Taxing Subjects

How Did Your 2023 Filing Season Go? [Infographic]

Tue, 13 Jun 2023 09:00:00 -0400

What did tax professionals think about the 2023 filing season?

Every filing season has unique challenges that attorneys, CPAs, EAs, and other tax professionals have to overcome when helping clients file their tax returns. To learn what preparers think about their experiences, Drake Software sends out its annual “How Did Your Filing Season Go?” survey.

This year, more than 1,600 tax professionals answered questions about a variety of topics, including the following:

How many extensions did you file this year?
How many clients had questions about the expiration of the Advance Child Tax Credit?
Were any of your clients affected by identity theft tax refund fraud this year?
Did you gain new clients who had been filing their own taxes?
What has been the most challenging tax issue of the 2023 filing season?

For the answers to these questions and more, download your free copy of the “How Did Your Filing Season Go?” infographic today.

Now Available: DrakeCPE 2023 AFTR Course!

Mon, 05 Jun 2023 15:05:00 -0400

As an IRS-approved continuing education provider, we know that preparing for the upcoming filing season requires more than updating your professional tax preparation software. That’s why our education specialists work tirelessly to deliver self-study and on-demand continuing education courses. We’re proud to announce that the Drake Software 2023 Annual Federal Tax Refresher Course (AFTR) is now available!

Who should take the 2023 AFTR Course?

This course is designed for tax professionals who are enrolled in the IRS Annual Filing Season Program (AFSP) who need to satisfy part of their annual voluntary continuing education requirement. The AFSP generally includes six credit hours for the AFTR Course, 10 credit hours for federal tax law, and two credit hours for ethics.

Participating tax professionals who complete all 18 continuing education credits earn an IRS AFSP Record of Completion, which includes additional benefits:

Inclusion in the public database of return preparers on IRS.gov
Limited client representation rights before the IRS

Those who pass tests administered as part of specific national and state tax return preparer programs may be exempt from the AFTR portion of the AFSP. However, these individuals will instead need to complete three credit hours in tax law updates to earn a Record of Completion.

For more information, visit the DrakeCPE FAQs page.

What is covered in the 2023 AFTR Course?

The six-credit-hour course covers three domains:

New Tax Law/Recent Updates
General Review
Practices, Procedures, and Professional Responsibility

The first two are primarily concerned with tax law. While New Tax Law/Recent Updates covers topics like inflation, new standard mileage rates, and the current status of tax extenders, General Review includes taxability of earnings and retirement income, tax credit eligibility, and the tax treatment of digital assets. Practices, Procedures, and Professional Responsibility addresses important practice-related items like tax-related identity theft, data security, and due diligence requirements.

Where can I take the 2023 AFTR Course?

Find the 2023 AFTR Course and AFSP bundles on DrakeCPE.com!

Drake Software Wins 8 Categories in 2023 CPA Practice Advisor Readers’ Choice Awards

Mon, 24 Apr 2023 10:32:39 -0400

Every year, CPA Practice Advisor asks readers to vote on the technology—both software and hardware—they trust the most. Just one day before the individual filing deadline, the publication announced the results of its nineteenth annual Readers’ Choice Awards, which included more than 5,000 respondents.

Just like years past, thousands of customers recognized Drake Software as a reliable partner during filing season. In addition to claiming the same five categories as last year, our solutions also took first place for website-builder, CPE-provider, and hosting-solution services.

Which categories did Drake Software win?

Federal/State Income Tax Preparation: Drake Tax®

Tax professionals need a reliable professional tax preparation solution—especially when navigating unprecedented challenges like a once-a-century pandemic. Since CPA Practice Advisor began hosting the Readers’ Choice Awards, Drake Tax has proven to be a dependable partner for paid tax return preparers: winning the Federal/State Income Tax Preparation category 18 times. Learn more about Drake Tax.

Tax Planning Systems: Drake Tax Planner™

Being able to quickly compare clients’ current tax situation with other possible scenarios—from having a child to changing jobs—helps you easily provide tax planning services. Just like last year, the Drake Tax Planner won the Tax Planning Systems category. Learn more about the Drake Tax Planner.

1099/W-2 Compliance: Drake Accounting®

Tax professionals who have small business clients commonly provide payroll services. Drake Accounting is our fully integrated bookkeeping solution, and it includes a number of essential payroll features, including live and after-the-fact payroll, multi-location payroll, and e-filing for Forms 94x, W-2, W-2G, W-3, and 1099. Learn more about Drake Accounting.

Client Portals: Drake Portals™

While remote tax preparation initially gained traction during the pandemic, many have now embraced the convenience of using Internet-based platforms to facilitate tax preparation services. Drake Portals allows tax professionals to securely exchange client tax documents, gather signatures, collect payments, back up files, and send instant messages. Learn more about Drake Portals.

Document Management & Document Storage: Drake Documents

Serving as the Drake Tax- and Drake Portals-integrated document management solution for client records and returns, Drake Documents also produces PDF images, password protects files, and watermarks documents as final, review, or draft. Learn more about Drake Documents.

Website Builders & Services for Accounting Firms: Drake Software SiteDart Hosting

SiteDart Hosting specializes in building websites for tax and accounting professionals, so you don’t need any experience with HTML to have a site with features like a financial calculator, tax-rate information, tax-return checklists, and federal and state refund searches. Learn more about SiteDart Hosting.

Favorite CPE Provider: DrakeCPE®

In addition to keeping tax pros informed about the latest tax and industry updates, continuing professional education is required to maintain myriad professional designations. For some, finding a reputable CPE provider that satisfies their educational needs and fits their busy schedules can be challenging. DrakeCPE offers more than 50 courses in a variety of formats, including self-study, on-demand, and live webinars. Learn more about DrakeCPE.

ASP/Hosted Solution Providers: Drake Software Hosting Powered by Right Networks

Whether operating a multi-site firm or needing anytime, anywhere access to your tax preparation applications, hosting software on a platform like Right Networks provides the convenience of browser-based applications with the user experience of local installs. In addition to accessing Drake Tax and Drake Accounting from any location with high-speed Internet, your data is stored in Tier 4 data centers that run 90-day, nightly rolling backups. Learn more about Drake Software Hosting Powered by Right Networks.

