Category: IRS – Tax Help

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.

April 1 Deadline Approaches for Taking Required Retirement Plan Distributions

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

IRS Issue Number:  IR-2017-63

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.

Nine IRS Common Filing Errors to Avoid

Nine IRS Common Filing Errors to Avoid

The IRS encourages taxpayers to file an accurate tax return. If a taxpayer makes an error on their return, it will likely take longer for the IRS to process it. This could delay a refund. Avoid many common errors by filing electronically. IRS e-file is the most accurate way to file a tax return. 

The IRS lists the nine most common errors to avoid when preparing a tax return below:

1. Missing or Inaccurate Social Security Numbers. Be sure to enter each SSN on a tax return exactly as printed on the Social Security card.

2. Misspelled Names. Spell all names listed on a tax return exactly as listed on that individual’s Social Security card.

3. Filing Status Errors.  Some people claim the wrong filing status, such as Head of Household instead of Single. The Interactive Tax Assistant on IRS.gov can help taxpayers choose the correct status. E-file software also helps prevent mistakes.

4. Math Mistakes.  Math errors are common. They range from simple addition and subtraction to more complex items. Transactions like figuring the taxable portion of a pension, IRA distribution or Social Security benefits are more difficult and result in more errors. Taxpayers should always double check their math. Better yet, tax preparation software does it automatically, so file electronically.

5. Errors in Figuring Tax Credits or Deductions.  Filers can make mistakes figuring their Earned Income Tax Credit, Child and Dependent Care Credit, the standard deduction and other items. Taxpayers need to follow the instructions carefully. For example, if a taxpayer is age 65 or older, or blind, they should be sure to claim the correct, higher standard deduction. 

6. Incorrect Bank Account Numbers.  The IRS strongly urges all taxpayers who have a refund due to choose direct deposit. It’s easy and convenient.  Be careful to use the right routing and account numbers on the tax return. The fastest and safest way to get a refund is to combine e-file with direct deposit.

7. Forms Not Signed.  An unsigned tax return is like an unsigned check – it’s not valid. Both spouses must sign a joint return. Taxpayers can avoid this error by filing their return electronically. Sign an e-filed tax return digitally before sending it to the IRS.

8. Electronic Filing PIN Errors. When e-filing, the taxpayer signs and validates the tax return electronically with a prior-year Self-Select Personal Identification Number. If they do not have or know their PIN, they should enter the Adjusted Gross Income from their 2015 tax return originally filed with the IRS. 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. Do not use the AGI amount from an amended return or a return that the IRS corrected.  

9. Filing with an expired ITIN. A tax return filed with an expired Individual Tax Identification Number (ITIN) will be processed and treated as timely filed, but will be processed without any exemptions or credits claimed. Taxpayers will receive a notice from the IRS explaining that an ITIN must be current before any refund is paid. Once the ITIN is renewed, exemptions and credits are processed and any allowed refund paid. ITIN expiration and renewal information is available on IRS.gov

 

你的基本税務責任

您剛到美國嗎?

你的基本税務責任如果您剛到美國，您需要知道自己在稅務申報上的責任。您在這一頁可以找到有關申報美國聯邦所得稅的答案。

  • 我如何知道自己是否有責任申報聯邦所得稅?
  • 我的移民身份是否決定了我需不需要繳稅?
  • 報稅對我有什麼好處?
  • 不報稅會受處罰嗎?

税務責任基礎

每一個住在美國，有收入並且符合某些資格規定的人都有責任申報聯邦所得稅。申報的資格規定不是由您的移民身份決定，而是取決於您的收入與其他因素。繳稅和報稅是法律規定，不遵守這項規定能讓您受到民事及刑事處罰。

依照法律規定，報稅表上列的每個人都要有一個身份識別號碼。這個稅表上表列的號碼通常是社會安全局所核發的社會安全號碼。

如果納稅人必須報稅但不符合申請社會安全號碼的資格，則該納稅人可取得個人納稅識別號碼(Individual Taxpayer Identification Number)用於報稅。個人納稅識別號碼由國稅局核發，僅限報稅使用。

您可以自己填寫並提交稅表，也可以找專業的報稅員幫您填寫稅表。如果您付錢請人替您填寫稅表，這個人必須在您的稅表上簽字。稅表可以用紙張格式填寫後寄出，也可以通過電子方式申報。

回到頁首

一般資訊: 我必須報稅嗎?

