Your Federal Tax Guide

Tax Calendar for Small Businesses

2008-08-08T11:42:00.000-04:00

Are you running a small business? Would you like a calendar packed with valuable business tax information? The IRS is offering a free calendar to help you keep track of tax deadlines and important dates throughout the year.

You might be surprised to learn that the IRS publishes a calendar, like our popular Web site, IRS.gov, the calendar is part of our many services to help owners and operators of small businesses.

The Tax Calendar for Small Businesses and Self-Employed Individuals from the Internal Revenue Service is a 12-month calendar filled with deadline reminders, important information such as changes in deductible mileage rates and business tips such as how to organize business and travel expenses.

This widely-used special business tax calendar provides the small business owner with a ready resource for meeting his or her tax obligations.

Each page of the calendar highlights different tax issues and tips such as business planning, accounting methods, tracking your records, and protecting your information that are especially relevant to small-business owners. The calendar has room each month to add notes, state tax dates or business appointments.

Topics include information on general business taxes, IRS and Social Security Administration customer assistance, electronic filing and paying options, retirement plans, business publications and forms, common tax filing dates, federal holidays and much more.

The 2008 IRS Tax Calendar for Small Businesses and Self-Employed, Publication 1518, is now available in both English and Spanish versions. For an online version of the calendar, visit the Small Business Self-Employed pages on the IRS Web site at IRS.gov. On IRS.gov you can download the tax calendar due dates and actions, and import them into Outlook or iCal. Printed copies of the tax calendar can also be ordered online or by calling 800-TAX-FORM (800-829-3676).

Remember that for the genuine IRS Web site be sure to use .gov. Don't be confused by internet sites that end in .com, .net, .org or other designations instead of .gov. The address of the official IRS governmental Web site is www.irs.gov.

Links:

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Tax Tip: Charitable Contributions

2008-08-06T09:57:00.000-04:00

Charitable Contributions

Did you make a cash contribution to your favorite charity? Have you recently spent a weekend cleaning stuff out of your garage or basement that you then donated to a local charity?

Charitable contributions can be tax deductible, but you must have the proper records to support your deduction. Due to the Pension Protection Act of 2006 the rules on recordkeeping for charitable contributions became a little more strict beginning in January 2007.

To deduct a charitable cash donation, regardless of the amount, you must have a bank record or a written communication from the charity showing the name of the charity and the date and amount of the contribution. Acceptable bank records would include canceled checks or bank or credit union statements containing the name of the charity, the date and the amount of the contribution.

Under the previous rules, records such as personal bank registers, diaries or notes made around the time of the donation could often be used as evidence of cash donations. Personal records like this are no longer sufficient.

Here are some additional tips to help you deduct your charitable contributions on your 2008 federal tax return.

Charitable contributions are deductible only if you itemize deductions using Form 1040.
Contributions must be made to a qualified organization.
Used clothing and household items such as furniture, linens and appliances must be in good used condition.
Vehicle donations are subject to special rules.
To deduct charitable contributions of items valued at $250 or more you must have a written acknowledgment from the qualified organization.
To deduct charitable contributions of items valued at $500 or more you must complete a Form 8283, Noncash Charitable Contributions, and attached the form to your return.

More information is available on the IRS Web site at IRS.gov. A good resource is IRS Publication 526, Charitable Contributions, found on the web site or by calling 800-TAX-FORM (800-829-3676).

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The tax consequences of converting a non-Roth IRA annuity to a Roth IRA

2008-07-29T11:33:00.004-04:00

This document contains final regulations that amend the Income Tax Regulations (26 CFR Part 1) under section 408A of the Code relating to Roth IRAs. Section 408A of the Code, which was added by section 302 of the Taxpayer Relief Act of 1997, Public Law 105-34 (111 Stat. 788), establishes the Roth IRA as a type of individual retirement plan, effective for taxable years beginning on or after January 1, 1998.

The identifying characteristic of Roth IRAs is that all contributions to Roth IRAs are after-tax contributions (that is, an IRA owner cannot take a deduction for a contribution made to a Roth IRA) but qualified distributions are tax-free. A qualified distribution from a Roth IRA is a distribution that is made: (1) at least 5 years after the account owner (or the account owner's spouse) made a Roth IRA contribution, and (2) after age 59\1/2\, after death, on account of disability, or for a first-time home purchase.

A taxpayer whose modified adjusted gross income for a year does not exceed $100,000 (and who, if married, files jointly) \1\ may convert an amount held in a non-Roth IRA(that is, a traditional IRA or SIMPLE IRA) to an amount held in a Roth IRA. If a taxpayer converts an amount held in a non-Roth IRA to a Roth IRA, the taxpayer must include the value of the non-Roth IRA being converted in gross income (to the extent the conversion is not a conversion of basis in the non-Roth IRA).

Read The Rest
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IRS Sending Stimulus Payment Information to Retirees, Veterans

2008-07-22T18:57:00.000-04:00

WASHINGTON — The Internal Revenue Service today reminded qualifying retirees and veterans that it is not too late to file for an economic stimulus payment and announced it will send a second set of information packets to 5.2 million people who may be eligible but who have not yet filed for their stimulus payment.

The packages will contain everything needed by a person who normally does not have a filing requirement but who must file this year in order to receive an economic stimulus payment. There will be instructions, an example Form 1040A return showing the few lines that need to be completed, and a blank Form 1040A. The packages will be mailed over a three-week period starting July 21.

“All it takes is a few simple steps, and the payment can be on its way. It’s not too late to file, but the sooner people file, the faster they’ll receive their money,” said Doug Shulman, IRS Commissioner.

The mailing is part of an IRS summer campaign to reach out to those people who have no requirement to file a tax return but who may be eligible for a stimulus payment of up to $300 ($600 for married filing jointly). For those eligible for a payment for themselves, there also is a $300 per child payment for eligible children younger than 17.

The IRS has accounted for about 75 percent of the approximately 20 million Social Security and Veterans Affairs beneficiaries identified as being potential stimulus recipients. All but 5.2 million of those have either filed a return, filed a joint return or were not eligible for a stimulus payment (for example, they were claimed as a dependent on another’s return).

To reach the remaining recipients, the IRS is working with national partners, members of Congress and state and local officials to ensure that assistance to eligible people is available.

The agency also reminded people that it has more than 400 local Taxpayer Assistance Centers operating normal business hours Monday through Friday. These centers can provide assistance to retirees and veterans trying to receive their payments. A list of addresses and office hours can be found at Contact My Local Office.

The Economic Stimulus Act of 2008 provided for payments of up to $600 ($1,200 for married filing jointly) for taxpayers who normally file a tax return and have a tax liability. It provided that stimulus recipients could receive another $300 for each eligible child younger than 17.

The Act also created a special category for people who had certain types of income but may not file a tax return because their income is too low or their income is nontaxable.

People in this category must have at least $3,000 in qualifying income to be eligible for the minimum amount of $300 ($600 married filing jointly). Qualifying income is the total of Social Security, Veterans Affairs and/or Railroad Retirement benefits plus earned income, including nontaxable combat pay

People receiving only Supplemental Security Income are not eligible. Eligible people must have a Social Security number (unless their spouse is a member of the military) and be neither a dependent nor eligible to be a dependent on another’s tax return.

Receiving the stimulus payment should have no impact on other federal benefits currently being received. The stimulus payment is not taxable. Absent any other filing requirements, filing a tax return to receive a stimulus payment does not mean that retirees and others will have to start filing tax returns again.

As of July 11, the IRS had issued 112.4 million payments totaling $91.8 billion. Payments are based on 2007 tax returns being filed this year. People must file by Oct. 15 in order to receive a payment in 2008. Those who do not file a tax return to obtain their stimulus payment this year may still receive their stimulus payments by filing a 2008 tax return next spring, but then their stimulus payment would be based on their 2008 qualifying income.

Updated IRS News

2008-07-22T11:20:00.001-04:00

1. Stimulus Payments Update

It’s not too late for qualifying retirees and veterans to get their payments. See news release IR-2008-91. Look for updates on the IRS.gov stimulus payments page, also available in Spanish.

2. Recent Disaster Relief

Victims of recent storms and floods in Indiana, Iowa, Illinois, Missouri, Nebraska, West Virginia and Wisconsin have until Aug. 29 to file certain tax returns. Be sure to check for updates on the tax relief in disaster situations page.

3. Commissioner Speaks About RRA ‘98 Anniversary

Remarks from IRS Commissioner Shulman before the Tax Analysts Conference on RRA '98.

4. Issue Management Resolution System (IMRS) Monthly Overview

The June overview and current hot issues are now available. IMRS facilitates stakeholder issue identification, resolution and feedback.

5. Nationwide Tax Forums

Make plans to attend the next tax forum in Orlando on Aug. 5-7 or check out the dates and locations of upcoming forums.

Advanced registration is required for the workshops on the new Form 990 and Retirement Plan Pitfalls. Make an appointment to bring your toughest unresolved case for practitioner case resolution. Attend a Taxpayer Advocate Service seminar or focus group. There’s a lot more, so

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Mortgage Workouts, Tax-Free for Many Homeowners

2008-07-18T10:43:00.001-04:00

There is now tax relief for struggling homeowners. If your mortgage debt is partly or entirely forgiven during 2007, 2008 or 2009 you may be able to claim special tax relief by filling out Form 982 and attaching it to your federal income tax return for that year.

Normally, debt forgiveness results in taxable income. But under the Mortgage Forgiveness Debt Relief Act of 2007, you may be able to exclude from tax up to $2 million of debt forgiven on your principal residence. The limit is $1 million for a married person filing a separate return.

Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, may qualify for this relief. The debt must have been used to buy, build or substantially improve your principal residence and must have been secured by that residence. Debt used to refinance qualifying debt is also eligible for the exclusion, but only up to the amount of the old mortgage principal, just before the refinancing.

Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the new tax-relief provision. In some cases, however, other kinds of tax relief, based on insolvency, for example, may be available. See Form 982 for details.

If your debt is reduced or eliminated you will receive a year-end statement (Form 1099-C) from your lender. By law, this form must show the amount of debt forgiven and the fair market value of any property given up through foreclosure.

The IRS urges borrowers to check the Form 1099-C carefully. Notify the lender immediately if any of the information shown is incorrect. You should pay particular attention to the amount of debt forgiven (Box 2) and the value listed for your home (Box 7).

For more information about the Mortgage Forgiveness Debt Relief Act of 2007, visit the IRS Web site at IRS.gov. A good resource is IRS Publication 4681, Canceled Debts, Foreclosures, Repossessions and Abandonments. This publication and Form 982 can be downloaded from IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Links:

IRS Publication 4681, Canceled Debts, Foreclosures, Repossessions and Abandonments (PDF)
Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (PDF)

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Start keeping good tax records

2008-07-17T10:16:00.000-04:00

In a tax emergency, would you be ready? Well–organized records not only help you prepare your tax return, but they also help you answer questions if your return is selected for examination or prepare a response if you are billed for additional tax.

Fortunately, you don’t have to keep all tax records around forever. Normally, tax records should be kept for three years, but some documents — such as records relating to a home purchase or sale, stock transactions, IRA and business or rental property — should be kept longer.

If you are an employer, you must keep all your employment tax records for at least 4 years after the tax becomes due or is paid, whichever is later.

If you are in business, there is no particular method of bookkeeping you must use. However, you must clearly and accurately show your gross income and expenses. The records should substantiate both your income and expenses.

Publication 552, Recordkeeping for Individuals, provides more detailed information on individual record keeping requirements.

Publication 583, Starting a Business and Keeping Records, and Publication 463, Travel, Entertainment, Gift, and Car Expenses, provide additional information on required documentation for taxpayers with business expenses.

These publications can be downloaded from IRS.gov or ordered by calling 800-TAX-FORM (800-829-3676).

Actually, there is a wealth of free tax information on the IRS Web site, IRS.gov. It’s not just about recordkeeping. Individuals and businesses can find answers to almost any question about federal taxes on the web site. Helpful links found at the top of the home page will take you directly to topics centered on Individuals, Businesses, Charities and Non-Profits, Government Entities, Tax Professionals, the Retirement Plan Community and Tax Exempt Bonds.

In addition to the latest news coming from the IRS, the homepage can lead you to statistics, news releases and tax tips, local IRS offices, the Taxpayer Advocate Service, and thousands of IRS forms and publications. Frequently asked questions and answers are available or you can use two separate search icons: one by keyword and one by answering “I need to . . .”

Why wait? Summertime is a great time to visit IRS.gov.

Links:

IRS Publication 552, Recordkeeping for Individuals (PDF)
IRS Publication 583, Starting a Business and Keeping Records (PDF)
IRS Publication 463, Travel, Entertainment, Gift, and Car Expenses (PDF)

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1986-2006 Individual Income Tax Return Stats

2008-07-15T10:56:00.000-04:00

Tax Year 1986-2006 Individual Income Tax Return Statistics by Selected Descending and Ascending Cumulative Percentiles - Tax Year 1986-2006 individual income tax return statistics by selected descending and ascending cumulative percentiles are now available. These updated tables show historical statistics from 1986 through 2006 on income and tax by cumulative percentiles based on numbers of returns. The tables show distributions of adjusted gross income (AGI) and total income tax, as defined for each tax year, by descending and ascending cumulative percentiles of returns in both current and constant dollars. They can be used to make comparisons across cumulative percentile classes beginning with Tax Year 1986. Table 1 is based on percentiles of returns cumulated downward from the highest income return and shows data for the top 1 percent, 5 percent, 10 percent, 25 percent, and 50 percent of returns with positive amounts of AGI. Table 2 is based on returns cumulated upward from the lowest income returns and shows for the bottom 50 percent, 75 percent, 90 percent, 95 percent, and 99 percent of returns with positive amounts of AGI.

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News for flood and storm victims

2008-07-14T16:44:00.000-04:00

Victims of Floods, Storms and Tornadoes In Six States Now Have Until Aug. 29 to File Certain Returns

WASHINGTON ––The Internal Revenue Service is postponing until Aug. 29 the time to file certain tax returns, to make certain tax payments and to perform time-sensitive acts for storm, flood, and tornado victims in presidential disaster areas in six states, mostly in the Midwest.

Previously, these deadlines varied by state, and the postponement provides people affected by the disasters with additional time.

"Our hearts go out to to the people hit by these disasters," IRS Commissioner Doug Shulman said. “We realize that as people put their lives back together, they need additional time to work on these tax issues."

This announcement will affect counties in Indiana, Iowa, Illinois, Nebraska, West Virginia and Wisconsin that qualify for individual assistance. Affected counties in Missouri previously have been granted relief until Aug. 29.

Related Items:

Disaster news release for Indiana,
Disaster news release for Iowa,
Disaster news release for Illinois,
Disaster news release for Nebraska,
Disaster news release for West Virginia,
Disaster news release for Wisconsin, and
Disaster news release for Missouri.

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Economic Stimulus Checks

2008-07-14T15:36:00.001-04:00

It's Not Too Late to Claim Your Economic Stimulus Payment: IRS Will Issue Checks Through End of Year

The last of the economic stimulus checks have been issued under the planned payment schedule, which was a timetable for tax returns that were filed and processed before April 15.

However, the Internal Revenue Service will continue processing tax returns and issuing economic stimulus payments for much of the year.

It is not too late to file a return to claim an economic stimulus payment. The IRS urges people to file by October 15 to ensure they receive a payment prior to year's end. It can take up to eight weeks for the IRS to process the return and issue the payment.

For people who have no tax liability or no tax filing requirement, there is a minimum payment of $300 ($600 for married couples), plus the $300 for each qualifying child. To be eligible for the minimum payment, individuals must have at least $3,000 in qualifying income.

Qualifying income includes any combination of earned income, nontaxable combat pay and certain benefit payments from Social Security, Veterans Affairs and Railroad Retirement. The IRS is continuing to work with numerous state, local and national partners to reach people who have no tax liability or no tax filing requirement and to help them file a simple Form 1040A.

Below are some links to IRS.gov and the U.S. Treasury regarding economic stimulus payments:

Also visit www.treas.gov to see the Treasury News Release Cumulative Economic Payment Totals.

Remember that for the genuine IRS Web site be sure to use .gov. Don't be confused by internet sites that end in .com, .net, .org or other designations instead of .gov. The address of the official IRS governmental Web site is www.irs.gov

Links:

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Tax Tips

2008-07-14T15:33:00.000-04:00

Parents Can Get Credit for Sending Kids to Day Camp

Here’s a tax break for the busy summer. Many working parents must arrange for care of their children under 13 years of age during the school vacation period. A popular solution — with a tax benefit — is a day camp program.

The cost of day camp can count as an expense towards the child and dependent care credit. Expenses for overnight camps do not qualify. If your childcare provider is a sitter at your home or a daycare facility outside the home, you'll get some tax benefit if you qualify for the credit.

The credit is generally 20% to 35% of non-reimbursed expenses; up to $3000 in expenses for one child and up to $6000 for two or more children. The actual credit is also based on your income. The 35% rate applies if your income is under $15,000; the 20% rate, if your income is over $43,000.

For more information, check out IRS Publication 503, Child and Dependent Care Expenses available on the IRS Web site, IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Link:

IRS Publication 503, Child and Dependent Care Expenses (PDF)

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If you have any questions, just ask

2008-07-11T20:09:00.004-04:00

Hi everyone,

If you run into a problem, have any questions, or get lost trying to navigate the IRS website, leave a comment for me and I will try to get your question or problem answered for you. If I don't know the answer, my boss is a phone call away, and he has been doing taxes for at least 20 years. The tax code is very complicated, it changes often, and it is easy to get wrong information. It is never too early to start preparing for your taxes.

Though the filing season is from mid-January to mid-April, all year you should pay attention to things that can affect your tax situation, as this can save you a lot of money. And last thing, and I cannot stress this enough, do not listen to any tax advice given to you, unless that person works for the IRS, is a tax attorney, or is a tax preparer. I cannot tell you how many times I have had clients come into the office and they were given totally wrong information or advice by someone, and then were mad or disappointed when presented with the correct information.

Oh yea, getting a big refund every year is a bad idea. You gave the government an interest free loan for the year. Why not take that money and invest it, so your money makes you more money?

Timothy Watson
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Can You Take a Home Office Deduction?

2008-07-11T16:50:00.000-04:00

If you plan to run your small business out of your home you may be temped to “write-off” many of your household expenses. But how do you know what is deductible and what is not? The IRS has some advice that may help answer the question: “Can I take a Home Office Deduction?”

Generally, expenses related to the rent, purchase, maintenance and repair of a personal residence are not deductible.

However, if you use part of your home for business purposes you may be able to take a home office deduction. Expenses that can be deducted include the business portion of real estate taxes, mortgage interest, rent, utilities, insurance, painting, repairs and depreciation.

In order to claim a business deduction, you must use part of your home:

Exclusively and regularly as your principal place of business, as a place to meet or deal with patients, clients or customers in the normal course of your business, or in connection with your trade or business where there is a separate structure not attached to the home; or
On a regular basis for certain storage use such as inventory or product samples, as rental property, or as a home daycare facility.

In addition, if you work as an employee you can claim this deduction only if the regular and exclusive business use of the home is for the convenience of your employer and the portion of the home is not rented by the employer.

“Exclusive use” means a specific area of the home is used only for trade or business. “Regular use” means the area is used regularly for trade or business. Incidental or occasional business use is not regular use.

Non-business profit-seeking endeavors such as investment activities do not qualify for a home office deduction, nor do not-for-profit activities such as hobbies.

Example: An attorney uses the den in his home to write legal briefs or prepare clients’ tax returns. The family also uses the den for recreation. The den is not used exclusively in the attorney’s profession, so a business deduction cannot be claimed for its use.

These requirements are discussed in greater detail in Publication 587, Business Use of Your Home available at IRS.gov or ordered by calling 800-TAX-FORM (800-829-3676).

Link: Publication 587, Business Use of Your Home

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The Various IRS Scams

2008-07-10T18:35:00.001-04:00

Please folks, do not fall for these

WASHINGTON — The Internal Revenue Service cautions taxpayers to be on the lookout for a new wave of scams using the IRS name in identity theft e-mails, or phishing, that have circulated during the last two months.

In May and June alone, taxpayers reported almost 700 separate phishing incidents to the IRS. In 2008 so far, taxpayers have reported about 1,600 phishing incidents to the IRS.

“Taxpayers should take steps to keep their personal information out of the hands of identity thieves,” said IRS Commissioner Doug Shulman. “That includes not falling for any of the phony e-mails or faxes now in circulation pretending to come from the IRS.”

The most common scams involve tax refunds and, this year, economic stimulus payments.

Although most of these scams consist of e-mails requesting detailed personal information, the IRS generally does not send e-mails to taxpayers, does not discuss tax account matters with taxpayers in e-mails, and does not request security-related personal information, such as PIN numbers, from taxpayers.

Refund e-Mail Scam

There are several variations of the refund scam, in which an e-mail claiming to come from the IRS falsely informs the recipient that he or she is eligible for a tax refund for a specific amount. The bogus e-mail instructs the recipient to click on a link to access a refund claim form. The form requests personal information that the scammers can use to access the e-mail recipient’s bank or credit card account.

This notification is phony. The IRS does not send unsolicited e-mail about tax account matters to taxpayers.