How did our partners perform?

Other Workflow Tools: GruntWorx®

The frenetic pace of filing season has led many tax professionals to seek workflow solutions that can help save their practice time. GruntWorx products automate a number of tasks, from organizing client documents to entering data in returns, and they are integrated with Drake Tax. Learn more about GruntWorx.

Tax Document Automation: GruntWorx Populate

Populate saves time spent on data entry by extracting and inserting information from scanned client tax documents into many professional tax preparation applications. Integration with Drake Tax makes this process even easier, since scanning, printing, and file management can all be handled in Drake Documents.

Tax & Accounting Research Systems: TheTaxBook™

It’s essential that you have the tax information you need when you need it, especially during filing season. TheTaxBook WebLibrary Plus is a deep tax research database that is integrated within Drake Tax. Learn more about TheTaxBook.

Source: CPA Practice Advisor 2023 Readers’ Choice Awards

Tennessee Storm Victims Have Deadlines Moved to July 31

Wed, 19 Apr 2023 09:20:57 -0400

After severe thunderstorms and tornadoes raked parts of Tennessee on March 31, many of Volunteer State taxpayers could use a little good news. The Internal Revenue Service is doing its part, announcing tax relief for storm victims.

The agency announced that taxpayers and businesses in the 10 hardest-hit counties have been given until July 31, 2023, to meet a number of filing and payment deadlines, including the following:

April 18: income tax return filing and payment deadline
April 18: quarterly estimated tax payment deadline
April 30: quarterly payroll and excise tax return deadline
June 15: quarterly estimated tax payment deadline

Further, the IRS says penalties on payroll or excise tax deposits due March 31 - April 18 will be abated as long as tax deposits are made by April 18.

Information on other returns qualifying for relief, payments delayed, and other details can be found on the Disaster Assistance and Emergency Relief for Individuals and Businesses page on the IRS website.

Which Tennessee counties are receiving this tax relief?

The expanded deadlines are available to taxpayers and businesses in the 10 Tennessee counties named in the federal disaster declaration:

Cannon
Hardeman
Hardin
Haywood
Lewis
Macon
McNairy
Rutherford
Tipton
Wayne

If any other counties are added to the disaster declaration, the IRS will automatically add them to the list of qualifying counties.

There is one caveat for those who want more time beyond the expanded July 31 deadline: extension requests from disaster-area taxpayers after April 18 and before July 31 can only be filed on paper. (See the "Extension of Time To File Your Tax Return" page on IRS.gov for more details.)

Do taxpayers need to do anything to receive this tax relief?

Taxpayers within the disaster area do not have to do anything to receive the IRS relief measures; when they file, IRS electronic systems will apply relief measures according to the address on the return. However, any tax return that claims a loss within the disaster area due to these storms should contain the FEMA declaration number: 4701-DR.

According to the IRS, those living outside the disaster area may still be able to qualify for this tax relief if "records necessary to meet a deadline occurring during the postponement period are located in the affected area," or they are "workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization." Unlike residents who automatically receive relief, these taxpayers need to call the IRS: 866-562-5227.

Source: IR-2023-75

2023 Dirty Dozen: Ineligible Employee Retention Credit Claims

Fri, 24 Mar 2023 17:07:42 -0400

Identity theft usually takes center stage during most tax-scam discussions. After all, so much of our personal and professional lives take place online in emails, texts, and direct messages—all of which are ripe targets for phishing attacks. However, not all identity threats are limited to inboxes.

The Internal Revenue Service began its 2023 Dirty Dozen campaign by warning taxpayers about a scam that is being spread through radio and online advertisements. Fraudsters are encouraging ineligible businesses to claim the Employee Retention Credit (ERC) by spreading incorrect eligibility requirements.

How does the ERC scam work?

Taxpayers are generally introduced to the scam in ads promoting easy ERC payouts. Once contacted, these third parties tend to either charge a significant upfront fee or collect a percentage from the employer’s refund—two tactics often utilized by scammers (like ghost preparers).

The scammers might use any of the following methods to convince employers to claim the credit:

[Inaccurately] explain eligibility for and computation of the credit
[Suggest] that all employers are eligible without evaluating an employer’s individual circumstances
[Fail to] inform employers that they cannot claim the ERC on wages that were reported as payroll costs in obtaining Paycheck Protection Program loan forgiveness

In addition to causing a headache for legitimate tax professionals dealing with duped business clients, the ERC scam could result in penalties—civil and criminal—and identity theft.

What is the legitimate method for claiming the ERC?

The Employee Retention Credit was created to help qualifying businesses weather pandemic-related shutdowns from March 13, 2020, to December 31, 2021—providing refundable tax credits for continuing to pay employees or experiencing a reduction in gross receipts during that period. So, to claim the ERC, employers need to meet the following criteria:

Sustained a full or partial suspension of operations due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings due to COVID-19 during 2020 or the first three quarters of 2021,
Experienced a significant decline in gross receipts during 2020 or a decline in gross receipts during the first three quarters of 2021, or
Qualified as a recovery startup business for the third or fourth quarters of 2021

For more information about credit eligibility, check out Notice 2021-20, Notice 2021-23, Notice 2021-49, Notice 2021-65, and Revenue Procedure 2021-33.

What should employers do if they were convinced to participate in the ERC scam?

The IRS suggests that employers who participated in the ERC scam should immediately file an amended return. The agency reminds that “taxpayers are always responsible for the information reported on their tax returns,” and “improperly claiming the ERC could result in taxpayers being required to repay the credit along with penalties and interest.”

Sources: IR-2023-49; IR-2022-183

IRS Digital Intake Initiative Underway

Mon, 20 Mar 2023 13:40:18 -0400

New technology could improve tax return processing time at the IRS

Paper returns have historically been slower to process due to the Internal Revenue Service having to manually transcribe information, leading taxpayers who want to more quickly receive their refund to electronically file. However, there could be a light at the end of the tunnel for those who either prefer or are required to file paper returns.

