This page contains announcements from the IRS that are important to tax practitioners. The most recent announcements are listed first.
IRS.gov feature helps people who normally don't file get payments; second tool next week provides taxpayers with payment delivery date and provide direct deposit information
WASHINGTON — To help millions of people, the Treasury Department and the Internal Revenue Service today launched a new web tool allowing quick registration for Economic Impact Payments for those who don't normally file a tax return.
The non-filer tool, developed in partnership between the IRS and the Free File Alliance, provides a free and easy option designed for people who don't have a return filing obligation, including those with too little income to file. The feature is available only on IRS.gov, and users should look for Non-filers: Enter Payment Info Here to take them directly to the tool.
"People who don't have a return filing obligation can use this tool to give us basic information so they can receive their Economic Impact Payments as soon as possible," said IRS Commissioner Chuck Rettig. "The IRS and Free File Alliance have been working around the clock to deliver this new tool to help people."
The IRS reminds taxpayers that Economic Impact Payments will be distributed automatically to most people starting next week. Eligible taxpayers who filed tax returns for 2019 or 2018 will receive the payments automatically. Automatic payments will also go in the near future to those receiving Social Security retirement or disability benefits and Railroad Retirement benefits.
For those who don't normally file a tax return, the process is simple and only takes a few minutes to complete. First, visit IRS.gov, and look for "Non-Filers: Enter Payment Info Here." Then provide basic information including Social Security number, name, address, and dependents. The IRS will use this information to confirm eligibility and calculate and send an Economic Impact Payment. Using the tool to get your payment will not result in any taxes being owed. Entering bank or financial account information will allow the IRS to deposit your payment directly in your account. Otherwise, your payment will be mailed to you.
"Non-Filers: Enter Payment Info" is secure, and the information entered will be safe. The tool is based on Free File Fillable Forms, part of the Free File Alliance's offerings of free products on IRS.gov.
This new tool is designed for people who did not file a tax return for 2018 or 2019 and who don't receive Social Security retirement or disability benefits or Railroad Retirement benefits. Others who should consider the Non-Filers tool as an option, include:
Eligible taxpayers who filed tax returns for either 2019 or 2018 and chose direct deposit of their refund will automatically receive an Economic Impact Payment of up to $1,200 for individuals or $2,400 for married couples and $500 for each qualifying child. Individuals who receive Social Security retirement or disability benefits, SSDI or who receive Railroad Retirement benefits but did not file a return for 2019 or 2018 will automatically receive a payment in the near future.
To help everyone check on the status of their payments, the IRS is building a second new tool expected to be available for use by April 17. Get My Payment will provide people with the status of their payment, including the date their payment is scheduled to be deposited into their bank account or mailed to them.
An additional feature on Get My Payment will allow eligible people a chance to provide their bank account information so they can receive their payment more quickly rather than waiting for a paper check. This feature will be unavailable if the Economic Impact Payment has already been scheduled for delivery.
The IRS will post additional updates on IRS.gov/coronavirus on these and other issues.
WASHINGTON — To help people facing the challenges of COVID-19 issues, the Internal Revenue Service announced today a sweeping series of steps to assist taxpayers by providing relief on a variety of issues ranging from easing payment guidelines to postponing compliance actions.
"The IRS is taking extraordinary steps to help the people of our country," said IRS Commissioner Chuck Rettig. "In addition to extending tax deadlines and working on new legislation, the IRS is pursuing unprecedented actions to ease the burden on people facing tax issues. During this difficult time, we want people working together, focused on their well-being, helping each other and others less fortunate."
"The new IRS People First Initiative provides immediate relief to help people facing uncertainty over taxes," Rettig added "We are temporarily adjusting our processes to help people and businesses during these uncertain times. We are facing this together, and we want to be part of the solution to improve the lives of all people in our country."
These new changes include issues ranging from postponing certain payments related to Installment Agreements and Offers in Compromise to collection and limiting certain enforcement actions. The IRS will be temporarily modifying the following activities as soon as possible; the projected start date will be April 1 and the effort will initially run through July 15. During this period, to the maximum extent possible, the IRS will avoid in-person contacts. However, the IRS will continue to take steps where necessary to protect all applicable statutes of limitations.
"IRS employees care about our people and our country, and they have a strong desire to help improve this situation," Rettig said. "These new actions reflect just one of many ways our employees are working hard every day to assist the nation. We care, a lot. IRS employees are actively engaged, and they have always delivered for their communities and our country. The People First Initiative is designed to help people take care of themselves and is a key part of our ongoing response to the coronavirus effort."
More specifics about the implementation of these provisions will be shared soon. Highlights of the key actions in the IRS People First Initiative include:
Existing Installment Agreements — For taxpayers under an existing Installment Agreement, payments due between April 1 and July 15, 2020 are suspended. Taxpayers who are currently unable to comply with the terms of an Installment Payment Agreement, including a Direct Deposit Installment Agreement, may suspend payments during this period if they prefer. Furthermore, the IRS will not default any Installment Agreements during this period. By law, interest will continue to accrue on any unpaid balances.
New Installment Agreements — The IRS reminds people unable to fully pay their federal taxes that they can resolve outstanding liabilities by entering into a monthly payment agreement with the IRS. See IRS.gov for further information.
Offers in Compromise (OIC) — The IRS is taking several steps to assist taxpayers in various stages of the OIC process:
Non-Filers — The IRS reminds people who have not filed their return for tax years before 2019 that they should file their delinquent returns. More than 1 million households that haven't filed tax returns during the last three years are actually owed refunds; they still have time to claim these refunds. Many should consider contacting a tax professional to consider various available options since the time to receive such refunds is limited by statute. Once delinquent returns have been filed, taxpayers with a tax liability should consider taking the opportunity to resolve any outstanding liabilities by entering into an Installment Agreement or an Offer in Compromise with the IRS to obtain a "Fresh Start." See IRS.gov for further information.
Field Collection Activities — Liens and levies (including any seizures of a personal residence) initiated by field revenue officers will be suspended during this period. However, field revenue officers will continue to pursue high-income non-filers and perform other similar activities where warranted.
Automated Liens and Levies — New automatic, systemic liens and levies will be suspended during this period.
Passport Certifications to the State Department — IRS will suspend new certifications to the Department of State for taxpayers who are "seriously delinquent" during this period. These taxpayers are encouraged to submit a request for an Installment Agreement or, if applicable, an OIC during this period. Certification prevents taxpayers from receiving or renewing passports.
Private Debt Collection — New delinquent accounts will not be forwarded by the IRS to private collection agencies to work during this period.
Field, Office and Correspondence Audits — During this period, the IRS will generally not start new field, office and correspondence examinations. We will continue to work refund claims where possible, without in-person contact. However, the IRS may start new examinations where deemed necessary to protect the government's interest in preserving the applicable statute of limitations.
Earned Income Tax Credit and Wage Verification Reviews — Taxpayers have until July 15, 2020, to respond to the IRS to verify that they qualify for the Earned Income Tax Credit or to verify their income. These taxpayers are encouraged to exercise their best efforts to obtain and submit all requested information, and if unable to do so, please reach out to the IRS indicating the reason such information is not available. Until July 15, 2020, the IRS will not deny these credits for a failure to provide requested information.
Independent Office of Appeals — Appeals employees will continue to work their cases. Although Appeals is not currently holding in-person conferences with taxpayers, conferences may be held over the telephone or by videoconference. Taxpayers are encouraged to promptly respond to any outstanding requests for information for all cases in the Independent Office of Appeals.
Statute of Limitations — The IRS will continue to take steps where necessary to protect all applicable statutes of limitations. In instances where statute expirations might be jeopardized during this period, taxpayers are encouraged to cooperate in extending such statutes. Otherwise, the IRS will issue Notices of Deficiency and pursue other similar actions to protect the interests of the government in preserving such statutes. Where a statutory period is not set to expire during 2020, the IRS is unlikely to pursue the foregoing actions until at least July 15, 2020.
Practitioner Priority Service — Practitioners are reminded that, depending on staffing levels and allocations going forward, there may be more significant wait times for the PPS. The IRS will continue to monitor this as situations develop.