Filing a tax return is the only way to apply for a tax refund; there is no separate application form. Taxpayers who wish to find out if they are due a refund from their last annual tax return filing may use the “Where’s My Refund?” interactive application on the IRS Web site at IRS.gov, the only official IRS Web site.

Economic Stimulus Payments Scam

In this scam, a taxpayer receives an e-mail pretending to come from the IRS which tells the recipient he or she is eligible for an economic stimulus payment. The message recommends direct deposit into the taxpayer’s checking or savings account. To receive the payment, recipients must click on a link to complete and submit an online form by a certain date; otherwise, the e-mail warns, payment may be delayed. The form requests personal and financial data, including checking or savings account numbers that the scammers can use to gain access to the accounts.

In reality, the way members of the public receive their economic stimulus payment is to file a tax return with the IRS, not a special form. Additionally, the IRS does not request personal or financial information via e-mail.

Information on how to obtain an economic stimulus payment may be found in the Economic Stimulus Payment Information Center on the IRS Web site (www.irs.gov). For more information on stimulus-related scams, see IR-2008-11.

Substitute Form 1040 Fax Scam

This scam consists of a cover letter and form that are faxed, rather than e-mailed. The cover letter is addressed “Dear Valued Tax Payer (sic)” and appears to be signed by an IRS employee. The letter says that the IRS is updating its files and that recipients who supply the requested information will receive a nominal tax refund. It also states that those who fail to immediately return the completed form risk additional tax and withholding. The attached form is labeled a substitute Form 1040 and is titled “Certificate of Current Status of Beneficial Owner For United States Tax Recertification & Withholding.” It requests a large amount of detailed personal and financial information, such as mother’s maiden name (often used in security screening), bank account numbers, estimated assets and more. It asks the recipient to sign and fax back the completed form, as well as a copy of the recipient’s driver’s license and passport.

The letter, signature and form are all fraudulent. Moreover, the IRS does not send unsolicited faxes to taxpayers and does not request such detailed personal and financial information.

This is a variant of earlier scams. For more information, see news releases IR-2004-104 and IR-2004-75.

Company Report Scam

This e-mail appears to come from an IRS.gov e-mail address, addresses recipients by name and references the company the recipient works for. These personalized details may convince the recipient that the e-mail is legitimate. The e-mail says that the IRS has a report on the company and asks the recipient to review a copy by clicking on a link to download the report. However, when the link is clicked, malware is downloaded to the recipient’s computer.

There are various types of malware, which can hijack a victim’s computer hard drive to give someone remote access to the computer, search for passwords and other information and send them to the scammer, or cause other types of identity theft or damage.

The IRS does not compile reports on companies or send e-mails to company staff asking them to review a report. Generally, the IRS does not send unsolicited e-mails to taxpayers.

Tax Court Scam

In this scam, an e-mail that appears to come from the U.S. Tax Court contains a petition involving a court case between the IRS and the recipient. The document instructs the recipient to download other files. The downloads transfer malware, or malicious code, to the recipient’s computer.

There are various types of malware, which, for example, can hijack a victim’s computer hard drive to give someone remote access to the computer, or can search for passwords and other information and send them to the scammer.

The truth is that the Tax Court is not e-mailing notices to anyone who currently has a case before the court. Visit the court’s Web site at http://www.ustaxcourt.gov/ for more information. Recipients are advised to avoid clicking on any links in the e-mail and to delete the e-mail.

How Scams Work

To lure their victims, phishing scams use the name of a known institution, such as the IRS, to either offer a reward for taking a simple action, such as providing information, or threaten or imply an unpleasant consequence, such as losing a refund, for failing to take the requested action.

The goal of the scams is to trick people into revealing personal and financial information, such as Social Security, bank account or credit card numbers, which the scammers can use to commit identity theft.

Typically, identity thieves use a victim’s personal and financial data to empty the victim’s financial accounts, run up charges on the victim’s existing credit cards, apply for new loans, credit cards, services or benefits in the victim’s name, file fraudulent tax returns or even commit crimes. Most of these fraudulent activities can be committed electronically from a remote location, including overseas. Committing these activities in cyberspace allows scammers to act quickly and cover their tracks before the victim becomes aware of the theft.

People whose identities have been stolen can spend months or years — and their hard-earned money — cleaning up the mess thieves have made of their reputations and credit records. In the meantime, victims may lose job opportunities or may be refused loans, education, housing or cars.

What to Do

Anyone wishing to access the IRS Web site should type www.irs.gov into their Internet address window, rather than clicking on a link in an e-mail or opening an attachment, either of which may download malicious code or send the recipient to a phony Web site.

Those who have received a questionable e-mail claiming to come from the IRS may forward it to the following address: phishing@irs.gov. Use the instructions contained in an article on IRS.gov titled “How to Protect Yourself from Suspicious E-Mails or Phishing Schemes.” Following the instructions will help the IRS track the suspicious e-mail to its origins and shut down the scam. Find the article by visiting IRS.gov and entering the words “suspicious e-mails” into the search box in the upper right corner of the front page.

Those who have received a questionable telephone call that claims to come from the IRS may also use the phishing@irs.gov mailbox to notify the IRS.

The IRS has issued previous warnings on scams that use the IRS name to lend the scam legitimacy. More information on identity theft, phishing and telephone scams using the IRS name, logo or spoofed (copied) Web site is available on the IRS Web site at IRS.gov. Enter the terms “phishing,” “identity theft” or “e-mail scams” into the search box in the upper right corner of the front page.

Related Information:

FS-2008-9, Identity Theft E-Mails Scams a Growing Problem
IR-2007-109, IRS Warns Taxpayers of New E-mail Scams
Suspicious e-Mails and Identity Theft

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National Taxpayer Advocate Releases Report to Congress

2008-07-08T16:43:00.001-04:00

WASHINGTON — National Taxpayer Advocate Nina E. Olson today delivered a report to Congress that identifies the priority issues the Office of the Taxpayer Advocate will address in the coming fiscal year. Among the key areas of focus will be improving IRS procedures to protect victims of tax-related identity theft and expanding outreach and education to individuals who have lost their homes to foreclosure concerning the “cancellation of debt” tax consequences they face.

The report notes that July 22, 2008, will mark the 10th anniversary of the enactment of the IRS Restructuring and Reform Act of 1998, which created the Office of the Taxpayer Advocate in its current form and added significant taxpayer rights protections. Olson praised the legislation, saying: “From my perspective as the National Taxpayer Advocate, I see daily how much taxpayers benefit from RRA 98.”

The Advocate’s report, which is required by law, sets out the objectives of the Office of the Taxpayer Advocate for the upcoming fiscal year and provides substantive analysis of issues as well as statistical information. Among the areas the report identifies for particular emphasis in FY 2009 are the following:

1. Tax-Related Identity Theft. The National Taxpayer Advocate’s 2007 Annual Report to Congress identified tax-related identity theft as one of the most serious problems facing taxpayers. The report stated that the IRS does not have adequate procedures in place to assist victims of identity theft and does not have adequate systems in place to quantify the number of tax-related incidents of identity theft that occur. The report made eight recommendations, including the creation of a centralized unit to handle identity theft cases and the development of a centralized set of procedures that cuts across IRS functions. The IRS has taken a number of steps to improve its procedures; notably, it has developed a Service-wide identity theft indicator and is studying the creation of a centralized unit to assist identity theft victims. During FY 2009, the Office of the Taxpayer Advocate will work with the IRS to improve its procedures in this area.

2. Cancellation of Debt Income. When an individual or business borrows money and the debt is cancelled, the borrower generally must include the amount of the cancelled debt in gross income. This requirement generally affects borrowers who lose their homes to foreclosure or who default on car loans or credit card debts. Taxpayers may exclude the amount of a cancelled debt from gross income under certain circumstances, but to do so, they must take the affirmative act of filing Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment), with their tax returns. Very few taxpayers file Form 982, and the Office of the Taxpayer Advocate has focused and will continue to focus on increasing public awareness of the rules and exceptions. It has worked with the IRS to simplify the instructions for Form 982 and to develop an IRS publication that covers the tax aspects of cancellation of debt issues comprehensively, produced podcasts (known as “TAScasts”) that are available online, and provided specialized training for Low Income Taxpayer Clinic (LITC) practitioners. The Office of the Taxpayer Advocate will continue to work with the IRS to simplify reporting procedures and will continue to conduct outreach to affected taxpayers and practitioners in FY 2009.

3. IRS Collection Practices. The National Taxpayer Advocate’s 2006 Annual Report to Congress raised a number of concerns about IRS collection practices. Joint working groups have been established to work on five issues – levies, allowable living expense standards, installment agreements, offers in compromise, and early intervention techniques. However, the Office of the Taxpayer Advocate remains concerned about additional collection issues, including resorting to seizures before all viable collection alternatives have been exhausted, under-utilization of partial-pay installment agreements, and excessive delays in collection that exacerbate taxpayer delinquency problems because of the accumulation of interest and penalties. The IRS is working with the Office of the Taxpayer Advocate to address these concerns, and the collaboration will continue in FY 2009.

Other areas of emphasis for FY 2009 identified in the report include monitoring the private debt collection program, working with the IRS to assist taxpayers with disproportionate tax liabilities due to alternative minimum tax resulting from the exercise of incentive stock options (known as “ISO/AMT” tax liabilities), working with the IRS to address problems and inefficiencies in the correspondence examination program, and updating a 2003 report on the standards and structure of federal ombudsmen offices.

* * * * * * *

The National Taxpayer Advocate is required by statute to submit two annual reports to the House Committee on Ways and Means and the Senate Committee on Finance. The statute requires these reports to be submitted directly to the Committees without any prior review or comment from the Commissioner of Internal Revenue, the Secretary of the Treasury, the IRS Oversight Board, any other officer or employee of the Department of the Treasury, or the Office of Management and Budget. The first report is submitted mid-year and must identify the objectives of the Office of the Taxpayer Advocate for the fiscal year beginning in that calendar year. The second report, due on December 31 of each year, must identify at least 20 of the most serious problems encountered by taxpayers, discuss the 10 tax issues most frequently litigated in the courts during the prior year, and make administrative and legislative recommendations to resolve taxpayer problems.

About the Taxpayer Advocate Service

The Office of the Taxpayer Advocate (also known as the Taxpayer Advocate Service) is an independent organization within the IRS that assists taxpayers who are experiencing economic harm, who are seeking help in resolving tax problems that have not been resolved through normal channels, or who believe that an IRS system or procedure is not working as it should. Taxpayers may be eligible for assistance if:

They are experiencing economic harm or significant cost (including fees for professional representation);
They have experienced a delay of more than 30 days to resolve a tax issue; or
They have not received a response or resolution to the problem by the date that was promised by the IRS.

The service is free, confidential, tailored to meet taxpayers’ needs, and available for businesses as well as individuals. There is at least one local taxpayer advocate in each state, the District of Columbia and Puerto Rico. Taxpayers can contact TAS by:

Calling the TAS toll-free case intake line at 1-877-777-4778 or TTY/TDD 1-800-829-4059;
Calling or writing to their local taxpayer advocate, whose address and phone number is listed in the government listings of their local telephone directory and in Publication 1546, Taxpayer Advocate Service – Your Voice at the IRS;
Filing Form 911, Request For Taxpayer Advocate Service Assistance (and Application for Taxpayer Assistance Order), with the Taxpayer Advocate Service; or
Asking an IRS employee to complete Form 911 on their behalf.

To get a copy of Form 911 or learn more about the Taxpayer Advocate Service, go to www.irs.gov/advocate.

Related Items:

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Reporting Your Gambling Winnings and Losses

2008-07-08T10:48:00.002-04:00

Your summer vacation may mean a trip to the casino or the racetrack. What will you owe Uncle Sam if Lady Luck happens to be on your side?

Gambling winnings are fully taxable and must be reported on your tax return.

You must file Form 1040 and include all of your winnings. Gambling income includes, among other things, winnings from lotteries, raffles, horse races, and casinos. It includes cash winnings and also the fair market value of prizes such as cars and trips. You can find more information in Publication 525, Taxable and Nontaxable Income.

Anyone who pays your winnings or awards you a prize is required to issue you a Form W-2G if your winnings are subject to Federal income tax withholding or if your winnings are over a certain amount.

However, all gambling winnings must be reported regardless of whether any portion is subject to withholding. In addition, you may be required to pay an estimated tax on your gambling winnings. For information on tax withholding on gambling income, refer to Publication 505, Tax Withholding and Estimated Tax.

If your luck isn’t always so good, you may deduct gambling losses. Losses may be deducted only if you itemize deductions and only if you also have gambling winnings. Claim your gambling losses as a miscellaneous deduction on Form 1040, Schedule A. But remember, the losses you deduct may not be more than the gambling income you report on your return.

Even though you may be on vacation, if you want to deduct losses when you file your return next spring, it is important to keep an accurate diary or similar record of your gambling winnings and losses right now.

To deduct your losses, you must be able to provide receipts, tickets, statements or other records that show both your winnings and losses.

For more information, refer to Publication 529, Miscellaneous Deductions. The publication is available at IRS.gov or ordered by calling 800-TAX-FORM (800-829-3676).

Links:

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The Advanced Earned Income Tax Credit

2008-07-08T10:43:00.001-04:00

You May Be Eligible for the Advanced Earned Income Tax Credit

Why wait? You may be eligible for a tax credit right now that could mean larger paychecks this summer. This benefit is called the Advanced Earned Income Credit or Advance EIC.

If you expect to qualify for the credit in 2008, you may be able to start getting part of the credit with your pay now. Otherwise, you could wait until you file your tax return in 2009.

To receive part of the credit with your pay, you must expect to have at least one qualifying child for the current year, expect to fall within certain income limits, and expect to meet certain other conditions. You cannot get the Advance EIC if you do not expect to have a qualifying child, even if you expect to be eligible to claim the EIC on your current year tax return. To see if you qualify, ask your employer for the current year Form W-5, Earned Income Credit Advance Payment Certificate.

If you qualify, complete Form W–5 and give it to your employer. Your employer will then add the advance earned income credit to your net pay each pay period you are eligible.

You may have only one Form W–5 in effect with a current employer at one time. If you and your spouse are both employed, each of you must file a separate Form W–5.

If your situation changes after you give your employer Form W–5, you must give your employer a new Form W–5. For example, give your employer a new Form W–5 if you no longer expect to qualify for the EIC or you no longer want to get advance payments of the credit with your pay.

Remember, if you receive the EIC with your pay during the current year, you must file Form 1040A or Form 1040 for the current year to report the advance payments you received during the year and to take advantage of any remaining credit. You cannot use Form 1040EZ. The total of the advance payments you receive will be shown on your current year Form W–2.

The current year Form W–5 expires on December 31, 2008. If you expect to be able to claim the credit in advance for the following year, you must give a new completed Form W–5 which is valid for that year to your employer.

For more information about the Advance EIC see IRS Publication 596, Earned Income Credit. This publication (available in both English and Spanish) and Form W-5 can be downloaded from IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Links:

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IRS Tax News

2008-07-07T17:41:00.001-04:00

1. Stimulus Payments Update

Check the Economic Stimulus Payments Information Center on IRS.gov for updates, also available in Spanish.

2. Recent Disaster Relief

Victims of recent storms and floods in Illinois, Missouri and Nebraska may qualify for IRS disaster relief. Be sure to check for updates on the tax relief in disaster situations page.

3. Apply for New VITA Grant

The IRS is now accepting applications for the first-ever Volunteer Income Tax Assistance (VITA) matching grant program. They must be received by Sept. 2, 2008. See news release IR-2008-85 for information on how to apply.

4. Filing Extensions Changing for Some Business Taxpayers

Temporary and proposed regulations will reduce the extension of time to file tax returns for certain businesses that generate Schedules K-1 and other similar statements from six months to five. Requiring these statements to be issued one month earlier, generally by Sept. 15, will provide recipients time to prepare and file returns within the extended time frames. For details, see news release IR-2008-84.

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Individual Income Tax Return Statistics by Geographic Area

2008-07-03T11:33:00.000-04:00

Individual Income Tax Return Statistics by Geographic Area – Updated statistics from individual income tax returns classified by geographic area are now available. County Income Data for Tax Year 2006 include total and selected sources of income, as well as the number of returns and personal exemptions, and are presented by county and State. Statistics for Tax Years 1989 through 2005 are also available. County-to-County Migration Data for Filing Years 2006-2007 include income items and the number of returns and personal exemptions. Data present migration patterns by county for the entire United States, including inflows and outflows. Data are also available for Filing Years 1984 through 2006. State-to-State Migration Data for Filing Years 2006-2007 also include income items, number of returns, and personal exemptions. Data present migration patterns, by State, for the entire United States. Data are also available for Filing Years 1989 through 2006. All statistics are based on addresses shown on the population of returns from the IRS Individual Master File. Examples of income and migration statistics are available free of charge, and complete statistics are available for purchase.
(July 2008)

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Filing Extensions Changing for Some Business Taxpayers Later this Year

2008-07-02T15:01:00.000-04:00

WASHINGTON — Internal Revenue Service officials today announced a change in the extended due date on certain business returns to help individuals better meet their filing obligations. The change, which reduces the extension period from six to five months, eases the burden on taxpayers who must report information from Schedules K-1 and similar documents on their individual tax returns.

Income, deductions and credits from partnerships, S corporations, estates and trusts are reported to partners, investors and beneficiaries on Schedules K-1 and other similar statements. The recipients then use that information to complete their own tax returns.

Currently, the extended due date for both businesses and individuals often falls on the same date, generally Oct. 15. This creates a burden for individual taxpayers who rely on the information from Schedule K-1 and other similar statements to prepare and file their personal tax returns in a timely manner.

"We are eliminating the same-day deadline for these returns, which causes needless hardship and puts the individual taxpayer in an awkward position," said IRS Commissioner Doug Shulman. "We want to correct this timing issue to ensure that all taxpayers have the information they need to file timely and stay in compliance with the law."

The IRS today issued temporary and proposed regulations that will reduce the extension of time to file tax returns for certain businesses that generate Schedules K-1 and other similar statements from six months to five. Requiring these statements to be issued one month earlier, generally by Sept. 15, will provide recipients time to prepare and file returns within the extended time frames.

This change will be effective for extension requests with respect to tax returns due on or after Jan. 1, 2009, and applies to business entities that file the following returns and forms that have a tax year ending on or after Sept. 30, 2008:

1. Form 1065, U.S.Return of Partnership Income
2. Form 1041, U.S. Income Tax Return for Estates & Trusts
3. Form 8804, Annual Return for Partnership Withholding Tax (Section 1446)

The regulation does not change the process for requesting an extension of time to file, nor does it affect extensions of time to file other types of business returns, such as those used by S corporations.

“The regulations will bring the extended time frames of certain business entities with flow-through items in line with other similar businesses, such as S corporations," said Jodi Patterson, director of IRS’s Office of Taxpayer Burden Reduction. “S corporations have a return due date of March 15 and, under a regular 6-month extension of time to file, their extended due date already falls on September 15.”

The IRS initiated the proposal to reduce the extension of time to file, carefully weighing the impact on partnerships and other affected entities against the burden the existing deadline puts on individuals, who need this information to file timely and accurate returns.

Comments on the proposed regulations can be sent electronically via the Federal eRulemaking Portal at http://www.regulations.gov (IRS REG-115457-08). For further information on commenting on the proposed regulations, see REG-115457-08.

The IRS is committed to reducing unnecessary taxpayer burden and welcomes input from tax and payroll professionals, business owners and the general public on opportunities to make it easier to comply with the tax laws. More information, including a link to Form 13285A, Reducing Tax Burden on America's Taxpayers, can be found on the TBR page of IRS.gov, Office of Taxpayer Burden Reduction.

Links:

REG-115457-08 -- Notice of proposed rulemaking by cross-reference to temporary on Extension of Time for Filing Returns
TD 9407 -- Final and temporary regulations and removal of temporary regulations on Extension of Time for Filing Returns

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The IRS has increased mileage rates

2008-06-24T11:28:00.002-04:00

WASHINGTON — The Internal Revenue Service today announced an increase in the optional standard mileage rates for the final six months of 2008. Taxpayers may use the optional standard rates to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

The rate will increase to 58.5 cents a mile for all business miles driven from July 1, 2008, through Dec. 31, 2008. This is an increase of eight (8) cents from the 50.5 cent rate in effect for the first six months of 2008, as set forth in Rev. Proc. 2007-70.

In recognition of recent gasoline price increases, the IRS made this special adjustment for the final months of 2008. The IRS normally updates the mileage rates once a year in the fall for the next calendar year.

"Rising gas prices are having a major impact on individual Americans. Given the increase in prices, the IRS is adjusting the standard mileage rates to better reflect the real cost of operating an automobile," said IRS Commissioner Doug Shulman. "We want the reimbursement rate to be fair to taxpayers."

While gasoline is a significant factor in the mileage figure, other items enter into the calculation of mileage rates, such as depreciation and insurance and other fixed and variable costs.

The optional business standard mileage rate is used to compute the deductible costs of operating an automobile for business use in lieu of tracking actual costs. This rate is also used as a benchmark by the federal government and many businesses to reimburse their employees for mileage.

The new six-month rate for computing deductible medical or moving expenses will also increase by eight (8) cents to 27 cents a mile, up from 19 cents for the first six months of 2008. The rate for providing services for charitable organizations is set by statute, not the IRS, and remains at 14 cents a mile.