This year, the IRS launched the Digital Intake scanning initiative as part of its push to improve the service it provides to everyone, from taxpayers and businesses to members of the tax industry. As part of the initiative, the agency is deploying new scanning technology to more quickly convert scanned paper tax returns into digital files.

“The IRS has been using various technologies to scan tax returns for more than 35 years but recently took a leap forward by leveraging cutting-edge technologies via a revolutionary procurement approach to test their effectiveness,” the IRS explains. “The capabilities enable the IRS to digitalize more paper for downstream processing and storage, resulting in greater efficiencies and improved data management outcomes.”

Currently, the initiative involves Lockbox Financial Agent banks and contracted industry partners.

How is the Digital Intake initiative going?

The IRS says they have already scanned more than 120,000 Forms 940 since the year began: roughly twenty times more than all the documents scanned last year. As a result, they have also earmarked Forms 1040 and 941 for the initiative.

This early inclusion of individual income and employer quarterly tax forms could signal that the program will be successful. Ultimately, the shift to efficient, accurate digital conversion tools would facilitate electronic processing and storage for paper filings, reducing turnaround time for these returns.

IRS Chief Information Officer Nancy Sieger shared her optimism about the program: "technology powers tax administration, and we have completed important work over the last year to help people get the assistance they need and reduce paper, in addition to improving the agency's underlying technology infrastructure. This is another positive step in the future technology direction for the IRS that includes improving service to taxpayers."

Source: IR-2023-41

Tax Relief Extended for Disaster Victims in Alabama, California, and Georgia

Thu, 09 Mar 2023 12:58:08 -0500

The Internal Revenue Service recently extended tax relief for disaster victims in Alabama, California, and Georgia. Individuals and businesses in these federally declared disaster areas now have until October 16, 2023, to meet several filing and payment deadlines.

Which filing and payment deadlines are extended by this tax relief?

The tax relief provided to disaster victims in Alabama, California, and Georgia affects a number of deadlines, including:

January 17: fourth quarter 2022 estimated tax payments
January 31: quarterly payroll and excise tax returns
March 1: farmer returns for those who forgo estimated tax payments
March 15: various business returns
April 18: individual income tax returns
April 18: various business returns
April 18: estimated tax payments
April 30: quarterly payroll and excise tax returns
May 15: tax-exempt organization returns
June 15: estimated tax payments
July 31: quarterly payroll and excise tax returns
September 15: estimated tax payments

Additionally, uninsured and unreimbursed losses resulting from these disasters can be “[claimed] on either the return for the year the loss occurred or the return for the prior year.”

Can anyone else qualify for this tax relief?

Taxpayers living outside disaster areas can also receive this tax relief if they meet specific requirements, like storing deadline-relevant records or serving as relief workers for a “recognized government or philanthropic organization” in those locations. The IRS directs these individuals to call 866-562-5227 to learn more about potentially qualifying.

Where can I learn more about this tax relief?

The following resources contain more information about affected deadlines and claiming uninsured or unreimbursed losses, respectively:

If you’re interested in earning CPE while learning to serve clients affected by a disaster, check out our new Federally Declared Disasters course on DrakeCPE.com. This course will teach you to determine filer eligibility, identify casualty losses, and prove, figure, and report gains and losses.

Source: IR-2023-33

SCOTUS Rules FBAR Penalty Determined on Per-Report Basis

Wed, 08 Mar 2023 17:28:33 -0500

Taxpayers with foreign bank accounts who forgot to file an annual Report of Foreign Bank and Financial Accounts (FBAR) received some good news at the end of February. In Bittner v. United States, the Supreme Court ruled that the penalty for nonwillful failure to file an FBAR should be assessed on a per-report basis—capping fines at $10,000 per year, regardless of the number of accounts.

Which foreign accounts should taxpayers include in FBAR?

The Bank Secrecy Act (BSA) requires that taxpayers report foreign accounts in which they hold a financial interest, including:

Bank accounts
Brokerage accounts
Mutual funds
Unit trusts
Other financial accounts (“Bank Secrecy Act,” IRS.gov)

One type of financial account is conspicuous by its absence: FBAR does not currently apply to accounts exclusively holding virtual currency. However, the Financial Crimes Enforcement Network (FinCEN) has already announced its intention to propose regulations that would “include virtual currency as a type of reportable account under 31 CFR 1010.350” (FinCEN Notice 2020-2).

Why did SCOTUS issue this ruling?

The majority opinion argues that the government’s per-account method for calculating nonwillful FBAR fines is not supported by statute, Treasury guidance, or Congressional statement of purpose (5-9, 11). They note that these examples actually serve as evidence for determining nonwillful fines on a per-report basis, including the following:

“Section 5314 provides that the Secretary of the Treasury ‘shall’ require certain persons to ‘keep records, file reports, or keep records and file reports’ when they ‘mak[e] a transaction or maintai[n] a relation’ with a ‘foreign financial agency’”
“Section 5321 authorizes the Secretary to impose a civil penalty of up to $10,000 for ‘any violation’ of Section 5314”
“In 2010, the Department of the Treasury issued a notice of proposed rulemaking warning that, under its proposed rules, ‘[a] person who is required to file an FBAR and fails to properly file may be subject to a civil penalty not to exceed $10,000’”
“Instructions included with the FBAR form have cautioned that ‘[a] person who is required to file an FBAR and fails to properly file may be subject to a civil penalty not to exceed $10,000’”
“Congress has declared that the BSA’s ‘purpose’ is ‘to require’ certain ‘reports’ or ‘records’ that may assist the government in everything from criminal and tax to intelligence and counterintelligence investigations”

Since there is no mention of per-account fines for nonwillful violations—and many government documents instead seemingly indicate per-report fines—SCOTUS ultimately sided with Bittner, reaffirming that penalties should be clearly stated in “language that the common world will understand” (15).

How can I learn more about FBAR?

We offer a new course on DrakeCPE.com dedicated to teaching paid tax return preparers about reporting foreign financial accounts. After completing Reporting Foreign Financial Accounts: FinCEN and FBAR, you will know what led to the creation of FBAR and how to meet relevant preparation and filing guidelines.

