Monday, October 31, 2016

Reminder: Employers Face New Jan. 31 W-2 Filing Deadline; Some Refunds Delayed Until Feb. 15


IR-2016-143, Oct. 28, 2016

WASHINGTON — The Internal Revenue Service today reminded employers and small businesses of a new Jan. 31 filing deadline for Forms W-2. The IRS must also hold some refunds until Feb. 15.

A new federal law, aimed at making it easier for the IRS to detect and prevent refund fraud, will accelerate the W-2 filing deadline for employers to Jan. 31. For similar reasons, the new law also requires the IRS to hold refunds involving two key refundable tax credits until at least Feb. 15. Here are details on each of these key dates.

New Jan. 31 Deadline for Employers
The Protecting Americans from Tax Hikes (PATH) Act, enacted last December, includes a new requirement for employers. They are now required to file their copies of Form W-2, submitted to the Social Security Administration, by Jan. 31. The new Jan. 31 filing deadline also applies to certain Forms 1099-MISC reporting non-employee compensation such as payments to independent contractors.

In the past, employers typically had until the end of February, if filing on paper, or the end of March, if filing electronically, to submit their copies of these forms. In addition, there are changes in requesting an extension to file the Form W-2. Only one 30-day extension to file Form W-2 is available and this extension is not automatic. If an extension is necessary, a Form 8809 Application for Extension of Time to File Information Returns must be completed as soon as you know an extension is necessary, but by January 31. Please carefully review the instructions for Form 8809, for more information.

"As tax season approaches, the IRS wants to be sure employers, especially smaller businesses, are aware of these new deadlines," said IRS Commissioner John Koskinen. "We are working with the payroll community and other partners to share this information widely."

The new accelerated deadline will help the IRS improve its efforts to spot errors on returns filed by taxpayers. Having these W-2s and 1099s earlier will make it easier for the IRS to verify the legitimacy of tax returns and properly issue refunds to taxpayers eligible to receive them. In many instances, this will enable the IRS to release tax refunds more quickly than in the past.

The Jan. 31 deadline has long applied to employers furnishing copies of these forms to their employees and that date remains unchanged.

Some Refunds Delayed Until at Least Feb. 15
Due to the PATH Act change, some people will get their refunds a little later. The new law requires the IRS to hold the refund for any tax return claiming either the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) until Feb. 15. By law, the IRS must hold the entire refund, not just the portion related to the EITC or ACTC.

Even with this change, taxpayers should file their returns as they normally do. Whether or not claiming the EITC or ACTC, the IRS cautions taxpayers not to count on getting a refund by a certain date, especially when making major purchases or paying other financial obligations. Though the IRS issues more than nine out 10 refunds in less than 21 days, some returns are held for further review.

Wednesday, October 12, 2016

IRS Gives Tax Relief to Victims of Hurricane Matthew



Victims of Hurricane Matthew, which took place beginning on October 4, 2016, in parts of North Carolina, may qualify for tax relief. The declaration permits the IRS to postpone certain deadlines for taxpayers who reside or have a business in the disaster area.
Affected areas that currently qualify include Beaufort, Bladen, Columbus, Cumberland, Edgecombe, Hoke, Lenoir, Nash, Pitt and Robeson counties. Continue to check the Tax Relief in Disaster Situations page to stay up-to-date on eligible areas and updated deadlines. The IRS expects additional states to be included in the extended relief.
Certain deadlines falling on or after October 4, 2016, and on or before March 15, 2017, have been postponed to March 15, 2017. This includes the 2015 individual returns on extension originally due on October 17 and the January 17, 2017, deadline for making quarterly estimated tax payments. Also included are the October 31 and January 31 deadlines for quarterly payroll and excise tax returns.
The IRS automatically identifies taxpayers located in the covered disaster area and applies automatic filing and payment relief. But affected taxpayers and their tax preparers who reside or have a business located outside the covered disaster area must call the IRS disaster hotline at 866.562.5227 to request this tax relief.
More details can be found in IR-2016-131.

Wednesday, September 28, 2016

IRS Picks Private Debt Collection Contractors


The Internal Revenue Service has chosen four private debt collection agencies to help collect unpaid tax debts as the IRS gears up to resurrect the controversial program.
The three agencies are CBE Group of Cedar Falls, Iowa, Conserve of Fairport, N.Y., Performant of Livermore, Calif., and Pioneer of Horseheads, N.Y. The IRS is required to revive the private debt collection program this year because of a provision in a highway funding bill that Congress passed last December.
Senators Charles Grassley, R-Iowa, and Charles Schumer, D-N.Y., were among the proponents of a bill to bring back the program, and it was incorporated in the highway legislation (see Here Come the Private Tax Debt Collectors … Again and the slideshow 7 Things You Need to Know about Private Tax Collectors). Three of the four agencies chosen are based in their states.                                        The program has been discontinued twice before because of complaints about harassment of taxpayers and the private companies’ low success rate at collecting unpaid tax debts. The increasing problem of scammers who pretend to be IRS employees and call taxpayers demanding immediate payment has also prompted concerns about reviving the program (see Highway Bill Will Revoke Passports for Tax Delinquents and Bring Back Private Tax Debt Collectors).
For the new program, the IRS said it will first send a written notice to taxpayers that it is turning over their tax debts to a collection agency. The IRS said it will send a written notice to both the taxpayer and their representative telling them the account has been turned over to a private collection agency, followed by a second letter confirming the transfer.
The private collection agencies are only supposed to work on accounts where taxpayers owe money and the IRS is no longer actively pursuing their accounts. These include older, overdue tax accounts, along with accounts where a lack of resources at the IRS prevent its employees from working on the cases.
The private collection agencies will be able to identify themselves as contractors of the IRS. However, their employees will need to follow the provisions of the Fair Debt Collection Practices Act, requiring them to be courteous and respect taxpayer rights.
The IRS said it will do everything it can to help taxpayers avoid confusion and understand their rights and tax responsibilities, especially given the prevalence of phone scams where criminals demand tax payments be sent on prepaid debit cards and gift cards.
The IRS noted the private collection agencies are not going to request payment on a prepaid debit card. They will instead inform taxpayers about the electronic payment options available to them on IRS.gov. Tax debts can also be paid by checks made out to the U.S. Treasury and sent directly to IRS, but not the private collection agency.
The IRS said it will keep taxpayers informed about any scams and offer tips for protecting themselves on the Tax Scams and Consumer Alerts page on IRS.gov.

Thursday, September 8, 2016

To Maintain Eligibility for Advance Payments of the Premium Tax Credit, File ASAP


The IRS is sending letters to taxpayers who received advance payments of the premium tax credit in 2015, but who have not yet filed their tax return. You must file a tax return to reconcile any advance credit payments you received in 2015 and to maintain your eligibility for future premium assistance. If you do not file, you will not be eligible for advance payments of the premium tax credit in 2017.
If you receive Letter 5858 or 5862, you are being reminded to file your 2015 federal tax return along with Form 8962, Premium Tax Credit.  The letter encourages you to file within 30 days of the date of the letter to substantially increase your chances of avoiding a gap in receiving assistance with paying Marketplace health insurance coverage in 2017.
Here’s what you need to do if you received a 5858 
  • Read your letter carefully.
  • Review the situation to see if you agree with the information in the letter.
  • Use the Form 1095-A that you received from your Marketplace to complete your return. If you need a copy of your Form 1095-A, log in to your HealthCare.gov or state Marketplace account or call your Marketplace call center.
  • File your 2015 tax return with Form 8962 as soon as possible, even if you don’t normally have to file.
  • If you have already filed your 2015 tax return with Form 8962, you can disregard the letter.
Here’s what you need to do if you received a 5862 letter:
  • Read your letter carefully.
  • Review the situation to see if you agree with the information in the letter.
  • Use the Form 1095-A that you received from your Marketplace to complete Form 8962. If you need a copy of your Form 1095-A, log in to your HealthCare.gov or state Marketplace account or call your Marketplace call center.
  • File your 2015 tax return with Form 8962 as soon as possible, even though you have an extension until October 17, 2016, to file.
  • If you have already filed your 2015 tax return with Form 8962, please disregard this letter.

Thursday, August 18, 2016

IRS Warns of Back-to-School Scams; Encourages Students, Parents, Schools to Stay Alert



WASHINGTON — The Internal Revenue Service today warned taxpayers against telephone scammers targeting students and parents during the back-to-school season and demanding payments for non-existent taxes, such as the “Federal Student Tax.”
People should be on the lookout for IRS impersonators calling students and demanding that they wire money immediately to pay a fake “federal student tax.” If the person does not comply, the scammer becomes aggressive and threatens to report the student to the police to be arrested. As schools around the nation prepare to re-open, it is important for taxpayers to be particularly aware of this scheme going after students and parents.    
“Although variations of the IRS impersonation scam continue year-round, they tend to peak when scammers find prime opportunities to strike”, said IRS Commissioner John Koskinen. “As students and parents enter the new school year, they should remain alert to bogus calls, including those demanding fake tax payments from students.”
The IRS encourages college and school communities to share this information so that students, parents and their families are aware of these scams.
Scammers are constantly identifying new tactics to carry out their crimes in new and unsuspecting ways. This year, the IRS has seen scammers use a variety of schemes to fool taxpayers into paying money or giving up personal information. Some of these include:
  • Altering the caller ID on incoming phone calls in a “spoofing” attempt to make it seem like the IRS, the local police or another agency is calling
  • Imitating software providers to trick tax professionals--IR-2016-103
  • Demanding fake tax payments using iTunes gift cards--IR-2016-99
  • Soliciting W-2 information from payroll and human resources professionals--IR-2016-34
  • “Verifying” tax return information over the phone--IR-2016-40
  • Pretending to be from the tax preparation industry--IR-2016-28
If you receive an unexpected call from someone claiming to be from the IRS, here are some of the telltale signs to help protect yourself.
The IRS Will Never:
  • Call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer. Generally, the IRS will first mail you a bill if you owe any taxes.
  • Threaten to immediately bring in local police or other law-enforcement groups to have you arrested for not paying.
  • Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
  • Ask for credit or debit card numbers over the phone.
If you get a suspicious phone call from someone claiming to be from the IRS and asking for money, here’s what you should do:
  • Do not give out any information. Hang up immediately.
  • Search the web for telephone numbers scammers leave in your voicemail asking you to call back. Some of the phone numbers may be published online and linked to criminal activity.
  • Contact TIGTA to report the call. Use their “IRS Impersonation Scam Reporting” web page or call 800-366-4484.
  • Report it to the Federal Trade Commission. Use the “FTC Complaint Assistant” on FTC.gov. Please add “IRS Telephone Scam” in the notes.
  • If you think you might owe taxes, call the IRS directly at 800-829-1040.

Wednesday, August 10, 2016

How Identity Theft Can Affect Your Taxes



Tax-related identity theft normally occurs when someone uses your stolen Social Security number to file a tax return claiming a fraudulent refund. Many people first find out about it when they do their taxes.
The IRS is working hard to stop identity theft with a strategy of prevention, detection and victim assistance. Here are nine key points:
  1. Taxes. Security. Together. The IRS, the states and the tax industry need your help. We can’t fight identity theft alone. The Taxes. Security. Together. awareness campaign is an effort to better inform you about the need to protect your personal, tax and financial data online and at home.

  2. Protect your Records. Keep your Social Security card at home and not in your wallet or purse. Only provide your Social Security number if it’s absolutely necessary. Protect your personal information at home and protect your computers with anti-spam and anti-virus software. Routinely change passwords for internet accounts.