"The IRS will continue to review and, where appropriate, modify or expand the People First Initiative as we continue reviewing our programs and receive feedback from others," Rettig said. "We are committed to helping people get through this period, and our employees will remain focused on these and other helpful efforts in the days and weeks ahead. I ask for your personal support, your understanding — and your patience — as we navigate our way forward together. Stay safe and take care of your families, friends and others."
WASHINGTON — Today the U.S. Treasury Department, Internal Revenue Service (IRS), and the U.S. Department of Labor (Labor) announced that small and midsize employers can begin taking advantage of two new refundable payroll tax credits, designed to immediately and fully reimburse them, dollar-for-dollar, for the cost of providing Coronavirus-related leave to their employees. This relief to employees and small and midsize businesses is provided under the Families First Coronavirus Response Act (Act), signed by President Trump on March 18, 2020.
The Act will help the United States combat and defeat COVID-19 by giving all American businesses with fewer than 500 employees funds to provide employees with paid leave, either for the employee's own health needs or to care for family members. The legislation will enable employers to keep their workers on their payrolls, while at the same time ensuring that workers are not forced to choose between their paychecks and the public health measures needed to combat the virus.
The Act provided paid sick leave and expanded family and medical leave for COVID-19 related reasons and created the refundable paid sick leave credit and the paid child care leave credit for eligible employers. Eligible employers are businesses and tax-exempt organizations with fewer than 500 employees that are required to provide emergency paid sick leave and emergency paid family and medical leave under the Act. Eligible employers will be able to claim these credits based on qualifying leave they provide between the effective date and December 31, 2020. Equivalent credits are available to self-employed individuals based on similar circumstances.
The Act provides that employees of eligible employers can receive two weeks (up to 80 hours) of paid sick leave at 100% of the employee's pay where the employee is unable to work because the employee is quarantined, and/or experiencing COVID-19 symptoms, and seeking a medical diagnosis. An employee who is unable to work because of a need to care for an individual subject to quarantine, to care for a child whose school is closed or child care provider is unavailable for reasons related to COVID-19, and/or the employee is experiencing substantially similar conditions as specified by the U.S. Department of Health and Human Services can receive two weeks (up to 80 hours) of paid sick leave at 2/3 the employee's pay. An employee who is unable to work due to a need to care for a child whose school is closed, or child care provider is unavailable for reasons related to COVID-19, may in some instances receive up to an additional ten weeks of expanded paid family and medical leave at 2/3 the employee's pay.
For an employee who is unable to work because of Coronavirus quarantine or self-quarantine or has Coronavirus symptoms and is seeking a medical diagnosis, eligible employers may receive a refundable sick leave credit for sick leave at the employee's regular rate of pay, up to $511 per day and $5,110 in the aggregate, for a total of 10 days.
For an employee who is caring for someone with Coronavirus, or is caring for a child because the child's school or child care facility is closed, or the child care provider is unavailable due to the Coronavirus, eligible employers may claim a credit for two-thirds of the employee's regular rate of pay, up to $200 per day and $2,000 in the aggregate, for up to 10 days. Eligible employers are entitled to an additional tax credit determined based on costs to maintain health insurance coverage for the eligible employee during the leave period.
In addition to the sick leave credit, for an employee who is unable to work because of a need to care for a child whose school or child care facility is closed or whose child care provider is unavailable due to the Coronavirus, eligible employers may receive a refundable child care leave credit. This credit is equal to two-thirds of the employee's regular pay, capped at $200 per day or $10,000 in the aggregate. Up to 10 weeks of qualifying leave can be counted towards the child care leave credit. Eligible employers are entitled to an additional tax credit determined based on costs to maintain health insurance coverage for the eligible employee during the leave period.
When employers pay their employees, they are required to withhold from their employees' paychecks federal income taxes and the employees' share of Social Security and Medicare taxes. The employers then are required to deposit these federal taxes, along with their share of Social Security and Medicare taxes, with the IRS and file quarterly payroll tax returns (Form 941 series) with the IRS.
Under guidance that will be released next week, eligible employers who pay qualifying sick or child care leave will be able to retain an amount of the payroll taxes equal to the amount of qualifying sick and child care leave that they paid, rather than deposit them with the IRS.
The payroll taxes that are available for retention include withheld federal income taxes, the employee share of Social Security and Medicare taxes, and the employer share of Social Security and Medicare taxes with respect to all employees.
If there are not sufficient payroll taxes to cover the cost of qualified sick and child care leave paid, employers will be able file a request for an accelerated payment from the IRS. The IRS expects to process these requests in two weeks or less. The details of this new, expedited procedure will be announced next week.
If an eligible employer paid $5,000 in sick leave and is otherwise required to deposit $8,000 in payroll taxes, including taxes withheld from all its employees, the employer could use up to $5,000 of the $8,000 of taxes it was going to deposit for making qualified leave payments. The employer would only be required under the law to deposit the remaining $3,000 on its next regular deposit date.
If an eligible employer paid $10,000 in sick leave and was required to deposit $8,000 in taxes, the employer could use the entire $8,000 of taxes in order to make qualified leave payments and file a request for an accelerated credit for the remaining $2,000.
Equivalent child care leave and sick leave credit amounts are available to self-employed individuals under similar circumstances. These credits will be claimed on their income tax return and will reduce estimated tax payments.
Small businesses with fewer than 50 employees will be eligible for an exemption from the leave requirements relating to school closings or child care unavailability where the requirements would jeopardize the ability of the business to continue. The exemption will be available on the basis of simple and clear criteria that make it available in circumstances involving jeopardy to the viability of an employer's business as a going concern. Labor will provide emergency guidance and rulemaking to clearly articulate this standard.
Labor will be issuing a temporary non-enforcement policy that provides a period of time for employers to come into compliance with the Act. Under this policy, Labor will not bring an enforcement action against any employer for violations of the Act so long as the employer has acted reasonably and in good faith to comply with the Act. Labor will instead focus on compliance assistance during the 30-day period.
For more information about these credits and other relief, visit Coronavirus Tax Relief on IRS.gov. Information regarding the process to receive an advance payment of the credit will be posted next week.
Notice 2020-15 provides tax relief to health plans as a result of the public health emergency posed by COVID-19, and the need to eliminate potential administrative and financial barriers to testing for and treatment of COVID-19. A health plan that otherwise satisfies the requirements to be a high deductible health plan (HDHP) under section 223(c)(2)(A) will not fail to be an HDHP merely because the health plan provides medical care services and items purchased related to testing for and treatment of COVID-19 prior to the satisfaction of the applicable minimum deductible. As a result, the individuals covered by such a plan will not fail to be eligible individuals under section 223(c)(1) merely because of the provision of those health benefits for testing and treatment of COVID-19.
Notice 2020-15 will be in IRB: IRB 2020-14, dated March 30, 2020.
WASHINGTON — The Internal Revenue Service today launched the new Tax Withholding Estimator, an expanded, mobile-friendly online tool designed to make it easier for everyone to have the right amount of tax withheld during the year.
The Tax Withholding Estimator replaces the Withholding Calculator, which offered workers a convenient online method for checking their withholding. The new Tax Withholding Estimator offers workers, as well as retirees, self-employed individuals and other taxpayers, a more user-friendly step-by-step tool for effectively tailoring the amount of income tax they have withheld from wages and pension payments.
“The new estimator takes a new approach and makes it easier for taxpayers to review their withholding,” said IRS Commissioner Chuck Rettig. “This is part of an ongoing effort by the IRS to improve quality services as we continue to pursue modernization and enhancements of our taxpayer relationships.”
The IRS took the feedback and concerns of taxpayers and tax professionals to develop the Tax Withholding Estimator, which offers a variety of new user-friendly features including:
In addition, the new Tax Withholding Estimator makes it easier to enter wages and withholding for each job held by the taxpayer and their spouse, as well as separately entering pensions and other sources of income. At the end of the process, the tool makes specific withholding recommendations for each job and each spouse and clearly explains what the taxpayer should do next.