Source: “Bank Secrecy Act,” IRS.gov; Bittner v. United States, No. 21-1195 (2023); FinCEN Notice 2020-2

IRS Announces Direct Deposit for Amended Returns

Mon, 20 Feb 2023 08:37:10 -0500

Filing an amended return used to mean completing a paper form, regardless of how taxpayers submitted the original return to the Internal Revenue Service. During the pandemic, paper-filed returns presented processing challenges that contributed to a historic backlog at the Internal Revenue Service.

Nearly two years after the IRS first began allowing electronic filing for Forms 1040-X, there is more good news for the roughly 3 million taxpayers expected to amend this year. Last week, the IRS announced that direct deposit is now available for refunds issued to taxpayers who file an amended return.

Why is the IRS now able to offer direct deposit for amended returns?

The IRS says recent system updates made the implementation of direct deposit for amended tax returns possible. This development represents the agency’s continued push to improve customer service, an effort ultimately bolstered by increased funding from legislation like the Inflation Reduction Act.

“Those filing amended returns can now enjoy the same speed and security of direct deposit as those filing an original Form 1040 tax return,” the IRS explains. “Taxpayers filing an original tax return using tax preparation software can file an electronic Form 1040-X if the software manufacturer offers that service.”

Will electronic filing and direct deposit help the IRS process amended returns faster?

The short answer is “no.”

The IRS is required to manually process all amended returns, which takes an average of 20 weeks, irrespective of the chosen filing method. However, the IRS says choosing e-file and direct deposit “cuts out the mail time” and “provides a convenient and secure way to receive refunds faster.”

Can I electronically file amended returns with Drake Tax®?

Drake Software customers do not have to wait for a program update to provide direct-deposit services to clients filing Forms 1040-X. Drake Tax has supported direct deposit for amended returns since the IRS announced its availability.

Source: IR-2023-22

2022 Special State Payments Not Taxable

Fri, 17 Feb 2023 11:47:50 -0500

In 2022, millions of Americans received special state-issued payments designed to provide economic relief to residents struggling with financial burdens exacerbated by issues ranging from the pandemic to natural disasters. One week after urging recipients to postpone filing their returns, the Internal Revenue Service has issued official guidance regarding the federal taxability of those payments.

Last Friday, the IRS clarified that one-time state payments that address general welfare or disaster relief would not be considered federally taxable. While some of these payments will automatically benefit from the agency declining to challenge their taxability, others must meet additional criteria to qualify.

Why did the IRS decide these payments were not federally taxable?

The IRS says a number of factors influenced their decision, including the start of filing season and the one-time nature of the payments. According to the agency, this decision ultimately serves “the interest of sound tax administration.”

Which special state payments are affected?

The following special state payments issued in 2022 will not be considered federally taxable, according to the State Payments page on IRS.gov:

Alaska: Energy Relief Payment (supplementing the Permanent Fund Dividend)
California: Middle Class Tax Refund
Colorado: Colorado Cash Back
Connecticut: Child Tax Rebate
Delaware: Relief Rebate Program
Florida: Pandemic Temporary Assistance to Needy Families
Hawaii: Act 115 Refund
Idaho: 2022 Tax Rebate
Illinois: Individual Income Tax Rebate and Property Tax Rebate
Indiana: Automatic Taxpayer Refund #1 and Automatic Taxpayer Refund #2
Maine: Pandemic Relief Payments
New Jersey: ITIN Holders Director Assistance Program
New Mexico: Review list on Tax.NewMexico.gov
New York: Supplemental Child Credit and Supplemental Earned Income Tax Credit
Oregon: One-Time Assistance Payments
Pennsylvania: One-Time Bonus Rebates
Rhode Island: 2022 Child Tax Rebates

The IRS says this treatment will only apply in Georgia, Massachusetts, South Carolina, and Virginia if recipients claimed the standard deduction or received no tax benefit when itemizing.

There could be some confusion in California

In January, the California Franchise Tax Board issued federal Forms 1099-MISC to taxpayers who received a Middle Class Tax Refund payment of $600 or more. While the MCTR is not considered taxable income at the state level, the board likely anticipated that the IRS would require taxpayers report these payments as federally taxable income.

Since many California taxpayers will likely have received these forms weeks ago, early filers may have incorrectly reported the payments as income. How the federal tax agency will handle those returns remains to be seen.

Source: IR-2023-23

Clean Vehicle Credit Guidance Revises Classifications

Tue, 14 Feb 2023 10:40:36 -0500

As part of the Inflation Reduction Act of 2022, lawmakers made changes to the Clean Vehicle Credit that were meant to encourage the purchase of U.S.-made electric and fuel cell vehicles. Unfortunately, the criteria for qualifying vehicles has proven confusing for some taxpayers.

To provide clarity for those interested in claiming the credit, the Internal Revenue Service issued proposed regulations for final assembly and MSRP requirements earlier this year. That effort was continued last week, when the agency announced new guidance updating the vehicle classification standard that defines the different types of qualifying vehicles.

How was vehicle classification information for the Clean Vehicle Credit changed?

The vehicle classification standard for vans, sport utility vehicles, pickup trucks, and passenger vehicles now includes the fuel economy labeling regime determined by the EPA Administrator. As a result of this change—and to ensure taxpayers can readily find qualifying information—the IRS updated information under five FAQ topics:

Topic A: Eligibility Rules for the New Clean Vehicle Credit: Questions 1 and 8
Topic B: Income and Price Limitations for the New Clean Vehicle Credit: Questions 2, 6, 8, 9 and added new Question 7
Topic C: When the New Requirements Apply to the New Clean Vehicle Credit: Question 7
Topic D: Eligibility Rules for the Previously Owned Clean Vehicle Credit: Question 4
Topic G: Qualified Commercial Clean Vehicles Credit: Question 6

However, the General Overview of Taxpayer Reliance on Guidance Published in the Internal Revenue Bulletin and FAQs page on IRS.gov notes that FAQs are not interchangeable with officially published guidance from the Internal Revenue Bulletin.

While the agency generally sees FAQs as merely a means of “quickly [communicating] information to the public on topics of frequent inquiry and general applicability,” they note “a taxpayer’s reasonable reliance on an FAQ (even one that is subsequently updated or modified) is relevant and will be considered in determining whether certain penalties apply.”

