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  April 3, 2023

Due to the plethora of weather events affecting most of California, Fema declared disaster zones most California counties as declared disaster zones, except Lassen, Modoc and Shasta.

 2022 Income tax returns postponement due date to file and pay is 10.16.23 for Fema California designated counties. There are other areas of the country that are eligible for postponement, but not identified within the scope of the information below. 

 The following deadlines falling on or after March 9, 2023, and before October 16, 2023, are granted additional time to file through October 16, 2023:

• 2022 individual income tax returns due on April 18
• Various 2022 business returns normally due on March 15 and April 18 (this means that eligible taxpayers will have until October 16 to make 2022 contributions to their IRAs and health savings accounts)
• Quarterly (#1 to #3), estimated tax payments and payroll and excise tax returns normally due between March 9 and October 16
• 2021 fiscal year and 2022 returns within tax returns on extension also eligible for postponement. If a fiscal-year taxpayer had an extended due date that fell within the January 8 through October 15 postponement period, then the original extended due date is automatically extended to October 16, 2023.

 Taxpayers are not eligible for an additional “automatic” extension beyond the October 16 postponed due date.

 All California Counties are listed as affected counties except:  Lassen; Modoc; and Shasta.

 In addition, penalties on payroll and excise tax deposits due on or after March 9, 2023, and before March 24, 2023, will be abated as long as the tax deposits are made by March 24, 2023.

Eligible for postponement also includes taxpayers who’s tax return(s) are prepared by CPAs and tax preparers located within a Fema declared disaster zone.

Our company is located in a Fema disaster declared zone.

Regardless of the Fema postponed due date to file and pay, we should work toward filing at an earlier date.

Postponement eligible taxpayers per IRS:

Affected Taxpayers

Taxpayers considered to be affected taxpayers eligible for the postponement of time to file returns, pay taxes and perform other time-sensitive acts are those taxpayers listed in Treas. Reg. § 301.7508A-1(d)(1), and include individuals who live, and businesses (including tax-exempt organizations) whose principal place of business is located, in the covered disaster area. Taxpayers not in the covered disaster area, but whose records necessary to meet a deadline listed in Treas. Reg. § 301.7508A-1(c) are in the covered disaster area, are also entitled to relief. In addition, all relief workers affiliated with a recognized government or philanthropic organization assisting in the relief activities in the covered disaster area and any individual visiting the covered disaster area who was killed or injured as a result of the disaster are entitled to relief.

Under section 7508A, the IRS gives affected taxpayers until October 16, 2023, to file most tax returns (including individual, corporate, and estate and trust income tax returns; partnership returns, S corporation returns, and trust returns; estate, gift, and generation-skipping transfer tax returns; annual information returns of tax-exempt organizations; and employment and certain excise tax returns), that have either an original or extended due date occurring on or after December 27, 2022, and before October 16, 2023, are granted additional time to file through October 16, 2023.

Affected taxpayers that have an estimated income tax payment originally due on or after December 27, 2022, and before October 16, 2023, are postponed through October 16, 2023, will not be subject to penalties for failure to pay estimated tax installments as long as such payments are paid on or before October 16, 2023.

The IRS also gives affected taxpayers until October 16, 2023, to perform other time-sensitive actions described in Treas. Reg. § 301.7508A-1(c)(1) and Rev. Proc. 2018-58, 2018-50 IRB 990 (December 10, 2018), that are due to be performed on or after December 27, 2022, and before October 16, 2023, are granted additional time to file through October 16, 2023.

This relief also includes the filing of Form 5500 series returns that were required to be filed on or after December 27, 2022, and before October 16, 2023, are postponed through October 16, 2023, in the manner described in section 8 of Rev. Proc. 2018-58. The relief described in section 17 of Rev. Proc. 2018-58, pertaining to like-kind exchanges of property, also applies to certain taxpayers who are not otherwise affected taxpayers and may include acts required to be performed before or after the period above.

Unless an act is specifically listed in Rev. Proc. 2018-58, the postponement of time to file and pay does not apply to information returns in the W-2, 1094, 1095, 1097, 1098 or 1099 series; to Forms 1042-S, 3921, 3922 or 8027; or to employment and excise tax deposits. However, penalties on deposits due on or after December 27, 2022, and before January 11, 2023, will be abated as long as the tax deposits were made by January 11, 2023.