The new Tax Withholding Estimator will help anyone doing tax planning for the last few months of 2019. Like last year, the IRS urges everyone to do a Paycheck Checkup and review their withholding for 2019. This is especially important for anyone who faced an unexpected tax bill or a penalty when they filed this year. It’s also an important step for those who made withholding adjustments in 2018 or had a major life change.
Those most at risk of having too little tax withheld include those who itemized in the past but now take the increased standard deduction, as well as two-wage-earner households, employees with nonwage sources of income and those with complex tax situations.
To get started, check out the Tax Withholding Estimator on IRS.gov.
WASHINGTON — The Internal Revenue Service is reminding veterans who received disability severance payments after 1991 and claimed it as income that time may be running out to claim their refund.
Veterans should take action soon if they received a notice (letters 6060-A and 6060-D) and have not already filed Form 1040X, Amended U.S. Individual Income Tax Return, to claim a refund or credit of the overpayment attributable to the disability severance payment should do so soon.
“We appreciate the service and sacrifice of our nation’s combat-injured veterans, and the IRS is pleased to help deliver refunds under this special provision,” said IRS Commissioner Chuck Rettig. “Time is running out this month for many people who qualify for this refund. We urge combat-injured veterans to take time review the provisions to see if they are eligible.”
The Combat-Injured Veterans Tax Fairness Act of 2016 provides that most veterans who received a one-time, lump-sum, disability severance payment when they separated from military service are entitled to a refund if that payment was claimed as income. The payment must have been received after Jan. 17, 1991, and before Jan. 1, 2017. Eligible veterans should have received a mailed notice from the Department of Defense in July of 2018 explaining how to claim their tax refunds.
Deadlines are soon approaching as the time available for claiming these tax refunds is limited to:
Veterans claiming their refund have the normal limitations period for claiming a refund or one year from the date of their letter from the DoD, whichever expires later. As taxpayers can usually only claim tax refunds within three years from the due date of the return, this alternative time frame is especially important since some of the claims may be for refunds of taxes paid as far back as 1991. While many veterans have claimed their refunds in the past year, many others have not, and time is running short.
Veterans can submit a claim based on the actual amount of their disability severance payment by completing Form 1040X and carefully following the instructions. An original return is not necessary if the information for that tax year available. Veterans without the required information to complete the Form 1040X, you can request a transcript online at IRS.gov/transcript.
Option 2, claiming a standard refund amount, is the easiest way to request a refund because it does not require finding the original tax return or requesting information about the return from the IRS. It may result in a larger or smaller refund based on the actual amount from the return. The standard refund amounts are:
Carefully follow the instructions in the notice mailed by the Department of Defense in July 2018:
Internal Revenue Service
333 W. Pershing Street, Stop 6503, P5
Kansas City, MO 64108
Veterans who did not receive the notice from the Department of Defense and received a disability severance payment after Jan. 17, 1991, that was reported as taxable income, can still file a claim. They must include the necessary documentation to file with their Form 1040X. Veterans should contact the National Archives, National Personnel Records Center, or the Department of Veterans Affairs to obtain the required documentation for submission with their Form 1040X.
The IRS has posted detailed information on IRS.gov. Veterans with questions about claiming a tax refund for disability severance payment, can call the IRS toll free at (833) 558-5245 ext. 378 between 7 a.m. and 7 p.m. local time (Alaska and Hawaii follow Pacific time).
WASHINGTON — As part of its ongoing security review, the Internal Revenue Service announced today that starting May 13 only individuals with tax identification numbers may request an Employer Identification Number (EIN) as the “responsible party” on the application.
An EIN is a nine-digit tax identification number assigned to sole proprietors, corporations, partnerships, estates, trusts, employee retirement plans and other entities for tax filing and reporting purposes.
The change will prohibit entities from using their own EINs to obtain additional EINs. The requirement will apply to both the paper Form SS-4, Application for Employer Identification Number, and online EIN application.
Individuals named as responsible party must have either a Social Security number (SSN) or an individual taxpayer identification number (ITIN). By making the announcement weeks in advance, entities and their representatives will have time to identify the proper responsible official and comply with the new policy.
The Form SS-4 Instructions provide a detailed explanation of who should be the responsible party for various types of entities. Generally, the responsible party is the person who ultimately owns or controls the entity or who exercises ultimate effective control over the entity. In cases where more than one person meets that definition, the entity may decide which individual should be the responsible party.
Only governmental entities (federal, state, local and tribal) are exempt from the responsible party requirement as well as the military, including state national guards.
There is no change for tax professionals who may act as third-party designees for entities and complete the paper or online applications on behalf of clients.
The new requirement will provide greater security to the EIN process by requiring an individual to be the responsible party and improve transparency. If there are changes to the responsible party, the entity can change the responsible official designation by completing Form 8822-B, Change of Address or Responsible Party. A Form 8822-B must be filed within 60 days of a change.
WASHINGTON — The Internal Revenue Service today provided additional expanded penalty relief to taxpayers whose 2018 federal income tax withholding and estimated tax payments fell short of their total tax liability for the year.
The IRS is lowering to 80 percent the threshold required to qualify for this relief. Under the relief originally announced Jan. 16, the threshold was 85 percent. The usual percentage threshold is 90 percent to avoid a penalty.“We heard the concerns from taxpayers and others in the tax community, and we made this adjustment in an effort to be responsive to a unique scenario this year,” said IRS Commissioner Chuck Rettig. “The expanded penalty waiver will help many taxpayers who didn’t have enough tax withheld. We continue to urge people to check their withholding again this year to make sure they are having the right amount of tax withheld for 2019.”
This means that the IRS is now waiving the estimated tax penalty for any taxpayer who paid at least 80 percent of their total tax liability during the year through federal income tax withholding, quarterly estimated tax payments or a combination of the two.
Today’s revised waiver computation will be integrated into commercially-available tax software and reflected in the forthcoming revision of the instructions for Form 2210, Underpayment of Estimated Tax by Individuals, Estates, and Trusts.
Taxpayers who have already filed for tax year 2018 but qualify for this expanded relief may claim a refund by filing Form 843, Claim for Refund and Request for Abatement and include the statement “80% Waiver of estimated tax penalty” on Line 7. This form cannot be filed electronically.
Today’s expanded relief will help many taxpayers who owe tax when they file, including taxpayers who did not properly adjust their withholding and estimated tax payments to reflect an array of changes under the Tax Cuts and Jobs Act (TCJA), the far-reaching tax reform law enacted in December 2017.
The IRS and partner groups conducted an extensive outreach and education campaign throughout 2018 to encourage taxpayers to do a “Paycheck Checkup” to avoid a situation where some might have had too much or too little tax withheld when they file their tax returns. If a taxpayer did not submit a revised W-4 withholding form to their employer or increase their estimated tax payments, they may have not had enough tax withheld during the tax year.
Because the U.S. tax system is pay-as-you-go, taxpayers are required, by law, to pay most of their tax obligation during the year, rather than at the end of the year. This can be done by either having tax withheld from paychecks or pension payments, or by making estimated tax payments.
Usually, a penalty applies at tax filing if too little is paid during the year. This penalty is an interest based amount approximately equivalent to the federal interest on the amount not paid in a timely manner. Normally, the penalty would not apply for 2018 if tax payments during the year met one of the following tests:
For waiver purposes only, today’s relief lowers the 90 percent threshold to 80 percent. This means that a taxpayer will not owe a penalty if they paid at least 80 percent of their total 2018 tax liability. If the taxpayer paid less than 80 percent, then they are not eligible for the waiver and the penalty will be calculated as it normally would be, using the 90 percent threshold. For further details, see Notice 2019-25, posted today on IRS.gov.
Like last year, the IRS urges everyone to take a Paycheck Checkup and review their withholding for 2019. This is especially important for anyone now facing an unexpected tax bill when they file. This is also an important step for those who made withholding adjustments in 2018 or had a major life change to ensure the right tax is still being withheld. Those most at risk of having too little tax withheld from their pay include taxpayers who itemized in the past but now take the increased standard deduction, as well as two-wage-earner households, employees with nonwage sources of income and those with complex tax situations.
WASHINGTON — The Treasury Department and the Internal Revenue Service issued guidance today that provides a safe harbor method for determining depreciation deductions for passenger automobiles that qualify for the 100-percent additional first year depreciation deduction and that are subject to the depreciation limitations for passenger automobiles.
Under the Tax Cuts and Jobs Act (TCJA), the additional first year depreciation deduction applies to qualified property, including passenger automobiles, acquired and placed in service after September 27, 2017, and before January 1, 2027.
In general, the section 179 and depreciation deductions for passenger automobiles are subject to dollar limitations for the year the taxpayer places the passenger automobile in service and for each succeeding year. For a passenger automobile that qualifies for the 100-percent additional first year depreciation deduction, TCJA increased the first-year limitation amount by $8,000. If the depreciable basis of a passenger automobile for which the 100-percent additional first year depreciation deduction is allowable exceeds the first-year limitation, the excess amount is deductible in the first taxable year after the end of the recovery period.
The guidance provides a safe harbor method of accounting for passenger automobiles. The safe harbor allows depreciation deductions for the excess amount during the recovery period subject to the depreciation limitations applicable to passenger automobiles. To apply the safe-harbor method, the taxpayer must use the applicable depreciation table in Appendix A of IRS Publication 946. The safe harbor method does not apply to a passenger automobile placed in service by the taxpayer after 2022, or to a passenger automobile for which the taxpayer elected out of the 100-percent additional first year depreciation deduction or elected under section 179 to expense all or a portion of the cost of the passenger automobile.
Taxpayers adopt the safe harbor method of accounting by applying it to deduct depreciation of a passenger automobile on their return for the first taxable year following the placed-in-service year.
For more information on the additional first year depreciation deduction, see TCJA, Depreciation. For information about other TCJA provisions, visit IRS.gov/taxreform.
The United States Tax Court's website announced that the Tax Court shut down operations on Friday, December 28, 2018, at 11:59 p.m. and will remain closed until further notice. The IRS reminds taxpayers and tax professionals the Tax Court website is the best place to get information about a pending case.
There are some important points for taxpayers and tax professionals to keep in mind. These are some questions and answers to help during the current appropriations lapse.
The Tax Court website indicates that mail sent to the court through the U.S. Postal Service or through designated private delivery services may have been returned undelivered. If a document you sent to the Tax Court was returned to you, as the Tax Court website indicates, re-mail or re-send the document to the Court with a copy of the envelope or container (with the postmark or proof of mailing date) in which it was first mailed or sent. In addition, please retain the original.
The Tax Court canceled trial sessions for January 28, 2019 (El Paso, TX; Los Angeles, CA; New York, NY; Philadelphia, PA; San Diego, CA; and Lubbock, TX), February 4, 2019 (Hartford, CT; Houston, TX; San Francisco, CA; Seattle, WA; St. Paul, MN; Washington, DC; and Winston-Salem, NC) and February 11, 2019 (Detroit, MI; Los Angeles, CA; New York, NY; San Diego, CA; and Mobile, AL). The Tax Court will inform taxpayers who had cases on the canceled trial sessions of their new trial dates.
The Tax Court's website indicates that it will make a decision about the February 25, 2019 trial sessions (Atlanta, GA; Chicago, IL; Dallas, TX; Los Angeles, CA; and Philadelphia, PA) on or before February 7, 2019. Taxpayers with cases that are scheduled for trial sessions that have not been canceled or that have not yet been scheduled for trial should expect their cases to proceed in the normal course until further notice.
After the IRS and Chief Counsel reopen, we will make our best efforts to expeditiously resolve cases.
If someone is representing you in your case, you should contact your representative. In addition, the Tax Court's website is the best place for updates. The IRS Chief Counsel and Appeals personnel assigned to your case may be furloughed and will not be available to answer your questions until the government reopens. In addition, The American Bar Association (ABA) is conducting a webinar on January 28, 2019, and you can get more information from the ABA Tax Section website. Taxpayers seeking assistance from Low Income Taxpayer Clinics (LITCs) can find a list of LITCs on the Tax Court's website.
Yes. To avoid additional interest on the tax that you are disputing in your pending Tax Court case, you can stop the running of interest by making a payment to the IRS. Go to www.irs.gov/payments for payment options available to you. The IRS is continuing to process payments during the shutdown.
If you receive a collection notice for the tax that is in dispute in your Tax Court case, it may be because the IRS has not received your petition and has made a premature assessment. When the government reopens, the IRS attorney assigned to your case will determine if a premature assessment was made and request that the IRS abate the premature assessment.
TD (REG-107892-18) contains final regulations concerning the deduction for qualified business income under section 199A of the Internal Revenue Code (Code). The regulations will affect individuals, partnerships, S corporations, trusts, and estates engaged in domestic trades or businesses. The regulations also contain an anti-avoidance rule under section 643 of the Code to treat multiple trusts as a single trust in certain cases, which will affect trusts, their grantors, and beneficiaries. This document also requests additional comments on certain aspects of the deduction.
Notice 2019-07 contains a proposed revenue procedure that provides for a safe harbor under which a rental real estate enterprise will be treated as a trade or business solely for purposes of section 199A of the Internal Revenue Code (Code) and §§ 1.199A-1 through 1.199A-6 of the Income Tax Regulations (Regulations) (26 CFR Part 1), which are being published contemporaneously with this notice. To qualify for treatment as a trade or business under this safe harbor, the rental real estate enterprise must satisfy the requirements of the proposed revenue procedure. If an enterprise fails to satisfy these requirements, the rental real estate enterprise may still be treated as a trade or business for purposes of section 199A if the enterprise otherwise meets the definition of trade or business in §1.199A-1(b)(14).
WASHINGTON — The Internal Revenue Service today issued the 2019 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
Beginning on Jan. 1, 2019, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
The business mileage rate increased 3.5 cents for business travel driven and 2 cents for medical and certain moving expense from the rates for 2018. The charitable rate is set by statute and remains unchanged.
It is important to note that under the Tax Cuts and Jobs Act, taxpayers cannot claim a miscellaneous itemized deduction for unreimbursed employee travel expenses. Taxpayers also cannot claim a deduction for moving expenses, except members of the Armed Forces on active duty moving under orders to a permanent change of station. For more details see Notice-2019-02.
The standard mileage rate for business use is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.
Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.
A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously. These and other limitations are described in section 4.05 of Rev. Proc. 2010-51.
Notice 2019-02, posted today on IRS.gov, contains the standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan.
WASHINGTON — The Internal Revenue Service today announced the tax year 2019 annual inflation adjustments for more than 60 tax provisions, including the tax rate schedules and other tax changes. Revenue Procedure 2018-57 provides details about these annual adjustments. The tax year 2019 adjustments generally are used on tax returns filed in 2020.
The tax items for tax year 2019 of greatest interest to most taxpayers include the following dollar amounts:
WASHINGTON — The Internal Revenue Service today announced cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2019. The IRS today issued technical guidance detailing these items in Notice 2018-83.
The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $18,500 to $19,000.
The limit on annual contributions to an IRA, which last increased in 2013, is increased from $5,500 to $6,000. The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.
The income ranges for determining eligibility to make deductible contributions to traditional Individual Retirement Arrangements (IRAs), to contribute to Roth IRAs and to claim the saver’s credit all increased for 2019.
Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If during the year either the taxpayer or their spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income. (If neither the taxpayer nor their spouse is covered by a retirement plan at work, the phase-outs of the deduction do not apply.) Here are the phase-out ranges for 2019:
The income phase-out range for taxpayers making contributions to a Roth IRA is $122,000 to $137,000 for singles and heads of household, up from $120,000 to $135,000. For married couples filing jointly, the income phase-out range is $193,000 to $203,000, up from $189,000 to $199,000. The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
The income limit for the Saver’s Credit (also known as the Retirement Savings Contributions Credit) for low- and moderate-income workers is $64,000 for married couples filing jointly, up from $63,000; $48,000 for heads of household, up from $47,250; and $32,000 for singles and married individuals filing separately, up from $31,500.
The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan remains unchanged at $6,000.
Section 415 of the Internal Revenue Code (Code) provides for dollar limitations on benefits and contributions under qualified retirement plans. Section 415(d) requires that the Secretary of the Treasury annually adjust these limits for cost of living increases. Other limitations applicable to deferred compensation plans are also affected by these adjustments under Section 415. Under Section 415(d), the adjustments are to be made following adjustment procedures similar to those used to adjust benefit amounts under Section 215(i)(2)(A) of the Social Security Act.
Effective Jan. 1, 2019, the limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) is increased from $220,000 to $225,000. For a participant who separated from service before Jan. 1, 2019, the limitation for defined benefit plans under Section 415(b)(1)(B) is computed by multiplying the participant's compensation limitation, as adjusted through 2018, by 1.0264.
The limitation for defined contribution plans under Section 415(c)(1)(A) is increased in 2019 from $55,000 to $56,000.
The Code provides that various other dollar amounts are to be adjusted at the same time and in the same manner as the dollar limitation of Section 415(b)(1)(A). After taking into account the applicable rounding rules, the amounts for 2019 are as follows:
The limitation under Section 402(g)(1) on the exclusion for elective deferrals described in Section 402(g)(3) is increased from $18,500 to $19,000.
The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased from $275,000 to $280,000.
The dollar limitation under Section 416(i)(1)(A)(i) concerning the definition of key employee in a top-heavy plan is increased from $175,000 to $180,000.
The dollar amount under Section 409(o)(1)(C)(ii) for determining the maximum account balance in an employee stock ownership plan subject to a five year distribution period is increased from $1,105,000 to $1,130,000, while the dollar amount used to determine the lengthening of the five year distribution period is increased from $220,000 to $225,000.
The limitation used in the definition of highly compensated employee under Section 414(q)(1)(B) is increased from $120,000 to $125,000.
The dollar limitation under Section 414(v)(2)(B)(i) for catch-up contributions to an applicable employer plan other than a plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over remains unchanged at $6,000. The dollar limitation under Section 414(v)(2)(B)(ii) for catch-up contributions to an applicable employer plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over remains unchanged at $3,000.
The annual compensation limitation under Section 401(a)(17) for eligible participants in certain governmental plans that, under the plan as in effect on July 1, 1993, allowed cost of living adjustments to the compensation limitation under the plan under Section 401(a)(17) to be taken into account, is increased from $405,000 to $415,000.
The compensation amount under Section 408(k)(2)(C) regarding simplified employee pensions (SEPs) remains unchanged at $600.
The limitation under Section 408(p)(2)(E) regarding SIMPLE retirement accounts is increased from $12,500 to $13,000.
The limitation on deferrals under Section 457(e)(15) concerning deferred compensation plans of state and local governments and tax-exempt organizations is increased from $18,500 to $19,000.
The limitation under Section 664(g)(7) concerning the qualified gratuitous transfer of qualified employer securities to an employee stock ownership plan remains unchanged at $50,000.
The compensation amount under Section 1.61 21(f)(5)(i) of the Income Tax Regulations concerning the definition of “control employee” for fringe benefit valuation remains unchanged at $110,000. The compensation amount under Section 1.61 21(f)(5)(iii) is increased from $220,000 to $225,000.
The dollar limitation on premiums paid with respect to a qualifying longevity annuity contract under Section 1.401(a)(9)-6, A-17(b)(2)(i) of the Income Tax Regulations remains unchanged at $130,000.
The Code provides that the $1,000,000,000 threshold used to determine whether a multiemployer plan is a systemically important plan under Section 432(e)(9)(H)(v)(III)(aa) is adjusted using the cost-of-living adjustment provided under Section 432(e)(9)(H)(v)(III)(bb). After taking the applicable rounding rule into account, the threshold used to determine whether a multiemployer plan is a systemically important plan under Section 432(e)(9)(H)(v)(III)(aa) is increased for 2019 from $1,087,000,000 to $1,097,000,000.
The Code also provides that several retirement-related amounts are to be adjusted using the cost-of-living adjustment under Section 1(f)(3). After taking the applicable rounding rules into account, the amounts for 2019 are as follows:
The Tax Cuts and Jobs Act (TCJA) changed deductions, depreciation, expensing, tax credits and other tax items affecting businesses. This side-by-side comparison can help businesses understand the changes and plan accordingly.
Some provisions of the TCJA affecting individual taxpayers can also affect business taxes. Businesses and self-employed individuals should review tax reform changes for individuals and determine if and how these provisions may concern their business situation.
WASHINGTON — The Internal Revenue Service today reminded the nation’s more than 768,000 federal tax return preparers that they must renew their Preparer Tax Identification Numbers (PTINs) for 2019. All current PTINs will expire Dec. 31, 2018.
Anyone who prepares or helps prepare any federal tax return, or claim for refund, for compensation must have a valid PTIN from the IRS. The PTIN must be used as the identifying number on returns prepared. Failure to have and use a valid PTIN may result in penalties.
“We ask that you renew your PTIN as soon as possible to avoid a last-minute rush,” said Carol A. Campbell, director, IRS Return Preparer Office. “It’s easy to let this slip as the holiday season approaches.”
For those who have a 2018 PTIN, the renewal process takes a few moments online. Those who cannot remember their user ID and password can find online tools to assist them. Preparers can get started at www.irs.gov/ptin. If registering for the first time, the PTIN application may also be completed online. There is no fee for obtaining or renewing a PTIN.
Paper Form W-12, IRS Paid Preparer Tax Identification Number Application and Renewal, is available for paper applications and renewals, and takes four to six weeks to process.
All enrolled agents, regardless of whether they prepare returns, must renew their PTIN annually in order to maintain their active status.
The voluntary IRS Annual Filing Season Program is intended to encourage non-credentialed tax return preparers to take continuing education (CE) courses to increase their knowledge and improve their filing season readiness. Participation generally requires 18 hours of CE from an IRS approved provider, including a course in basic tax filing issues and updates, ethics, as well as other federal tax law courses. More information on the types and amounts of CE required for the program is available online.
Preparers desiring to receive an Annual Filing Season Program Record of Completion for 2019, must (1) complete their continuing education requirements by Dec. 31, 2018; (2) have a valid 2019 PTIN; and (3) consent to adhere to specific requirements in Treasury Department Circular No. 230.
The IRS has a video to demonstrate how to sign the Circular 230 consent and print the Record of Completion.
The Annual Filing Season Program is a filing season qualification, while the enrolled agent program provides professional status. The enrolled agent credential is an elite credential issued by the IRS to tax professionals who demonstrate special competence in federal tax planning, individual and business tax return preparation and representation matters. Enrolled agents have unlimited representation rights; allowing them to represent any client before the IRS on any tax matter. As non-credentialed return preparers consider the next steps in their professional career, the IRS encourages them to consider becoming an enrolled agent.
Enrolled agents and participants in the Annual Filing Season Program are included in the Directory of Federal Tax Return Preparers with Credentials and Select Qualifications created on IRS.gov to help explain the various tax return preparer credentials and qualifications to taxpayers. The directory also contains information on attorneys, certified public accountants, enrolled retirement plan agents and enrolled actuaries who are registered with the IRS.
WASHINGTON — The Internal Revenue Service today reminded business owners that tax reform legislation passed last December affects nearly every business.
With just a few months left in the year, the IRS is highlighting important information for small businesses and self-employed individuals to help them understand and meet their tax obligations.
Here are several changes that could affect the bottom line of many small businesses:
Many owners of sole proprietorships, partnerships, trusts and S corporations may deduct 20 percent of their qualified business income. The new deduction — referred to as the Section 199A deduction or the qualified business income deduction — is available for tax years beginning after Dec. 31, 2017. Eligible taxpayers can claim it for the first time on the 2018 federal income tax return they file next year.
A set of FAQs provides more information on the deduction, income and other limitations.
Businesses are now able to write off most depreciable business assets in the year the business places them in service. The 100-percent depreciation deduction generally applies to depreciable business assets with a recovery period of 20 years or less and certain other property. Machinery, equipment, computers, appliances and furniture generally qualify.
Taxpayers can find more information in the proposed regulations.
The tax reform for businesses page has more information on fringe benefit changes.
Individuals, including sole proprietors, partners and S corporation shareholders, may need to pay quarterly installments of estimated tax unless they owe less than $1,000 when they file their tax return or they had no tax liability in the prior year (subject to certain conditions). More information about tax withholding and estimated taxes can be found on the agency’s Pay As You Go web page as well as in Publication 505, Tax Withholding and Estimated Tax. Publication 505 has additional details, including worksheets and examples, which can help taxpayers determine whether they should pay estimated taxes. Some affected taxpayers may include those who have dividend or capital gain income, owe alternative minimum tax or have other special situations.
See IRS.gov/taxreform for more information about these and many other tax law changes.
WASHINGTON — The Internal Revenue Service today reminds business taxpayers who placed qualifying property in service during 2017 but choose not to claim the new 100-percent depreciation deduction, that they have a limited time to file the required election with the IRS.
In general, individuals and calendar-year corporations must file the election with the IRS by Oct. 15, 2018. The new 100-percent deduction allows businesses to write off most depreciable business assets in the year they are placed in service. This deduction was created by the Tax Cuts and Jobs Act (TCJA), the tax reform legislation enacted in December 2017. Because the deduction is retroactive and applies to qualifying property acquired and placed in service after Sept. 27, 2017, it may affect many 2017 tax returns. See IRS Fact Sheet 2018-09 for more details.
The 100-percent depreciation deduction generally applies to depreciable business assets with a recovery period of 20 years or less and certain other property. Machinery, equipment, computers, appliances, furniture, certain plants and qualified film, television and live theatrical productions generally qualify. Further details can be found in proposed regulations, issued last month, as well as in Publication 946, How to Depreciate Property, and in Form 4562, Depreciation and Amortization, and its instructions.
Taxpayers who elect out of the 100-percent depreciation deduction, as well as the 50-percent deduction available under prior law, must do so by attaching a statement to a timely-filed return. For details, see the instructions for Part II of Form 4562.
Those who have already timely filed their 2017 return and did not elect out but still wish to do so need to file an amended return. The deadline for filing the election is six months after the original deadline. For individuals or calendar-year corporations, this means Oct. 15, 2018.
For more information about this and other TCJA provisions, visit IRS.gov/taxreform.
WASHINGTON — Today the IRS announced that eligible employers who provide paid family and medical leave to their employees may qualify for a new business credit for tax years 2018 and 2019.
In addition, eligible employers who set up qualifying paid family leave programs or amend existing programs by Dec. 31, 2018, will be eligible to claim the employer credit for paid family and medical leave, retroactive to the beginning of the employer’s 2018 tax year, for qualifying leave already provided.
In Notice 2018-71, posted today on IRS.gov, the IRS provided detailed guidance on the new credit in a question and answer format. The credit was enacted by the 2017 Tax Cuts and Jobs Act (TCJA).
The notice released today clarifies how to calculate the credit including the application of special rules and limitations. Only paid family and medical leave provided to employees whose prior-year compensation was at or below a certain amount qualify for the credit. Generally, for tax year 2018, the employee’s 2017 compensation from the employer must have been $72,000 or less.
Updates on the implementation of the TCJA can be found on the Tax Reform page of IRS.gov.
WASHINGTON — Employer payments or reimbursements in 2018 for employees’ moving expenses incurred prior to 2018 are excluded from the employee’s wages for income and employment tax purposes, the Internal Revenue Service announced today.
The 2017 Tax Cuts and Jobs Act (TCJA) suspended the exclusion from income for moving expenses reimbursed or paid by an employer for most employees starting in 2018, making these amounts taxable, except for amounts for active-duty members of the U.S. Armed Forces whose moves relate to a military-ordered permanent change of station.
Under Notice 2018-75, posted today on IRS.gov, reimbursements an employer pays to an employee in 2018 for qualified moving expenses incurred in a prior year are not subject to federal income or employment taxes. The same is true if the employer pays a moving company in 2018 for qualified moving services provided to an employee prior to 2018.
To qualify, reimbursements or payments must be for work-related moving expenses that would have been deductible by the employee if the employee had directly paid them prior to Jan. 1, 2018. The employee must not have deducted them in 2017. For more information on the 2017 rules, see Form 3903 or Publication 521.
Employers that have already treated reimbursements or payments as taxable can follow the normal employment tax adjustment and refund procedures. See Publication 15, section 13, or Form 941-X and its instructions for details.
Updates on this and other TCJA provisions can be found at IRS.gov/taxreform.
The Tax Cuts and Jobs Act includes changes to moving, mileage and travel expenses:
The new law suspends the deduction for tax years beginning after Dec. 31, 2017, through Jan. 1, 2026. During the suspension, no deduction is allowed for use of an auto as part of a move using the mileage rate listed in IRS Notice 2018-03.
This does not apply to members of the Armed Forces on active duty who move related to a permanent change of station.
The Act also suspends all miscellaneous itemized deductions subject to the 2 percent of adjusted gross income floor. This change affects unreimbursed employee expenses such as uniforms, union dues and the deduction for business-related meals, entertainment and travel.
For additional guidance, see IRS Notice 2018-42.
The standard mileage rates for the use of a car, van, pickup or panel truck for 2018 remain:
The recent legislation also increases the depreciation limitations for passenger autos placed in service after Dec. 31, 2017, for purposes of computing the allowance under a fixed and variable rate plan. The maximum standard automobile cost may not exceed $50,000 for passenger automobiles, trucks and vans placed in service after Dec. 31, 2017.
For additional details, see the May 25, 2018 IRS news release: Law change affects moving, mileage and travel expenses.
WASHINGTON — Many U.S. corporations elect to use a fiscal year end and not a calendar year end for federal income tax reporting purposes. Due to a provision in the recently enacted Tax Cuts and Jobs Act (TCJA), a corporation with a fiscal year that includes Jan. 1, 2018 will pay federal income tax using a blended tax rate and not the flat 21 percent tax rate under the TCJA that would generally apply to taxable years beginning after Dec. 31, 2017.
Corporations determine their federal income tax for fiscal years that include Jan. 1, 2018, by first calculating their tax for the entire taxable year using the tax rates in effect prior to TCJA and then calculating their tax using the new 21 percent rate, subsequently proportioning each tax amount based on the number of days in the taxable year when the different rates were in effect. The sum of these two amounts is the corporation's federal income tax for the fiscal year.
The blended rate applies to all fiscal year corporations whose fiscal year includes Jan. 1, 2018. Fiscal year corporations that have already filed their federal income tax returns that do not reflect the blended rate may want to consider filing an amended return.
The federal sequester law remains in effect for the 2018 federal fiscal year. Corporations need to be aware of how this may affect their tax credits and refunds. Revised forms and instructions can be found on IRS.gov.
Updates on the implementation of the Tax Cuts and Jobs Act can be found on the Tax Reform page of IRS.gov. The Treasury media contact for this matter is Marisol Garibay, Deputy Assistant Secretary for Public Affairs, 202-622-6490.
WASHINGTON — The Internal Revenue Service today reminded taxpayers that income from virtual currency transactions is reportable on their income tax returns.
Virtual currency transactions are taxable by law just like transactions in any other property. The IRS has issued guidance in IRS Notice 2014-21 for use by taxpayers and their return preparers that addresses transactions in virtual currency, also known as digital currency.
Taxpayers who do not properly report the income tax consequences of virtual currency transactions can be audited for those transactions and, when appropriate, can be liable for penalties and interest.
In more extreme situations, taxpayers could be subject to criminal prosecution for failing to properly report the income tax consequences of virtual currency transactions. Criminal charges could include tax evasion and filing a false tax return. Anyone convicted of tax evasion is subject to a prison term of up to five years and a fine of up to $250,000. Anyone convicted of filing a false return is subject to a prison term of up to three years and a fine of up to $250,000.
