|
|
|
Seven Things
You Need to Know About the Government Retiree Credit
Certain government retirees
who receive a government pension or annuity payment in 2009 may be eligible for
the Government Retiree Credit. The American Recovery and Reinvestment Act of 2009
provides this one-time credit of $250 for certain federal and state pensioners.
Here are seven things
the IRS wants you to know about the Government Retiree Credit:
1. You can take this credit if you receive
a pension or annuity payment in 2009 for service performed for the U.S. Government
or any U.S. state or local government and the service was not covered by social
security.
2. Recipients of the Making Work Pay Credit
will have that credit reduced by any Government Retiree Credit they receive.
3. The credit is $250 for individuals and
$500 if married filing jointly and both you and your spouse receive a qualifying
pension or annuity.
4. You must have a valid social security
number to claim the credit. If married filing jointly, both spouses must have a
valid social security number to each claim the $250 credit.
5. You cannot take the credit if you received
a $250 economic recovery payment in 2009.
6. This is a refundable credit, which means
it may give you a refund even if you had no tax withheld from your pension.
7. To claim the credit, you must complete
Schedule M, Making Work Pay and Government Retiree Credits, and attach it to your
Form 1040A or 1040.
Links:
Top
Do I have
to File a Tax Return?
January 26, 2010
You must file a tax
return if your income is above a certain level. The amount varies depending on filing
status, age and the type of income you receive.
Check the Individuals
section of IRS.gov or consult the instructions for Form 1040, 1040A, or 1040EZ for
specific details that may affect your need to file a tax return with the IRS this
year.
Even if you don’t have
to file, here are eight reasons why you may want to file:
1. Federal Income Tax Withheld -
If you are not required to file, you should file to get money back if Federal Income
Tax was withheld from your pay, you made estimated tax payments, or had a prior
year overpayment applied to this year's tax.
2. Making Work Pay Credit -
You may be able to take this credit if you have earned income from work. The maximum
credit for a married couple filing a joint return is $800 and $400 for other taxpayers.
3. Government Retiree Credit -
You may be eligible for this credit if you received a government pension or annuity
payment in 2009. However, the amount of this credit reduces any making work pay
credit you receive.
4. Earned Income Tax Credit -
You may qualify for EITC if you worked, but did not earn a lot of money. EITC is
a refundable tax credit; which means you could qualify for a tax refund.
5. Additional Child Tax Credit -
This credit may be available to you if you have at least one qualifying child and
you did not get the full amount of the Child Tax Credit.
6. Refundable American Opportunity Credit -
This education tax credit is available for 2009 and 2010. The maximum credit per
student is $2,500 and the first four years of postsecondary education qualify.
7. First-Time Homebuyer Credit -
The credit is a maximum of $8,000 or $4,000 if your filing status is married filing
separately. The credit applies to homes bought anytime in 2009 and on or before
April 30, 2010. However, you have until on or before June 30, 2010, if you entered
into a written binding contract before May 1, 2010. If you bought a home after November
6, 2009, you may be able to qualify and claim the credit even if you already owned
a home. In this case, the maximum credit for long-time residents is $6,500, or $3,250
if your filing status is married filing separately.
8. Health Coverage Tax Credit -
Certain individuals, who are receiving Trade Adjustment Assistance, Reemployment
Trade Adjustment Assistance, or pension benefit payments from the Pension Benefit
Guaranty Corporation, may be eligible for a Health Coverage Tax Credit worth 80
percent of monthly health insurance premiums when you file your 2009 tax return.
For more information
about filing requirements and your eligibility to receive tax credits, visit IRS.gov.
Links:
Back to Top
Haiti Relief
Donations Qualify for Immediate Tax Relief
January 25, 2010
Videos:
Haiti Earthquake
Donations: English
For this and other videos: YouTube/IRSVideos
WASHINGTON — People
who give to charities providing earthquake relief in Haiti can claim these donations
on the tax return they are completing this season, according to the Internal Revenue
Service.
Taxpayers who itemize
deductions on their 2009 return qualify for this special tax relief provision, enacted
Jan. 22. Only cash contributions made to these charities after Jan. 11, 2010, and
before March 1, 2010, are eligible. This includes contributions made by text message,
check, credit card or debit card.
"Americans have opened
their hearts to help those affected by the Haiti earthquake," said IRS Commissioner
Doug Shulman." This new law provides an immediate tax benefit for the many taxpayers
who have made generous donations."
Taxpayers can benefit
from their donations, almost immediately, by filing their 2009 returns early, filing
electronically and choosing direct deposit.
Refunds take as few as ten days and can be directly deposited into a savings, checking
or brokerage account, or used to purchase Series I U.S. savings bonds.
The new law only applies
to cash (as opposed to property) contributions. The contributions must be made specifically
for the relief of victims in areas affected by the Jan. 12 earthquake in Haiti.
Taxpayers have the option of deducting these contributions on either their 2009
or 2010 returns, but not both.
To get a tax benefit,
taxpayers must itemize their deductions on
Schedule A. Those who claim the
standard deduction, including all short-form filers, are not eligible.
Taxpayers should be
sure their contributions go to qualified charities. Most organizations eligible
to receive tax-deductible donations are listed in a searchable online database available
on IRS.gov under
Search for Charities. Some organizations, such as churches or governments,
may be qualified even though they are not listed on IRS.gov. Donors can find out
more about organizations helping Haitian earthquake victims from agencies such as
USAID.
The IRS reminds donors
that contributions to foreign organizations generally are not deductible.
IRS Publication 526, Charitable Contributions, provides information on making
contributions to charities.
Federal law requires
that taxpayers keep a record of any deductible donations they make. For donations
by text message, a telephone bill will meet the recordkeeping requirement if it
shows the name of the donee organization, the date of the contribution and the amount
of the contribution. For cash contributions made by other means, be sure to keep
a bank record, such as a cancelled check, or a receipt from the charity showing
the name of the charity and the date and amount of the contribution. Publication
526 has further details on the recordkeeping rules for cash contributions.
This year’s special
Haiti relief provision is modeled on a 2005 law that, in the wake of the Dec. 26,
2004, Indian Ocean
tsunami, allowed taxpayers to deduct donations they made during January
2005 as if they made the donations in 2004.
Top
Ten Facts
About Claiming Donations Made to Haiti
January 25, 2010
If you are donating
to charities providing earthquake relief in Haiti, you may be able to claim those
donations on your 2009 tax return. Here are 10 important facts the Internal Revenue
Service wants you to know about this special provision.
1. A new law allows you to claim donations
for Haitian relief on your 2009 tax return, which you will be filing this year.
2. The contributions must be made specifically
for the relief of victims in areas affected by the Jan. 12 earthquake in Haiti.
3. To be eligible for a deduction on the
2009 tax return, donations must be made after Jan. 11, 2010 and before March 1,
2010.
4. In order to be deductible, contributions
must be made to qualified charities and can not be designated for the benefit of
specific individuals or families.
5. The new law applies only to cash contributions.
6. Cash contributions made by text message,
check, credit card or debit card may be claimed on your federal tax return.
7. You must itemize your deductions in
order to claim these donations on your tax return.
8. You have the option of deducting these
contributions on either your 2009 or 2010 tax return, but not both.
9. Contributions made to foreign organizations
generally are not deductible. You can find out more about organizations helping
Haitian earthquake victims from agencies such as the U.S. Agency for International
Development ( www.usaid.gov).