如果您是美國公民或是稅法定義的居民，而且您符合下列任何一類適用於您的報稅資格規定，您就必須申報聯邦所得稅。

  1. 一般的個人
  2. 被撫養人
  3. 19 歲以下的某些子女或全職學生
  4. 自雇者
  5. 外籍人士

如果您是美國公民或是稅法定義的居民，您是否必須報稅取決於三項因素：

  1. 您的總收入
  2. 您的報稅身份，以及
  3. 您的年齡

社會安全號碼

如何申請社會安全號碼(PDF)

您必須在稅表上的空白欄填入您的社會安全號碼(SSN)。您報稅表上的社會安全號碼務必要和您社會安全卡上的號碼相同。如果您已婚，填入您與配偶兩人的社會安全號碼。

如果您採用夫妻聯合報稅，按稅表上的姓名先後順序填寫兩人的社會安全號碼。向國稅局提交其他表格與檔時也用此一順序。

更改姓名。如果您因為結婚，離婚等原因而更改姓名，務必在報稅以前向社會安全局(SSA)報告這項變更。這樣可以防止在處理您稅表及退稅核發上的延誤。它還能保障您未來的社會安全福利。

被撫養人的社會安全號碼。無論被撫養人的年齡，您都必須提供您申報的每位被撫養人的社會安全號碼。此一規定適用於您報稅表上申報的所有被撫養人（不僅限於您的子女）。

信函上注明社會安全號碼。如果您因稅務事宜寫信給國稅局，務必在您的信函中注明您的社會安全號碼（夫妻聯合報稅者附上配偶的姓名與社會安全號碼）。由於您的報稅帳戶是用您的社會安全號碼來識別，這能幫助國稅局迅速回復您的來信。

報稅身份

每個申報聯邦所得稅的人都必須決定適用於自己情況的報稅身份。選對報稅身份是很重要的，因為這會決定您的標準扣抵額，您需補繳的稅額，以及欠您的任何退稅款。

在您能決定您的申報資格，標準扣抵額和正確稅額之前，您必須先確定您的報稅身份。您也可以用您的報稅身份來決定您是否符合申請某些扣除額和抵免額的條件。

報稅身份有五種

婚姻狀況 通常，您的報稅身份取決於您被認定為未婚或已婚。

已婚人士 如果您被視為全年已婚，您與您的配偶就能以夫妻聯合申報或夫妻分別申報的方式報稅。

視為已婚 如果您與您的配偶在稅務年度最後一天符合以下任何一項測試條件，您倆即被視為已婚。

  1. 您倆已婚，並以丈夫與妻子的關係住在一起。
  2. 您倆以普通法婚姻關係住在一起，該婚姻關係為您現在定居的州或此普通法婚姻關係開始時所在的州所承認。
  3. 您倆已婚並且分開居住，但並非依離婚判決或分居撫養費判決而合法分居。
  4. 您倆依中期（非最終）離婚判決而分居。就夫妻聯合報稅而言，您倆不被視為已離婚。

1. 單身 (Single)
若您符合以下情況，您的報稅身份是單身：您在年度最後一天未婚或依離婚判決或分居撫養費判決而與配偶合法分居，並且您不符合其他報稅身份的資格。

2. 已婚夫妻聯合報稅 (Married Filing Jointly)
如果您已婚，而且您與配偶皆同意以聯合申報的方式報稅，您就能選擇以已婚夫妻聯合報稅作為您的報稅身份。在聯合報稅表上，您申報您倆合併的收入並扣除您倆合併的可允許支出。即使您倆之中有一人沒有收入或扣除項，您還是可以使用夫妻聯合報稅身份。

