Tuesday, December 27, 2016

IRS, Partners Move to Strengthen Anti-Fraud Effort with Form W-2 Verification Code

When you get your Form W-2 in early 2017, you may notice a new entry – a 16-digit verification code. This is part of an effort conducted by the Internal Revenue Service to protect taxpayers and strengthen anti-fraud efforts.

The expanded use of the W-2 Verification Code is a way to validate the wage and tax withholding information on the tax form. For taxpayers, taking a moment to add this code when filling out their taxes helps the IRS authenticate the information. This in turn helps protect against identity theft and unnecessary refund delays. 

For 2017, the IRS and its partners in the payroll service provider industry will place the code on 50 million Forms W-2. This is up from two million forms in 2016.

The IRS, state tax agencies and the nation’s tax industry – partners in combating identity theft – ask for your help in their efforts. Working in partnership with you, we can make a difference. 

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

One area where we need your help is with the W-2 Verification Code. If your W-2 contains the code, please enter it when prompted if using software to prepare your return. Or, please make sure your tax preparer enters it. 

If the code is not included, your tax return will still be accepted. However, initial results indicate the verification code shows promise in reducing tax fraud. It helps IRS processing systems authenticate the real taxpayer. Identity thieves sometimes file false Forms W-2 to support their fraudulent tax returns.

This initiative will affect only those Forms W-2 prepared by payroll service providers. The verification code’s location on the form will vary. Enter the code on electronically filed returns only. Most software providers will prompt you to enter the code.

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.

Friday, December 23, 2016

Tax Professionals Provide Insights on IRS Future State; Feedback Efforts Continue in 2017 as Online Account Shows Strong Early Use

WASHINGTON — As part of ongoing efforts to receive feedback from the tax community and partner groups, the Internal Revenue Service today said tax professionals attending the Nationwide Tax Forums this year highlighted a number of areas to help the agency shape Future State efforts to improve taxpayer service.

“This year’s Tax Forums were an excellent opportunity to discuss the IRS Future State with tax professionals and get their perspectives,” said IRS Commissioner John Koskinen. “Our Future State work continues to evolve, and this type of feedback is important to help us with this ongoing effort.”
IRS Tax Forums were held in five cities in 2016 with more than 10,700 tax professionals attending.

The IRS has been developing a “Future State” plan that envisions the taxpayer experience over the next five years and beyond. The initiative is designed to improve the IRS’s ability to fulfill its mission in the years to come. The IRS wants to enhance and expand services for all taxpayers, to provide the services they need whether in-person or on-line. The goal is to make interactions with the IRS more timely and easier for taxpayers and tax professionals.   A central component of the plan is the creation of online taxpayer accounts as a new option through which taxpayers will be able to obtain information from and interact with the IRS.

The Future State does not contemplate replacing current methods of customer service, such as phone assistance; rather it envisions finding alternative ways for people to receive the specific services they need.

Elements of the evolving Future State were displayed at an exhibit at each Tax Forum in 2016. Thousands of forum attendees visited the exhibit.

In a survey, the IRS asked tax professionals what changes in the Future State could have the biggest impact on the experience taxpayers have with the IRS. More than 1,300 tax professionals responded to the question. More than 30 percent of respondents cited enhanced support and tools for taxpayers and overall more than 20 percent cited agile, efficient and effective operations as the areas of greatest impact.

Another question asked tax professionals how they saw the Future State affecting their work. Nearly half of more than 600 tax professional respondents noted they saw the Future State expanding their role as a service partner.

The IRS will be using these results as well as other feedback to help guide ongoing work as well as prepare for next year’s Tax Forums. Throughout this year, the IRS has also been talking with a variety of groups across the agency’s business divisions to get insight and feedback about various changes taking place at the IRS. In addition, the IRS will continue to solicit input from partner groups about Future State efforts to help ensure the future direction of IRS changes reflects the needs of taxpayers as well as the greater tax community.

Forums are three-day events that provide tax professionals with the most up-to-date information on federal and state tax issues presented by experts from the IRS and partner organizations through a variety of training seminars and workshops. The forums were held during July, August and September.

Online Account Shows Strong Early Use

As part of the Tax Forums this year, tax professionals received a demonstration of the online tax account application.

Last month, the IRS went from the demo to an actual launch of the online tax account application on IRS.gov, which provides information to taxpayers with straightforward balance-owed inquiries in a secure, easy and convenient way. This new “Finding Out How Much You Owe” feature, paired with existing IRS online payment options, increases taxpayer self-service options.

