Many People in Rural Areas Can Benefit from EITC

The IRS wants taxpayers living in rural communities to be aware of the earned income tax credit and correctly claim it if they qualify. Many qualified individuals and families who live in rural areas don’t claim the EITC. There are many reasons for this. They may:

• Think they are ineligible.
• Not know about the credit.
• Not think they made enough money to qualify.
• Worry about paying for tax preparation services.

The average household income in many small towns and rural areas is below the national average. Because of this, many of these taxpayers may qualify for EITC. Here are some things that people living in these areas should remember about the credit and how it can benefit them:

• Because it’s a refundable tax credit, those who qualify and claim the credit could pay less federal tax, pay no tax or even get a tax refund.
• An eligible taxpayer must have earned income from employment or owning a business or farm and meet basic rules.
• To get the credit, taxpayers must file a tax return, even if they don’t owe any tax or aren’t required to file.
• Single workers without a qualifying child who earn less than $15,010 may qualify for a smaller amount of the credit.
• There are special rules for individuals receiving disability benefits and for members of the military.
• The IRS recommends using the EITC Assistant on IRS.gov to determine eligibility and estimate the amount of credit.

Qualified taxpayers should consider claiming the EITC by filing electronically, which they can do:

• Through a qualified tax professional.

By law, the IRS cannot issue refunds before mid-February for tax returns that claim the EITC or the additional child tax credit. The law requires the IRS to hold the entire refund — even the portion not associated with the EITC or ACTC.  The IRS expects the earliest EITC/ACTC related refunds to be available in taxpayer bank accounts or on debit cards starting Feb. 27, 2018, if these taxpayers choose direct deposit and there are no other issues with their tax return.

Grandparents Caring for Grandchildren Should Check Their Eligibility for EITC

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Grandparents who work and are also raising grandchildren might benefit from the earned income tax credit. The IRS encourages these grandparents to find out, not guess, if they qualify for this credit. This is important because grandparents who care for children are often not aware that they could claim these children for the EITC.

The EITC is a refundable tax credit. This means that those who qualify and claim the credit could pay less  federal tax, pay no tax, or even get a tax refund. Grandparents who are the primary caretakers of their grandchildren should remember these facts about the credit:

• A grandparent who is working and has a grandchild living with them 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 and qualifying child requirements for EITC.  
• The rules for grandparents claiming the EITC are the same for parents claiming the EITC.  
• Special rules and restrictions apply if the child’s parents or other family members also qualify for the EITC.  
• There are also special rules for individuals receiving disability benefits and members of the military.  
• To qualify for the EITC, the grandparent must have earned income either from a job or self-employment and meet basic rules.  
• The IRS recommends using the EITC Assistant, available in English or Spanish, on IRS.gov, to determine eligibility and estimate the amount of credit.  
• Eligible grandparents must file a tax return, even if they don’t owe any tax or aren’t required to file.

Qualified taxpayers should consider filing electronically. It’s the fastest and most secure way to file a tax return and get a refund.

By law, the IRS cannot issue refunds before mid-February for tax returns that claim the EITC or the additional child tax credit. The law requires the IRS to hold the entire refund — even the portion not associated with the EITC or ACTC.  The IRS expects the earliest EITC/ACTC related refunds to be available in taxpayer bank accounts or on debit cards starting Feb. 27, 2018, if these taxpayers choose direct deposit and there are no other issues with their tax return.

Consumer Alert: IRS Warns Taxpayers, Tax Pros of New Email Scam Targeting Hotmail Users

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WASHINGTON — The Internal Revenue Service today warned taxpayers and tax professionals of a new email scam targeting Hotmail users that is being used to steal personal and financial information.

The phishing email subject line reads: “Internal Revenue Service Email No. XXXX | We’re processing your request soon | TXXXXXX-XXXXXXXX”. The email leads taxpayers to sign in to a fake Microsoft page and then asks for personal and financial information.

The IRS has received over 900 complaints about this new phishing scheme that seems to exclusively target Hotmail users. The suspect websites associated with this scam have been shut down, but taxpayers should be on the lookout for similar schemes.

Individuals who receive unsolicited emails claiming to be from the IRS should forward it to phishing@irs.gov and then delete it. It is important to keep in mind the IRS generally does not initiate contact with taxpayers by email to request personal or financial information. For more information, visit the “Tax Scams and Consumer Alerts” page on IRS.gov.

The IRS reminds tax professionals to be aware of phishing emails, free offers and other common tricks by scammers. Tax professionals who have data breaches should contact the IRS immediately through their Stakeholder Liaison. See Data Theft Information for Tax Professionals.

Individual Taxpayers: Nine Things to Do When an IRS Letter Arrives

The IRS mails millions of letters to taxpayers every year for many reasons. Here are Nine suggestions on how individuals can handle a letter or notice from the IRS:

1. Don’t panic. Simply responding will take care of most IRS letters and notices.
2. Read the entire letter carefully. Most letters deal with a specific issue and provide specific instructions on what to do.
3. Compare it with the tax return. If a letter indicates a changed or corrected tax return, the taxpayer should review the information and compare it with their original return.
4. Only reply if necessary. There is usually no need to reply to a letter unless specifically instructed to do so, or to make a payment.
5. Respond timely. Taxpayers should respond to a letter with which they do not agree. They should mail a letter explaining why they disagree. They should mail their response to the address listed at the bottom of the letter. The taxpayer should include information and documents for the IRS to consider. The taxpayer should allow at least 30 days for a response.
   
   When a specific date is listed in the letter, there are two main reasons taxpayers should respond by that date:
   • To minimize additional interest and penalty charges.
   • To preserve appeal rights if the taxpayers doesn’t agree.
     
     
6. Don’t call. For most letters, there is no need to call the IRS or make an appointment at a taxpayer assistance center. If a call seems necessary, the taxpayer can use the phone number in the upper right-hand corner of the letter. They should have a copy of the tax return and letter on hand when calling. 
7. Keep the letter. A taxpayer should keep copies of any IRS letters or notices received with their tax records.  
8. Contact your preparer.  If you had your tax return prepared by a paid preparer, contact them. They should assist you with any problems with a return they prepared. 
9. Contact an Enrolled Agent (EA) If you didn't have a preparer, you may want to contact an Enrolled Agent (EA). EAs are the only federally licensed tax professionals who also have unlimited rights to represent taxpayers before the IRS. To find an EA in your area http://taxexperts.naea.org/.

IRS has Resources for Veterans, Current Members of the Military

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As the nation prepares to celebrate Veterans Day, the IRS reminds them that they may be eligible for certain tax benefits. There are also tax benefits that can affect current members of the military.

The IRS has resources for both these groups. The following tools will help military members and veterans navigate tax issues:

Resources for veterans

• Frequently asked questions about veteran employment and retirement plan benefits. These include information about the re-employment of veterans and the restoration of retirement plan benefits.
• The Resources for Disabled Veterans page features links to resources geared to this audience: ◦Where to get free help in preparing income tax returns.
• Access to IRS forms and publications in formats accessible for people with disabilities.

Resources for current members of the military

• The Tax Information for Members of the Military page on IRS.gov includes resources geared to several groups: ◦Current and former military personnel.
• Those serving in a combat zone.
• Disabled veterans.
• Publication 3, Armed Forces Tax Guide covers special situations of active members of the Armed Forces, including: ◦Travel expenses of Armed Forces Reservists.
• IRA contribution rules for members of the military serving in combat zones.
• Rules for members of the Armed Forces deducting moving expenses.
• The Tax Exclusion for Combat Service page highlights information for members of the military who serve in a combat zone.
• The Notifying the IRS by E-mail about Combat Zone Service page includes information about the steps that someone serving in a combat zone follows to notify the IRS about their service.

Tips for Individuals Who Need to Reconstruct Records After a Disaster

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Taxpayers who are victims of a disaster might need to reconstruct records to prove their loss. Doing this may be essential for tax purposes, getting federal assistance, or insurance reimbursement.

Here are 12 things taxpayers can do to help reconstruct their records after a disaster:

• Taxpayers can get free tax return transcripts by using the Get Transcript tool on IRS.gov, or use their smartphone with the IRS2Go mobile phone app. They can also call 800-908-9946 to order them by phone.
• To establish the extent of the damage, taxpayers should take photographs or videos as soon after the disaster as possible.
• Taxpayers can contact the title company, escrow company, or bank that handled the purchase of their home to get copies of appropriate documents.
• Home owners should review their insurance policy as the policy usually lists the value of a building to establish a base figure for replacement.
• Taxpayers who made improvements to their home should contact the contractors who did the work to see if records are available. If possible, the home owner should get statements from the contractors to verify the work and cost. They can also get written accounts from friends and relatives who saw the house before and after any improvements.
• For inherited property, taxpayers can check court records for probate values. If a trust or estate existed, the taxpayer can contact the attorney who handled the trust.
• When no other records are available, taxpayers can check the county assessor’s office for old records that might address the value of the property.
• There are several resources that can help someone determine the current fair-market value of most cars on the road. These resources are all available online and at most libraries:
• Kelley’s Blue Book
• National Automobile Dealers Association
• Edmunds
• Taxpayers can look on their mobile phone for pictures that show the damaged property before the disaster.
• Taxpayers can support the valuation of property with photographs, videos, canceled checks, receipts, or other evidence.
• If they bought items using a credit card or debit card, they should contact their credit card company or bank for past statements.
• If a taxpayer doesn’t have photographs or videos of their property, a simple method to help them remember what items they lost is to sketch pictures of each room that was impacted.

More Information:

• Publication 547, Casualties, Disasters, and Thefts
• Publication 584, Casualty, Disaster, and Theft Loss Workbook
• Publication 584-B, Business Casualty, Disaster, and Theft Loss Workbook
• Publication 2194, Disaster Resource Guide for Individuals and Businesses
• Federal Emergency Management Agency
• Small Business Administration
• Disasterassistance.gov

IRS Reminds Parents, Students to Explore Education Resources on IRS.gov

WASHINGTON – The Internal Revenue Service today reminded parents and students that there are many tax benefits available to them, and the easiest way to learn more about them is through the education resources available on IRS.gov.

Besides tax credits such as the American Opportunity Tax Credit and the Lifetime Learning Credit, there are other education-related tax benefits that can help reduce a taxpayer’s tax liability. Savings plans, such as 529 plans, also offer tax-free ways to save for a student’s qualified education expenses.

Deductions:

Student Loan Interest Deduction

If a taxpayer’s modified adjusted gross income (MAGI) in 2017 is less than $80,000 ($165,000 if filing a joint return), there is a special deduction allowed for paying interest on a qualified student loan used for higher education. This may include both required and voluntary interest payments. Eligible taxpayers can claim this deduction even if they don’t itemize their deductions on Form 1040 Schedule A.

• Qualified Student Loan is a loan:
• Taken out solely to pay qualified education expenses that were for the taxpayer, their spouse or a person who was their dependent when they took out the loan.
• Paid or incurred within a reasonable period of time before or after the taxpayer took out the loan.
• For education provided during an academic period for an eligible student.
• From someone other than a relative.
• That is not taken from a qualified employer plan.
• Qualified Education Expenses include amounts paid for the following items:
• Tuition and fees.
• Room and board.
• Books, supplies and equipment.
• Other necessary expenses, such as transportation.

Business Deduction for Work-Related Education

A taxpayer who is an employee and can itemize their deductions may be able to claim a deduction for expenses they paid for work-related education.

For self-employed workers, deduct expenses for qualifying work-related education directly from self-employment income. This reduces the amount of income subject to both income tax and self-employment tax.

To claim a business deduction for work-related education, the taxpayer must:

• Be working.
• Itemize their deductions on Schedule A (Form 1040 or 1040NR), if they are an employee.
• File Schedule C, Schedule C-EZ or Schedule F if the taxpayer is self-employed.
• Have expenses for education that meet the requirements for qualifying work-related education.

Savings Plans:

Qualified Tuition Programs (529 Plans)

States may establish and maintain programs that allow taxpayers to either prepay or contribute to an account for paying a student’s qualified education expenses at a postsecondary institution. No tax is due on a distribution from a qualified tuition program unless the amount distributed is greater than the beneficiary’s adjusted qualified education expenses.

Qualified expenses include:

• Required tuition and fees.
• Books, supplies and equipment.
• Computer or peripheral equipment, computer software and internet access and related services.
• Room and board for those who qualify as at least half-time students.  

Additional IRS Resources:

• 529 Plans: Questions and Answers
• Tax Benefit for Disability: Section 529A ABLE Accounts
• Education Credits
• Publication 970, Tax Benefits for Education
• Tax Information for Students