3. 已婚夫妻分開報稅 (Married Filing Separately)
如果您已婚，您可以選擇已婚夫妻分開報稅作為您的報稅身份。如果您只想負責您自己的稅，或是這個方式算起來比夫妻聯合報稅所繳的稅額要少，那這個報稅身份可能對您有利。

如果您與配偶不同意用夫妻聯合報稅，您可能就必須用此一報稅身份，除非您符合一家之主的身份。

4. 一家之主 (Head of Household)
如果您符合下述所有的資格要求，您可能就能以一家之主的身份報稅。

  1. 您在年度最後一天為未婚或“被視為未婚”。
  2. 您在該年度支付一半以上的持家費用。
  3. 一個“合格個人”與您同住家中超過該年度的半年以上（暫時離開不在此限，例如就學。）但是，如果“合格個人”是您奉養的父母，則您的父親或母親不須與您同住。

5. 撫養子女的合格寡婦（鰥夫）(Qualifying Widow(er) With Dependent Child)
如果您的配偶在 2016年身故，您可以使用已婚夫妻聯合報稅作為您 2016 年的報稅身份，前提是您原本即符合該報稅身份的資格。配偶身故那年是您可以與身故配偶聯合報稅的最後一個稅務年度。

配偶身故後的下兩年，您可以用撫養子女的合格寡婦（鰥夫）作為您的報稅身份。例如，如果配偶在 2015 年身故，而且您一直沒有再婚，您就可能在 2016 和 2017 的稅務年度使用這個報稅身份。

適用多數納稅人的2016年度報稅資格規定

如果您的報稅身份是… 而且您在2016年底時是… 那麼只要您的總收入到達以下標準，您就要報稅…
單身 65 歲以下
65 歲或以上		 $10,350
$11,900
已婚夫妻聯合報稅 65 歲以下（配偶雙方）
65 歲或以上（配偶單方）
65 歲或以上（配偶雙方）		 $20,700
$21,950
$23,200
已婚夫妻分開報稅 任何年齡 $4,050
一家之主 65 歲以下
65 歲或以上		 $13,350
$14,900
撫養子女的合格寡婦（鰥夫） 65 歲以下
65 歲或以上		 $16,650
$17,900

 

哪類收入應向國稅局申報?

應計入總收入並且向國稅局申報的各類收入

哪類收入應當申報?

通常的原則是，總收入包含所有收到的付款數額，這些付款是提供個人服務所得到的。這被視為已得收入。

未在發出方預扣稅款的所有收入，均須由接受這些收入的人詳實保存準確的賬目記錄。來自於自雇所得的收入也被視為已得收入。

除了已得收入以外，其他哪些收入應當申報?
除了作為雇員所得的收入應申報外，其他類型的應納稅收入也應在稅表上申報。

應申報的收入包括

  • 薪水，工資
  • 傭金
  • 酬金
  • 附加福利
  • 小費
  • 股票購買選擇權
  • 利息
  • 股息
  • 合夥分紅
  • 資本利得分紅
  • 退休金收入
  • 失業補償金收入
  • 博弈贏得的獲利
  • 國外已得收入

失業福利金是否應計入稅務申報表?
所有的失業福利金均應在稅表上申報。

Debt Cancellation May be Taxable

Debt Cancellation May be Taxable

The IRS issued Tax Tip 2017-23 providing information about debt cancellation.  If a lender cancels part or all of a debt, a taxpayer must generally consider this as income. However, the law allows an exclusion that may apply to homeowners who had their mortgage debt canceled in 2016.