In nearly four weeks since the launch of the online account, taxpayers have checked their account balance over 76,000 times. And taxpayers have used this new offering to make more than 8,600 tax payments, worth over $27.6 million, through the Direct Pay feature. Taxpayers have also completed more than 2,100 installment agreements through the Online Payment Agreement. In subsequent phases of the online account, the IRS will gradually add features, providing taxpayers with additional tax information and the ability to complete more tasks online.

“These expansions of our online services illustrate our Future State work. Part of our effort has been putting the infrastructure and technology in place to help make improved taxpayer service possible,” Koskinen said. “It’s important to keep in mind that the Future State is not a “big bang” initiative where everything is put in place all at once; rather the work on the new online account feature reflects our focus on careful, incremental steps to make sure each process works well. Feedback from the tax community is a critical part of that effort.”

Koskinen also noted that IRS employees remain a critical part of the Future State effort – especially in providing in-person service to taxpayers as well as tax professionals.

“While technology and new service options are important parts of Future State, you can’t overlook the continuing need to have in-person service available to taxpayers over the phone and in-person,” Koskinen said. “Our hope is that expanded online options will provide help to taxpayers who prefer that option, while also freeing up valuable resources for people who need help over the phone or in-person.” 

Many ITINs Expire Jan. 1; Renew Now to Avoid Refund Delays, IRS Says

WASHINGTON – Time is running out for many ITIN holders who need to file a federal income tax return in 2017 and want to avoid a long wait for a refund, according to the Internal Revenue Service.

An Individual Taxpayer Identification Number (ITIN) is used by anyone who has tax-filing or payment obligations under U.S. law but is not eligible for a Social Security number. Under a recent law change by Congress, any ITIN not used on a tax return at least once in the past three years will expire on Sunday, Jan. 1, 2017. In addition, any ITIN with middle digits of either 78 or 79 (9NN-78-NNNN or 9NN-79-NNNN) will also expire on that date.

This means that anyone with an expiring ITIN should act now to make sure they have a renewed ITIN in time to file a return during the upcoming tax season. Failure to do so will result in refund delays and possible loss of eligibility for some tax benefits until the ITIN is renewed.

The IRS said that an ITIN renewal application filed now will be processed before one submitted in January or February at the height of tax season. Currently, a complete and accurate renewal application can be processed in as little as seven weeks. But this timeframe is expected to lengthen to 11 weeks during tax season.

Several common errors are currently slowing down and holding up some ITIN renewal applications. The mistakes generally center on missing information, and/or insufficient supporting documentation. The IRS urges any applicant to check over their form carefully before sending it to the IRS.

To avoid processing delays, ITIN renewal applicants should be sure to use the latest version of Form W-7, revised September 2016. This version of the form, along with its instructions, is currently posted on IRS.gov.

To ensure prompt processing of the form, ITIN renewal applicants should also complete the following steps: 
  • At the top of the form, be sure to check the box that says, “Renew an existing ITIN.”
  • Under, “Reason you’re submitting Form W-7,” every applicant must check one of the eight boxes. If more than one applies, be sure to check the option that best describes the tax purpose for filing the application. Do not write, “ITIN renewal,” in this section of the form, as it is not a valid reason.
  • On Line 3, an applicant living outside the United States should enter their foreign address, if different from the mailing address on Line 2. If now living in the U.S., be sure to enter the foreign country of last residence. See the Form W-7 instructions for details.
  • Include original supporting and required identification documentation, or certified copies from the issuing agency to prove foreign status and identity.
Unlike in the past, only a passport with a U.S. entry date is now acceptable as a stand-alone identification document for dependents. This means that dependent ITIN applicants who use a passport without a date of entry must provide additional documentation, along with the passport, to prove U.S. residency. Acceptable documents include:
  • If under age 6, a U.S. medical record
  • If under age 18, a U.S. school record
  • If at least age 18, a U.S. school record for anyone who is a student.  Otherwise, anyone 18 and over can provide a rental or bank statement or a utility bill listing the applicant’s name and U.S. address.
Dependents from Canada, Mexico, or dependents of U.S. military personnel stationed overseas are exempt from these additional requirements.

