Tips to Keep in Mind for Taxpayers Traveling for Charity

During the summer, some taxpayers may travel because of their involvement with a qualified charity. These traveling taxpayers may be able to lower their taxes.

Here are some tax tips for taxpayers to use when deducting charity-related travel expenses:

• Qualified Charities.  For a taxpayer to deduct costs, they must volunteer for a qualified charity. Most groups must apply to the IRS to become qualified. Churches and governments are generally qualified, and do not need to apply to the IRS. A taxpayer should ask the group about its status before they donate. Taxpayers can also use the Select Check tool on IRS.gov to check a group’s status.
• Out-of-Pocket Expenses.  A taxpayer may be able to deduct some of their costs including travel. These out-of-pocket expenses must be necessary while the taxpayer is away from home. All costs must be:
• Unreimbursed,
• Directly connected with the services,
• Expenses the taxpayer had only because of the services the taxpayer gave, and
• Not personal, living or family expenses.
• Genuine and Substantial Duty.  The charity work the taxpayer is involved with has to be real and substantial throughout the trip. The taxpayer can’t deduct expenses if they only have nominal duties or do not have any duties for significant parts of the trip.
• Value of Time or Service.  A taxpayer can’t deduct the value of their time or services that they give to charity. This includes income lost while the taxpayer serves as an unpaid volunteer for a qualified charity.
• Travel Expenses a Taxpayer Can Deduct.  The types of expenses a taxpayer may be able to deduct include:
• Air, rail and bus transportation,
• Car expenses,
• Lodging costs,
• Cost of meals, and
• Taxi or other transportation costs between the airport or station and their hotel.
• Travel Expenses a Taxpayer Can’t Deduct. Some types of travel do not qualify for a tax deduction. For example, a taxpayer can’t deduct their costs if a significant part of the trip involves recreation or vacation.

For more on these rules, see Publication 526, Charitable Contributions. Get it on IRS.gov/forms at any time.

Avoid scams. The IRS will never initiate contact using social media or text message. First contact generally comes in the mail. Those wondering if they owe money to the IRS can view their tax account information on IRS.gov to find out.

Share this tip on social media -- #IRSTaxTip: Tips to Keep in Mind for Taxpayers Traveling for Charity.  https://go.usa.gov/xRWWR

How to Get Tax Transcripts and Copies of Tax Returns from the IRS

Taxpayers should keep copies of their tax returns for at least three years. Those who need a copy of their tax return should check with their software provider or tax preparer. Prior year tax returns are available from IRS for a fee.

For those that need tax transcripts, however, IRS can help. Transcripts are free.

Tax Transcripts

A transcript summarizes return information and includes Adjusted Gross Income (AGI). They are available for the most current tax year after the IRS has processed the return. People can also get them for the past three years.

When applying for home mortgages or college financial aid, transcripts are often necessary. Mortgage companies, however, normally arrange to get one for a homeowner or potential homeowner. For people applying for college financial aid, see IRS Offers Help to Students, Families to Get Tax Information for Student Financial Aid Applications on IRS.gov for the latest options.

Taxpayers can get two types of transcripts from the IRS:

• Tax Return Transcript.  A tax return transcript shows most line items including AGI from an original tax return (Form 1040, 1040A or 1040EZ) as filed, along with any forms and schedules. It doesn’t show changes made after the filing of the original return. This transcript is only available for the current tax year and returns processed during the prior three years. A tax return transcript usually meets the needs of lending institutions offering mortgages and student loans.
• Tax Account Transcript.  A tax account transcript shows basic data such as return type, marital status, adjusted gross income, taxable income and all payment types. It also shows changes made after the filing of the original return.