Here are 10 tips about debt cancellation:

  1. Main Home. If the canceled debt was a loan on a taxpayer’s main home, they may be  able to exclude the canceled amount from their income. They must have used the loan to buy, build or substantially improve their main home to qualify. Their main home must also secure the mortgage.
  2. Loan Modification. If a taxpayer’s lender canceled or reduced part of their mortgage balance through a loan modification or ‘workout,’ the taxpayer may be able to exclude that amount from their income. They may also be able to exclude debt discharged as part of the Home Affordable Modification Program, or HAMP. The exclusion may also apply to the amount of debt canceled in a foreclosure.
  3. Refinanced Mortgage. The exclusion may apply to amounts canceled on a refinanced mortgage. This applies only if the taxpayer used proceeds from the refinancing to buy, build or substantially improve their main home and only up to the amount of the old mortgage principal just before refinancing. Amounts used for other purposes do not qualify.
  4. Other Canceled Debt. Other types of canceled debt such as second homes, rental and business property, credit card debt or car loans do not qualify for this special exclusion. On the other hand, there are other rules that may allow those types of canceled debts to be nontaxable.
  5. Form 1099-C. If a lender reduced or canceled at least $600 of a taxpayer’s debt, the taxpayer should receive Form 1099-C, Cancellation of Debt, by Feb. 1. This form shows the amount of canceled debt and other information.
  6. Form 982. If a taxpayer qualifies, report the excluded debt on Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness. They should file the form with their income tax return.
  7. IRS.gov Tool. Taxpayers should use the Interactive Tax Assistant tool – Do I Have Cancellation of Debt Income on My Personal Residence? – on IRS.gov to find out if their canceled mortgage debt is taxable.
  8. Exclusion Extended. The law that authorized the exclusion of cancelled debt from income was extended through Dec. 31, 2016.
  9. IRS Free File.  IRS e-file is fastest, safest and easiest way to file. Taxpayers can use IRS Free File to e-file their tax return for free. If they earned $64,000 or less, they can use brand name tax software. The software does the math and completes the right forms for them. If they earned more than $64,000, they can use Free File Fillable Forms. This option uses electronic versions of IRS paper forms. It is best for those who are used to doing their own taxes. Free File is available only on IRS.gov/freefile.

More Information. For more on this topic see Publication 4681, Canceled Debts, Foreclosures, Repossessions and Abandonments.

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.

Taxes and Name Changes? – How it Impacts Taxes

Taxes and Name Changes? How It Impacts Taxes  

A name change can have an impact on taxes. All the names on a taxpayer’s tax return must match Social Security Administration records. A name mismatch can delay a tax refund. Here’s what taxpayers should know if they changed their name:

  • Reporting Name Changes. Got married and now using a new spouse’s last name or hyphenate a name? Divorced and now back to using a former last name? In either case, taxpayers should notify the SSA of a name change. That way the new name on IRS records will match the SSA records.
  • Making Dependent’s Name Change. Notify the SSA if a dependent had a name change. For example, if a taxpayer adopted a child and the child’s last name changed. If the child does not have a Social Security number, the taxpayer may use an Adoption Taxpayer Identification Number on their tax return. An ATIN is a temporary number. Apply for an ATIN by filing Form W-7A, Application for Taxpayer Identification Number for Pending U.S. Adoptions, with the IRS. Visit IRS.gov to get the form.
  • Getting a New SS Card. File Form SS-5, Application for a Social Security Card. The form is on SSA.gov or by calling 800-772-1213. The taxpayer’s new card will reflect the name change.

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.

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)

Which States Require ID Before You Can Efile Your Return?

States Require Driver’s License for E-Filing Tax Returns

Which States Require ID Before You Can Efile Your Return?For individual filers who are required to e-file their income tax returns, don’t be surprised when your CPA tells you a copy of your driver’s license or other acceptable form of ID is required in order to efile or process your tax return.

During this tax filing season, more and more states are requiring tax return preparers to include driver’s license numbers (or another form of acceptable identification) on e-filings as a measure to help combat identity and refund theft.

In states that require it, failing to include this mandatory information will prevent your tax preparer from e-filing your return. (On the bright side, providing this information may help state taxing authorities process tax returns more quickly).