Source: IR-2023-18

Drake Tax® Wins 3 Categories in Survey of New York State CPAs

Thu, 26 Jan 2023 09:33:58 -0500

Every year, the New York State Society of CPAs surveys its membership to learn what those who prepare tax returns think about the performance of their practice management and tax preparation tools. Unsurprisingly, the authors found that the pandemic continued to cast a shadow over filing season, specifically highlighting trouble resulting from the IRS backlog.

Respondents to the 2022 Annual Survey of New York State Practitioners were asked about a range of topics, including their tax preparation software, tax research software, contactless technology, and challenges faced during filing season. Participating Drake Software customers gave Drake Tax the highest rating in three critical categories.

Which categories did Drake Tax win?

Customers have long associated Drake Tax with industry-leading value and support due to time-saving efficiency features, critical software integrations, and knowledgeable onboarding staff and customer service representatives. This belief was reflected in the results of the tax preparation software ratings, where our professional tax preparation software won the following categories:

Value for Cost
Customer Support
Overall Rating

The CPA Journal notes that Drake Tax has consistently earned the highest overall rating for tax preparation software since 2010, winning the category for 12 of the past 13 years. Given the authors describe the 2022 filing season as “an extremely difficult practice environment,” the survey results underscore the importance of having reliable tax preparation software.

Can I try Drake Tax for free?

Want to see for yourself why Drake Tax consistently earns the highest overall rating in industry surveys? Just click the button below to get started with our free trial.

Source: “Practice Management and Tax Practice in the Current Environment,” CPAJournal.com

Did You Know DrakePortals® Has a Mobile App?

Fri, 20 Jan 2023 10:57:12 -0500

In 2022, email inboxes are inundated with phishing scams. For most people, one wrong click can result in a stolen identity or lost access to important files. Considering tax offices routinely serve hundreds (or even thousands) of clients every year, finding a convenient, secure platform for remotely exchanging tax documents can be a game changer.

DrakePortals provides tax professionals a Drake Tax®-integrated, SecureFilePro.com-subdomain website for exchanging tax documents, communicating with clients, collecting signatures and payments, and more. While tax clients have always been able to access the web-based client portal from a browser, they can now download the SecureFilePro® mobile app from Google Play or the Apple App Store.

What features can tax clients access on the SecureFilePro mobile app?

Tax clients who download the SecureFilePro mobile app have access to the same features as the client-facing website:

Send and receive instant messages
Review a prior-year summary
Exchange documents (no file-size limit for attachments!)
Sign forms (requires the separate purchase of e-signature events)
Make payments

Clients can also change account information—including email, password, and multi-factor authentication status—at any time.

How do tax clients log in to the SecureFilePro mobile app?

Tax clients log in with the credentials they chose during account creation.

What features are available for Drake Tax users?

Cloud backup and restore features are available to tax professionals using Drake Tax. While 5GB of storage is included with Drake Portals, you can purchase up to 25GB.

Where can I find more information about Drake Portals?

To learn more, visit the Drake Portals page on DrakeSoftware.com.

Drake Accounting® Makes Bookkeeping Easy

Tue, 17 Jan 2023 11:21:34 -0500

Welcome to the third blog in our three-part series highlighting Drake Accounting features that can help you better serve clients! This week, we are focusing on the accounting module in our integrated, full-scale accounting software.

From initial client setup to posting transactions, professional accountants need simple, efficient software that helps address each client’s unique financial circumstance. Drake Accounting was designed from the ground up to streamline accounting workflow and provide convenient customization options.

Make Chart of Accounts setup easy

Drake Accounting has three options for setting up a new client’s Chart of Accounts (COA):

Use one of our COA templates based on Generally Accepted Accounting Principles (GAAP)
Import a COA from another client
Create a custom COA

After making your own COA, you can use that template for other clients. As part of the integration with Drake Tax®, you can export a mapped COA to specific forms and lines of tax forms.

Don’t already have Drake Tax? Download the free trial to see why Drake Software customers responding to the Journal of Accountancy 2022 Tax Software Survey gave our professional tax software the highest rating in critical categories, like Easy e-Filing, Easy Update/Installation Process, Easy to Get Technical Support, and Easy to Use.

Seamlessly update prior-year information

Moving last year’s data forward is painless in Drake Accounting. Whether updating clients’ prior-year bookkeeping records or On-the-Fly Update payroll entries, you won’t have to enter any client information again. (Read more about payroll features in part two of this Drake Accounting blog series.)

Use the journal entry method you prefer

If you prefer to enter transactions manually, choose from five customizable presets or create your own journal types. Filtering by month, year, and current status (“balanced,” “not balanced,” or “no entries”) makes it easy to find specific transactions.

When saving time is a priority, automatic journal entry significantly expedites the process—and enabling Detailed Descriptions for these transactions provides even more information (like indicating a payroll entry is “gross pay”). Further, you can simplify cumulative entries for clients who make regular purchases from another company by designating that business as a default vendor account.

Can I get a free trial of Drake Accounting?

Visit the “Try Drake Accounting” page on Accounting.DrakeSoftware.com to get the free trial. To access the Drake Accounting free trial, you need an existing Drake Software account.

2022 Tax Filing Statistics [Infographic]

Mon, 16 Jan 2023 10:06:20 -0500

In 2022, the Internal Revenue Service faced a historic backlog of unprocessed tax returns that the Department of Treasury attributed to underfunding and pandemic-related challenges. When Drake Software pulled the IRS tax filing statistics for last year, two issues were top of mind:

How many individual returns were processed compared to the same period in 2021?
Did taxpayers choose to file with a tax professional or do-it-yourself product?

For the answers to those questions and more, get the FREE Drake Software 2022 Tax Filing Statistics Infographic.

California Storm Victims Get Tax Relief

Thu, 12 Jan 2023 17:30:01 -0500

Californians have been battered by torrential rains and flooding from a recent series of storms. To help victims recover, the Internal Revenue Service recently announced tax relief for federally declared disaster areas in the state.