The new rates are contained in Announcement 2008-63 on the optional standard mileage rates.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

Mileage Rate Changes

Purpose	Rates 1/1 through 6/30/08	Rates 7/1 through 12/31/08
Business	50.5	58.5
Medical/Moving	19	27
Charitable	14	14

Low-Income Housing Limits to Be Waived in Indiana and Iowa

2008-06-20T19:39:00.001-04:00

Low-Income Housing Limits to Be Waived in Indiana and Iowa

WASHINGTON — The Internal Revenue Service today announced that it will waive certain limitations for the low-income housing tax credit in Indiana and Iowa so that owners of facilities in these states can provide housing to victims of recent storms and flooding.

The IRS will continue to monitor closely the housing situation in other states affected by the recent flooding and is prepared to act quickly as circumstances warrant.

“Our thoughts are with the thousands of families left homeless by these terrible tragedies,” IRS Commissioner Doug Shulman said. “We are pleased to help these states to quickly house the needy whose homes were destroyed.”

Because of the widespread devastation to housing caused by storms and flooding, the IRS will temporarily suspend certain limitations for qualified low-income housing projects located anywhere in the states of Indiana and Iowa. Today’s action will expand the availability of housing for disaster victims and their families.

Formal notices detailing this relief will be issued shortly.

For related information, see:

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Report Certain Foreign Bank and Financial Accounts by June 30

2008-06-17T12:16:00.002-04:00

IRS Reminds Taxpayers to Report Certain Bank and Financial Accounts

WASHINGTON –– The Internal Revenue Service today reminded U.S. persons who have bank and other financial accounts in a foreign country that they may be required to report those accounts to the U.S. Department of Treasury by the June 30 deadline.

With globalization, more people in the U.S. have foreign financial accounts. There is nothing improper about setting up or maintaining such accounts. Still, IRS officials are concerned that U.S. persons may overlook that their accounts are large enough to trigger reporting obligations.

“There are responsibilities that go along with owning such foreign bank and financial accounts,” said IRS Commissioner Doug Shulman. “Foreign account owners must remember that they may have to report their accounts to the government, even if the accounts do not generate any taxable income.”

Since 2000, the number of Report of Foreign Bank and Financial Accounts (FBAR) forms received by the Treasury has increased by nearly 85 percent, from 174,528 in 2000 to 322,414 in 2007. Despite this significant increase in filings, concern remains about the degree of reporting compliance for those who are required to file.

U.S. persons are required to file a Report of Foreign Bank and Financial Accounts (FBAR), Form TD F 90-22.1, each year if they have a financial interest in or signature authority or other authority over any financial accounts, including bank, securities or other types of financial accounts, in a foreign country, if the aggregate value of these financial accounts exceeds $10,000 at any time during the calendar year.

The 2007 FBAR form is due June 30, 2008.

The FBAR is not an income tax return and should not be mailed with any income tax returns. The FBAR must be filed on or before June 30 of the following year to: U.S. Department of the Treasury, P.O. Box 32621, Detroit, MI 48232-0621.

Unlike with federal income tax returns, requests for an extension of time to file an FBAR are not granted.

Civil and criminal penalties for non-compliance with the FBAR filing requirements are severe. Civil penalties for a non-willful violation can range up to $10,000 per violation. Civil penalties for a willful violation can range up to the greater of $100,000 or 50 percent of the amount in the account at the time of the violation. Criminal penalties for violating the FBAR requirements while also violating certain other laws can range up to a $500,000 fine or 10 years imprisonment or both. Civil and criminal penalties may be imposed together.

If a holder of a foreign account was required to file FBARs for earlier years, however, he or she should file the delinquent FBAR reports and attach a statement explaining why the reports are filed late. No penalty will be assessed if IRS determines that the late filings were due to reasonable cause. The account holder should keep copies of their statement for his or her own record.

FBAR information returns for the 2007 calendar year must be filed with the U.S. Department of Treasury, P.O. Box 32621, Detroit, Mich., 48232-0621. The address for commercial delivery is: U.S. Department of Treasury, Currency Transaction Reporting, 985 Michigan Avenue, Detroit, Mich., 48226.

The FBAR form is not available for electronic filing, but many income tax software packages can prepare a printed copy. FBAR forms and instructions are also available on IRS.gov or the FinCEN Web site and by calling 1-800-829-3676.

Taxpayers who need assistance completing Form TD F 90-22.1 can contact the IRS by telephone at 1-800-800-2877, option 2, or via email at FBARquestions@irs.gov.
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IRS Gives Storm Victims More Time to File and Pay

2008-06-16T17:21:00.000-04:00

IRS Gives Storm Victims More Time to File and Pay; Taxpayers in Parts of 10 States Qualify

WASHINGTON — Victims of storms and flooding in 10 states will have more time to make quarterly estimated tax payments normally due today, according to the Internal Revenue Service.

"Our hearts go out to the flood victims in the stricken states," IRS Commissioner Doug Shulman said. "At a time like this, taxes should be the last thing on the minds of these unfortunate victims."

Over the weekend the IRS provided tax relief, including the postponement of various tax-filing and tax-payment deadlines, to disaster-area counties in Iowa, Indiana and Wisconsin. Earlier this spring, the agency extended similar relief to storm victims in parts of Arkansas, Colorado, Georgia, Maine, Mississippi, Missouri and Oklahoma.

As a result, self-employed individuals, retirees and others in these areas who make quarterly estimated tax payments will have more time to make the payment normally due today. Businesses will also have extra time to file various returns and pay any taxes due. Due dates vary, depending upon location, and details are available on the Tax Relief in Disaster Situations page on this Web site.

In addition, affected taxpayers in these areas who suffered uninsured or unreimbursed property damage can choose to claim these losses on their 2007 tax returns.

The IRS is monitoring and regularly updating all available relief.
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IRS e-file Up Sharply in 2008

2008-05-29T12:28:00.000-04:00

WASHINGTON — The Internal Revenue Service’s e-file program set another record in the just-finished 2008 filing season, while Web page visits to IRS.gov also reached new highs in part due to interest in economic stimulus payments.
“The IRS has made great strides in harnessing the power of technology to do its work more efficiently,” IRS Commissioner Doug Shulman said. “The growth in electronic services helped the IRS deliver a strong filing season for the nation’s taxpayers in 2008. The increase in e-file, particularly in the final weeks of the filing season, shows that taxpayers are continuing to recognize the benefits of filing electronically.”

More than 86 million individual tax returns were electronically filed so far in the 2008 filing season, a 12 percent increase over last year at this time. By comparison, for all of 2007 just under 80 million returns were filed electronically. In all, 60 percent of all returns filed so far this year came in through e-file.

A small percentage of the growth in e-file resulted from those taxpayers who were only required to file tax returns this year to claim their federal economic stimulus payments.

The 2008 tax season saw an increase in electronic filing among last-minute filers, a group that has traditionally filed paper returns. From April 12 to 18, the number of electronically filed returns received by the IRS was up 28 percent over the comparable week last year, even though the overall number of tax returns (paper and electronic) received during the same week was up only 9 percent.

Here are some other highlights among statistics released today:

The IRS Customer Account Data Engine (CADE) has so far processed more than 30 million individual tax returns this year, more than double the number of returns handled by the system during all of last year. CADE, which is at the heart of efforts to replace many of the agency’s aging account processing systems, dramatically speeds up internal IRS processing. CADE processes refunds on average 5 days faster than the IRS’ legacy tax return processing system.
The IRS has received about 4.6 million Free File returns, a 21 percent jump over last year at this time. Free File, available only on IRS.gov, will continue to accept returns through Oct. 15 from taxpayers with incomes of $54,000 or less.
The number of balance-due returns filed electronically surged 21 percent to over 11.3 million, also a new record.
This year’s economic-stimulus payments helped fuel a 44-percent increase in the number of visits to IRS.gov, the agency’s Web site. The nearly 206 million visits included, for example, over 8 million to the economic stimulus calculator in April.

2008 FILING SEASON STATISTICS
Cumulative through the weeks ending 5/18/07 and 5/16/08
Individual Income Tax Returns	2007	2008	% Change
Total Receipts	129,150,000	143,138,000	10.8%
Total Processed	119,827,000	130,342,000	8.8%

E-filing Receipts:
TOTAL	77,076,000	86,347,000	12.0%
Tax Professionals	54,932,000	59,975,000	9.2%
Self-prepared	22,145,000	26,372,000	19.1%

Web Usage:
Visits to IRS.gov	142,282,000	205,654,000	44.5%

2008 FILING SEASON STATISTICS
Cumulative through the weeks ending 4/20/07 and 4/18/08
Individual Income Tax Returns	2007		2008		% Change
Total Receipts	124,965,000		136,941,000		9.6%
Total Processed	105,159,000		114,737,000		9.1%

E-filing Receipts:
TOTAL	76,159,000		85,154,000		11.8%
Tax Professionals	54,324,000		59,163,000		8.9%
Self-prepared	21,835,000		25,990,000		19.0%

Web Usage:
Visits to IRS.gov	132,673,000		160,777,000		21.2%

Total Refunds:
Number	88,168,000		89,898,000		2.0%
Amount	$203.022	Billion	$214.264	Billion	5.5%
Average refund	$2,303		$2,383		3.5%

Direct Deposit Refunds:
Number	57,155,000		61,820,000		8.2%
Amount	$153.486	Billion	$166.461	Billion	8.5%
Average refund	$2,685		$2,693		0.3%

First Filing Date for the e-Postcard Electronic Notice

2008-05-13T17:31:00.002-04:00

IRS Reminds Small Tax-Exempt Organizations of the First Filing Date for the e-Postcard Electronic Notice

WASHINGTON –– The Internal Revenue Service today reminded small tax-exempt organizations of their new annual electronic filing requirement as the first filing deadline of May 15 approaches. Organizations can file by going to the appropriate page on this Web site.

Beginning this year, most organizations whose gross receipts are normally $25,000 or less must file Form 990-N, also known as the e-Postcard. Previously these small organizations did not have an annual filing requirement.

“The e-Postcard is fast and easy. An organization just quickly answers a few questions online,” said Steven T. Miller, Commissioner of the Tax Exempt and Government Entities Division of the IRS. “It’s free, totally paperless and will help ensure integrity and transparency in the tax-exempt community.”

The first e-Postcards are due by May 15, 2008, from small tax-exempt organizations whose tax year ended on December 31, 2007. For organizations with a tax year that ends after December 31, 2007, the e-Postcard is due by the 15th day of the 5th month after the close of their tax year.

It is important for small organizations to file the e-Postcard because, under the Pension Protection Act of 2006, if an organization fails to file for three consecutive years it will lose its tax-exempt status.

Some organizations do not have to file including organizations that are part of a group return, as well as churches, their integrated auxiliaries and conventions or associations of churches.

Related Items:

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Economic Stimulus Payments Questions And Answers

2008-05-07T14:18:00.000-04:00

IRS Has Answers to Questions People Are Asking About Economic Stimulus Payments; IRS Urges People to Visit IRS.gov

WASHINGTON — As millions of Americans begin receiving their economic stimulus payments, the Internal Revenue Service released a list of the most-frequently-asked questions –– and answers –– that people now are asking.

“Many people have questions about the stimulus payments, and the IRS has the answers available on the IRS.gov Web site,” IRS Commissioner Doug Shulman said. “The stimulus payments are automatic for eligible taxpayers who filed a 2007 tax return, and taxpayers do not need to take any additional action to receive the payment.”

Stimulus payments started going out last week, and the initial round of payments will continue on a weekly basis through mid-July. In all, nearly 130 million payments will go out this year. Last week, 7.7 million payments were direct deposited, and the first mass production of paper checks begins Thursday.

Since last week millions of Americans have visited IRS.gov and called the IRS toll-free lines. The IRS reminded taxpayers the fastest way to get answers is to visit IRS.gov, which has payment schedules and other information.

Since the payments began, the IRS has been fielding a variety of questions centered on the payment schedule, factors affecting direct deposit of payments, eligibility requirements and questions about the payment amounts. The IRS today released an updated set of Frequently Asked Questions covering everything from when someone can expect the payment to whether it will be delivered electronically or on paper. A link to these Frequently Asked Questions can be found at the bottom of this page.

The most common question has been when people can expect their payments. Economic stimulus payments will be issued according to the last two-digits of the taxpayer’s Social Security number. For joint filers the payments will go out based on the last two digits of the Social Security number of the person listed first on the return. Payments will be made by either direct deposit or paper check, based generally on the option people chose when they filed their 2007 tax returns.

The payment schedule below is for people who filed early enough to have their tax returns processed by April 15.

Related Items:

Frequently Asked Questions

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Stimulus Payments Update; IRS Phishing Scams

2008-05-05T23:22:00.001-04:00

Stimulus Payments Update

Stimulus payments directly deposited into IRAs and other tax-favored accounts may be withdrawn tax-free and penalty-free. See news release IR-2008-68.

Check the Economic Stimulus Payments Information Center on IRS.gov for updates. Also in Spanish.

Phish Tales

An old phishing scheme has emerged again in the United States and overseas. A bogus IRS letter and Form W-8BEN (Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding) asks for the recipient’s account numbers, PINs, mother’s maiden name and passport number. The letter arrives through FAX or email. Don’t believe it! Find out more about suspicious emails and identity theft.

Tax Talk

The May 13 Tax Talk Today gives you the latest news on e-file, e-services and other electronic tools important to the practitioner community and a glimpse of the changes you can expect to see in 2009. Tune in before 2:00 p.m. ET to get any program materials available.

Technical Guidance

Announcement 2008-44 provides that individuals who have payments made by direct deposit under the Economic Stimulus Act of 2008, P.L. No. 110-185, to their IRAs or certain other accounts afforded special tax benefits under the Code may remove the payments without incurring any adverse tax consequences. It will be published in IRB 2008-20 dated May 19, 2008.

Revenue Procedure 2008-20 provides guidance relating to the obligation of material advisors to prepare and maintain lists with respect to reportable transactions under section 6112. It will be published in IRB 2008-20 dated May 19, 2008.
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Updated IRS News

2008-05-01T15:47:00.001-04:00

Updated IRS News, May 1, 2008

Revenue Procedure 2008-20 provides guidance relating to the obligation of material advisors to prepare and maintain lists with respect to reportable transactions under § 6112 and provides that material advisors may use the Form 13976, “Itemized Statement Component of Advisee List” (or successor form) to maintain the itemized statement component of the list. The use of the form is optional. The form is available on the IRS website.

Revenue Procedure 2008-20 will be in IRB 2008-20, dated May 19, 2008.

IRS Seeks New Members of Advisory Council

WASHINGTON –– The Internal Revenue Service today announced it seeks applications for its broad-based private-sector advisory panel, the Internal Revenue Service Advisory Council (IRSAC), which provides important feedback and recommendations regarding tax administration.

The 30-member panel is a diverse slice of the tax professional community including tax attorneys, certified public accountants, enrolled agents, enrolled actuaries, appraisers, other tax practitioners, as well as business representatives.

"The IRSAC plays a vital role by ensuring that executives at the IRS have feedback about how our policies and actions affect the private sector,” said Doug Shulman, IRS Commissioner.

Applications will be accepted from May 1 to June 16 of this year for three Council openings that will begin in January 2009. The IRS Commissioner appoints members to three-year terms.

IRSAC was originally called the Commissioner’s Advisory Group (CAG) and was renamed in 1998. IRSAC provides an organized public forum for IRS officials and relevant members of the public to discuss tax administration issues. The panel presents a report to the Commissioner each year at a public meeting in the fall.

More information and applications are available on the Tax Professionals page of the IRS web site (IRS.gov). Questions about the nomination and application process can be sent to the following email: *public_liaison@irs.gov

Related Items:

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Stimulus Payments Withdrawn from IRAs and Tax-Favored Accounts Are Tax Free

2008-04-30T16:30:00.001-04:00

Relief for Stimulus Payments Withdrawn from IRAs and Tax-Favored Accounts

WASHINGTON — Economic stimulus payments directly deposited into IRAs and other tax-favored accounts may be withdrawn tax-free and penalty-free, the Internal Revenue Service announced today.

This relief is designed to help taxpayers who may have been unaware that by choosing direct deposit for their entire regular tax refund, they were also choosing to have their stimulus payment directly deposited as well. If a taxpayer elected a split refund, however, their stimulus payment will be paid by a paper check.

This relief is available for amounts withdrawn from these tax-favored accounts that are less than or equal to a taxpayer’s directly deposited stimulus payment.

To qualify for this relief, funds must be taken out by April 15, 2009, in most cases. Without this relief, taxes, penalties and other special rules would apply to amounts removed from these accounts. Regular refunds are not eligible for this relief.

Eligible tax-favored accounts include traditional and Roth IRAs, health savings accounts (HSAs), Archer MSAs, Coverdell education savings accounts (ESAs) and qualified tuition programs, also known as QTPs or 529 plans. Thus, for example, a taxpayer whose $1,200 stimulus payment is directly deposited into his or her IRA can take out anywhere up to $1,200 from the IRA, tax-free and penalty-free.

In general, the deadline for these withdrawals is the due date or extended due date for filing a 2008 return. This means April 15, 2009, for most taxpayers, or Oct. 15, 2009, for those who obtain tax-filing extensions.

Details on reporting these withdrawals and claiming relief will be included in tax forms and instructions for 2008. Other details are in Announcement 2008-44 on this Web site.

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May’s Tax Talk Today Features

2008-04-30T15:27:00.001-04:00

May’s Tax Talk Today Features “The Electronic IRS...more than just e-file”

WASHINGTON — The Internal Revenue Service’s next Web cast aimed at educating tax and payroll professionals will provide the latest news and information on e-file, e-services and other electronic tools important to the practitioner community.

The latest Tax Talk Today program will appear on Tuesday, May 13, 2008, at 2 p.m. The Web cast is entitled “The Electronic IRS...more than just e-file”.

If you haven’t visited IRS.gov lately, you’ll be surprised and amazed how easy it is to find information about and use IRS’s ever-expanding, on-line products and services.

This month, tune in for the latest news and information on e-file, e-services, and other electronic tools important to the practitioner community.

The show’s panel of experts includes Roger Harris, President and C.O.O., Padgett Business Services®/SmallBizPros, Inc., Padgett Foundation; Tony Tullo, Federal Compliance Director, Automatic Data Processing; Beth Jones, Director, Electronic Products & Services Support (EPSS), IRS Wage & Investment (W&I) Division; and Paul Mamo, Director, Development Services Division, IRS Electronic Tax Administration. Tax professionals are encouraged to watch and submit questions.

To access the Web cast at no charge, viewers can register online. Tax professionals in need of continuing education credits are eligible to receive one CEC by viewing the March 11 Web cast.

Archived shows are available on the site also.

The next show is on Tuesday, July 8 when the topic will be “Retirement Plan Pitfalls”.
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Taxpayers Can Check Their Refund Status

2008-04-24T12:44:00.000-04:00

Taxpayers Can Check Their Refund Status
with “Where’s My Refund?”

WASHINGTON — Taxpayers who have filed their federal income tax returns and are expecting their refunds can use the Internal Revenue Service’s online tool, “Where’s My Refund?,” to check on the status of their refunds.

“Where’s My Refund?” is fast, easy, safe and convenient. Nearly 9.7 million taxpayers have checked the status of their 2007 federal income tax refunds online, up about 18 percent over the same time period last year.

To get to personalized refund information, taxpayers should be ready to enter their:

* Social Security Number (or Taxpayer Identification Number),
* Filing status (Single, Married Filing Joint Return, Married Filing Separate Return, Head of Household, or Qualifying Widow(er)),
* Exact refund amount shown on their tax returns.

Taxpayers can check on the status of their refund seven days after e-filing a return. For a paper return, check four to six weeks after mailing the return.

“Where’s My Refund?” also includes links to customized information based on a taxpayer’s specific situation. For example if “Where’s My Refund?” shows that the IRS was unable to deliver a refund, a taxpayer can change his or her address online. Taxpayers can avoid undelivered refund checks by having their refunds directly deposited into a personal checking or savings account.

If 28 days have passed after the IRS says it mailed a refund check, “Where’s My Refund?” enables taxpayers to initiate a trace.

New this year Spanish-speaking taxpayers can get information about the status of their federal refunds using Dónde Está mi Reembolso? available by entering the Spanish language area of the web site by clicking the Espanol link on IRS.gov. The refund trace and address change features are only available in English at this time.

Taxpayers without internet access can check the status of their refunds by calling the IRS TeleTax System at 800-829-4477 or the IRS Refund Hotline at 800-829-1954. The TeleTax refund information is updated each weekend. If you do not get a date for your refund, please wait until the next week before calling back.

Where’s My Refund? is also accessible to visually impaired taxpayers who use the Job Access with Speech screen reader used with a Braille display and is compatible with different JAWS modes.

Some scam artists are sending phony emails, including those relating to “Where’s My Refund?”, to trick individuals into revealing personal financial information that can be used to access their financial accounts. People who want to access the genuine IRS Web site and the “Where’s My Refund?” feature should go directly to the IRS Web site by typing the address, www.irs.gov, into the address` line of their Internet window. The only genuine IRS Web site is IRS.gov.
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It’s Not too Late to File for Your 2008 Stimulus Payment

2008-04-23T18:29:00.000-04:00

Even though the April 15 tax deadline has passed, it is not too late to file for your economic stimulus payment this year. Persons who qualify for the payment must file a 2007 tax return by October 15, 2008.

Millions of people are eligible but may not know it, or think it is too late to get a payment. These are certain retirees, disabled veterans and low-wage workers who normally don’t file a tax return because their income is too low or nontaxable. This year, they must file to receive their stimulus payment.

The IRS will issue economic stimulus payments of up to $600 for individuals ($1,200 for married couples) plus $300 for each eligible child under age 17 starting in early May, based on 2007 tax returns processed by April 15.

People who have no tax filing requirement but have at least $3,000 in qualifying income must file a simple Form 1040A tax return to obtain their stimulus payment. The law provides a minimum payment of $300 ($600 for married couples) plus the $300 payment per eligible child, if the person (or married couple) qualifies.

Qualifying income includes any combination of earned income, nontaxable combat pay as well as certain payments from Social Security, Veterans Affairs and Railroad Retirement.

The types of Social Security benefits that are considered qualifying income include retirement, disability and survivor payments. Supplemental Security Income (SSI) is not qualifying income. The types of Veterans Affairs benefits that are considered qualifying income include disability compensation, disability pension and survivor payments. Qualifying Railroad Retirement payments include the social security equivalent portion of Tier 1 benefits.

People not otherwise required to file an income tax return must file a simple Form 1040A with basic information to ensure that they receive the economic stimulus payment. This information includes their name; address; dependents, if any; amount of their qualifying income (which must be $3,000 or more); direct deposit information and their signatures. Form 1040A and instructions are available on the IRS Web site at www.irs.gov or by calling 800-TAX-FORM (800-829-3676).

All eligible persons, including qualifying children, must have Social Security numbers. People with Individual Taxpayer Identification Numbers are not eligible. Also, people cannot be claimed or be eligible to be claimed as a dependent on another’s tax return to qualify for a payment.

More than 400 IRS Taxpayer Assistance Centers are open weekdays offering free tax preparation and filing for individuals and families whose income is $40,000 or less and those filing a tax return solely to receive the economic stimulus payment. To find an IRS office near you, go to IRS.gov and click on “Contact IRS,” then “Contact Your Local IRS Office.”

A select number of volunteer tax assistance sites in local communities may also remain open providing free help. Call 1-800-906-9887 to find the nearest volunteer tax assistance site.

People filing solely to receive a stimulus payment can file their own return electronically by using IRS Free File – Economic Stimulus Payment, also available at www.irs.gov. This program provides free software and free electronic filing of Form 1040A, and it remains open until the October 15 filing deadline to receive a stimulus payment.

Remember that for the genuine IRS Web site be sure to use .gov. Don't be confused by internet sites that end in .com, .net, .org or other designations instead of .gov. The address of the official IRS governmental Web site is www.irs.gov.

2008-2009 Guidance Priority List

2008-04-18T16:34:00.000-04:00

Treasury, IRS Solicit Recommendation for 2008-2009 Guidance Priority List

WASHINGTON — The Department of Treasury and Internal Revenue Service invite public comment on recommendations for items that should be included on the 2008-2009 Guidance Priority List.

The Treasury Department's Office of Tax Policy and IRS use the Guidance Priority List each year to identify and prioritize the tax issues that should be addressed through regulations, revenue rulings, revenue procedures, notices, and other published administrative guidance. The Guidance Priority List focuses resources on guidance items that are most important to taxpayers and tax administration. Published guidance plays an important role in increasing voluntary compliance by helping to clarify ambiguous areas of the tax law.

The 2008-2009 Guidance Priority List will establish the guidance that the Treasury Department and IRS intend to issue from July 1, 2008, through June 30, 2009.

In reviewing recommendations and selecting projects for inclusion on the 2008-2009 Guidance Priority List, the Treasury Department and the IRS will consider the following:

Whether the recommended guidance resolves significant issues relevant to many taxpayers;
Whether the guidance may be appropriate for enhanced public involvement through the process described in Notice 2007-17, 2007-12 I.R.B. 748;
Whether the recommended guidance promotes sound tax administration;
Whether the recommended guidance can be drafted in a manner that will enable taxpayers to understand and apply the guidance easily;
Whether the IRS can administer the recommended guidance on a uniform basis; and
Whether the recommended guidance reduces controversy and lessens the burden on taxpayers or the IRS.

Please submit recommendations by May 31, 2008, for possible inclusion on the original 2008-2009 Guidance Priority List.

Information on how to submit recommendations can be found in Notice 2008-47. Taxpayers are not required to submit recommendations for guidance in any particular format. Taxpayers should, however, briefly describe the recommended guidance and explain the need for the guidance. In addition, taxpayers may include an analysis of how the issue should be resolved.

All comments will be available for public inspection and copying in their entirety.

Related Item: Notice 2008-47

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Federal Rates

2008-04-18T16:33:00.001-04:00

Revenue Ruling 2008-24 provides various prescribed rates for federal income tax purposes including the applicable federal interest rates, the adjusted applicable federal interest rates, the adjusted federal long-term rate, the adjusted federal long-term tax-exempt rate. These rates are determined as prescribed by § 1274.

The rates are published monthly for purposes of sections 42, 382, 412, 1288, 1274, 7520, 7872, and various other sections of the Internal Revenue Code.

Revenue Ruling 2008-24 will appear in Internal Revenue Bulletin 2008-18, Dated: May 5, 2008

2008 Form 990 Instructions

2008-04-15T13:23:00.001-04:00

IRS Issues Draft Instructions for 2008 Form 990

WASHINGTON –– The Internal Revenue Service recently released for public comment the draft instructions to the 2008 Form 990, which is the return most tax-exempt organizations must file annually.

The instructions apply to the redesigned Form 990 that organizations will file for their 2008 tax years (returns filed in 2009). The final version of the redesigned Form 990 was unveiled in December 2007 (IRS news release IR-2007-204).

“Tax-exempt organizations provide tremendous benefits to the people and communities they serve, but their ability to do good work hinges upon the public’s trust,” said IRS Commissioner Doug Shulman. “The new Form 990 will foster this trust by greatly improving transparency and compliance in the tax-exempt sector. Public comment on the draft instructions will help the IRS to minimize the reporting burden on tax-exempt organizations, which is another important goal.”

The IRS seeks public comment on the draft instructions to ensure that the final instructions meet the needs of the tax-exempt community. The public comment period will run until June 1, 2008.

The IRS also released a list of special “highlights” with the draft instructions, in the hope that public comments give particular attention to these details. The IRS will post comments on its Web site as it did with comments about the draft redesigned Form 990 last year.

The draft 2008 Form 990 instructions include a general overview that explains its purpose, an explanation of who must file particular schedules and line-by-line instructions. The draft instructions also include new tools to assist organizations in answering certain questions and facilitating uniform reporting.

“We were immensely gratified by the amount and quality of public comments we received on the Form 990 redesign,” said Lois G. Lerner, director of the IRS Tax-Exempt Organizations division. “Public input resulted in a form that meets the needs of tax-exempt organizations, the public and tax administrators. We hope for similarly thoughtful and useful comments about the draft instructions.”

The draft Form 990 instructions are on the tax-exempt organizations part of the IRS Web site. Comments on the instructions should be e-mailed to the IRS at Form990Revision@irs.gov. To facilitate posting on the IRS Web site, please e-mail comments in a text (not picture) format.

Comments may also be mailed to:

IRS
Draft 2008 Form 990 Instructions, SE:T:EO
1111 Constitution Ave., NW.
Washington, DC 20224

Related Items:

Draft Form 990 Instructions and other information

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The End Of Tax Season

2008-04-14T10:28:00.003-04:00

The end of tax season is almost here, and it can't get here fast enough, this year has been a little crazy. For example, early in the season, when the W-2's start coming out, we call that peak. In the previous 2 seasons, the returns I did were just W-2's with dependents, nothing else, and these are really easy returns. The customer usually wants a bank product also, because our fees come out of their check, and they usually have a big Earned Income Credit, so the refunds are in the $2,000-6000 range. These returns take 20-30 minutes to do. We do a lot of returns in this time. And for the record, I have never, or will I ever, push a bank product on a client. I just explain the options. Most clients know which bank product they want before they even come in the door.

For some reason though, this season I had much harder returns during peak, and the clients paid their fee up front and had the IRS send their refund. I'm not complaining, I love to do tough returns, it was unusual though, because we don't start getting these types of returns until later in the season. When I mean tough returns, I mean a lot of deductions, depreciation, and things like that, where it takes more than an hour to do.

Anyway, my last day is the 16th, because I have to close the office. It will be my 9th straight day, which is fine with me, more money on my last check before I move. My guess is I've done about 150 returns or so this season, give or take a few. The office is close to 500.

And a last minute tip, you still have until tomorrow to contribute to your IRA and lower the amount of tax you pay.

Tim

Your Appeal Rights

2008-04-12T07:33:00.001-04:00

Are you in the middle of a disagreement with the IRS? If you disagree with the IRS about the amount of your tax liability or about proposed collection actions, you have the right to ask the IRS Appeals Office to review your case.

IRS Publication 1, Your Rights as a Taxpayer, explains some of your most important taxpayer rights. During their contact with taxpayers, IRS employees are required to explain and protect these taxpayer rights, including the right to appeal.

The Appeals Office, which is independent of the IRS office that proposed the disputed action, can work with taxpayers by correspondence, telephone, or informal conferences.

Through Appeals procedures, taxpayers can settle most differences without expensive and time-consuming court trials. However, if you and the Appeals Officer or Settlement Officer cannot reach agreement, or if you prefer not to appeal within the IRS, in most cases, you may take your disagreement to federal court.

For more information about Appeals and its processes, go to the IRS Web site at IRS.gov and select the link to “Appeal a Tax Dispute”, which is found at the bottom of the home page. The Appeals Web page provides links to assist you in determining if you are ready for Appeals, how to request an appeal, and what you can expect from Appeals.

This page also provides a link to easy-to-use online self-help tools to help you focus on your area of dispute and determine if you will benefit from filing an appeal. You can also link to “Online Videos of the Appeals Process” containing informative online video streams entitled “The Appeals Process (Examination)” and “The Appeals Process (Collection).”

Information is also available in IRS Publication 5, Your Appeal Rights and How to Prepare a Protest If You Don't Agree; Publication 556, Examination of Returns, Appeal Rights, and Claims for Refund; and Publication 1660, Collection Appeal Rights (for Liens, Levies, and Seizures). To get copies of IRS publications, visit the IRS Web site at IRS.gov or call 800-TAX-FORM (800-829-3676).

Links:

Tax Information for Appeals
Tax Topic 151 – Your Appeal Rights
Publication 1, Your Rights as a Taxpayer (PDF 21K)
Publication 5, Your Appeal Rights and How to Prepare a Protest If You Don't Agree (PDF 36K)
Publication 556, Examination of Returns, Appeal Rights and Claims for Refunds (PDF 105K)
Publication 1660, Collection Appeal Rights (for Liens, Levies, and Seizures) (PDF 31K)
Publication 3605, Fast Track Mediation ( PDF 15K)

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2008 Filing Season Statistics

2008-04-12T07:29:00.001-04:00

2008 FILING SEASON STATISTICS
Cumulative through the weeks ending 4/3/07 and 4/4/08
Individual Income Tax Returns	2007		2008		% Change
Total Receipts	88,581,000		96,821,000		9.3%
Total Processed	84,215,000		90,064,000		6.9%

E-filing Receipts:
TOTAL	61,345,000		67,437,000		9.9%
Tax Professionals	44,210,000		47,184,000		6.7%
Self-prepared	17,135,000		20,253,000		18.2%

Web Usage:
Visits to IRS.gov	109,353,000		132,444,000		21.1%

Total Refunds:
Number	73,622,000		75,136,000		2.1%
Amount	$174.165	Billion	$183.043	Billion	5.1%
Average refund	$2,366		$2,436		3.0%

Direct Deposit Refunds:
Number	49,935,000		53,694,000		7.5%
Amount	$136.605	Billion	$147.164	Billion	7.7%
Average refund	$2,736		$2,741		0.2%

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Last Minute Tax Reminders

2008-04-12T07:27:00.000-04:00

WASHINTON — Now that the April 15 tax return filing and tax payment deadline is nearing, the Internal Revenue Service offers the following last-minute tips for those taxpayers who haven’t yet filed, paid what they owe or taken the necessary steps to ensure they receive the economic stimulus payment they qualify for.

Taxpayers can speed their receipt of their economic stimulus payment by choosing IRS e-file and direct deposit and by filing by the due date. They also can minimize possible interest assessments and late filing or late payment penalties by filing and paying by the due date.

File Electronically

Take advantage of e-filing, which is fast, accurate and easy. Most available tax preparation programs check for errors and necessary information, increasing the accuracy of the return and reducing the need for correspondence with the IRS to clarify errors or omissions. With most programs taxpayers can usually file a state tax return at the same time they electronically file their federal return. Once the return is accepted for processing, the IRS electronically acknowledges receipt of the return. Generally, when someone files electronically, their refund will be issued in about half the time it would take if they had filed a paper return. Those who choose direct deposit will get their refund in even less time and receive their economic stimulus payments sooner as well.

Use IRS Free File

Free electronic filing from nearly 20 companies is available to taxpayers whose 2007 adjusted gross income was $54,000 or less. That means 70 percent of all taxpayers, 95 million filers, can take advantage of the IRS-sponsored Free File program. The only way to access this program is through the IRS’s secure, official Web site, IRS.gov. Free File is also available for individuals who are filing a tax return solely to receive their economic stimulus payment. There is no charge for this service.

Economic Stimulus Payments

Starting in May, the Treasury will begin sending economic stimulus payments to more than 130 million households. To receive a payment, taxpayers must have a valid Social Security number, $3,000 of qualifying income and file a 2007 federal income tax return. The IRS will take care of the rest. Eligible people will receive up to $600 ($1,200 for married couples), and parents will receive an additional $300 for each eligible child younger than 17. Millions of retirees, disabled veterans and low-wage workers who normally do not need to file a tax return must do so this year in order to receive a stimulus payment. People filing only to receive the economic stimulus payment do not have to file by April 15 and they do not have to file a Form 4868 for an extension. These people must file Form 1040A, though, by Oct. 15 to receive the payment in 2008. Taxpayers normally required to file who cannot meet the April 15 deadline should file a Form 4868 to obtain an extension to file until Oct. 15.

Avoid Scams

If you receive unsolicited email or telephone calls from anyone purporting to be from the IRS, it’s probably a scam. Don’t click on any links; don’t answer any questions. Forward the emails or report the calls to phishing@irs.gov.

Earned Income Tax Credit

Earned income of less than $39,783 in 2007 may qualify a taxpayer (married filing jointly with more than one qualifying child) to claim the earned income tax credit. This credit could be worth up to $4,716 (depending on the number of qualified children and level of earned income). When the EITC exceeds the amount of taxes owed, it results in a tax refund to those who claim and qualify for the credit. To qualify, taxpayers must meet certain requirements and file a tax return, even if they did not earn enough money to be obligated to file a tax return. An electronic special “EITC Assistant” is available to help taxpayers determine whether they are eligible. Taxpayers can access more information on this credit by clicking on “1040 Central” on the front page of IRS.gov.

Make Sure Your Paper Return is Error-Free

Those who file a paper return can avoid most potential delays in processing the return and avoid additional correspondence with the IRS to clarify errors should make certain they:

Double-check their figures,
Sign their form,
Attach all required schedules,
Send their return or request an extension by the April 15 filing deadline.

Pay Electronically

Taxpayers who file electronically can e-file and e-pay in a single step by authorizing an electronic funds withdrawal or by credit card. Electronic payment options are convenient, safe and secure methods for paying taxes or user fees. Taxpayers can charge taxes on their American Express, MasterCard, Visa or Discover cards, using an IRS-authorized service provider listed on IRS.gov. The service providers charge a convenience fee based on the amount of tax the taxpayer is paying. Taxpayers should not add the convenience fee to their tax payment. For those who can’t file or pay on time, the IRS provides extensions of time to file and payment plans.

Request an Extension of Time to File

Taxpayers who can't meet the deadline to file their tax return can get an automatic six-month extension of time to file from the IRS, but they must submit the request by April 15. The extension gives taxpayers until Oct. 15 to file the tax return. However, an extension of time to file does not give the taxpayer an extension of time to pay, which must be separately requested. Those who owe taxes can make a payment when they file the extension either by mailing a check made out to the U.S. Department of the Treasury or by several electronic payment methods, such as electronic funds withdrawals from bank accounts and credit card payments. Taxpayers can get an automatic six-month extension of time to file their tax returns by filing Form 4868, Automatic Extension of Time to File. Taxpayers can e-file the extension request from a home computer or through a tax professional who uses e-file. Taxpayers can e-file their extensions at no cost. Several companies offer free e-filing of extensions through the Free File Alliance; these companies are listed on IRS.gov.

Request an Extension of Time to Pay

Based on the circumstances, a taxpayer could qualify for an extension of time to pay. The IRS is willing to allow extensions of time to pay in order to assist in tax debt repayment. However, interest and certain penalties may apply. A taxpayer can request an extension from 30 to 120 days depending on the specific situation. Taxpayers qualifying for an extension of time to pay of 30 to 120 days generally will pay less in penalties and interest than if the debt were repaid through an installment agreement. Taxpayers can request an extension of time to pay using the Online Payment Agreement option available. If you owe tax but cannot pay the full amount, you should pay as much as you can by the April 15 due date in order to minimize any interest and penalty charges.

Apply for an Installment Agreement

The IRS may allow taxpayers to pay any remaining balance in monthly installments through an installment agreement. Taxpayers who owe $25,000 or less may apply for a payment plan electronically, using the Online Payment Agreement application. Alternatively, taxpayers may attach a Form 9465, Installment Agreement Request, to the front of his or her tax return. Taxpayers must show the amount of their proposed monthly payment and the date they wish to make their payment each month. The IRS charges a $105 fee for setting up an installment agreement. The fee is reduced to $52 for those who establish a direct debit installment agreement and $43 for those with an income below a certain level (more information is available on Form 13844). Taxpayers are required to pay interest plus a late payment penalty on the unpaid taxes for each month, or part of a month, after the due date that the tax is not paid. A taxpayer who does not file the return by the due date — including extensions — may have to pay a failure-to-file penalty.

For more information about filing and paying taxes, choose “1040 Central” or refer to the Form 1040 instructions or IRS Publication 17, Your Federal Income Tax. Taxpayers can download forms and publications from the official IRS Web site, IRS.gov or request a free copy by calling toll free 800-TAX-FORM (800-829-3676).

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How Long Should It Take To Receive Your Tax Refund?

2008-04-08T15:50:00.000-04:00

Are you expecting a tax refund from the Internal Revenue Service this year? If you file a complete and accurate paper tax return, your refund should be issued about six to eight weeks after the IRS receives your return. If you file your return electronically, your refund is issued in about half that time — even faster if you choose direct deposit.

You can check on the status of your refund 72 hours after you e-filed your return or four weeks after mailing your return. There are several ways to check the status of your refund. You will need your Social Security number, filing status and the exact whole dollar amount of your refund to use these applications.

Where's My Refund: The fastest, easiest way to find out about your current year refund is to go to the IRS.gov Web site and click on the “Where’s My Refund” link available from the home page.
Refund Hotline: Call the IRS Refund Hotline at 800-829–1954.
TeleTax: Call the IRS TeleTax System at 800-829-4477.
If you do not get a date for your refund, wait until the next week before calling back.

In some circumstances, you may not receive your refund as quickly as you expected. Refund delays can be caused by a variety of reasons. For example, a name and Social Security number listed on the tax return may not match the IRS records. You may have failed to sign the return or include a necessary attachment, such as Form W-2, Wage and Tax Statement. Or you may have made math errors that require extra time for the IRS to correct.

For more information on how long it may take the IRS to process your federal tax refund, visit Frequently Asked Questions at IRS.gov.

Links:

Where’s My Refund?
Form 3911, Taxpayer Statement Regarding Refund (PDF 62K)
Tax Topic 152 — Refunds
Frequently Asked Questions

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IRS Continues Efforts to Reach People for Stimulus Payments

2008-04-08T07:18:00.000-04:00

Free Help Available for Certain Taxpayers, Retirees and Disabled Vets

WASHINGTON — With the April 15 tax filing deadline quickly approaching, the Internal Revenue Service today reminded taxpayers that free help is available and announced extended hours at some locations.

Free assistance also is available to retirees, disabled veterans and others filing a tax return solely to receive the economic stimulus payment.

“We expect a record number of tax returns because of the stimulus payments. If you can, we urge you to avoid the rush. File now, file electronically and use direct deposit to receive a speedy refund and stimulus payment. If you need assistance, free help is available,” said Doug Shulman, IRS Commissioner.

Timely filing of the 2007 income tax return is particularly important this year because of the economic stimulus payments. Eligible Americans must file a tax return in order to receive economic stimulus payments of up to $600 ($1,200 married filing jointly). There is another $300 payment for each qualifying child younger than 17.

The IRS will use the 2007 income tax return to determine eligibility for the economic stimulus payment and to calculate the amount of the payment. People who normally file a tax return don’t need to take any additional steps to get their stimulus payment. Starting May 2, the IRS will transfer economic stimulus payments to taxpayers using direct deposit. It will begin mailing paper checks on May 16.

All IRS Taxpayer Assistance Centers are open Monday through Friday from 8:30 a.m. until 4:30 p.m. Locations are listed at www.irs.gov . Click on “Contact IRS,” then “Contact Your Local IRS Office.” These sites offer free tax preparation and filing for individuals and families whose income is $40,000 or less.

On Saturday, April 12, nearly 300 Taxpayer Assistance Centers will have special hours from 9 a.m. to 1 p.m. local time to help people filing solely to claim the economic stimulus payment. Assistance will also be provided for taxpayers preparing regular tax returns. Also on April 12, the IRS will offer special Saturday hours on the toll-free help line at 1-800-829-1040 from 10 a.m. to 3 p.m. local time.

As the filing deadline approaches, help is also available from IRS partners that operate 12,000 volunteer tax preparation sites nationwide. To find a nearby Volunteer Income Tax Assistance or Tax Counseling for the Elderly site, people can call 1-800-906-9887. Most VITA sites offer free services to individuals or families whose income is $40,000 or less. People who are 60 and older are eligible for free help at TCE sites operated by AARP.

Free File, the private-public partnership that offers free tax software and free electronic filing, is available at www.irs.gov for people whose income is $54,000 or less. Approximately 70 percent of the nation’s taxpayers are eligible for Free File.

Several Free File partners also are offering free forms and filing for those retirees, disabled veterans and others who are filing a tax return solely to receive the economic stimulus payment. This help is available at Free File – Economic Stimulus Payment at www.irs.gov.

Eligible taxpayers will qualify for their stimulus payment simply by filing their 2007 tax return, as they would normally do.

However, people who do not have a tax filing requirement but who have at least $3,000 in income from any combination of earned income, nontaxable combat pay and certain benefits from Social Security, Veterans Affairs and Railroad Retirement must file a 2007 income tax return in order to receive an economic stimulus payment. They may be eligible for the minimum amount of $300 ($600 for married couples) plus the $300 per qualifying child payment.

The IRS urges people who are filing only to receive the economic stimulus payment to use the Form 1040A. All people in this category are eligible for free assistance.

Key Documents Can Help With Tax Returns

For help in completing a tax return, taxpayers are encouraged to bring certain documents to IRS offices or volunteer sites:

Photo I.D. (valid driver’s license or other photo identification.)
Social Security Cards for you, your spouse and dependents and/or a Social Security
Number verification letter issued by the Social Security Administration
Birth dates for you, your spouse and dependents on the tax return
Current year’s tax package, if you received one
Wage and earning statement(s) Form W-2, W-2G, 1099-R, from all employers
Interest and dividend statements from banks (Forms 1099)
A copy of last year’s Federal and State returns if available
Bank Routing Numbers and Account Numbers for Direct Deposit
Total paid for day care provider and the day care provider's tax identification number (the provider's Social Security Number or the provider's business Employer Identification Number)
To file taxes electronically on a married filing joint tax return, both spouses must be present to sign the required forms.

People filing solely to receive the stimulus payment should bring proof that they have at least $3,000 in qualifying income. This would include:

Form SSA-1099 from Social Security or Form RRB-1099 from Railroad Retirement Board, or if 1099 is not available, a monthly statement and/or the amount of monthly benefits.
Monthly statement from the Department of Veteran's Affairs showing payments you received in 2007 for veterans’ disability compensation, disability pension and survivor benefits and/or the amount of monthly benefits.
Form W-2 showing your non-taxable Qualified Combat Pay.
Proof of any other income, taxable or nontaxable.

People filing only to receive the economic stimulus payment do not have to file by April 15 and they do not have to file a Form 4868 for an extension. However, they do need to file Form 1040A by October 15 to receive the payment in 2008.

Taxpayers normally required to file who cannot meet the April 15 deadline should file a Form 4868 to obtain an extension to file until October 15. Taxpayers can use Free File to submit the Form 4868 electronically.

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IRS Economic Stimulus Payment Information Now in Spanish

2008-04-07T13:26:00.000-04:00

IRS Economic Stimulus Payment Information Now in Spanish

WASHINGTON — The Internal Revenue Service today reminded taxpayers and tax-preparation volunteers that information about the economic stimulus payment is available in Spanish.

Information also is available for Spanish-speaking retirees, disabled veterans and low-wage workers who normally do not have a tax filing requirement but must file a tax return this year to receive an economic stimulus payment. All stimulus payment details are available at Centro de Información Sobre los Pagos de Estímulo Económico.

Starting in May, the IRS will issue economic stimulus payments of up to $600 ($1,200 for married couples) for people who have an adjusted gross income of less than $75,000 in adjusted gross income ($150,000 for married couples). There also is a payment of $300 for each qualifying child younger than 17.

People who normally do not pay taxes because their income is too low or nontaxable also may be eligible. People in this category must have at least $3,000 in qualifying income from, or a combination from, earned income, nontaxable combat pay and certain benefits from Social Security, Veterans Affairs and Railroad Retirement Board.

To be eligible, people cannot be dependents or eligible to be dependents on another’s tax return. Eligible people must also have a valid Social Security number. People with Individual Taxpayer Identification Numbers are not eligible.

Most taxpayers just need to file a tax return as usual. The IRS will take care of the calculations. However, the eligible retirees, disabled veterans and low-income workers who normally do not file a return, must file a Form 1040A and write “economic stimulus payment” across the top.

Newly translated information includes the Package 1040A-3, an 8-page package of instructions, a sample Form 1040A and a blank Form 1040A. It contains everything needed to file a return immediately. Also, Free File – Economic Stimulus Payment is now available in Spanish.

Just click ‘Español” at www.irs.gov to go to the main El IRS en Español page.

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Do You Need More Time To File?

2008-04-07T09:50:00.000-04:00

If you can't meet the April filing deadline to file your tax return, you can get an automatic six month extension of time to file from the IRS.

Here are some things to remember about filing extensions:

File Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, with the IRS by the April deadline, or make an extension-related electronic credit card payment.
The extension will give you extra time to get your paperwork to the IRS, but it does not extend the time you have to pay any tax due.
You will owe interest on any amounts not paid by the April deadline, plus a late payment penalty if you have paid less than 90 percent of your total tax by that date.
You can e-file an extension request using tax preparation software on your own computer or by going to a tax preparer that has the software. The IRS will acknowledge receipt of the extension request if you file by computer.
You can use Free File to file for an extension. Many private-sector companies in the IRS Free File Alliance offer extensions for no charge. You can access Free File via the IRS Web site at IRS.gov. Taxpayers with adjusted gross incomes of $54,000 or less may file their 2007 Federal Income Tax Returns electronically through Free File.

If you ask for an extension via computer, you can also choose to pay any expected balance due by authorizing an electronic funds withdrawal from a checking or savings account. You will need the appropriate bank routing and account numbers and must also have available the adjusted gross income from your 2006 federal income tax return to verify your identity. For information on these and other methods of payment, visit the IRS.gov Web site or call 800-TAX-1040 (800-829-1040).

If your return is completed but you are unable to pay the full amount of tax due, do not request an extension. File your return on time and pay as much as you can. The IRS will send you a bill or notice for the balance due. To apply online for a payment agreement, go to IRS.gov, use the pull-down menu under “I need to …” and select “Set Up a Payment Plan.”

To obtain a copy of Form 4868 or other forms and publications use E-file tax preparation software, download them from IRS.gov or visit your local IRS office. Note that forms and publications can be ordered by calling 800-TAX-Form (800-829-3676). However, telephone requests normally take 10 days to fill and may not arrive before the tax deadline of April 15.

Links:

Form 4868, Application for Extension of Time to File U.S. Individual Income Tax Return (PDF 50K)
Form 9465, Installment Agreement Request (PDF 100K)
Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad (PDF 348K)
Publication 3, Armed Forces' Tax Guide (PDF 206K)
Official Payments Corporation
Link2 Gov Corporation

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Payment Options If You Owe Tax

2008-04-04T18:06:00.000-04:00

If you cannot pay the full amount of taxes you owe by the April deadline, you should still file your return by the deadline and pay as much as you can to avoid penalties and interest. There are also alternative payment options to consider:

Pay by Credit Card You can charge your taxes on your American Express, MasterCard, Visa or Discover cards. To pay by credit card, contact one of the service providers at its telephone number or Web site listed below and follow the instructions. The service providers charge a convenience fee based on the amount you are paying. Do not add the convenience fee to your tax payment.

Link2Gov Corporation: 888-PAY-1040 (888-729-1040), www.pay1040.com

Official Payments Corporation: 800-2PAY-TAX (800-272-9829), www.officialpayments.com

Extension of Time to Pay Based on the circumstances, a taxpayer could qualify for an extension of time to pay. The IRS is willing to allow extensions of time to pay in order to assist in tax debt repayment. A short term extension of time to pay can be requested through the Online Payment Agreement application at IRS.gov or by calling 800-829-1040. Taxpayers qualifying for an extension of time to pay of 30 -120 days generally will pay less in penalties and interest than if the debt were repaid through an installment agreement.
Installment Agreement The IRS may allow you to pay any remaining balance in monthly installments through an installment agreement. You can apply for an IRS installment agreement using our Web-based Online Payment Agreement application on IRS.gov. Another alternative is to attach a Form 9465, Installment Agreement Request, to the front of your tax return. The IRS charges a $105 fee for setting up an installment agreement. The fee is only $52 if you pay via direct debit. If your income is below a certain level (see Form 13844), you may qualify for a $43 fee. You will also be required to pay interest plus a late payment penalty on the unpaid taxes for each month or part of a month, after the due date that the tax is not paid. If you do not file your return by the due date -- including extensions -- you may have to pay a failure-to-file penalty.

In most circumstances, the Online Payment Agreement application provides immediate notification regarding the approval of your request. There may be times when you will need to mail paperwork or speak with us before we can determine your eligibility for an installment agreement or short term extension to pay. If that is the case, the online application will provide an address and telephone number that can be used to reach the appropriate IRS office.

For more information about filing and paying your taxes, visit the IRS Web site at IRS.gov and choose “1040 Central” or refer to the Form 1040 Instructions or IRS Publication 17, Your Federal Income Tax. You can download forms and publications at IRS.gov or request a free copy by calling toll free 800-TAX-FORM (800-829-3676).

Links:

Online Payment Agreement Application
Electronic Payment Options
www.officialpayments.com
www.pay1040.com
Form 9465, Installment Agreement Request (PDF 100K)
Installment payment process
Partial Pay Installment Agreements
Is an Offer in Compromise Right for You?
Publication 17, Your Federal Income Tax (PDF 2,072K)

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Make Your Tax Payments Correctly

2008-04-03T10:46:00.000-04:00

If you have a balance due when filing your 2007 income tax return, remember to make sure your tax payment check or money order is payable to the "United States Treasury." Complete and include Form 1040-V, Payment Voucher, when sending your payment and tax return to the IRS. This will help the IRS process your payment more accurately and efficiently.

Whether you are filing your current year’s return (2007), a prior year’s return or an amended return, always provide your correct name, address, the Social Security number that is listed first on the tax form, daytime telephone number, tax year and form number on the front of your check or money order. Enclose your payment with your return, but do not staple it to the form. Do not mail cash with your tax return.

If you are e-filing you have the option of paying by electronic debit of your bank account using Electronic Funds Withdrawal. You will need to know your account number and your financial institution’s routing number. You can check with your financial institution to make sure that an electronic withdrawal is allowed and to get the correct routing and account numbers.

If you are paying by credit card, call or visit the Web site of either service provider listed below and follow the instructions:

Link2Gov Corporation: 888-PAY-1040 (888-729-1040), pay1040.com.
Official Payments Corporation: 800-2PAY-TAX (800-272-9829), officialpayments.com.

The service providers charge a convenience fee which may vary between the providers. You will be told what the fee is during the transaction and you will have the option to either continue or cancel the transaction. You can also find out what the fee will be by calling the provider’s automated customer service number or visiting the provider’s website. You will be given a confirmation number for your payment at the end of the call.

For more information, call 800-829-4477 to check out TeleTax Topic 158, "Ensuring Proper Credit of Payments.” This information is also contained in Publication 17, Your Federal Income Tax, available at IRS.gov, as is Form 1040-V.

Links:

Electronic Payment Options
www.pay1040.com
www.officialpayments.com
Form 1040-V, Payment Voucher (PDF 47K)
Form 1040-ES, Estimated Tax for Individuals (PDF 294.9K)
Publication 17, Your Federal Income Tax (PDF 2,072K)

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Tax Tips For Last Minute Filers

2008-04-02T09:44:00.000-04:00

If you’re trying to beat the tax deadline, there are several options for last-minute help:

Receive a six-month extension of time to file using Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return.
Payment options are available to taxpayers having trouble paying their tax bill.
Download forms and publications at IRS.gov.

Filing an extension will give you extra time to get the paperwork to the IRS and avoids the late-filing penalty, but it does not extend the time you have to pay any tax due. You must estimate your tax liability when you apply for an extension.

You will owe interest on any amounts not paid by the April deadline, and you also will be charged a penalty for late payment unless at least 90 percent of your tax liability is paid by the regular due date of your tax return.

You can also e-file an extension request using tax preparation software on your own computer or by going to a tax preparer.

If your return is completed but you are unable to pay the tax due, do not request an extension. File your return on time and pay as much as you can. The IRS will send you a bill or notice for the balance due and will charge interest and penalties only on the unpaid balance.

If you cannot pay the full amount due with your return, you can ask to make monthly installment payments for the full or a partial amount. You can apply for an IRS installment agreement using our Web-based Online Payment Agreement application on IRS.gov. The Web-based application allows eligible taxpayers or their authorized representatives to self-qualify, apply for, and receive immediate notification of approval. You can also request an installment agreement by submitting a completed Form 9465, Installment Agreement Request, either when you file the return or when you later get a bill from the IRS.

For more information regarding extensions of time to file or installment agreements, including options for requesting an installment agreement online, visit the IRS Web site at IRS.gov and click on 1040 Central.

Links:

Form 4868, Application for Extension of Time to File U.S. Individual Income Tax Return (PDF 76K)
Form 9465, Installment Agreement Request (PDF 100K)

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Your Federal Tax Return And Filing Methods

2008-04-01T12:41:00.002-04:00

Once you complete your 2007 federal tax return, you can either file it electronically or mail it to the IRS.

More than one-half of all taxpayers file electronically because they know that IRS e-file provides a fast, easy, accurate, secure and convenient way to file. Taxpayers who file electronically receive an acknowledgement that their return has been received and accepted for processing.

Electronic options include:

Computer filing using an authorized IRS e-file tax professional
Using your personal computer to file
Free File is available at IRS.gov for many taxpayers as an option for filing their returns with no charge

If you choose to mail your return, you will find directions on where to send it on the back cover of your instruction booklet.

When mailing your return, whether enclosing a payment or not, use the envelope and the appropriate mailing label that came with your tax instruction booklet. If you moved during the year, check the tax package to find the mailing address of the appropriate IRS Center. The appropriate address depends on where you live and whether or not you are enclosing a check or money order. Checks or money orders should be payable to the “United States Treasury.”

For more information on where to file your tax return, check out the 1040 Central page on the IRS Web site at IRS.gov. Use the 1040 Central page as your one-stop guide to filing your 2007 federal income tax return.

Links:

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Mailing Your Tax Return

2008-03-31T09:48:00.003-04:00

If you are one of the few people who still mail in your tax return, here are the guidelines from the IRS. For your information though, it is much easier and faster to e-file your return. If you are due a refund, you will get it faster. If you owe, still file, and send in your payment on April 15th.

If you are mailing a paper return to the IRS, take a few minutes to make certain that all information is complete and accurate before sealing the envelope. This simple precaution could help you avoid mistakes that can delay your refund or result in correspondence from the IRS.

Here are just a few items to complete prior to mailing your tax return:

Sign your return Your federal tax return is not considered a valid return unless it is signed. If you are filing a joint return, your spouse also must sign.
Provide a daytime phone number. This may help speed the processing of your return if the IRS has questions about items on your return.
Assemble any schedules and forms behind your Form 1040/1040A in the order of the "Attachment Sequence No." shown in the upper right hand corner of the schedule or form. Arrange any supporting statements in the same order as the schedules or forms they support and attach them last.
Attach all copies of Forms W-2, W-2G and 2439 to the front of Form 1040. Also attach Form 1099-R if federal tax was withheld.
Use the coded envelope included with your tax package to mail your return. If you did not receive an envelope, check the section called "Where Do You File?" in the tax instruction booklet. Don’t forget the stamp!
If you are due a refund, consider direct deposit to receive your refund in the quickest and safest manner. Then make sure that the financial institution routing and account numbers you have entered are accurate. Incorrect numbers can cause the refund to be delayed or misdirected.
Do you owe tax? If so, enclose a check or money order made payable to the “United States Treasury” and Form 1040-V, Payment Voucher, if used. Make sure you include your correct name, address, the Social Security number that is listed first on the tax form, daytime telephone number, tax year and form number (i.e. Form 1040). Or, you may choose to pay by credit card by contacting one of the credit card service providers.

For more information, refer to your tax instruction booklet or visit the IRS Web site at IRS.gov.

Links:

Where Do You File?
Form 1040-V, Payment Voucher (PDF 47K)

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Tips For Last Minute Tax Filers

2008-03-27T10:04:00.000-04:00

With the tax filing deadline close at hand, the IRS offers some tips for those still working on their paper tax forms:

Consider filing electronically instead of using paper tax forms
Put all required Social Security numbers on the return
Double-check your figures
Sign your form
Attach all required schedules
Send your return or request an extension by the April filing deadline

Choosing to e-file your tax return instead of preparing a paper tax form is the best step you can take to ensure that your return is accurate and complete.

When you file a paper return, the numbers to check most carefully on the tax return are the identification numbers — usually Social Security numbers — for each person listed. This includes the taxpayer, spouse, dependents and persons listed in relation to claims for the Child and Dependent Care Credit or Earned Income Tax Credit. Missing, incorrect or illegible Social Security Numbers can delay or reduce a tax refund.

Taxpayers filing paper returns should also double-check that they have correctly figured the refund or balance due and have used the right figure from the tax table.

Taxpayers must sign and date their returns. Both spouses must sign a joint return, even if only one had income. Anyone paid to prepare a return must also sign it.

People sending a payment should make the check out to “United States Treasury” and should enclose it with, but not attach it to the tax return or the Form 1040-V, Payment Voucher, if used. The check should include the taxpayer’s Social Security number, daytime phone number, the tax year and the type of form filed.

By the April due date, taxpayers should either file a return or request an extension of time to file. Remember, the extension of time to file is not an extension of time to pay.

Forms and publications and helpful information on a variety of tax subjects are available around the clock on the IRS Web site at IRS.gov.

Links:

Form 9465, Installment Agreement Request (PDF 100K)
Form 1040-V, Payment Voucher (PDF 47K)
Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return (PDF 50K)
Official Payments Corporation
Link2Gov

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2007 IRA Deduction: Contribute By April 15

2008-03-26T13:17:00.001-04:00

If you haven’t contributed funds to an Individual Retirement Arrangement for tax year 2007, or if you’ve put in less than the maximum allowed, you still have time to do so. You can contribute to either a traditional or Roth IRA until the April due date for filing your tax return for 2007, not including extensions.

Be sure to tell the IRA trustee that the contribution is for 2007. Otherwise, the trustee may report the contribution as being for 2008 when they get your funds.

Generally, you can contribute up to $4,000 of your earnings for 2007 or up to $5,000 if you are age 50 or older in 2007. You can fund a traditional IRA, a Roth IRA (if you qualify), or both, but your total contributions cannot be more than these amounts.

Traditional IRA: You may be able to take a tax deduction for the contributions to a traditional IRA, depending on your income and whether you — or your spouse, if filing jointly — are covered by an employer’s pension plan.
Roth IRA: You cannot deduct Roth IRA contributions, but the earnings on a Roth IRA may be tax-free if you meet the conditions for a qualified distribution.

You can file your tax return claiming a traditional IRA contribution before the contribution is actually made. However, the contribution must be made by the due date of your return, not including extensions. If you report a contribution to a traditional IRA on your return, but fail to contribute by the deadline, you must file an amended tax return by using Form 1040X, Amended U.S. Individual Income Tax Return. You must add the amount you deducted to your income on the amended return and pay the additional tax accordingly.

For more information get IRS Publication 590, Individual Retirement Arrangements (IRAs), available on the IRS Web site at IRS.gov or by calling 800-TAX-FORM (800-829-3676). Taxpayers who need to have any IRS publication mailed to them should act soon to be sure they have the item in time to meet the April due date.

Links:

Publication 590, Individual Retirement Arrangements (PDF 449K)
Form 1040X, Amended U.S. Individual Income Tax Return (PDF 123K)
Form 1040X Instructions (PDF 45K)

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Retirees, Veterans and Economic Stimulus Payments

2008-03-25T13:54:00.001-04:00

IRS Sets March 29 as “Super Saturday” to Help Retirees, Veterans and Low-Income Workers Receive Economic Stimulus Payments

WASHINGTON — The Internal Revenue Service and scores of its partners nationwide will open hundreds of locations on Super Saturday, March 29, in an effort to reach those Americans who are eligible for the economic stimulus payment but who normally are not required to file an income tax return.

Approximately 320 IRS offices will be open on Super Saturday to prepare the simple Form 1040A for people who are filing a return solely to receive their stimulus payment. IRS partners such as AARP, United Way of America and dozens of others also are making special efforts on Super Saturday to reach out to those who normally are not required to file a tax return.

“We don’t want any Americans to miss out on their economic stimulus payment. For millions of Americans, filing a tax return is not routine. Their income is either too low or not taxable. But this year, filing a 2007 tax return is the only way to receive an economic stimulus payment. Super Saturday is one way the IRS and its partners are working to ensure everyone eligible receives a stimulus payment,” said IRS Commissioner Doug Shulman.

Super Saturday, part of an extensive outreach effort by the IRS, is a one-day event for which Americans can plan in advance. It also highlights the need for all taxpayers to file as soon as possible to avoid the April 15 rush.

Millions of Americans who do not pay federal income taxes may be eligible for a $300 payment ($600 for married couples) if they have at least $3,000 in qualifying income. Qualifying income is defined as any combination of earned income such as wages, nontaxable combat pay and certain benefits from Social Security, Veterans Affairs and Railroad Retirement. Many households also will be eligible for an additional $300 for each qualifying child younger than 17.

The IRS this week is mailing 20.5 million Social Security and Veterans Affairs recipients a Package 1040A-3 that contains all the information they need to file a return immediately. Railroad Retirement recipients, low-income individuals and military personnel with nontaxable combat pay also can use the package if they need to file solely to receive the payment.

The 320 IRS offices are located in all 50 states and the District of Columbia. Operating hours will be 9 a.m. to 3 p.m., although some may be open longer. IRS employees will help prepare the Form 1040A returns for low-income workers, retirees, disabled veterans and others. IRS field assistance personnel also will visit nursing homes and similar locations to prepare returns.

A list of IRS offices and partner sites providing assistance on Super Saturday is available at www.irs.gov or by calling the IRS Hotline, 1-800-906-9887, for free assistance locations. If taxpayers have economic stimulus questions on March 29, they can call 1-866-234-2942. These phone services are available on March 29 between 9 a.m. and 3 p.m. local time. (Alaska and Hawaii service is based on Pacific Time Zone.)

IRS partners are actively involved in reaching out to these people to help them receive their payments. Many are using innovative techniques to ensure eligible recipients who normally are not required to file a tax return receive the payment they are due. Here is just a brief sampling of partner activities and the complete list is still evolving:

Sweetwater, Fla.: Miami-Dade County Mayor Carlos Alvarez will conduct a press conference at City of Sweetwater's Jorge Mas Canosa Youth Center free tax preparation site staffed by Florida International University students.
• Baltimore, Md.: Baltimore Commission on Disability will help prepare returns for people with disabilities and others;
Houston, Texas: Ripley Neighborhood Center will prepare returns for Social Security recipients and veterans;
Manning, S.C.: Antioch Baptist Church will host a tax preparation day for Form 1040A filers;
Boston, Mass.: Mayor Thomas Menino will open 10 locations throughout the city to prepare Form 1040A returns;
Aurora, Col.: IRS partners printed Economic Stimulus Payment information in Vietnamese and will be available at two locations to assist the Vietnamese community;
Fresno, Calif.: Hispanic Internal Revenue Employees (HIRE) chapter members have volunteered to prepare returns at the Fresno Veteran’s Hospital and the Aging Adult Center.

Starting in May, the IRS will issue economic stimulus payments of up to $600 ($1,200 for married couples) plus additional payments of $300 for each for qualifying child. Most Americans don’t need to do anything more than file their tax returns as they normally do. The maximum payments will begin to phase out at $75,000 in adjusted gross income ($150,000 for married couples).

The IRS encourages everyone who is required to file a tax return to do so prior to the April 15 deadline to enable the agency to process the return and to calculate stimulus payment eligibility and amounts. Taxpayers who already have filed a tax return can calculate their potential payment amounts by visiting www.irs.gov.

The IRS reminds taxpayers that they can get their stimulus payments faster by using direct deposit when they file their tax return.

In addition, the IRS urges taxpayers to file electronically. For people who normally are not required to file a tax return, the IRS and the Free File Alliance have a special program set up to allow for free electronic filing. For those with computer access, IRS Free File –Economic Stimulus Payment is available at IRS.gov.

Also, people should be wary of unsolicited e-mail or telephone calls from anyone claiming to be from the IRS. Don't click on any links. Instead, forward the email to phishing@irs.gov, and then delete it. Use the same email address to report unsolicited telephone calls. The only official IRS Web site is located at www.irs.gov.

Related Items:

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How To Check On Your Tax Refund

2008-03-25T10:57:00.000-04:00

If you already filed your federal tax return and are due a refund, you have several options for checking on the status of your refund.

One way is to use "Where’s My Refund?" an interactive tool on the IRS Web site at IRS.gov. Simple online instructions guide taxpayers through a process that checks the status of their refund after they provide identifying information shown on their tax return. Once the information is processed, you could get several responses, including:

Acknowledgement that your return was received and is in processing.
The mailing date or direct deposit date of your refund.
Notice that the IRS could not deliver your refund due to an incorrect address. In this instance, you can change or correct your address online.

Where’s My Refund? is a very flexible tool. Whether you split your refund among several accounts, opt for direct deposit into one account, or ask IRS to mail you a check, Where’s My Refund? gives you online access to your refund information.

Where’s My Refund? also include links to customized information based on the taxpayer’s specific situation. The links guide taxpayers through the steps they need to take to resolve any issues that may be affecting their refund. For example, if you do not get the refund within 28 days from the original IRS mailing date shown on Where’s My Refund?, you can start a refund trace online.

The "Where’s My Refund?" service meets stringent IRS security and privacy certifications. Taxpayers enter identifying information that includes their Social Security number, filing status and the exact amount of the refund shown on the return. This specific information verifies that the person is authorized to access that account.

"Where’s My Refund?" is accessible to visually impaired taxpayers who use the Job Access with Speech screen reader used with a Braille display and is compatible with different JAWS modes.

Another option for checking the status of your refund is by calling the IRS TeleTax System at 800-829-4477 or the IRS Refund Hotline at 800-829-1954. When calling, you must provide the first Social Security number shown on the return, your filing status and the amount of the refund. If the IRS processed your return, the system will tell you the date your refund will be sent. The TeleTax refund information is updated each weekend. If you do not get a date for your refund, please wait until the next week before calling back.

Links:

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Vehicle Donation Deductions

2008-03-22T07:12:00.000-04:00

If you donated a car or other vehicle to a qualified charitable organization in 2007 and intend to claim a deduction you should review the special rules that apply to vehicle donations. You can deduct contributions to a charity only if you itemize deductions on Schedule A of Form 1040.

Generally, the amount you may deduct for a vehicle contribution depends upon what the charity does with the vehicle. Charities typically sell donated vehicles. If the vehicle is sold by the charitable organization, the deduction claimed by the donor usually may not exceed the gross proceeds from the sale.

If your deduction is $250 or more you must obtain written acknowledgement of the donation from the charity. If your deduction is more than $500, this written acknowledgment or Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes, must be attached to your return. Among other things, the acknowledgment generally must include the gross proceeds of the sale, the vehicle identification number, and a statement certifying the vehicle was sold in an arm's length transaction between unrelated parties.

If the organization intends to make significant intervening use of the vehicle or material improvements to the vehicle, the acknowledgment must include certain certifications. If the organization intends to sell the vehicle to a needy individual at a price significantly below fair market value, or gratuitously transfers the vehicle to a needy individual, the acknowledgment must also include certain certifications.

In addition, for deductions greater than $500, Form 8283, Noncash Charitable Contributions, must be attached to the return.

You can generally deduct the vehicle’s fair market value instead of the amount of gross proceeds from the sale if any of the following situations apply:

The organization makes significant intervening use of or materially improves the vehicle
The organization gives or sells the vehicle to a needy individual at a price significantly below fair market value in direct furtherance of its charitable purpose of relieving the poor and distressed or underprivileged who are in need of a means of transportation
The claimed deduction is $500 or less

The fair market value cannot exceed the private party sales price listed in a used vehicle pricing guide.

For more information see Publication 526, Charitable Contributions, Publication 561, Determining the Value of Donated Property, and Publication 4303, A Donor’s Guide to Car Donations, available on IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Links:

Search for Exempt Organizations
Publication 526, Charitable Contributions (PDF 177K)
Publication 561, Determining The Value of Donated Property (PDF 101K)
Publication 4303, A Donor’s Guide to Car Donations (PDF)
Form 8283, Noncash Charitable Contributions (PDF)
Instructions for Form 8283, Noncash Charitable Contributions (PDF)

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Updated 2008 Tax Season Filing Stats

2008-03-20T11:34:00.001-04:00

WASHINGTON — The continued growth of Free File shows taxpayers are taking advantage of the program’s benefits, which include free electronic return preparation and filing of tax returns, as well as quicker refunds with direct deposit.

The number of tax returns filed via Free File as of the end of February has jumped more than 12 percent compared with the same period last year, the Internal Revenue Service said.

“Free File provides an opportunity for taxpayers to prepare and file their tax returns electronically for free,” said Acting IRS Commissioner Linda E. Stiff. “Free File is also available to individuals who normally do not file a tax return but must do so this year in order to qualify for the economic stimulus payment.”

Free File is run by the IRS and the Free File Alliance, LLC, a private-sector consortium of tax software companies. Over 22 million taxpayers have used Free File since its inception. Their partnership is intended to provide taxpayers earning $54,000 or less with a free, safe and quick way to prepare and file their taxes. Free File is available to 70 percent of taxpayers

Use of Free File, like electronic filing in general, continues to see steady growth. Nearly 3.0 million taxpayers used Free File as of the end of February, compared with 2.6 million who used it during the same period last year.

Customer satisfaction with Free File also remains high. Taxpayers find the program to be easy and convenient to use. Individuals who e-file using the Free File program can get their refunds in as little as 10 days with direct deposit. Also Free File has been improved in the last few years to ensure taxpayers aren't subjected to marketing and advertising messages while preparing their returns.

The IRS works with Free File partners to enhance the Free File program when new tax laws are enacted. For instance, changes were made to Free File to accommodate recently enacted legislation creating the economic stimulus payment and expanding the

exclusion for debt forgiveness, which is targeted to taxpayers who have lost their homes because of difficulty with their mortgage payments.

IRS Free File also is now available to people who normally do not file a tax return but must do so this year to receive their 2008 economic stimulus payment. People who have no legal requirement to file other than to receive their payments should take care to use only those companies listed on the Free File - Economic Stimulus Payment page at IRS.gov.

While not all Free File offerings serve all taxpayers, the Free File assistor can be used to guide taxpayers to the Free File offering that is right for them.

2008 FILING SEASON STATISTICS
Cumulative through the weeks ending 3/16/07 and 3/14/08
Individual Income Tax Returns	2007		2008		% Change
Total Receipts	67,705,000		71,028,000		4.9%
Total Processed	63,799,000		66,656,000		4.5%

E-filing Receipts:
TOTAL	49,401,000		53,359,000		8.0%
Tax Professionals	35,105,000		36,771,000		4.7%
Self-prepared	14,296,000		16,588,000		16.0%

Web Usage:
Visits to IRS.gov	88,834,000		100,660,000		13.3%

Total Refunds:
Number	57,434,000		59,199,000		3.1%
Amount	$141.680	Billion	$149.621	Billion	5.6%
Average refund	$2,467		$2,527		2.5%

Direct Deposit Refunds:
Number	42,057,000		45,023,000		7.1%
Amount	$117.429	Billion	$126.127	Billion	7.4%
Average refund	$2,792		$2,801		0.3%

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Charitable Contribution Tax Deduction

2008-03-20T11:21:00.001-04:00

Keep in mind the IRS requires dated receipts for deducting charitable contributions on your tax return.

When preparing to file your federal tax return, don’t forget your contributions to charitable organizations. Your donations could add up to a sizeable tax deduction if you itemize on IRS Form 1040, Schedule A.

Starting in 2007 to deduct any charitable donation of money, taxpayers must have a bank record or a written communication from the recipient showing the name of the organization and the date and amount of the contribution. Though taxpayers are already required to keep records to support their contribution deductions, this new provision is designed to provide greater certainty, both to taxpayers and the government, in determining what may be deducted as a charitable contribution.

Here are a few tips to ensure your contributions pay off on your tax return:

You cannot deduct contributions made to specific individuals, political organizations and candidates. Nor can you deduct the value of your time or services and the cost of raffles, bingo or other games of chance.
Contributions must be made to qualified organizations to be deductible.
Only contributions actually made during the tax year are deductible.
If your contributions entitle you to merchandise, goods or services, including admission to a charity ball, banquet, theatrical performance or sporting event, you can deduct only the amount that exceeds the fair market value of the benefit received.
Donations of stock or other property are usually valued at the fair market value of the property.
Clothing and household items donated must be in good used condition or better to be deductible.
Special rules apply to donation of vehicles.
You can claim a deduction for individual contributions of $250 or more only if you obtain a written acknowledgment from the qualified organization.
If you claim a deduction of more than $500 for all contributed property, you must attach IRS Form 8283, Noncash Charitable Contributions, to your return.
Taxpayers donating an item or a group of similar items valued at more than $5,000 must also complete Section B of Form 8283, which requires an appraisal by a qualified appraiser.

For more information, check out Publication 526, Charitable Contributions, which is available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Links:

Search for Charities or download Publication 78, Cumulative List of Organizations
Publication 526, Charitable Contributions (PDF 178K)
Publication 561, Determining the Value of Donated Property (PDF 101K)
Form 1040, U.S. Individual Income Tax Return (PDF 176K)
Schedule A, Itemized Deductions (PDF 116K)
Form 8283, Noncash Charitable Contributions (PDF)
Instructions for Form 8283, Noncash Charitable Contributions (PDF)

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$1.2 Billion For For 2004 Tax Returns

2008-03-19T17:53:00.002-04:00

IRS Has $1.2 Billion for People Who Have Not Filed a 2004 Tax Return

WASHINGTON — Unclaimed refunds totaling approximately $1.2 billion are awaiting about 1.3 million people who failed to file a federal income tax return for 2004, the Internal Revenue Service announced today. However, to collect the money, a return for 2004 must be filed with an IRS office no later than Tuesday, April 15, 2008.

Those due a refund who did not file a 2004 tax return could collect even more money by also filing a 2007 tax return to claim the economic stimulus payment. To receive a payment, taxpayers must have a valid Social Security number, $3,000 of qualifying income and file a 2007 federal tax return. Millions of retirees, disabled veterans and low-wage workers who usually are exempt from filing a tax return must do so this year in order to receive the stimulus payment. Eligible people will receive up to $600 ($1,200 for married couples), and parents will receive an additional $300 for each eligible child younger than 17.

The IRS estimates that half of those who could claim refunds for tax year 2004 would receive more than $552. In some cases, individuals had taxes withheld from their wages, or made payments against their taxes out of self-employed earnings, but had too little income to require filing a tax return. Some taxpayers may also be eligible for the refundable Earned Income Tax Credit.

In cases where a return was not filed, the law provides most taxpayers with a three-year window of opportunity for claiming a refund. If no return is filed to claim the refund within three years, the money becomes property of the U.S. Treasury. For 2004 returns, the window closes on April 15, 2008. The law requires that the return be properly addressed, postmarked and mailed by that date. There is no penalty assessed by the IRS for filing a late return qualifying for a refund.

“Time is getting short for claiming the tax refund you may be entitled to,” said acting IRS Commissioner Linda E. Stiff. “But you can’t get it unless you file the tax return. Don't take a chance on losing your tax refund. And this year, remember that you need to file a 2007 tax return in order to receive an economic stimulus payment.”

The IRS reminds taxpayers seeking a 2004 refund that their checks will be held if they have not filed tax returns for 2005 or 2006. In addition, the refund will be applied to any amounts still owed to the IRS and may be used to satisfy unpaid child support or past due federal debts such as student loans.

By failing to file a return, individuals stand to lose more than refunds of taxes withheld or paid during 2004. Many low-income workers may not have claimed the Earned Income Tax Credit (EITC). Although eligible taxpayers may get a refund when their EITC is more than what they owe in tax, those who file returns more than three years late would be able only to apply it toward the taxes they owe (if any). They would not be able to receive a refund if the credit exceeded their tax.

Generally, unmarried individuals qualified for the EITC if in 2004 they earned less than $34,458 and had more than one qualifying child living with them, earned less than $30,338 with one qualifying child, or earned less than $11,490 and had no qualifying child. Limits are slightly higher for married individuals filing jointly.

Current and prior year tax forms and instructions are available on the Forms and Publications page of the IRS Web site at IRS.gov or by calling 1-800-TAX-FORM (1-800-829-3676). Information about the Earned Income Tax Credit and how to claim it is also available on the IRS Web site, IRS.gov. Taxpayers who need help also can call the toll-free IRS help line at 1-800-829-1040.

A state-by-state breakdown of estimates for individuals who failed to file a 2004 return with a refund due is attached.

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Deductions When Refinancing Your Home

2008-03-18T10:02:00.001-04:00

Taxpayers who refinanced their homes may be eligible to deduct some costs associated with their loans.

The term "points" is used to describe certain charges paid to obtain a home mortgage.

Here are some things to remember when deducting points:

Taxpayers who itemize deductions generally may be able to deduct the points paid to obtain a home mortgage as mortgage interest
Points paid solely to refinance a home mortgage usually must be deducted over the life of the loan
Points can be fully deducted in the year paid if certain tests are met

For a refinanced mortgage, the interest deduction for points is determined by dividing the points paid by the number of payments to be made over the life of the loan. This information is usually available from lenders. Taxpayers may deduct points only for those payments made in the tax year.

However, if part of the refinanced mortgage money was used to finance improvements to the home and if the taxpayer meets certain other requirements, the points associated with the home improvements may be fully deductible in the year the points were paid. Also, if a homeowner is refinancing a mortgage for a second time, the balance of points paid for the first refinanced mortgage may be fully deductible in the year it is paid off.

Other closing costs – such as appraisal fees and other non-interest fees – generally are not deductible. Additionally, the amount of Adjusted Gross Income can affect the amount of deductions that can be taken.

For more information on deductions related to refinancing, visit IRS.gov for Tax Topics 504, Home Mortgage Points, and 505, Interest Expenses. You may also review IRS Publication 936, Home Mortgage Interest Deduction, available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Links:

Tax Topic 504 — Home Mortgage Points
Tax Topic 505 — Interest Expenses
Publication 936, Home Mortgage Interest Deduction (PDF 130K)
Publication 523, Selling Your Home (PDF 194K)
Publication 527, Residential Rental Property (PDF 187K)
Publication 530, Tax Information for First-Time Homeowners (PDF 120K)

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IRS Announces Economic Stimulus Payment Schedules, Provides Online Payment Calculator

2008-03-17T15:33:00.000-04:00

WASHINGTON — The Internal Revenue Service announced today that it will begin sending more than 130 million economic stimulus payments starting May 2. The initial round of weekly payments will be completed by early July.

The IRS also announced the availability of a new online calculator on IRS.gov to help people determine the amount of their stimulus payments.

Stimulus payments will be made by direct deposit to people who choose to receive their 2007 income tax refunds through direct deposit. All others will receive their economic stimulus payments in the form of a paper check.

“To receive an economic stimulus payment, people just need to file their tax returns as they usually do,” said IRS Acting Commissioner Linda E. Stiff. “The payments will be automatic for the vast majority of taxpayers. Some lower-income workers and recipients of certain Social Security and veterans benefits who don’t normally need to file a tax return will need to do so in order to receive a stimulus payment. IRS.gov has all the information people need to help them obtain a stimulus payment.”

Stimulus payments will be sent out in the order of the last two digits of the Social Security number used on the tax return.

Because the IRS will use the Social Security number to determine when checks are mailed, taxpayers may receive their checks at different times than their neighbors or other family members. On a jointly filed return, the first Social Security number listed will determine the mail-out time.

The IRS expects to make about 34 million payments within the first three weeks after the payment schedule begins May 2. With more than 130 million households expected to receive stimulus payments, more than 25 percent of the payments will be made in the first three weeks.

Taxpayers who choose direct deposit on their federal income tax returns can expect to receive their economic stimulus payments between May 2 and May 16 provided their returns were received and processed by April 15, 2008. For taxpayers who did not choose direct deposit on their tax return but whose returns were processed by April 15, the paper checks will be in the mail starting May 16, with the initial mailings completed by around July 11.

The IRS is also announcing today the availability of an on-line calculator on IRS.gov to help taxpayers determine if they are eligible to receive an economic stimulus payment and if they are, how much they can expect. Anyone who has prepared a 2007 income tax return can use the calculator. It will ask taxpayers a series of questions, so they should have their 2007 tax returns handy. After answering the questions, the calculator will provide the projected dollar value of the payment.

Below are the schedules for economic stimulus payments related to tax returns processed by April 15, 2008.

Stimulus Payment Schedule for Tax Returns
Received and Processed by April 15

Direct Deposit Payments
If the last two digits of your Social Security number are:	Your economic stimulus payment deposit should be sent to your bank account by:
00 – 20	May 2
21 – 75	May 9
76 – 99	May 16
Paper Check
If the last two digits of your Social Security number are:	Your check should be in the mail by:
00 – 09	May 16
10 – 18	May 23
19 – 25	May 30
26 – 38	June 6
39 – 51	June 13
52 – 63	June 20
64 – 75	June 27
76 – 87	July 4
88 – 99	July 11

A small percentage of tax returns will require additional time to process and to compute a stimulus payment amount. For these returns, stimulus payments may not be issued in accordance with the schedule above, even if the tax return was processed by April 15.

All or part of an economic stimulus payment may be applied to back taxes or certain other debts of the taxpayer, such as delinquent child support and student loans. In such cases, the IRS will send a letter to the taxpayer explaining the offset.

To accommodate people whose tax returns are processed after April 15, the IRS will continue sending weekly payments. People who file tax returns after April 15 and receive a refund can expect to receive their economic stimulus payments in about two weeks after receiving their tax refunds, but not before the date they would have received their payment if the return had been processed by April 15. To ensure taxpayers receive their stimulus payment this year, they must file a tax return by Oct. 15.

Two bureaus of the Treasury Department are involved in making the payments. The IRS will calculate the amount of each economic stimulus payment based on the tax year 2007 income tax returns it receives. The IRS will then forward the information to the Financial Management Service (FMS), which is the bureau of the Treasury Department that makes federal payments such as Social Security benefits, federal income tax refunds and, now, economic stimulus payments.

The IRS reminds taxpayers that they can get their stimulus payments faster by using direct deposit when they file their tax return.

In addition, the IRS urges taxpayers to file electronically. For people who normally don’t need to file a tax return, the IRS and Free File Alliance have a special program set up to allow for free electronic filing.

Related Link: Podcast on Economic Stimulus Payements

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The Selling Of Your Home

2008-03-17T12:04:00.000-04:00

If you have a gain from the sale or exchange of your main home, you may be able to exclude all or part of the gain from your income.

Individuals may be able to exclude up to $250,000 of capital gain, and married taxpayers filing joint returns may be able to exclude up to $500,000 of gain each time you sell your main home, but generally no more frequently than once every two years.

To qualify for this exclusion of gain, you must meet ownership and use tests.

Ownership Test: During the 5-year period ending on the date of the sale, you must have owned the home for at least 2 years.
Use Test: During the 5-year period ending on the date of the sale, you must have lived in the home as your main home at least 2 years.

If you and your spouse file a joint return for the year of the sale, you can exclude the gain if either of you qualify for the exclusion. But both of you would have to meet the use test to claim the $500,000 maximum amount.

If you do not meet the ownership and use tests, you may be allowed to exclude a reduced maximum amount of the gain realized on the sale of your home if you sold your home because of health reasons, a change in place of employment, or certain unforeseen circumstances. Unforeseen circumstances include, for example, divorce or legal separation, natural or man-made disasters resulting in a casualty to your home, or an involuntary conversion of your home.

If you can exclude all the gain from the sale of your home, you do not report the gain on your federal tax return. If you cannot exclude all the gain from the sale of your home, or you choose not to, use Schedule D, Capital Gains and Losses, of the Form 1040 to report it.

For more details and information see IRS Publication 523, Selling Your Home, available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Links:

Publication 523, Selling Your Home (PDF 194K)
Schedule D, Capital Gains and Losses (PDF 136K)
Tax Topic 701 — Sale of Your Home

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IRS Releases 2007 Data Book

2008-03-16T13:39:00.000-04:00

WASHINGTON — The Internal Revenue Service (IRS) today released the 2007 IRS Data Book, which is an annual snapshot of IRS activities for a given fiscal year.

The report describes activities of the IRS from Oct. 1, 2006, to Sept. 30, 2007, and includes information about returns filed, tax collections, enforcement, taxpayer assistance, as well as the IRS budget and workforce.

During fiscal year 2007, the IRS collected almost $2.4 trillion in taxes (net of refunds) and processed more than 235 million returns. More than 114 million individual income tax return filers received tax refunds that totaled $248.6 billion. In fiscal year 2007, IRS spent an average of 40 cents to collect each $100 of tax revenue, which was the lowest in seven years and down from 42 cents per $100 in fiscal year 2006.

IRS examined nearly 1.4 million individual income tax returns in fiscal year 2007. IRS personnel answered more than 33.2 million toll-free calls from taxpayers during the fiscal year, and the IRS Web site received about 215 million visits.

An electronic version of the 2007 IRS Data Book can be found on the Tax Stats page of www.irs.gov.

Printed copies of the IRS Data Book, Publication 55B, will be available by mid-April 2008 from the U.S. Government Printing Office. To obtain a copy, write to the Superintendent of Documents, P.O. Box 371954, Pittsburgh, PA 15250-7954, or call (202) 512-1800 for voicemail, or fax a request to (202) 512-225
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Deduction for Educator Expenses

2008-03-13T11:27:00.000-04:00

If you are an eligible educator, you may be able to deduct up to $250 of expenses you paid for purchases of books and classroom supplies. These out-of-pocket expenses may lower your 2007 tax bill even if you don’t itemize your deductions.

Eligible Educator: The deduction is available if you are an eligible educator in a public or private elementary or secondary school. To be eligible, you must work at least 900 hours during a school year as a kindergarten through grade 12 teacher, instructor, counselor, principal or aide.
Qualifying Expenses: You may subtract up to $250 of qualified expenses when figuring your adjusted gross income. Qualified expenses are unreimbursed expenses you paid or incurred for books, supplies, equipment (including computer equipment, software and services) and other materials that you use in the classroom. Supply expenses for courses in health and physical education are qualified only if they are related to athletics.

To be deductible, the qualified expenses must be more than the savings bond interest excluded on Form 8815, any nontaxable distribution from a qualified tuition program, and any tax-free withdrawals from your Coverdell Education savings account.

The deduction for educator expenses can only be claimed on Form 1040, line 23.

For more information about this topic, see IRS Publication 529, Miscellaneous Deductions. The publication can be downloaded at IRS.gov or ordered by calling 800-TAX-FORM (800-829-3676).

Links:

Form 1040, U.S. Individual Income Tax Return (PDF 176K)
Tax Topic 458, Educator Expense Deduction

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Phishing Scams, Frivolous Arguments Top the 2008 “Dirty Dozen” Tax Scams

2008-03-13T11:25:00.001-04:00

WASHINGTON — The Internal Revenue Service today issued its 2008 list of the 12 most egregious tax schemes and scams, highlighted by Internet phishing scams and several frivolous tax arguments.

Topping this year’s list of scams is phishing, which encompasses numerous Internet-based ploys to steal financial information from taxpayers. New to the “Dirty Dozen” this year is a scheme, which IRS auditors discovered, that relates to unreasonable and/or excessive fuel tax credit claims.

“Taxpayers should be wary of scams and promises to avoid paying taxes that seem too good to be true,” Acting IRS Commissioner Linda Stiff said. “There is no secret formula that can eliminate a person’s tax obligations. People should be wary of anyone peddling any of these scams.”

Tax schemes can lead to problems for both scam artists and taxpayers. Tax return preparers and promoters also risk significant penalties, interest and possible criminal prosecution.

The IRS urges taxpayers to avoid these common schemes:

1. Phishing

Phishing is a tactic used by Internet-based thieves to trick unsuspecting victims into revealing personal information they can then use to access the victims’ financial accounts. These criminals use the information obtained to empty the victims’ bank accounts, run up credit card charges and apply for loans or credit in the victims’ names. Phishing scams often take the form of an e-mail that appears to come from a legitimate source. Some scam e-mails falsely claim to come from the IRS. To date, taxpayers have forwarded more than 33,000 of these scam e-mails, reflecting more than 1,500 different schemes, to the IRS. The IRS never uses e-mail to contact taxpayers about their tax issues. Taxpayers who receive unsolicited e-mail that claims to be from the IRS can forward the message to a special electronic mailbox, phishing@irs.gov, using instructions contained in an article titled “How to Protect Yourself from Suspicious E-Mails or Phishing Schemes.”Remember: the only official IRS Web site is located at www.irs.gov.

2. Scams Related to the Economic Stimulus Payment

Some scam artists are trying to trick individuals into revealing personal financial information that can be used to access their financial accounts by making promises relating to the economic stimulus payment, often called a “rebate.” To obtain the payment, eligible individuals in most cases will not have to do anything more than file a 2007 federal tax return. But some criminals posing as IRS representatives are trying to trick taxpayers into revealing their personal financial information by falsely telling them they must provide information to get a payment. For instance, a potential victim is told by phone or e-mail that he or she is eligible for a rebate but must provide a bank account number (or similar information) to get the payment. If the target is unwilling, the victim is then told that he cannot receive the rebate unless the information is provided. Individuals should remember that the only way to get a stimulus payment is to file a 2007 tax return. The IRS urges taxpayers to be extra-vigilant. The IRS will not contact taxpayers by phone or e-mail about their stimulus payment.

3. Frivolous Arguments

Promoters of frivolous schemes encourage people to make unreasonable and unfounded claims to avoid paying the taxes they owe. Most recently, the IRS expanded its list of frivolous legal positions that taxpayers should stay away from. Taxpayers who file a tax return or make a submission based on one of these positions on the list are subject to a $5,000 penalty. The most recent update of the list of frivolous positions includes: misinterpretation of the 9th Amendment to the U.S. Constitution regarding objections to military spending, erroneous claims that taxes are owed only by persons with a fiduciary relationship to the United States, a nonexistent “Mariner’s Tax Deduction” related to invalid deductions for meals and the misuse of the fuel tax credit (see below). The complete list of frivolous arguments is on the IRS Web site at IRS.gov.

4. Fuel Tax Credit Scams

The IRS is receiving claims for the fuel tax credit that are unreasonable. Some taxpayers, such as farmers who use fuel for off-highway business purposes, may be eligible for the fuel tax credit. But some individuals are claiming the tax credit for nontaxable uses of fuel when their occupation or income level makes the claim unreasonable. Fraud involving the fuel tax credit was recently added to the list of frivolous tax claims, potentially subjecting those who improperly claim the credit to a $5,000 penalty.

5. Hiding Income Offshore

Individuals continue to try to avoid paying U.S.taxes by illegally hiding income in offshore bank and brokerage accounts or using offshore debit cards, credit cards, wire transfers, foreign trusts, employee leasing schemes, private annuities or life insurance plans. The IRS and the tax agencies of U.S. states and possessions continue to aggressively pursue taxpayers and promoters involved in such abusive transactions.

6. Abusive Retirement Plans

The IRS continues to uncover abuses in retirement plan arrangements, including Roth Individual Retirement Arrangements (IRAs). The IRS is looking for transactions that taxpayers are using to avoid the limitations on contributions to Roth IRAs. Taxpayers should be wary of advisers who encourage them to shift appreciated assets into Roth IRAs or companies owned by their Roth IRAs at less than fair market value. In one variation of the scheme, a promoter has the taxpayer move a highly appreciated asset into a Roth IRA at cost value, which is below annual contribution limits even though the fair market value far exceeds the amount allowed.

7. Zero Wages

Filing a phony wage- or income-related information return to replace a legitimate information return has been used as an illegal method to lower the amount of taxes owed. Typically, a Form 4852 (Substitute Form W-2) or a “corrected” Form 1099 is used as a way to improperly reduce taxable income to zero. The taxpayer also may submit a statement rebutting wages and taxes reported by a payer to the IRS. Sometimes fraudsters even include an explanation on their Form 4852 that cites statutory language on the definition of wages or may include some reference to a paying company that refuses to issue a corrected Form W-2 for fear of IRS retaliation. Taxpayers should resist any temptation to participate in any of the variations of this scheme.

8. False Claims for Refund and Requests for Abatement

This scam involves a request for abatement of previously assessed tax using Form 843, “Claim for Refund and Request for Abatement.” Many individuals who try this have not previously filed tax returns. The tax they are trying to have abated has been assessed by the IRS through the Substitute for Return Program. The filer uses Form 843 to list reasons for the request. Often, one of the reasons given is "Failed to properly compute and/or calculate Section 83-Property Transferred in Connection with Performance of Service."

9. Return Preparer Fraud

Dishonest tax return preparers can cause many problems for taxpayers who fall victim to their schemes. These scam artists make their money by skimming a portion of their clients’ refunds and charging inflated fees for return preparation services. They attract new clients by promising large refunds. Some preparers promote the filing of fraudulent claims for refunds on items such as fuel tax credits to recover taxes paid in prior years. Taxpayers should choose carefully when hiring a tax preparer, especially one who promises something that seems too good to be true.

10. Diguised Corporate Ownership

Some people are going as far as forming domestic shell corporations in certain states for the purpose of disguising the ownership of a business or financial activity. Once formed, these anonymous entities can be used to facilitate underreporting of income, non-filing of tax returns, engaging in listed transactions, money laundering, financial crimes and even terrorist financing. The IRS is working with state authorities to identify these entities and to bring the owners of these entities into compliance.

11. Misuse of Trusts

For years, unscrupulous promoters have urged taxpayers to transfer assets into trusts. They promise reduction of income subject to tax, deductions for personal expenses and reduced estate or gift taxes. However, some trusts do not deliver the promised tax benefits. As with other arrangements, taxpayers should seek the advice of a trusted professional before entering into a trust.

12. Abuse of Charitable Organizations and Deductions

The IRS continues to observe the misuse of tax-exempt organizations. Misuse includes arrangements to improperly shield income or assets from taxation, attempts by donors to maintain control over donated assets or income from donated property and overvaluation of contributed property. In addition, IRS examiners are seeing an upturn in instances where taxpayers try to disguise private tuition payments as contributions to charitable or religious organizations.

IRS Watches Scams That Fall Off the List

While the IRS has seen a decline in the occurrence of some of these scams, other problems, such as abuse of the American Indian Employment Credit and misuse of structured entity credits, continue to be areas of concern. The absence of a particular scheme from the Dirty Dozen should not be taken as an indication that the IRS is unaware of it or not taking steps to counter it.

How to Report Suspected Tax Fraud Activity

Suspected tax fraud can be reported to the IRS using IRS Form 3949-A, Information Referral. Form 3949-A is available for download from the IRS Web site at IRS.gov. The completed form or a letter detailing the alleged fraudulent activity should be addressed to the Internal Revenue Service, Fresno, CA 93888. The mailing should include specific information about who is being reported, the activity being reported, how the activity became known, when the alleged violation took place, the amount of money involved and any other information that might be helpful in an investigation. The person filing the report is not required to self-identify, although it is helpful to do so. The identity of the person filing the report can be kept confidential.

Whistleblowers also could provide allegations of fraud to the IRS and may be eligible for a reward by filing Form 211, Application for Award for Original Information, and following the procedures outlined in Notice 2008-4, Claims Submitted to the IRS Whistleblower Office under Section 7623.

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IRS CADE Processing System Tops 15 Million Tax Returns

2008-03-12T15:21:00.000-04:00

WASHINGTON — One quarter of all individual tax returns so far this filing season is being processed by the Internal Revenue Service’s modernized account information computer system.

Known as the Customer Account Data Engine, or CADE, the system has successfully processed 15.1 million individual tax returns through March 7, more than 25 percent of all those processed so far this year by the IRS. The number of tax returns processed this year by CADE has already topped the 11.2 million returns the system handled for all of last year.

“This system is the centerpiece of our modernization efforts at the IRS,” said Richard Spires, IRS Deputy Commissioner for Operations Support. “CADE is handling significantly more tax returns each year. The long-term investment in this program is paying off with meaningful results for the American taxpayer.”

CADE, which is at the core of the effort to replace many of the agency’s aging systems, dramatically speeds up internal IRS processing, permitting taxpayer accounts to update on a daily basis. The older system updates only on a weekly basis.

“This supports better customer service for the taxpayers, processes refunds quicker and helps the IRS better administer the nation’s tax system,” Spires said.

The IRS is rolling out CADE in a series of “releases,” each improving on and adding to the system capabilities. The current release, launched in January, permits CADE to process certain 1040, 1040A and 1040EZ forms, as well as schedules C, E and F for Form 1040 and a number of other IRS schedules, such as the Earned Income Tax Credit (EITC).

CADE was envisioned to replace the legacy Master File system, parts of which date back to the Kennedy Administration. CADE will eventually house the account information of more than 200 million individual and business taxpayers.

The IRS will process nearly 140 million individual tax returns in 2008 and collect approximately $2 trillion in federal government revenue.

In addition, the IRS today issued the latest two weeks of filing season statistics.

2008 FILING SEASON STATISTICS
Cumulative through the weeks ending 3/9/07 and 3/7/08
Individual Income Tax Returns	2007		2008		% Change
Total Receipts	61,124,000		63,383,000		3.7%
Total Processed	56,975,000		59,270,000		4.0%

E-filing Receipts:
TOTAL	45,497,000		48,795,000		7.2%
Tax Professionals	32,156,000		33,419,000		3.9%
Self-prepared	13,342,000		15,377,000		15.3%

Web Usage:
Visits to IRS.gov	81,664,000		91,686,000		12.3%

Total Refunds:
Number	51,700,000		53,176,000		2.9%
Amount	$129.992	Billion	$136.976	Billion	5.4%
Average refund	$2,514		$2,576		2.4%

Direct Deposit Refunds:
Number	39,088,000		41,665,000		6.6%
Amount	$110.090	Billion	$117.808	Billion	7.0%
Average refund	$2,816		$2,827		0.4%

2008 FILING SEASON STATISTICS
Cumulative through the weeks ending 3/2/07 and 2/29/08
Individual Income Tax Returns	2007		2008		% Change
Total Receipts	54,173,000		55,704,000		2.8%
Total Processed	49,691,000		51,240,000		3.1%

E-filing Receipts:
TOTAL	41,221,000		43,777,000		6.2%
Tax Professionals	29,002,000		29,738,000		2.5%
Self-prepared	12,220,000		14,027,000		14.8%

Web Usage:
Visits to IRS.gov	74,187,000		82,613,000		11.4%

Total Refunds:
Number	45,420,000		46,539,000		2.5%
Amount	$117.078	Billion	$122.716	Billion	4.8%
Average refund	$2,578		$2,637		2.3%

Direct Deposit Refunds:
Number	35,645,000		37,748,000		5.9%
Amount	$101.540	Billion	$107.955	Billion	6.3%
Average refund	$2,849		$2,860		0.4%

Itemizers Can Deduct Certain Taxes

2008-03-12T10:31:00.000-04:00

Did you know that you may be able to deduct certain taxes on your federal income tax return? You can take these deductions if you file Form 1040 and itemize deductions on Schedule A. Deductions decrease the amount of income subject to taxation.

There are several types of deductible non-business taxes:

State and local taxes: You can choose to claim a state and local tax deduction for either income taxes or sales taxes on your return. You can deduct any state and local income taxes withheld from your salary in 2007, estimated taxes paid to state or local governments and any prior year's state or local income tax as long as they were paid during the tax year. If deducting general sales taxes instead, you may deduct actual expenses or use the optional tables provided by the IRS to determine your deduction amount, relieving you of the need to save receipts. Sales taxes paid on certain items such as motor vehicles and boats may be added to the table amount, but only up to the amount paid at the general sales tax rate.
Real estate taxes: Deductible real estate taxes are usually any state, local or foreign taxes on real property. If a portion of your monthly mortgage payment goes into an escrow account and your lender periodically pays your real estate taxes to local governments out of this account, you can deduct only the amount actually paid during the year to the taxing authorities. Your lender will normally send you a Form 1098, Mortgage Interest Statement, at the end of the tax year with this information
Personal property taxes: Personal property taxes are deductible when they are based only on the value of personal property, such as a boat or car. To be deductible, the tax must be charged to you on a yearly basis, even if it is collected more than once a year or less than once a year.
Foreign income taxes: Generally, you can take either a deduction or a tax credit for foreign income taxes, but not for taxes paid on income that is excluded from U.S. tax.

For detailed information about the sales tax deduction, consult the instructions for Form 1040, Schedule A, Itemized Deductions, and the interactive State and Local Sales Tax Calculator found on IRS.gov. More information about each of these topics is available at IRS.gov. IRS forms and publications can be downloaded from the Web site or obtained by calling 800-TAX-FORM (800-829-3676).

Links:

Schedules A&B, Itemized Deductions and Interest & Dividend Income (PDF 116K)
Publication 17, Your Federal Income Tax (PDF 2074K)
State and Local Sales Tax Calculator

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IRS Announces 2008 Low Income Taxpayer Clinic Grant Recipients

2008-03-11T11:59:00.001-04:00

WASHINGTON — The National Taxpayer Advocate, Nina E. Olson, announced today that the Internal Revenue Service has awarded almost $9 million in matching grants to Low Income Taxpayer Clinics (LITCs) for the 2008 grant cycle (Jan. 1, 2008, through Dec. 31, 2008).

LITCs are organizations independent from the IRS that provide low income taxpayers with representation in federal tax controversies with the IRS for free or for a nominal charge. The clinics also provide tax education and outreach for taxpayers who speak English as a second language. IRS Publication 4134, Low Income Taxpayer Clinic List, provides information on clinics in your area and contains details about the languages each clinic serves in addition to English.

Through the LITC program, the IRS awards matching grants of up to $100,000 a year to qualifying organizations. For the 2008 grant cycle, the IRS awarded LITC grants to 154 organizations representing all 50 states, plus the District of Columbia, Puerto Rico, and Guam.

Questions about the LITC Program can be addressed to the LITC Program Office at (202) 622-4711 (not a toll-free call) or by e-mail at LITCProgramOffice@irs.gov

A list of organizations awarded a matching grant for the 2008 grant cycle is available.

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How to Avoid Tax Time Problems

2008-03-11T11:27:00.000-04:00

Are you looking for ways to avoid the last-minute rush for doing your taxes? Here are some stress-relieving ideas to help you.

• Don’t Procrastinate Resist the temptation to put off your taxes until the very last minute. Your haste to meet the filing deadline may cause you to overlook potential sources of tax savings and will likely increase your risk of making an error.

• Visit the IRS Online In fiscal year 2007, there were more than 214 million visits to IRS.gov and 1.35 billion page views. Anyone with Internet access can find tax law information and answers to frequently asked tax questions.

• File Your Return Electronically Nearly 80 million taxpayers filed their returns electronically in fiscal year 2007. Aside from ease of filing, IRS e-file is the fastest and most accurate way to file a tax return. If you’re due a refund, the waiting time for e-filers is half that of paper filers.

• Don’t Panic if You Can’t Pay If you can’t immediately pay the taxes you owe, consider some stress-reducing alternatives. You can apply for an IRS installment agreement, using our new Web-based Online Payment Agreement application on IRS.gov. The Web-based application allows eligible taxpayers or their authorized representatives to self-qualify, apply for, and receive immediate notification of approval. You also have various options for charging your balance on a credit or debit card. There is no IRS fee for credit or debit card payments, but the processing companies charge a convenience fee. Electronic filers with a balance due can also file early and pay their taxes directly from their checking or savings account on the April due date with no service fee.

• Request an Extension of Time to File – But Pay on Time If the clock runs out, you can get an automatic six month extension of time to file to October 15. However, this extension of time to file does not give you more time to pay any taxes due. You will owe interest on any amount not paid by the April deadline, plus a late payment penalty if you have not paid at least 90 percent of your total tax by that date. See IRS Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return for a variety of easy ways to apply for an extension. Form 4868 is available at IRS.gov or by calling 800-TAX-FORM (800-829-3676). Taxpayers needing Form 4868 should act soon to be sure they have the item in time to meet the April deadline.

Links:

Official Payments Corporation
Link2Gov Corporation
Electronic filing
Free File
Electronic payment options
Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return (PDF)

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Special Economic Stimulus Payment Packages Go to Social Security, Veterans Recipients

2008-03-10T16:58:00.000-04:00

WASHINGTON — Starting next week, the Internal Revenue Service will mail special information packages to 20.5 million recipients of Social Security or Veterans Affairs benefits to help them get their 2008 economic stimulus payment.

The 10-page tax package contains everything the recipients will need to file a 2007 tax form immediately. Each package contains an informational notice, tips for completing Form 1040A, a sample Form 1040A and an actual Form 1040A for the filer to complete.

The package is specially designed for people who may qualify for an economic stimulus payment but who normally aren’t required to file a tax return.

“We want to put everything right at the fingertips of the people who need this information the most,” said Linda E. Stiff, Acting IRS Commissioner. “In some cases, seniors and others in this group haven’t needed to file a tax return for years or even decades. To help them get a stimulus payment, we’re doing everything we can to make this as easy as possible. These packages mean many people will just need a pen and a stamp, and the IRS will do the rest.”

Under the Economic Stimulus Act of 2008, people may be eligible for the minimum payment of $300 ($600 for married couples) even if they do not normally file a tax return. There also is an additional payment of $300 for people with eligible children younger than 17. However, people must file an income tax return in order to receive the payment.

People who don’t normally need to file also can use Free File – Economic Stimulus Payment, which is available at IRS.gov. Several Free File software providers are making their products available for the simplified filing of a tax return.

“These stimulus payments have the potential to help people in real need and stimulate our economy,” said Tom Nelson, AARP’s Chief Operating Officer. “The IRS, through efforts like this, is doing a great job of informing people that they might be eligible for a stimulus payment, offering step-by-step guidance on how they can apply, and what scams they need to avoid.”

To qualify for the minimum economic stimulus payment, people must have at least $3,000 in any combination of qualifying income from retirement, disability or survivors’ benefits from the Social Security Administration; disability compensation, disability pension or survivors’ benefits from the Department of Veterans Affairs; Tier 1 benefits from Railroad Retirement, certain combat pay and earned income from wages, salaries, tips or net earnings from self-employment that are includible in taxable income.

The mailing list of 20.5 million names represents Social Security and Veterans Affairs benefit recipients who did not file a tax return in 2006, allowing the IRS to directly target the special package to people likely to qualify for a stimulus payment but who may not otherwise file a tax return this year. The mailing, called Package 1040A-3, is separate from more than 130 million other economic stimulus letters (Notice 1377) being sent this month to taxpayers who filed tax returns in 2006.

Generally, the special mailing does not include low-wage workers without a filing requirement who could qualify for economic stimulus payments. The IRS is working with numerous community, governmental organizations and charitable groups to reach low-income workers and their families. People in this category also need to fill out a tax form, preferably a simple Form 1040A.

With so many people potentially unaware of the stimulus payments, Stiff encouraged people to reach out to help their friends and family members. “We don’t want anyone to fall through the cracks,” Stiff said. “People can help friends and family members by making them aware of the payments or helping fill out the forms. These forms are very simple. In just a few minutes you can complete the entire process by filling in just a few lines.”

A sample Form 1040A is included in the tax package and is available at IRS.gov. People need to complete the lines for the mailing label and provide a Social Security number; the filing status (single or married) and exemptions (children younger than 17 and their Social Security numbers).

People with earned income must complete Line 7 to report their 2007 annual income. Recipients of Social Security, VA and Railroad Retirement payments must complete Line 14a of Form 1040A to report their 2007 annual benefits. Certain recipients should have a Form SSA-1099 or Form RRB-1099 with that information. Or, people can multiply their 2007 monthly benefit by the number of months the payment was received for 2007 to estimate their annual benefit amount.

The IRS encourages recipients to complete the direct deposit information on the Form 1040A if they have bank accounts. Direct deposit will be the easiest and fastest way to receive a payment. The IRS also encourages people to file their income tax return as soon as possible. The IRS will begin issuing economic stimulus payments starting in May.

The IRS reminds taxpayers it does not gather information for stimulus payments over the telephone, and it does not send unsolicited e-mail to taxpayers about tax account matters. If taxpayers receive an unsolicited e-mail from someone claiming to be from the IRS, don't click on any links. People should forward it to phishing@irs.gov, and then delete it. The only official IRS Web site is located at www.irs.gov.

To be eligible for economic stimulus payments, people must have valid Social Security numbers, have at least $3,000 in qualifying income and not be a dependent or eligible to be a dependent on someone else’s income tax return.

For taxpayers who normally file an income tax return, the maximum stimulus payment is $600 ($1,200 for married couples), amounts that will phase out starting with adjusted gross income of $75,000 ($150,000 for married couples). For taxpayers who file a 2007 income tax return, the amount of the economic stimulus payment will be calculated automatically by the IRS.

Related Items:

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Offset Education Costs

2008-03-08T07:53:00.000-05:00

Education tax credits can help offset the costs of higher education for yourself or a dependent. The Hope Credit and the Lifetime Learning Credit are two education credits available which may benefit you. Because they are credits, rather than deductions, you may be able to subtract them in full dollar for dollar from your federal income tax.

The Hope Credit

Applies for the first two years of post-secondary education, such as college or vocational school. It does not apply to the third, fourth, or higher years of undergraduate programs, to graduate programs, or to professional-level programs.
It can be worth up to $1,650 per eligible student, per year.
You're allowed a credit of 100% of the first $1,100 of qualified tuition and related fees paid during the tax year, plus 50% of the next $1,100.
Each student must be enrolled at least half-time for at least one academic period which began during the year.
The student must be free of any federal or state felony conviction for possessing or distributing a controlled substance as of the end of the tax year.

The Lifetime Learning Credit

Applies to undergraduate, graduate and professional degree courses, including instruction to acquire or improve job skills, regardless of the number of years in the program.
If you qualify, your credit equals 20% of the first $10,000 of post-secondary tuition and fees you pay during the year, for a maximum credit of $2,000 per tax return.

You cannot claim both the Hope and Lifetime Learning Credits for the same student in the same year. To qualify for either credit, you must pay post-secondary tuition and certain related expenses for yourself, your spouse or your dependent. The credit may be claimed by the parent or the student, but not by both. Students who are claimed as a dependent cannot claim the credit.

These credits are phased out for Modified Adjusted Gross Income over $47,000 ($94,000 for married filing jointly) and eliminated completely for Modified Adjusted Gross Income of $57,000 or more ($114,000 for married filing jointly). If the taxpayer is married, the credit may be claimed only on a joint return.

For more information, see Publication 970, Tax Benefits for Education, which can be obtained online at IRS.gov or by calling the IRS at 800-TAX-FORM (800-829-3676).

Links:

Form 8863, Education Credits (PDF 82K)
Publication 970, Tax Benefits for Higher Education (PDF 368K)
Tax Topic 605

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IRS Free File Now Available for Nonfilers Who Must File a Return to Receive Economic Stimulus Payment

2008-03-07T07:58:00.000-05:00

WASHINGTON — The Internal Revenue Service announced today that individuals who normally do not file a tax return but must do so this year in order to receive their 2008 economic stimulus payment can now use the IRS Free File program to help them file returns for 2007.

IRS and several of its partners in the Free File Alliance can now accept returns submitted by people who have no legal requirement to file other than to receive their payments. People in this category should take care to use only those companies listed on the Free File - Economic Stimulus Payment.

“If you are only filing a return to receive your economic stimulus payment, Free File is a great option for you. All you need to do is follow the simple instructions provided by the software. It’s easy, and it’s free,” said Acting IRS Commissioner Linda E. Stiff.

Individuals and families must have at least $3,000 of income from any combination of earned income, Social Security retirement or disability benefits, certain Railroad retirement benefits, or disability compensation, disability pension, or survivor benefits paid by the Veterans Affairs. The minimum economic stimulus payment is $300 for individuals and $600 for married couples.

To obtain a payment, all people who are eligible for payments of up to $600 for individuals ($1,200 for married couples) must file a tax return in order for the IRS to know their name, address and eligibility. Parents also may qualify for a $300 payment for each eligible child younger than 17. Valid Social Security numbers are required.

Taxpayers who normally file a tax return and want to use Free File, should simply go to the main Free File page and click ‘Start Now’ to see a list of the 19 companies offering free preparation and electronic filing to the IRS. Free File is available to 97 million taxpayers who earn $54,000 or less.

There is no charge for using IRS Free File. With just a few answers, people can complete a simple form and use IRS e-file. The IRS also urges all filers to use direct deposit, if they have a checking or savings account, because it is the fastest way to receive an economic stimulus payment.

Once people file a tax return, they don’t need to do anything more. The IRS will do the rest. The IRS will begin issuing payments starting in May.

Related Items:

Free File - Economic Stimulus Payment (Free tax preparation and electronic filing for people who have no tax filing requirement but who must file a tax form to receive the 2008 economic stimulus payment.)

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New Form for Employees Misclassified as Independent Contractors

2008-03-06T14:39:00.001-05:00

In 2007 were you an employee whose employer paid you as an independent contractor? Employees usually receive a Form W-2 while independent contractors usually receive a Form 1099-MISC.

Generally, a worker who received a Form 1099 for services provided as an independent contractor must report the income on Schedule C and pay self-employment tax on the net profit using Schedule SE. However, if the worker was actually an employee, rather than an independent contractor, the worker is not required to pay the full self-employment tax, and expenses can only be deducted as an itemized deduction.

Beginning in 2007, Form 8919, Uncollected Social Security and Medicare Tax on Wages, may be used if you were an employee and your employer did not withhold your share these taxes and you meet certain criteria. These taxes will then be credited to you social security records.

To be eligible to use Form 8919 you must meet one of several criteria indicating that you were an employee while performing these services. The criteria include:

You filed Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding, and received a determination letter from the IRS stating that you are an employee of the firm.
You have been designated as a “section 530 employee” by your employer or by the IRS prior to January 1, 1997.
You have received other correspondence from the IRS that states you are an employee.
You were previously treated as an employee by the firm and you are performing services in a similar capacity and under similar direction and control.
Your co-workers are performing similar services under similar direction and control and are treated as employees.
Your co-workers are performing similar services under similar direction and control and filed Form SS-8 for the firm and received a determination that they were employees.
You have filed Form SS-8 with the IRS and have not yet received a reply.

For more information see Form 8919, Uncollected Social Security and Medicare Tax on Wages available on the IRS Web site at IRS.gov or by calling 800-TAX FORM (800-829-3676).

Links:

Form 1099-MISC, Miscellaneous Income

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Claiming the Child and Dependent Care Credit

2008-03-05T10:55:00.000-05:00

If you paid someone to care for a child under age 13 or a qualifying spouse or dependent so you could work or look for work, you may be able to reduce your tax by claiming the Child and Dependent Care Credit on your federal income tax return. To qualify, your spouse, children age 13 or older, and other dependents must be physically or mentally incapable of self-care.

The credit is a percentage of the amount of work-related child and dependent care expenses you paid to a care provider. The credit can be up to 35 percent of your qualifying expenses, depending upon your income.

For 2007, you may use up to $3,000 of the expenses paid in a year for one qualifying individual, or $6,000 for two or more qualifying individuals. These dollar limits must be reduced by the amount of any dependent care benefits provided by your employer that you exclude from your income.

To claim the credit for child and dependent care expenses, you must meet certain conditions including:

Income - You must have earned income from wages, salaries, tips, other taxable employee compensation, or net earnings from self-employment (one spouse may be considered as having earned income if they were a full-time student or physically or mentally not able to care for himself or herself)
Payee - The payments for care cannot be paid to someone you can claim as your dependent on your return or to your child who is under age 19, even if he or she is not your dependent
Filing Status - Your filing status must be single, married filing jointly, head of household, or qualifying widow(er) with a dependent child
Care - The care must have been provided for one or more qualifying persons
Home - The qualifying person must have lived with you for more than half of 2007

There are some limitations on the amount of credit you can claim. If you received dependent care benefits from your employer, other rules apply.

For more information on the Child and Dependent Care Credit, see Publication 503, Child and Dependent Care Expenses. You may download these free publications from IRS.gov or order them by calling 800-TAX-FORM (800-829-3676).

Links:

Publication 503, Child and Dependent Care Expenses (PDF 167K)
Form W-10, Dependent Care Provider’s Identification and Certification (PDF 31K)
Form 2441, Child and Dependent Care Expenses (PDF)
Form 2441 Instructions (PDF 32K)
Publication 17, Your Federal Income Tax (PDF 2,075K)
Tax Topic 602

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Claiming the Child Tax Credit

2008-03-04T14:02:00.001-05:00

With the Child Tax Credit, you may be able to reduce the federal income tax you owe by up to $1,000 for each qualifying child under the age of 17.

A qualifying child for this credit is someone who meets the following criteria:

Age - Was under age 17 at the end of 2007
Relationship - Is your son, daughter, adopted child, stepchild or eligible foster child, brother, sister, stepbrother, stepsister, or a descendant of any of these individuals
Citizenship - Is a U.S. citizen, U.S. national or resident of the U.S.
Support - Did not provide over half of his or her own support, and
Lived with you - Must have lived with you for more than half of 2007 (note that some exceptions to this criteria exist)

The credit is limited if your modified adjusted gross income is above a certain amount. The amount at which this phase-out begins varies depending on your filing status:

Married Filing Jointly $110,000
Married Filing Separately $ 55,000
All others $ 75,000

In addition, the Child Tax Credit is generally limited by the amount of the income tax you owe as well as any alternative minimum tax you owe.

If the amount of your Child Tax Credit is greater than the amount of income tax you owe, you may be able to claim some or all of the difference as an “Additional” Child Tax Credit. The Additional Child Tax Credit may give you a refund even if you do not owe any tax. For 2007, the total amount of the Child Tax Credit and any Additional Child Tax Credit cannot exceed the maximum of $1,000 for each qualifying child.

You may claim the Child Tax Credit on Form 1040 or 1040A. Details on how to compute the credit can be found in the forms’ instructions and in Publication 972, Child Tax Credit. The forms and publications are available from the IRS Web site at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Links:

Form 8812, Additional Child Tax Credit (PDF 56K)
Publication 972, Child Tax Credit (PDF 128K)
Form 1040 (PDF 176K)
Form 1040 Instructions (PDF 1,101K)
Form 1040A, U.S. Individual Income Tax Return (PDF 136K)
Form 1040A Instructions (PDF 428K)
Tax Topic 606

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Beware of Tax Scams

2008-03-04T13:55:00.000-05:00

Don’t fall victim to tax scams. These schemes take several shapes, ranging from promises of large tax refunds to illegal ways of “untaxing” yourself.

The IRS suggests that you remember three important guidelines:

You are responsible and liable for the content of your tax return.
Anyone who promises you a bigger refund without knowing your tax situation could be misleading you, and
Never sign a tax return without looking it over to make sure it is accurate.

Beware of these common schemes:

Return Preparer Fraud:
Dishonest tax return preparers can cause many headaches for taxpayers who fall victim to their ploys. Such preparers derive financial gain by skimming a portion of their clients’ refunds and charging inflated fees for return preparation services. They attract new clients by promising large refunds. Choose carefully when hiring a tax preparer. As the saying goes, if it sounds too good to be true, it probably is. No matter who prepares your tax return you are ultimately responsible for its accuracy and for any tax bill that may arise due to a questionable claim.

Identity Theft:
It pays to be choosy when it comes to disclosing personal information. Identity thieves have used stolen personal data to access financial accounts, run up charges on credit cards and apply for new loans. The IRS is aware of several identity theft scams involving taxes or scammers posing as the IRS itself. The IRS does not use e-mail to contact taxpayers about issues related to their accounts. If you have any doubt whether a contact from the IRS is authentic call 800-829-1040 to confirm it.

Frivolous Arguments:
Promoters have been known to make outlandish claims that the Sixteenth Amendment concerning congressional power to establish and collect income taxes was never ratified; that wages are not income; that filing a return and paying taxes are merely voluntary; and that being required to file Form 1040 violates the Fifth Amendment right against self-incrimination or the Fourth Amendment right to privacy. Don’t believe these or other similar claims. Such arguments are false and have been thrown out of court. Taxpayers have the right to contest their tax liabilities in court, but no one has the right to disobey the law.

For more information about these and other tax scams visit the IRS Web site at IRS.gov.

Links:

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Electronic Filing Off To Strong Start

2008-03-04T13:50:00.000-05:00

WASHINGTON — The Internal Revenue Service announced that e-file is off to a fast start in 2008 with more than 38 million tax returns filed electronically so far.

The 2008 e-file level is up 5 percent from the 36 million returns filed for the same period last year, with double digit growth coming from taxpayers filing from their home computers.

“E-filing continues to be the preferred way to file your tax return. It is the fast, easy, safe and more accurate way to file your tax return,” said IRS Acting Commissioner Linda E. Stiff.

According to the new filing season statistics for the week ending Feb. 22, 2008, one of the biggest areas of growth is returns electronically filed from home computers. More than 12.3 million returns were filed from home, an increase of almost 14 percent from the same time last year.

Overall, 46.9 million tax returns have been filed so far in 2008, a 1.5 percent increase from the 46.2 million returns that had been filed at the same point in 2007.

As for the total amount of all refunds, $106.7 billion has been issued so far in 2008 with the average refund amount of $2,708, up two percent from the same time last year. So far this year, the IRS has directly deposited 33 million refunds out of the total of 39 million refunds. The direct deposit refunds were valued at just over $96 billion with the average amount of a direct deposit refund of $2,900.

The IRS reminds taxpayers who have not filed their 2007 returns yet that direct deposit is the fastest way to get both regular refunds and economic stimulus payments. These stimulus payments will be direct deposited for those eligible filers who select that option when filing their 2007 tax returns. For more information on the economic stimulus payment go to IRS.gov.

People are visiting the IRS Web site at IRS.gov in record numbers. The IRS has recorded more than 72 million unique visits to IRS.gov this year, up from about 67 million for the same period last year, an increase of 8 percent.

2008 FILING SEASON STATISTICS
Cumulative through the weeks ending 2/23/07 and 2/22/08
Individual Income Tax Returns	2007		2008		% Change
Total Receipts	46,244,000		46,918,000		1.5%
Total Processed	41,905,000		42,866,000		2.3%

E-filing Receipts:
TOTAL	36,233,000		38,059,000		5.0%
Tax Professionals	25,363,000		25,699,000		1.3%
Self-prepared	10,870,000		12,360,000		13.7%

Web Usage:
Visits to IRS.gov	67,104,000		72,596,000		8.2%

Total Refunds:
Number	38,622,000		39,387,000		2.0%
Amount	$102.552	Billion	$106.651	Billion	4.0%
Average refund	$2,655		$2,708		2.0%

Direct Deposit Refunds:
Number	31,586,000		33,131,000		4.9%
Amount	$91.262	Billion	$96.071	Billion	5.3%
Average refund	$2,889		$2,900		0.4%

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