As the tax extension quickly approaches the October 15th deadline, now is a great time to review happenings at the IRS and how it may impact you and your situation.
- New formats for W-2s and 1099s. With the advent of tax-free tips and tax-free overtime, look forward to seeing revised information tax returns that are required to report this income. This means if these tax breaks impact you, you should be seeing this breakout in your pay stubs and invoices. Specifically look for qualified tip codes on your W-2. It will be noted on line 12 with a code TP. You then will need a valid tip classification on box 14b. Without it you cannot take the tax-free tip designation. So please pay attention here.
- New filing system is launching. Speaking of changes, the IRS is moving the filing of informational tax returns (W-2s, 1099s and payroll forms 94x) to a new system called IRIS. This new system is a major change and it could lead to some complications filing the forms this January. So we may see some delays and if you file these returns you may wish to file them as early as possible.
- It looks like tax brackets may increase around 3.7%. While formal announcements usually come in late October or November, it is nice to get a heads up on the change.
- Review your paychecks. The IRS also reminds everyone this month to review your paychecks and pay special attention to your withholdings. No one likes a tax surprise at the end of the year, and there is still time to make adjustments and have it make a difference in your tax situation. But also review your retirement plan withholdings and any HSA withholdings to maximize your tax-free and tax-deferred spending for retirement and qualified medical expenses.
- Retirement plan rollovers simplified? The Department of the Treasury and the Internal Revenue Service recently provided guidance to simplify and standardize the retirement plan rollover process by issuing sample forms for direct rollovers to or from a retirement plan. IRS notice 2026-49 provides sample forms and proposed rollover procedures and protocols that aim to simplify and standardize the rollover process for both participants and plan sponsors. While the reading of the notice is not for the faint of heart, the wording and forms at the end of the notice could be helpful if you are in a situation where you wish to rollover funds from retirement plans and want to avoid any hassle with communicating this change.
As always please reach out for assistance.