Monday February 26, 2024
IRS Offers New Voice "Bot" Service
IRS Commissioner Chuck Rettig noted, "We continue to look for ways to better assist taxpayers, and that includes helping people avoid waiting on hold without having to make a second phone call to get what they need. The expanded voice bots are another example of how technology can help the IRS provide better service to taxpayers."
Voice bots are computer software that relies on artificial intelligence. This software helps taxpayers to navigate on a phone call and receive answers to questions. The IRS has used other voice bots on toll-free lines since January. These bots are designed to help taxpayers with basic questions. If more help is needed than the voice bots can provide, taxpayers may speak with an IRS representative in either English or Spanish.
The new voice bots include the Automated Collection System (ACS) or the Accounts Management toll-free lines. Taxpayers may discuss payment plans by creating a personal identification number (PIN). The PIN request process is easy – individuals need the most recent IRS bill and basic personal information to obtain a PIN.
Darren Guillot is the IRS Deputy Commissioner of Small Business/Self Employed Division, Collection & Operations Support. He stated, "To date, the voice bots have answered over three million calls. As we add more functions for taxpayers to resolve their issues, I anticipate many more taxpayers getting the service they need quickly and easily."
Future voice bots will help taxpayers to obtain tax return transcripts, to review their payment history and understand any current balance owed. Current voice bots help with questions on Economic Impact Payments or the Advance Child Tax Credit.
EARN Act Sent to Full Senate For Vote
With a unanimous vote, the Senate Finance Committee passed the Enhancing American Retirement Now (EARN) Act. The new retirement bill includes 70 provisions that are helpful in encouraging individuals to build up retirement accounts.
This legislation includes provisions on the Savers Credit, added catch-up contributions, an increased age for required minimum distributions (RMDs), expanded qualified charitable distributions and Rothification of catch-up contributions.
1. Savers Credit -- Existing law allows a nonrefundable credit for individuals who contribute to IRA, 401(k) and ABLE accounts. The credit would be increased to the lesser of 50% of the retirement plan contribution or $2,000. It phases out for joint filing taxpayers with incomes between $41,000 and $71,000, or for single taxpayers with incomes from $20,500 to $35,500.
2. Expanded Catch-Up Limits -- Present law permits individuals over age 50 to make an additional contribution to 401(k) plans of $6,500. The EARN Act would allow individuals from age 60 to 63 to contribute an additional $10,000 in 2024 and later years.
3. Increased Required Minimum Distribution (RMD) Age -- The current minimum age for RMDs is 72. This age would increase to 75 in 2032 under the EARN Act.
4. Expanded Qualified Charitable Distributions -- The existing QCD limit of $100,000 would be indexed starting in 2024. In addition, a one-time $50,000 distribution from a traditional IRA to a charitable gift annuity, standard charitable remainder unitrust or charitable remainder annuity trust would be permitted. This distribution to a life-income planned gift does not qualify for a charitable deduction and all payouts will be ordinary income.
5. Rothification of Catch-up Contributions -- Individuals over age 50 currently are permitted to make $6,500 catch-up contributions to a 401(k) plan. The contributions for these individuals in 2024 and later years would be after-tax Roth payments.
Editor's Note: Nonprofits have been hoping for many years that the QCD would be expanded to include life income gifts. The one-time $50,000 contribution will be used primarily for transfers to an immediate charitable gift annuity. However, this expanded QCD is certainly a favorable provision for nonprofits. The bill must proceed to the full Senate for approval and then to conference prior to enactment by the House and Senate. With strong bipartisan support, there are excellent prospects for passage of the EARN Act this year.
Wyden and Crapo support EARN Act
Senate Finance Committee Chair Ron Wyden (D-OR) and Ranking Member Mike Crapo (R-ID) both enthusiastically support the Enhancing American Retirement Now (EARN) Act.
Sen. Wyden stated, "It starts with the proposition that helping people save is key to an economic system that gives everybody a chance to get ahead. Particularly for people of modest incomes and the middle class, the system on the books today is not doing enough to help them set money aside."
Wyden was pleased with the enhanced Savers Tax Credit. This credit is fully refundable and individuals with modest incomes will receive a deposit directly to IRA or 401(k) accounts. Wyden notes that up to 77 million American workers could qualify for the new Savers Credit.
Another provision enhances the ability to pay off student loans. Payments of student loans will not reduce employer retirement plan contributions. Student loan payments may be made by workers, but their employers will continue to make contributions to their retirement accounts.
In addition, the EARN Act contains the option to use funds from traditional IRAs and other retirement accounts to pay for long-term care premiums. The distribution is still taxable income to the individual, but there will not be a 10% penalty for these distributions.
Wyden did express concern that one important provision was not included in the EARN Act. He has proposed that individuals with IRA balances over $10 million should be required to take a distribution. Wyden concluded, "There is no reason why American taxpayers should be on the hook for subsidizing these massive accounts. I have proposed ending this game-playing by requiring distributions when a taxpayer's 401(k) and IRA account balances reach $10 million."
Ranking Member Mike Crapo also supported the EARN Act. He noted there has been strong bipartisan cooperation on both the original SECURE Act and the new bill, which Members of Congress refer to as SECURE 2.0.
Crapo noted, "Incentivizing automatic enrollment in plans, increasing the required minimum distribution age and catch-up contribution limits and making it easier for part-time workers to participate in retirement plans are just a few of their policies that have built the foundation for this bill and the entire 'SECURE 2.0' process."
Wayne Chopus, President of the Insured Retirement Institute (IRI), strongly supported the bill, stating, "IRI looks forward to working with the House and Senate to finalize a comprehensive bill that will put individuals on a path toward a secure and dignified retirement. We will advocate to expand the reach and impact of the final legislation to ensure there are more opportunities to offer protected lifetime income through workplace retirement plans."
Applicable Federal Rate of 3.6% for July -- Rev. Rul. 2022-12; 2022-27 IRB 1 (15 June 2022)
The IRS has announced the Applicable Federal Rate (AFR) for July of 2022. The AFR under Section 7520 for the month of July is 3.6%. The rates for June of 3.6% or May of 3.0% 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.