Postponement eligible taxpayers IRS link below

https://www.irs.gov/newsroom/irs-announces-tax-relief-for-victims-of-severe-winter-storms-flooding-landslides-and-mudslides-in-california

 Below, a more detailed explanation and links to Federal and California sites:

 On March 17, 2023, the IRS issued yet another storm-related disaster postponement announcement for California taxpayers.1 This means we now have three different disaster relief notices for storms in California (CA-2023-01, CA-2023-02, and CA-2023-03). Unfortunately, the notices apply to different counties, have different applicable periods, and postpone different filing and payment deadlines. The most recent announcement extends the available October 16 postponement deadline (see “Storm-related disaster extensions extended to October 16, 2023” . The only counties that are not currently included in the filing/payment October 16 postponement relief (for now) are Lassen, Modoc, and Shasta. However, for taxpayers in Imperial, Kern, Plumas, and Sierra counties, the relief only applies to deadlines that fall on or after March 9, 2023. California conforms to this extended relief.

The announcement does provide additional payroll deposit relief for taxpayers listed in the most recent notice. Penalties on payroll and excise tax deposits due on or after March 9, 2023, and before March 24, 2023, will be abated as long as the tax deposits were made by March 24, 2023, for taxpayers in all counties except the following: ● Alameda; ● Colusa; ● Contra Costa; ● Lassen; ● Marin; ● Modoc; ● Riverside; ● San Diego; ● Shasta; ● Siskiyou; ● Solano; ● Sutter; ● Tehama; ● Ventura; and ● Yolo.

 Can taxpayers outside the listed counties qualify for relief?

 Relief from federal and California tax and payment deadlines is available to taxpayers outside the listed counties if their tax preparer is located in one of the listed counties1 (see upcoming box regarding listed counties). The postponement also applies to partners and S corporation shareholders if the partnership or S corporation is located in a listed county and is unable to provide the records necessary to file the partner’s/shareholder’s return. For taxpayers located outside California whose tax records are in one of the listed counties or California resident taxpayers who must file a tax return in another state, we recommend that you contact the applicable state tax department to determine whether postponement relief is available for the other state’s tax return.

 How does taxpayer request relief outside the listed counties?

 Taxpayers located outside the listed counties who want to request an IRS postponement must:2 ● Call the IRS’s Disaster Hotline at (866) 562-5227; ● Explain that the necessary records are located in a covered disaster area; and ● Provide the FEMA Disaster Number or IRS announcement (CA-2023-01, CA-2023-02, or CA-2023-03) of the area where the tax preparer is located.

 Which payment deadlines are extended?

  All payments scheduled for or payments due with tax returns that were originally due on or after January 8, 2023, (December 27, 2022, 24 or March 9 for some counties) and before October 16, 2023, are postponed until October 16, 2023. This includes, but is not limited to, the following payments: ● The balance of the 2022 passthrough entity elective tax due on March 15, 2023, for calendar‑year taxpayers and the 2023 prepayment of the passthrough entity elective tax due on June 15; ● The 2023 estimated tax LLC fee due on June 15, 2023; ● Individual and entity estimated tax payments; and ● Any installment payments that would otherwise be due during the postponement period.

 Are withholding taxes and returns postponed?

 The postponement does not apply to payroll deposits nor to California real estate or nonresident withholding payments. However, it does apply to IRS Form 8804, Annual Return for Partnership Withholding,6 as well as FTB Form 592, Resident and Nonresident Withholding Statement, and 592-PTE, Pass-Through Entity Annual Withholding Return.

 California counties identified by Fema go to link below:

 IRS Fema information:

 https://www.fema.gov/disaster/4699

 https://bit.ly/irs-provides-tax-relief-for-victims-of-severe-winter-storms

 California information:

https://www.ftb.ca.gov/file/when-to-file/Emergency-tax-relief.html

 February 7, 2023

 The Inflation Reduction Act of 2022 (2022 Inflation Act) modifies and extends both the nonbusiness energy property credit and the residential energy efficient property credit available to individual homeowners.

Energy Efficient Home Improvement Credit. The 2022 Inflation Act extends the nonbusiness energy property credit to property placed in service before the end of 2032 and renames the credit the “Energy Efficient Home Improvement Credit.” The nonrefundable tax credit is available to individuals for the installation of:

• qualified energy efficiency improvements (building envelope components); and
• qualified residential energy property expenditures (furnaces and certain fans, water heaters, certain heat pumps, and for tax years beginning before 2021, biomass stoves).

