Tax Scams — How to Report Them

The IRS would like your help in identifying promoters of “too good to be true” abusive tax schemes, and tax preparers using illegal schemes to avoid paying taxes.

Use the Report Suspected Abusive Tax Promotions or Preparers form to make a referral to the IRS. Learn more about the role of the IRS Lead Development Center and its efforts to stop abusive tax schemes at IRS.gov/scams.

These Tax Credits Can Mean a Refund for Individual Taxpayers

Taxpayers who are not required to file a tax return may want to do so. They might be eligible for a tax refund and don’t even know it. Some taxpayers might qualify for a tax credit that can result in money in their pocket. Taxpayers need to file a 2017 tax return to claim these credits.

Here is information about four tax credits that can mean a refund for eligible taxpayers:

• Earned Income Tax Credit. A taxpayer who worked and earned less than $53,930 last year could receive the EITC as a tax refund. They must qualify for the credit, and may do so with or without a qualifying child. They may be eligible for up to $6,318. Taxpayers can use the 2017 EITC Assistant tool to find out if they qualify.
• Premium Tax Credit.Taxpayers who chose to have advance payments of the premium tax credit sent directly to their insurer during 2017 must file a federal tax return to reconcile any advance payments with the allowable premium tax credit. In addition, taxpayers who enrolled in health insurance through the Health Insurance Marketplace in 2017 and did not receive the benefit of advance credit payments may be eligible to claim the premium tax credit when they file. They can use the Interactive Tax Assistant to see if they qualify for this credit.
• Additional Child Tax Credit. If a taxpayer has at least one child that qualifies for the Child Tax Credit, they might be eligible for the ACTC. This credit is for certain individuals who get less than the full amount of the child tax credit.
• American Opportunity Tax Credit. To claim the AOTC, the taxpayer, their spouse or their dependent must have been a student who was enrolled at least half time for one academic period. The credit is available for four years of post-secondary education. It can be worth up to $2,500 per eligible student. Even if the taxpayer doesn’t owe any taxes, they may still qualify. They are required to have Form 1098-T, Tuition Statement, to be eligible for an education benefit. Students receive this form from the school they attended. There are exceptions for some students. Taxpayers should complete Form 8863, Education Credits, and file it with their tax return.

By law, the IRS is required to hold EITC and Additional Child Tax Credit refunds until mid-February — even the portion not associated with the EITC or ACTC.  The IRS expects the earliest of these refunds to be available in taxpayer bank accounts or debit cards starting February 27, 2018, if these taxpayers choose direct deposit and there are no other issues with their tax return.

Instructions for Forms 1040, 1040A or 1040EZ list income tax filing requirements. Taxpayers can also use the Interactive Tax Assistant tool on IRS.gov to answer many tax questions. They should look for “Do I need to file a return?” under general topics.

This tax tip covers information for tax year 2017 and is not affected by the Tax Cuts and Jobs Act of 2017. Most of the changes in this legislation take effect in 2018 and will affect the tax returns filed in 2019.

More Information:

• Publication 596, Earned Income Credit
• Schedule 8812 (Form 1040A or 1040), Child Tax Credit
• Publication 972, Child Tax Credit
• Publication 970, Tax Benefits for Education
• Education Credits

Bookkeeper: The NEW Definition

Bookkeeper: A management accounting professional, often specializing in financial compliance, business strategy, technology setup, execution, and maintenance.

If you look up the definition of a Bookkeeper in Webster's Dictionary, or online, most of the time, the definition of a Bookkeeper is extremely outdated, and no longer applies to the bookkeeping profession. The above definition of a Bookkeeper is more up-to-date, and a much more accurate description of what a Bookkeeper does today.

Tax Issues for Alaska Native American Corporations and Alaska Native Settlement Trusts

The Internal Revenue Service today reminds Alaska Native Corporations and Alaska Native Settlement Trusts that they may be able to take advantage of certain benefits in the recently enacted tax reform legislation. The new law also requires that certain contributions made by Native Corporations to Settlement Trusts in 2017 be reported to the Settlement Trusts by January 31, 2018.

Assignment of Payments to a Settlement Trust

The new law allows a Native Corporation to assign certain payments to a Settlement Trust without treating the payments as income for federal tax purposes.

The assignments must be in writing and the Native Corporations must not have received the payments prior to the assignment to the trust. The Settlement Trust must include the payments in its gross income in the taxable year received, for taxable years beginning in 2017.

If a Native Corporation assigns payments to a Settlement Trust, they are not allowed to deduct those same payments.

