NTS News

Working Grandparents May Be Eligible for EITC

noreply@blogger.com (Anonymous) — Thu, 26 Jan 2017 10:31:00 -0500

IR-2017-09, Jan. 25, 2017

WASHINGTON — The Internal Revenue Service wants working grandparents raising grandchildren to be aware of the Earned Income Tax Credit (EITC) and correctly claim it if they qualify.

The EITC is a federal income tax credit for workers who don't earn a high income ($53,505 or less for 2016) and meet certain eligibility requirements. Because it’s a refundable credit, those who qualify and claim the credit could pay less federal tax, pay no tax or even get a tax refund. The EITC could put an extra $2 or up to $6,269 into a taxpayer’s pocket.

Grandparents and other relatives care for millions of children, but are often not aware that they could claim the children under their care for the EITC. A grandparent who is working and has a grandchild who is a qualifying child living with him or her may qualify for the EITC, even if the grandparent is 65 years of age or older. Generally, to be a qualified child for EITC purposes, the grandchild must meet the dependency requirements.

Special rules and restrictions apply if the child’s parents or other family members also qualify for the EITC. Details including numerous helpful examples can be found in Publication 596, available on IRS.gov. There are also special rules, described in the publication, for individuals receiving disability benefits and members of the military.

Working grandparents are encouraged to find out, not guess, if they qualify for this very important credit. To qualify for EITC, the taxpayer must have earned income either from a job or from self-employment and meet basic rules. Also, certain disability payments may qualify as earned income for EITC purposes. EITC eligibility also depends on family size. The IRS recommends using the EITC Assistant, on IRS.gov, to determine eligibility, estimate the amount of credit and more.

Eligible taxpayers must file a tax return, even if they do not owe any tax or are not required to file. Qualified taxpayers should consider claiming the EITC by filing electronically: through a qualified tax professional; using free community tax help sites; or doing it themselves with IRS Free File.

Many EITC filers will get their refunds later this year than in past years. That’s because a new law requires the IRS to hold refunds claiming the EITC and the Additional Child Tax Credit (ACTC) until mid-February. The IRS cautions taxpayers that these refunds likely will not start arriving in bank accounts or on debit cards until the week of Feb. 27. Taxpayers claiming the EITC or ACTC should file as soon as they have all of the necessary documentation together to prepare an accurate return. In other words, file as they normally would.

The IRS and partners nationwide will hold the annual EITC Awareness Day on Friday, Jan. 27, 2017 to alert millions of workers who may be missing out on this significant tax credit and other refundable credits. One easy way to support this outreach effort is by participating on the IRS Thunderclap to help promote #EITCAwarenessDay through social media. For more information on EITC and other refundable credits, visit the EITC page on IRS.gov.

IRS Tests W-2 Verification Code for Filing Season 2017

noreply@blogger.com (Anonymous) — Thu, 19 Jan 2017 19:16:00 -0500

For filing season 2017, the Internal Revenue Service will expand an initiative to verify the authenticity of Form W-2 data. This initiative is one in a series of steps to combat tax-related identity theft and refund fraud.

The objective is to verify Form W-2 data submitted by taxpayers on e-filed individual tax returns. The IRS has partnered with certain Payroll Service Providers (PSPs) to include a 16-digit code and a new Verification Code field on a limited number of Form W-2 copies provided to employees.
Verification codes will appear on approximately 50 million Forms W-2 in 2017, up from the 2 million forms in 2016. Tax professionals are urged to look for “Verification Code” on W-2s because location will vary.

The code will be displayed in four groups of four alphanumeric characters, separated by hyphens. Example: XXXX-XXXX-XXXX-XXXX.

The Verification Code will appear on some versions of payroll firms’ Form W-2 copies B and C, in a separate, labeled box (Copy B is "To be filed with employee's federal tax return" and Copy C is "For employee's records.")

The form will include these instructions to taxpayer and tax preparers:

Verification Code. If this field is populated, enter this code when it is requested by your tax return preparation software. It is possible your software or preparer will not request the code. The code is not entered on paper-filed returns.

Some Forms W-2 employees receive will have a “Verification Code” box which is blank. These taxpayers do not need to enter any code data into their tax software product.
For the purposes of the test, omitted and incorrect W-2 Verification Codes will not delay the processing of a tax return.

The code will not be included in Forms W-2 or W-2 data submitted by the PSPs to the Social Security Administration or any state or local departments of revenue. Nor will this pilot affect state and local income tax returns or paper federal returns.

Feeding Our Filers - Annual Client Appreciation Day

noreply@blogger.com (Anonymous) — Mon, 16 Jan 2017 14:51:00 -0500

IRS Offers New Cash Payment Option

noreply@blogger.com (Anonymous) — Thu, 7 Apr 2016 13:34:00 -0400

WASHINGTON — The Internal Revenue Service announced today a new payment option for individual taxpayers who need to pay their taxes with cash. In partnership with ACI Worldwide’s OfficialPayments.com and the PayNearMe Company, individuals can now make a payment without the need of a bank account or credit card at over 7,000 7-Eleven stores nationwide.

“We continue to look for new ways to provide services for our taxpayers. Taxpayers have many options to pay their tax bills by direct debit, a check or a credit card, but this provides a new way for people who can only pay their taxes in cash without having to travel to an IRS Taxpayer Assistance Center," said IRS Commissioner John Koskinen.

Individuals wishing to take advantage of this payment option should visit the IRS.gov payments page, select the cash option in the other ways you can pay section and follow the instructions:

Taxpayers will receive an email from OfficialPayments.com confirming their information.
Once the IRS has verified the information, PayNearMe sends the taxpayer an email with a link to the payment code and instructions.
Individuals may print the payment code provided or send it to their smart phone, along with a list of the closest 7-Eleven stores.
The retail store provides a receipt after accepting the cash and the payment usually posts to the taxpayer’s account within two business days.
There is a $1,000 payment limit per day and a $3.99 fee per payment.

Because PayNearMe involves a three-step process, the IRS urges taxpayers choosing this option to start the process well ahead of the tax deadline to avoid interest and penalty charges.

The IRS has been partnering with Official Payments since 1999 for taxpayers wanting to use a credit card to pay taxes.

In this new option, PayNearMe is currently available at participating 7-Eleven stores in 34 states. Most stores are open 24 hours a day, seven days a week,. For details about PayNearMe, the IRS offers a list of frequently asked questions on IRS.gov.

The IRS reminds individuals without the need to pay in cash that IRS Direct Pay offers the fastest and easiest way to pay the taxes they owe. Available at IRS.gov/Payments/Direct-Pay, this free, secure online tool allows taxpayers to pay their income tax directly from a checking or savings account without any fees or pre-registration.

“Taxpayers should look into the payment option that works best for them,” Koskinen said.

Check IRS.gov/payments for the most current information about making a tax payment.

The IRS continues to remind taxpayers to watch out for email schemes. Taxpayers will only receive an email from OfficialPayments.com or PayNearMe if they have initiated the payment process. The IRS reminds taxpayers who haven’t taken this step to be watchful of any emails they receive saying there are tax issues involving the IRS or from others in the tax industry.

SIX Facts You Should Know Before Deducting a Charitable Donation

noreply@blogger.com (Anonymous) — Thu, 24 Mar 2016 12:21:00 -0400

If you gave money or goods to a charity in 2015, you may be able to claim a deduction on your federal tax return. Here are six important facts you should know about charitable donations.

1. Qualified Charities. You must donate to a qualified charity. Gifts to individuals, political organizations or candidates are not deductible. An exception to this rule is contributions under the Slain Officer Family Support Act of 2015. To check the status of a charity, use the IRS Select Check tool.

2. Itemize Deductions. To deduct your contributions, you must file Form 1040 and itemize deductions. File Schedule A, Itemized Deductions, with your federal tax return.

