Monday, April 17, 2017

IRS Reminds Taxpayers of April 18 Tax-Filing Deadline


WASHINGTON — The Internal Revenue Service has received 103.6 million 2016 individual income tax returns as of April 7 and expects millions more to be filed by the April 18 deadline. Special filing deadline rules apply to members of the military serving in combat zones, those living outside the U.S. and those living in declared disaster areas.

The IRS also expects more than 13 million taxpayers to request a filing extension, giving them six additional months to complete and file their tax return.

Who Needs to File?
Not everyone is required to file a tax return. The requirement to file depends on a person’s income, filing status, age and whether they can be claimed as a dependent on someone else’s return. Anyone not sure whether they need to file a return should see Do I Need to File a Tax Return or refer to Publication 17, Your Federal Income Tax for Individuals, on IRS.gov.

For an estimated one million taxpayers who did not file a 2013 tax return, April 18, 2017, is the last day to file to claim their part of tax refunds totaling more than $1 billion. Taxpayers due a refund must file a return within three years of its due date or the money becomes the property of the U.S. Treasury. There are no late filing penalties if a refund is due.

According to the IRS, the most common reasons people do not file a return who should are: they don’t know how, may not have the documents needed or owe more tax than they can pay. Taxpayers who owe more than they can pay should pay as much as they can by the due date in order to minimize interest and penalties.

Extensions of Time to File
Taxpayers who are not ready to file by the deadline should request an extension of time to file. An extension gives the taxpayer until Oct. 16 to file but does not extend the time to pay. Penalties and interest will be charged on all taxes not paid by the April 18 filing deadline.


IRS will automatically process an extension of time to file when taxpayers select Form 4868 and they are making a full or partial federal tax payment using IRS Direct Pay, the Electronic Federal Tax Payment System or by paying with a credit or debit card by the April due date. There is no need to file a separate Form 4868 extension request when making an electronic payment and indicating it is for an extension.
Taxpayers also can complete and mail in Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, to get a six-month extension.

Taxpayers Who Can’t Pay
Taxpayers should file by the deadline, even if they can’t pay, or pay as much as possible and ask the IRS about payment options. By filing a tax return, even without full payment, taxpayers will avoid the failure-to-file penalty. This penalty is assessed when the required return is not filed by the due date or extended due date if an extension is requested.

The failure-to-file penalty is generally 5 percent per month and can be as much of 25 percent of the unpaid tax. The penalty for returns filed more than 60 days late can be $205 or 100 percent of the unpaid tax.

The failure-to-pay penalty, which is the penalty for any taxes not paid by the deadline, is ½ of 1 percent of the unpaid taxes per month and can be up to 25 percent of the unpaid amount. Taxpayers must also pay interest on taxes not paid by the filing deadline.

The IRS reminds taxpayers that there is no law that permits taxpayers to refuse to file a federal tax return or refuse to pay their taxes. This includes for reasons based on programs or policies with which they disagree on moral, ethical, religious or other grounds. Taxpayers who file a frivolous tax return can be assessed a $5,000 penalty and civil penalties of up to 75 percent of the underpaid tax. Frivolous tax returns are those tax returns that do not include enough information to figure the correct tax or that contain information clearly showing that the tax reported is substantially incorrect.

Thursday, March 23, 2017

IRS Reminds Seniors to Remain on Alert to Phone Scams during Tax Season


WASHINGTON – With the 2017 tax season underway, the IRS reminds seniors to remain alert to aggressive and threatening phone calls by criminals impersonating IRS agents. The callers claim to be IRS employees, but are not.
These con artists can sound convincing when they call. They use fake names and bogus IRS identification badge numbers. They may know a lot about their targets, and they usually alter the caller ID to make it look like the IRS is calling.
The victims are told they owe money to the IRS and must pay it promptly through a preloaded debit card or wire transfer. If the victim refuses to cooperate, they are often threatened with arrest. In many cases, the caller becomes hostile and insulting. Alternately, victims may be told they have a refund due to try to trick them into sharing private information. If the phone isn’t answered, the phone scammers often leave an “urgent” callback request.
“The IRS warns seniors about these aggressive phone calls that can be frightening and intimidating. The IRS doesn't do business like that," said IRS Commissioner John Koskinen. “We urge seniors to safeguard their personal information at all times. Don't let the convincing tone of these scam calls lead you to provide personal or credit card information, potentially losing hundreds or thousands of dollars. Just hang up and avoid becoming a victim to these criminals‎."
In recent years, thousands of people have lost millions of dollars and their personal information to tax scams and fake IRS communication.
Later this spring, the only outside agencies authorized to contact taxpayers about their unpaid tax accounts will be one of the four authorized under the new private debt collection program. Even then, any affected taxpayer will be notified first by the IRS, not the private collection agency (PCA).
The private debt collection program, authorized under a federal law enacted by Congress in 2015, enables designated contractors to collect tax payments on the government’s behalf. The program begins later this spring. The IRS will give taxpayers and their representative written notice when their account is being transferred to a private collection agency. The collection agency will then send a second, separate letter to the taxpayer and their representative confirming this transfer. Information contained in these letters will help taxpayers identify the tax amount owed and help ensure that future collection agency calls are legitimate.
The IRS reminds seniors this tax season that they can easily identify when a supposed IRS caller is a fake. Here are four things the scammers often do but the IRS and its authorized PCAs will not do. Any one of these things is a telltale sign of a scam.
The IRS and its authorized private collection agencies will never:
  • Call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer. The IRS does not use these methods for tax payments. Generally, the IRS will first mail a bill to any taxpayer who owes taxes. All tax payments should only be made payable to the U.S. Treasury and checks should never be made payable to third parties.
  • Threaten to immediately bring in local police or other law-enforcement groups to have the taxpayer arrested for not paying.
  • Demand that taxes be paid without giving the taxpayer the opportunity to question or appeal the amount owed.
  • Ask for credit or debit card numbers over the phone.
If you don’t owe taxes, or have no reason to think that you do:
  • Do not give out any information. Hang up immediately.
  • Contact the Treasury Inspector General for Tax Administration to report the call. Use their “IRS Impersonation Scam Reporting” web page. You can also 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 know you owe, or think you may owe tax:
  • Call the IRS at 800-829-1040. IRS workers can help you.
Remember, too, the IRS does not use email, text messages or social media to discuss personal tax issues involving bills or refunds. The IRS will continue to keep taxpayers informed about scams and provide tips to protect them. The IRS encourages taxpayers to visit IRS.gov for information including the “Tax Scams and Consumer Alerts” page.
Additional information about tax scams is available on IRS social media sites, including YouTube Tax Scams.

Saturday, March 18, 2017

Understanding the Child and Dependent Care Tax Credit



The IRS urges people not to overlook the Child and Dependent Care Tax Credit. Eligible taxpayers may be able claim it if they paid for someone to care for a child, dependent or spouse last year.
Taxpayers can use the IRS Interactive Tax Assistant tool, Am I Eligible to Claim the Child and Dependent Care Credit?, to help determine if they are eligible to claim the credit for expenses paid for the care of an individual to allow the taxpayer to work or look for work.
Eight other key points about this credit include:
  1. Work-Related Expenses. The care must have been necessary so a person could work or look for work. For those who are married, the care also must have been necessary so a spouse could work or look for work. This rule does not apply if the spouse was disabled or a full-time student.
  2. Qualifying Person. The care must have been for “qualifying persons.” A qualifying person can be a child under age 13. A qualifying person can also be a spouse or dependent who lived with the taxpayer for more than half the year and is physically or mentally incapable of self-care.
  3. Earned Income. A taxpayer must have earned income for the year, such as wages from a job. For those who are married and file jointly, the spouse must also have earned income. Special rules apply to a spouse who is a student or disabled.
  4. Credit Percentage / Expense Limits. The credit is worth between 20 and 35 percent of allowable expenses. The percentage depends on the income amount. Allowable expenses are limited to $3,000 for paid care of one qualifying person. The limit is $6,000 if the taxpayer paid for the care of two or more.
  5. Dependent Care Benefits. Special rules apply for people who get dependent care benefits from their employer. Form 2441, Child and Dependent Care Expenses, has more on these rules. File the form with a tax return.
  6. Qualifying Person’s SSN. The Social Security number of each qualifying person must be included to claim the credit.
  7. Care Provider Information. The name, address and taxpayer identification number of the care provider must be included on the return.
Taxpayers who pay someone to come to their home and care for their dependent or spouse may be a household employer and may have to withhold and pay Social Security and Medicare tax and pay federal unemployment tax. See Publication 926, Household Employer's Tax Guide.
Taxpayers should keep a copy of their tax return. Beginning in 2017, taxpayers using a software product for the first time may need their Adjusted Gross Income (AGI) amount from their prior-year tax return to verify their identity. Taxpayers can learn more about how to verify their identity and electronically sign tax returns at Validating Your Electronically Filed Tax Return.

IRS Reminds Taxpayers of April 1 Deadline to Take Required Retirement Plan Distributions



WASHINGTON — The Internal Revenue Service today reminded taxpayers who turned age 70½ during 2016 that, in most cases, they must start receiving required minimum distributions (RMDs) from Individual Retirement Accounts (IRAs) and workplace retirement plans by Saturday, April 1, 2017.
The April 1 deadline applies to owners of traditional (including SEP and SIMPLE) IRAs but not Roth IRAs. It also typically applies to participants in various workplace retirement plans, including 401(k), 403(b) and 457(b) plans.
The April 1 deadline only applies to the required distribution for the first year. For all subsequent years, the RMD must be made by Dec. 31. A taxpayer who turned 70½ in 2016 (born after June 30, 1945 and before July 1, 1946) and receives the first required distribution (for 2016) on April 1, 2017, for example, must still receive the second RMD by Dec. 31, 2017. 
Affected taxpayers who turned 70½ during 2016 must figure the RMD for the first year using the life expectancy as of their birthday in 2016 and their account balance on Dec. 31, 2015. The trustee reports the year-end account value to the IRA owner on Form 5498 in Box 5. Worksheets and life expectancy tables for making this computation can be found in the appendices to Publication 590-B.
Most taxpayers use Table III  (Uniform Lifetime) to figure their RMD. For a taxpayer who reached age 70½ in 2016 and turned 71 before the end of the year, for example, the first required distribution would be based on a distribution period of 26.5 years. A separate table, Table II, applies to a taxpayer married to a spouse who is more than 10 years younger and is the taxpayer’s only beneficiary. Both tables can be found in the appendices to Publication 590-B. 
Though the April 1 deadline is mandatory for all owners of traditional IRAs and most participants in workplace retirement plans, some people with workplace plans can wait longer to receive their RMD. Employees who are still working usually can, if their plan allows, wait until April 1 of the year after they retire to start receiving these distributions. See Tax on Excess Accumulation  in Publication 575. Employees of public schools and certain tax-exempt organizations with 403(b) plan accruals before 1987 should check with their employer, plan administrator or provider to see how to treat these accruals.
The IRS encourages taxpayers to begin planning now for any distributions required during 2017. An IRA trustee must either report the amount of the RMD to the IRA owner or offer to calculate it for the owner. Often, the trustee shows the RMD amount in Box 12b on Form 5498. For a 2017 RMD, this amount would be on the 2016 Form 5498 that is normally issued in January 2017.
IRA owners can use a qualified charitable distribution (QCD) paid directly from an IRA to an eligible charity to meet part or all of their RMD obligation. Available only to IRA owners age 70½ or older, the maximum annual exclusion for QCDs is $100,000. For details, see the QCD discussion in Publication 590-B.
A 50 percent tax normally applies to any required amounts not received by the April 1 deadline. Report this tax on Form 5329 Part IX. For details, see the instructions for Part IX of this form.
More information on RMDs, including answers to frequently asked questions, can be found on IRS.gov.

IRS, States and Tax Industry Warn of Last-Minute Email Scams



WASHINGTON – The Internal Revenue Service, state tax agencies and the tax industry today warned both tax professionals and taxpayers of last-minute phishing email scams, especially those requesting last-minute deposit changes for refunds or account updates.
As the 2017 tax filing season winds down to the April 18 deadline, tax-related scams of various sorts are at their peak. The IRS urged both tax professionals and taxpayers to be on guard against suspicious activity.
The IRS, state tax agencies and the tax industry, acting as the Security Summit, enacted many safeguards against identity theft for 2017, but cybercriminals are ever evolving and make use of sophisticated scams to trick people into divulging sensitive data.
For example, one new scam poses as taxpayers asking their tax preparer to make a last-minute change to their refund destination, often to a prepaid debit card. The IRS urges tax preparers to verbally reconfirm information with the client should they receive last-minute email request to change an address or direct deposit account for refunds.
The IRS also suggests that tax professionals change and strengthen their own email passwords to better protect their email accounts used to exchange sensitive data with clients.
This is also the time of year when taxpayers may see scam emails from their tax software provider or others asking them to update online accounts. Taxpayers should learn to recognize phishing emails, calls or texts that pose as familiar organizations such as banks, credit card companies, tax software providers or even the IRS. These ruses generally urge taxpayers to give up sensitive data such as passwords, Social Security numbers and bank account or credit card numbers.
Taxpayers who receive suspicious emails purporting to be from a tax software provider or from the IRS should forward them to phishing@irs.gov. Remember: never open an attachment or link from an unknown or suspicious source. It may infect your computer with malware or steal information. Also, the IRS does not send unsolicited emails or request sensitive data via email.
The Security Summit maintains a public awareness campaign for taxpayers – Taxes. Security. Together. – and an awareness campaign for tax professionals – Protect Your Clients; Protect Yourself – as part of its effort to combat identity theft.

Sunday, March 5, 2017

People Who Have Not Filed a 2013 Federal Income Tax Return

IRS YouTube Videos:
Refund: Claim It or Lose It – English | Spanish | ASL 

IR-2017-50, March 1, 2017                                                                               EspaƱol
WASHINGTON — The Internal Revenue Service announced today that unclaimed federal income tax refunds totaling more than $1 billion may be waiting for an estimated 1 million taxpayers who did not file a 2013 federal income tax return.
To collect the money, taxpayers must file a 2013 tax return with the IRS no later than this year's tax deadline, Tuesday, April 18.
"We’re trying to connect a million people with their share of 1 billion dollars in unclaimed refunds for the 2013 tax year,” said IRS Commissioner John Koskinen. “People across the nation haven’t filed tax returns to claim these refunds, and their window of opportunity is closing soon. Students and many others may not realize they’re due a tax refund. Remember, there’s no penalty for filing a late return if you’re due a refund.”
The IRS estimates the midpoint for potential refunds for 2013 to be $763; half of the refunds are more than $763 and half are less.
In cases where a tax return was not filed, the law provides most taxpayers with a three-year window of opportunity for claiming a refund. If they do not file a return within three years, the money becomes the property of the U.S. Treasury. For 2013 tax returns, the window closes April 18, 2017. The law requires taxpayers to properly address mail and postmark the tax return by that date.
The IRS reminds taxpayers seeking a 2013 refund that their checks may be held if they have not filed tax returns for 2014 and 2015. In addition, the refund will be applied to any amounts still owed to the IRS, or a state tax agency, and may be used to offset unpaid child support or past due federal debts, such as student loans.
By failing to file a tax return, people stand to lose more than just their refund of taxes withheld or paid during 2013. Many low-and-moderate income workers may have been eligible for the Earned Income Tax Credit (EITC). For 2013, the credit was worth as much as $6,044. The EITC helps individuals and families whose incomes are below certain thresholds. The thresholds for 2013 were:
  • $46,227 ($51,567 if married filing jointly) for those with three or more qualifying children;
  • $43,038 ($48,378 if married filing jointly) for people with two qualifying children;
  • $37,870 ($43,210 if married filing jointly) for those with one qualifying child, and;
  • $14,340 ($19,680 if married filing jointly) for people without qualifying children.
Current and prior year tax forms (such as the Tax Year 2013 Form 1040, 1040A and 1040EZ) and instructions are available on the IRS.gov Forms and Publications page or by calling toll-free: 800- TAX-FORM (800-829-3676). Taxpayers who are missing Forms W-2, 1098, 1099 or 5498 for the years 2013, 2014 or 2015 should request copies from their employer, bank or other payer.
Taxpayers who are unable to get missing forms from their employer or other payer should go to IRS.gov and use the “Get Transcript Online” tool to obtain a Wage and Income transcript.  Taxpayers can also file Form 4506-T to request a transcript of their 2013 income. A Wage and Income transcript shows data from information returns we receive such as Forms W-2, 1099, 1098 and Form 5498, IRA Contribution Information. Taxpayers can use the information on the transcript to file their tax return.
State-by-state estimates of individuals who may be due 2013 tax refunds:

State or District
Estimated
Number of
Individuals
Median
Potential
Refund
Total
Potential
Refunds*
Alabama
18,100
$729
$17,549,000
Alaska
4,700
$917
$5,665,000
Arizona
24,800
$650
$22,642,000
Arkansas
9,900
$722
$9,571,000
California
97,200
$696
$93,406,000
Colorado
20,200
$699
$19,454,000
Connecticut
11,500
$846
$12,691,000
Delaware
4,300
$776
$4,321,000
District of Columbia
3,200
$762
$3,341,000
Florida
66,900
$776
$67,758,000
Georgia
34,400
$671
$32,082,000
Hawaii
6,500
$793
$6,876,000
Idaho
4,500
$619
$3,919,000
Illinois
40,000
$834
$42,673,000
Indiana
21,700
$788
$22,060,000
Iowa
10,200
$808
$10,193,000
Kansas
11,100
$746
$10,700,000
Kentucky
12,900
$772
$12,627,000
Louisiana
20,300
$767
$21,209,000
Maine
4,000
$715
$3,645,000
Maryland
22,200
$770
$23,080,000
Massachusetts
23,000
$838
$24,950,000
Michigan
33,600
$763
$33,998,000
Minnesota
15,600
$691
$14,544,000
Mississippi
10,400
$702
$10,041,000
Missouri
22,400
$705
$20,787,000
Montana
3,600
$727
$3,480,000
Nebraska
5,300
$745
$5,084,000
Nevada
12,300
$753
$12,078,000
New Hampshire
4,400
$892
$4,930,000
New Jersey
29,900
$873
$33,207,000
New Mexico
8,100
$753
$8,162,000
New York
54,700
$847
$59,416,000
North Carolina
29,800
$656
$26,874,000
North Dakota
2,900
$888
$3,209,000
Ohio
36,000
$749
$34,547,000
Oklahoma
17,700
$773
$17,979,000
Oregon
15,500
$658
$14,188,000
Pennsylvania
39,400
$835
$41,078,000
Rhode Island
2,900
$796
$2,906,000
South Carolina
12,100
$674
$11,267,000
South Dakota
2,700
$823
$2,709,000
Tennessee
19,500
$743
$18,829,000
Texas
104,700
$829
$115,580,000
Utah
7,900
$667
$7,443,000
Vermont
2,000
$747
$1,859,000
Virginia
29,000
$752
$29,578,000
Washington
27,600
$829
$30,330,000
West Virginia
5,000
$855
$5,258,000
Wisconsin
12,700
$675
$11,619,000
Wyoming
2,800
$911
$3,189,000
Totals
1,042,100
$763
$1,054,581,000

* Excluding the Earned Income Tax Credit and other credits.

Wednesday, February 15, 2017

Check Out These Tax Benefits for Parents


Taxpayers with children may qualify for certain tax benefits. Parents should consider child-related tax benefits when filing their federal tax return:
  • Dependent. Most of the time, taxpayers can claim their child as a dependent. Use the Interactive Tax Assistant to help determine who can be claimed as a dependent. Taxpayers can generally deduct $4,050 for each qualified dependent. If the taxpayer’s income is above a certain limit, this amount may be reduced. For more on these rules, see Publication 501, Exemptions, Standard Deduction and Filing Information.
  • Child Tax Credit.  Generally, taxpayers can claim the Child Tax Credit for each qualifying child under the age of 17. The maximum credit is $1,000 per child. Taxpayers who get less than the full amount of the credit may qualify for the Additional Child Tax Credit. Use the Interactive Tax Assistant to determine if a child qualifies for the Child Tax Credit. For more information, see Schedule 8812 and Publication 972, Child Tax Credit.
  • Child and Dependent Care Credit. Taxpayers may be able to claim this credit if they paid for the care of one or more qualifying persons. Dependent children under age 13 are among those who qualify. Taxpayers must have paid for care so that they could work or look for work. Use the Interactive Tax Assistant to determine if a child qualifies for the Child Tax Credit. See Publication 503, Child and Dependent Care Expenses, for more on this credit.  
  • Earned Income Tax Credit. Taxpayers who worked but earned less than $53,505 last year should look into the EITC. They can get up to $6,269 in EITC. Taxpayers may qualify with or without children. Use the 2016 EITC Assistant tool at IRS.gov or see Publication 596, Earned Income Tax Credit, to learn more.
EITC and ACTC Refunds. Because of new tax-law change, the IRS cannot issue refunds before Feb. 15 returns that claim the Earned Income Tax Credit (EITC) or the Additional Child Tax Credit (ACTC). This applies to the entire refund, even the portion not associated with these credits. The IRS will begin to release EITC/ACTC refunds starting Feb. 15. However, the IRS expects the earliest of these refunds to be available in bank accounts or debit cards during the week of Feb. 27, as long as there are no processing issues with the tax return and the taxpayer chose direct deposit. Read more about refund timing for early EITC/ACTC filers.
  • Adoption Credit. It is possible to claim a tax credit for certain costs paid to adopt a child. For details, see Form 8839, Qualified Adoption Expenses.
  • Education Tax Credits. An education credit can help with the cost of higher education. Two credits are available: the American Opportunity Tax Credit and the Lifetime Learning Credit. These credits may reduce the amount of tax owed. If the credit cuts a taxpayer’s tax to less than zero, it could mean a refund. Taxpayers may qualify even if they owe no tax. Complete Form 8863, Education Credits, and file a return to claim these credits. Taxpayers can use the Interactive Tax Assistant tool on IRS.gov to see if they can claim them. Visit the IRS’s Education Credits web page to learn more on this topic. Also, see Publication 970, Tax Benefits for Education.  
  • Student Loan Interest. Taxpayers may be able to deduct interest paid on a qualified student loan. They can claim this benefit even if they do not itemize deductions. Use the Interactive Tax Assistant to determine if interest paid on a student or educational loan is deductible. For more information, see Publication 970.
  • Self-employed Health Insurance Deduction. Taxpayers who were self-employed and paid for health insurance may be able to deduct premiums paid during the year. See Publication 535, Business Expenses, for details.