ITIN renewal applicants can get help by visiting IRS.gov/ITIN, consulting a Certified Acceptance Agent or Acceptance Agent or making an appointment at an IRS Taxpayer Assistance Center (TAC). Here are details on each of these options:

  • IRS.gov: The IRS website has information in several languages to assist with the renewal process. This includes Form W-7 and its instructions. Be sure to fill out the form completely, attach required documentation and mail it to the IRS. The IRS returns documents to applicants via standard U.S. mail within 60 days of receipt and processing of the Form W-7.
  • Acceptance Agents: Certified Acceptance Agents and Acceptance Agents submit Forms W-7 on behalf of their clients. Rather than mailing the IRS important original documents, applicants have the option to work with an IRS authorized CAA. The CAAs review documentation for taxpayers and their spouses as well as passports and birth certificates for dependents. Acceptance Agents complete the Form W-7 and send the original documents or previously certified copies of the documents to IRS for processing.
  • IRS Taxpayer Assistance Centers: Applicants may submit W-7 applications in person with original documents at designated IRS Taxpayer Assistance Centers. Employees at designated TACs certify original and certified copies of passports, National ID cards and birth certificates. Service at the TACs is by appointment. Schedule an appointment by calling 844-545-5640. See IRS.gov for a list of designated TACs that offer ITIN document authentication services.

Wednesday, December 21, 2016

What to Know About Health Coverage Information Statements You May Receive in 2017

Many individuals will receive ACA information statements from their employer or coverage provider by early March in 2017 about their 2016 health insurance coverage:

·         Form 1095-B, Health Coverage

Here is information about these forms:

Sent to
Individuals who had health coverage for themselves or their family members that is not reported on Form 1095-A or Form 1095-C.
Sent by
Health Coverage Providers –
  • Insurance companies outside the Marketplace
  • Government agencies such as Medicare or CHIP
  • Employers who provide certain kinds of health coverage, which is sometimes referred to as “self-insured coverage,” but are not required to send Form 1095-C.
Other coverage providers
What to do with
This Form
This form provides information about your 2016 health coverage.

Use Form 1095-B for information on whether you and your family members had health coverage that satisfies the individual shared responsibility provision.

  • If Form 1095-B shows coverage for you and everyone in your family for the entire year, check the full-year coverage box on your tax return.
  • If there are months when you or your family members did not have coverage, determine if you qualify for an exemption or must make an individual shared responsibility payment.

You don’t need to wait for your Form 1095- B to file your tax return. Do not attach Form 1095-B to your tax return - keep it with your tax records. Contact the issuer if you have questions about your Form 1095-B.

Sent to
Certain employees of applicable large employers
Sent by
Applicable large employers – generally those with 50 or more full-time employees, including full-time equivalent employees 
What to do with
This Form
Form 1095-C provides information about the health coverage offered by your employer in 2016 and, in some cases, about whether you enrolled in this coverage.

Use Form 1095-C to help determine your eligibility for the premium tax credit.

  • If you enrolled in a health plan in the Marketplace, you may need the information in Part II of Form 1095-C to help determine your eligibility for the premium tax credit.
  •  If you did not enroll in a health plan in the Marketplace, the information in Part II of your Form 1095-C is not relevant to you.

Use Form 1095-C for information on whether you or any family members enrolled in certain kinds of coverage offered by your employer – sometimes referred to as “self-insured coverage”.
  • If Form 1095-C shows coverage for you and everyone in your family for the entire year, check the full-year coverage box on your tax return. 
  • If there are months when you or your family members did not have coverage, determine if you qualify for an exemption or must make an individual shared responsibility payment.

You don’t need to wait for your Form 1095- C to file your tax return. Do not attach Form 1095-C to your tax return - keep it with your tax records. Contact the issuer if you have questions about your Form 1095-B.

If you enrolled in coverage through the Marketplace, you will receive a Form Form 1095-A, Health Insurance Marketplace Statement. For more information about this form, see the Health Care Information Forms for Individuals questions and answers on IRS.gov/aca.

Tuesday, December 20, 2016

Tax Preparedness Series: IRS Face-To-Face Help Now By Appointment

This is the eighth in a series of reminders to help taxpayers prepare for the upcoming tax filing season.

WASHINGTON – As the tax filing season approaches, the Internal Revenue Service reminds taxpayers that an appointment is required for in-person tax help at all IRS Taxpayer Assistance Centers (TAC).

IRS TACs continue to be a vital part of the service IRS provides when a tax issue cannot be resolved on-line or by phone. All IRS TACs now provide face-to-face service by-appointment. Instead of taxpayers going directly to their local TAC, they can call 844-545-5640 to reach an IRS representative, who is trained to either help them resolve their issue or schedule an appointment for them to get the help they need.

The Contact Your Local Office tool on IRS.gov helps taxpayers find the closest IRS TAC, the days and hours of operation, and a list of services provided. Studies show most taxpayers visit a TAC to make payments, inquire about a notice, ask about a refund, get a transcript or obtain a tax form. Many of these issues can be resolved at IRS.gov without traveling to an IRS office.

Check Publication 5136, the IRS Services Guide for additional information on available services.

Don’t Wait In Line

Between January and mid-May 2016, taxpayers used IRS.gov nearly 349 million times to find tax information and assistance. But many taxpayers are not aware that in addition to various interactive tools, IRS.gov has resources and answers about many tax matters, some in Spanish.

Tax help is just a keystroke away using the Interactive Tax Assistant or Publication 17, Your Federal Income Tax, a comprehensive tax guide for individuals. The IRS Tax Map allows taxpayers to search by topic or keyword for information.

For more information, visit IRS.Gov/GetReady.

IRS Offers Tips on Validating Your Identity on Your Tax Return

You should always keep a copy of your tax return. It is even more important for 2017, as the Internal Revenue Service moves to strengthen its e-signature validation process.

You must use your 2015 adjusted gross income or your 2015 self-select PIN to validate your identity on your federal electronic tax return this tax season. The electronic filing PIN is no longer available as an option.

The IRS, state tax agencies and the nation’s tax industry – partners in combating identity theft -ask for your help in their efforts. Working in partnership with you, we can make a difference.

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

As part of the IRS efforts to protect taxpayers, the e-signature validation change mostly affects those taxpayers who have used tax software in the past but are changing software brands in 2017. If that’s you, learn more about how to verify your identity and electronically sign your tax return at Validating Your Electronically Filed Tax Return.

Here are a few important steps:
  1. Find a copy of your 2015 tax return; the original return filed with the IRS.
  2. Create a five-digit Self-Select PIN to serve as your electronic signature. It can be any five numbers except all zeros.
  3. If married filing jointly, each taxpayer must create a self-select PIN.
  4. Provide your date of birth when prompted
  5. Provide either your 2015 adjusted gross income or your 2015 self-select PIN as the “shared secret” between you and the IRS. Either number, along with your date of birth, will serve to help validate your identity and verify your e-signature.
  6. On your 2015 tax return, your adjusted gross income (AGI) is on line 37 of the Form 1040; line 21 on the Form 1040-A or line 4 on the Form 1040-EZ.
This change will not affect most taxpayers. For example, if you are a returning customer, your software generally will automatically populate your date of birth and “shared secret” information. Those of you who switched software products generally must enter the “shared secret” information yourself.

If you don’t have a copy of your 2015 tax return, you may be able to get a copy from your prior-year software provider. If your software account is still active, you may be able to view your 2015 federal return to find your AGI. Or, you may ask your prior-year tax preparer for a copy if you had your return prepared professionally. If those are not options, you may use a Get Transcript self-help tool on IRS.gov to get a Tax Return Transcript showing your AGI.

Use Get Transcript Online to immediately view your AGI. You must pass the Secure Access identity verification process. Select the “Tax Return Transcript” and use only the “Adjusted Gross Income” line entry.

Use Get Transcript by Mail or call 800-908-9946 if you cannot pass Secure Access and need to request a Tax Return Transcript. Please allow five to 10 days for delivery. Use only the “Adjusted Gross Income” line entry.

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. You can help by taking these basic steps.

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

Monday, December 19, 2016

CURE Act and Year End Law Changes

The end of 2016 has seen a flurry of last minute Tax bills signed by the President and IRS Notices updating various items. The big change of course is the new CURE Act which makes sweeping modifications of small business health care plans for 2017.
  • The 21st Century Cure Act allows a new small business HRA for qualified reimbursements of medical costs starting 01/01/2017, with a waiver of the $100 daily penalty prior to that date for many plans. The new rules allow, within guidelines, employers to reimburse up to $10,000 family ($4,950 individual) in annual costs for employee insurance and medical care. Many planning opportunities are available for small businesses, but several traps also apply such as an inability to reimburse employees who choose not to participate in an employee sponsored group plan.
  • In Notice 2016-79, the IRS issued the 2017 optional standard mileage rates used to calculate the deductible cost of operating an automobile for business, charitable, medical or moving expenses. The IRS also issued the amount taxpayers must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, as well as the maximum standard automobile cost that may be used in computing the allowance under a fixed and variable rate plan. Beginning on January 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 driven for business purposes;
    • 17 cents per mile for medical or moving purposes; and
    • 14 cents per mile driven in service of charitable organizations.
  • In IRS Info 2016-0051, the IRS advised that because participation in a healthcare sharing ministry is not employer-provided coverage under an accident or health plan, an employer's payment to the HCSM will be taxable income and wages to the employee.
  • On 12/16/2016, the President signed the Combat-Injured Veterans Tax Fairness Act which extends the time that veterans who were separated from service for combat-related injuries and that had taxes improperly withheld from their severance pay, have to file amended returns and claim refunds for such taxes.
The Combat-Injured Veterans Tax Fairness Act of 2016 directs the Department of Defense (DOD) to identify certain severance payments to veterans with combat-related injuries paid after January 17, 1991 from which DOD withheld amounts for tax purposes. Once such veterans are identified, the DOD must provide the identified veteran with a notice of the amount of improperly withheld severance payments, and instructions for filing amended tax returns to recover such amount.

While the statute of limitations for  filing a refund claim is generally three years from the date the return is due or the date the return is filed, the Veterans Tax Fairness Act of 2016 extends the period of time for filing a severance-related claim to the date that is one year after DOD provides the veteran with the relevant information to file an amended return. The Act further requires that, in the future, the DOD ensure that amounts are not withheld for tax purposes from DOD severance payments to individuals when such payments are not considered gross income.

Thursday, December 15, 2016

Plan Now to Get Full Benefit of Saver’s Credit; Tax Credit Helps Low- and Moderate-Income Workers Save for Retirement

This is the seventh in a series of reminders to help taxpayers prepare for the upcoming tax filing season.

WASHINGTON — As the tax filing season approaches, the Internal Revenue Service reminds low- and moderate-income workers that they can take steps now to save for retirement and earn a special tax credit in 2016 and years ahead.

The saver’s credit helps offset part of the first $2,000 workers voluntarily contribute to IRAs and 401(k) plans and similar workplace retirement programs. Also known as the retirement savings contributions credit, the saver’s credit is available in addition to any other tax savings that apply.

Eligible workers still have time to make qualifying retirement contributions and get the saver’s credit on their 2016 tax returns. People have until the due date for filing their 2016 return (April 18, 2017), to set up a new individual retirement arrangement or add money to an existing IRA for 2016. This includes the Treasury Department’s myRA. However, elective deferrals (contributions) must be made by the end of the year to a 401(k) plan or similar workplace program, such as a 403(b) plan for employees of public schools and certain tax-exempt organizations, a governmental 457 plan for state or local government employees, or the Thrift Savings Plan for federal employees.

Employees who are unable to set aside money for this year may want to schedule their 2017 contributions soon so their employer can begin withholding them in January.

The saver’s credit can be claimed by:
  • Married couples filing jointly with incomes up to $61,500 in 2016 or $62,000 in 2017;
  • Heads of Household with incomes up to $46,125 in 2016 or $46,500 in 2017; and
  • Married individuals filing separately and singles with incomes up to $30,750 in 2016 or $31,000 in 2017.
Like other tax credits, the saver’s credit can increase a taxpayer’s refund or reduce the tax owed. Though the maximum saver’s credit is $1,000 ($2,000 for married couples), the IRS cautioned that it is often much less and, due in part to the impact of other deductions and credits, may, in fact, be zero for some taxpayers.

A taxpayer’s credit amount is based on his or her filing status, adjusted gross income, tax liability and amount contributed to qualifying retirement programs. Form 8880 is used to claim the saver’s credit, and its instructions have details on figuring the credit correctly.

In tax year 2014, the most recent year for which complete figures are available, saver’s credits totaling nearly $1.4 billion were claimed on more than 7.9 million individual income tax returns.

The saver’s credit supplements other tax benefits available to people who set money aside for retirement. For example, most workers may deduct their contributions to a traditional IRA. Though Roth IRA contributions are not deductible, qualifying withdrawals, usually after retirement, are tax-free. Normally, contributions to 401(k) and similar workplace plans are not taxed until withdrawn.