3. Benefit in Return. If you get something in return for your donation, you may have to reduce your deduction. You can only deduct the amount of your gift that is more than the value of what you got in return. Examples of benefits include merchandise, meals, tickets to an event or other goods and services.

4. Type of Donation. If you give property instead of cash, your deduction amount is normally limited to the item’s fair market value. Fair market value is generally the price you would get if you sold the property on the open market. If you donate used clothing and household items, they generally must be in good condition, or better, to be deductible. Special rules apply to cars, boats and other types of property donations.

5. Form to File and Records to Keep. You must file Form 8283, Noncash Charitable Contributions, for all noncash gifts totaling more than $500 for the year. If you need to prepare a Form 8283, you can prepare and e-file your tax return for free using IRS Free File. The type of records you must keep depends on the amount and type of your donation. To learn more about what records to keep see Publication 526.

6. Donations of $250 or More. If you donated cash or goods of $250 or more, you must have a written statement from the charity. It must show the amount of the donation and a description of any property given. It must also say whether you received any goods or services in exchange for the gift.

Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on IRS.gov.

Additional IRS Resources:

Can I Deduct my Charitable Contributions?
Charitable Contributions – Topic 506
Publication 561, Determining the Value of Donated Property

IRS Removes Some Restrictions on Cuba Income

noreply@blogger.com (Anonymous) — Fri, 18 Mar 2016 12:21:00 -0400

The Internal Revenue Service has followed up on the Obama administration’s opening of diplomatic relations with Cuba by releasing a new revenue ruling that removes certain restrictions on income earned in Cuba.

The previously applicable restrictions denied a foreign tax credit for income taxes paid to Cuba and disallowed deferral on income earned in Cuba through a controlled foreign corporation.

Revenue Ruling 2016-08 removes those restrictions. It modifies an earlier revenue ruling from 2005, which lists countries subject to special rules under sections 901(j) and 952(a)(5) of the Tax Code.

The Code generally allow U.S. taxpayers to claim a foreign tax credit for income, war profits, and excess profits taxes paid or accrued (or deemed paid or accrued) to any foreign country or to any possession of the United States. But the foreign tax credit is subject to various limitations and restrictions under section 901(j)(1), which imposes restrictions in the case of income and taxes attributable to certain countries. Section 952(a)(5) provides that subpart F income includes income derived by a controlled foreign corporation from any foreign country during any period during which section 901(j) applies to that foreign country.

Home Energy Credits Save Money and Cut Taxes

noreply@blogger.com (Anonymous) — Tue, 1 Mar 2016 09:56:00 -0500

You can trim your taxes and save on your energy bills with certain home improvements. Here are some key facts to know about home energy tax credits:

Non-Business Energy Property Credit

Part of this credit is worth 10 percent of the cost of certain qualified energy-saving items you added to your main home last year. This may include items such as insulation, windows, doors and roofs.
The other part of the credit is not a percentage of the cost. It is for the actual cost of certain property. This may include items like water heaters and heating and air conditioning systems. The credit amount for each type of property has a different dollar limit.
This credit has a maximum lifetime limit of $500. You may only use $200 of this limit for windows.
Your main home must be located in the U.S. to qualify for the credit.
Be sure you have the written certification from the manufacturer that their product qualifies for this tax credit. They usually post it on their website or include it with the product’s packaging. You can rely on it to claim the credit, but do not attach it to your return. Keep it with your tax records.
You may claim the credit on your 2015 tax return if you didn’t reach the lifetime limit in past years. Under current law, this credit is available through Dec. 31, 2016.

Residential Energy Efficient Property Credit

This tax credit is 30 percent of the cost of alternative energy equipment installed on or in your home.
Qualified equipment includes solar hot water heaters, solar electric equipment, wind turbines and fuel cell property.
There is no dollar limit on the credit for most types of property. If your credit is more than the tax you owe, you can carry forward the unused portion of this credit to next year’s tax return.
The home must be in the U.S. It does not have to be your main home, unless the alternative energy equipment is qualified fuel cell property.
This credit is available through 2016.

Use Form 5695, Residential Energy Credits, to claim these credits. For more information on this topic, refer to the form’s instructions. You can get IRS forms anytime on IRS.gov/forms.

5 Things You Should Know about the Child Tax Credit

noreply@blogger.com (Anonymous) — Fri, 26 Feb 2016 14:39:00 -0500

The Child Tax Credit is an important tax credit that may save you up to $1,000 for each eligible qualifying child. Be sure you qualify before you claim it. Here are five useful facts from the IRS on the Child Tax Credit:

1. Qualifications. For the Child Tax Credit, a qualifying child must pass several tests:

Age. The child must have been under age 17 at the end of 2015.
Relationship. The child must be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, half brother, or half sister. The child may be a descendant of any of these individuals. A qualifying child could also include your grandchild, niece or nephew. You would always treat an adopted child as your own child. An adopted child includes a child lawfully placed with you for legal adoption.
Support. The child must have not provided more than half of their own support for the year.
Dependent. The child must be a dependent that you claim on your federal tax return.
Joint return. The child cannot file a joint return for the year, unless the only reason they are filing is to claim a refund.
Citizenship. The child must be a U.S. citizen, a U.S. national or a U.S. resident alien.
Residence. In most cases, the child must have lived with you for more than half of 2015.

2. Limitations. The Child Tax Credit is subject to income limitations. The limits may reduce or eliminate your credit depending on your filing status and income.

3. Additional Child Tax Credit. If you qualify and get less than the full Child Tax Credit, you could receive a refund even if you owe no tax with the Additional Child Tax Credit.

4. Schedule 8812. If you qualify to claim the Child Tax Credit, make sure to check if you must complete and attach Schedule 8812, Child Tax Credit, with your tax return. For example, if you claim a credit for a child with an Individual Taxpayer Identification Number, you must complete Part I of Schedule 8812. If you qualify to claim the Additional Child Tax Credit, you must complete and attach Schedule 8812. You can visit IRS.gov to view, download or print IRS tax forms anytime.

5. IRS E-file. The easiest way to claim the Child Tax Credit is with IRS E-file. This system is safe, accurate and easy to use. You can also use IRS Free Fileto prepare and e-file your taxes for free. Go to IRS.gov/filing to learn more.

Additional IRS Resources:

Deciding Whether to Itemize or Use the Standard Deduction - 5 steps

noreply@blogger.com (Anonymous) — Wed, 17 Feb 2016 15:47:00 -0500

Most people claim the standard deduction when they file their federal tax return, but you may be able to lower your tax bill if you itemize. You can find out which way saves you the most by figuring your taxes both ways. The IRS offers these six tips to help you choose:

1. Figure Your Itemized Deductions. Add up deductible expenses you paid during the year. These may include expenses such as:

Home mortgage interest
State and local income taxes or sales taxes (but not both)
Real estate and personal property taxes
Gifts to charities
Casualty or theft losses
Unreimbursed medical expenses
Unreimbursed employee business expenses

Special rules and limits apply. Visit IRS.gov and refer to Publication 17, Your Federal Income Tax, for more details.

2. Know Your Standard Deduction. If you don’t itemize, your basic standard deduction for 2015 depends on your filing status:

Single $6,300
Married Filing Jointly $12,600
Head of Household $9,250
Married Filing Separately $6,300
Qualifying Widow(er) $12,600

If you’re 65 or older or blind, your standard deduction is higher than these amounts. If someone can claim you as a dependent, your deduction may be limited.

3. Check the Exceptions. There are some situations where the law does not allow a person to claim the standard deduction. This rule applies if you are married filing a separate return and your spouse itemizes. In this case, you can’t claim a standard deduction. You usually will pay less tax if you itemize. SeePublication 17 for more on these rules.

4. Use the IRS ITA Tool. Visit IRS.gov and use the Interactive Tax Assistanttool. It can help determine your standard deduction. It can also help you figure your itemized deductions.

5. File the Right Forms. To itemize your deductions, use Form 1040 andSchedule A, Itemized Deductions. You can take the standard deduction on Forms 1040, 1040A or 1040EZ.

Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on IRS.gov.

These are your

Obtaining and Claiming a Health Coverage Exemption

noreply@blogger.com (Anonymous) — Tue, 9 Feb 2016 13:09:00 -0500

The Affordable Care Act requires you and each member of your family to have minimum essential coverage, qualify for an insurance coverage exemption, or make an individual shared responsibility payment for months without coverage or an exemption when you file your federal income tax return.

You, your spouse or your dependents may be eligible to claim an exemption from the requirement to have coverage and are not required to make a payment. .For any month that you do not qualify for a coverage exemption, you will need to have minimum essential coverage or make a shared responsibility payment.

You can claim most exemptions when you file your tax return. However, you must apply for certain exemptions in advance through the Health Insurance Marketplace, You may be exempt if:

The minimum amount you must pay for the annual premiums is more than 8.05 percent of your household income
You have a gap in coverage that is less than three consecutive months
You qualify for an exemption for one of several other reasons, including having a hardship that prevents you from obtaining coverage, or belonging to a group explicitly exempt from the requirement

Claiming an exemption when you file

You will claim or report coverage exemptions on Form 8965, Health Coverage Exemptions, and attach it to Form 1040, Form 1040A, or Form 1040EZ. You can file each of these forms electronically.

If your income is below your filing threshold and you are not required to file a tax return, you are eligible for an automatic exemption and you do not have to file a tax return to claim it. You do not need to file a return solely to report your coverage or to claim a coverage exemption.

However, if you choose to file a tax return, you will use Part II, Coverage Exemptions for Your Household Claimed on Your Return, of Form 8965 to claim a health coverage exemption. You should not make an individual shared responsibility payment if you qualify for this exemption because your income is below the filing threshold.

You can claim other IRS-granted coverage exemptions on your tax return using Part III, Coverage Exemptions for Individuals Claimed on Your Return, of Form 8965. For a coverage exemption that you qualify to claim on your tax return, all you need to do is file Form 8965 with your tax return. You do not need to contact the IRS to obtain an exemption in advance.

Reporting Marketplace granted exemptions

If you are granted a coverage exemption from the Marketplace, they will send you a notice with your unique Exemption Certificate Number or ECN. You will enter your ECN in Part I, Marketplace-Granted Coverage Exemptions for Individuals, of Form 8965 in Column C.

If the Marketplace hasn’t processed your exemption application before you file your tax return, complete Part I of Form 8965 and enter “pending” in Column C for each person listed. If you can claim the exemption on your return, you do not need an ECN from the Marketplace.

Filing Electronically

Taxpayers and their tax professionals should consider filing returns electronically. Using tax preparation software is the best and simplest way to file a complete and accurate tax return as it guides individuals and tax preparers through the process and does all the math. There are a variety of electronic filing options, including free volunteer assistance, IRS Free File for taxpayers who qualify, commercial software, and professional assistance.

More Information

Form 8965, Health Coverage Exemptions

For more information about the Affordable Care Act and filing your 2015 income tax return, visit IRS.gov/aca.

Hiding Money or Income Offshore Resides on the “Dirty Dozen” List of Tax Scams for the 2016 Filing Season

noreply@blogger.com (Anonymous) — Sat, 6 Feb 2016 11:10:00 -0500

WASHINGTON — The Internal Revenue Service today said avoiding taxes by hiding money or assets in unreported offshore accounts remains on its annual list of tax scams known as the “Dirty Dozen” for the 2015 filing season.

"Our continued enforcement actions should discourage anyone from trying to illegally hide money and income offshore," said IRS Commissioner John Koskinen. "We have voluntary options to help taxpayers get their taxes and filing obligations in order."

Since the first Offshore Voluntary Disclosure Program (OVDP) opened in 2009, there have been more than 54,000 disclosures and we have collected more than $8 billion from this initiative alone. The IRS conducted thousands of offshore-related civil audits that have produced tens of millions of dollars. The IRS has also pursued criminal charges leading to billions of dollars in criminal fines and restitutions.

The IRS remains committed to our priority efforts to stop offshore tax evasion wherever it occurs. Even though the IRS has faced several years of budget reductions, the IRS continues to pursue cases in all parts of the world, regardless of whether the person hiding money overseas chooses a bank with no offices on U.S. soil.

Through the years, offshore accounts have been used to lure taxpayers into scams and schemes.

Compiled annually, the “Dirty Dozen” lists a variety of common scams that taxpayers may encounter anytime, but many of these schemes peak during filing season as people prepare their returns or hire people to help with their taxes.

Illegal scams can lead to significant penalties and interest and possible criminal prosecution. IRS Criminal Investigation works closely with the Department of Justice (DOJ) to shut down scams and prosecute the criminals behind them.

Hiding Income Offshore

Over the years, numerous individuals have been identified as evading U.S. taxes by hiding income in offshore banks, brokerage accounts or nominee entities and then using debit cards, credit cards or wire transfers to access the funds. Others have employed foreign trusts, employee-leasing schemes, private annuities or insurance plans for the same purpose.

The IRS uses information gained from its investigations to pursue taxpayers with undeclared accounts, as well as the banks and bankers suspected of helping clients hide their assets overseas. The IRS works closely with the Department of Justice (DOJ) to prosecute tax evasion cases.

While there are legitimate reasons for maintaining financial accounts abroad, there are reporting requirements that need to be fulfilled. U.S. taxpayers who maintain such accounts and who do not comply with reporting requirements are breaking the law and risk significant penalties and fines, as well as the possibility of criminal prosecution.

Since 2009, tens of thousands of individuals have come forward voluntarily to disclose their foreign financial accounts, taking advantage of special opportunities to comply with the U.S. tax system and resolve their tax obligations. And, with new foreign account reporting requirements being phased in over the next few years, hiding income offshore is increasingly more difficult.

At the beginning of 2012, the IRS reopened the Offshore Voluntary Disclosure Program (OVDP) following continued strong interest from taxpayers and tax practitioners after the closure of the 2011 and 2009 programs. This program will be open for an indefinite period until otherwise announced.

Third-Party Reporting

Under the Foreign Account Tax Compliance Act (FATCA) and the network ofintergovernmental agreements (IGAs) between the U.S. and partner jurisdictions, automatic third-party account reporting began in 2015, making it less likely that offshore financial accounts will go unnoticed by the IRS.

In addition to FATCA and reporting through IGAs, the Department of Justice’sSwiss Bank Program continues to reach non-prosecution agreements with Swiss financial institutions that facilitated past non-compliance. As part of these agreements, banks provide information on potential non-compliance by U.S. taxpayers. Potential civil penalties increase substantially if U.S. taxpayers associated with participating banks wait to apply to OVDP to resolve their tax obligations.

Get to Know Your Taxpayer Bill of Rights

noreply@blogger.com (Anonymous) — Thu, 14 Jan 2016 11:47:00 -0500

Every taxpayer has a set of fundamental rights. The “Taxpayer Bill of Rights” takes the many existing rights in the tax code and groups them into 10 categories. You should be aware of these rights when you interact with the IRS.