Which California counties are getting tax relief?

Initially published on January 10, the news release was updated yesterday to include 10 new affected areas. Now, the relief applies to 41 counties across the state:

Alameda
Colusa
Contra Costa
El Dorado
Fresno
Glenn
Humboldt
Kings
Lake
Los Angeles
Madera
Marin
Mariposa
Mendocino
Merced
Mono
Monterey
Napa
Orange
Placer
Riverside
Sacramento
San Benito
San Bernardino
San Diego
San Francisco
San Joaquin
San Luis Obispo
San Mateo
Santa Barbara
Santa Clara
Santa Cruz
Solano
Sonoma
Stanislaus
Sutter
Tehama
Tulare
Ventura
Yolo
Yuba

Visit the IRS’s Tax Relief in Disaster Situations page for the most up-to-date list of eligible locations.

What are the terms of the California tax relief?

Tax relief generally provides qualifying individuals and businesses residing in federally declared disaster areas additional time to meet filing and payment deadlines. The California relief pushes back a number of deadlines beginning January 8, 2023, until May 15, 2023, including the following:

January 17, 2023, quarterly estimated tax payment deadline
January 31, 2023, quarterly payroll and excise tax filing deadline
March 1, 2023, farmers’ filing and payment deadline (if they forgo quarterly estimated payments)
April 18, 2023, quarterly estimated tax payment deadline
April 18, 2023, individual income tax return filing and payment deadline
April 30, 2023, quarterly payroll and excise tax filing deadline

This relief also extends to individuals and businesses with uninsured or unreimbursed losses resulting from the storms. Qualifying victims “can choose to claim [those losses] on either the return for the year the loss occurred (in this instance, the 2023 return normally filed next year), or the return for the prior year (2022, normally filed this tax season).”

However, when claiming uninsured or unreimbursed losses, taxpayers should review Publication 547 and remember to “write the FEMA declaration number—3691-EM—on any return claiming a loss.”

Sources: IR-2023-03; “Storms keep pummeling California, causing widespread flooding and evacuations,” NPR.org

2023 Filing Season Begins January 23

Thu, 12 Jan 2023 15:35:58 -0500

The wait is over for tax professionals eager to learn when the 2023 filing season will begin. Today, the Internal Revenue Service revealed they will start accepting and processing individual returns on January 23, 2023. The federal tax agency reassures that the service it provides this year will be improved by the recent hiring of more than 5,000 telephone and in-person staff.

This announcement caps off several busy weeks for the federal tax agency, which have included the publication of guidance related to clean vehicles, the completion of automatic corrections for the 2020 unemployment compensation exclusion, and the extension of deadlines for California storm victims.

When is Tax Day 2023?

The deadline for filing an individual return, requesting an extension, and paying tax owed is April 18, 2023 due to the Emancipation Day holiday.

How long will it take the IRS to issue tax refunds?

The IRS predicts that tax refunds generally will be issued within 21 days if the following criteria are met:

The return is filed electronically
The taxpayer chooses direct deposit
The return has no issues

However, a provision in the PATH Act prevents the IRS from issuing refunds for any return claiming the Earned Income Tax Credit or Additional Child Tax Credit until February 15. This delay is designed to provide the agency with additional time to combat fraudulent tax returns.

Do I have to wait until January 23 to transmit client returns to the IRS?

Tax professionals using Drake Tax® do not have to wait until January 23 to submit completed individual client returns. Drake Software places returns received before the start of filing season in a queue and automatically transmits them to the IRS when the agency begins processing.

Source: IR-2023-05

IRS Addresses Final Assembly, MSRP Requirements for Clean Vehicle Credit

Fri, 06 Jan 2023 22:01:36 -0500

High gas prices have understandably made plug-in electric and fuel cell vehicles more attractive in recent years. While a provision in the Inflation Reduction Act of 2022 is designed to make the switch less of a financial burden, there is confusion surrounding some of the new requirements for the Clean Vehicle Credit.

Naturally, the Internal Revenue Service has been working to issue guidance for those new requirements. As part of that effort, the agency announced proposed regulations in Notice 2023-1 and updated webpages containing general information about the Clean Vehicle Credit and an index of qualified manufacturers and vehicles.

How does the Clean Vehicle Credit work for TY 2023?

The Clean Vehicle Credit can be worth up to $7,500 for qualifying EVs and FCVs purchased and put into service on or after January 1, 2023. For the purposes of the credit, “put into service” means “the date the taxpayer takes possession of the vehicle” (N 2023-1, 5).

(Note: The Clean Vehicle Credit was available for clean vehicles purchased prior to 2023, but those requirements are different.)

Like many individual tax credits, those who want to claim the Clean Vehicle Credit cannot have a modified adjusted gross income (AGI) that exceeds a specific threshold established for their filing status:

$300,000 for married couples filing jointly
$225,000 for heads of households
$150,000 for all other filers

Further, qualifying vehicles have to meet a number of requirements, ranging from the location of final assembly to MSRP thresholds for specific vehicle classifications. Here is how the IRS breaks down the requirements:

Have a battery capacity of at least 7 kilowatt hours
Have a gross vehicle weight rating of less than 14,000 pounds
Be made by a qualified manufacturer. See [the] index of qualified manufacturers and vehicles.

FCVs do not need to be made by a qualified manufacturer to be eligible. See Rev. Proc. 2022-42 for more detailed guidance.

Undergo final assembly in North America
[MSRP doesn’t exceed] $80,000 for vans, sport utility vehicles, and pickup trucks
[MSRP doesn’t exceed] $55,000 for other vehicles

Further, the vehicle must be purchased new, and the seller has to report all required information to the IRS at the time of sale. To ensure a vehicle meets the North America final assembly requirement, the IRS recommends using the Department of Energy VIN Decoder tool. (The rules for used vehicles are different.)

What about the mineral and battery component requirements?

Unfortunately, the notice does not explain the critical mineral and battery component percentage requirements, which are generally considered the most complicated aspect of the updated Clean Vehicle Credit. However, the agency promises that proposed regulations for those requirements are “forthcoming” (N 2023-1, 3).

Want to learn more about the Inflation Reduction Act?

Attend a Drake Software webinar exploring the Inflation Reduction Act that features Drake Software Chief Revenue Officer John Sapp, CPA; Drake Software Lead Tax Analyst Bob Nolan, CPA EA; and Drake Software Tax Software Trainer Ann Campbell, CPA CIA. Sign up for “Inflation Reduction Act: Panel Discussion” on DrakeCPE.com.

Sources: Notice 2023-1; “Manufacturers and Models of Qualified Used Clean Vehicles,” IRS.gov; “Manufacturers and Models for New Qualified Clean Vehicles Purchased in 2022 and Before,” IRS.gov; “Manufacturers and Models for New Qualified Clean Vehicles Purchased in 2023 or After,” IRS.gov; “Credits for New Clean Vehicles Purchased in 2023 or After,” IRS.gov

Provide Payroll Services with Drake Accounting

Thu, 15 Dec 2022 17:06:54 -0500

Welcome to the second in our three-part series highlighting Drake Accounting features that can help you better serve clients! This week, we are focusing on payroll features in our integrated, full-scale accounting software.

Many tax offices first dabble in accounting services by providing payroll for existing business clients. This transition is built upon the trust established by years of positive results, and it is an opportunity to grow the tax practice in a meaningful way. Whether entering the market for the first time or having provided these services for years, you need a dependable, flexible payroll solution.

Does Drake Accounting support live and after-the-fact employee payroll?

Drake Accounting provides live and after-the-fact (ATF) payroll, allowing you to print negotiable employee payroll checks or record checks printed by clients. Access the features you need, when you need them:

Print MICR checks
Provide direct deposit
E-file quarterly and yearly employment tax forms
E-file Forms W-2 and 1099-MISC

When running reports or producing informational returns, live and ATF entries are automatically combined—providing all the information you need in one location.

Can I provide payroll services to multi-location businesses?

Drake Accounting makes it easy to serve businesses with multiple locations, even those in different states. The multi-location payroll feature lets you configure benefits, deductions, and pay rates by location. Further, payroll can be printed as one check or by location.

Do I have a limited number of deductions in Drake Accounting?

Drake Accounting provides unlimited clients, installs per site, and payroll. Within the payroll module, there are no limits on the number of deductions, benefits, pay rates, localities, and diversions.

Where can I find more information about Drake Accounting?

Visit Accounting.DrakeSoftware.com to learn more about critical features. Already a Drake Tax customer? Attend a webcast to learn how purchasing Drake Accounting can improve office workflow and help expand client services.

2022 Are You Ready for Filing Season? [Infographic]

Tue, 29 Nov 2022 12:15:12 -0500

Preparing for filing season is a serious time investment. From renewing credentials and purchasing software to completing training and contacting clients, successful tax professionals diligently work through their checklist every year—but no two offices are the same.

Drake Software surveyed more than 1,900 tax pros to learn how they prepare for filing season. The 2022 Are You Ready for Filing Season? Infographic details the results, covering PTIN renewal, continuing professional education, tax-preparation products, office equipment, and more.

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E-File Employer Forms with Drake Accounting

Wed, 23 Nov 2022 12:14:20 -0500

Welcome to the first in our three-part series highlighting Drake Accounting features that can help you better serve clients! This week, we are focusing on how our integrated, full-scale accounting software supports electronic filing for employer forms.

Small-business clients are the cornerstones of many tax and accounting practices across the country. Having efficient, feature-rich accounting software can help you improve the quality of the service you provide and improve your bottom line.

Which business forms can I e-file with Drake Accounting?

Going paperless whenever possible can streamline workflow and help you seamlessly transition from data entry to transmission. Drake Accounting enables you to save time by supporting e-file for many employer-related forms:

If you serve clients who need to report income from other sources, Drake Accounting will also e-file Forms 945, 1099, 1096, 1098, and W-2G.

Can I e-file the forms with Drake Accounting if my client keeps their own books or uses a separate payroll service?

Yes, you can e-file employer forms for clients who keep their own books or use a separate payroll service using the On-the-Fly feature in Drake Accounting. See the Drake Software Knowledge Base for more information about this process.

Where can I learn more about Drake Accounting?

For more information about Drake Accounting features and how it seamlessly integrates with Drake Tax, visit Accounting.DrakeSoftware.com. If you already have Drake Tax and want to learn how purchasing Drake Accounting can improve your business workflow, sign up for a webcast. Our expert instructors host classroom-style training that you can enjoy from any location with Internet access.

Drake Software 2022 How Do Your Tax Prep Fees Stack Up? [Infographic]

Fri, 04 Nov 2022 15:27:55 -0400

The results of the How Do Your Tax Prep Fees Stack Up? survey are in!

Drake Software surveyed 3,620 tax professionals to learn what they plan to charge for tax preparation services during the 2023 filing season. Respondents answered more than 15 questions covering fee-related topics, including:

How they intend to charge for services
Whether they intend to increase fees
Which payment options they accept
What they plan to charge per form

In addition to detailing this information, the resulting infographic contains an appendix that organizes responses by demographic information, like state, local market, professional credentials, and the anticipated number of prepared returns.

Tax professionals are planning to increase their fees for the 2023 filing season

One of the most surprising findings is that tax professionals are planning an across-the-board 10% increase in form-based fees compared to last year. Here are those percentages by form:

1040: 12%
1040 + Schedule A: 10%
1040 + Schedule C: 11%
1065: 13%
1120: 10%
1120-S: 10%
1041: 13%
990: 4%
706: 7%

To learn how much preparers will charge next year, get your free copy of the 2022 How Do Your Tax Prep Fees Stack Up? Infographic.

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Complete the form below
Wait for the page to refresh
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Storm Victims in North Carolina and South Carolina Get Tax Relief

Fri, 14 Oct 2022 13:19:36 -0400

New filing deadlines for more Hurricane Ian victims

The Internal Revenue Service this week announced tax relief for victims of Hurricane Ian who reside or operate a business anywhere in North Carolina and South Carolina. Like relief granted to storm victims in Florida, the agency is delaying several federal filing and payment deadlines.

Each state has a different start date for the automatic, retroactive tax relief. In South Carolina, it affects deadlines occurring on or after September 25, 2022; in North Carolina, this period begins on September 28. In both states, the following federal deadlines are now February 15, 2023:

October 17, 2022, individual extension filing deadline (does not apply to tax payments due April 18, 2022)
October 17, 2022, calendar-year corporation extension filing deadline
October 31, 2022, quarterly payroll and excise tax returns deadline
November 15, 2022, calendar-year tax-exempt organization extension filing deadline
January 17, 2023, quarterly estimated income tax payment deadline
January 31, 2023, quarterly payroll and excise tax returns deadline

However, the new deadlines for penalties on payroll and excise tax deposits are different in each state. “In South Carolina, penalties on payroll and excise tax deposits due on or after September 25, 2022, and before October 11, 2022, will be abated as long as the deposits are made by October 11, 2022,” the IRS explains. “In North Carolina, penalties on payroll and excise tax deposits due on or after September 28, 2022, and before October 13, 2022, will be abated as long as the deposits are made by October 13, 2022.”

Can out-of-state relief workers get tax relief?

Those who do not reside or own businesses in the declared disaster areas can qualify for tax relief if they are currently in these locations. Relief workers affiliated with charitable and government organizations can call the IRS (866-562-5227) to receive this tax relief.

What can storm victims do about uninsured or unreimbursed losses?

The IRS also says that uninsured or unreimbursed disaster-related losses can be claimed on either the current- or prior-year tax return. When doing this, taxpayers need to include their state’s FEMA declaration number on the return:

North Carolina: 3586-NC
South Carolina: 3585-SC

For more information about claiming losses in this manner, read Publication 547, Casualties, Disasters, and Thefts.

Florida dyed diesel fuel penalty relief now includes all vehicles

The IRS is also expanding relief in another Hurricane Ian-ravaged state. Dyed diesel fuel is usually only allowed in equipment and vehicles exempt from the fuel excise tax. In the storm’s immediate aftermath, the IRS waived the dyed diesel fuel penalty for fuel sellers and highway emergency vehicles in Florida. This week, the agency announced it is extending that relief to all highway diesel vehicles in the state from September 28, 2022, until October 19, 2022.

To receive dyed diesel fuel penalty relief, vehicle operators must pay the 24.4-cents-per-gallon excise tax. The IRS notes it “will not impose penalties for failure to make semimonthly deposits of tax for dyed diesel fuel sold for use or used in diesel-powered vehicles on the highway in the state of Florida during the relief period.”

Sources: IR-2022-173, IR-2022-177

Tax Year 2022 Desk Reference Guide

Fri, 07 Oct 2022 15:30:05 -0400

Having a convenient list of commonly accessed tax information can make it easier to weather the hectic pace of filing season. To make life a little easier for you, we produce a desk reference guide containing items ranging from due diligence requirements to MACRS recovery periods every year.

Complete the form below to get your copy of the Tax Year 2022 Desk Reference Guide.

Florida Storm Victims Get Tax and Fuel Penalty Relief

Tue, 04 Oct 2022 09:08:49 -0400

IRS extends tax deadlines and lifts dyed diesel fuel penalties for Hurricane Ian victims in Florida.

Hurricane Ian slammed into the Florida coast last week, leaving a trail of destruction that resulted in more than a million without power and 81 confirmed dead. The Internal Revenue Service announced tax relief and dyed diesel fuel penalty relief for storm victims following a disaster declaration for the entire state by the Federal Emergency Management Agency (FEMA).

These relief measures are designed to make disaster recovery easier by delaying upcoming tax-related deadlines and helping emergency workers operate in affected areas. Tax relief is automatically granted to individual residents and business owners in affected areas; dyed diesel fuel penalty relief is available to sellers and emergency-vehicle operators who pay the highway diesel tax.

What deadlines are affected by Hurricane Ian tax relief?

The Florida tax relief delays some individual and business deadlines beginning on September 23, 2022, until February 15, 2023. While the “Disaster Assistance and Emergency Relief for Individuals and Businesses” page on IRS.gov includes information about the affected deadlines, the agency listed the following affected deadlines in its news release:

October 17, 2022, individual extension filing deadline (does not apply to tax payments due April 18, 2022)
October 17, 2022, calendar-year corporation extension filing deadline
October 31, 2022, quarterly payroll and excise tax return deadline
November 15, 2022, calendar-year tax-exempt organization extension filing deadline
January 17, 2023, quarterly estimated income tax payment deadline
January 31, 2023, quarterly payroll and excise tax return deadline

Further, the IRS says that “penalties on payroll and excise tax deposits due on or after September 23, 2022, and before October 10, 2022, will be abated as long as the deposits are made by October 10, 2022.”

While these new deadlines are automatically granted to those with “an IRS address of record located in the disaster area,” some individuals who live out of state may be able to qualify, like relief workers. They will need to call the IRS number used for disaster-related assistance: 866-562-5227.

How does the dyed diesel fuel penalty relief work?

Dyed diesel fuel is typically only approved for usage that is exempt from excise tax, like off-road farm vehicles and heating homes. To help emergency workers responding to the situation in Florida, the IRS lifted the penalty for fuel sellers and highway emergency vehicle operators.

In a Friday news release, the agency outlined specifics of this relief:

This relief begins on September 28, 2022, and will remain in effect through October 19, 2022
The relief is available only if the operator or the person selling such fuel pays the tax of 24.4 cents per gallon that is normally applied to diesel fuel for highway use
The IRS will not impose penalties for failure to make semimonthly deposits of tax for dyed diesel fuel sold for use or used in an emergency vehicle on the highway in the state of Florida during the relief period

For more information about tax reporting and payment, see “Publication 510, Excise Taxes.”

Want to learn more about hurricane season preparedness strategies?

Read our blog covering recent IRS tips for protecting data and rebuilding records: "Prepare Now to Be Ready for Hurricane Season."

Sources: “Hurricane Ian updates: Florida death toll climbs,” ABCNews.go.com; “Ian recovery efforts in the Southeast will be complicated: Live updates,” NPR.org; IR-2022-168; IR-2022-169