10. Federal law requires that you keep a
record of any deductible donations you make. For donations by text message, a telephone
bill will meet the record-keeping requirement if it shows the name of the organization
receiving your donation, the date of the contribution, and the amount given. For
cash contributions made by other means, be sure to keep a bank record, such as a
cancelled check or a receipt from the charity. Receipts should show the name of
the charity, the date and amount of the contribution.
For more information
see IRS Publication 526, Charitable
Contributions and Publication 3833
, Disaster Relief: Providing Assistance through Charitable Organizations. To determine
if an organization is a qualified charity visit IRS.gov, keyword "Search for Charities".
Note that some organizations, such as churches or governments, may be qualified
even though they are not listed on IRS.gov.
Links:
YouTube Videos:
Top
IRS Announces
Qualified Disaster Treatment for Haiti
January 22, 2010
Washington — The Internal
Revenue Service today issued guidance
that designates the earthquake in Haiti in January 2010 as a qualified disaster
for federal tax purposes. The guidance allows recipients of qualified disaster relief
payments to exclude those payments from income on their tax returns. Also, the guidance
allows employer-sponsored private foundations to assist victims in areas affected
by the January 2010 earthquake in Haiti without affecting their tax-exempt status.
Charities usually fall
into one of two categories — public charities or private foundations. Under the
tax law, a private foundation that is employer-sponsored may make qualified disaster
relief payments to employees affected by a qualified disaster. These payments generally
include amounts to cover necessary personal, family, living or funeral expenses
that were not covered by insurance. They also include expenses to repair or rehabilitate
personal residences or repair or replace the contents to the extent that they were
not covered by insurance. Again, these payments would not be included in the individual
recipient’s gross income.
Qualified disasters
include Presidentially declared disasters and any other event that the Secretary
of the Treasury determines to be catastrophic. The IRS has determined that the earthquake
in Haiti that occurred this month is an event of catastrophic nature for purposes
of the federal tax law.
The IRS will presume
that qualified disaster relief payments made by a private foundation to employees
and their family members in areas affected by the earthquake in Haiti to be consistent
with the foundation's charitable purposes.
Top
Ten Tax Topics
for Taxpayers with Tots and Teens
January 12, 2010
Got Kids? They may have
an impact on your tax situation. Listed below are the top 10 things the IRS wants
you to consider if you have children.
1. Dependents -
In most cases, a child can be claimed as a dependent in the year they were born.
For more information see IRS Publication 501, Exemptions, Standard Deduction, and
Filing Information.
2. Child Tax Credit -
You may be able to take this credit on your tax return for each of your children
under age 17. If you do not benefit from the full amount of the Child Tax Credit,
you may be eligible for the Additional Child Tax Credit. The Additional Child Tax
Credit is a refundable credit and may give you a refund even if you do not owe any
tax. For more information see IRS Publication 972, Child Tax Credit.
3. Child and Dependent Care Credit -
You may be able to claim the credit if you pay someone to care for your child under
age 13 so that you can work or look for work. For more information see IRS Publication
503, Child and Dependent Care Expenses.
4. Earned Income Tax Credit -
The EITC is a benefit for certain people who work and have earned income from wages,
self-employment or farming. EITC reduces the amount of tax you owe and may also
give you a refund. For more information see IRS Publication 596, Earned Income Credit.
5. Adoption Credit -
You may be able to take a tax credit for qualifying expenses paid to adopt an eligible
child. For more information see the instructions for IRS Form 8839, Qualified Adoption
Expenses.
6. Children with Earned Income -
If your child has income earned from working they may be required to file a tax
return. For more information see IRS Publication 501.
7. Children with Investment Income -
Under certain circumstances a child’s investment income may be taxed at the parent’s
tax rate. For more information see IRS Publication 929, Tax Rules for Children and
Dependents.
8. Coverdell Education Savings Account -
This savings account is used to pay qualified educational expenses at an eligible
educational institution. Contributions are not deductible, however, qualified distributions
generally are tax-free. For more information see IRS Publication 970, Tax Benefits
for Education.
9. Higher Education Credits -
Education tax credits can help offset the costs of education. The American Opportunity
and the Lifetime Learning Credit are education credits that reduce your federal
income tax dollar-for-dollar, unlike a deduction, which reduces your taxable income.
For more information see IRS Publication 970.
10. Student Loan Interest -
You may be able to deduct interest you pay on a qualified student loan. The deduction
is claimed as an adjustment to income so you do not need to itemize your deductions.
For more information see IRS Publication 970.
The forms and publications
on these topics can be found on IRS.gov
or by calling 800-TAX-FORM (800-829-3676).
Top
Three Reasons
to Prepare and File Your Taxes Electronically
January 12, 2010
Last year, 2 out of
3 tax returns were filed electronically. Was yours? If not, here are three important
reasons to e-file your return.
- Your tax return will get processed
more quickly if you use e-file. If there is an error on your return, it will
typically be identified and can be corrected right away. If you file electronically
and choose to have your tax refund deposited directly into your bank account, you
will have your money in as few as 10 days.
- The IRS is fully committed to protecting
your tax information and e-filed returns are protected by the latest technology.
In 20 years, nearly 800 million e-filed returns have been processed safely
and securely by the IRS.
- Don’t miss out on the benefits of e-file,
2 out of 3 taxpayers, 95 million, already get the benefits of e-file.
E-file software reduces
the chance of making errors when you prepare your return. However, some people
still print the computer generated return and mail it to the IRS instead of hitting
the “Send” button. By mailing the return, taxpayers miss out on some important
benefits of IRS e-file.
- With e-file, you get the peace of mind
that comes with the electronic receipt you’ll receive notifying you that the IRS
received your tax return.
- Virtually everyone can prepare a return
and file it for free. For the second year, the IRS and its partners are offering
the option of Free File Fillable Forms. Another option is Traditional Free File.
About 98 million taxpayers – 70% of all taxpayers – are eligible for the IRS Traditional
Free File. Traditional Free File is a service offered by software companies
and the IRS in partnership to provide free tax preparation software and free filing.
- E-file is available 24 hours a day,
seven days a week, from the convenience of your own home.
- If you owe money to the IRS, e-file
also allows you to file your tax return early and delay payment up until the due
date.
- In 37 states and the District of Columbia,
you can simultaneously e-file your federal and state tax returns.
Find out more about
E-file at IRS.gov.
Top
Choose the
Tax Form that Best Fits Your Needs
January 8, 2010
To file your 2009 individual
tax return, you’ll have to decide which form to use…unless you e-file. If you file
electronically, the software automatically selects the simplest and best form for
you. Whether you use e-file or prepare on paper, using the simplest form will help
avoid costly errors or processing delays. And remember, if you file electronically,
it speeds up the processing of your tax return and the delivery of your refund.
Here are things to consider
when deciding which IRS form to file.
Use the 1040EZ if:
- Your taxable income is below $100,000
- Your filing status is Single or Married Filing Jointly
- You and your spouse – if married - are under age 65 and not blind
- You are not claiming any dependents
- Your interest income is$1,500 or less
- You are not claiming the additional standard deduction for real estate taxes,
taxes on the purchase of a new motor vehicle, or disaster losses
Use the 1040A if:
- Your taxable income is below $100,000
- You have capital gain distributions
- You claim certain tax credits
- You claim deductions for IRA contributions, student loan interest,
educator expenses or higher education tuition and fees
If you cannot use the
1040EZ or the 1040A, you’ll probably need to file using the 1040. You must use the 1040 if:
- Your taxable income is $100,000 or more
- You claim itemized deductions
- You are reporting self-employment income
- You are reporting income from sale of property
All IRS forms, instructions
and information about e-file can be found on IRS.gov.