The 2022 Inflation Act also modifies the credit by:

• increasing the credit from 10% of the cost of qualified energy efficiency improvements to 30% of the cost;
• replacing the lifetime credit cap with annual limits depending on the type of property;
• requiring that manufacturers and taxpayers comply with reporting the identification number of certain property placed into service after December 31, 2024;
• expanding the credit to cover the costs of home energy audits;
• updating efficiency standards; and
• expanding the definition of “qualified energy property” to include (1) electric or natural gas heat pump water heaters, (2) electric or natural gas heat pumps, (3) central air conditioners, (4) natural gas, propane, or oil water heaters, (5) certain natural gas, propane, or oil furnace or hot water boilers, (6) certain biomass stoves or boilers, and (7) electrical panel upgrades necessary for other efficiency improvements.

Residential Clean Energy Credit. The 2022 Inflation Act extends the residential energy efficient property credit to eligible property placed in service on or before December 31, 2034, and renames the credit the “Residential Clean Energy Credit.” The residential clean energy credit may be claimed for qualified residential energy efficient property installed on, or in connection with, a dwelling unit located in the United States and used as a residence by the taxpayer. Qualified residential clean energy property includes solar electric property, solar water heating property, fuel cell property, small wind energy property, geothermal heat pump property, and for expenditures incurred after 2020, biomass fuel property.

The 2022 Inflation Act allows for a 30% credit for eligible expenditures through the end of 2032, then phases down to 26% in 2033 and 22% in 2034. Qualified expenditures for battery storage technology are eligible for the credit beginning after 2022, while qualified expenditures for biomass fuel property are not eligible for the credit after 2021.

The Inflation Reduction Act of 2022 (2022 Inflation Act) modifies the energy efficient commercial buildings deduction for tax years beginning after December 31, 2022, by increasing the maximum deduction and updating the eligibility requirements for reduction of energy costs, in addition to other changes.

Energy efficient commercial buildings deduction. A deduction is allowed for all or part of the cost of energy efficient commercial building property placed in service as part of a building's:

• interior lighting systems;
• heating, cooling, ventilation, and hot water systems; or

The deduction was enacted to encourage commercial building owners or lessees to install energy efficient property. Installation of energy-efficient commercial building property occurs when constructing a new, or improving an existing, commercial building or government building. The tax deduction benefits both commercial building owners or lessees and designers of government-owned buildings.

Efficiency standard. The 2022 Inflation Act updates eligibility requirements for the deduction so that property must reduce associated energy costs by 25% or more (decreased from 50% or more) in comparison to a reference building that meets the latest efficiency standard.

Applicable amount. The applicable dollar value of the deduction is $0.50 per square foot, increased by $0.02 for each percentage point above 25% that a building’s total annual energy cost savings are increased. The amount cannot be greater than $1.00 per square foot. However, the maximum amount of the deduction in any tax year cannot exceed $1 per square foot minus the total deductions taken in the previous three tax years (or during a four-year period in cases where the deduction is allowable for someone other than the taxpayer). The applicable dollar value will be adjusted for inflation for tax years beginning after 2022.

An increased dollar value is available for projects that satisfy prevailing wage and apprenticeship requirements for the duration of the construction.

Alternative deduction for energy-efficient retrofit property. Under the 2022 Inflation Act, taxpayers may elect to take an alternative deduction for a qualified retrofit of any qualified property. However, instead of a reduction in total annual energy power costs, the deduction is based on the reduction of energy usage intensity.

Eligibility rules to claim a tax credit for clean vehicles has changed.

The passing of the Inflation Reduction Act of 2022 (IRA) has shaken up electric/clean vehicles with multiple – and detailed – changes. Tax credits available under section 30D (EV credit) for purchasing a new electric vehicle after August 16, 2022 (when the Inflation Reduction Act of 2022 was enacted) are generally available only for qualifying electric vehicles for which final assembly occurred in North America. 

The Department of Energy has provided a list of Model Year 2022 and early Model Year 2023 electric vehicles that may meet the final assembly requirement.  The basic burning hoops to qualify:

Does the taxpayer's modified adjusted gross income for the current tax year or, if less, for the preceding year exceed:

• $300,000 if married filing jointly or surviving spouse;
• $225,000 if filing as head of household; or
• $150,000 if single or married filing separately?

Does the manufacturer's suggested retail price (MSRP) for the vehicle exceed:

• $80,000 for a van, a sport utility vehicle (SUV), or pick-truck; or
• $55,000 for other vehicles?

If you qualify above, next refer to further questions to qualify for federal tax credit here: 

https://www.irs.gov/credits-deductions/credits-for-new-clean-vehicles-purchased-in-2023-or-after

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Tong & Fong CPAs