Deduction for Contributions by a Native Corporation to a Settlement Trust

Native Corporations may also choose to deduct contributions made to a Settlement Trust. The deduction is limited to the amount of the Native Corporation’s taxable income for that year. Any unused deduction may be carried forward 15 additional years.

A Native Corporation makes the election to deduct contributions to a Settlement Trust for a specific taxable year by including a statement with its original or amended income tax return. The election is effective only for the taxable year for which the return is filed. Additionally, the election may be revoked on a timely filed amendment or supplement to that income tax return.

A Native Corporation may make this election for any taxable year for which the statute of limitations period has not expired. If the refund statute of limitations period expires before December 22, 2018, the Native Corporation has until December 21, 2018 to make a claim for credit or refund.

Reporting Requirements for Electing Native Corporations

Native Corporations that choose to deduct contributions made to a Settlement Trust are under a new reporting requirement. They must furnish a statement to the Settlement Trust providing information about the contributed property by January 31 of the year after the contribution was made.

The statement must include:

• the total amount of contributions to which the election applies,
• for each contribution, whether the contribution was in cash,
• for each contribution of other than cash, the date the contributed property was acquired by the Native Corporation, the adjusted tax basis and fair market value of the property at the time of its contribution; and
• the date of each contribution.

Deferral of Income Recognition by Settlement Trusts

Generally, the Settlement Trust must include income equal to the deduction by the Native Corporation. However, under the new law, Settlement Trusts may choose to defer recognizing contributions of property other than cash as income until the Settlement Trust sells or disposes of the property. The new law allows a Settlement Trust to amend the terms of its agreement to allow this choice up to December 21, 2018, with certain restrictions.

To defer recognition of income related to any property contributed to it by a Native Corporation, the Settlement Trust must identify and describe the property on a statement attached to its original or amended income tax return for the year in which the contribution was made. A Settlement Trust may make this election for any taxable year for which the statute of limitations period has not expired.  If the refund statute of limitations period expires before December 22, 2018, the Settlement Trust has until December 21, 2018 to make a claim for credit or refund.

IRS Encourages Native Americans to Check Eligibility for Earned Income Tax Credit

The IRS urges Native American taxpayers to check if they qualify for the earned income tax credit since many workers in Tribal communities often overlook this credit.

EITC benefits Native Americans who meet basic rules. Taxpayers must have income from a job, be self-employed, or run their own business. This includes home-based businesses and work in the service industry, construction and farming.

Income Limits and Maximum Credit Amounts

For tax year 2017, the income limits for all taxpayers’ earned income and adjusted gross income must each be less than:

Filing Status	Qualifying Children Claimed
	Zero	One	Two	Three or More
Single	$15,010	$39,617	$45,007	$48,340
Head of Household	$15,010	$39,617	$45,007	$48,340
Qualifying Widow(er) with Dependent Child	$15,010	$39,617	$45,007	$48,340
Married Filing Jointly	$20,600	$45,207	$50,957	$53,930

The maximum credit for Tax Year 2017 is:

• $6,318 with three or more qualifying children
• $5,616 with two qualifying children
• $3,400 with one qualifying child
• $510 with no qualifying children

By law, the IRS cannot issue refunds before mid-February for tax returns that claim the EITC or the additional child tax credit. The law requires the IRS to hold the entire refund — even the portion not associated with the EITC or ACTC. The IRS expects the earliest EITC/ACTC related refunds to be available in taxpayer bank accounts or on debit cards starting Feb. 27, 2018, if these taxpayers choose direct deposit and there are no other issues with their tax return.

More Information:

• Filing for Individuals
• EITC Assistant

IRS Reminds Employers: Forms W-2, W-3 Some Forms 1099-MISC Due Jan. 31

The Internal Revenue Service is reminding employers that the deadline for filing employee Forms W-2, Wage and Tax Statement, for calendar year 2017 is Jan. 31, 2018. This includes Forms W-3, Transmittal of Wage and Tax Statements.

In addition, reporting payments to contract workers on Form 1099-MISC (box 7, nonemployee compensation) must also be filed by Jan. 31.

Employers must file Form W-2 showing the wages paid and taxes withheld for the year for each employee with the Social Security Administration. The due date applies to both e-filed and paper filed W-2s. The Jan. 31 deadline began last year as part of the Protecting Americans Against Tax Hikes (PATH) Act legislation to combat identity theft and refund fraud.

The Social Security Administration encourages all employers to e-file their Forms W-2 by using its Business Services Online. The online filing checklist provides a step-by-step process for employers to file W-2s quickly and securely. Employers are required to use e-file if they file 250 or more Forms W-2 or W-2c, and failing to do so may incur a penalty. The IRS projects that employers will file more than 250 million Forms W-2 this year and that the vast majority will be e-filed. E-filing can save time and effort and helps ensure accuracy.

