Monday, January 23, 2017

Seven Reasons Taxpayers Should E-file Their Taxes in 2017

Taxpayers who still file paper returns may find now is the best time to switch to e-file. Last year over 85 percent of taxpayers filed their taxes electronically. E-file is the fastest and safest way to file.

Here are the top seven reasons a taxpayer should file electronically in 2017:

  1. Accurate and Easy. IRS e-file is the best way to file an accurate tax return. The tax software helps taxpayers avoid mistakes by doing the math for them. It guides users through each section of a tax return. E-file is easier than doing taxes by hand and mailing paper tax forms.
  2. Safe and Secure. IRS e-file meets strict security guidelines. It uses modern encryption technology to protect tax returns. The IRS continues to work with states and tax industry leaders to protect tax returns from refund fraud. This new effort has put more safeguards in place to make tax filing safer than ever before. The IRS has processed more than one billion e-filed returns safely and securely.
  3. Convenient and Often Free. Taxpayers can e-file for free through IRS Free File. Free File is only available on IRS.gov. Taxpayers may qualify to have their taxes e-filed for free through IRS volunteer programs. Volunteer Income Tax Assistance offers free tax preparation for those earning $54,000 or less. Tax Counseling for the Elderly generally helps people who are age 60 or older. Taxpayers can buy commercial tax software or ask their tax preparer to e-file their tax return. Most paid preparers have to file their clients’ returns electronically.
  4. Faster Refunds. In most cases, e-file prevents mistakes and helps people get their refund faster. The quickest way to get a refund is to combine e-file with direct deposit into a bank account. The IRS issues more than nine out of 10 refunds in less than 21 days – however, some returns need further review and take longer.
  5. Prior-Year Tax Return. Taxpayers should keep a copy of their tax return. Beginning in 2017, taxpayers using a software product for the first time may need their Adjusted Gross Income (AGI) amount from their prior-year tax return to verify their identity. Taxpayers can learn more about how to verify their identity and electronically sign tax returns at Validating Your Electronically Filed Tax Return.
  6. Health Care Coverage Reporting. IRS e-file can help with tax provisions of the health care law. The software will walk users through each line on the tax form that relate to the Affordable Care Act.
  7. Payment Options. If taxpayers owe taxes, they can e-file early and set up an automatic payment on any day until the April 18 deadline. They can pay electronically from their bank account with IRS Direct Pay. Other payment options include electronic funds withdrawal and payment by debit or credit card. Visit IRS.gov/payments for details.

Wednesday, January 18, 2017

What to Do If You Suffer a Data Breach or Other Security Incident

Tax professionals are increasingly targets of cybercriminals seeking access to client data. Criminals use the stolen information to file fraudulent tax returns for refunds. Be prepared to protect your clients and yourself by taking a few critical steps.

Should you experience a data compromise, there are certain basic steps you should take. For a comprehensive list of security actions, consult a security professional. Also see Data Theft Information for Tax Professionals on IRS.gov.

Preliminary steps include:

Contact the IRS and law enforcement:
  • Internal Revenue Service - Report client data theft to your local IRS Stakeholder Liaison. Liaisons will notify IRS Criminal Investigation and others within the agency on your behalf. Speed is critical. If reported quickly, the IRS can take steps to block fraudulent returns in your clients’ names.
  • Federal Bureau of Investigation – Contact your local office.
  • Secret Service – Contact your local office (if directed).
  • Local police – File a police report on the data breach.
Contact states in which you prepare state returns:
  • State Tax Agencies - Contact each state in which you prepare returns
  • State Attorneys General - Contact each state in which you prepare returns. Most states require that the attorney general be notified of data breaches. This notification process may involve multiple offices.
Contact experts:
  • Security expert – They can determine the cause and scope of the breach, what to do to stop the breach and prevent further breaches from occurring.
  • Insurance company – Report the breach and check if your insurance policy covers data breach mitigation expenses.
Contact clients and other services:
  • Federal Trade Commission offers tips and templates for businesses that suffer data compromise, including suggested language for informing clients.
  • Clients – Send an individual letter to victims to inform them of the breach but work with law enforcement on timing. Remember that you may need to contact former clients if their prior year data was still in your system.
  • Your tax software provider – They may need to take steps to prevent inappropriate use of your account for e-filing.
  • Your web site/client portal provider(s) – It’s possible that your firm and client passwords may have been compromised and need to be reset.
  • Federal Trade Commission offers tips and templates for businesses that suffer data compromise, including suggested language for informing clients.
  • Credit/ID theft protection agency - Certain states require offering credit monitoring/ID theft protection to victims of ID theft.
  • Credit bureaus – Notify them if there is a compromise. Clients may seek their services.
The IRS reminds tax professionals that toll-free assisters cannot accept third-party notification of tax-related identity theft. Clients should file a Form 14039, Identity Theft Affidavit, only if their electronic return is rejected as a duplicate or they are directed to do so.

This tax tip is one in a series of special security tax tips intended to raise awareness for tax professionals. The “Protect Your Clients; Protect Yourself” campaign is an initiative of the Security Summit. The Security Summit is a joint project by the IRS, states and the tax community to combat identity theft. Due to the sensitive client data held by tax professionals, cybercriminals increasingly are targeting the tax preparation community.

2017 Standard Mileage Rates for Business, Medical and Moving Announced

The Internal Revenue Service issued the 2017 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2017, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

  • 53.5 cents per mile for business miles driven, down from 54 cents for 2016
  • 17 cents per mile driven for medical or moving purposes, down from 19 cents for 2016
  • 14 cents per mile driven in service of charitable organizations

Tuesday, January 17, 2017

How the IRS Taxpayer Bill of Rights Works

Taxpayers have fundamental rights under the law. The “Taxpayer Bill of Rights” presents these rights in 10 categories. This helps taxpayers when they interact with the IRS.

Publication 1, Your Rights as a Taxpayer, highlights a list of taxpayer rights and the agency’s obligations to protect them. Here is a wrap-up of the Taxpayer Bill of Rights:

1. The Right to Be Informed.

Taxpayers have the right to know what is required to comply with the tax laws. They are entitled to clear explanations of the laws and IRS procedures in all tax forms, instructions, publications, notices and correspondence. They have the right to know about IRS decisions affecting their accounts and clear explanations of the outcomes.

2. The Right to Quality Service.

Taxpayers have the right to receive prompt, courteous and professional assistance in their dealings with the IRS and the freedom to speak to a supervisor about inadequate service. Communications from the IRS should be clear and easy to understand.

3. The Right to Pay No More than the Correct Amount of Tax.

Taxpayers have the right to pay only the amount of tax legally due, including interest and penalties. They should also expect the IRS to apply all tax payments properly.

4. The Right to Challenge the IRS’s Position and Be Heard.

Taxpayers have the right to object to formal IRS actions or proposed actions and provide justification with additional documentation. They should expect that the IRS will consider their timely objections and documentation promptly and fairly. If the IRS does not agree with their position, they should expect a response.

5. The Right to Appeal an IRS Decision in an Independent Forum.

Taxpayers are entitled to a fair and impartial administrative appeal of most IRS decisions, including certain penalties. Taxpayers have the right to receive a written response regarding a decision from the Office of Appeals. Taxpayers generally have the right to take their cases to court.

6. The Right to Finality.

Taxpayers have the right to know the maximum amount of time they have to challenge an IRS position and the maximum amount of time the IRS has to audit a particular tax year or collect a tax debt. Taxpayers have the right to know when the IRS concludes an audit.

7. The Right to Privacy.

Taxpayers have the right to expect that any IRS inquiry, examination or enforcement action will comply with the law and be no more intrusive than necessary. They should expect such proceedings to respect all due process rights, including search and seizure protections. The IRS will provide, where applicable, a collection due process hearing.

8. The Right to Confidentiality.

Taxpayers have the right to expect that their tax information will remain confidential. The IRS will not disclose information unless authorized by the taxpayer or by law. Taxpayers should expect the IRS to take appropriate action against employees, return preparers and others who wrongfully use or disclose their return information.

9. The Right to Retain Representation.

Taxpayers have the right to retain an authorized representative of their choice to represent them in their dealings with the IRS. Taxpayers have the right to seek assistance from a Low Income Taxpayer Clinic if they cannot afford representation.

10. The Right to a Fair and Just Tax System.

Taxpayers have the right to expect fairness from the tax system. This includes considering all facts and circumstances that might affect their underlying liabilities, ability to pay or ability to provide information timely. Taxpayers have the right to receive assistance from the Taxpayer Advocate Service if they are experiencing financial difficulty or if the IRS has not resolved their tax issues properly and timely through its normal channels.

The IRS will include Publication 1 when sending a notice to taxpayers on a range of issues, such as an audit or collection matter. IRS offices display the rights for taxpayers and employees to see.
Publication 1 is available in  English, Chinese, Korean, Russian, Spanish and Vietnamese.

All taxpayers should keep a copy of their tax return. Beginning in 2017, taxpayers using a software product for the first time may need their Adjusted Gross Income (AGI) amount from their prior-year tax return to verify their identity. Taxpayers can learn more about how to verify their identity and electronically sign tax returns at Validating Your Electronically Filed Tax Return.

Additional IRS Resources:

Thursday, January 12, 2017

Who Will Prepare Your Tax Return?

WASHINGTON – As the start of tax filing season approaches, the Internal Revenue Service is reminding taxpayers to start thinking about who will prepare their 2016 federal tax return. The IRS will begin processing tax returns on Monday, January 23. Many software companies and tax professionals will accept and submit tax returns before the IRS systems open on January 23.

In 2016, more than 131 million individual and family tax returns were e-filed, the most accurate, safest and easiest way to file. The rest of the returns received by the IRS, numbering over 19 million, were either prepared on a computer and printed or prepared by hand then mailed.

The IRS stresses that no matter who prepares it, by signing the return, the taxpayer becomes legally responsible for the accuracy of all information included.

Free Tax Preparation

Each year, millions of tax returns are prepared for free by taxpayers using IRS Free File or by volunteers at community organization sites nationwide.

IRS Free File lets taxpayers who earned less than $64,000 prepare and e-file a return for free. Go to IRS.gov and click on the ‘Filing’ tab for options on using commercial tax software. Those who earned more than $64,000 are still eligible for Free File Fillable Forms, the electronic version of IRS paper forms. This more basic Free File option is best for people who are comfortable preparing their own tax returns.

IRS trained and certified volunteers at thousands of Volunteer Income Tax Assistance and Tax Counseling for the Elderly (VITA and TCE) sites nationwide offer free tax preparation and e-filing. VITA offers free tax return preparation to taxpayers who earn $54,000 or less. The TCE program is mainly for people age 60 or older and focuses on tax issues unique to seniors. AARP participates in the TCE program and helps taxpayers with low to moderate incomes.
  • To find the closest VITA site, visit IRS.gov and search the word “VITA.” Or  download the IRS2Go app on a smart phone. Site information is also available by calling the IRS at 800-906-9887.
  • To locate the nearest AARP Tax-Aide site, visit aarp.org, or call 888-227-7669. There are also VITA and TCE sites that provide bilingual help for taxpayers who have limited English skills.
Many taxpayers pay for tax return preparation. By law, all paid tax preparers must have a Preparer Tax Identification Number, or PTIN. Paid preparers must sign the return and include their PTIN.  The IRS offers tips to help taxpayers choose a tax return preparer wisely. The Choosing a Tax Professional page has information about tax preparer credentials and qualifications. The IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications can help identify many preparers in your locality by type of credential or qualification.