Links:
Top
Five Filing
Facts for Recently Married or Divorced Taxpayers
January 5, 2010
If you were married
or divorced recently, there are a couple of things you’ll want to do to ensure the
name on your tax return matches the name registered with the Social Security Administration.
Here are five facts
from the IRS for recently married or divorced taxpayers. Following these steps will
help avoid problems when you file your tax return.
1. If you took your spouse’s last name
or if both spouses hyphenate their last names, you may run into complications if
you don’t notify the SSA. When newlyweds file a tax return using their new last
names, IRS computers can’t match the new name with their Social Security Number.
2. If you were recently divorced and changed
back to your previous last name, you’ll also need to notify the SSA of this name
change.
3. Informing the SSA of a name change is
a snap; you’ll just need to file a Form SS-5, Application for a Social Security
Card at your local SSA office.
4. Form SS-5 is available on SSA’s Web
site at www.socialsecurity.gov, by calling
800-772-1213 or at local offices. It usually takes about two weeks to have the change
verified.
5. If you adopted your spouse’s children
after getting married, you’ll want to make sure the children have an SSN. Taxpayers
must provide an SSN for each dependent claimed on a tax return. For adopted children
without SSNs, the parents can apply for an Adoption Taxpayer Identification Number
– or ATIN – by filing Form W-7A, Application for Taxpayer Identification Number
for Pending U.S. Adoptions with the IRS. The ATIN is a temporary number used in
place of an SSN on the tax return. The W-7A is available on IRS.gov, or by calling
800-TAX-FORM (800-829-3676).
Links:
Top
IRS Presents: Top Ten Tax Time Tips
January 4, 2010
While the tax filing
deadline is more than three months away, it always seems to be here before you know
it. Here are the Internal Revenue Service’s top 10 tips that will help your tax
filing process run smoother than ever this year.
1. Start gathering your records
Round up any documents or forms you’ll need when filing your taxes: receipts, canceled
checks and other documents that support an item of income or a deduction you’re
taking on your return.
2. Be on the lookout
W-2s and 1099s will be coming soon from your employer; you’ll need these to file
your tax return.
3. Try e-file
When you file electronically, the software will handle the math calculations for
you. If you use direct deposit, you will get your refund in about half the time
it takes when you file a paper return. E-file is now the way the majority of returns
are filed. In fact, last year, 2 out of 3 taxpayers used e-file.
4. Check out Free File
If your income is $57,000 or less you may be eligible for free tax preparation software
and free electronic filing. The IRS partners with 20 tax software companies to create
this free service. Free File is for the cost conscious taxpayer who wants reliable
question-and-answer software to help them prepare a return. Visit IRS.gov to learn
more.
5. Consider other filing options
There are many different options for filing your tax return. You can prepare it
yourself or go to a tax preparer. You may be eligible for free face-to-face help
at an IRS office or volunteer site. Give yourself time to weigh all the different
options and find the one that best suits your needs.
6. Consider Direct Deposit
If you elect to have your refund directly deposited into your bank account, you’ll
receive it faster than waiting for a paper check.
7. Visit IRS.gov again and again
The official IRS Web site is a great place to find everything you’ll need to file
your tax return: forms, tips, answers to frequently asked questions and updates
on tax law changes.
8. Remember this number: 17
Check out Publication 17, Your Federal Income Tax on IRS.gov. It’s a comprehensive
collection of information for taxpayers highlighting everything you’ll need to know
when filing your return.
9. Review! Review! Review!
Don’t rush. We all make mistakes when we rush. Mistakes will slow down the processing
of your return. Be sure to double-check all the Social Security Numbers and math
calculations on your return as these are the most common errors made by taxpayers.
10. Don’t panic!
If you run into a problem, remember the IRS is here to help. Try IRS.gov or call
our customer service number at 800-829-1040.
Links:
Top
IRS Reminds Car Shoppers about 2009 Tax Break
December 17, 2009
Video:
English |
Spanish |
ASL
WASHINGTON — The Internal
Revenue Service today reminds individual taxpayers who are considering buying a
new car that they have until Dec. 31 to take advantage of a tax break that may not
be around in 2010.
Taxpayers who buy a
qualifying new motor vehicle this year after Feb. 16 can deduct the state or local
sales or excise taxes they paid on the first $49,500 of the purchase price. Qualifying
motor vehicles include new passenger automobiles, light trucks, motorcycles, and
motor homes.
Individuals who itemize
and those who take the standard deduction can benefit from this tax break. In states
without a sales tax, other taxes or fees can qualify if they are assessed on the
purchase of the vehicle and are based on the vehicle’s sales price or as a per unit
fee.
The deduction is reduced
for joint filers with modified adjusted gross incomes (MAGI) between $250,000 and
$260,000 and other taxpayers with MAGI between $125,000 and $135,000. Taxpayers
with higher incomes do not qualify.
Taxpayers who take the
standard deduction need to complete Schedule L and attach it to Form 1040 or Form
1040A to increase the standard deduction by the allowable amount of state or local
sales or excise taxes paid on the purchase of the new vehicle. Also, check the box
on line 40b on Form 1040 or line 24b on Form 1040A. Individuals who itemize should
include the allowable amount of state or local sales or excise taxes from the purchase
of the vehicle on Form 1040, Schedule A.
See also: Sales Tax Deduction
for Vehicle Purchases
Top
10 Important Facts about the
Extended First-Time Homebuyer Credit
November 25, 2009
If you are in the market
for a new home, you may still be able to claim the First-Time Homebuyer Credit.
Congress recently passed The Worker, Homeownership and Business Assistance Act Of
2009, extending the First-Time Homebuyer Credit and expanding who qualifies.
Here are the top 10
things the IRS wants you to know about the expanded credit and the qualifications
you must meet in order to qualify for it.
1. You must buy – or enter into a binding
contract to buy a principal residence – on or before April 30, 2010.
2. If you enter into a binding contract
by April 30, 2010 you must close on the home on or before June 30, 2010.
3. For qualifying purchases in 2010, you
will have the option of claiming the credit on either your 2009 or 2010 return.
4. A long-time resident of the same home
can now qualify for a reduced credit. You can qualify for the credit if you’ve lived
in the same principal residence for any five-consecutive year period during the
eight-year period that ended on the date the new home is purchased and the settlement
date is after November 6, 2009.
5. The maximum credit for long-time residents
is $6,500. However, married individuals filing separately are limited to $3,250.
6. People with higher incomes can now qualify
for the credit. The new law raises the income limits for homes purchased after November
6, 2009. The full credit is available to taxpayers with modified adjusted gross
incomes up to $125,000, or $225,000 for joint filers.
7. The IRS will issue a December 2009 revision
of Form 5405 to claim this credit. The December 2009 form must be used for homes
purchased after November 6, 2009 – whether the credit is claimed for 2008 or for
2009 – and for all home purchases that are claimed on 2009 returns.
8. No credit is available if the purchase
price of the home exceeds $800,000.