Publication 1, Your Rights as a Taxpayer, highlights a list of your rights and the agency’s obligations to protect them. Here is a summary of the Taxpayer Bill of Rights:

The Right to Be Informed. Taxpayers have the right to know what is required to comply with the tax laws. They are entitled to clear explanations of the laws and IRS procedures in all tax forms, instructions, publications, notices and correspondence. They have the right to know about IRS decisions affecting their accounts and clear explanations of the outcomes.
The Right to Quality Service. Taxpayers have the right to receive prompt, courteous and professional assistance in their dealings with the IRS and the freedom to speak to a supervisor about inadequate service. Communications from the IRS should be clear and easy to understand.
The Right to Pay No More than the Correct Amount of Tax. Taxpayers have the right to pay only the amount of tax legally due, including interest and penalties. They should also expect the IRS to apply all tax payments properly.
The Right to Challenge the IRS’s Position and Be Heard. Taxpayers have the right to object to formal IRS actions or proposed actions and provide justification with additional documentation. They should expect that the IRS will consider their timely objections and documentation promptly and fairly. If the IRS does not agree with their position, they should expect a response.
The Right to Appeal an IRS Decision in an Independent Forum. Taxpayers are entitled to a fair and impartial administrative appeal of most IRS decisions, including certain penalties. Taxpayers have the right to receive a written response regarding a decision from the Office of Appeals. Taxpayers generally have the right to take their cases to court.
The Right to Finality. Taxpayers have the right to know the maximum amount of time they have to challenge an IRS position and the maximum amount of time the IRS has to audit a particular tax year or collect a tax debt. Taxpayers have the right to know when the IRS concludes an audit.
The Right to Privacy. Taxpayers have the right to expect that any IRS inquiry, examination or enforcement action will comply with the law and be as unobtrusive as possible. They should expect such proceedings to respect all due process rights, including search and seizure protections. The IRS will provide, where applicable, a collection due process hearing.
The Right to Confidentiality. Taxpayers have the right to expect that their tax information will remain confidential. The IRS will not disclose information unless authorized by the taxpayer or by law. Taxpayers should expect the IRS to take appropriate action against employees, return preparers and others who wrongfully use or disclose their return information.
The Right to Retain Representation. Taxpayers have the right to retain an authorized representative of their choice to represent them in their dealings with the IRS. Taxpayers have the right to seek assistance from a Low Income Taxpayer Clinic if they cannot afford representation.
The Right to a Fair and Just Tax System. Taxpayers have the right to expect fairness from the tax system. This includes considering all facts and circumstances that might affect their underlying liabilities, ability to pay or ability to provide information timely. Taxpayers have the right to receive assistance from the Taxpayer Advocate Service if they are experiencing financial difficulty or if the IRS has not resolved their tax issues properly and timely through its normal channels.

In an effort to expand awareness, the IRS has made Publication 1 available in English, Chinese, Korean, Russian, Spanish andVietnamese.

The IRS will include Publication 1 when sending a notice to taxpayers on a range of issues, such as an audit or collection matter. All IRS facilities will publicly display the rights for taxpayers and employees to see.

Additional IRS Resources:

What the Taxpayer Bill of Rights Means for You
IR-2014-72, IRS Adopts "Taxpayer Bill of Rights;" 10 Provisions to be Highlighted on IRS.gov, in Publication 1
IR-2014-80, IRS "Taxpayer Bill of Rights" Now Available in 6 Languages; 10 Key Rights Outlined in Updated Publication 1

IRS YouTube Videos:

Taxpayer Bill of Rights – English | Spanish | ASL

IRS Podcasts:

Taxpayer Bill of Rights – English | Spanish

Internal Revenue Service Reminds Taxpayers to Plan Ahead If You Need a Tax Transcript

noreply@blogger.com (Anonymous) — Mon, 4 Jan 2016 20:14:00 -0500

IR-2015-140, Dec. 23, 2015 Español

WASHINGTON — The IRS reminds taxpayers that the quickest way to get a copy of their tax transcript is to order it online using the Get Transcript application on IRS.gov. By planning ahead, they should receive their transcript in the mail within five to 10 days from the time the IRS receives the request online.

The IRS continues to work to bring the viewable/printable functionality of the application back online in the near future with enhanced identity protection security features. In the meantime, taxpayers can still request a mailed transcript by going online to Get Transcript.

Though taxpayers should always keep a copy of their tax return for their records, some may need the information from filed tax returns for many reasons. This includes college financial aid applicants or taxpayers who have applied for a loan to buy a home or start a business.

If a taxpayer is returning to college this January and applying for financial aid, they should check with their financial aid department at school to see if they will need a copy of their transcript before they start classes. Frequently, students get all the tax return information they need on the FAFSA application via the IRS Data Retrieval Tool.

Similarly, if a taxpayer plans to apply for a loan, they should ask their financial institution if a transcript will be necessary so they can plan ahead and have it at the appropriate time.

The fastest way to get a transcript is through the Get Transcript tool on IRS.gov. Although the IRS temporarily stopped the online viewing and printing of transcripts, Get Transcript still allows taxpayers to order their transcript online and receive it by mail. Taxpayers simply click the "Get a Transcript by Mail" button to order the paper copy of their transcript and have it sent to their address of record. Among the options available:

To order a transcript online and have it delivered by mail, go to IRS.gov and use the Get Transcript tool.
To order by phone, call 800-908-9946 and follow the prompts.
To request an individual tax return transcript by mail or fax, complete Form 4506T-EZ, Short Form Request for Individual Tax Return Transcript. Businesses and individuals who need a tax account transcript should use Form 4506-T, Request for Transcript of Tax Return.

The IRS will mail the transcript to the address of record entered on the prior year’s tax return. The mailed transcript is an official document. It does not need to be a “certified” copy as is the case with some other documents. If a taxpayer has moved since they last filed a tax return with the IRS, they need to first submit Form 8822, Change of Address, to ensure that the transcript is mailed to the correct address. Allowing time for the Form 8822 is another reason for taxpayers to plan ahead for their transcript needs.

If a taxpayer is applying for financial aid, they are encouraged to use the IRS Data Retrieval Tool on the FAFSA website to easily import their tax return information to their financial aid application. The temporary shutdown of the Get Transcript tool does not affect the Data Retrieval Tool. Taxpayers may also click on the FAFSA help page for more information.

If they are applying for a mortgage, most mortgage companies only require a tax return transcript for income verification purposes. Most of these companies participate in our IVES (Income Verification Express Service) program and can request (with the taxpayer’s consent) to have a transcript sent directly to the financial institution. If a taxpayer needs to order a transcript, they should follow the process described above and have it mailed to the address the IRS has on file for them.

Remember, ordering a transcript online is the quickest option. For more information, read the IRSHow Do I Get My Transcript? fact sheet.

2016 Standard Mileage Rates for Business, Medical and Moving Announced

noreply@blogger.com (Anonymous) — Wed, 30 Dec 2015 13:00:00 -0500

IR-2015-137, Dec.17, 2015

WASHINGTON — The Internal Revenue Service today issued the 2016 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2016, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

54 cents per mile for business miles driven, down from 57.5 cents for 2015
19 cents per mile driven for medical or moving purposes, down from 23 cents for 2015
14 cents per mile driven in service of charitable organizations

The business mileage rate decreased 3.5 cents per mile and the medical, and moving expense rates decrease 4 cents per mile from the 2015 rates. The charitable rate is based on statute.

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.

These and other requirements for a taxpayer to use a standard mileage rate to calculate the amount of a deductible business, moving, medical or charitable expense are in Rev. Proc. 2010-51. Notice 2016-01 contains the standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan.

For Same-Sex Couples and Certain Domestic Partners

noreply@blogger.com (Anonymous) — Thu, 10 Dec 2015 16:32:00 -0500

The theft of your identity, especially personal information such as your name, Social Security number, address and children’s names, can be traumatic and frustrating. In this online era, it’s important to always be on guard.

The IRS has teamed up with state revenue departments and the tax industry to make sure you understand the dangers to your personal and financial data. Taxes. Security. Together. Working in partnership with you, we can make a difference.

Here are seven steps you can make part of your routine to protect your tax and financial information:

Read your credit card and banking statements carefully and often – watch for even the smallest charge that appears suspicious. (Neither your credit card nor bank – or the IRS – will send you emails asking for sensitive personal and financial information such as asking you to update your account.)
Review and respond to all notices and correspondence from the Internal Revenue Service. Warning signs of tax-related identity theft can include IRS notices about tax returns you did not file, income you did not receive or employers you’ve never heard of or where you’ve never worked.
Review each of your three credit reports at least once a year. Visit annualcreditreport.com to get your free reports.
Review your annual Social Security income statement for excessive income reported. You can sign up for an electronic account at www.SSA.gov.
Read your health insurance statements; look for claims you never filed or care you never received.
Shred any documents with personal and financial information. Never toss documents with your personally identifiable information, especially your social security number, in the trash.
If you receive any routine federal deposit such as Social Security Administrator or Department of Veterans Affairs benefits, you probably receive those deposits electronically. You can use the same direct deposit process for your federal and state tax refund. IRS direct deposit is safe and secure and places your tax refund directly into the financial account of your choice.

To learn additional steps you can take to protect your personal and financial data, visit Taxes. Security. Together. You also can read Publication 4524, Security Awareness for Taxpayers.

Additional IRS Resources:

IRS Commissioner Koskinen's Statement on the Security Summit Group Public Awareness Campaign
Taxpayer Guide to Identity Theft
Publication 5027, Identity Theft Information for Taxpayers
www.irs.gov/identitytheft -- Identity Protection: Prevention, Detection and Victim Assistance
IR-2015-129, IRS, States and Tax Industry Announce New Steps to Help Public to Protect Personal Tax Data
Fact Sheet 2015-23, IRS, States and Industry Partners Provide Update on Collaborative Fight Against Tax-Related Identity Theft
IRS and Partner Statements on the October 2015 Security Summit Meeting

IRS YouTube Videos:

Taxes. Security. Together. – English
IRS Efforts On Identity Theft – English| Spanish| ASL
IRS Identity Theft FAQ: First Steps for Victims – English | Spanish | ASL
IRS Identity Theft FAQ: Going After The Bad Guys – English | Spanish | ASL

IRS Podcasts:

IRS Efforts on Identity Theft – English | Spanish
IRS Identity Theft FAQ: First Steps for Victims – English | Spanish\
IRS Identity Theft FAQ: Going After The Bad Guys – English | Spanish

IRS Tax Tips for Deducting Gifts to Charity

noreply@blogger.com (Anonymous) — Tue, 24 Nov 2015 15:00:00 -0500

IRS Tax Tips

November 24, 2015

Issue Number: IRS Special Edition Tax Tip 2015-20

Inside This Issue

IRS Tax Tips for Deducting Gifts to Charity

The holiday season often prompts people to give money or property to charity. If you plan to give and want to claim a tax deduction, there are a few tips you should know before you give. For instance, you must itemize your deductions. Here are six more tips that you should keep in mind:

1. Give to qualified charities. You can only deduct gifts you give to a qualified charity. Use the IRS Select Check tool to see if the group you give to is qualified. You can deduct gifts to churches, synagogues, temples, mosques and government agencies. This is true even if Select Check does not list them in its database.

2. Keep a record of all cash gifts. Gifts of money include those made in cash or by check, electronic funds transfer, credit card and payroll deduction. You must have a bank record or a written statement from the charity to deduct any gift of money on your tax return. This is true regardless of the amount of the gift. The statement must show the name of the charity and the date and amount of the contribution. Bank records include canceled checks, or bank, credit union and credit card statements. If you give by payroll deductions, you should retain a pay stub, a Form W-2 wage statement or other document from your employer. It must show the total amount withheld for charity, along with the pledge card showing the name of the charity.

3. Household goods must be in good condition. Household items include furniture, furnishings, electronics, appliances and linens. These items must be in at least good-used condition to claim on your taxes. A deduction claimed of over $500 does not have to meet this standard if you include a qualified appraisal of the item with your tax return.

4. Additional records required. You must get an acknowledgment from a charity for each deductible donation (either money or property) of $250 or more. Additional rules apply to the statement for gifts of that amount. This statement is in addition to the records required for deducting cash gifts. However, one statement with all of the required information may meet both requirements.

5. Year-end gifts. Deduct contributions in the year you make them. If you charge your gift to a credit card before the end of the year it will count for 2015. This is true even if you don’t pay the credit card bill until 2016. Also, a check will count for 2015 as long as you mail it in 2015.

6. Special rules. Special rules apply if you give a car, boat or airplane to charity. If you claim a deduction of more than $500 for a noncash contribution, you will need to file another form with your tax return. UseForm 8283, Noncash Charitable Contributions to report these gifts. For more on these rules, visit IRS.gov.

Tax Topic 506, Charitable Contributions
Publication 526, Charitable Contributions.
Publication 561, Determining the Value of Donated Property
Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes

IRS YouTube Videos:

Charitable Contributions – English | Spanish | ASL
Exempt Organizations Select Check – English | Spanish | ASL

IRS Podcasts:

Exempt Organizations Select Check – English | Spanish

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Job Search Expenses May be Deductible

noreply@blogger.com (Anonymous) — Thu, 27 Aug 2015 16:42:00 -0400

People often change their job in the summer. If you look for a job in the same line of work, you may be able to deduct some of your job search costs. Here are some key tax facts you should know about if you search for a new job:

Same Occupation. Your expenses must be for a job search in your current line of work. You can’t deduct expenses for a job search in a new occupation.
Résumé Costs. You can deduct the cost of preparing and mailing your résumé.
Travel Expenses. If you travel to look for a new job, you may be able to deduct the cost of the trip. To deduct the cost of the travel to and from the area, the trip must be mainly to look for a new job. You may still be able to deduct some costs if looking for a job is not the main purpose of the trip.
Placement Agency. You can deduct some job placement agency fees you pay to look for a job.
First Job. You can’t deduct job search expenses if you’re looking for a job for the first time.
Substantial Job Break. You can’t deduct job search expenses if there was a long break between the end of your last job and the time you began looking for a new one.
Reimbursed Costs. Reimbursed expenses are not deductible.
Schedule A. You usually deduct your job search expenses on Schedule A, Itemized Deductions. You’ll claim them as a miscellaneous deduction. You can deduct the total miscellaneous deductions that are more than two percent of your adjusted gross income.
Premium Tax Credit. If you receive advance payments of the premium tax credit it is important that you report changes in circumstances, such as changes in your income or eligibility for other coverage, to your Health Insurance.
Marketplace. Other changes that you should report include changes in your family size or address. Advance payments of the premium tax credit provide financial assistance to help you pay for the insurance you buy through the Health Insurance Marketplace. Reporting changes will help you get the proper type and amount of financial assistance so you can avoid getting too much or too little in advance.

For more on job hunting refer to Publication 529, Miscellaneous Deductions. You can get IRS tax forms and publications on IRS.gov/forms at any time.

Additional IRS Resources:

Publication 463, Travel, Entertainment, Gift, and Car Expenses
The “What Ifs” for Struggling Taxpayers
Publication 4128, Tax Impact of Job Loss
Publication 5152: Report changes to the Marketplace as they happen English | Spanish

IRS YouTube Videos:

Job Search Expenses – English | Spanish | ASL
What If – English | Spanish | ASL
Premium Tax Credit – English | Spanish | ASL
Premium Tax Credit: Changes in Circumstances – English| Spanish

IRS Podcasts:

Premium Tax Credit – English | Spanish
Premium Tax Credit Changes in Circumstances – English | Spanish

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Many IRS Tax Return Due Dates Just Changed, FBARs Too

noreply@blogger.com (Anonymous) — Tue, 4 Aug 2015 13:32:00 -0400

Is your IRS tax return due April 15? Yes, and that date still holds, including the 6 month automatic extension. But many other filing deadlines were just changed by Congress. The due dates for partnership and corporate tax returns were changed, and for those important foreign account FBAR forms, also known as FinCEN Form 114. The changes came in an unlikely vehicle, H.R. 3236, the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015. That non-tax law also gave the IRS an increased audit period from three to six years in many cases.

Starting after December 31, 2015:

Partnership tax returns are due March 15, NOT April 15 as in the past. If your partnership isn’t on a calendar year, the return is due on the 15th day of the third month following the close of your tax year.
C corporation tax returns are due April 15, NOT March 15. For non-calendar years, it is due on the 15th day of the fourth month following the close of the tax year.
S corporation tax returns remain unchanged—they are still due March 15, or the third month following the close of the taxable year;
There are other rules too. C corporations with tax years ending on June 30 will continue to have a due date of September 15 until 2025. For years beginning after 2025, the due date for these returns will be October 15.

The due date for FBARs go from June 30 to April 15. That’s a relief! And now you can even get a six-month extension, just like tax returns. Note that FBARs–also called Form 114 are important. If you had foreign accounts that in the aggregate topped $10,000 at any time during the year, you must file. The penalties are scary, including willful and non-willful civil penalties, and even criminal sanctions.

In fact, although many tax evasion charges carry the risk of a three year jail sentence, criminal FBAR charges can earn up to a ten year sentence. Even on the civil penalty front, FBARs are nothing to ignore. FinCEN now requires that you file your FBAR, Form 114 electronically. Yet starting to report foreign accounts you failed to report in the past can be touchy. Will filing one FBAR prompt questions about whether you had the account in the past and why you didn’t report it?

Since the statute of limitations for civil or criminal violations is generally six years, opening yourself up to that kind of exposure is frightening. Willful civil violations can draw penalties equal to the greater of $100,000 or 50% of the balance in the account for each violation. With six years open, that could more than wipe out your account.A Florida man was hit with civil penalties equal to 150% of his account even though this penalty exceeded his entire offshore account balance. Recent guidance suggests that the IRS could be more lenient in the future, but the IRS’s definition of leniency can still make the IRS amnesty program for offshore accounts a very good–and very certain–deal. You can choose OVDP or streamlined depending on your facts. Even a 50% penalty applied once can look attractive when you consider the possibility of prosecution or even just higher civil FBAR penalties.

Don’t Overlook the Child and Dependent Care Tax Credit this Summer

noreply@blogger.com (Anonymous) — Fri, 19 Jun 2015 12:43:00 -0400

Day camps are common during the summer months. Many parents pay for them for their children while they work or look for work. If this applies to you, your costs may qualify for a federal tax credit that can lower your taxes. Here are the top ten tips to know about the Child and Dependent Care Credit:

Care for Qualifying Persons. Your expenses must be for the care of one or more qualifying persons. Your dependent child or children under age 13 usually qualify. For more about this rule see Publication 503, Child and Dependent Care Expenses.
Work-related Expenses. Your expenses for care must be work-related. This means that you must pay for the care so you can work or look for work. This rule also applies to your spouse if you file a joint return. Your spouse meets this rule during any month they are a full-time student. They also meet it if they’re physically or mentally incapable of self-care.
Earned Income Required. You must have earned income, such as from wages, salaries and tips. It also includes net earnings from self-employment. Your spouse must also have earned income if you file jointly. Your spouse is treated as having earned income for any month that they are a full-time student or incapable of self-care. This rule also applies to you if you file a joint return. Refer to Publication 503 for more details.
Joint Return if Married. Generally, married couples must file a joint return. You can still take the credit, however, if you are legally separated or living apart from your spouse.
Type of Care. You may qualify for it whether you pay for care at home, at a daycare facility or at a day camp.
Credit Amount. The credit is worth between 20 and 35 percent of your allowable expenses. The percentage depends on the amount of your income.
Expense Limits. The total expense that you can use in a year is limited. The limit is $3,000 for one qualifying person or $6,000 for two or more.
Certain Care Does Not Qualify. You may not include the cost of certain types of care for the tax credit, including:
- Overnight camps or summer school tutoring costs.
- Care provided by your spouse or your child who is under age 19 at the end of the year.
- Care given by a person you can claim as your dependent.
Keep Records and Receipts. Keep all your receipts and records for when you file your tax return next year. You will need the name, address and taxpayer identification number of the care provider. You must report this information when you claim the credit on Form 2441, Child and Dependent Care Expenses.
Dependent Care Benefits. Special rules apply if you get dependent care benefits from your employer. See Publication 503 for more on this topic.

Remember that this credit is not just a summer tax benefit. You may be able to claim it for qualifying care that you pay for at any time during the year.

Additional IRS Resources:

Tax Topic 602 - Child and Dependent Care Credit
Frequently Asked Questions - Child Care Credit
Publication 926, Household Employer's Tax Guide
Publication 907, Tax Highlights for Persons With Disabilities

IRS YouTube Videos:

Summer Day Camp Expenses - English | Spanish | ASL

IRS, Industry, States Take New Steps Together to Fight Identity Theft, Protect Taxpayers

noreply@blogger.com (Anonymous) — Wed, 17 Jun 2015 13:58:00 -0400

WASHINGTON — The Internal Revenue Service joined today with representatives of tax preparation and software firms, payroll and tax financial product processors and state tax administrators to announce a sweeping new collaborative effort to combat identity theft refund fraud and protect the nation's taxpayers.

The agreement — reached after the project was originally announced March 19 — includes identifying new steps to validate taxpayer and tax return information at the time of filing. The effort will increase information sharing between industry and governments. There will be standardized sharing of suspected identity fraud information and analytics from the tax industry to identify fraud schemes and locate indicators of fraud patterns. And there will be continued collaborative efforts going forward.

"This agreement represents a new era of cooperation and collaboration among the IRS, states and the electronic tax industry that will help combat identity theft and protect taxpayers against tax refund fraud," IRS Commissioner John Koskinen said. "We've made tremendous progress, and we will continue these efforts. Taxpayers filing their tax returns next filing season should have a safer and more secure experience."

Koskinen convened a Security Summit on March 19 with the chief executive officers and leaders of private sector firm and federal and state tax administrators to discuss emerging threats on identity theft and expand existing collaborative efforts to stop fraud.

Three specialized working groups were established as part of the Summit, with members from the IRS, states and industry co-chairing and serving on each team. During the past 12 weeks, the teams focused on developing ways to validate the authenticity of taxpayers and information included on tax return submissions, information sharing to improve detection and expand prevention of refund fraud, and threat assessment and strategy development to prevent risks and threats.

The groups agreed to several important new initiatives in this unprecedented effort, including:

Taxpayer authentication. The industry and government groups identified numerous new data elements that can be shared at the time of filing to help authenticate a taxpayer and detect identity theft refund fraud. The data will be submitted to the IRS and states with the tax return transmission for the 2016 filing season. Some of these issues include, but are not limited to:

- Reviewing the transmission of the tax return, including the improper and or repetitive use of Internet Protocol numbers, the Internet ‘address’ from which the return is originating.
- Reviewing computer device identification data tied to the return’s origin.
- Reviewing the time it takes to complete a tax return, so computer mechanized fraud can be detected.
- Capturing metadata in the computer transaction that will allow review for identity theft related fraud.

Fraud identification. The groups agreed to expand sharing of fraud leads. For the first time, the entire tax industry and other parts of the tax industry will share aggregated analytical information about their filings with the IRS to help identify fraud. This post-return filing process has produced valuable fraud information because trends are easier to identify with aggregated data. Currently, the IRS obtains this analytical information from some groups. The expanded effort will ensure a level playing field so everyone approaches fraud from the same perspective, making it more difficult for the perpetration of fraud schemes.

Information assessment. In addition to continuing cooperative efforts, the groups will look at establishing a formalized Refund Fraud Information Sharing and Assessment Center (ISAC) to more aggressively and efficiently share information between the public and private sector to help stop the proliferation of fraud schemes and reduce the risk to taxpayers. This would help in many ways, including providing better data to law enforcement to improve the investigations and prosecution of identity thieves.

Cybersecurity framework. Participants with the tax industry agreed to align with the IRS and states under the National Institute of Standards and Technology (NIST) cybersecurity framework to promote the protection of information technology (IT) infrastructure. The IRS and states currently operate under this standard, as do many in the tax industry.

Taxpayer awareness and communication. The IRS, industry and states agreed that more can be done to inform taxpayers and raise awareness about the protection of sensitive personal, tax and financial data to help prevent refund fraud and identity theft. These efforts have already started, and will increase through the year and expand in conjunction with the 2016 filing season.

"Industry, states and the IRS all have a role to play in this effort," Koskinen said. "We share a common enemy in those stealing personal information and perpetrating refund fraud and we share a common goal of protecting taxpayers. We want to build these changes into the DNA of the entire tax system to make it safer."

Many major system and process changes will be made this summer and fall by the participants in order to be ready for the 2016 filing season. The public-private partnership also will continue this cooperative, collaborative approach to address not just short-term issues but longer-term issues facing the tax community and taxpayers.

The partnership parties recognize the need to continuously improve our tax system defenses for combating this threat to taxpayers and our tax system, Koskinen added. Those defenses include a continually improving multi-level identity proofing and authentication capability that anticipates and stops threats.

"I applaud the industry and the states for stepping forward to take on this challenge and making the needed changes," Koskinen. "This is good for taxpayers, good for tax administrators and good for the tax community."

Koskinen emphasized that a continuing theme throughout this effort focuses on protecting taxpayer information and privacy. “Working together we can achieve results that none of us, working alone, could accomplish,” he said.

In addition to companies from the private sector, the summit team included several groups including the Electronic Tax Administration Advisory Committee (ETAAC), the Federation of Tax Administrators (FTA) representing the states, the Council for Electronic Revenue Communication Advancement (CERCA) and the American Coalition for Taxpayer Rights (ACTR).

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Page Last Reviewed or Updated: 11-Jun-2015

Raking in Tax Breaks from Gambling - Losses are deductible against winnings

noreply@blogger.com (Anonymous) — Thu, 11 Jun 2015 12:59:00 -0400

Do you like to gamble for entertainment? If the answer is “yes,” it is important to understand all the tax rules related to gambling wins and losses. Otherwise, you may end up paying considerably more taxes than necessary.

Basic Premise: Gambling winnings constitute taxable income on the federal level. It does not matter how and where you win. It could be at a church raffle or the racetrack or a casino aboard a cruise ship. In any case, you owe tax to Uncle Sam on the income. Depending on the type and amount of your winnings, the payer may provide you with a Form W-2G and may withhold federal income tax from the payment.

On the other side of the coin, gambling losses are deductible on your federal tax return, but only up to the amount of your winnings. For example, if you win $10,000 in a lottery this year and then lose $12,000 at the blackjack and craps tables in Las Vegas, your deduction is limited to $10,000. Conversely, if you lose $8,000, the entire $8,000 is deductible, resulting in tax on $2,000 of gambling income.

Although gambling losses are deducted as miscellaneous expenses, you at least avoid a special tax-law floor. Generally, miscellaneous expenses are deductible only to the extent your annual total from all sources exceeds 2% of your adjusted gross income (AGI). However, the 2%-of-AGI limit does not apply to gambling losses.

As you might imagine, taxpayers may try to play fast and loose with the rules for gambling losses, so the IRS stays on its toes. You must keep adequate records to back up your claims in case the IRS challenges gambling loss deductions. If you do not have the proper records, you may be leaving tax money on the table.

What sort of records must you keep? This can vary according to the gambling activity, as shown below.

Bingo: A record of the number of games played, cost of cards purchased and amounts collected on winning cards.
Keno: Copies of the keno tickets validated by the gambling establishment, copies of the casino credit reports and copies of the casino check-cashing records.
Racing (horse, harness, dog, etc.): Records of the number of races, amounts of wagers and amounts won and lost.
Slot machines: A record of the machine number and all the winnings by date and time the machine was played.
Table games (e.g., blackjack, craps and roulette): The number of the table where you played and casino credit card data indicating where credit was issued.

Note that these records may be supported by other means (e.g., unredeemed ticket stubs from the racetrack). However, the supporting records must be legitimate.

Finally, be aware that special rules apply to those who gamble professionally for a living. Among other requirements, you must be engaged in the activity with the intention of turning a profit. If you qualify, the activity is generally treated like a business, so you may be able to deduct an annual loss.

June 15, 2015 - Estimated Tax Payment Due

noreply@blogger.com (Anonymous) — Mon, 8 Jun 2015 16:25:00 -0400

It’s time to make your second quarter estimated tax installment payment for the 2015 tax year. Our tax system is a “pay-as-you-go” system. To facilitate that concept, the government has provided several means of assisting taxpayers in meeting the “pay-as-you-go” requirement. These include:

Payroll withholding for employees;
Pension withholding for retirees; and
Estimated tax payments for self-employed individuals and those with other sources of income not covered by withholding.

When a taxpayer fails to prepay a safe harbor (minimum) amount, they can be subject to the underpayment penalty. This penalty is equal to the federal short-term rate plus 3 percentage points, and the penalty is computed on a quarter-by-quarter basis.

Federal tax law does provide ways to avoid the underpayment penalty. If the underpayment is less than $1,000 (the “de minimis amount”), no penalty is assessed. In addition, the law provides "safe harbor" prepayments. There are two safe harbors:

The first safe harbor is based on the tax owed in the current year. If your payments equal or exceed 90% of what is owed in the current year, you can escape a penalty.

The second safe harbor is based on the tax owed in the immediately preceding tax year. This safe harbor is generally 100% of the prior year’s tax liability. However, for taxpayers whose AGI exceeds $150,000 ($75,000 for married taxpayers filing separately), the prior year’s safe harbor is 110%.

Example: Suppose your tax for the year is $10,000 and your prepayments total $5,600. The result is that you owe an additional $4,400 on your tax return. To find out if you owe a penalty, see if you meet the first safe harbor exception. Since 90% of $10,000 is $9,000, your prepayments fell short of the mark. You can't avoid the penalty under this exception.

However, in the above example, the safe harbor may still apply. Assume your prior year’s tax was $5,000. Since you prepaid $5,600, which is greater than 110% of the prior year’s tax (110% = $5,500), you qualify for this safe harbor and can escape the penalty.

This example underscores the importance of making sure your prepayments are adequate, especially if you have a large increase in income. This is common when there is a large gain from the sale of stocks, sale of property, when large bonuses are paid, when a taxpayer retires, etc. Timely payment of each required estimated tax installment is also a requirement to meet the safe harbor exception to the penalty. If you have questions regarding your safe harbor estimates, please call this office as soon as possible.

CAUTION: Some state de minimis amounts and safe harbor estimate rules are different than those for the Federal estimates. Please call this office for particular state safe harbor rules.

IRS Statement on the "Get Transcript" Application

noreply@blogger.com (Anonymous) — Tue, 2 Jun 2015 13:08:00 -0400

The IRS announced today that criminals used taxpayer-specific data acquired from non-IRS sources to gain unauthorized access to information on approximately 100,000 tax accounts through IRS’ “Get Transcript” application. This data included Social Security information, date of birth and street address.

These third parties gained sufficient information from an outside source before trying to access the IRS site, which allowed them to clear a multi-step authentication process, including several personal verification questions that typically are only known by the taxpayer. The matter is under review by the Treasury Inspector General for Tax Administration as well as the IRS’ Criminal Investigation unit, and the “Get Transcript” application has been shut down temporarily. The IRS will provide free credit monitoring services for the approximately 100,000 taxpayers whose accounts were accessed. In total, the IRS has identified 200,000 total attempts to access data and will be notifying all of these taxpayers about the incident.

As always, the IRS takes the security of taxpayer data extremely seriously, and we are working aggressively to protect affected taxpayers and continue to strengthen our protocols.

Additional information

The IRS announced today it will be notifying taxpayers after third parties gained unauthorized access to information on about 100,000 accounts through the “Get Transcript” online application.

The IRS determined late last week that unusual activity had taken place on the application, which indicates that unauthorized third parties had access to some accounts on the transcript application. Following an initial review, it appears that access was gained to more than 100,000 accounts through the Get Transcript application.

In this sophisticated effort, third parties succeeded in clearing a multi-step authentication process that required prior personal knowledge about the taxpayer, including Social Security information, date of birth, tax filing status and street address before accessing IRS systems. The multi-layer process also requires an additional step, where applicants must correctly answer several personal identity verification questions that typically are only known by the taxpayer.

The IRS temporarily shut down the Get Transcript application last week after an initial assessment identified questionable attempts were detected on the system in mid-May. The online application will remain disabled until the IRS makes modifications and further strengthens security for it.

The matter is under continuing review by the Treasury Inspector General for Tax Administration and IRS offices, including Criminal Investigation.

The IRS notes this issue does not involve its main computer system that handles tax filing submission; that system remains secure.

On the Get Transcript application, a further review by the IRS identified that these attempts were quite complex in nature and appear to have started in February and ran through mid-May. In all, about 200,000 attempts were made from questionable email domains, with more than 100,000 of those attempts successfully clearing authentication hurdles. During this filing season, taxpayers successfully and safely downloaded a total of approximately 23 million transcripts.

In addition, to disabling the Get Transcript application, the IRS has taken a number of immediate steps to protect taxpayers, including:

Sending a letter to all of the approximately 200,000 taxpayers whose accounts had attempted unauthorized accesses, notifying them that third parties appear to have had access to taxpayer Social Security numbers and additional personal financial information from a non-IRS source before attempting to access the IRS transcript application. Although half of this group did not actually have their transcript account accessed because the third parties failed the authentication tests, the IRS is still taking an additional protective step to alert taxpayers. That’s because malicious actors acquired sensitive financial information from a source outside the IRS about these households that led to the attempts to access the transcript application.
Offering free credit monitoring for the approximately 100,000 taxpayers whose Get Transcript accounts were accessed to ensure this information isn’t being used through other financial avenues. Taxpayers will receive specific instructions so they can sign up for the credit monitoring. The IRS emphasizes these outreach letters will not request any personal identification information from taxpayers. In addition, the IRS is marking the underlying taxpayer accounts on our core processing system to flag for potential identity theft to protect taxpayers going forward — both right now and in 2016.

These letters will be mailed out starting later this week and will include additional details for taxpayers about the credit monitoring and other steps. At this time, no action is needed by taxpayers outside these affected groups.

The IRS is continuing to conduct further reviews on those instances where the transcript application was accessed, including how many of these households filed taxes in 2015. It’s possible that some of these transcript accesses were made with an eye toward using them for identity theft for next year’s tax season.

The IRS emphasizes this incident involves one application involving transcripts — it does not involve other IRS systems, such as our core taxpayer accounts or other applications, such as Where’s My Refund.

The IRS will be working aggressively to protect affected taxpayers and strengthen our protocols even further going forward.

Related Items:

Taxpayers Receiving Identity Verification Letter Should Use IDVerify.irs.gov

noreply@blogger.com (Anonymous) — Thu, 19 Mar 2015 13:49:00 -0400

WASHINGTON – The Internal Revenue Service today reminded taxpayers who receive requests from the IRS to verify their identities that the Identity Verification Service website, idverify.irs.gov, offers the fastest, easiest way to complete the task.

Taxpayers may receive a letter when the IRS stops suspicious tax returns that have indications of being identity theft but contains a real taxpayer’s name and/or Social Security number. Only those taxpayers receiving Letter 5071C should access idverify.irs.gov.

The website will ask a series of questions that only the real taxpayer can answer.

Once the identity is verified, the taxpayers can confirm whether or not they filed the return in question. If they did not file the return, the IRS can take steps at that time to assist them. If they did file the return, it will take approximately six weeks to process it and issue a refund.

Letter 5071C is mailed through the U.S. Postal Service to the address on the return. It asks taxpayers to verify their identities in order for the IRS to complete processing of the returns if the taxpayers did file it or reject the returns if the taxpayers did not file it. The IRS does not request such information via email, nor will the IRS call a taxpayer directly to ask this information without you receiving a letter first. The letter number can be found in the upper corner of the page.

The letter gives taxpayers two options to contact the IRS and confirm whether or not they filed the return. Taxpayers may use the idverify.irs.gov site or call a toll-free number on the letter. Because of the high-volume on the toll-free numbers, the IRS-sponsored website, idverify.irs.gov, is the safest, fastest option for taxpayers with web access.

Taxpayers should have available their prior year tax return and their current year tax return, if they filed one, including supporting documents, such as Forms W-2 and 1099 and Schedules A and C.

Taxpayers also may access idverify.irs.gov through www.IRS.gov by going toUnderstanding Your 5071C Letter or the Understanding Your IRS Notice or Letter page. The tool is also available in Spanish. Taxpayers should always be aware of tax scams, efforts to solicit personally identifiable information and IRS impersonations.

However, idverify.irs.gov is a secure, IRS-supported site that allows taxpayers to verify their identities quickly and safely.

IRS.gov is the official IRS website. Always look for a URL ending with “.gov” – not “.com,” “.org,” “.net,” or other nongovernmental URLs.

2015 IRS e-file Refund Cycle Chart

noreply@blogger.com (Anonymous) — Sat, 7 Feb 2015 13:53:00 -0500

This has not been and will not be published by the IRS. They have adopted a standard of issuing refunds for the most part within 21 days of your return being accepted. However, many sites now try to estimate dates when refunds will be sent and the IRS e-file Refund Cycle Chart for 2015 with Direct Deposit and Check dates are only estimates.

Here are the latest dates published:

DATE ACCEPTED	DIRECT DEPOSIT SENT	PAPER CHECK MAILED
Jan 18 – Jan 24, 2015	Feb 6, 2015	Feb 9, 2015
Jan 25 – Jan 31, 2015	Feb 13, 2015	Feb 16, 2015
Feb 1 – Feb 7, 2015	Feb 20, 2015	Feb 23, 2015
Feb 8 – 14, 2015	Feb 27, 2015	Mar 2, 2015
Feb 15 – 21, 2015	Mar 6, 2015	Mar 13, 2015
Feb 22 – 28, 2015	Mar 13, 2015	Mar 20, 2015
Mar 1 – 7, 2015	Mar 20, 2015	Mar 27, 2015
Mar 8 – 14, 2015	Mar 27, 2015	Apr 3, 2015
Mar 15 – 21, 2015	Apr 3, 2015	Apr 10, 2015
Mar 22 – 28, 2015	Apr 10, 2015	Apr 17, 2015
Mar 29 – Apr 4, 2015	Apr 17, 2015	Apr 24, 2015
Apr 5 – Apr 11, 2015	Apr 24, 2015	May 1, 2015
Apr 12 – Apr 15, 2015	May 1, 2015	May 8, 2015
Apr 16 – Apr 25, 2015	May 8, 2015	May 15, 2015
Apr 26 – May 2, 2015	May 15, 2015	May 22, 2015

Prediction as to when you will get your tax refund can be difficult; and, now the IRS sticks pretty tight to a general statement “21 days” wherein they ask you to wait this time frame before checking the status of your refund. But the dates you will find will not all be the same. Why? The official Refund Cycle Chart published by the IRS is no more.

While we near the end of the year and approach the next tax filing season, many people start to pop the big question, “When will I get my tax refund in 2015?” and with this we will find more and more of these best guess date charts. Some of the “estimated refund cycle charts” are based on guesses, some educated; and other refund charts you might find are just from prior years with dates that have been slightly adjusted.

Since an official IRS refund calendar is a thing of the past, when taxpayers can expect to receive their tax refund in 2015 remains a mystic idea; and as always there will be glitches with one process or another at the IRS which could delay your refund. As always, we stress to you that pre-spending those beloved refunds is playing with fire, wait for that direct deposit to hit in 2015! IGMR will post any estimated tax refund charts here that we find credible or to have plausible time frames.

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2015 IRS e-file Refund Cycle Chart

Here are the latest dates published: