The new health care law enacted this year eliminates the old ability to create discriminatory health insurance plans which were used by many one-owner and husband-and-wife-owned businesses. However, existing discriminatory plans are grandfathered by the law and allowed to continue discriminate as before.
Our article, New Law Grandfathers Discriminatory Health Insurance, will help you determine if your business can continue to discriminate with its health insurance.
What Is Discriminatory Health Insurance?
One-owner businesses with employees usually avoided the Section 105 medical reimbursement plan because of its anti-discrimination rules that required coverage of all employees.
To get around covering all the employees, many one-owner businesses established a plan based on health insurance that permits certain types of discrimination.
Under such a discriminatory health insurance plan, the business covers select employees with health insurance while providing no insurance for other employees. Tax law allows a deduction for such a plan.
The Patient Protection and Affordable Care Act (2010 Health Care Act), P.L. 111-148, and the Health Care and Education Reconciliation Act of 2010 (2010 Reconciliation Act), P.L. 111-152, establish new discrimination guidelines that apply the Section 105 discrimination rules to insurance plans that are not grandfathered plans.
Protect Your Grandfathered Status
To maintain status as a discriminatory grandfathered health plan, your business health insurance coverage must include a statement to the plan participant that you, the employer, believe the benefits under the plan are grandfathered within the meaning of Section 1251 of the Patient Protection and Affordable Care Act.
You must also maintain records that document the coverage in effect on March 23, 2010, and any other documents necessary to verify, explain, or clarify the plan's status as a grandfathered health plan. Such records must be available for examination by the IRS upon request.
Friday, August 13, 2010
Five Tax Tips for Recently Married Taxpayers
Are you getting married this summer? If you recently got married or are planning a wedding, the last thing on your mind is taxes. However, there are some important steps you need to take to avoid stress at tax time. Here are five tips from the IRS for newlyweds to keep in mind.
1. Notify the Social Security Administration Report any name change to the Social Security Administration, so your name and Social Security Number will match when you file your next tax return. Informing the SSA of a name change is quite simple. File a Form SS-5, Application for a Social Security Card, at your local SSA office. The form is available on SSA’s website at www.socialsecurity.gov, by calling 800-772-1213 or at local offices.
2. Notify the IRS If you have a new address you should notify the IRS by sending Form 8822, Change of Address. You may download Form 8822 from IRS.gov or order it by calling 800–TAX–FORM (800–829–3676).
3. Notify the U.S.Postal Service You should also notify the U.S. Postal Service when you move so it can forward any IRS correspondence.
4. Notify Your Employer Report any name and address changes to your employer(s) to make sure you receive your Form W-2, Wage and Tax Statement, after the end of the year.
5. Check Your Withholding If both you and your spouse work, your combined income may place you in a higher tax bracket. You can use the IRS Withholding Calculator available on IRS.gov to assist you in determining the correct amount of withholding needed for your new filing status. The IRS Withholding Calculator will even provide you with a new Form W-4, Employee's Withholding Allowance Certificate, you can print out and give to your employer so they can withhold the correct amount from your pay.
1. Notify the Social Security Administration Report any name change to the Social Security Administration, so your name and Social Security Number will match when you file your next tax return. Informing the SSA of a name change is quite simple. File a Form SS-5, Application for a Social Security Card, at your local SSA office. The form is available on SSA’s website at www.socialsecurity.gov, by calling 800-772-1213 or at local offices.
2. Notify the IRS If you have a new address you should notify the IRS by sending Form 8822, Change of Address. You may download Form 8822 from IRS.gov or order it by calling 800–TAX–FORM (800–829–3676).
3. Notify the U.S.Postal Service You should also notify the U.S. Postal Service when you move so it can forward any IRS correspondence.
4. Notify Your Employer Report any name and address changes to your employer(s) to make sure you receive your Form W-2, Wage and Tax Statement, after the end of the year.
5. Check Your Withholding If both you and your spouse work, your combined income may place you in a higher tax bracket. You can use the IRS Withholding Calculator available on IRS.gov to assist you in determining the correct amount of withholding needed for your new filing status. The IRS Withholding Calculator will even provide you with a new Form W-4, Employee's Withholding Allowance Certificate, you can print out and give to your employer so they can withhold the correct amount from your pay.
Wednesday, August 11, 2010
Seven Facts about the Nonbusiness Energy Property Credit
Thinking about making some energy saving improvements to your home this summer? Taking some energy saving steps now may lead to bigger tax savings next year. The Nonbusiness Energy Property Credit, a tax credit for making energy efficient improvements to homes was increased as part of the American Recovery and Reinvestment Act of 2009.
Here are seven things the IRS wants you to know about the Nonbusiness Energy Property Credit:
1. The new law increases the credit rate to 30 percent of the cost of all qualifying improvements and raises the maximum credit limit to $1,500 claimed for 2009 and 2010 combined.
2. The credit applies to improvements such as adding insulation, energy-efficient exterior windows and energy-efficient heating and air conditioning systems.
3. To qualify as “energy efficient” for purposes of this tax credit, products generally must meet higher standards than the standards for the credit that was available in 2007.
4. Manufacturers must certify that their products meet new standards and they must provide a written statement to the taxpayer such as with the packaging of the product or in a printable format on the manufacturers’ Website.
5. Qualifying improvements must be placed into service after December 31, 2008, and before January 1, 2011.
6. The improvements must be made to the taxpayer’s principal residence located in the United States.
7. To claim the credit, attach Form 5695, Residential Energy Credits to either the 2009 or 2010 tax return. Taxpayers must claim the credit on the tax return for the year that the improvements are made.
Homeowners who have been considering some energy efficient home improvements may find these tax credits will get them bigger tax savings next year.
For more information on this and other key tax provisions of the Recovery Act, visit IRS.gov/recovery.
Here are seven things the IRS wants you to know about the Nonbusiness Energy Property Credit:
1. The new law increases the credit rate to 30 percent of the cost of all qualifying improvements and raises the maximum credit limit to $1,500 claimed for 2009 and 2010 combined.
2. The credit applies to improvements such as adding insulation, energy-efficient exterior windows and energy-efficient heating and air conditioning systems.
3. To qualify as “energy efficient” for purposes of this tax credit, products generally must meet higher standards than the standards for the credit that was available in 2007.
4. Manufacturers must certify that their products meet new standards and they must provide a written statement to the taxpayer such as with the packaging of the product or in a printable format on the manufacturers’ Website.
5. Qualifying improvements must be placed into service after December 31, 2008, and before January 1, 2011.
6. The improvements must be made to the taxpayer’s principal residence located in the United States.
7. To claim the credit, attach Form 5695, Residential Energy Credits to either the 2009 or 2010 tax return. Taxpayers must claim the credit on the tax return for the year that the improvements are made.
Homeowners who have been considering some energy efficient home improvements may find these tax credits will get them bigger tax savings next year.
For more information on this and other key tax provisions of the Recovery Act, visit IRS.gov/recovery.
Monday, August 9, 2010
Top 10 Things Every Taxpayer Should Know about Identity Theft
Taxpayers need to be careful to protect their personal information. Identity thieves use many methods to steal personal information and then they use the information to file a tax return and get a refund. Here are 10 things the IRS wants you to know about identity theft so you can avoid becoming the victim of an identity thief.
1. The IRS does not initiate contact with a taxpayer by e-mail.
2. If you receive a scam e-mail claiming to be from the IRS, forward it to the IRS at phishing@irs.gov.
3. Identity thieves get your personal information by many different means, including:
• Stealing your wallet or purse
• Posing as someone who needs information about you through a phone call or e-mail
• Looking through your trash for personal information
• Accessing information you provide to an unsecured Internet site.
4. If you discover a website that claims to be the IRS but does not begin with ‘www.irs.gov’, forward that link to the IRS at phishing@irs.gov.
5. To learn how to identify a secure website, visit the Federal Trade Commission at www.onguardonline.gov/tools/recognize-secure-site-using-ssl.aspx.
6. If your Social Security number is stolen, another individual may use it to get a job. That person’s employer may report income earned by them to the IRS using your Social Security number, thus making it appear that you did not report all of your income on your tax return.
7. Your identity may have been stolen if a letter from the IRS indicates more than one tax return was filed for you or the letter states you received wages from an employer you don’t know. If you receive such a letter from the IRS, leading you to believe your identity has been stolen, respond immediately to the name, address or phone number on the IRS notice.
8. If your tax records are not currently affected by identity theft, but you believe you may be at risk due to a lost wallet, questionable credit card activity, or credit report, you need to provide the IRS with proof of your identity. You should submit a copy of your valid government-issued identification – such as a Social Security card, driver’s license, or passport – along with a copy of a police report and/or a completed Form 14039, Identity Theft Affidavit. As an option, you can also contact the IRS Identity Protection Specialized Unit, toll-free at 800-908-4490. You should also follow FTC guidance for reporting identity theft at www.ftc.gov/idtheft.
9. Show your Social Security card to your employer when you start a job or to your financial institution for tax reporting purposes. Do not routinely carry your card or other documents that display your Social Security number.
10. For more information about identity theft – including information about how to report identity theft, phishing and related fraudulent activity – visit the IRS Identity Theft and Your Tax Records Page, which you can find by searching “Identity Theft” on the IRS.gov home page.
1. The IRS does not initiate contact with a taxpayer by e-mail.
2. If you receive a scam e-mail claiming to be from the IRS, forward it to the IRS at phishing@irs.gov.
3. Identity thieves get your personal information by many different means, including:
• Stealing your wallet or purse
• Posing as someone who needs information about you through a phone call or e-mail
• Looking through your trash for personal information
• Accessing information you provide to an unsecured Internet site.
4. If you discover a website that claims to be the IRS but does not begin with ‘www.irs.gov’, forward that link to the IRS at phishing@irs.gov.
5. To learn how to identify a secure website, visit the Federal Trade Commission at www.onguardonline.gov/tools/recognize-secure-site-using-ssl.aspx.
6. If your Social Security number is stolen, another individual may use it to get a job. That person’s employer may report income earned by them to the IRS using your Social Security number, thus making it appear that you did not report all of your income on your tax return.
7. Your identity may have been stolen if a letter from the IRS indicates more than one tax return was filed for you or the letter states you received wages from an employer you don’t know. If you receive such a letter from the IRS, leading you to believe your identity has been stolen, respond immediately to the name, address or phone number on the IRS notice.
8. If your tax records are not currently affected by identity theft, but you believe you may be at risk due to a lost wallet, questionable credit card activity, or credit report, you need to provide the IRS with proof of your identity. You should submit a copy of your valid government-issued identification – such as a Social Security card, driver’s license, or passport – along with a copy of a police report and/or a completed Form 14039, Identity Theft Affidavit. As an option, you can also contact the IRS Identity Protection Specialized Unit, toll-free at 800-908-4490. You should also follow FTC guidance for reporting identity theft at www.ftc.gov/idtheft.
9. Show your Social Security card to your employer when you start a job or to your financial institution for tax reporting purposes. Do not routinely carry your card or other documents that display your Social Security number.
10. For more information about identity theft – including information about how to report identity theft, phishing and related fraudulent activity – visit the IRS Identity Theft and Your Tax Records Page, which you can find by searching “Identity Theft” on the IRS.gov home page.
Do You Need to Amend Your Return?
If you forgot to include some income or to take a deduction on your tax return – you can correct it by amending your tax return.
In some cases, you do not need to amend your tax return. The Internal Revenue Service usually corrects math errors or requests missing forms – such as W-2s or schedules – when processing an original return. In these instances, do not amend your return.
However, you should file an amended return if any of the following were reported incorrectly:
• Your filing status
• Your dependents
• Your total income
• Your deductions or credits
You may also elect to amend your 2009 return if you are eligible to claim the first-time homebuyer credit for a qualified 2010 home purchase. The amended tax return will allow you to claim the homebuyer credit on your 2009 return without waiting until next year to claim it on the 2010 return.
Use Form 1040X, Amended U.S. Individual Income Tax Return, to correct a previously filed Form 1040, 1040A or 1040EZ. Be sure to check the box for the year of the return you are amending on the Form 1040X, Line B. If you are amending more than one tax return, prepare a 1040X for each return and mail them in separate envelopes to the appropriate IRS processing center.. The 1040X instructions list the addresses for the centers.
The newly revised Form 1040X (Rev. January 2010) now has only one column used to show the corrected figures. There is an area on the front of the form where you explain why you are filing Form 1040X.
If the changes involve other schedules or forms, attach them to the Form 1040X. For example, if you are filing a 1040X because you have a qualifying child and now want to claim the Earned Income Credit, you must attach a Schedule EIC, Earned Income Credit to show the qualifying person's name, year of birth and Social Security number.
If you are filing to claim an additional refund, wait until you have received your original refund before filing Form 1040X. You may cash that check while waiting for any additional refund. If you owe additional tax for 2009, you should file Form 1040X and pay the tax as soon as possible to limit interest and penalty charges. Interest is charged on any tax not paid by the due date of the original return, without regard to extensions.
Generally, to claim a refund, you must file Form 1040X within three years from the date you filed your original return or within two years from the date you paid the tax, whichever is later.
Form 1040X and instructions are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
In some cases, you do not need to amend your tax return. The Internal Revenue Service usually corrects math errors or requests missing forms – such as W-2s or schedules – when processing an original return. In these instances, do not amend your return.
However, you should file an amended return if any of the following were reported incorrectly:
• Your filing status
• Your dependents
• Your total income
• Your deductions or credits
You may also elect to amend your 2009 return if you are eligible to claim the first-time homebuyer credit for a qualified 2010 home purchase. The amended tax return will allow you to claim the homebuyer credit on your 2009 return without waiting until next year to claim it on the 2010 return.
Use Form 1040X, Amended U.S. Individual Income Tax Return, to correct a previously filed Form 1040, 1040A or 1040EZ. Be sure to check the box for the year of the return you are amending on the Form 1040X, Line B. If you are amending more than one tax return, prepare a 1040X for each return and mail them in separate envelopes to the appropriate IRS processing center.. The 1040X instructions list the addresses for the centers.
The newly revised Form 1040X (Rev. January 2010) now has only one column used to show the corrected figures. There is an area on the front of the form where you explain why you are filing Form 1040X.
If the changes involve other schedules or forms, attach them to the Form 1040X. For example, if you are filing a 1040X because you have a qualifying child and now want to claim the Earned Income Credit, you must attach a Schedule EIC, Earned Income Credit to show the qualifying person's name, year of birth and Social Security number.
If you are filing to claim an additional refund, wait until you have received your original refund before filing Form 1040X. You may cash that check while waiting for any additional refund. If you owe additional tax for 2009, you should file Form 1040X and pay the tax as soon as possible to limit interest and penalty charges. Interest is charged on any tax not paid by the due date of the original return, without regard to extensions.
Generally, to claim a refund, you must file Form 1040X within three years from the date you filed your original return or within two years from the date you paid the tax, whichever is later.
Form 1040X and instructions are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
Does the IRS Owe You Money?
The Internal Revenue Service may have money for you. Was your income below the limit that requires you to file a tax return? If so, you may still be due a refund.
If you have not filed a prior year tax return and are due a refund, you should consider filing the return to claim that refund. If you are missing a refund for a previously filed tax return, you should contact the IRS to check the status of your refund and confirm your current address.
Unclaimed Refunds
Some people may have had taxes withheld from their wages but were not required to file a tax return because they had too little income. Others may not have had any tax withheld but would be eligible for the refundable Earned Income Tax Credit.
• To collect this money a return must be filed with the IRS no later than three years from the due date of the return.
• If no return is filed to claim the refund within three years, the money becomes the property of the U.S. Treasury.
• There is no penalty assessed by the IRS for filing a late return qualifying for a refund.
• Current and prior year tax forms and instructions are available on the Forms and Publications page of IRS.gov or by calling 800-TAX-FORM (800-829-3676).
• Information about the Earned Income Tax Credit and how to claim it is also available on IRS.gov.
Undeliverable Refunds
Were you expecting a refund check but didn't get it?
• Refund checks are mailed to your last known address. Checks are returned to the IRS if you move without notifying the IRS or the U.S. Postal Service.
• You may be able to update your address with the IRS on the “Where’s My Refund?” feature available on IRS.gov. You will be prompted to provide an updated address if there is an undeliverable check outstanding within the last 12 months.
• You can also ensure the IRS has your correct address by filing Form 8822, Change of Address, which is available on IRS.gov or can be ordered by calling 800-TAX-FORM (800-829-3676).
• If you do not have access to the Internet and think you may be missing a refund, you should first check your records or contact your tax preparer. If your refund information appears correct, call the IRS toll-free assistance line at 800-829-1040 to check the status of your refund and confirm your address.
If you have not filed a prior year tax return and are due a refund, you should consider filing the return to claim that refund. If you are missing a refund for a previously filed tax return, you should contact the IRS to check the status of your refund and confirm your current address.
Unclaimed Refunds
Some people may have had taxes withheld from their wages but were not required to file a tax return because they had too little income. Others may not have had any tax withheld but would be eligible for the refundable Earned Income Tax Credit.
• To collect this money a return must be filed with the IRS no later than three years from the due date of the return.
• If no return is filed to claim the refund within three years, the money becomes the property of the U.S. Treasury.
• There is no penalty assessed by the IRS for filing a late return qualifying for a refund.
• Current and prior year tax forms and instructions are available on the Forms and Publications page of IRS.gov or by calling 800-TAX-FORM (800-829-3676).
• Information about the Earned Income Tax Credit and how to claim it is also available on IRS.gov.
Undeliverable Refunds
Were you expecting a refund check but didn't get it?
• Refund checks are mailed to your last known address. Checks are returned to the IRS if you move without notifying the IRS or the U.S. Postal Service.
• You may be able to update your address with the IRS on the “Where’s My Refund?” feature available on IRS.gov. You will be prompted to provide an updated address if there is an undeliverable check outstanding within the last 12 months.
• You can also ensure the IRS has your correct address by filing Form 8822, Change of Address, which is available on IRS.gov or can be ordered by calling 800-TAX-FORM (800-829-3676).
• If you do not have access to the Internet and think you may be missing a refund, you should first check your records or contact your tax preparer. If your refund information appears correct, call the IRS toll-free assistance line at 800-829-1040 to check the status of your refund and confirm your address.
IRS Realigns and Renames Large Business Division, Enhances Focus on International Tax Administration
As part of a continuing effort to improve global tax administration efforts, Internal Revenue Service officials announced today the realignment of the Large and Mid-Size Business (LMSB) division to create a more centralized organization dedicated to improving international tax compliance.
As part of the organizational shift, the name of the IRS’s large corporate unit — LMSB — will change on Oct. 1 to the Large Business and International division (LB&I).
“Executing our international strategy is a top priority, and our work continues to intensify in this area,” said IRS Commissioner Doug Shulman. “Every day, we are moving forward in our international compliance efforts. Bringing together our top international personnel in this new group will help us advance our global tax administration efforts and ensure focus and fairness in a critical area for our nation.”
The new LB&I organization will enhance the current International program, adding about 875 employees to the existing staff of nearly 600. Most of the additional examiners, economists and technical staff are current employees who specialize on international issues within other parts of LMSB.
The realignment will strengthen international tax compliance for individuals and corporations in several ways, including:
• Identifying emerging international compliance issues more quickly.
• Removing geographic barriers, allowing for the dedication of IRS experts to the most pressing international issues.
• Increasing international specialization among IRS staff by creating economies of scale and improving IRS international coordination.
• Ensuring the right compliance resources are allocated to the right cases.
• Consolidating oversight of international information reporting and implementing new programs, such as the Foreign Account Tax Compliance Act (FATCA).
• Coordinating the Competent Authority more closely with field staff that originate cases, especially those dealing with transfer pricing.
• Otherwise centralizing and enhancing the IRS’s focus on transfer pricing.
Heather C. Maloy will continue serving as Commissioner of LB&I. Michael Danilack, Deputy Commissioner, International, will head the realigned global unit. Paul D. DeNard will continue serving as Deputy Commissioner (Operations).
The new international unit will include a transfer pricing director, who will continue piloting the new transfer pricing practice, and a chief economist, who will oversee the IRS’s economic positions pertaining to transfer pricing.
“The realigned organization will let us focus on high-risk international compliance issues and handle these cases with greater consistency and efficiency as we continue to increase our work in this area,” Shulman said.
In addition, the realigned LB&I will continue to serve the same population of taxpayers — corporations, subchapter S corporations and partnerships with assets greater than $10 million as well as certain high wealth individuals.
Today’s announcement marks the latest in a number of efforts the IRS has made to increase international tax compliance. The IRS has taken major steps to address offshore tax evasion, including the investigation of the misuse of undisclosed offshore accounts by U.S. taxpayers. Last fall, the IRS created a Global High Wealth Industry unit to better monitor tax compliance by high income individuals and their related enterprises.
LB&I is also charged with overseeing the implementation of the recently enacted Foreign Account Tax Compliance Act (FATCA). Signed into law in March, FATCA will substantially improve international information reporting, increasing international transparency and compliance.
The IRS and the Department of Treasury have also worked to revise tax treaties and tax information exchange agreements (TIEAs) to increase transparency and to make it more difficult for taxpayers to evade taxes just by crossing international borders.
As part of the organizational shift, the name of the IRS’s large corporate unit — LMSB — will change on Oct. 1 to the Large Business and International division (LB&I).
“Executing our international strategy is a top priority, and our work continues to intensify in this area,” said IRS Commissioner Doug Shulman. “Every day, we are moving forward in our international compliance efforts. Bringing together our top international personnel in this new group will help us advance our global tax administration efforts and ensure focus and fairness in a critical area for our nation.”
The new LB&I organization will enhance the current International program, adding about 875 employees to the existing staff of nearly 600. Most of the additional examiners, economists and technical staff are current employees who specialize on international issues within other parts of LMSB.
The realignment will strengthen international tax compliance for individuals and corporations in several ways, including:
• Identifying emerging international compliance issues more quickly.
• Removing geographic barriers, allowing for the dedication of IRS experts to the most pressing international issues.
• Increasing international specialization among IRS staff by creating economies of scale and improving IRS international coordination.
• Ensuring the right compliance resources are allocated to the right cases.
• Consolidating oversight of international information reporting and implementing new programs, such as the Foreign Account Tax Compliance Act (FATCA).
• Coordinating the Competent Authority more closely with field staff that originate cases, especially those dealing with transfer pricing.
• Otherwise centralizing and enhancing the IRS’s focus on transfer pricing.
Heather C. Maloy will continue serving as Commissioner of LB&I. Michael Danilack, Deputy Commissioner, International, will head the realigned global unit. Paul D. DeNard will continue serving as Deputy Commissioner (Operations).
The new international unit will include a transfer pricing director, who will continue piloting the new transfer pricing practice, and a chief economist, who will oversee the IRS’s economic positions pertaining to transfer pricing.
“The realigned organization will let us focus on high-risk international compliance issues and handle these cases with greater consistency and efficiency as we continue to increase our work in this area,” Shulman said.
In addition, the realigned LB&I will continue to serve the same population of taxpayers — corporations, subchapter S corporations and partnerships with assets greater than $10 million as well as certain high wealth individuals.
Today’s announcement marks the latest in a number of efforts the IRS has made to increase international tax compliance. The IRS has taken major steps to address offshore tax evasion, including the investigation of the misuse of undisclosed offshore accounts by U.S. taxpayers. Last fall, the IRS created a Global High Wealth Industry unit to better monitor tax compliance by high income individuals and their related enterprises.
LB&I is also charged with overseeing the implementation of the recently enacted Foreign Account Tax Compliance Act (FATCA). Signed into law in March, FATCA will substantially improve international information reporting, increasing international transparency and compliance.
The IRS and the Department of Treasury have also worked to revise tax treaties and tax information exchange agreements (TIEAs) to increase transparency and to make it more difficult for taxpayers to evade taxes just by crossing international borders.
IRS Removes Debt Indicator for 2011 Tax Filing Season
The Internal Revenue Service today announced that starting with next year’s tax filing season it will no longer provide tax preparers and associated financial institutions with the “debt indicator,” which is used to facilitate refund anticipation loans (RALs).
“As we prepare for tax season every year, we look at past practices and consider whether they still make sense. We no longer see a need for the debt indicator in a world where we can process a tax return and deliver a refund in 10 days,” IRS Commissioner Doug Shulman said. “We encourage taxpayers to use e-file with direct deposit so they can get their refunds in just a few days.”
So far this year, more than 95 million tax returns have been e-filed, representing more than 70 percent of tax returns.
“Refund Anticipation Loans are often targeted at lower-income taxpayers,” Shulman said. “With e-file and direct deposit, these taxpayers now have other ways to quickly access their cash.”
The IRS has been reviewing refund settlement products, such as RALs and Refund Anticipation Checks (RACs), as part of the Return Preparer Review released in January. Specifically, the IRS announced that it would study refund settlement products.
RALs are loans secured by a taxpayer’s anticipated tax refund. Currently, tax preparers who electronically submit a client’s tax return receive in the acknowledgment file an indication of whether an individual taxpayer will have any portion of the refund offset for delinquent tax or other debts, such as unpaid child support or delinquent federally funded student loans. This acknowledgment is known as the debt indicator, and is used as an underwriting tool for RALs.
The IRS announcement would remove the debt indicator starting with the upcoming 2011 tax filing season. The IRS noted that taxpayers will continue to have access to information about their tax refunds and any offsets through the “Where’s My Refund?” service on IRS.gov.
RACs are temporary bank accounts established on behalf of a taxpayer into which a direct deposit refund can be received and out of which a bank typically issues a payment to the taxpayer.
With both RALs and RACs, tax preparation and product fees are subtracted directly from the refund, and the taxpayer does not make any “out-of-pocket” payments. They are frequently marketed to taxpayers who do not have cash to pay for professional tax preparation services.
In a related effort, the IRS plans to explore the possibility of providing a new tool for the 2012 tax filing season to give taxpayers a mechanism to use an appropriate portion of their tax refund to pay for the services of a professional tax return preparer. The IRS plans to engage with taxpayers, consumer advocates and the tax return preparer community to consider whether providing this option would be a cost-effective way for consumers to pay for tax return preparation services.
“As we prepare for tax season every year, we look at past practices and consider whether they still make sense. We no longer see a need for the debt indicator in a world where we can process a tax return and deliver a refund in 10 days,” IRS Commissioner Doug Shulman said. “We encourage taxpayers to use e-file with direct deposit so they can get their refunds in just a few days.”
So far this year, more than 95 million tax returns have been e-filed, representing more than 70 percent of tax returns.
“Refund Anticipation Loans are often targeted at lower-income taxpayers,” Shulman said. “With e-file and direct deposit, these taxpayers now have other ways to quickly access their cash.”
The IRS has been reviewing refund settlement products, such as RALs and Refund Anticipation Checks (RACs), as part of the Return Preparer Review released in January. Specifically, the IRS announced that it would study refund settlement products.
RALs are loans secured by a taxpayer’s anticipated tax refund. Currently, tax preparers who electronically submit a client’s tax return receive in the acknowledgment file an indication of whether an individual taxpayer will have any portion of the refund offset for delinquent tax or other debts, such as unpaid child support or delinquent federally funded student loans. This acknowledgment is known as the debt indicator, and is used as an underwriting tool for RALs.
The IRS announcement would remove the debt indicator starting with the upcoming 2011 tax filing season. The IRS noted that taxpayers will continue to have access to information about their tax refunds and any offsets through the “Where’s My Refund?” service on IRS.gov.
RACs are temporary bank accounts established on behalf of a taxpayer into which a direct deposit refund can be received and out of which a bank typically issues a payment to the taxpayer.
With both RALs and RACs, tax preparation and product fees are subtracted directly from the refund, and the taxpayer does not make any “out-of-pocket” payments. They are frequently marketed to taxpayers who do not have cash to pay for professional tax preparation services.
In a related effort, the IRS plans to explore the possibility of providing a new tool for the 2012 tax filing season to give taxpayers a mechanism to use an appropriate portion of their tax refund to pay for the services of a professional tax return preparer. The IRS plans to engage with taxpayers, consumer advocates and the tax return preparer community to consider whether providing this option would be a cost-effective way for consumers to pay for tax return preparation services.
What You Need to Know About the 2010 IRS Nationwide Tax Forums
Updated August 6, 2010 — To qualify for discounted enrollment costs you must pre-register for the Las Vegas forum by August 10 and the San Diego forum by August 17.
The 2010 IRS Nationwide Tax Forums are three-day events that provide tax professionals with the most up-to-date information on federal and state tax issues presented by IRS experts and partner organizations.
Here are nine things enrolled agents, certified public accountants, certified financial planners and other tax professionals need to know about the 2010 IRS Nationwide Tax Forums.
1. Forums are held June through August in Atlanta, Chicago, Orlando, New York, Las Vegas and San Diego.
2. Those who sign up early can qualify for discounted enrollment costs. Pre-registration ends two weeks prior to the start of each forum. The pre-registration dates for the August forums are quickly approaching. To qualify for discounted enrollment costs you must pre-register for the Las Vegas forum by August 10 and the San Diego forum by August 17.
Location Forum Pre-Registration Deadline
Las Vegas August 24-26 August 10
San Diego August 31-September 2 August 17
3. Forums offer an opportunity to receive up to 18 continuing education credits through a variety of training seminars and workshops.
4. Forums will offer 43 separate seminars and workshops on valuable and relevant tax topics.
5. Forums will also feature a two-day expo with representatives from the IRS as well as other tax, financial, and business communities offering their products, services, and expertise.
6. Attendees can sign up to become an Authorized IRS e-file Provider.
7. Tax professionals attending a forum can bring their toughest unresolved case to meet with IRS personnel who may be able to help.
8. Registering for a tax forum is easy! Register by internet, fax or mail.
9. For more information or to register visit www.irstaxforum.com.
The 2010 IRS Nationwide Tax Forums are three-day events that provide tax professionals with the most up-to-date information on federal and state tax issues presented by IRS experts and partner organizations.
Here are nine things enrolled agents, certified public accountants, certified financial planners and other tax professionals need to know about the 2010 IRS Nationwide Tax Forums.
1. Forums are held June through August in Atlanta, Chicago, Orlando, New York, Las Vegas and San Diego.
2. Those who sign up early can qualify for discounted enrollment costs. Pre-registration ends two weeks prior to the start of each forum. The pre-registration dates for the August forums are quickly approaching. To qualify for discounted enrollment costs you must pre-register for the Las Vegas forum by August 10 and the San Diego forum by August 17.
Location Forum Pre-Registration Deadline
Las Vegas August 24-26 August 10
San Diego August 31-September 2 August 17
3. Forums offer an opportunity to receive up to 18 continuing education credits through a variety of training seminars and workshops.
4. Forums will offer 43 separate seminars and workshops on valuable and relevant tax topics.
5. Forums will also feature a two-day expo with representatives from the IRS as well as other tax, financial, and business communities offering their products, services, and expertise.
6. Attendees can sign up to become an Authorized IRS e-file Provider.
7. Tax professionals attending a forum can bring their toughest unresolved case to meet with IRS personnel who may be able to help.
8. Registering for a tax forum is easy! Register by internet, fax or mail.
9. For more information or to register visit www.irstaxforum.com.
Nine Tips for Taxpayers Who Owe Money to the IRS
Did you end up owing taxes this year? The vast majority of Americans get a tax refund from the IRS each spring, but those who receive a bill may not know that the IRS has a number of ways for people to pay. Here are nine tips for taxpayers who owe money to the IRS.
1. If you get a bill this summer for late taxes, you are expected to promptly pay the tax owed including any penalties and interest. If you are unable to pay the amount due, it is often in your best interest to get a loan to pay the bill in full rather than to make installment payments to the IRS.
2. You can also pay the bill with your credit card. The interest rate on a credit card or bank loan may be lower than the combination of interest and penalties imposed by the Internal Revenue Code. To pay by credit card contact one of the following processing companies: Official Payments Corporation at 888-UPAY-TAX (also www.officialpayments.com/fed) or Link2Gov at 888-PAY-1040 (also www.pay1040.com) or RBS WorldPay, Inc at 888-9PAY-TAX (also www.payUSAtax.com).
3. You can pay the balance owed by electronic funds transfer, check, money order, cashier’s check or cash. To pay using electronic funds transfer you can take advantage of the Electronic Federal Tax Payment System by calling 800-555-4477 or online at www.eftps.gov.
4. An installment agreement may be requested if you cannot pay the liability in full. This is an agreement between you and the IRS to pay the amount due in monthly installment payments. You must first file all returns that are required and be current with estimated tax payments.
5. If you owe $25,000 or less in combined tax, penalties and interest, you can request an installment agreement using the Online Payment Agreement application at IRS.gov.
6. You can also complete and mail an IRS Form 9465, Installment Agreement Request, along with your bill in the envelope that you have received from the IRS. The IRS will inform you usually within 30 days whether your request is approved, denied, or if additional information is needed. If the amount you owe is $25,000 or less, provide the highest monthly amount you can pay with your request.
7. You may still qualify for an installment agreement if you owe more than $25,000, but a Form 433F, Collection Information Statement, is required to be completed before an installment agreement can be considered. If your balance is over $25,000, consider your financial situation and propose the highest amount possible, as that is how the IRS will arrive at your payment amount based upon your financial information.
8. If an agreement is approved, a one-time user fee will be charged. The user fee for a new agreement is $105 or $52 for agreements where payments are deducted directly from your bank account. For eligible individuals with incomes at or below certain levels, a reduced fee of $43 will be charged.
9. Taxpayers who have a balance due, may want to consider changing their W-4, Employee’s Withholding Allowance Certificate, with their employer. There is a withholding calculator available on IRS.gov to help taxpayers determine the amount that should be withheld.
For more information about installment agreements and other payment options visit IRS.gov. IRS Publications 594, The IRS Collection Process and 966, Electronic Choices to Pay All Your Federal Taxes also provide additional information regarding your payment options. These publications and Form 9465 can be obtained from IRS.gov or by calling 800-TAX-FORM (800-829-3676).
1. If you get a bill this summer for late taxes, you are expected to promptly pay the tax owed including any penalties and interest. If you are unable to pay the amount due, it is often in your best interest to get a loan to pay the bill in full rather than to make installment payments to the IRS.
2. You can also pay the bill with your credit card. The interest rate on a credit card or bank loan may be lower than the combination of interest and penalties imposed by the Internal Revenue Code. To pay by credit card contact one of the following processing companies: Official Payments Corporation at 888-UPAY-TAX (also www.officialpayments.com/fed) or Link2Gov at 888-PAY-1040 (also www.pay1040.com) or RBS WorldPay, Inc at 888-9PAY-TAX (also www.payUSAtax.com).
3. You can pay the balance owed by electronic funds transfer, check, money order, cashier’s check or cash. To pay using electronic funds transfer you can take advantage of the Electronic Federal Tax Payment System by calling 800-555-4477 or online at www.eftps.gov.
4. An installment agreement may be requested if you cannot pay the liability in full. This is an agreement between you and the IRS to pay the amount due in monthly installment payments. You must first file all returns that are required and be current with estimated tax payments.
5. If you owe $25,000 or less in combined tax, penalties and interest, you can request an installment agreement using the Online Payment Agreement application at IRS.gov.
6. You can also complete and mail an IRS Form 9465, Installment Agreement Request, along with your bill in the envelope that you have received from the IRS. The IRS will inform you usually within 30 days whether your request is approved, denied, or if additional information is needed. If the amount you owe is $25,000 or less, provide the highest monthly amount you can pay with your request.
7. You may still qualify for an installment agreement if you owe more than $25,000, but a Form 433F, Collection Information Statement, is required to be completed before an installment agreement can be considered. If your balance is over $25,000, consider your financial situation and propose the highest amount possible, as that is how the IRS will arrive at your payment amount based upon your financial information.
8. If an agreement is approved, a one-time user fee will be charged. The user fee for a new agreement is $105 or $52 for agreements where payments are deducted directly from your bank account. For eligible individuals with incomes at or below certain levels, a reduced fee of $43 will be charged.
9. Taxpayers who have a balance due, may want to consider changing their W-4, Employee’s Withholding Allowance Certificate, with their employer. There is a withholding calculator available on IRS.gov to help taxpayers determine the amount that should be withheld.
For more information about installment agreements and other payment options visit IRS.gov. IRS Publications 594, The IRS Collection Process and 966, Electronic Choices to Pay All Your Federal Taxes also provide additional information regarding your payment options. These publications and Form 9465 can be obtained from IRS.gov or by calling 800-TAX-FORM (800-829-3676).
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