9. The purchaser must be at least 18 years
old on the date of purchase. For a married couple, only one spouse must meet this
age requirement.
10. A dependent is not eligible to claim
the credit.
For more information
about the expanded First-Time Home Buyer Credit, visit IRS.gov/recovery.
Links:
YouTube Videos:
Top
Six Facts About the American Opportunity Tax Credit
September 24, 2009
Many parents and college
students will be able to offset the cost of college over the next two years under
the new American Opportunity Tax Credit. This tax credit is part of the American
Recovery and Reinvestment Act of 2009.
Here are six important
facts the IRS wants you to know about the new American Opportunity Tax Credit:
1. This credit, which expands and renames
the existing Hope Credit, can be claimed for qualified tuition and related expenses
that you pay for higher education in 2009 and 2010. Qualified tuition and related
expenses include tuition, related fees, books and other required course Materials.
2. The credit is equal to 100 percent of
the first $2,000 spent and 25 percent of the next $2,000 per student each year.
Therefore, the full $2,500 credit may be available to a taxpayer who pays $4,000
or more in qualifying expenses for an eligible student.
3. The full credit is generally available
to eligible taxpayers who make less than $80,000 or $160,000 for married couples
filing a joint return. The credit is gradually reduced, however, for taxpayers with
incomes above these levels.
4. Forty percent of the credit is refundable,
so even those who owe no tax can get up to $1,000 of the credit for each eligible
student as cash back.
5. The credit can be claimed for qualified
expenses paid for any of the first four years of post-secondary education.
6. You cannot claim the tuition and fees
tax deduction in the same year that you claim the American Opportunity Tax Credit
or the Lifetime Learning Credit. You must choose to either take the credit or the
deduction, which ever is more beneficial for you.
Complete details on
the American Opportunity Tax Credit and other key tax provisions of the Recovery
Act are available at the official IRS Web site at IRS.gov/Recovery.
Links:
Top
Nine Facts
about the New Vehicle Sales and Excise Tax Deduction
September 15, 2009
Taxpayers who buy new
motor vehicles this year may be entitled to a special tax deduction for the sales
or excise taxes on those purchases when they file their 2009 federal tax returns
next year. This tax break is part of the American Recovery and Reinvestment Act
of 2009.
Taxpayers in states
that do not have state sales taxes may be entitled to deduct other fees or taxes
imposed by the state or local government.
Here are nine important
facts the IRS wants you to know about the deduction.
1. State and local sales and excise taxes
paid on up to $49,500 of the purchase price of each qualifying vehicle are deductible.
2. Qualified motor vehicles generally include
new cars, light trucks, motor homes and motorcycles.
3. To qualify for the deduction, the new
cars, light trucks and motorcycles must weigh 8,500 pounds or less. Motor homes
are not subject to the weight limit.
4. Purchases must occur after Feb. 16,
2009, and before Jan. 1, 2010.
5. Taxpayers who purchase new motor vehicles
in states that do not have state sales taxes may be entitled to deduct other fees
or taxes assessed on the purchase of those vehicles. Fees or taxes that qualify
must be based on the vehicles’ sales price or as a per unit fee. These states include
Alaska, Delaware, Hawaii, Montana, New Hampshire and Oregon.
6. Taxpayers who purchase qualified motor
vehicles may claim the deduction when they file their 2009 tax return in 2010.
7. The deduction may not be taken on 2008
tax returns.
8. This deduction can be taken regardless
of whether the buyers itemize their deductions or choose the standard deduction.Taxpayers
who do not itemize will add this additional amount to the standard deduction on
their 2009 tax return.
9. The amount of the deduction is phased
out for taxpayers whose modified adjusted gross income is between $125,000 and $135,000
for individual filers and between $250,000 and $260,000 for joint filers.
For more information
on this and other key tax provisions of the Recovery Act visit the official IRS
Website at IRS.gov.
Links:
Back to Top
Six Recovery
Tax Incentives for Individuals
September 11, 2009
The American Recovery
and Reinvestment Act provides tax incentives for first-time homebuyers, people purchasing
new cars, those interested in making their homes more energy efficient, and parents
and students paying for college.
Here are six things
the IRS wants you to know about ARRA tax incentives for individuals:
1. First-Time Homebuyer Credit
Taxpayers who haven’t owned a principal residence during the past three years prior
to the purchase date of a home before Dec. 1 of this year may be eligible to receive
a credit of up to $8,000 on an original or amended 2008 tax return. They can also
wait and claim the credit on their 2009 return.
2. New Vehicle Purchase Incentive
Qualifying taxpayers can deduct the state and local sales and excise taxes paid
on the purchase of new cars, light trucks, motor homes and motorcycles. The deduction
per vehicle is limited to the tax on up to $49,500 of the purchase price of each
qualifying vehicle and phases out for taxpayers at higher income levels.
3. Making Work Pay and Withholding
The Making Work Pay Credit lowered employees’ tax withholding rates this year and
has already put more money into the pockets of wage earners. Self-employed individuals
will have an opportunity to claim this credit when they file their 2009 return.
Taxpayers who fall into any of the following groups should review their tax withholding
rates to ensure enough tax is currently being withheld: multiple job holders, families
in which both spouses work, workers who can be claimed as dependents by other taxpayers,
workers without a valid social security number, some social security recipients
who work and pensioners. Failure to adjust your withholding in these situations
could result in potentially smaller refunds or in limited instances may cause you
to owe tax rather than receive a refund next year.
4. Tax Credit for First Four Years of College
The American Opportunity Credit can help parents and students pay part of the cost
of the first four years of college. The new credit modifies the existing Hope Credit
for tax years 2009 and 2010, making it available to a broader range of taxpayers.
Eligible taxpayers may qualify for the maximum annual credit of $2,500 per student.
5. Certain Computer Technology Purchases
Allowed for 529 Plans ARRA adds computer technology to the list of college expenses
that can be paid for by a qualified tuition program, commonly referred to as a 529
plan. For 2009 and 2010, the law expands the definition of qualified higher education
expenses to include expenses for computer technology and equipment or Internet access
and related services.
6. Energy-Efficient Home Improvements
The credit for nonbusiness energy-efficient improvements is increased for homeowners
who make qualified improvements to existing homes. Qualifying improvements include
the addition of insulation, energy-efficient exterior windows and energy-efficient
heating and air conditioning systems.
For more information
on this and other key tax provisions of the Recovery Act, visit the official IRS
Website at IRS.gov/Recovery.
Links:
YouTube Videos:
Audio Files for Podcast:
Top
Five Facts
about the Making Work Pay Tax Credit
September 10, 2009
Working taxpayers may
be eligible for the Making Work Pay tax credit, a significant tax provision of the
American Recovery and Reinvestment Act of 2009. This tax credit means more take-home
pay for millions of American workers. Here are five things the IRS wants every taxpayer
to know about the Making Work Pay tax credit:
1.
This credit -- available
for tax years 2009 and 2010 -- equals 6.2 percent of a taxpayer’s earned income.
The maximum credit for a married couple filing a joint return is $800 and $400 for
other taxpayers. Most wage earners have been enjoying a boost in their paychecks
from this credit since April.
2.
Eligible self-employed
taxpayers can also benefit from the credit by evaluating their expected income tax
liability. If eligible, self-employed taxpayers can make the appropriate adjustments
to the amounts of their upcoming estimated tax payments in September and January.
3.
Taxpayers who fall into
any of the following groups should review their tax withholding to ensure enough
tax is being withheld. Those who should pay particular attention to their
withholding include:
- Married couples with two incomes
- Individuals with multiple jobs
- Dependents
- Pensioners
- Social Security recipients who
also work
- Workers without valid Social Security
numbers
Having too little tax
withheld could result in potentially smaller refunds or – in limited instances –small
balance due rather than an expected refund.
4.
The Making Work Pay tax
credit is either phased out or unavailable for higher-income taxpayers. The phase
out begins at $75,000 for single taxpayers and $150,000 for couples filing a joint
return.
5.
For those who believe
their current withholding is not right for their personal situation, a quick withholding
check using the IRS withholding calculator on IRS.gov may be helpful. Taxpayers
can also do this by using the worksheets in IRS Publication 919, How Do I Adjust
My Withholding? Adjustments can be made by filing a revised Form W-4, Employee's
Withholding Allowance Certificate. Pensioners can adjust their withholding by filing
Form W-4P, Withholding Certificate for Pension or Annuity Payments.
For more information
on this and other key tax provisions of the Recovery Act, visit the official IRS
Website at IRS.gov/Recovery.
Links:
Video:
Audio:
Top
Keeping Good
Records Reduces Stress at Tax Time
August 28, 2009
Although most people
won’t be filing their tax returns for several months, the dog days of summer are
actually a great time to start planning for the tax filing season by ensuring your
records are organized. Whether you are an individual taxpayer or a business
owner, you can avoid headaches at tax time with good records because they will help
you remember transactions you made during the year.
Here are a few things
the IRS wants you to know about recordkeeping.
Keeping well-organized
records also ensures you can answer questions if your return is selected for examination
or prepare a response if you are billed for additional tax. In most cases, the IRS
does not require you to keep records in any special manner. Generally speaking,
you should keep any and all documents that may have an impact on your federal tax
return.
Individual taxpayers
should usually keep the following records supporting items on their tax returns
for at least three years:
-
Bills
- Credit card and other receipts
- Invoices
- Mileage logs
- Canceled, imaged or substitute checks or
any other proof of payment
- Any other records to support deductions
or credits you claim on your return
You should normally
keep records relating to property until at least three years after you sell or otherwise
dispose of the property. Examples include:
- A home purchase or improvement
- Stocks and other investments
- Individual Retirement Arrangement transactions
- Rental property records
If you are a small business
owner, you must keep all your employment tax records for at least four years after
the tax becomes due or is paid, whichever is later. Examples of important documents
business owners should keep Include:
- Gross receipts: Cash register tapes,
bank deposit slips, receipt books, invoices, credit card charge slips and Forms
1099-MISC
- Proof of purchases: Canceled checks,
cash register tape receipts, credit card sales slips and invoices
- Expense documents: Canceled checks,
cash register tapes, account statements, credit card sales slips, invoices and petty
cash slips for small cash payments
- Documents to verify your assets: Purchase
and sales invoices, real estate closing statements and canceled checks
For more information
about recordkeeping, check out IRS Publications 552, Recordkeeping for Individuals,
583, Starting a Business and Keeping Records, and Publication 463, Travel, Entertainment,
Gift, and Car Expenses. These publications are available on the IRS Web site, IRS.gov
or by calling 800-TAX-FORM (800-829-3676).
Links:
Top
Eight Things
to Know If You Receive an IRS Notice
August 26, 2009
Every year, the IRS
sends millions of letters and notices to taxpayers. Many taxpayers will receive
this correspondence during the late summer and fall. Here are eight things every
taxpayer should know about IRS notices – just in case one shows up in your mailbox.
1. Don’t panic. Many of these letters can
be dealt with simply and painlessly.
2. There are number of reasons the IRS
sends notices to taxpayers. The notice may request payment of taxes, notify you
of a change to your account or request additional information. The notice you receive
normally covers a very specific issue about your account or tax return.
3. Each letter and notice offers specific
instructions on what you are asked to do to satisfy the inquiry.
4. If you receive a correction notice,
you should review the correspondence and compare it with the information on your
return.
5. If you agree with the correction to
your account, usually no reply is necessary unless a payment is due.
6. If you do not agree with the correction
the IRS made, it is important that you respond as requested. Write to explain why
you disagree. Include any documents and information you wish the IRS to consider,
along with the bottom tear-off portion of the notice. Mail the information to the
IRS address shown in the upper left-hand corner of the notice. Allow at least 30
days for a response.
7. Most correspondence can be handled without
calling or visiting an IRS office. However, if you have questions, call the telephone
number in the upper right-hand corner of the notice. Have a copy of your tax return
and the correspondence available when you call to help us respond to your inquiry.
8. It’s important that you keep copies
of any correspondence with your records.
For more information
about IRS notices and bills, see Publication 594, The IRS Collection Process. Information
about penalties and interest charges is available in Publication 17, Your Federal
Income Tax for Individuals. Both publications are available at IRS.gov or by calling
800-TAX-FORM (800-829-3676).
Links:
Top
Ten Tips
for Taxpayers Making Charitable Donations
August 24, 2009
Every year, millions
of taxpayers itemize their deductions on their federal tax return. One of the most
common itemized deductions is a donation made to a charitable organization.
Here are the top ten
things the IRS wants every taxpayer to know before deducting charitable donations.
1. Charitable contributions must be made
to qualified organizations to be deductible. You can ask any organization whether
it is a qualified organization and most will be able to tell you. You can also check
IRS Publication 78, which lists most qualified organizations. IRS Publication 78
is available at IRS.gov.
2. Charitable contributions are deductible
only if you itemize deductions using Form 1040, Schedule A.
3. You generally can deduct your cash contributions
and the fair market value of most property you donate to a qualified organization.
Special rules apply to several types of donated property, including clothing or
household items, cars and boats.
4. If your contribution entitles you to
receive merchandise, goods, or services in return – such as admission to a charity
banquet or sporting event – you can deduct only the amount that exceeds the fair
market value of the benefit received.
5. Be sure to keep good records of any
contribution you make, regardless of the amount. For any contribution made in cash,
you must maintain a record of the contribution such as a bank record – including
a cancelled check or a bank or credit card statement – a written record from the
charity containing the date and amount of the contribution and the donor’s name,
or a payroll deduction record.
6. Only contributions actually made during
the tax year are deductible. For example, if you pledged $500 in September but paid
the charity only $200 by Dec. 31, your deduction would be $200.
7. Include credit card charges and payments
by check in the year they are given to the charity, even though you may not pay
the credit card bill or have your bank account debited until the next year.
8. For any contribution of $250 or more,
you must have written acknowledgment from the organization to substantiate your
donation. This written proof must include the amount of cash and a description of
any property you contributed, and whether the organization provided any goods or
services in exchange for the gift.
9. To deduct charitable contributions of
items valued at $500 or more you must complete a Form 8283, Noncash Charitable Contributions,
and attached the form to your return.
10. An appraisal generally must be obtained
if you claim a deduction for a contribution of noncash property worth more than
$5,000. In that case, you must also fill out Section B of Form 8283 and attach the
form to your return.
For more information
see IRS Publication 526, Charitable Contributions, and for information on determining
value, refer to Publication 561, Determining the Value of Donated Property. These
publications are available on the IRS Web site, IRS.gov or by calling 800-TAX-FORM
(800-829-3676).
Links:
Top
Employee
vs. Independent Contractor – Ten Tips for Business Owners
August 21, 2009
If you are a small business
owner, whether you hire people as independent contractors or as employees will impact
how much taxes you pay and the amount of taxes you withhold from their paychecks.
Additionally, it will affect how much additional cost your business must bear, what
documents and information they must provide to you, and what tax documents you must
give to them.
Here are the top ten
things every business owner should know about hiring people as independent contractors
versus hiring them as employees.
1. Three characteristics are used by the
IRS to determine the relationship between businesses and workers: Behavioral Control,
Financial Control, and the Type of Relationship.
2. Behavioral Control covers facts that
show whether the business has a right to direct or control how the work is done
through instructions, training or other means.
3. Financial Control covers facts that
show whether the business has a right to direct or control the financial and business
aspects of the worker's job.
4. The Type of Relationship factor relates
to how the workers and the business owner perceive their relationship.
5. If you have the right to control or
direct not only what is to be done, but also how it is to be done, then your workers
are most likely employees.
6. If you can direct or control only the
result of the work done -- and not the means and methods of accomplishing the result
-- then your workers are probably independent contractors.
7. Employers who misclassify workers as
independent contractors can end up with substantial tax bills. Additionally, they
can face penalties for failing to pay employment taxes and for failing to file required
tax forms.
8. Workers can avoid higher tax bills and
lost benefits if they know their proper status.
9. Both employers and workers can ask the
IRS to make a determination on whether a specific individual is an independent contractor
or an employee by filing a Form SS-8 – Determination of Worker Status for Purposes
of Federal Employment Taxes and Income Tax Withholding – with the IRS.
10. You can learn more about the critical
determination of a worker’s status as an Independent Contractor or Employee at IRS.gov
by selecting the Small Business link. Additional resources include IRS Publication
15-A, Employer's Supplemental Tax Guide, Publication 1779, Independent Contractor
or Employee, and Publication 1976, Do You Qualify for Relief under Section 530?
These publications and Form SS-8 are available on the IRS Web site or by calling
the IRS at 800-829-3676 (800-TAX-FORM).
Links:
Top
Top Ten Tips
for Taxpayers Deducting Casualty and Theft Losses
August 14, 2009
Taxpayers who find themselves
the victim of a natural disaster or theft this summer should know the rules for
deducting their casualty losses next year when they file their federal tax return.
Generally, you may deduct losses to your home, household items and vehicles on your
federal income tax return.
Here are ten things
the IRS wants you to know about deducting casualty or theft losses.
- You may not deduct casualty and theft
losses covered by insurance unless you file a timely claim for reimbursement. You
must reduce your loss by the amount of the reimbursement.
- A casualty does not include normal wear
and tear or progressive deterioration from age or termite damage.
- The damage must be caused by a sudden,
unexpected or unusual event like a car accident, fire, earthquake, flood or vandalism.
- If your property is not completely destroyed
or if it is personal-use property, the amount of your casualty or theft loss is
the lesser of the adjusted basis of your property, or the decrease in fair market
value of your property as a result of the casualty or theft, reduced by any insurance
or other reimbursement you receive or expect to receive.
- If business or income-producing property,
such as rental property, is completely destroyed, the amount of your loss is your
adjusted basis in the property minus any salvage value, and minus any insurance
or other reimbursement you receive or expect to receive.
- To claim a casualty or theft loss, you
must complete Form 4684, Casualties and Thefts, and attach it to your return. Generally,
you may claim casualty or theft loss of personal use property only if you itemize
deductions on Form 1040, Schedule A. However, you can deduct a 2008 or 2009 net
disaster loss from a federally-declared disaster even if you do not itemize your
deductions.
- If the property was held by you for
personal use, you must further reduce your loss by $100. This $100 reduction for
losses of personal-use property applies to each casualty or theft event that occurred
during the year other than 2009. For 2009, individuals must reduce their casualty
and theft losses for personal-use property by $500 instead of $100. This $500 reduction
for losses of personal-use property applies to each casualty or theft event.
- The total of all your casualty and theft
losses of personal-use property usually must be further reduced by 10 percent of
your adjusted gross income. The 10 percent AGI limitation does not apply to net
disaster losses resulting from federally declared disasters in 2008 and 2009.
- In figuring your loss, do not consider
the loss of future profits or income due to the casualty.
- Casualty losses are normally deductible
only in the year the casualty occurred. But if you have a deductible loss from a
federally declared disaster you can choose to deduct that loss on your tax return
for the previous year. If you have already filed your return for the preceding year,
you can claim the loss on the previous year tax return by filing an amended return.
For more information
about casualty and theft losses and the special rules for net disaster losses see
Publication 547, Casualties, Disasters and Thefts available on the IRS.gov Web site
or by calling 800-TAX-FORM (800-829-3676).
Links:
Top
Five Facts about the Home Office Deduction
August 12, 2009
With technology making
it easier than ever for people to operate a business out of their house, many taxpayers
may be able to take a home office deduction when filing their 2009 federal tax return
next year.
Here are five important
things the IRS wants you to know about claiming the home office deduction.
1. Generally, in order
to claim a business deduction for your home, you must use part of your home exclusively
and regularly:
-
As your principal place of business, or
- As a place to meet or deal with patients,
clients or customers in the normal course of your business, or
-
In the case of a separate structure
which is not attached to your home, it must be used in connection with your trade
or business
For certain storage
use, rental use or daycare-facility use, you are required to use the property regularly
but not exclusively.
2. Generally, the amount
you can deduct depends on the percentage of your home that you used for business.
Your deduction for certain expenses will be limited if your gross income from your
business is less than your total business expenses.
3. There are special
rules for qualified daycare providers and for persons storing business inventory
or product samples.
4. If you are self-employed,
use Form 8829, Expenses for Business Use of Your Home, to figure your home office
deduction. Report the deduction on line 30 of Schedule C, Form 1040.
5. Different rules apply
to claiming the home office deduction if you are an employee. For example, the regular
and exclusive business use must be for the convenience of your employer.
For more information
see IRS Publication 587, Business Use of Your Home, available on IRS.gov or by calling
800-TAX-FORM (800-829-3676).
Link:
Publication 587, Business
Use of Your Home
Top
Eight Tips
for Taxpayers Who Owe Money to the IRS
August 10, 2009
The vast majority of
Americans get a tax refund from the IRS each spring, but what do you do if you are
one of those who received a tax bill? Here are eight 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 additional 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. To pay by credit card contact either Official Payments
Corporation at 800-2PAYTAX (also www.officialpayments.com)
or Link2Gov at 888-PAY-1040 (also www.pay1040.com).
3. 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.
4. You can also 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 800-945-8400
or online at www.eftps.gov.
5. An installment agreement
may be requested if you cannot pay the liability in full. This is an agreement
between you and the IRS for the collection of the amount due in monthly installment
payments. To be eligible for an installment agreement, you must first file
all returns that are required and be current with estimated tax payments.
6. If you owe $25,000
or less in combined tax, penalties and interest, you can request an installment
agreement using the web-based application called Online Payment Agreement found
at IRS.gov.
7. 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
monthly amount you wish to pay with your request. At a minimum, the monthly
amount you will be allowed to pay without completing a Collection Information Statement,
Form 433, is an amount that will full pay the total balance owed within 60 months.
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, and is automatically figured based on your
income.
For more information
about installment agreements and other payment options visit the IRS Web site at
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 on
the IRS.gov Web site or by calling 800-TAX-FORM (800-829-3676).
Links:
Top
The Lucky Seven…Gambling Winnings and Losses Tax Tips
August 7, 2009
You may know when to hold 'em and when to fold 'em but do you know how and when to report 'em? Whether
you are playing cards or the slots, it is important to know the rules about reporting gambling winnings and losses.
Here are seven things
the IRS wants you to know about reporting what Lady Luck has sent your way.
1. All gambling winnings are fully taxable.
2. Gambling income includes, but is not
limited to, winnings from lotteries, raffles, horse races, poker tournaments and
casinos. It includes cash winnings and also the fair market value of prizes such
as cars and trips.
3. A payer is required to issue you a Form
W-2G if you receive certain gambling winnings or if you have any gambling winnings
subject to federal income tax withholding.
4. Even if a W-2G is not issued, all gambling
winnings must be reported as taxable income. Therefore, you may be required to pay
an estimated tax on the gambling winnings. For more information on paying estimated
taxes, refer to IRS Publication 505, Tax Withholding and Estimated Tax.
5. You must report your gambling winnings
on Form 1040, line 21.
6. If you itemize your deductions on Form
1040, Schedule A, you can deduct gambling losses you had during the year, but only
up to the amount of your winnings. Your losses are not subject to the 2 percent
of AGI Limitation.
7. It is important to keep an accurate
diary or similar record of your gambling winnings and losses. To deduct your losses,
you must be able to provide receipts, tickets, statements or other records that
show the amount of both your winnings and losses.
For more information,
refer to IRS Publications 525, Taxable and Nontaxable Income, and 529, Miscellaneous
Deductions. Additional information can also be found in IRS Instructions for Forms
W-2G and 5754, Certain Gambling Winnings & Statement by Person(s) Receiving
Gambling Winnings. These publications are available at IRS.gov or ordered by calling
800-TAX-FORM (800-829-3676).
Links:
Top
IRS Alerts Public to New Identity Theft Scams
Video:
Watch Out for Tax Scams:
English |
Spanish |
ASL
August 4, 2009
WASHINGTON
— The Internal Revenue Service reminds consumers to avoid identity theft scams that
use the IRS name, logo or Web site in an attempt to convince taxpayers that the
scam is a genuine communication from the IRS. Scammers may use other federal agency
names, such as the U.S. Department of the Treasury.
In an
identity theft scam, a fraudster, often posing as a trusted government, financial
or business institution or official, tries to trick a victim into revealing personal
and financial information, such as credit card numbers and passwords, bank account
numbers and passwords, Social Security numbers and more. Generally, identity thieves
use someone’s personal data to steal his or her financial accounts, run up charges
on the victim’s existing credit cards, apply for new loans, credit cards, services
or benefits in the victim’s name and even file fraudulent tax returns.
The scams
may take place through e-mail, fax or phone. When they take place via e-mail, they
are called “phishing” scams.
The IRS
does not discuss tax account matters with taxpayers by e-mail.
The IRS
urges consumers to avoid falling for the following recent schemes:
Making Work Pay Refund
This phishing e-mail, which claims to come from the IRS,
references the president and the
Making Work Pay provision of the
2009 economic recovery law. It says that there is a refundable credit available to workers, consumers
and retirees that can be paid into the recipient’s bank account if the recipient registers their account
information with the IRS. The e-mail contains links to register the account and to claim the tax refund.
In reality, most taxpayers
receive their Making Work Pay tax credit, which was designed for wage earners, in
their paychecks as a result of decreased tax withholding, not as a lump sum distribution
from a federal fund. Additionally, consumers and retirees who are not wage earners
are not eligible for this tax credit.
Inherited Funds / Lottery Winnings / Cash Consignment
In this phishing scheme,
recipients receive an e-mail claiming to come from the U.S. Department of the Treasury
notifying them that they will receive millions of dollars in recovered funds or
lottery winnings or cash consignment if they provide certain personal information,
including phone numbers, via return e-mail. The e-mail may be just the first step
in a multi-step scheme, in which the victim is later contacted by telephone or further
e-mail and instructed to deposit taxes on the funds or winnings before they can
receive any of it. Alternatively, they may be sent a phony check of the funds or
winnings and told to deposit it but pay 10 percent in taxes or fees. Thinking that
the check must have cleared the bank and is genuine, some people comply. However,
the scammers, not the Treasury Department, will get the taxes or fees.
Form W-8BEN
In this scam, fraudsters
modify a genuine IRS form, the W-8BEN,
Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding,
to request detailed personal and financial information. This could include nationality,
passport number, bank account and PIN numbers, spouse’s name and mother’s maiden
name, or other personal or financial information or security measures for financial
accounts. The scammers may use the genuine form number and name or may make up a
new form number, such as W-4100B2.
They either e-mail or
fax the form or letter. If only a letter, the letter itself contains the request
for the personal and financial information. The letter, which claims to come from
the IRS, states that the recipient will face additional taxes unless he or she quickly
faxes the required information to the number provided by the scammer.
In reality, taxpayers
file the genuine Form W-8BEN with their financial institutions, not with the IRS.
Additionally, the genuine W-8BEN does not request the taxpayer’s passport number,
bank account number, security or similar information.
Refund Scam
The bogus e-mail, which
claims to come from the IRS, tells the recipient that he or she is eligible to receive
a tax refund for a given amount. It instructs the recipient to click on a link contained
in the e-mail to access and complete a form for the tax refund. The form requires
the entry of personal and financial information. The refund scam is the most common
one seen by the IRS. Several recent variations on this scam have claimed to come
from the Exempt Organizations area of the IRS. Some others have included the name
and purported signature of a genuine or a made-up IRS executive.
Taxpayers do not have
to complete a special form to obtain a refund. Taxpayer refunds are based on the
tax return they submit to the IRS.
How to Spot a Scam
Many e-mail scams are
fairly sophisticated and hard to detect. However, there are signs to watch for,
such as an e-mail that:
-
Requests detailed or an unusual amount
of personal and/or financial information, such as name, SSN, bank or credit card
account numbers or security-related information, such as mother’s maiden name, either
in the e-mail itself or on another site to which a link in the e-mail sends the
recipient.
- Dangles bait to get the recipient to
respond to the e-mail, such as mentioning a tax refund or offering to pay the recipient
to participate in an IRS survey.
- Threatens a consequence for not responding
to the e-mail, such as additional taxes or blocking access to the recipient’s funds.
- Gets the Internal Revenue Service or
other federal agency names wrong.
- Uses incorrect grammar or odd phrasing
(many of the e-mail scams originate overseas and are written by non-native English
speakers).
- Uses a really long address in any link
contained in the e-mail message or one that does not start with the actual IRS Web
site address (www.irs.gov). To see the actual link
address, or url, move the mouse over the link included in the text of the e-mail.
What to Do
The IRS does not initiate
taxpayer contact via unsolicited e-mail or ask for personal identifying or financial
information via e-mail. If you receive a suspicious e-mail claiming to come from
the IRS, take the following steps:
- Do not open any attachments to the e-mail,
in case they contain malicious code that will infect your computer.
- Do not click on any links, for the same
reason. Also, be aware that the links often connect to a phony IRS Web site that
appears authentic and then prompts the victim for personal identifiers, bank or
credit card account numbers or PINs. The phony Web sites appear legitimate because
the appearance and much of the content are directly copied from an actual page on
the IRS Web site and then modified by the scammers for their own purposes.
- Contact the IRS at 1-800-829-1040 to
determine whether the IRS is trying to contact you.
- Forward the suspicious e-mail or url
address to the IRS mailbox phishing@irs.gov,
then delete the e-mail from your inbox.
Genuine IRS Web site
The only genuine IRS
Web site is IRS.gov. All IRS.gov Web page addresses begin with
http://www.irs.gov/. Anyone wishing to access the IRS Web site should initiate
contact by typing the IRS.gov address into their Internet address window, rather
than clicking on a link in an e-mail.
Related Items:
OnGuardOnline.gov,
for tips from the federal government and the technology industry
Top
IRS Warns Taxpayers to Beware of First-Time Homebuyer Credit Fraud
IRS Special Edition Tax Tip 2009-05 - July 29, 2009
The Internal Revenue
Service today announced its first successful prosecution related to fraud involving
the first-time homebuyer credit and warned taxpayers to beware of this type of scheme.
On Thursday July 23,
2009, a Jacksonville, Fla., tax preparer, James Otto Price III, pled guilty to falsely
claiming the first-time homebuyer credit on a client’s federal tax return. Price
faces the possibility of up to three years in jail, a fine of as much as $250,000,
or both.
To date, the IRS has
executed seven search warrants and currently has 24 open criminal investigations
in pursuit of potential instances of fraud involving the credit. The agency has
a number of sophisticated computer screening tools to quickly identify returns that
may contain fraudulent claims for the first-time homebuyer credit.
“We will vigorously
pursue anyone who falsely tries to claim this or any other tax credit or deduction,”
said Eileen Mayer, Chief, IRS Criminal Investigation. “The penalties for tax fraud
are steep. Taxpayers should be wary of anyone who promises to get them a big refund.”
Whether a taxpayer prepares
his or her own return or uses the services of a paid preparer, it is the taxpayer
who is ultimately responsible for the accuracy of the return. Fraudulent returns
may result not only in the required payment of back taxes but also in penalties
and interest.
First-Time Homebuyer Credit
The First-Time Homebuyer
Credit, originally passed in 2008 and modified in 2009, provides up to $8,000 for
first-time homebuyers. The purchaser, however, must qualify as a first-time homebuyer,
which for purposes of this credit means someone who has not owned a primary residence
in the past three years. If the taxpayer is married, this requirement also applies
to the taxpayer’s spouse. The home purchase must close before Dec. 1, 2009, to qualify,
and the credit may not be claimed on the purchaser’s tax return until after the
taxpayer closes and has purchased the home.
Different rules apply for homes bought in 2008.
Full details and instructions are available on the official
IRS Web site, IRS.gov. See:
http://www.irs.gov/newsroom/article/0,,id=204671,00.html
Top
Five Tax Facts about Summertime Child Care Expenses
July 17, 2009
Many parents who work
or are looking for work must arrange for care of their children under 13 years of
age during the school vacation.
Here are five facts
the IRS wants you to know about a tax credit available for child care expenses.
The Child and Dependent Care Credit is available for expenses incurred during the
lazy hazy days of summer and throughout the rest of the year.
-
The cost of day camp can count as an
expense towards the child and dependent care credit.
-
Expenses for overnight camps do not
qualify.
-
If your childcare provider is a sitter
at your home or a daycare facility outside the home, you'll get some tax benefit
if you qualify for the credit.
-
The actual credit can be up to 35 percent
of your qualifying expenses, depending upon your income.
-
You may use up to $3,000 of the unreimbursed
expenses paid in a year for one qualifying individual or $6,000 for two or more
qualifying individuals to figure the credit.
For more information,
including rules for claiming this credit for your spouse or a dependent age 13 or
over who is not able to care for himself or herself, check out IRS Publication 503,
Child and Dependent Care Expenses. This publication is available on the IRS Web
site, IRS.gov or by calling 800-TAX-FORM (800-829-3676).
Link:
IRS Publication 503, Child and Dependent Care Expenses (PDF)
Top
The American Recovery and Reinvestment Act of 2009: Information Center
The IRS is implementing the tax-related
provisions of the American Recovery and Reinvestment Act of 2009 (ARRA) as quickly
as possible. More information on these and other provisions of the recovery program
will be available on this Web site as it becomes available.
Information for Individuals
Some of the provisions of the law primarily affect individuals.
-
Making Work Pay Tax Credit. This tax credit
means more take-home pay for many Americans. To make sure enough tax is withheld
from their pay, taxpayers can use the
IRS withholding calculator. See
Making Work Pay for more.
- First-Time Homebuyer Credit Expands. Homebuyers
who purchase in 2009 can get a credit
of up to $8,000 with no payback requirement.
-
$250 for Social Security Recipients, Veterans and Railroad
Retirees. The
Economic Recovery Payment will be paid by the Social Security Administration, Department of
Veterans Affairs and the Railroad Retirement Board.
- Health Coverage Tax Credit. The
credit
increases from 65 percent to 80 percent of qualified health insurance
premiums, and more people are eligible.
Information for Businesses
Some of the provisions of the law primarily affect businesses.
- Work Opportunity
tax credit. This newly-expanded credit
adds returning veterans and "disconnected youth" to the list of new hires covered
by the credit that businesses may claim. Certification by the state work force agency
is required.
2008 and 2009 Tax Returns
The law could affect some
2008 tax returns due in 2009.
However, most of the changes in ARRA will affect
2009 individual tax returns filed next year and due April 15, 2010.
Top
Top Seven Tips for Taxpayers Starting a New Business
IRS Summertime Tax Tip 2009-02
Anyone starting a new business this summer should be aware
of their federal tax responsibilities. Here are the top seven things the IRS wants
you to know if you plan on opening a new business this year.
-
First, you must decide what type of business
entity you are going to establish. The type your business takes will determine which
tax form you have to file. The most common types of business are the sole proprietorship,
partnership, corporation and S corporation.
-
The type of business you operate determines what taxes you must pay and how you
pay them. The four general types of business taxes are income tax, self-employment
tax, employment tax and excise tax.
- An Employer Identification
Number is used to identify a business entity. Generally, businesses need an EIN.
Visit IRS.gov for more information about whether you will need an EIN. You can also
apply for an EIN online at IRS.gov.
- Good records will help
you ensure successful operation of your new business. You may choose any recordkeeping
system suited to your business that clearly shows your income and expenses. Except
in a few cases, the law does not require any special kind of records. However, the
business you are in affects the type of records you need to keep for federal tax
purposes.
- Every business taxpayer
must figure taxable income on an annual accounting period called a tax year. The
calendar year and the fiscal year are the most common tax years used.
-
Each taxpayer must also use a consistent accounting method, which is a set of rules
for determining when to report income and expenses. The most commonly used accounting
methods are the cash method and an accrual method. Under the cash method, you generally
report income in the tax year you receive it and deduct expenses in the tax year
you pay them. Under an accrual method, you generally report income in the tax year
you earn it and deduct expenses in the tax year you incur them.
- Visit the Business section of IRS.gov for resources
to assist entrepreneurs with starting and operating a new business.
Links:
Top
|