Reminder about Forms W-4

An accurate Form W-4 is important. Tax Topic 753 has information to help employees and employers.

Notice about Backup Withholding for Form 1099-K available

Notice 1430

Don’t Get Caught in Backup Withholding
Information about Your Form 1099-K

Why you are receiving this notice

Your name and taxpayer identification number (TIN) submitted on Form 1099-K, Payment Card and Third Party Network Transactions, by a payment card processor or third-party settlement organization does not match IRS records. If a payment card processor or third-party settlement organization submits a Form 1099-K for tax year 2013 with an incorrect TIN or name for you, the payments you receive for your payment card or third party network transactions will be subject to backup withholding. This means the payment card processor or third-party settlement organization will be required to withhold 28% from each payment to you beginning as early as September 2014.

If you operate as a partnership or subchapter S corporation, any monies withheld due to an incorrect name or TIN can only be claimed by the partners and shareholders on their individual income tax returns for their shares of the withheld amounts. The monies are not refundable to the partnership or subchapter S corporation.

What you need to do

You need to immediately contact your payment card processor or third-party settlement organization. Verify that the name and TIN the payment card processor or third-party settlement organization has in its records matches the exact name and TIN on your income tax return.

For additional information on Form 1099-K reporting and backup withholding, visit our website at www.irs.gov and enter keywords, “Third Party Reporting Center” or “Backup Withholding.”

Back-to-School Tax Credits

Are you, your spouse or a dependent heading off to college? If so, here’s a quick tip from the IRS: some of the costs you pay for higher education can save you money at tax time. Here are several important facts you should know about education tax credits:  

• American Opportunity Tax Credit.  The AOTC can be up to $2,500 annually for an eligible student. This credit applies for the first four years of higher education. Forty percent of the AOTC is refundable. That means that you may be able to get up to $1,000 of the credit as a refund, even if you don’t owe any taxes.
• Lifetime Learning Credit.  With the LLC, you may be able to claim a tax credit of up to $2,000 on your federal tax return. There is no limit on the number of years you can claim this credit for an eligible student.
• One credit per student.  You can claim only one type of education credit per student on your federal tax return each year. If more than one student qualifies for a credit in the same year, you can claim a different credit for each student.  For example, you can claim the AOTC for one student and claim the LLC for the other student.
• Qualified expenses.  You may include qualified expenses to figure your credit.  This may include amounts you pay for tuition, fees and other related expenses for an eligible student. Refer to IRS.gov for more about the additional rules that apply to each credit.
• Eligible educational institutions.  Eligible schools are those that offer education beyond high school. This includes most colleges and universities. Vocational schools or other postsecondary schools may also qualify.
• Form 1098-T.  In most cases, you should receive Form 1098-T, Tuition Statement, from your school. This form reports your qualified expenses to the IRS and to you. You may notice that the amount shown on the form is different than the amount you actually paid. That’s because some of your related costs may not appear on Form 1098-T. For example, the cost of your textbooks may not appear on the form, but you still may be able to claim your textbook costs as part of the credit. Remember, you can only claim an education credit for the qualified expenses that you paid in that same tax year.
• Nonresident alien.  If you are in the U.S. on an F-1 student visa, you usually file your federal tax return as a nonresident alien. You can’t claim an education credit if you were a nonresident alien for any part of the tax year unless you elect to be treated as a resident alien for federal tax purposes. To learn more about these rules see Publication 519, U.S. Tax Guide for Aliens.
• Income limits. These credits are subject to income limitations and may be reduced or eliminated, based on your income.

For more information, visit the Tax Benefits for Education Information Center on IRS.gov. Also, check Publication 970, Tax Benefits for Education. You can get it on IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Additional IRS Resources:

• Education Credits – AOTC and LLC
• Education Credits: Questions and Answers
• Education Credits Frequently Asked Questions and Answers
• Form 1098-T, Tuition Statement (see instructions for student)
• Form 8863, Education Credits (American Opportunity and Lifetime Learning Credits)
• Form 1040A, U.S. Individual Income Tax Return
• Form 1040, U.S. Individual Income Tax Return

Make A Mistake? Amend Your Tax Return

Don’t worry if you made a mistake on your tax return or forgot to claim a tax credit or deduction. You can fix it by filing an amended return. Here are 10 tips that you should know about amending your federal tax return:

1. When to amend.  You should amend your tax return if you need to correct your filing status, the number of dependents you claimed, or your total income. You should also amend your return to claim tax deductions or tax credits that you did not claim when you filed your original return. The instructions for Form 1040X, Amended U.S. Individual Income Tax Return, list more reasons to amend a return.

2. When NOT to amend.  In some cases, you don’t need to amend your tax return. The IRS usually corrects math errors when processing your original return. If you didn’t include a required form or schedule, the IRS will send you a request for the missing item.

3. Form to use.  Use Form 1040X to amend a federal income tax return that you previously filed. Make sure you check the box at the top of the form that shows which year you are amending. Since you can’t e-file an amended return, you’ll need to file your Form 1040X on paper and mail it to the IRS.

4. More than one year.  If you file an amended return for more than one year, use a separate 1040X for each tax year. Mail them in separate envelopes to the IRS. See "Where to File" in the instructions for Form 1040X for the correct address to use.

5. Form 1040X.  Form 1040X has three columns. Column A shows amounts from the original return. Column B shows the net increase or decrease for the amounts you are changing. Column C shows the corrected amounts. You should explain what you are changing and the reasons why on the back of the form.

6. Other forms or schedules..  If your changes involve other tax forms or schedules, make sure you attach them to Form 1040X when you file the form. Failure to do this will cause a delay in processing.

7. Amending to claim an additional refund.  If you are waiting for a refund from your original tax return, don’t file your amended return until after you receive the refund. You may cash the refund check from your original return. Amended returns take up to 12 weeks to process. You will receive any additional refund you are owed.

8. Amending to pay additional tax.  If you’re filing an amended tax return because you owe more tax, you should file Form 1040X and pay the tax as soon as possible. This will limit any interest and penalty charges.

9. When to file.  To claim a refund, you generally must file Form 1040X within three years from the date you filed your original tax return. You can also file it within two years from the date you paid the tax, if that date is later than the three-year rule.

10. Track your return.  You can track the status of your amended tax return three weeks after you file with ‘Where’s My Amended Return?’ This tool is available on IRS.gov or by phone at 866-464-2050.

Visit IRS.gov to get Form 1040X or call 800-TAX-FORM (800-829-3676).

Additional IRS Resources:

• Tax Topic 308 - Amended Returns 
• Amended Returns & Form 1040X – Frequently Asked Questions

Scam Phone Calls Continue; IRS Identifies Five Easy Ways to Spot Suspicious Calls

WASHINGTON — The Internal Revenue Service issued a consumer alert today providing taxpayers with additional tips to protect themselves from telephone scam artists calling and pretending to be with the IRS.

These callers may demand money or may say you have a refund due and try to trick you into sharing private information. These con artists can sound convincing when they call. They may know a lot about you, and they usually alter the caller ID to make it look like the IRS is calling. They use fake names and bogus IRS identification badge numbers. If you don’t answer, they often leave an “urgent” callback request.

“These telephone scams are being seen in every part of the country, and we urge people not to be deceived by these threatening phone calls,” IRS Commissioner John Koskinen said. “We have formal processes in place for people with tax issues. The IRS respects taxpayer rights, and these angry, shake-down calls are not how we do business.”

The IRS reminds people that they can know pretty easily when a supposed IRS caller is a fake. 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:

1. Call you about taxes you owe without first mailing you an official notice.

2. Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.

3. Require you to use a specific payment method for your taxes, such as a prepaid debit card.

4. Ask for credit or debit card numbers over the phone.

5. 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 know you owe taxes or think you might owe, call the IRS at 1.800.829.1040. The IRS workers can help you with a payment issue.
• If you know you don’t owe taxes or have no reason to believe that you do, report the incident to the Treasury Inspector General for Tax Administration (TIGTA) at 1.800.366.4484 or at www.tigta.gov.
• If you’ve been targeted by this scam, also contact the Federal Trade Commission and use their “FTC Complaint Assistant” at FTC.gov. Please add "IRS Telephone Scam" to the comments of your complaint..

Remember, too, the IRS does not use email, text messages or any social media to discuss your personal tax issue. For more information on reporting tax scams, go to www.irs.gov and type “scam” in the search box.

Additional information about tax scams are available on IRS social media sites, including YouTube http://youtu.be/UHlxTX4rTRU?list=PL2A3E7A9BD8A8D41D. and Tumblr http://internalrevenueservice.tumblr.com where people can search “scam” to find all the scam-related posts.