Currently, the following states either require or request a driver’s license number or other acceptable form of identification to be included with the e-filing of state returns:

Alabama

California

Illinois

Kansas

Louisiana

New York

Ohio

Virginia

Wisconsin

It is optional, for now, in New Jersey and Pennsylvania.

However, some tax preparation software programs may still require the ID in order to process returns, regardless of the state filing requirements. So, your tax preparer may still request you to provide an acceptable ID even if you do not file in any of the above states because their software requires an ID before it will create a return for efiling.

Currently, a driver’s license or other acceptable ID is not required to file a federal return.

Signs A “Tax Preparer” May Be Phony or Unscrupulous

Falsely Inflating Refund Claims on the IRS “Dirty Dozen” List of Tax Scams for 2017

The Internal Revenue Service warns taxpayers to be alert to unscrupulous tax return preparers touting inflated tax refunds. This scam remains on the annual list of tax scams known as the “Dirty Dozen” for 2017.

“Exercise caution when a return preparer promises an extremely large refund or one based on credits or benefits you’ve never been able to claim before,” said IRS Commissioner John Koskinen. “If it sounds too good to be true, it probably is.”

The “Dirty Dozen,” an annual list compiled by the IRS, outlines common scams that taxpayers may encounter. These schemes peak during filing season as people prepare their returns or hire others to help with their taxes.

Scams can lead to significant penalties and interest and possible criminal prosecution. The IRS Criminal Investigation Division works closely with the Department of Justice to shutdown scams and prosecute the criminals behind them.

Scam artists pose as tax preparers during tax time, luring victims by promising large federal tax refunds. They use flyers, advertisements, phony storefronts or word of mouth to attract victims. They may make presentations through community groups or churches.

Scammers frequently prey on people who do not have a filing requirement, such as those with low-income or the elderly. They also prey on non-English speakers, who may or may not have a filing requirement.

Con artists dupe people into making claims for fictitious rebates, benefits or tax credits. Or they file a false return in their client’s name, and the client never knows that a refund was paid.

Scam artists may also victimize those with a filing requirement and due a refund. They do this by promising larger refunds based on fake Social Security benefits and false claims for education credits or the Earned Income Tax Credit (EITC), among others.

Falsely Claiming Zero Wages

Filing a phony information return, such as a Form 1099 or W-2, is an illegal way to lower the amount of taxes owed. The use of self-prepared, “corrected” or otherwise bogus forms that improperly report taxable income as zero is illegal. So is an attempt to submit a statement rebutting wages and taxes reported by a third-party payer to the IRS.

Some people also attempt fraud using false Form 1099 refund claims. In some cases, individuals have made refund claims based on the bogus theory that the federal government maintains secret accounts for U.S. citizens and that taxpayers can gain access to the accounts by issuing 1099-OID forms to the IRS.

Taxpayers should resist the temptation to participate in any variations of this scheme. The IRS is aware of this scam and the courts have consistently rejected attempts to use this tax dodge. Perpetrators receive significant penalties, imprisonment or both. Simply filing this type of return may result in a $5,000 penalty.

The IRS sometimes hears about scams from victims complaining about losing their federal benefits, such as Social Security, veterans or low-income housing benefits. The loss of benefits comes as a result of false claims being filed with the IRS that provided incorrect income amounts.

Choose Tax Preparers Wisely

Honest tax preparers provide their customers a copy of the tax return they’ve prepared. Scam victims frequently are not given a copy of what was filed. Victims also report that the fraudulent refund is deposited into the scammer’s bank account. The scammers deduct a large “fee” before paying victims, a practice not used by legitimate tax preparers.

The IRS reminds taxpayers that they are legally responsible for what’s on their return even if it was prepared by someone else. Taxpayers who buy into such schemes can end up being penalized for filing false claims or receiving fraudulent refunds.

Taxpayers can help protect themselves by doing a little homework before choosing a tax preparer. Check the preparer’s history.  For CPAs, check with the State Board of Accountancy. For attorneys, check with the State Bar Association. For Enrolled Agents, go to IRS.gov and search for “verify enrolled agent status” or check the Directory.