To get a transcript, people can:

• Order online. Use the ‘Get Transcript’ tool available on IRS.gov. There is a link to it under the red TOOLS bar on the front page. Those who use it must authenticate their identity using the Secure Access process.
• Order by phone. The number to call is 800-908-9946.
• Order by mail.  Complete and send either Form 4506-T or Form 4506T-EZ to the IRS to get one by mail. Use Form 4506-T to request other tax records: tax account transcript, record of account, wage and income and verification of non-filing. These forms are available on the Forms & Pubs page on IRS.gov

Those who need an actual copy of a tax return can get one for the current tax year and as far back as six years. The fee per copy is $50. Complete and mail Form 4506 to request a copy of a tax return. Mail the request to the appropriate IRS office listed on the form. People who live in a federally declared disaster area can get a free copy. More disaster relief information is available on IRS.gov.

Plan ahead. Delivery times for online and phone orders typically take five to 10 days from the time the IRS receives the request. You should allow 30 days to receive a transcript ordered by mail and 75 days for copies of your tax return.

Avoid scams. The IRS will never initiate contact using social media or text message. First contact generally comes in the mail. Those wondering if they owe money to the IRS can view their tax account information on IRS.gov to find out.

Additional IRS Resources:

• Topic 156 - Copy or Transcript of Your Tax Return – How to Get One
• IRS Tax Map, Copy of Return

Don’t Take the Bait, Step 3: Security Summit Safeguards Help Protect Individuals; Renew Focus on Curbing Data Breaches and Business Identity Theft

The IRS, state tax agencies and the tax industry have made significant progress in the past two years against tax-related identity theft aimed at individuals but warned business identity theft is on the upswing.

Some of the increase in business and partnership return identity theft is fueled by cybercriminals’ increasing focus on breaching tax professionals’ systems and stealing client data. The Security Summit has launched a 10-week awareness campaign called “Don’t Take the Bait,” which encourages tax professionals to step up their security measures.

“The IRS, state tax agencies and the tax community have worked hard to turn the tide against tax-related identity theft. We’re making progress in protecting individuals but we still have more work to do, especially in the business tax area and involving tax professionals. Continued lapses in simple security measures can happen in tax professional offices and other business as well as at home,” said John Koskinen, IRS Commissioner.

So far for 2017, individuals reporting identity theft have declined sharply compared to the same time in 2016 and 2015. In the first five months of 2017, about 107,000 taxpayers reported being victims of identity theft, compared to the same period in 2016, when 204,000 filed victim reports. That’s about 97,000 fewer victims – representing a drop of 47 percent.  For comparison, there were nearly 297,000 identity theft victims during the first five months of 2015.

The decline is part of an ongoing trend that began in 2016 as Security Summit safeguards were put in place.

However, the IRS also saw an increase in identity theft involving business-related tax returns. So far for 2017, the IRS has identified approximately 10,000 business returns as potential identity theft through June 1, compared to about 4,000 for calendar year 2016 and 350 for calendar year 2015. While the number of businesses affected was relatively low, the potential dollar amounts were significant: $137 million for 2017, $268 million for 2016 and $122 million for 2015.

The affected returns included corporate returns (Forms 1120 and 1120S) and estate and trust returns (Form 1041). There also was an increase in identity theft related to the Schedule K-1 filings made by partnerships. Tax preparers will see new trusted customer questions on these types of returns. (See FS 2017-10, Information about Identity Theft Involving Businesses, Partnerships and Estates and Trusts.)

Cybercriminals are showing increasing savvy and tax expertise as they use stolen data, sometimes from tax practitioners, to file these business, partnership and trust returns for refunds. Or, they post the stolen data for resale on the Dark Net so that other criminals can file fraudulent tax returns.

“It’s especially difficult to identify any tax return as fraudulent when criminals are using information stolen from tax preparers,” Koskinen said. “The stolen data allows criminals to better impersonate the legitimate taxpayers.”

Many tax professionals take appropriate security measures, but problems persist. For the first five months of 2017, there were 177 reported data breaches at tax preparers’ offices. The IRS continues to receive reports of three to five data breaches each week.

“We need help from the tax community to combat cybercriminals and raise security awareness,” Koskinen said. “That’s why we launched a campaign this summer aimed at tax professionals called Don’t Take the Bait. We want all tax professionals to be aware of the threats and to take the necessary security steps to protect their clients’ most sensitive information. A lot of tax professionals think a data breach can’t happen to them. Unfortunately, we see new victims every week.”

Protecting Your Clients and Your Business from Business-related Identity Theft

During the 2017 filing season, the tax software industry began sharing data elements from tax returns with the IRS and states to help identity suspected identity theft business returns. For 2018, the number of elements shared from tax returns will increase to better help identify those suspect returns.

Also for 2018, the IRS will be asking tax professionals to gather more information on their business clients. All of the data being collected assists the IRS in authenticating that the tax return being submitted is the legitimate return filing and not an identity theft return. Some of the new information people may be asked to provide when filing their business, trust or estate client returns include:

• The name and Social Security number of the company individual authorized to sign the business return. Is the person signing the return authorized to do so?
• Payment history – Were estimated tax payments made? If yes, when were they made, how were they made, and how much was paid?
• Parent company information – Is there a parent company? If yes who?
• Additional information based on deductions claimed.
• Filing history – Has the business filed Form(s) 940, 941 or other business related tax forms?

Tax professionals also should beware of any potential business clients claiming they do not currently have an Employer Identification Number.

Tax professionals – like the IRS and state tax agencies - must protect their data and systems against sophisticated, well-funded and technologically adept criminal syndicates around the world. The 10-week Don’t Take the Bait campaign will focus on the steps practitioners can take to protect themselves from phishing attacks, ransomware and remote takeovers.

The Security Summit urges all tax professionals to take these simple steps:

• Educate all employees about the dangers of phishing emails posing as familiar businesses, organizations or colleagues.
• Use the best security software to guard against malware, phishing sites and viruses; set it to update automatically.
• Use strong, unique passwords for all accounts and change them frequently; use a password manager if necessary. Better yet, use two-factor authentication whenever possible.
• Encrypt all sensitive data and routinely back it up to an external disk.
• Review Publication 4557, Safeguarding Taxpayer Data, to create a security plan.

The “Don’t Take the Bait” campaign will focus on more extensive steps tax professionals can take to protect their clients and their business. See more at www.irs.gov/protectyourclients.

Check Withholding Now to Avoid Surprises at Tax Time

The federal income tax is a pay-as-you-go system. Employers generally withhold tax from workers’ wages. Taxpayers also often have taxes withheld from certain other income including pensions, bonuses, commissions and gambling winnings.

People who do not pay tax through withholding, like the self-employed, generally pay estimated tax. In addition, those who earn income such as dividends, interest, capital gains, rent and royalties are usually required to make estimated tax payments.

Each year, because of life events like changes to household income or family size, some people get a larger refund than they expect while others find they owe more tax.

To prevent a tax-time surprise, the IRS offers these tips:

• New Job. When starting a new job, an employee must fill out a Form W-4, Employee's Withholding Allowance Certificate. Employers use this form to calculate how much federal income tax to withhold from regular pay, bonuses, commissions and vacation allowances. The IRS Withholding Calculator tool on IRS.gov is easy for taxpayers to use to figure how much tax to withhold to avoid surprises.
• Estimated Tax. People who have income not subject to withholding may need to pay estimated tax. Those expecting to owe $1,000 or more than taxes withheld from their wages may also need to make estimated tax payments to avoid penalties. The worksheet in Form 1040-ES, Estimated Tax for Individuals, helps to figure the tax.
• Life Events. A change in marital status, the birth of a child or the purchase of a new home can change the amount of taxes a taxpayer owes. The Managing Your Taxes After a Life Event page on IRS.gov provides resources to explain the tax impact of these changes. In most cases, an employee can submit a new Form W–4 to their employer anytime.

Avoid scams. The IRS will never initiate contact using social media or text message. First contact generally comes in the mail. Those wondering if they owe money to the IRS can view their tax account information on IRS.gov to find out.

Additional IRS Resources:

• Publication 505, Tax Withholding and Estimated Tax
• IRS Tax Map, Withholding of Tax
• Topic 753, Form W-4 – Employee's Withholding Allowance Certificate

IRS Office of Appeals Pilots Virtual Service

IR-2017-122, July 24, 2017

The Internal Revenue Service Office of Appeals will soon pilot a new web-based virtual conference option for taxpayers and their representatives. This virtual face-to-face option will provide an additional option for taxpayer conferences. The IRS expects it to be especially useful for taxpayers located far from an IRS Appeals office.

Each year, the Office of Appeals hears appeals of more than 100,000 taxpayers attempting to resolve their tax disputes without going to court. Currently, taxpayers involved in the appeals process can meet with an Appeals Officer by phone, in person or virtually through videoconference technology available only at a limited number of IRS offices.

While a phone call works well for most taxpayers, others prefer face-to-face interaction. Appeals’ pilot program will use a secure, web-based screen-sharing platform to connect with taxpayers face-to-face from anywhere they have internet access. Similar to popular screen-sharing programs used on phones and home computers, this technology may also be a way for the IRS to provide greater access, efficiency and flexibility to taxpayers. This web-based model is more convenient and has more features than the existing video-conferencing technology.

“Taxpayers who choose the web-based option will be able to get face-to-face service remotely,” said IRS Chief, Appeals Donna Hansberry. “In the future, the technology may give taxpayers greater options in engaging with Appeals and could allow us the flexibility to serve taxpayers virtually from any location using mobile devices or computers.

“We hope this is one more option to enable IRS employees to provide timely, efficient and effective service to taxpayers,” said Hansberry.

Appeals plans to start the pilot Aug. 1, 2017 and will assess the results, including taxpayer satisfaction with the technology.  

The IRS reminds taxpayers that their right to appeal an IRS decision in an independent forum is one of 10 key rights guaranteed to taxpayers under the Taxpayer Bill of Rights. Other rights especially relevant to the appeals process include the right to quality service, the right to pay no more than the correct amount of tax, the right to challenge the IRS’s position and be heard and the right to retain representation. For a complete list of the Taxpayer Bill of Rights, see Publication 1, Your Rights as a Taxpayer, available on IRS.gov.

Making the Most out of Miscellaneous Deductions

Miscellaneous deductions are tax breaks that generally don’t fit into a particular tax category.  They can help reduce taxable income and the amount of taxes owed.  For example, some employees can deduct certain work expenses like uniforms as miscellaneous deductions.  To do that, they must itemize their deductions instead of taking the standard deduction on their tax return.

Here are several tips from the IRS about miscellaneous deductions:  

• The Two Percent Limit.  Most miscellaneous costs are deductible only if the sum exceeds 2% of the taxpayer’s adjusted gross income (AGI).  For example, before being able to deduct certain expenses, a taxpayer with $50,000 in AGI must come up with more than $1,000 in miscellaneous deductions.  Expenses may include:
• Unreimbursed employee expenses.
• Job search costs for a new job in the same line of work.
• Job tools.
• Union dues.
• Work-related travel and transportation.
• The cost paid to prepare a tax return. These fees include the cost paid for tax preparation software. They also include any fee paid for e-filing a return.
• Deductions Not Subject to the Limit. Some deductions are not subject to the 2% limit. They include:
• Certain casualty and theft losses. In most cases, this rule is for damaged or stolen property held for investment. This may include property such as stocks, bonds and works of art.
• Gambling losses up to the total of gambling winnings.
• Losses from Ponzi-type investment schemes.

Taxpayers can’t deduct some expenses. For example, personal living or family expenses are not deductible. To claim allowable miscellaneous deductions, taxpayers must use Schedule A, Itemized Deductions. For more about this topic, see Publication 529, Miscellaneous Deductions. Get them on IRS.gov/forms at any time.

Avoid scams. The IRS will never initiate contact using social media or text message. First contact generally comes in the mail. Those wondering if they owe money to the IRS can view their tax account information on IRS.gov to find out.

Additional IRS Resources:

• Tax Topic 508 – Miscellaneous Expenses
• Interactive Tax Assistant tool – Can I Claim My Expenses as Miscellaneous Itemized Deductions on Schedule A (Form 1040)?

Taxpayers Should Review Their Withholding; Avoid Having Too Much or Too Little Federal Income Tax Withheld

The Internal Revenue Service today encouraged taxpayers to consider checking their tax withholding, keeping in mind several factors that could affect potential refunds or taxes they may owe in 2018.

Reviewing the amount of taxes withheld can help taxpayers avoid having too much or too little federal income tax taken from their paychecks. Having the correct amount taken out helps to move taxpayers closer to a zero balance at the end of the year when they file their tax return, which means no taxes owed or refund due.

During the year, changes sometimes occur in a taxpayer’s life, such as in their marital status, that impacts exemptions, adjustments or credits that they will claim on their tax return. When this happens, they need to give their employer a new Form W-4, Employee’s Withholding Allowance Certificate, to change their withholding status or number of allowances.

Employers use the form to figure the amount of federal income tax to be withheld from pay. Making these changes in the late summer or early fall can give taxpayers enough time to adjust their withholdings before the tax year ends in December.

The withholding review takes on even more importance now that federal law requires the IRS to hold refunds a few weeks for some early filers claiming the Earned Income Tax Credit and the Additional Child Tax Credit. In addition, the steps the IRS and state tax administrators are now taking to strengthen protections against identity theft and refund fraud mean some tax returns could face additional review time next year.

So far in 2017, the IRS has issued more than 106 million tax refunds out of the 142 million total individual tax returns processed, with the average refund well over $2,700. Historically, refund dollar amounts have increased over time.

Making a Withholding Adjustment

In many cases, a new Form W-4, Employee’s Withholding Allowance Certificate, is all that is needed to make an adjustment. Taxpayers submit it to their employer, and the employer uses the form to figure the amount of federal income tax to be withheld from their employee’s pay.

The IRS offers several online resources to help taxpayers bring taxes paid closer to what they owe. They are available anytime on IRS.gov. They include:

• IRS Withholding Calculator – Online tool helps determine the correct amount of tax to withhold.
• IRS Publication 505 – Tax Withholding and Estimated Tax.
• Tax Withholding – Complete information on withholding, estimated taxes, FAQs, and more.

Self-employed taxpayers, including those involved in the sharing economy, can use the Form 1040-ES worksheet to correctly figure their estimated tax payments. If they also work for an employer, they can often forgo making these quarterly payments by instead having more tax taken out of their pay.

Reduce Certain Summertime Costs with the Child and Dependent Care Tax Credit

Many parents send their children to summer day camps while they work or look for work. The IRS urges those who do to save their paperwork for the Child and Dependent Care Tax Credit. Eligible taxpayers may be able claim it on their taxes in 2018 if they paid for day camp or for someone to care for a child, dependent or spouse during 2017.

Here are a few key facts to know about this credit:

1. Qualifying Person. The care must have been for “qualifying persons.” A qualifying person can be a child under age 13. A qualifying person can also be a spouse or dependent who lived with the taxpayer for more than half the year and is physically or mentally incapable of self-care.
2. Work-Related Expenses. The care must have been necessary so the taxpayer could work or look for work. For those who are married, the care also must have been necessary so a spouse could work or look for work. This rule does not apply if the spouse was disabled or a full-time student.
3. Earned Income. The taxpayer -- and their spouse if married filing jointly -- must have earned income for the tax year. Special rules apply to a spouse who is a student or disabled.
4. Credit Percentage/Expense Limits. The credit is worth between 20 and 35 percent of allowable expenses. The percentage depends on the income amount. Allowable expenses are limited to $3,000 for care of one qualifying person. The limit is $6,000 if the taxpayer paid for the care of two or more.
5. Care Provider Information. The name, address and taxpayer identification number of the care provider must be included on the return. The childcare provider cannot be the taxpayer’s spouse, dependent or the child's parent.
6. IRS Interactive Tax Assistant tool. Use Am I Eligible to Claim the Child and Dependent Care Credit? tool on IRS.gov to help determine if eligible to claim the credit.
7. Dependent Care Benefits. Special rules apply for people who get dependent care benefits from their employer. See Form 2441, Child and Dependent Care Expenses, has more on these rules. File the form with a tax return.
8. Special Circumstances. Since every family is different, the IRS has a series of exceptions to the rules in the qualification process. These exceptions allow a greater number of families to take advantage of the credit. For more information, see IRS Publication 503, Child and Dependent Care Expenses.

Even if the childcare provider is a sitter in the home, taxpayers may qualify for the credit. Taxpayers who pay someone to come to their home and care for their dependent or spouse may be a household employer. They may have to withhold and pay Social Security and Medicare tax and pay federal unemployment tax. Find more on that in IRS Publication 926, Household Employer's Tax Guide.

Avoid scams. The IRS will never initiate contact using social media or text message. First contact generally comes in the mail. Those wondering if they owe money to the IRS can view their tax account information on IRS.gov to find out.

Additional IRS Resources:

• Tax Topic 602 - Child and Dependent Care Credit
• Filing Your Taxes
• IRS Tax Map
• Is My Child a Qualifying Child for the Child Tax Credit?

Do you need to make a tax payment?

If you owe taxes, schedule the earliest payment date to minimize penalties and interest. The IRS offers electronic payment options that are easy and secure. Making tax payments online or with your mobile device is much quicker than paying by mail, and you get immediate confirmation after you submit your payment.

Use the IRS electronic payment option that’s right for you. You can pay your taxes online, by phone or with your mobile device. Visit the payments page for telephone numbers and instructions. If you can’t pay in full immediately, you may qualify for an online payment agreement.

You can securely pay your tax bill or estimated taxes directly from your checking or savings accounts at no cost to you with IRS Direct Pay. You can use the Look Up a Payment feature to view your payment details and status. You can also modify or cancel a payment up until two business days before the payment is scheduled.

From your mobile device try our IRS2Go app and pay with either IRS Direct Pay for free or by debit or credit card through an IRS payment processor for a fee. You can download IRS2Go from Google Play, the Apple App Store or the Amazon App Store.

Another payment option for both individuals and businesses is the Electronic FederalTax Payment System. After you enroll, you can log on to EFTPS and pay various types of federal taxes year-round. Visit eftps.gov or call 800-555-4477 to make your payment.

If cash is your only option, you can use PayNearMe. With Official Payments and PayNearMe, you can pay your taxes at a participating 7-Eleven in your area. Visit IRS.gov/paywithcash for instructions.

You can use your online account to view your amount owed. It’s safe, secure and available through the IRS.gov/payments page. After you log in, you can view your amount owed, 18 months of payment history, access payment options or apply for an installment agreement.

For more information about making payments, online payment agreements and offers in compromise, click the Payments tab on IRS.gov or go to IRS.gov/payments.

If you’re bartering and trading, each transaction is taxable to both parties

Sometimes, when the right opportunity presents itself, people are able to “pay” for goods and services that they need or want by trading goods that they own or providing a service that they can perform in return. For example, a person who owns a lawn maintenance company may receive legal services from an attorney and “pay” for those services by providing an agreed upon amount of mowing and maintenance services at the attorney’s home or place of business. In this scenario, the fair market value of the legal services provided is taxable to the lawn maintenance company owner. At the same time, the fair market value of the lawn and maintenance services provided is taxable to the attorney or his firm.

This type of transaction — bartering or trading — can prove to be useful when cash-flow circumstances would otherwise hinder a person’s ability to secure needed goods and/or services. And while there is no exchange of cash or credit, the fair market value of the goods and/or services that were exchanged are taxable to both parties and must be claimed as income on an individual or business’s income tax return.

When considering record keeping requirements, barter and trade transactions are treated just like any other financial transaction or exchange. The original cost of goods being bartered or traded, transaction dates, fair market value at the time of the transaction, and other pertinent details will need to be recorded to assist in the preparation of your income tax return. These records should be held for a period of three years in accordance with other documents and receipts that are used to substantiate income and expenses.

For more details on barter and trade transactions, please visit the Bartering Tax Center at IRS.gov.

Tips to Know for Deducting Losses from a Disaster

The IRS wants taxpayers to know it stands ready to help in the event of a disaster. If a taxpayer suffers damage to their home or personal property, they may be able to deduct the loss they incur on their federal income tax return. If their area receives a federal disaster designation, they may be able to claim the loss sooner.

Ordinarily, a deduction is available only if the loss is major and not covered by insurance or other reimbursement.

Here are 10 tips taxpayers should know about deducting casualty losses:

1. Casualty loss.  A taxpayer may be able to deduct a loss based on the damage done to their property during a disaster. A casualty is a sudden, unexpected or unusual event. This may include natural disasters like hurricanes, tornadoes, floods and earthquakes. It can also include losses from fires, accidents, thefts or vandalism.

2. Normal wear and tear.  A casualty loss does not include losses from normal wear and tear. It does not include progressive deterioration from age or termite damage.

3. Covered by insurance.  If a taxpayer insured their property, they must file a timely claim for reimbursement of their loss. If they don’t, they cannot deduct the loss as a casualty or theft. Reduce the loss by the amount of the reimbursement received or expected to receive.

4. When to deduct.  As a general rule, deduct a casualty loss in the year it occurred. However, if a taxpayer has a loss from a federally declared disaster, they may have a choice of when to deduct the loss. They can choose to deduct it on their return for the year the loss occurred or on an original or amended return for the immediately preceding tax year.

This means that if a disaster loss occurs in 2017, the taxpayer doesn’t need to wait until the end of the year to claim the loss. They can instead choose to claim it on their 2016 return. Claiming a disaster loss on the prior year's return may result in a lower tax for that year, often producing a refund.

5. Amount of loss.  Figure the amount of loss using the following steps:

• Determine the adjusted basis in the property before the casualty. For property a taxpayer buys, the basis is usually its cost to them. For property they acquire in some other way, such as inheriting it or getting it as a gift, the basis is determined differently. For more information, see Publication 551, Basis of Assets.
• Determine the decrease in fair market value, or FMV, of the property as a result of the casualty. FMV is the price for which a person could sell their property to a willing buyer. The decrease in FMV is the difference between the property's FMV immediately before and immediately after the casualty.
• Subtract any insurance or other reimbursement received or expected to receive from the smaller of those two amounts.

6. $100 rule.  After figuring the casualty loss on personal-use property, reduce that loss by $100. This reduction applies to each casualty-loss event during the year. It does not matter how many pieces of property are involved in an event.

7. 10 percent rule.  Reduce the total of all casualty or theft losses on personal-use property for the year by 10 percent of the taxpayer’s adjusted gross income.

8. Future income.  Do not consider the loss of future profits or income due to the casualty.

9. Form 4684.  Complete Form 4684, Casualties and Thefts, to report the casualty loss on a federal tax return. Claim the deductible amount on Schedule A, Itemized Deductions.

10. Business or income property.  Some of the casualty loss rules for business or income property are different from the rules for property held for personal use.

Call the IRS disaster hotline at 866-562-5227 for special help with disaster-related tax issues. For more on this topic and the special rules for federally declared disaster-area losses see Publication 547, Casualties, Disasters and Thefts. Get it and other IRS tax forms on IRS.gov/forms at any time.

Avoid scams. The IRS will never initiate contact using social media or text message. First contact generally comes in the mail. Those wondering if they owe money to the IRS can view their tax account information on IRS.gov to find out.

Additional IRS Resources:

• Disaster Assistance and Emergency Relief for Individuals and Businesses
• Tax Topic 515 - Casualty, Disaster and Theft Losses
• Frequently Asked Questions for Disaster Victims
• Tax Relief in Disaster Situations
• Publication 2194, Disaster Resource Guide for Individuals and Businesses
• Publication 584, Casualty, Disaster, and Theft Loss Workbook (Personal-Use Property)
• Publication 584-B, Business Casualty, Disaster, and Theft Loss Workbook