The IRS urges taxpayers to avoid fly-by-night preparers who may not be available after this year’s April 18 due date or base fees on a percentage of the refund. The IRS also reminds taxpayers that a new law requires all refunds on returns that claim the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) be held until Feb. 15. This change helps the IRS detect and prevent fraud.

Wednesday, January 11, 2017

Affordable Care Act: What Employers with Fewer than 50 Employees Need to Know

As an employer, the number of employees you have during the last calendar year determines which parts of the health care law apply to your organization. If you are an employer with fewer than 50 full-time employees, including full-time equivalent employees, here are three things to know about how the health care law affects you.

Information Reporting
  • If you offer employer-sponsored self-insured health coverage to your employees, you will use Form 1095-B, Health Coverage Information Return to report information to covered individuals about each person enrolled in coverage. The deadline for filing this form with the IRS is February 28, 2017, or March 31, 2017 if filing electronically. The deadline for furnishing this form to the covered individual is March 2, 2017, which is a 30-day extension from the original due date of January 31.
Tax Credit
  • You may be eligible for the small business health care tax credit if you meet all of the following conditions. You:
    • cover at least 50 percent of employees’ premium costs
    • have fewer than 25 full-time equivalent employees
    • pay average annual wages per full-time equivalent employee of less than $52,000 in tax year 2016
    • purchase coverage through the SHOP Marketplace
Shared Responsibility Payment

Monday, January 9, 2017

Security Awareness for Taxpayers: The Tax Community Needs Your Help

The IRS, the states and the tax industry are committed to protecting you from identity theft. But, we need your help to join us in this effort.

By taking a few simple steps, you can better protect your personal and financial data online and at home.

In recent weeks, we’ve issued a series of IRS Security Awareness Tax Tips designed to help you take steps to protect yourself. If you missed them, we’ve created an IRS Security Awareness Tax Tips page for you to catch up or review.

Remember, cybercriminals continue stealing large amounts of personal data from outside the tax system. They can use that data to file fraudulent tax returns or commit other crimes while impersonating the victims.

The IRS, the states and the tax industry joined together in the Security Summit initiative to help fight back against these criminals. We’ve made significant progress to help taxpayers, but we can do an even better job with your help.

Please consider these steps to protect yourselves and your data:

Keep Your Computer Secure
  • Use security software and make sure it updates automatically; essential tools include using a firewall, virus/malware protection and file encryption for sensitive data
  • Treat your personal information like cash, don’t leave it lying around
  • Check out companies to find out who you’re really dealing with
  • Give personal information only over encrypted websites – look for “https” addresses.
  • Use strong passwords and protect them
  • Back up your files
Avoid Phishing and Malware
  • Avoid phishing emails, texts or calls that appear to be from the IRS, tax companies  and other well-known business; instead, go directly to their websites
  • Don’t open attachments in emails unless you know who sent it and what it is
  • Download and install software only from websites you know and trust
  • Use a pop-up blocker
  • Talk to your family about safe computing practices
Protect Personal Information

Don’t routinely carry your Social Security card or documents with your SSN. Do not overshare personal information on social media. Information about past addresses, a new car, a new home and your children help identity thieves pose as you. Keep old tax returns and tax records under lock and key or encrypted, if electronic. Shred tax documents before trashing.

Watch out for IRS Impersonators. The IRS will not call you with threats of jail or lawsuits. The IRS will not send you an unsolicited email suggesting you have a refund or that you need to update your account. The IRS will not request any sensitive information online. These are all scams, and they persistent and change frequently. Don’t fall for them. Forward IRS-related scam emails to phishing@irs.gov. Report IRS-impersonation telephone calls at www.tigta.gov.

Additional steps:
  • Check your credit report annually; check your bank and credit card statements often;
  • Review your Social Security Administration records annually: Sign up for My Social Security at www.ssa.gov.
  • If you are an identity theft victim whose tax account is affected, review http://www.irs.gov/identitytheft for details.
Publication 4524, Security Awareness for Taxpayers, outlines this information. Consider printing and sharing this form with your family, friends, clients or employees.

This tax tip concludes the 2017 filing season Security Awareness Tax Tip series, which is part of the Taxes. Security. Together. public education campaign. This is a joint effort  by the Security Summit partners, which includes the IRS, state tax agencies and the private-sector tax industry.


Remember: Taxes. Security. Together. We all have a role to play in protecting your data.

Wednesday, January 4, 2017

If/Then Chart Explains How the Health Care Law Affects You

As you prepare to file your 2016 tax return, review this chart to see how the health care law affects you.
IF YOU…
THEN YOU…

Are a U.S. citizen or a non-U.S. citizen living in the United States

Must have qualifying health care coverage, qualify for a health coverage exemption, or make a payment when you file your income tax return.

Had coverage or an employer offered coverage to you in the previous year

Will receive one or more of the following forms;
This information will help you complete your tax return.
Had health coverage through an employer or under a government program – such as Medicare, Medicaid and coverage for veterans – for the entire year
Just have to check the full-year coverage box on your Form 1040 series return and do not have to read any further.
Did not have coverage for any month of the year
Should check the instructions to Form 8965, Health Coverage Exemptions, to see if you are eligible for an exemption.
Were eligible for an exemption from coverage for a month
Must claim the exemption or report an exemption already obtained from the Marketplace by completing Form 8965, Health Coverage Exemptions, and submitting it with your tax return.
Did not have coverage and were not eligible for an exemption from coverage for any month of the year
Are responsible for making an individual shared responsibility payment when you file your return.
Are responsible for making an individual shared responsibility payment
Will report it on your tax return and make the payment with your income taxes.
Need qualifying health care coverage for the current year
Can visit HealthCare.gov to find out about the dates of open and special enrollment periods for purchasing qualified health coverage.
Enroll in health insurance through the Marketplace for yourself or someone else on your tax return.
Might be eligible for the premium tax credit.

Received the benefit of more advance payments of the premium tax credit than the amount of credit for which you qualify on your tax return
Will repay the amount in excess of the credit you are allowed subject to a repayment cap.
Did not enroll in health insurance from the Marketplace for yourself or anyone else on your tax return
Cannot claim the premium tax credit.

Are eligible for the premium tax credit
Can choose when you enroll in coverage to get premium assistance sent to your insurer each month to lower your monthly payments or get all the benefit of the credit when you claim it on your tax return.
Are claiming the premium tax credit and did not benefit from advance payments of the premium tax credit
Must file a tax return and IRS Form 8962, Premium Tax Credit (PTC) and claim the credit on the line labeled - Net premium tax credit.
Choose to get premium assistance when you enroll in Marketplace coverage
Will have payments sent on your behalf - to your insurance provider. These payments are called advance payments of the premium tax credit.
Get the benefit of advance payments of the premium tax credit and experience a significant life change, such as a change in income or marital status
Should report these changes in circumstances to your Marketplace when they happen.
Get the benefit of advance payments of the premium tax credit
Will report the payments on your tax return and reconcile the amount of the payments with the amount of credit for which you are eligible.

Tuesday, January 3, 2017

Employers and Coverage Providers: 11 Facts About Health Care Information Forms

Under the Affordable Care Act, insurance companies, self-insured companies, and large businesses and businesses that provide health insurance to their employees must submit information returns to the IRS and individuals reporting on health coverage.

Taxpayers can use the information on these forms when they file their tax returns to verify the months that they had minimum essential coverage and determine if they satisfied the individual shared responsibility provision of the health care law. The IRS will use the information on the statements to verify the months of the individual’s coverage.

Here is some information about the types of forms, the purpose of each, and noteworthy dates

Form 1095-C, Employer-Provided Health Insurance Offer and Coverage
  •  This form is filed by applicable large employers, which generally are employers with 50 or more full-time employees, including full-time equivalents. • ALEs send this form to certain employees, with information about what coverage the employer offered.
  • Employers that offer health coverage referred to as “self-insured coverage” send this form to individuals they cover, with information about who was covered and when.
  • This form is submitted to the IRS with Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns.
  • The deadline for filing this form with the IRS is February 28, 2017, or March 31, 2017 if filing electronically.
  • The deadline for furnishing this form to the employee is March 2, 2017, which is a 30-day extension from the original due date of January 31.
Form 1095-B, Health Coverage Information Return

  • This form is filed by providers of minimum essential coverage, including employers that are not applicable large employers, but who offer employer-sponsored self-insured health coverage.
  • It is used to report information to covered individuals about each person enrolled in coverage – this form is sent to the person identified as the responsible individual on the form.
  • This form is submitted to the IRS with Form 1094-B, Transmittal of Health Coverage Information Returns.
  • The deadline for filing this form with the IRS is February 28, 2017, or March 31, 2017 if filing electronically.
  • The deadline for furnishing this form to the covered individual is March 2, 2017, which is a 30-day extension from the original due date of January 31.

IRS Taxes. Security. Together. Tax Tip Number 11: IRS, States, Industry Urge Taxpayers to Learn Signs of Identity Theft

No matter how careful you are, identity thieves may be able to steal your personal information. If this happens, thieves try to turn that data quickly into cash by filing fraudulent tax returns.

The IRS, state tax agencies and the nation’s tax industry ask for your help in their effort to combat identity theft and fraudulent returns. Working in partnership with you, we can make a difference.

That’s why we launched a public awareness campaign called “Taxes. Security. Together.” We’ve also started a new series of security awareness tips that can help protect you from cybercriminals.

Here are a few signs that you may be a victim of tax-related identity theft:
  1. Your attempt to file your tax return electronically is rejected. You get a message saying a return with a duplicate Social Security number has been filed. First, check to make sure you did not transpose any numbers. Also, make sure one of your dependents, for example, your college-age child, did not file a tax return and claim themselves. If your information is accurate, and you still can’t successfully e-file because of a duplicate SSN, you may be a victim of identity theft. You should complete Form 14039, Identity Theft Affidavit. Attach it to the top of a paper tax return and mail to the IRS.
  2. You receive a letter from the IRS asking you to verify whether you sent a tax return bearing your name and SSN. The IRS holds suspicious tax returns and sends taxpayers letters to verify them. If you did not file the tax return, follow the instructions in the IRS letter immediately.
  3. You receive income information at tax time from an employer unknown to you. Employment-related identity theft involves the use of your SSN by someone, generally an undocumented worker, for employment purposes only.
  4. You receive a tax refund that you did not request. You may receive a paper refund check by mail that the thief intended to have sent elsewhere. If you receive a tax refund you did not request, return it to the IRS. Write “VOID” in the endorsement section, and include a note on why you are returning it. If it is a direct deposit refund that you did not request, contact your bank and ask them to return it to the IRS. Search IRS.gov for “Returning an Erroneous Refund” for more information.
  5. You receive a tax transcript by mail that you did not request. Identity thieves sometimes try to test the validity of the personal data they have chosen or they attempt to use your data to steal even more information. If you receive a tax transcript in the mail and you did not request it, be alert to the possibility of identity theft.
  6. You receive a reloadable, pre-paid debit card in the mail that you did not request. Identity thieves sometimes use your name and address to create an account for a reloadable prepaid debit card that they use for various schemes, including tax-related identity theft. 
More information about tax-related identity theft can be found at Identity Protection: Prevention, Detection and Victim Assistance as well as the Taxpayer Guide to Identity Theft – all on IRS.gov.

The IRS, state tax agencies and the tax industry joined together as the Security Summit to enact a series of initiatives to help protect you from tax-related identity theft.

To learn additional steps you can take to protect your personal and financial data, visit Taxes. Security. Together. Also read Publication 4524, Security Awareness for Taxpayers.