Employers that file Forms 1097, 1098, 1099 (except a Form 1099-MISC reporting nonemployee compensation), 3921, 3922 or W-2G electronically, have an extended filing due date with the IRS of April 2, 2018. However, the due date for giving the recipient these forms generally remains Jan. 31.

IRS Announces 2018 Tax Filing Season Opens with April 17 Deadline; 155 Million Tax Returns Projected, 70 Percent Expect Refunds

Marking the beginning of the nation’s tax season, the Internal Revenue Service said today that it successfully started accepting and processing 2017 federal individual income tax returns. More than 155 million returns are expected to be filed this year.

People have until Tuesday, April 17, 2018, to file their 2017 returns and pay any taxes due. The filing tax deadline is later this year due to several factors. The usual April 15 deadline falls on Sunday this year, which would normally give taxpayers until at least the following Monday. However, Emancipation Day, a Washington, D.C., holiday, is observed on Monday, April 16, giving taxpayers nationwide an additional day to file. By law, Washington holidays impact tax deadlines for everyone in the same way federal holidays do. Taxpayers requesting an extension will have until Monday, Oct. 15, 2018, to file.

The IRS expects more than 70 percent of taxpayers to get tax refunds this year. Last year, nearly 112 million refunds were issued, with an average refund of $2,895.

“The IRS has a number of ways to help taxpayers this filing season, and we encourage people to look into the many options available,” said Acting IRS Commissioner David Kautter. “The nation’s tax professionals and software community work with the IRS and help make the tax filing process easier for Americans. Today’s filing season kick-off reflects many months of hard work by the nation’s tax community and IRS employees. And we also appreciate the time and attention taxpayers take as they prepare and file their taxes."

Use e-File and Free File

The IRS expects about 90 percent of returns to be filed electronically. Choosing e-file and direct deposit remains the fastest and safest way to file an accurate income tax return and receive a refund.

The IRS Free File program, available at IRS.gov, gives eligible taxpayers a dozen options for brand-name products. Free File is a partnership with commercial partners offering free brand-name software to about 100 million individuals and families with incomes of $66,000 or less. About 70 percent of the nation’s taxpayers are eligible for IRS Free File. People who earned more than $66,000 may use Free File Fillable Forms, the electronic version of IRS paper forms.

Refunds in 2018: More than 90 Percent in Less than 21 days; EITC/ACTC Refunds Starting Feb. 27

The IRS issues more than nine out of 10 refunds in less than 21 days. However, it’s possible a tax return may require additional review and take longer. “Where’s My Refund?” has the most up to date information available about refunds. The tool is updated no more than once a day, so taxpayers don’t need to check more often.

The IRS also notes that refunds cannot be issued before mid-February for tax returns that claim the Earned Income Tax Credit or the Additional Child Tax Credit. This applies to the entire refund — even the portion not associated with the EITC and ACTC. While the IRS will process the EITC and ACTC returns when received, these refunds cannot be issued before mid-February. The IRS expects the earliest EITC/ACTC related refunds to be available in taxpayer bank accounts or on debit cards starting on Feb. 27, 2018, if they chose direct deposit and there are no other issues with the tax return.

“Where's My Refund?” ‎on IRS.gov and the IRS2Go mobile app remain the best way to check the status of a refund. “Where’s My Refund?” will be updated with projected deposit dates for most early EITC and ACTC refund filers Feb. 17, so those filers will not see a refund date on “Where's My Refund?” ‎or through their software packages until then. The IRS, tax preparers and tax software will not have additional information on refund dates, so these filers should not contact or call about refunds before the end of February.

This law change gives the IRS more time to detect and prevent fraud. Even with the EITC and ACTC refunds and the additional security safeguards, the IRS still expects to issue more than nine out of 10 refunds in less than 21 days. However, it’s possible a particular tax return may require additional review and take longer. Taxpayers are reminded that state tax agencies have their own refund processing timeframes that vary, and some states may make additional reviews to ensure their refunds are being issued properly. Even so, taxpayers and tax return preparers should file when they’re ready. For those who usually file early in the year and are ready to file a complete and accurate return, there is no need to wait to file.

Free Tax Help

Low- and moderate-income taxpayers can get help filing their tax return for free. More than 90,000 volunteers around the country can help people correctly complete their return.

To get this help, taxpayers can visit one of the more than 12,000 community-based tax help sites that participate in the Volunteer Income Tax Assistance and Tax Counseling for the Elderly programs. To find the nearest site, use the VITA/TCE Site Locator on IRS.gov or the IRS2Go mobile app.

Filing Assistance

No matter who prepares a federal tax return, by signing the return, the taxpayer becomes legally responsible for the accuracy of all information included. IRS.gov offers a number of tips about selecting a preparer and information about national tax professional groups.

The IRS urges all taxpayers to make sure they have all their year-end statements in hand before filing. This includes Forms W-2 from employers and Forms 1099 from banks and other payers. Doing so will help avoid refund delays and the need to file an amended return.

Online tools

The IRS reminds taxpayers they have a variety of options to get help filing and preparing their tax return on IRS.gov, the official IRS website. Taxpayers can find answers to their tax questions and resolve tax issues online. The Let Us Help You page helps answer most tax questions, and the IRS Services Guide links to these and other IRS services.

Taxpayers can go to IRS.gov/account to securely access information about their federal tax account. They can view the amount they owe, pay online or set up an online payment agreement; access their tax records online; review the past 18 months of payment history; and view key tax return information for the current year as filed. Visit IRS.gov/secureaccess to review the required identity authentication process.

The IRS urges taxpayers to take advantage of the many tools and other resources available on IRS.gov. IRS phone lines will be busy again this year, so to save time, people should first visit the IRS website for tax assistance.

The IRS continues to work with state tax authorities and the tax industry to address tax-related identity theft and refund fraud. As part of the Security Summit effort, stronger protections for taxpayers and the nation’s tax system are in effect for the 2018 tax filing season.

The new measures attack tax-related identity theft from multiple sides. Many changes will be invisible to taxpayers but will help the IRS, states and the tax industry provide new protections. New security requirements will better protect tax software accounts and personal information. 

Renew ITIN to Avoid Refund Delays

Many Individual Taxpayer Identification Numbers (ITINs) expired on Dec. 31, 2017. This includes any ITIN not used on a tax return at least once in the past three years. Also, any ITIN with middle digits of 70, 71, 72 or 80 (Example: 9NN-70-NNNN or 9NN-80-NNNN) is now expired. ITINs that have middle digits 78 or 79 expired Dec. 31, 2016, but taxpayers can still renew them. Affected taxpayers should act soon to avoid refund delays and possible loss of eligibility for some key tax benefits until the ITIN is renewed. An ITIN is used by anyone who has tax-filing or payment obligations under U.S. tax law but is not eligible for a Social Security number.

It can take up to 11 weeks to process a complete and accurate ITIN renewal application. For that reason, the IRS urges anyone with an expired ITIN needing to file a tax return this tax season to submit their ITIN renewal application soon.

Sign and Validate Electronically Filed Tax Returns

All taxpayers should keep a copy of their tax return. Some taxpayers using a tax filing software product for the first time may need their Adjusted Gross Income (AGI) amount from their prior-year tax return to verify their identity.

Taxpayers using the same tax software they used last year will not need to enter their prior year information to electronically sign their 2017 tax return. Taxpayers can learn more about how to verify their identity and electronically sign tax returns at Validating Your Electronically Filed Tax Return.

Check Out These Three Tools on IRS.gov

With the tax filing season kicking off today, the IRS reminds taxpayers about tools that will help answer questions. Taxpayers can access Publication 17, the Interactive Tax Assistant, and Where’s My Refund? on IRS.gov.

• Publication 17, Your Federal Income tax

This publication covers the general rules for filing a federal income tax return. It explains the tax law to make sure someone pays only the tax they owe and no more.  Using eBooks taxpayers can view   Publication 17 and other frequently used tax publications on their mobile devices such as smart phones, tablets and eReaders. IRS tax products are generally available online six to eight weeks before paper products are distributed. To view and download tax products, use the ‘Forms and Pubs’ tab on IRS.gov.

• Interactive Tax Assistant

The ITA provides answers to several tax law questions. The ITA includes question-and-answer session for a variety of topics. Users simply respond to basic questions to find the answers they need. Topics include:

• Do I Need to File a Tax Return?
• Who Can I Claim as a Dependent?
• How Much Is My Standard Deduction?
• What Is My Filing Status?
• Am I Eligible to Claim an Education Credit?

•  Where’s My Refund?

Taxpayers can use this tool on IRS.gov or with the IRS2Go mobile app for a personalized refund status. Taxpayers can generally check the status of their refund 24 hours after the IRS receives their e-filed return. Where’s My Refund? has the most up-to-date information available. It is updated no more than once a day, so taxpayers don’t need to check more often.

More Information:

• Filing for Individuals
• Paying Your Taxes

N-2018-14: Guidance on Withholding Rules

Notice 2018-14: 1) extends the effective period of Forms W-4 furnished to claim exemption from income tax withholding under § 3402(n) for 2017 until February 28, 2018 and temporarily permits employees to claim exemption from withholding under § 3402(n) for 2018 by using 2017 Form W-4, (2) suspends the requirement that employees must furnish their employers new Forms W-4 within 10 days of changes of status resulting in fewer withholding allowances, (3) provides that the optional withholding rate on supplemental wage payments is 22% for taxable years 2018 through 2025, and (4) provides that, for 2018, withholding on annuities or similar periodic payments where no withholding certificate is in effect is based on treating the payee as a married individual claiming three withholding allowances  under § 3405(a)(4).

Notice 2018-14 will be in IRB 2018-07, dated 02/12/2018.

IRS: Special Rules Help Many with Disabilities Qualify for Earned Income Tax Credit

The Internal Revenue Service wants taxpayers with disabilities and parents of children with disabilities to be aware of the Earned Income Tax Credit (EITC) and correctly claim it if they qualify.

The IRS says that many with disabilities miss out on this valuable credit because they do not file a tax return. EITC could put a refund of up to $6,318 into an eligible taxpayer’s pocket. Many people who do not claim the credit fall below the income threshold requiring them to file. Even so, the IRS urges them to consider filing anyway because the only way to receive this credit is to file a tax return and claim the EITC.

The EITC is a federal income tax credit for workers who earn $53,930 or less for 2017 and meet other eligibility requirements. Because it’s a refundable credit, those who qualify and claim the credit could pay less federal tax, pay no tax or even get a tax refund.

To qualify for EITC, the taxpayer must have earned income. Usually, this means income either from a job or from self-employment. But taxpayers who retired on disability can also count as earned income any taxable benefits they receive under an employer’s disability retirement plan. These benefits remain earned income until the disability retiree reaches minimum retirement age. The IRS emphasized that Social Security benefits and Social Security Disability Income (SSDI) do not count as earned income.

Additionally, taxpayers may claim a child with a disability or a relative with a disability of any age to get the credit if the person meets all other EITC requirements. Use the EITC Assistant, on IRS.gov, available in English and Spanish, to determine eligibility and to estimate the amount of the credit.

People with disabilities are often concerned that a tax refund will impact their eligibility for one or more public benefits, including Social Security disability, Medicaid, and SNAP -- the Supplemental Nutrition Assistance Program. The law is clear that tax refunds, including refunds from tax credits such as the EITC, are not counted as income for purposes of determining eligibility for such benefits. This applies to any federal program and any state or local program financed with federal funds.

The best way to get the EITC is to file electronically through a qualified tax professional, using free community tax help sites or through IRS Free File.

Many EITC filers will receive their refunds later this year than in past years. That’s because by federal law, the IRS cannot issue refunds for tax returns that claim the EITC or the Additional Child Tax Credit (ACTC) before mid-February. The IRS expects the earliest EITC/ACTC related refunds to be available in taxpayer bank accounts or on debit cards starting Feb. 27, 2018, if they chose direct deposit and there are no other issues with the tax return. Even so, taxpayers claiming the EITC or ACTC should file as soon as they have all the documents they need to prepare a complete and accurate return.

The IRS and partners nationwide will hold the annual EITC Awareness Day on Friday, Jan. 26, 2018, to alert millions of workers who may be missing out on this significant tax credit and other refundable credits. One easy way to support this outreach effort is by participating on the IRS Thunderclap to help promote EITC Awareness Day through social media. For more information on EITC and other refundable credits, visit the EITC page on IRS.gov.

Many People in Rural Areas Can Benefit from EITC

The IRS wants taxpayers living in rural communities to be aware of the earned income tax credit and correctly claim it if they qualify. Many qualified individuals and families who live in rural areas don’t claim the EITC. There are many reasons for this. They may:

• Think they are ineligible.
• Not know about the credit.
• Not think they made enough money to qualify.
• Worry about paying for tax preparation services.

The average household income in many small towns and rural areas is below the national average. Because of this, many of these taxpayers may qualify for EITC. Here are some things that people living in these areas should remember about the credit and how it can benefit them:

• Because it’s a refundable tax credit, those who qualify and claim the credit could pay less federal tax, pay no tax or even get a tax refund.
• An eligible taxpayer must have earned income from employment or owning a business or farm and meet basic rules.
• To get the credit, taxpayers must file a tax return, even if they don’t owe any tax or aren’t required to file.
• Single workers without a qualifying child who earn less than $15,010 may qualify for a smaller amount of the credit.
• There are special rules for individuals receiving disability benefits and for members of the military.
• The IRS recommends using the EITC Assistant on IRS.gov to determine eligibility and estimate the amount of credit.

Qualified taxpayers should consider claiming the EITC by filing electronically, which they can do:

• Through a qualified tax professional.
• Using free community tax help sites.
• Themselves, with IRS Free File.

By law, the IRS cannot issue refunds before mid-February for tax returns that claim the EITC or the additional child tax credit. The law requires the IRS to hold the entire refund — even the portion not associated with the EITC or ACTC.  The IRS expects the earliest EITC/ACTC related refunds to be available in taxpayer bank accounts or on debit cards starting Feb. 27, 2018, if these taxpayers choose direct deposit and there are no other issues with their tax return.

Many Hurricane Victims Qualify for Earned Income Tax Credit; Special Method Can Aid Workers Whose Income Dropped

The IRS is urging victims of last year’s hurricanes, especially those who lived in areas affected by Hurricanes Harvey, Irma and Maria, to see if they qualify for the Earned Income Tax Credit (EITC). According to the IRS, many people whose incomes dropped in 2017 may be eligible to choose a special option for figuring the EITC, a credit for low- and moderate-income workers and families.

A special computation method, available only to people who lived in one of the hurricane disaster areas during 2017, may enable them to claim the EITC or claim a larger than usual credit. Under this method, taxpayers whose incomes dropped in 2017 can choose to figure the credit using their 2016 earned income rather than their 2017 earned income. Eligible taxpayers should figure the credit both ways -- the regular way using 2017 earned income and this special way using 2016 earned income -- to see which yields the larger EITC. For more information and special instructions on how to report, see the instructions for Form 1040, Line 66, and Publication 976, available on IRS.gov.

The EITC helps working people who don't earn a lot ($53,930 or less for 2017) and meet other eligibility requirements. Because it’s a refundable credit, those who qualify and claim it could pay less federal tax, pay no tax or even get a refund.

EITC can mean up to a $6,318 refund for working families with qualifying children. Actual credit amounts vary based on income, family size and other factors. Workers without a qualifying child with incomes below $20,600 could also be eligible for a smaller credit of up to $510. On average, EITC adds $2,445 to refunds.

To qualify for EITC, an eligible taxpayer must meet basic rules and have earned income from working for someone, being self-employed or running a business or farm. This includes home-based businesses, the sharing economy and employment in the service, construction and agriculture industries. In addition, certain disability payments may qualify as earned income for EITC purposes. The EITC Assistant, available on IRS.gov, can help taxpayers determine eligibility and estimate the amount of their credit.

To get the credit, people must file a tax return, even if they owe no tax and even if they normally aren’t required to file. The fastest and easiest way to do so is by filing electronically, whether through a qualified tax professional; using free community tax help sites; or self-preparing with IRS Free File.

By law the IRS cannot issue refunds before mid-February for tax returns that claim the EITC or the Additional Child Tax Credit (ACTC). The IRS must hold the entire refund — even the portion not associated with EITC or ACTC. This change helps ensure taxpayers receive the refund they deserve and gives the agency more time to detect and prevent errors and fraud.

The IRS expects the earliest EITC/ACTC related refunds to be in taxpayer bank accounts or debit cards starting Feb. 27, 2018, if they chose direct deposit and there are no issues with the tax return.

The IRS and partners nationwide will hold the annual EITC Awareness Day on Friday, Jan. 26 to alert millions of workers who may be missing out on this and other refundable credits. One easy way to support this outreach effort is by participating on the IRS Thunderclap to help promote #EITCAwarenessDay through social media. For more information on EITC and other refundable credits visit the EITC page on IRS.gov.

Grandparents Caring for Grandchildren Should Check Their Eligibility for EITC

Grandparents who work and are also raising grandchildren might benefit from the earned income tax credit. The IRS encourages these grandparents to find out, not guess, if they qualify for this credit. This is important because grandparents who care for children are often not aware that they could claim these children for the EITC.

The EITC is a refundable tax credit. This means that those who qualify and claim the credit could pay less  federal tax, pay no tax, or even get a tax refund. Grandparents who are the primary caretakers of their grandchildren should remember these facts about the credit:

• A grandparent who is working and has a grandchild living with them may qualify for the EITC, even if the grandparent is 65 years of age or older.  
• Generally, to be a qualified child for EITC purposes, the grandchild must meet the dependency and qualifying child requirements for EITC.  
• The rules for grandparents claiming the EITC are the same for parents claiming the EITC.  
• Special rules and restrictions apply if the child’s parents or other family members also qualify for the EITC.  
• There are also special rules for individuals receiving disability benefits and members of the military.  
• To qualify for the EITC, the grandparent must have earned income either from a job or self-employment and meet basic rules.  
• The IRS recommends using the EITC Assistant, available in English or Spanish, on IRS.gov, to determine eligibility and estimate the amount of credit.  
• Eligible grandparents must file a tax return, even if they don’t owe any tax or aren’t required to file.

Qualified taxpayers should consider filing electronically. It’s the fastest and most secure way to file a tax return and get a refund.

By law, the IRS cannot issue refunds before mid-February for tax returns that claim the EITC or the additional child tax credit. The law requires the IRS to hold the entire refund — even the portion not associated with the EITC or ACTC.  The IRS expects the earliest EITC/ACTC related refunds to be available in taxpayer bank accounts or on debit cards starting Feb. 27, 2018, if these taxpayers choose direct deposit and there are no other issues with their tax return.

More Information:

Publication 596, available on IRS.gov.

IRS, States and Tax Industry Warn Employers to Beware of Form W-2 Scam; Tax Season Could Bring New Surge in Phishing Scheme

The Internal Revenue Service, state tax agencies and the tax industry today urged all employers to educate their payroll personnel about a Form W-2 phishing scam that made victims of hundreds of organizations and thousands of employees last year.

The Form W-2 scam has emerged as one of the most dangerous phishing emails in the tax community. During the last two tax seasons, cybercriminals tricked payroll personnel or people with access to payroll information into disclosing sensitive information for entire workforces. The scam affected all types of employers, from small and large businesses to public schools and universities, hospitals, tribal governments and charities.

Reports to phishing@irs.gov from victims and nonvictims about this scam jumped to approximately 900 in 2017, compared to slightly over 100 in 2016. Last year, more than 200 employers were victimized, which translated into hundreds of thousands of employees who had their identities compromised.

By alerting employers now, the IRS and its partners in the Security Summit effort hope to limit the success of this scam in 2018. The IRS last year also created a new process by which employers should report these scams. There are steps the IRS can take to protect employees, but only if the agency is notified immediately by employers about the theft.

Here’s how the scam works: Cybercriminals do their homework, identifying chief operating officers, school executives or others in positions of authority. Using a technique known as business email compromise (BEC) or business email spoofing (BES), fraudsters posing as executives send emails to payroll personnel requesting copies of Forms W-2 for all employees.

The Form W-2 contains the employee’s name, address, Social Security number, income and withholdings. Criminals use that information to file fraudulent tax returns, or they post it for sale on the Dark Net.

The initial email may be a friendly, “hi, are you working today” exchange before the fraudster asks for all Form W-2 information. In several reported cases, after the fraudsters acquired the workforce information, they immediately followed that up with a request for a wire transfer.

In addition to educating payroll or finance personnel, the IRS and Security Summit partners also urge employers to consider creating a policy to limit the number of employees who have authority to handle Form W-2 requests and that they require additional verification procedures to validate the actual request before emailing sensitive data such as employee Form W-2s.

If the business or organization victimized by these attacks notifies the IRS, the IRS can take steps to help prevent employees from being victims of tax-related identity theft. However, because of the nature of these scams, some businesses and organizations did not realize for days, weeks or months that they had been scammed.

The IRS established a special email notification address specifically for employers to report Form W-2 data thefts. Here’s how Form W-2 scam victims can notify the IRS:

• Email dataloss@irs.gov to notify the IRS of a Form W-2 data loss and provide contact information, as listed below.
• In the subject line, type “W2 Data Loss” so that the email can be routed properly. Do not attach any employee personally identifiable information data.
• Include the following:
• Business name
• Business employer identification number (EIN) associated with the data loss
• Contact name
• Contact phone number
• Summary of how the data loss occurred
• Volume of employees impacted

Businesses and organizations that fall victim to the scam and/or organizations that only receive a suspect email but do not fall victim to the scam should send the full email headers to phishing@irs.gov and use “W2 Scam” in the subject line.

Employers can learn more at Form W-2/SSN Data Theft: Information for Businesses and Payroll Service Providers.

Employers should be aware that cybercriminals’ scams constantly evolve. Finance and payroll personnel should be alert to any unusual requests for employee data.

Deciding Whether and How to File? Here’s What to Remember

As people prepare to file their taxes, there are things to consider. They will want to determine if they need to file and the best way to do so.

Here are three things for people to keep in mind as they prepare to file their taxes:

• Who is Required to File.  In most cases, income, filing status and age determine if a taxpayer must file a tax return. Other rules may apply if the taxpayer is self-employed or if they are a dependent of another person. For example, if a taxpayer is single and younger than age 65, they must file if their income was at least $10,400. There are other instances when a taxpayer must file. Go to IRS.gov/filing  for more information.
• Filing to get a refund. Even if a taxpayer doesn’t have to file, they should file a tax return if they can get money back. If a taxpayer answers “yes” to any of these questions, they could be due a refund: ◦Did my employer withhold federal income tax from my pay?
• Did I make estimated tax payments?
• Did I overpay last year and have it applied to this year’s tax?  
• Taxpayers can File for Free. Join the millions of Americans who safely file their taxes and save money using IRS Free File. Seventy percent of the nation’s taxpayers are eligible for IRS Free File. Commercial partners of the IRS offer free brand-name software to about 100 million individuals and families with incomes of $66,000 or less. Taxpayers who earned more can use Free File Fillable Forms. This option allows taxpayers to complete IRS forms electronically. It is best for those who are used to doing their own taxes.

Instructions for Forms 1040, 1040A or 1040EZ list income tax filing requirements. Taxpayers can also use the Interactive Tax Assistant tool on IRS.gov to answer many tax questions.. They should look for “Do I need to file a return?” under general topics.

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

More Information:

• Publication 17, Your Federal Income Tax
• Publication 501 Exemptions, Standard Deduction and Filing Information

IRS Withholding Tables Frequently Asked Questions

Q: Why are these changes being made?

A: The new withholding tables are needed to reflect the changes in tax rates and tax brackets, increased standard deduction and repeal of personal exemptions that were included in the new tax reform law signed in December. The withholding guidance issued today is for employers to make changes to their payroll systems and is designed to work with existing W-4s that employees have on file.

Q: How soon will people see the changes in their paychecks?

A: Employees should begin to see withholding changes in their checks in February. The exact timing depends on when their employer can make the change and how often they are paid. It typically takes payroll providers and employers about a month to update withholding changes on their systems.

Q: Will employees need to take any action to get the new withholding rates?

A: No. Payroll changes required each year are made by employers and their payroll providers, so employees are not required to take any extra steps. However, employees should review their withholding to make sure that it is accurate. IRS will be releasing a new calculator and Form W-4 soon, to help employees ensure withholding is accurate.

Q: What is a withholding table?

A: A withholding table shows payroll service providers and employers how much tax to withhold from employee paychecks, given each employee’s wages, marital status, and the number of withholding allowances they claim.

Q: What is a Form W-4?

A: This is an IRS form that employees provide to their employers, to determine the amount of federal income tax to withhold from the employees’ paychecks. The form helps employees adjust withholding based on their personal circumstances, such as whether they have children or a spouse who is also working. The IRS always recommends employees check their withholding any time their personal or financial information changes.

Q: Will people need to fill out a new W-4 form right now?

A: No, the new withholding tables are designed to minimize taxpayer burden as much as possible and will work with the Forms W-4 that workers have already filed with their employers to claim withholding allowances. The IRS is working on revising the Form W-4 to more fully reflect the new law and provide taxpayers information to determine whether they need to adjust their withholding.

Q: Is the IRS working on a new Form W-4 to reflect the new tax law?

A: Yes. The IRS continues to work on more detailed withholding information, which will be available soon in Publication 15 and related publications. In addition, the IRS is working on revising the Form W-4 to more fully reflect the new law and providing taxpayers information to determine whether they need to adjust their withholding. The IRS is also revising the withholding tax calculator on IRS.gov to help employees who wish to update their withholding in response to the new law or other changes in their personal circumstances in 2018. The IRS anticipates this calculator should be available by the end of February.

Q: Should people check their withholding after the new 2018 Form W-4 and the withholding calculator are available?

A: Yes. It’s always a good idea for people to check their withholding status. The IRS encourages all taxpayers to check their withholding when the new information is available in February. The IRS will help educate taxpayers about the new withholding guidelines and the calculator. The effort will be designed to help workers ensure that they are not having too much or too little tax taken out of their pay.

Q: Are some taxpayers at risk of being under-withheld on their taxes with the changes to the withholding tables?

A: Some people have more complicated tax situations and face the possibility of being under-withheld. For example, people who itemize their deductions, couples with multiple jobs or individuals with more than one job a year will be encouraged to review their tax situations. The IRS will be encouraging people – particularly those with more than one income in their household—to check their withholding. The IRS is updating the 2018 Form W-4 and the IRS.gov withholding calculator to help with this process.

Q: Are many people under-withheld on their taxes?

A: Most people are over-withheld on their taxes, meaning that more taxes are held out of their paychecks than what they owe.

Q: Will the IRS be making further changes to Form W-4 in 2019?

A: In 2019, the IRS anticipates making further changes involving withholding. The IRS will work with the business and payroll community to encourage workers to file new Forms W-4 next year and share information on changes in the new tax law that impact withholding.