Other special rules that apply to the saver’s credit include the following:

  • Eligible taxpayers must be at least 18 years of age.
  • Anyone claimed as a dependent on someone else’s return cannot take the credit.
  • A student cannot take the credit. A person enrolled as a full-time student during any part of 5 calendar months during the year is considered a student.
  • Certain retirement plan distributions reduce the contribution amount used to figure the credit. For 2016, this rule applies to distributions received after 2013 and before the due date, including extensions, of the 2016 return. Form 8880 and its instructions have details on making this computation.

Wednesday, December 14, 2016

The Health Care Law & Your Taxes: Not Too Early to Determine if You Qualify for Exemption

With the 2017 tax filing season approaching, it’s not too early to think about how the health care law affects your taxes. The Affordable Care Act requires you and each member of your family to do at least one of the following:
  • Have qualifying health coverage called minimum essential coverage
  • Qualify for a health coverage exemption
  • Make a shared responsibility payment with your federal income tax return for the months that you did not have coverage or an exemption
If you meet certain criteria for the tax year, you may be exempt from the requirement to have minimum essential coverage. You will not have to make a shared responsibility payment for any month that you are exempt. Instead, you'll file Form 8965, Health Coverage Exemptions, with your federal income tax return. For any month that you do not qualify for a coverage exemption, you will need to have minimum essential coverage or make a shared responsibility payment.   You may be exempt if you meet one of the following:
  • The lowest-cost coverage available to you is considered unaffordable
  • You have a gap in coverage that is less than 3 consecutive months
  • You qualify for an exemption for one of several other reasons, including having a hardship that prevents you from obtaining coverage, or belonging to a group specifically exempt from the coverage requirement
The Federally-facilitated Marketplace is no longer granting exemptions for members of a health care sharing ministry, members of Indian Tribes, and incarceration. Eligible individuals can still claim these exemptions on a tax return. For a full list of exemptions and how to claim them, see our Individual Shared Responsibility Provision – Exemptions: Claiming or Reporting page on IRS.gov/aca.

Find out if you’re eligible for a coverage exemption or must make a payment by using our interactive tool, Am I eligible for a coverage exemption or required to make an Individual Shared Responsibility Payment?

Federal tax returns that do not reflect at least one of these options – reporting health care coverage, claiming a coverage exemption or reporting a shared responsibility payment -  will be rejected if the return is filed electronically. If filed on paper,tax  returns that do not reflect at least one of these options will take longer to process and any refunds will be delayed.You should respond promptly to IRS correspondence about your health care coverage.

Tax Preparedness Series: What To Do Before The Tax Year Ends Dec. 31

This is the sixth in a series of reminders to help taxpayers prepare for the upcoming tax filing season.

WASHINGTON – As tax filing season approaches, the Internal Revenue Service is reminding taxpayers there are things they should do now to get ready for filing season.

For most taxpayers, Dec. 31 is the last day to take actions that will impact their 2016 tax returns. For example, charitable contributions are deductible in the year made. Donations charged to a credit card before the end of 2016 count for the 2016 tax year, even if the bill isn’t paid until 2017. Checks to a charity count for 2016 as long as they are mailed  by the last day of the year.

Taxpayers who are over age 70 ½ are generally required to receive payments from their individual retirement accounts and workplace retirement plans by the end of 2016, though a special rule allows those who reached 70 ½ in 2016 to wait until April 1, 2017 to receive them. Most workplace retirement account contributions should be made by the end of the year, but taxpayers can make 2016 IRA contributions until April 18, 2017. For 2016, the limit for a 401(k) is $18,000. For traditional and Roth IRAs, the limit is $6,500 if age 50 or older and up to $15,500 for a Simple IRA for age 50 or older.

Taxpayers who have moved should tell the US Postal Service, their employers and the IRS. To notify the IRS, mail IRS Form 8822, Change of Address, to the address listed on the form’s instructions. For taxpayers who purchase health insurance through the Health Insurance Marketplace, they should also notify the Marketplace when they move out of the area covered by their current Marketplace plan.

For name changes due to marriage or divorce, notify the Social Security Administration (SSA) so the new name will match IRS and SSA records. Also notify the SSA if a dependent’s name changed.  A mismatch between the name shown on your tax return and the SSA records can cause problems in the processing of your return and may even delay your refund.

Effective Jan. 1, 2017, any Individual Taxpayer Identification Number (ITIN) not used at least once on a tax return in the past three years will no longer be valid for use on a return. In addition, an ITIN with middle digits 78 or 79 will also expire on Jan. 1. Those with expiring ITINs who need to file a return in 2017 must renew their ITIN. Affected ITIN holders can avoid delays by starting the renewal process now.

