Q: Did the IRS make a mid-year adjustment for the mileage deduction in 2022?
A: Yes, the IRS increased the mileage deduction starting in July. A taxpayer can deduct 58.5, 18 and 14 cents per mile for business, medical and charity from Jan. 1, 2022 to June 30, 2022. Effective July 1, 2022, the deduction increases by 4 cents per mile for business and medical but charity remains the same.
Q: I filed for an extension but I was unable to pay $6,200 in taxes owed to the IRS. What should I do?
A: Any amount owed past the deadline of April 18, 2022 will incur interest and penalties. If you do not do anything, the IRS will send you a letter for a payoff or an installment plan. I recommend that you contact the IRS, explain your situation and work out a payment plan to minimize the IRS fees.
Q: An insurance agent is trying to sell me an annuity but I am not comfortable with this investment. What is an annuity?
A: If you are uncomfortable with any investment, do not invest. An annuity is a contract between you and the insurance company. A fixed annuity pays a fixed rate of interest for a specific period of time and a variable annuity allows you to select various investments. Annuities are not CD substitutes and are not life insurance policies. Variable annuities are expensive due to the layers of fees (management, administrative, mortality, etc.). If you cancel an annuity early, you will pay a surrender charge. Any gains from an annuity are taxed at ordinary rates and do not receive the favorable long-term capital gains rate.
Q: I will be 67 this October and want to start collecting my Social Security benefits. When do I apply to ensure that I receive my first payment in October?
A: You need to apply three months before your birthday. Your first payment will be in November since all Social Security benefits are paid in arrearages. I recommend that you use the on-line filing system except for special cases like spousal benefits.
Q: My first Social Security check is scheduled to come in July. What date in July should I expect the automatic deposit to appear in my checking account?
A: The date will depend on your birthday. Anybody born between the 1st and the 10th of the month is paid on the 2nd Wednesday of the month; anybody born between the 11th and the 20th is paid on the 3rd Wednesday of the month; and anybody born after the 20th is paid on the 4th Wednesday of the month.
Q: My uncle donates to several charities and I am concerned that some are bogus. How do I check if the charity is legitimate?
A: You can check the IRS site for legitimate tax-exempt charities. There are several bogus charities that prey on human emotion and kindness. A bogus charity can have a similar name to a real charity and frequently, will pop up after a natural disaster to solicit donations. An excellent rule is to never give money or credit card information to an unsolicited caller.
Q: I need a copy of my 2020 tax return to complete a mortgage application. Can I get copies of my tax return from the IRS?
A: The IRS will send you a copy of your tax return but will charge you $43 for each tax year. A better way is to request a tax return transcript which is free and is available online or by mail.
Q: The Detroit metropolitan area is experiencing IRS phone scams. How can a taxpayer recognize an IRS phone scam?
A: Several variations of IRS phone scams exist but the tell-tale signs are an aggressive phone call from a “supposed” IRS agent that is demanding an immediate payment via credit cards, gift cards or wire transfers. Threats of arrest, deportation, and loss of driver’s license are common. The IRS will never demand payment over the phone. If you receive one of these phone calls, hang up. The legitimate IRS always communicates by mail.