  3. Don’t Fall for Scams.  Criminals often try to impersonate your bank, your credit card company, even the IRS in order to steal your personal data. Learn to recognize and avoid those fake emails and texts. Also, the IRS will not call you threatening a lawsuit, arrest or to demand an immediate tax payment. Normal correspondence is a letter in the mail. Beware of threatening phone calls from someone claiming to be from the IRS.

  4. Report Tax-Related ID Theft to the IRS. If you cannot e-file your return because a tax return already was filed using your SSN, consider the following steps: • File your taxes by paper and pay any taxes owed. • File an IRS Form 14039 Identity Theft Affidavit. Print the form and mail or fax it according to the instructions. You may include it with your paper return. • File a report with the Federal Trade Commission using the FTC Complaint Assistant; • Contact one of the three credit bureaus so they can place a fraud alert or credit freeze on your account;

  5. IRS Letters. If the IRS identifies a suspicious tax return with your SSN, it may send you a letter asking you to verify your identity by calling a special number or visiting a Taxpayer Assistance Center. This is to protect you from tax-related identity theft.

  6. IP PIN. If you are a confirmed ID theft victim, the IRS may issue an IP PIN. The IP PIN is a unique six-digit number that you will use to e-file your tax return. Each year, you will receive an IRS letter with a new IP PIN.

  7. Report Suspicious Activity. If you suspect or know of an individual or business that is committing tax fraud, you can visit IRS.gov and follow the chart on How to Report Suspected Tax Fraud Activity.

  8. Combating ID Theft.  In 2015, the IRS stopped 1.4 million confirmed ID theft returns and protected $8.7 billion. In the past couple of years, more than 2,000 people have been convicted of filing fraudulent ID theft returns. 

  9. Service Options. Information about tax-related identity theft is available online. We have a special section on IRS.gov devoted to identity theft and a phone number available for victims to obtain assistance.
For more on this Topic, see the Taxpayer Guide to Identity Theft.
IRS Tax Tips provide valuable information throughout the year. IRS.gov offers tax help and info on various topics including common tax scams, taxpayer rights and more.
Additional IRS Resources:
  • Publication 5027, Identity Theft Information for Taxpayers
  • Publication 5199, Tax Preparer Guide to Identity Theft
  • Publication 4524, Security Awareness-Identity Theft Flyer
  • Publication 4523, Beware of Phishing Schemes

Monday, August 8, 2016

Four Tax Tips about Hobbies that Earn Income


Millions of people enjoy hobbies. Hobbies can also be a source of income. Some of these types of hobbies include stamp or coin collecting, craft making and horse breeding. You must report any income you get from a hobby on your tax return. How you report the income from hobbies is different from how you report income from a business. There are special rules and limits for deductions you can claim for a hobby. Here are five basic tax tips you should know if you get income from your hobby:
  1. Business versus Hobby. There are nine factors to consider to determine if you are conducting business or participating in a hobby. Make sure to base your decision on all the facts and circumstances of your situation. Refer to Publication 535, Business Expenses, to learn more. You can also visit IRS.gov and type “not-for-profit” in the search box.

  2. Allowable Hobby Deductions. You may be able to deduct ordinary and necessary hobby expenses. An ordinary expense is one that is common and accepted for the activity. A necessary expense is one that is helpful or appropriate. See Publication 535 for more on these rules.

  3. Limits on Expenses. As a general rule, you can only deduct your hobby expenses up to the amount of your hobby income. If your expenses are more than your income, you have a loss from the activity. You can’t deduct that loss from your other income.

  4. How to Deduct Expenses. You must itemize deductions on your tax return in order to deduct hobby expenses. Your costs may fall into three types of expenses. Special rules apply to each type. See Publication 535 for how you should report them on Schedule A, Itemized Deductions.