Taxpayers should allow seven weeks from Jan. 1, 2017, or the mailing date of the Form W-7, whichever is later, for the IRS to notify them of their ITIN application status - nine to 11 weeks if taxpayers wait to submit Form W-7 during the peak filing season, or send it from overseas. Those who fail to renew before filing a return could face a delayed refund and may be ineligible for some important tax credits. For more information, including answers to frequently-asked questions, visit the ITIN information page on IRS.gov.

Keeping copies of tax returns is important as the IRS makes changes to protect taxpayers and authenticate their identity. Beginning in 2017, taxpayers using a software product for the first time may need their Adjusted Gross Income amount from a prior tax return to verify their identity. Taxpayers can learn more about how to verify their identity and electronically sign their tax return at Validating Your Electronically Filed Tax Return.

For more information visit IRS.gov.

Thursday, December 8, 2016

IRS Warns Taxpayers of Numerous Tax Scams Nationwide; Provides Summary of Most Recent Schemes

WASHINGTON — As tax season approaches, the Internal Revenue Service, the states and the tax industry reminded taxpayers to be on the lookout for an array of evolving tax scams related to identity theft and refund fraud.

Every tax season, there is an increase in schemes that target innocent taxpayers by email, by phone and on-line. The IRS and Security Summit partners remind taxpayers and tax professionals to be on the lookout for these deceptive schemes.

“Whether it's during the holidays or the approach of tax season, scam artists look for ways to use tax agencies and the tax industry to trick and confuse people,” said IRS Commissioner John Koskinen. “There are warning signs to these scams people should watch out for, and simple steps to avoid being duped into giving these criminals money, sensitive financial information or access to computers."

This marks the fourth reminder to taxpayers during the “National Tax Security Awareness Week.” This week, the IRS, the states and the tax community are sending out a series of reminders to taxpayers and tax professionals as part of the ongoing Security Summit effort.

Some of the most prevalent IRS impersonation scams include:

Requesting fake tax payments: The IRS has seen automated calls where scammers leave urgent callback requests telling taxpayers to call back to settle their “tax bill.” These fake calls generally claim to be the last warning before legal action is taken. Taxpayers may also receive live calls from IRS impersonators. They may demand payments on prepaid debit cards, iTunes and other gift cards or wire transfer. The IRS reminds taxpayers that any request to settle a tax bill using any of these payment methods is a clear indication of a scam. (IR-2016-99)

Targeting students and parents and demanding payment for a fake “Federal Student Tax”: Telephone scammers are targeting students and parents demanding payments for fictitious taxes, such as the “Federal Student Tax.” If the person does not comply, the scammer becomes aggressive and threatens to report the student to the police to be arrested. (IR-2016-107)

Sending a fraudulent IRS bill for tax year 2015 related to the Affordable Care Act: The IRS has received numerous reports around the country of scammers sending a fraudulent version of CP2000 notices for tax year 2015. Generally, the scam involves an email or letter that includes the fake CP2000. The fraudulent notice includes a payment request that taxpayers mail a check made out to “I.R.S.” to the “Austin Processing Center” at a Post Office Box address. (IR-2016-123)

Soliciting W-2 information from payroll and human resources professionals:  Payroll and human resources professionals should be aware of phishing email schemes that pretend to be from company executives and request personal information on employees. The email contains the actual name of the company chief executive officer. In this scam, the “CEO” sends an email to a company payroll office employee and requests a list of employees and financial and personal information including Social Security numbers (SSN). (IR-2016-34)

Imitating software providers to trick tax professionals: Tax professionals may receive emails pretending to be from tax software companies. The email scheme requests the recipient download and install an important software update via a link included in the e-mail. Upon completion, tax professionals believe they have downloaded a software update when in fact they have loaded a program designed to track the tax professional’s key strokes, which is a common tactic used by cyber thieves to steal login information, passwords and other sensitive data. (IR-2016-103)

“Verifying” tax return information over the phone: Scam artists call saying they have your tax return, and they just need to verify a few details to process your return. The scam tries to get you to give up personal information such as a SSN or personal financial information, including bank numbers or credit cards. (IR-2016-40)

Pretending to be from the tax preparation industry: The emails are designed to trick taxpayers into thinking these are official communications from the IRS or others in the tax industry, including tax software companies. The phishing schemes can ask taxpayers about a wide range of topics. E-mails or text messages can seek information related to refunds, filing status, confirming personal information, ordering transcripts and verifying PIN information. (IR-2016-28)

If you receive an unexpected call, unsolicited email, letter or text message from someone claiming to be from the IRS, here are some of the tell-tale signs to help protect yourself.

The IRS Will Never:
  • Call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer or initiate contact by e-mail or text message. Generally, the IRS will first mail you a bill if you owe any taxes.
  • Threaten to immediately bring in local police or other law-enforcement groups to have you arrested for not paying.
  • Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
  •  Ask for credit or debit card numbers over the phone.
If you get a suspicious phone call from someone claiming to be from the IRS and asking for money, here’s what you should do:
  • Do not give out any information. Hang up immediately.
  • Search the web for telephone numbers scammers leave in your voicemail asking you to call back. Some of the phone numbers may be published online and linked to criminal activity.
  • Contact TIGTA to report the call. Use their “IRS Impersonation Scam Reporting” web page or call 800-366-4484.
  • Report it to the Federal Trade Commission. Use the “FTC Complaint Assistant” on FTC.gov. Please add “IRS Telephone Scam” in the notes.
  • If you think you might owe taxes, call the IRS directly at 800-829-1040.
If you receive an unsolicited email that appears to be from either the IRS or an organization closely linked to the IRS, such as the Electronic Federal Tax Payment System (EFTPS), report it by sending it to phishing@irs.gov.

The IRS also provides a variety of resources for tax professionals about security threats posed by identity theft issues targeting the industry through its Protect Your Clients; Protect Yourself campaign.

Additional IRS Resources

IRS, Partners Urge Taxpayers to Beware of IRS Impersonations and Tax Scams

If you get a call from the “IRS” threatening you with lawsuits or jail unless you pay up immediately … Guess what? It’s a scam.

IRS impersonation and tax scams by phone, email, postal mail and text are ongoing. Criminals use more  and more creative ploys to trick taxpayers and tax preparers. Don’t be a victim.

The IRS, state tax agencies and the private-sector tax industry are asking for your help in the effort to combat identity theft and fraudulent returns. Working in partnership with you, we can make a difference.

That’s why for the second year in a row, we launched a public awareness campaign that we call “Taxes. Security. Together.” And, we’ve launched a series of security awareness tips that can help protect you from cybercriminals.

The IRS doesn't initiate contact with taxpayers by email, text message or social media channels to request personal or financial information. This includes requests for PIN numbers, passwords or similar access information for credit cards, banks or other financial accounts.

Here are five things the scammers often do but the IRS will not do. Any one of these five things is a tell-tale sign of a scam.

The IRS will never:
  • Call to demand immediate payment, nor will the agency call about taxes owed without first having mailed you a bill.
  • Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
  • Require you to use a specific payment method for your taxes, such as a prepaid debit card.
  • Ask for credit or debit card numbers over the phone.
  • Threaten to bring in local police or other law-enforcement groups to have you arrested for not paying.
If you get a phone call from someone claiming to be from the IRS and asking for money, here’s what you should do:

If you don’t owe taxes, or have no reason to think that you do:
  • Do not give out any information. Hang up immediately.
  • Contact TIGTA to report the call. Use their “IRS Impersonation Scam Reporting” web page. You can also call 800-366-4484.
  • Report it to the Federal Trade Commission. Use the “FTC Complaint Assistant” on FTC.gov. Please add "IRS Telephone Scam" in the notes.
If you know you owe, or think you may owe tax:
  • Call the IRS at 800-829-1040. IRS workers can help you.
Stay alert to scams that use the IRS as a lure. Tax scams can happen any time of year, not just at tax time. For more, visit “Tax Scams and Consumer Alerts” on IRS.gov.

Wednesday, December 7, 2016

A Series of Yes-or-No Questions help you Determine Eligibility for the Premium Tax Credit

The premium tax credit – also known simply as PTC –  is a credit for certain people who enroll, or whose family member enrolls, in a qualified health plan offered through a Health Insurance Marketplace. Answer the yes-or-no questions in the chart – or via accessible text – and follow the arrows to find out if you may be eligible for the premium tax credit.

The current open season with the Health Insurance Marketplace is underway and runs through Jan. 31, 2017. You must enroll by Dec. 15, 2016 to have coverage begin on January 1, 2017.

Here are links to information and resources referenced in the graphic: