink

estate tax return IRS forum slide slide

This fantastic question about the estate tax came from Richie Phillips, one of our forum users. 


 From Richie Phillips

If an individual gives multiple gifts of less than the exclusion amount over their lifetime, do each of these gifts still count toward the aggregate exclusion amount for estate tax?

For example, an individual taxpayer gives gifts to 1,000 people of $15,000 each. This is an aggregate total of $15,000,000. Since each gift was below the annual exclusion amount, does it matter that the aggregate total is above the $11.7 Million aggregate exclusion amount? Or will the taxpayer owe estate taxes on $3.3Million, the amount over the Estate exclusion limit? Hope this question makes sense.

Trying to wrap head around this. Thanks in advance.


From Christy Pinheiro 

Hi Richie, I understand what you are asking.

That $15,000 annual gift is not reportable, and does not count against the aggregate "lifetime" limit. We are talking about the ESTATE and GIFT tax, (not the income tax, now). The ESTATE tax is a tax on the transfer of property.

Congress basically does not want wealthy people to gift huge assets at the very end of their lives in order to distribute the majority of their estate to their family and friends and escape the estate tax. Whether you think this is right or wrong, it's just the way it is, and many wealthy people actually do NOT do any estate planning until it is too late, or they are in hospice, or whatever. In that case, it does make it much more difficult for the truly wealthy to avoid the estate tax and distribute assets to their loved ones. 

Now, if you happen to die and do not have assets even close to that $15 million limit, then none of this really matters.

But let's say I own valuable real estate, plus I have a lot of money and investments and also a valuable company and now my estate is worth more than $15,000,000. I want to make sure I distribute as much as I can to my family, tax-free to them, and non-reportable, so it does not count against my estate tax exclusion. 

I can give up to $15,000, in cash, every year, to any human I want, family or friends, and that never has to be reported anywhere. It is also not taxable to the recipient. So, let's say I want to transfer as much as I can to my brother, and by extension, my nieces and nephews, tax-free, and I do NOT want it to count against my lifetime exclusion. That's where estate tax planning comes in. 

My brother is married and has three kids. Okay, so I can give my brother and his family $75,000 in 2022 and nothing has to be reported anywhere ($15,000 X 5 people [my brother, his wife, and his three kids) all by giving them each separate checks, because they are all individual humans. Now, I am also married, so I could (potentially) ask my husband to write separate checks out of our joint account totaling $75,000 (once again, $15,000 each) and that, also would not be reported anywhere.

That means, that if my husband and I both write separate checks, we could potentially gift my brother's family $150,000 EVERY SINGLE YEAR, tax-free, and nonreportable, and that would not count against my gift/estate lifetime limit ($15,000 annual gift limit x 5 family members x 2 [me and the hubby]). 

Because each person is allowed to gift another person $15,000, every single year, and that is completely legal and does not have to be reported as a reportable gift. I can also increase this amount by offering to pay for my nephew's and niece's college education or any medical expenses, and as long as I make those payments directly to the college or the medical institution, that doesn't have to be reported, either. 

And yes, as you mentioned in your own example, if I wanted to gift 1,000 total strangers $15,000 each in 2022, that would be completely legal, not taxable to the donee, and not reportable by me (the donor). 

Realistically, though, wealthy people do not want to give 1,000 gifts to total strangers. What they want to do (and what most of us want to do, too) is to gift as many assets as possible to our children, or other very close relatives, like our parents or siblings.

This can easily be done, if it is done yearly, carefully, and consistently, (as I mentioned in the example above, with my brother), then wealth transfers can be made, but it has to be done with care, and annually. Not all at once when you get some terrible diagnosis, which unfortunately is how we see so many people who are just upper middle class get hit with the estate tax. Maybe they own valuable farmland, or even something as innocuous as 2 houses in the Bay Area, or Silicon Valley! And now their estate is over the limit.

This type of tax planning is so important to do BEFORE it is too late. But I digress. I hope this helps your understanding of a very, very complicated topic. 

~Christy Pinheiro, EA ABA

You can learn more about the estate tax, gift tax, and income tax by joining PassKey Online, and participating in our forums!

Free CPE Webinar: July 19, 2022: Understanding the Identity Verification Process

posted Jul 18, 10:06 am (78 days ago), permalink

IRS Presenting, July 19, 2022

Accessing the IRS: Understanding the Identity Verification Process

This free 75-minute webinar will discuss:

  • Improved access to IRS online services
  • What this means for e-Services users
  • IRS’s new identity verification and authentication platform
  • Registration overview
  • Key takeaways
  • Plus, a live Q&A

Registration: To register for the event, visit: https://www.webcaster4.com/Webcast/Page/1148/45798

Sponsored By: IRS Stakeholder Liaison

All participants who qualify will receive a Certificate of Completion. Tax Professionals — Earn up to 1 CE Credit. Category: Federal Tax.

Closed captioning will be offered.

Date: July 19, 2022
Time: 2 p.m. (ET); 1 p.m. (CT); 12 p.m. (MT); 11 a.m.  (Arizona and Pacific); 8 a.m. (Hawaii)

The EA Exam used to be 4 Parts!

posted Jul 10, 8:19 am (86 days ago), 0 comments, permalink

This letter was shared by a user in a public study group, (I redacted the name and any private information). I thought it would be interesting for current candidates to see how the SEE exam was broken into 4 parts in the past. You can also see why Part 2 is now widely considered to be the hardest part, because Part 2 and 3 of the old SEE exam were combined into one section. 

EA Exam Day Test Tips!

posted Jun 27, 9:29 am (99 days ago), permalink

Check out these fantastic exam tips shared by Steven Mangiameli, EA. We are so lucky to have him as part of our forum admin team! Come join the conversation! https://www.passkeyonline.com/group/show/128717.

Steve's EA Exam Tips

 

 

PassKey EA Exam Tax Forums are now LIVE!

posted Jun 23, 1:37 pm (103 days ago), permalink

The PassKey Power Forums are now live! Existing subscribers can post questions, ask for EA exam tips and ask for tax advice! You can earn badges and rise up our leaderboards! Moderators include licensed tax professionals. Join the conversation today!

Passkey Power Forum Group Image

PassKey EA Review TEXTBOOK and WORKBOOK for Part 2, Businesses

posted Apr 2, 8:33 am (185 days ago), permalink

The digital editions of the PassKey EA Review TEXTBOOK and WORKBOOK for Part 2, Businesses , have been uploaded for the 2022-23 testing cycle and are now live for Premium Subscribers. We will keep posting updates as new content is uploaded and becomes available. Sign up for the PassKey EA Review here: https://www.passkeyonline.com.

PassKey Textbook and Workbook DIGITAL editions

New PassKey EA Review Textbook Editions Coming Soon for 2022-2023

posted Feb 18, 10:30 am (228 days ago), permalink

New PassKey EA Review textbook editions will be available the first week of March. The trade paperback editions will be available on Amazon and Barnes & Noble in mid-April, 2022.

PassKey EA Review Coming soon 2022-2023

Free Ethics Course from John Sheely, EA and Marc Dombrowski, EA Dec 13, 2021

posted Dec 1, 10:06 am (307 days ago), permalink

 

2 Free IRS Ethics CE for enrolled agents

WEBINAR DETAILS

When Mon, Dec 13, 2021 · 1:00 PM Central Time 

Join Marc Dombrowski, EA and John Sheeley, EA for Tax Practice Pro's annual "Giving Tuesday" (on Monday this year) Free ETHICS IRS CE event. This course offers 2 ethics CE to PTIN holders and enrolled agents. 

IRS Program number: TBA 

This course discusses the ethics of taxpayer representation when multiple parties are involved. Specifically, the course looks at conflicts of interest and the duty of the Circular 230 professional.

Register early as seats are limited! 

Webinar sign up link: https://www.bigmarker.com/tax-practice-pro-inc1/Giving-Tuesday-moves-to-Cyber-2021-2-Free-IRS-Ethics-CE

This course satisfies the annual 2 hour ethics requirement for enrolled agents. Feel free to share this post with any tax practitioners who may benefit from it.

NOTE: PassKey Online is not affiliated with Tax Practice Pro, we are just passing on this information as a courtesy.  

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