Category: Business Taxes

Taxpayers Should Be Wary of Unsolicited Calls from the IRS

Taxpayers Should Be Wary of

Unsolicited Calls from the IRS

(IRS Tax Tip 2017-53)

Unsolicited Calls from the IRS

Taxpayers who get an unexpected or unsolicited phone call from the IRS should be wary – it’s probably a scam. Phone calls continue to be one of the most common ways that thieves try to get taxpayers to provide personal information. These scammers then use that information to gain access to the victim’s bank or other account. 

When a taxpayer answers the phone, it might be a recording or an actual person claiming to be from the IRS. Sometimes the scammer tells the taxpayer they owe money and must pay right away. They might also say the person has a refund waiting, and then they ask for bank account information over the phone.

Taxpayers should not take the bait and fall for this trick. Here are several tips that will help taxpayers avoid becoming a scam victim.

The real IRS will not:

  • Call to demand immediate payment
  • Call someone if they owe taxes without first sending a bill in the mail
  • Demand tax payment and not allow the taxpayer to question or appeal the amount owed
  • Require that someone pay their taxes a certain way, such as with a prepaid debit card
  • Ask for credit or debit card numbers over the phone
  • Threaten to bring in local police or other agencies to arrest a taxpayer who doesn’t pay
  • Threaten a lawsuit

Taxpayers who don’t owe taxes or who have no reason to think they do should follow these steps:

  • Use the Treasury Inspector General for Tax Administration’s IRS Impersonation Scam Reporting web page to report the incident.
  • Report it to the Federal Trade Commission with the FTC Complaint Assistant on FTC.gov. 
  • Taxpayers who think they might actually owe taxes should follow these steps:
  • Ask for a call back number and an employee badge number.
  • Call the IRS at 1-800-829-1040.

Every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are the Taxpayer Bill of Rights.

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Starting Your Own Business

Six Simple Steps to Consider when

Starting A Business

Starting A BusinessOwning a business is a dream that can become a nightmare without adequate planning. But if you follow some simple steps, a business can be a satisfying and lucrative venture. The following are six steps you can take to ensure that your business idea has a chance to succeed.

 

1) Evaluate Your Personality

Not everyone is meant to be an entrepreneur. Are you driven to be in business despite the inherent risks? Or do you prefer regular hours and the certainty of a steady paycheck? If the latter describes you, owning your own business might not be your cup of tea. Are you willing to work hard? Do you thrive on risk? Are you self disciplined? Think carefully about what it takes to be an entrepreneur and understand the risks; only you can choose the right course for you.

On the other hand, an uncertain job market can create new entrepreneurs out of necessity. If you can’t find the right job, making your own job is an option.

2) Get Professional Advice

The Small Business Administration and an organization called SCORE (Service Corps of Retired Executives) are among the organizations that offer free resources for entrepreneurs. Make full use of the resources available to ensure you get the best possible advice about starting your business.  Also, meet with business attorneys and tax consultants (CPAs) to get questions answered about starting your business.

3) Find a Good Idea

Every business idea requires thought and research, even those that strike you with a sudden burst of inspiration. No matter how excited you are about your idea, it must meet a demand or solve a problem in the marketplace. As you’re brainstorming for ideas, ask yourself:

  • Does my product or service solve a problem or fill a need?
  • Does it improve upon an existing product or service?
  • If my product or service is similar to one already being offered, can I do a better job of selling it than my competition?

Whether your idea springs naturally from a hobby or requires intense brainstorming and research, find something that interests you, that you are passionate about and that you can sell.

4) Do Your Market Research

Once you have identified an idea, get some feedback from potential customers to make sure it’s viable. Search online for similar or identical businesses. Can you compete with others on price? Is there room for your idea in the marketplace?

Present your product or service to potential prospects to see how many would buy it and at what price. However you choose to test your idea, this step could save you time, money and disappointment. Market testing will not only reveal your idea’s potential, but it will also help you learn about your customers. Knowing your buyers makes it easier to target your marketing efforts.

5) Write a Business Plan

A written business plan makes it easier to take your new business from concept to reality. And if you need funding from lenders or investors, a business plan is essential. Even if you don’t need financing, writing a business plan will force you to do your research and help you establish the details of your new business, including sales and marketing goals, expenses, business structure, target markets, sales channels, anticipated profits, competitive analysis and much more. If you need help, the Small Business Administration offers free business plan writing resources.

6) Find Your Financing

Depending on the type of business you choose, you may or may not require outside financing, but you should expect to invest some capital to get started. Online businesses will probably require a smaller investment than a brick-and-mortar store, which requires a building, utilities and other overhead expenses. You might need to buy inventory, pay for website development or hire employees.

Besides the standard funding sources, such as small business loans, your sources of capital can come from “bootstrapping” (personal savings, income from a job, credit cards, etc.), loans from friends, venture capital or even online “crowdfunding,” which allows you to solicit very small investments from many sources, minimizing risk for any single investor and saving you the hassle of loan applications.

Get Started!  There are many other elements to consider, such as business tax structure, location, business name, licenses, permits and others, and a good business plan will cover all of these details.

Starting a business can be a long, complex process, but if you lay the proper groundwork, you can save yourself time and money and ensure yourself the best possible chance of success.

Five Tax Tips When Starting Your Own Business

Five Tax Tips When Starting Your Own Business

 

(IRS Tax Tip 2017-18)

Starting Your Own BusinessNew business owners may find the following five IRS tax tips helpful. These tips are the very first tax issues you need to consider as you organize your company for tax reporting:

1. Business Structure.  An early choice to make is to decide on the type of structure for the business. The most common types are sole proprietor, partnership and corporation. The type of business chosen will determine which tax forms to file.

2. Business Taxes. There are four general types of business taxes. They are income tax, self-employment tax, employment tax and excise tax. In most cases, the types of tax a business pays depends on the type of business structure set up. Taxpayers may need to make estimated tax payments. If so, use either IRS Direct Pay or estimated tax payment vouchers to make them. 

3. Employer Identification Number (EIN).  Most businesses are required to need to get an EIN for federal tax purposes. You can either complete form SS-4 and mail the application to the IRS or apply for and EIN online.

4. Accounting Method.  An accounting method is a set of rules used to determine when to report income and expenses. Taxpayers must use a consistent method. The two most common are the cash and accrual methods:

a. Under the cash method, taxpayers normally report income and deduct expenses in the year that they receive or pay them.

b. Under the accrual method, taxpayers generally report income and deduct expenses in the year that they earn or incur them. This is true even if they get the income or pay the expense in a later year. (Please note that certain types of business are required to use the accrual method.  For example, most businesses with inventory can only use the accrual method of accounting for reporting to the IRS.)

Know these Helpful Tips about Employee Business Expenses

Know these Helpful Tips about

Employee Business Expenses

(IRS Tax Tip 2017-42)

Taxpayers who pay work-related expenses out of their own pocket may be able to deduct them. Generally, employee business expenses are deductible if they are more than two percent of adjusted gross income. In most cases, they go on IRS Schedule A, Itemized Deductions.

Other key points about employee business expenses:

  1. They must be Ordinary and Necessary. People can only deduct unreimbursed expenses that are ordinary and necessary to their work as an employee. An ordinary expense is one that is common and accepted in the industry. A necessary expense is appropriate and helpful to a business.
  2. Expense Examples. Some potentially deductible costs include:  
  • Required work clothes or uniforms not appropriate for everyday use.
  • Supplies and tools for use on the job.
  • Business use of a car.
  • Business meals and entertainment. 
  • Business travel away from home. 
  • Business use of a home.
  • Work-related education.

This list is not all-inclusive. Special rules apply for reimbursed expenses by an employer. IRS Publication 529, Miscellaneous Deductions, and Publication 463, Travel, Entertainment, Gift and Car Expenses, provide more details.

  1. Forms to Use. In most cases, expenses are reported using Form 2106 or Form 2106-EZ. IRS Schedule A may also be used.
  2. Educator Expenses. K-12 teachers may be able to deduct up to $250 of certain expenses paid in 2016. These may include books, supplies, equipment and other materials used in the classroom. They are an adjustment to income rather than an itemized deduction. In other words, people do not need to itemize to claim them. IRS Publication 529 has more.
  3. Keep Records. The IRS urges people to keep good records for proof of income and expenses and also as a reminder not to overlook anything. IRS Publication 17, Your Federal Income Tax, has more on what to keep.

$1 Billion IRS Unclaimed Refunds for 2013

IRS Has Refunds Totaling $1 Billion for People Who Have Not Filed a 2013 Federal Income Tax Return

The IRS Issued the Following:  Refund: Claim It or Lose It!

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. 

International Taxpayers Tax Obligations and Rules for Tax Withholding Agents

IRS Reminds International Taxpayers of Tax Obligations; Clarifies Rules for Tax Withholding Agents

International TaxpayersWASHINGTON – The Internal Revenue Service today reminded non-U.S. citizens who may have taxable income, such as international students and scholars who may be working or receiving scholarship funds, that they may have special requirements to file a U.S. tax return.

The IRS also reminded withholding agents — such as payroll professionals or universities — that accurately filed Forms 1042-S help speed any refunds due to their non-U.S. citizen taxpayers. Errors on forms or returns could result in some refunds being delayed.

What Non-U.S. Citizen Taxpayers Must Do

The Internal Revenue Code generally requires non-U.S. citizens, whom the code defines as either resident or non-resident aliens, who are engaged in a trade or business within the U.S. to file tax returns. Non-resident aliens such as foreign students, teachers or trainees temporarily in the United States on F, J, M or Q visas are considered engaged in a trade or business.

Most individuals in F-1, J-1, M-1, Q-1 and Q-2 non-immigrant status are eligible to be employed in the U.S. and are eligible to apply for a Social Security number if they are actually employed in the United States. Those not eligible for an SSN but who have a tax filing requirement may request an Individual Taxpayer Identification Number from the IRS.

The non-U.S. citizen’s name must be reported exactly as it appears on the official documentation provided to the withholding agent (such as a Social Security Administration card or some other form of official governmental documentation).

Filing a Form 1040-NR or 1040NR-EZ is required by non-U.S. citizens who have a taxable event such as:

  • A taxable scholarship or fellowship, as described in Chapter 1 of Publication 970, Tax Benefits for Education;
  • Income partially or totally exempt from tax under the terms of a tax treaty; and/or
  • Any other income, which is taxable under the Internal Revenue Code.

Non-U.S. citizens also must attach one copy (generally Copy B) for each Form 1042-S received to their tax returns. Non-U.S. citizens should review the Form 1042-S to ensure it accurately reflects their name and income. If the form does not contain accurate information, they must contact the withholding agent for an amended Form 1042-S.

What Withholding Agents Must Do

Generally, non-U.S. citizens who have taxable income also may have withholding of taxes by the source of their income. Withholding agents are required to complete Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding.

Withholding agents must provide five copies of the Form 1042-S. Copy A should go to the IRS; Copies B, C and D to the recipient of the income; and copy E should be retained by the withholding agent. All information, including the name of the taxpayer, must match exactly on all copies of Form 1042-S.

If withholding agents create a substitute Form 1042-S, all five copies must be in the same physical format. The size, shape and format of any substitute form must adhere to the rules of Publication 1179, General Rules and Specifications for Substitute Forms 1096, 1098, 1099, 5498, and Certain Other Information Returns. The official Form 1042-S is the standard for substitute forms.

A common error is to have a Form 1042-S listing two or more recipients in box 13a. The 2016 instructions to Form 1042-S have been updated to clarify that in the case of joint owners, Form 1042-S can only list one of the owners in box 13a.

Withholding agents should review Fact Sheet 2017-3, where they can find the latest changes to Form 1042-S instructions and common errors that delay processing of tax returns.

IRS Recaps “Dirty Dozen” List of Tax Scams for 2017

IRS Recaps “Dirty Dozen” List of Tax Scams for 2017

Tax Scams for 2017Each year, the Internal Revenue Service issues a list of the top 12 tax-related scams it sees throughout the year. The IRS “Dirty Dozen” highlights various schemes that taxpayers may encounter anytime, many of which peak during tax-filing season.

Taxpayers need to guard against ploys that steal their personal information, scam them out of money or talk them into engaging in questionable behavior with their taxes.

Here is a recap of this year’s “Dirty Dozen” scams:

Phishing: Taxpayers need to be on guard against fake emails or websites looking to steal personal information. The IRS will never initiate contact with taxpayers via email about a tax bill or refund. Don’t click on emails or fake websites claiming to be from the IRS. They may be nothing more than scams to steal personal information. (IR-2017-15)

Phone Scams: Phone calls from criminals impersonating IRS agents remain an ongoing threat to taxpayers. The IRS has seen a surge of these phone scams in recent years as con artists threaten taxpayers with police arrest, deportation and license revocation, among other things. (IR-2017-19)

Identity Theft: Taxpayers need to watch out for identity theft, especially around tax time. The IRS aggressively pursues criminals that file fraudulent returns using someone else’s Social Security number. Though the agency is making progress on this front, taxpayers still need to be extremely cautious and do everything they can to avoid becoming victimized. (IR-2017-22)

Return Preparer Fraud: Be on the lookout for unscrupulous return preparers. The vast majority of tax professionals provide honest high-quality service. There are some dishonest preparers who set up shop each filing season to perpetrate refund fraud, identity theft and other scams that hurt taxpayers. (IR-2017-23)

Fake Charities: Be on guard against groups masquerading as charitable organizations to attract donations from unsuspecting contributors. Look out for charities with names similar to familiar or nationally-known organizations. Contributors should take a few extra minutes to ensure their hard-earned money goes to legitimate and currently eligible charities. IRS.gov has the tools taxpayers need to check out the status of charitable organizations. (IR-2017-25)

Inflated Refund Claims: Taxpayers should be cautious of anyone promising inflated refunds. Avoid preparers who ask taxpayers to sign a blank return, promise a big refund before looking at any records or charge fees based on a percentage of the refund. Fraudsters use flyers, advertisements, phony storefronts and word of mouth via community groups where trust is high to find their victims. (IR-2017-26)

Excessive Claims for Business Credits: Avoid improperly claiming the fuel tax credit. This tax benefit is generally not available to most taxpayers. The credit is usually limited to off-highway business use, including use in farming. Taxpayers should also avoid misuse of the research credit. Improper claims often involve failures to participate in or substantiate qualified research activities and satisfy the requirements related to qualified research expenses. (IR-2017-27)

Falsely Padding Deductions on Returns: Taxpayers should avoid the temptation to falsify deductions or expenses on their tax returns in order to pay less than they owe or  receive larger refunds. Think twice before overstating deductions such as charitable contributions and business expenses or improperly claiming credits such as the Earned Income Tax Credit or Child Tax Credit. (IR-2017-28)

Falsifying Income to Claim Credits: Don’t invent income to erroneously qualify for tax credits, such as the Earned Income Tax Credit. Taxpayers should file the most accurate return possible because they are legally responsible for what is on their return. Claiming false income can lead to taxpayers facing large bills to pay back taxes, interest and penalties. In some cases, they may even face criminal prosecution. (IR-2017-29)

Abusive Tax Shelters: Don’t use abusive tax structures to avoid paying taxes. The IRS is committed to stopping complex tax avoidance schemes and the people who create and sell them. The vast majority of taxpayers pay their fair share, and everyone should be on the lookout for people peddling tax shelters that sound too good to be true. When in doubt, seek an independent opinion if offered complex products. (IR-2017-31)

Frivolous Tax Arguments: Don’t use frivolous tax arguments to avoid paying tax. Promoters of such schemes encourage taxpayers to make unreasonable and outlandish claims, even though they have been repeatedly thrown out of court. While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law or disregard their responsibility to pay taxes. The penalty for filing a frivolous tax return is $5,000. (IR-2017-33)

Offshore Tax Avoidance: The recent string of successful enforcement actions against offshore tax cheats — and the financial organizations that help them — show that it’s a bad bet to hide money and income offshore. Taxpayers are best served by coming in voluntarily and taking care of their tax-filing responsibilities. The IRS offers the Offshore Voluntary Disclosure Program to enable people to catch up on their filing and tax obligations. (IR-2017-35)

Top Tips to Prepare for Tax Season

Top Tips to Prepare for Tax Season

Top Tips to Prepare for Tax SeasonIt’s here again, the most wonderful time of the year – tax season. Uncle Sam is the reason for the season, and the IRS is ready to give everyone a nice tax bill. Fortunately for you, we have the top tax tips, so you don’t end up with an excessive bill.

  1. Shield Your Personal Information – You can get an Identity Protection (IP) PIN from the IRS to help protect your identity. An IP PIN is a six-digit number that helps prevent fraudulent use of your Social Security number on federal income tax returns. The IP PIN itself changes every year, and you’ll receive notification in the mail of your new PIN every year.You can learn more about IP PINs here at the IRS’s website: https://www.irs.gov/individuals/get-an-identity-protection-pin
  2. Keep Your Check in Check – Are you getting a huge refund, or none at all? If you are at either extreme, then it’s high time you look at your withholdings and consider changes. You’ll need to get a new Form W-4 from your employer and complete it to make the changes. Remember that tax withholding is a lot like porridge – best served just right. Withhold too much, and you’re essentially giving the government an interest-free loan. Withhold too little, and you’ll end up not only owing money but potentially interest and perhaps even penalties.
  3. Maximize Retirement Plans – Are you offered a retirement plan where you work? If so, a smart tax step is to do whatever you can to maximum your contributions, especially if your employer matches your contribution. Not only are you giving up free money through the matched contributions, but you are missing out on the opportunity to build a tax-deferred nest egg.
  4. Are You a Globetrotter? – Do you have a foreign bank account anywhere outside the United States? Did you have more than $10,000 in that account – and by that, I mean ever at any point in time, not just at the end of the year?If you answered yes to both of these, then make sure you file what accountants colloquially refer to as an FBAR – or a foreign bank account reporting form. The new name for this form is FinCEN Report 114.

    It can get even more detailed from here. If you and your spouse held “specified foreign assets” of more than $100,000 on the last day of the tax year or more than $150,000 at any time during the year, then you’ll also need to file a Form 8937, Statement of Specified Foreign Financial Assets.

    There is a slew of other foreign account reporting requirements – for example, if you own an interest in a foreign business or are the beneficiary of a foreign trust. The penal ties for noncompliance with foreign asset and account reporting can be high and repercussions severe.

  5. Clean Out the Closet – There’s a good chance you donated some old clothing, furniture or household items to charity. After all, noncash charitable donations are one of the most common deductions people take on Schedule A. Unfortunately, they are also one of the most abused – and the IRS knows it.Whether it’s because you moved or just wanted to declutter and simplify your life, the key is keeping good records. Deductions for donated items are limited to their fair market value and they must be in good condition; you don’t get a deduction for junk. The organization to which you donate should give you a receipt to prove your donation, but it also is a good idea to keep an itemized list of what you donated and even take pictures of the items, especially if the value is substantial.

Another tip: The IRS tends to scrutinize extra-large deductions. In other words, be careful when you claim a noncash charitable deduction that is a lot bigger than most people in similar situations. You can check out the IRS’s published statistics on Taxpayers with Noncash Charitable Contributions here: https://www.irs.gov/uac/soi-tax-stats-individual-statistical-tables-by-size-of-adjusted-gross-income

Conclusion

Keep these tips in mind to make tax season less taxing when you file. Remember, working with your accountant is the best way to minimize taxes and make sure you don’t pay a penny more than you should.

2017 Tax Season Has Officially Opened

The IRS posted the following on January 23, 2017 to assist taxpayers with their tax filing.

2017 Tax Filing Season Opens Today

IRS YouTube Videos
When Will I Get My Refund: English | Spanish
Claiming EITC or ACTC? Your refund may be delayed: English
Welcome to Free File: English
Security Summit Identity Theft Tips Overview: English

IR-2017-06, Jan. 23, 2017                                                                          Español

2017 Tax SeasonWASHINGTON — The Internal Revenue Service said today that it successfully started accepting and processing 2016 federal individual income tax returns on schedule. More than 153 million returns are expected to be filed this year.

People have until Tuesday, April 18, 2017 to file their 2016 returns and pay any taxes due. The deadline is later this year due to several factors. The usual April 15 deadline falls on Saturday this year, which would normally give taxpayers until at least the following Monday. However, Emancipation Day, a D.C. holiday, is observed on Monday, April 17, giving taxpayers nationwide an additional day to file. By law, D.C. holidays impact tax deadlines for everyone in the same way federal holidays do. Taxpayers requesting an extension will have until Monday, Oct. 16, 2017 to file.

“Following months of hard work, we successfully opened our processing systems today to start this year’s tax season,” said IRS Commissioner John Koskinen.  “Getting to this point is a year-round effort for the IRS and the nation’s tax community. The dedicated employees of the IRS look forward to serving taxpayers this filing season, and I want to thank all of the tax and payroll community for their hard work that makes tax time smoother for the nation.”

The IRS expects more than 70 percent of taxpayers to get tax refunds this year. Last year, 111 million refunds were issued, with an average refund of $2,860.

Refund Delays
A law change now requires the IRS to hold refunds on tax returns claiming the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) until Feb. 15. Under this change required by the Protecting Americans from Tax Hikes (PATH) Act, the IRS must hold the entire refund — even the portion not associated with the EITC and ACTC. Even though the IRS will begin releasing EITC and ACTC refunds on Feb. 15, many early filers will still not have actual access to their refunds until the week of Feb. 27. The additional delay is due to several factors, including weekends, the Presidents Day holiday and the time banks often need to process direct deposits.

This law change gives the IRS more time to detect and prevent fraud. Beyond the EITC and ACTC refunds and  the additional security safeguards, the IRS anticipates issuing more than nine out of 10 refunds in less than 21 days. However, it’s possible a particular return may require additional review and take longer. Taxpayers are reminded that state tax agencies have their own refund processing timeframes that vary, and some states may make additional reviews to ensure their refunds are being issued properly. Even so, taxpayers should file as usual, and tax return preparers should submit returns as they normally do.

Use e-File and Free File

The IRS expects more than 80 percent of returns to be filed electronically. Choosing e-file and direct deposit remains the fastest and safest way to file an accurate income tax return and receive a refund.

The IRS Free File program, available at IRS.gov, gives eligible taxpayers a dozen options for brand-name products. Free File is a partnership with commercial partners offering free brand-name software to about 100 million individuals and families with incomes of $64,000 or less. Seventy percent of the nation’s taxpayers are eligible for IRS Free File. People who earned more than $64,000 may use Free File Fillable Forms, the electronic version of IRS paper forms.

Protecting Taxpayers from Identity Theft-Related Refund Fraud

The IRS continues to work with state tax authorities and the tax industry to address tax-related identity theft and refund fraud. As part of the Security Summit effort, stronger protections for taxpayers and the nation’s tax system are in effect for the 2017 tax filing season.

The new measures attack tax-related identity theft from multiple sides. Many changes will be invisible to taxpayers but will help the IRS, states and the tax industry provide new protections. New security requirements will better protect tax software accounts and personal information.

Renew ITIN to Avoid Refund Delays

Many Individual Taxpayer Identification Numbers (ITINs) expired on Jan. 1, 2017. This includes any ITIN not used on a tax return at least once in the past three years. Also now expired is any ITIN with middle digits of either 78 or 79 (Example: 9NN-78-NNNN or 9NN-79-NNNN). Affected taxpayers should act soon to avoid refund delays and possible loss of eligibility for some key tax benefits until the ITIN is renewed. An ITIN is used by anyone who has tax-filing or payment obligations under U.S. tax law but is not eligible for a Social Security number.

It can take up to 11 weeks to process a complete and accurate ITIN renewal application. For that reason, the IRS urges anyone with an expired ITIN needing to file a return this tax season to submit their ITIN renewal application soon.

New AGI requirement for e-file

All taxpayers should keep a copy of their tax return. Beginning in 2017, taxpayers using a tax filing 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.

Free Tax Help

Low- and moderate-income taxpayers can get help filing their tax return for free. More than 90,000 volunteers around the country can help people correctly complete their return.

To get this filing help, taxpayers can visit one of the more than 12,000 community-based tax help sites that participate in the Volunteer Income Tax Assistance and Tax Counseling for the Elderly programs. To find the nearest site, use the VITA/TCE Site Locator on IRS.gov or the IRS2Go mobile app.

Filing Assistance

The IRS reminds taxpayers that a trusted tax professional can provide helpful information about the tax laws. A number of tips about selecting a preparer and information about national tax professional groups are available on IRS.gov.

The IRS urges all taxpayers to make sure they have all their year-end statements in hand before filing. This includes Forms W-2 from employers, Forms 1099 from banks and other payers. Doing so will help avoid refund delays and the need to file an amended return.

Online tools

Many tax issues can now be resolved online or by phone from the convenience of a home or office. The IRS urges taxpayers to take advantage of the many tools and other resources available on IRS.gov. IRS phone lines will be busy again this year, so in order to save time, people should first visit the IRS website for tax assistance.

Five Tips on Whether to File a 2016 Tax Return

Five Tips on Whether to File a 2016 Tax Return

(The following is the IRS Tax Tip 2017-02.)

Five Tips on Whether to File a 2016 Tax ReturnMost people file a tax return because they have to. Even if a taxpayer doesn’t have to file, there are times they should. They may be eligible for a tax refund and not know it.

Here are five tips on whether to file a tax return:

  1. General Filing Rules.  In most cases, income, filing status and age determine if a taxpayer must file a tax return. Other rules may apply if the taxpayer is self-employed or a dependent of another person. For example, if a taxpayer is single and under age 65, they must file if their income was at least $10,350. There are other instances when a taxpayer must file. Go to IRS.gov/filing  for more information.
  2. Tax Withheld or Paid.  Did the taxpayer’s employer withhold federal income tax from their pay? Did the taxpayer make estimated tax payments? Did they overpay last year and have it applied to this year’s tax? If the answer is “yes” to any of these questions, they could be due a refund. They have to file a tax return to get it.
  3. Earned Income Tax Credit.  A taxpayer who worked and earned less than $53,505 last year could receive the EITC as a tax refund. They must qualify and may do so with or without a qualifying child. They may be eligible for up to $6,269. Use the 2016 EITC Assistant tool on IRS.gov to find out. Taxpayers need to file a tax return to claim the EITC.
  4. Additional Child Tax Credit.  Did the taxpayer have at least one child that qualifies for the Child Tax Credit? If they do not qualify for the full credit amount, they may be eligible for the Additional Child Tax Credit. Beginning in January 2017, by law, the IRS must hold refunds for any tax return claiming either the EITC or the Additional Child Tax Credit until Feb. 15. This means the entire refund, not just the part related to either credit.
  5. American Opportunity Tax Credit.  To claim the AOTC, the taxpayer, their spouse or their dependent must have been a student enrolled at least half time for one academic period to qualify. The credit is available for four years of post-secondary education. It can be worth up to $2,500 per eligible student. Even if the taxpayer doesn’t owe any taxes, they may still qualify. Complete Form 8863, Education Credits, and file it with the tax return. Learn more by visiting the Education Credits web page.

Instructions for Forms 1040, 1040A or 1040EZ list income tax filing requirements. Taxpayers can also use the Interactive Tax Assistant tool on IRS.gov. They should look for “Do I need to file a return?” under general topics. The tool is available 24/7 to answer many tax questions.

All 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.