In a series of letters this week, the Internal Revenue Service (IRS) gave advice to late filers, those who have extended until October and nonprofits. Taxpayers who missed the April 18 filing deadline should file promptly. Those who filed for an extension have until October 17 to file. The nonprofit filing date is May 16, 2022.
- Automatic Filing Extension — There are several groups that qualify for an automatic extension. Military members serving in a combat zone have an extension of at least 180 days. Support personnel in the combat zone generally also qualify for this extension. Taxpayers who reside outside the United States usually qualify for a two-month extension. Finally, disaster victims in federal designated areas may qualify for an extension.
- Refunds Issued Without Penalty — Taxpayers who missed the April deadline but qualify for a refund may file without penalty. They are encouraged to use IRS Free File on the IRS.gov website. These individuals may benefit from the Earned Income Tax Credit, Child and Dependent Care Credit or Child Tax Credit. Some may also receive a 2021 Recovery Rebate Credit. The late–filers who use an electronic method will usually receive a refund within 21 days. The "Where's My Refund?" tool on IRS.gov is helpful in understanding the status of your refund.
- Reduced Penalties for Late Filers — If you have missed the filing deadline, you should still file your taxes and pay as soon as possible. The failure to file penalty is 5% of the tax owed for each late month, up to 5 months. If you file over 60 days after the April 18 due date, the minimum penalty is $435 or 100% of the unpaid tax, whichever is less. If you have filed and paid your taxes timely for the past three years and meet specific requirements, you may qualify for penalty relief. The penalty abatement page on IRS.gov offers additional information.
- Payment of Your Taxes — If you owe taxes, you may pay with an IRS Online Account, IRS Direct Pay, a debit or credit card, a digital wallet or you may apply online for a payment plan. If you pay electronically, you should receive a prompt confirmation by email.
- Extensions to October 17 — Taxpayers may file for a six-month extension until October 17, 2022. There are automatic extensions for military members in combat zones and taxpayers living outside the US. Many victims in specific areas of the nation with federally declared disasters may delay filing. Some individuals in Arkansas, Illinois, Kentucky and Tennessee who were in zones with tornadoes and flooding may delay filing until May 16, 2022.
- Nonprofit Organizations — The information and tax returns for tax–exempt organizations have a May 16, 2022 filing deadline. These organizations should file IRS Form 990, 990–EZ, 990–PF or 990–T by this date. The nonprofit forms must be filed electronically. Robert Malone, Director of Exempt Organizations and Government Entities stated, "To help exempt organizations comply with their filing requirements, the IRS provides a series of pre–recorded online workshops. These workshops are designed to assist officers, board members and volunteers with the steps they need to take to maintain their tax–exempt status, including filing annual information returns."
If a nonprofit is not able to file by May 16, it should file IRS Form 8868, Application for Extension of Time. If tax is due for unrelated business taxable income, that payment is required by May 16. However, most organizations are permitted to obtain the six–month extension with no tax payments.
American Hospital Association Highlights Community Benefit
Sen. Chuck Grassley (R–IA) is a senior member of the Senate Finance Committee. He has on multiple occasions asked for information from medical centers to demonstrate the amount of community benefit that is provided. Sen. Grassley states that some medical centers should provide greater community benefit because they are receiving tax–exempt status.
The Lown Institute is a health care think tank that recently published a study on hospitals and community benefit. The Lown Institute study claimed that 227 of the 275 private nonprofit hospitals were not providing community benefit commensurate with their tax-exempt status. The Lown Institute calls the difference between the community benefit level and the tax savings due to exempt status a "fair share deficit." According to the Lown Institute, the "fair share deficit" in 2018 was $18.4 billion.
A representative of the Lown Institute is Dr. Vikas Saini. He stated, "At the end of the day, some of these hospital systems are walking away with over a billion in government funds. Taxpayers should be seeing a better return on their investments and demanding greater accountability."
Rick Pollack is a representative of the American Hospital Association (AHA). In a blog published on April 12, he claimed that the Lown Institute report used "faulty methodology to draw inaccurate conclusions."
Pollack stated "The report cherry–picks categories of community investment while simply ignoring others, such as researching life–saving treatments and cures and training and educating the next generation of caregivers. It overlooks many of the essential contributions hospitals make to their communities that are critically important, especially during the pandemic."
Pollack highlights the benefits provided during the COVID–19 pandemic. Many medical centers created vaccine clinics, expanded their treatment capacity for pandemic victims and conducted health safety education campaigns.
A 2019 AHA report noted that each dollar of tax benefit invested in the nonprofit hospitals produced $11 in community benefits. The total 2018 community benefit was $105 billion.
Community benefit occurs in many ways. Health screenings, educational and wellness programs and transportation for patients are frequently not reported in statistics but are important to individuals in the community. The medical centers absorb the underpayments from Medicaid and Medicare. They also maintain high–cost services such as burn and neonatal units.
Pollack concluded, "America's hospitals and health systems do more than any other part of the health care field to support vulnerable patients and communities: Our doors are always open, regardless of a patient's ability to pay."
President Biden and Vice President Harris Make Charitable Gifts
Both President Biden and Vice President Harris have released their 2021 tax returns. President Biden and First Lady Jill Biden reported income of $610,702 and paid $150,439 in federal income tax. This is an effective rate of 24.6%.
The President received salary of $378,333 and the First Lady received $67,116 through her position at Northern Virginia Community College.
The President and First Lady made gifts of $17,394. The larger gifts were given to the Beau Biden Foundation, the Tragedy Assistance Program for Survivors and St. Joseph on the Brandywine Church.
Vice President Harris and her husband Douglas Emhoff reported $1,655,563 in income and paid $523,371 in federal income tax. This represented a 31.6% effective tax rate. They made gifts of $22,100. Their larger gifts were made to the CSUN Arts and Communications Fund, Howard University, the University of Southern California and the DC Central Kitchen.
Applicable Federal Rate of 3.0% for May -- Rev. Rul. 2022-9; 2022-18 IRB 1 (17 Apr 2022)
The IRS has announced the Applicable Federal Rate (AFR) for May of 2022. The AFR under Section 7520 for the month of May is 3.0%. The rates for April of 2.2% or March of 2.0% also may be used. The highest AFR is beneficial for charitable deductions of remainder interests. The lowest AFR is best for lead trusts and life estate reserved agreements. With a gift annuity, if the annuitant desires greater tax-free payments the lowest AFR is preferable. During 2022, pooled income funds in existence less than three tax years must use a 1.6% deemed rate of return.