Virtual currency, as generally defined, is a digital representation of value that functions in the same manner as a country’s traditional currency. There are currently more than 1,500 known virtual currencies. Because transactions in virtual currencies can be difficult to trace and have an inherently pseudo-anonymous aspect, some taxpayers may be tempted to hide taxable income from the IRS.
Notice 2014-21 provides that virtual currency is treated as property for U.S. federal tax purposes. General tax principles that apply to property transactions apply to transactions using virtual currency. Among other things, this means that:
More information can be found on IRS.gov.
WASHINGTON — The Internal Revenue Service today announced it will begin to ramp down the 2014 Offshore Voluntary Disclosure Program (OVDP) and close the program on Sept. 28, 2018. By alerting taxpayers now, the IRS intends that any U.S. taxpayers with undisclosed foreign financial assets have time to use the OVDP before the program closes.
“Taxpayers have had several years to come into compliance with U.S. tax laws under this program,” said Acting IRS Commissioner David Kautter. “All along, we have been clear that we would close the program at the appropriate time, and we have reached that point. Those who still wish to come forward have time to do so.”
Since the OVDP’s initial launch in 2009, more than 56,000 taxpayers have used one of the programs to comply voluntarily. All told, those taxpayers paid a total of $11.1 billion in back taxes, interest and penalties. The planned end of the current OVDP also reflects advances in third-party reporting and increased awareness of U.S. taxpayers of their offshore tax and reporting obligations.
The number of taxpayer disclosures under the OVDP peaked in 2011, when about 18,000 people came forward. The number steadily declined through the years, falling to only 600 disclosures in 2017.
The current OVDP began in 2014 and is a modified version of the OVDP launched in 2012, which followed voluntary programs offered in 2011 and 2009. The programs have enabled U.S. taxpayers to voluntarily resolve past non-compliance related to unreported foreign financial assets and failure to file foreign information returns.
The IRS notes that it will continue to use tools besides voluntary disclosure to combat offshore tax avoidance, including taxpayer education, Whistleblower leads, civil examination and criminal prosecution. Since 2009, IRS Criminal Investigation has indicted 1,545 taxpayers on criminal violations related to international activities, of which 671 taxpayers were indicted on international criminal tax violations.
“The IRS remains actively engaged in ferreting out the identities of those with undisclosed foreign accounts with the use of information resources and increased data analytics,” said Don Fort, Chief, IRS Criminal Investigation. “Stopping offshore tax noncompliance remains a top priority of the IRS.”
A separate program, the Streamlined Filing Compliance Procedures, for taxpayers who might not have been aware of their filing obligations, has helped about 65,000 additional taxpayers come into compliance. The Streamlined Filing Compliance Procedures will remain in place and available to eligible taxpayers. As with OVDP, the IRS has said it may end the Streamlined Filing Compliance Procedures at some point.
The implementation of the Foreign Account Tax Compliance Act (FATCA) and the ongoing efforts of the IRS and the Department of Justice to ensure compliance by those with U.S. tax obligations have raised awareness of U.S. tax and information reporting obligations with respect to undisclosed foreign financial assets. Because the circumstances of taxpayers with foreign financial assets vary widely, the IRS will continue offering the following options for addressing previous failures to comply with U.S. tax and information return obligations with respect to those assets:
Full details of the options available for U.S. taxpayers with undisclosed foreign financial assets can be found on IRS.gov.
IR-2018-39, March 5, 2018
WASHINGTON — Following continuing threats to taxpayers, the Internal Revenue Service today listed email “phishing” schemes as a top filing season concern and part of the annual listing of the “Dirty Dozen” tax scams for 2018.
The IRS warned taxpayers, businesses and tax professionals to be alert to fake emails or websites looking to steal personal information. These attempts can expand during tax season and remain a major identity theft threat.
Compiled annually by the IRS, the “Dirty Dozen” lists a variety of common scams that taxpayers may encounter any time of the year, but many of these schemes peak during filing season as people prepare their tax returns or seek help from tax professionals.
To help protect taxpayers, the IRS is highlighting each of these scams on 12 consecutive days to help raise awareness. The IRS also urges taxpayers to help protect themselves against identity theft by reviewing safety tips prepared the Security Summit, a collaborative effort between the IRS, states and the private-sector tax community.
“We urge taxpayers to watch out for these tricky and dangerous schemes,” said Acting IRS Commissioner David Kautter. “Phishing and other scams on the ‘Dirty Dozen’ list can trap unsuspecting taxpayers. Being cautious and taking basic security steps can help protect people and their sensitive tax and financial data.”
The IRS continues to see a steady onslaught of new and evolving phishing schemes as scam artists work to victimize taxpayers during filing season.
In a recent twist to a phishing scam, the IRS has seen thousands of taxpayers victimized by an unusual scheme that involves their own bank accounts. After stealing client data from tax professionals and filing fraudulent tax returns, the criminals use taxpayers' real bank accounts to direct deposit refunds. Thieves are then using various tactics to reclaim the refund from the taxpayers, including falsely claiming to be from a collection agency or representing the IRS. Phone calls, emails and web sites are used to make the scheme more elaborate. Versions of the scam may continue to evolve. The IRS encourages taxpayers to review some basic tips if they see an unexpected deposit in their bank account.
In addition, the IRS has seen email schemes in recent weeks targeting tax professionals, payroll professionals, human resources personnel, schools as well as individual taxpayers.
In these email schemes, criminals pose as a person or organization the taxpayer trusts or recognizes. They may hack an email account and send mass emails under another person’s name. Or they may pose as a bank, credit card company, tax software provider or government agency. Criminals go to great lengths to create websites that appear legitimate but contain phony log-in pages. These criminals hope victims will “take the bait” and provide money, passwords, Social Security numbers and other information that can lead to identity theft.
Fake emails and websites also can infect a taxpayer’s computer with malware without the user knowing it. The malware gives the criminal access to the device, enabling them to access all sensitive files or even track keyboard strokes, exposing login information.
For those participating in these schemes, such activity can lead to significant penalties and possible criminal prosecution. IRS Criminal Investigation works closely with the Department of Justice to shutdown scams and prosecute the criminals behind them.
Numerous data breaches in the past year mean the entire tax preparation community must be on high alert during filing season to any unusual activity. Criminals increasingly target tax professionals, deploying various types of phishing emails in an attempt to access client data. Thieves may use this data to impersonate taxpayers and file fraudulent tax returns for refunds.
As part of the Security Summit initiative, the IRS has joined with representatives of the software industry, tax preparation firms, payroll and tax financial product processors and state tax administrators to combat identity theft refund fraud to protect the nation's taxpayers.
The Security Summit partners encourage tax practitioners to be wary of communicating solely by email with potential or even existing clients, especially if unusual requests are made. Data breach thefts have given thieves millions of identity data points including names, addresses, Social Security numbers and email addresses. If in doubt, tax practitioners should call to confirm a client’s identity.
If a taxpayer receives an unsolicited email that appears to be from either the IRS or an organization closely linked to the IRS, such as the Electronic Federal Tax Payment System (EFTPS), they should report it by sending it to firstname.lastname@example.org. Learn more by going to the Report Phishing and Online Scams page on IRS.gov.
Tax professionals who receive unsolicited and suspicious emails that appear to be from the IRS or related to the e-Services program also should report it by sending it to email@example.com.
It is important to keep in mind the IRS generally does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels.
WASHINGTON — The Internal Revenue Service today released an updated Withholding Calculator on IRS.gov and a new version of Form W-4 to help taxpayers check their 2018 tax withholding following passage of the Tax Cuts and Jobs Act in December.
The IRS urges taxpayers to use these tools to make sure they have the right amount of tax taken out of their paychecks.
“Following the major changes in the tax law, the IRS encourages employees to check their paychecks to help ensure they’re having the right amount of tax withheld for their personal situation,” said Acting IRS Commissioner David Kautter.
The Tax Cuts and Jobs Act made changes to the tax law, including increasing the standard deduction, removing personal exemptions, increasing the child tax credit, limiting or discontinuing certain deductions and changing the tax rates and brackets.
If changes to withholding should be made, the Withholding Calculator gives employees the information they need to fill out a new Form W-4, Employee’s Withholding Allowance Certificate. Employees will submit the completed W-4 to their employer.
“Withholding issues can be complicated, and the calculator is designed to help employees make changes based on their personal financial situation,” Kautter said. “Taking a few minutes can help taxpayers ensure they don’t have too little — or too much — withheld from their paycheck.”
The withholding changes do not affect 2017 tax returns due this April. However, having a completed 2017 tax return can help taxpayers work with the Withholding Calculator to determine their proper withholding for 2018 and avoid issues when they file next year.
The IRS encourages employees to use the Withholding Calculator to perform a quick “paycheck checkup.” An employee checking their withholding can help protect against having too little tax withheld and facing an unexpected tax bill or penalty at tax time in 2019. It can also prevent employees from having too much tax withheld; with the average refund topping $2,800, some taxpayers might prefer to have less tax withheld up front and receive more in their paychecks.
The Withholding Calculator can be used by taxpayers who want to update their withholding in response to the new law or who start a new job or have other changes in their personal circumstances in 2018.
As a first step to reflect the tax law changes, the IRS released new withholding tables in January. These tables were designed to produce the correct amount of tax withholding — avoiding under- and over-withholding of tax — for those with simple tax situations. This means that people with simple situations might not need to make any changes. Simple situations include singles and married couples with only one job, who have no dependents, and who have not claimed itemized deductions, adjustments to income or tax credits.
People with more complicated financial situations might need to revise their W-4. With the new tax law changes, it’s especially important for these people to use the Withholding Calculator on IRS.gov to make sure they have the right amount of withholding.
Among the groups who should check their withholding are:
Taxpayers with more complex situations might need to use Publication 505, Tax Withholding and Estimated Tax, expected to be available on IRS.gov in early spring, instead of the Withholding Calculator. This includes those who owe self-employment tax, the alternative minimum tax, or tax on unearned income from dependents, and people who have capital gains and dividends.
The Withholding Calculator asks taxpayers to estimate their 2018 income and other items that affect their taxes, including the number of children claimed for the Child Tax Credit, Earned Income Tax Credit and other items.
Take a few minutes and plan ahead to make using the calculator on IRS.gov as easy as possible. Here are some tips:
This spring and throughout the year, the IRS will be working closely with businesses as well as the tax and payroll communities to help educate the public about the new withholding guidelines and the Withholding Calculator.
For 2019, the IRS plans to make further changes involving withholding. The agency will work with businesses and the tax and payroll communities to explain and implement these additional changes.
More information is available in the special Withholding Calculator Frequently Asked Questions.
WASHINGTON — The Internal Revenue Service today said that it is ready to process tax year 2017 returns claiming three popular tax benefits recently renewed retroactively into law.
The Bipartisan Budget Act, enacted on Feb. 9, renewed for tax year 2017 a wide range of individual and business tax benefits that had expired at the end of 2016. The IRS has now reprogrammed its processing systems to handle the three benefits most likely to be claimed on returns filed early in the tax season.
As a result, taxpayers can now file returns claiming:
The IRS is working closely with tax professionals and the tax-preparation industry to ensure that their available software processes can now accommodate these new provisions. As always, filing electronically and choosing direct deposit is the fastest, most accurate and most convenient way to receive a tax refund. Last year, nearly 87 percent of individual returns were filed electronically and nearly 80 percent of refunds were direct deposited.
The IRS is continuing to update its systems to handle returns claiming the other tax benefits extended by the new law, enacted on Feb. 9. In general, these benefits affect a smaller number of taxpayers. Taxpayers eligible for these benefits can avoid delays or possibly needing to file an amended return later, by filing after IRS systems have been updated to reflect these changes. Check IRS.gov/Extenders for future updates.
Taxpayers who have already filed their 2017 federal tax return and now wish to claim one of these renewed tax benefits can do so by filing an amended return on Form 1040X. Amended returns cannot be filed electronically and can take up to 16 weeks to process. Visit IRS.gov for details.
WASHINGTON — The Internal Revenue Service today advised taxpayers that in many cases they can continue to deduct interest paid on home equity loans.
Responding to many questions received from taxpayers and tax professionals, the IRS said that despite newly-enacted restrictions on home mortgages, taxpayers can often still deduct interest on a home equity loan, home equity line of credit (HELOC) or second mortgage, regardless of how the loan is labelled. The Tax Cuts and Jobs Act of 2017, enacted Dec. 22, suspends from 2018 until 2026 the deduction for interest paid on home equity loans and lines of credit, unless they are used to buy, build or substantially improve the taxpayer's home that secures the loan.
Under the new law, for example, interest on a home equity loan used to build an addition to an existing home is typically deductible, while interest on the same loan used to pay personal living expenses, such as credit card debts, is not. As under prior law, the loan must be secured by the taxpayer's main home or second home (known as a qualified residence), not exceed the cost of the home and meet other requirements.
For anyone considering taking out a mortgage, the new law imposes a lower dollar limit on mortgages qualifying for the home mortgage interest deduction. Beginning in 2018, taxpayers may only deduct interest on $750,000 of qualified residence loans. The limit is $375,000 for a married taxpayer filing a separate return. These are down from the prior limits of $1 million, or $500,000 for a married taxpayer filing a separate return. The limits apply to the combined amount of loans used to buy, build or substantially improve the taxpayer’s main home and second home.
The following examples illustrate these points.
For more information about the new tax law, visit the Tax Reform page on IRS.gov.
WASHINGTON — The Internal Revenue Service today announced that the Tax Cut and Jobs Act of 2017 does not affect the tax year 2018 dollar limitations for retirement plans announced in IR 2017-177 and detailed in Notice 2017-64.
The tax law provides dollar limitations on benefits and contributions under qualified retirement plans, and it requires the Treasury Department to annually adjust these limits for cost of living increases. Those adjustments are to be made using procedures that are similar to those used to adjust benefit amounts under the Social Security Act.
As the recently enacted tax legislation made no changes to the section of the tax law limiting benefits and contributions for retirement plans, the qualified retirement plan limitations for tax year 2018 previously announced in the news release and detailed in guidance remain unchanged.
The tax law also specifies that contribution limits for IRAs, as well as the income thresholds related to IRAs and the saver’s credit, are to be adjusted for changes in the cost of living using procedures that are used to make cost-of-living adjustments that apply to many of the basic income tax parameters.
Although the new law made changes to how these cost of living adjustments are made, after taking the applicable rounding rules into account, the amounts for 2018 in the news release and the guidance remain unchanged.
WASHINGTON — 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 firstname.lastname@example.org 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:
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 email@example.com 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.
WASHINGTON — The IRS announced today that it has extended the 2018 due date for certain entities to provide 2017 health coverage information forms to individuals. Insurers, self-insuring employers, other coverage providers, and applicable large employers now have until March 2, 2018, to provide Forms 1095-B or 1095-C to individuals, which is a 30-day extension from the original due date of Jan. 31. Insurers, self-insuring employers, other coverage providers, and applicable large employers must furnish statements to employees or covered individuals regarding the health care coverage offered to them. Individuals may use this information to determine whether, for each month of the calendar year, they may claim the premium tax credit on their individual income tax returns.
This 30-day extension is automatic. Employers and providers don’t have to request it. The due dates for filing 2017 information returns with the IRS are not extended. For 2018, the due dates to file information returns with the IRS are:
Because of these extensions, individuals may not receive their Forms 1095-B or 1095-C by the time they are ready to file their 2017 individual income tax return. While information on these forms may assist in preparing a return, the forms are not required to file. Taxpayers can prepare and file their returns using other information about their health coverage. They do not have to wait for Forms 1095-B or 1095-C to file.
WASHINGTON— The Internal Revenue Service today issued the 2018 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
Beginning on Jan. 1, 2018, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
The business mileage rate and the medical and moving expense rates each increased 1 cent per mile from the rates for 2017. The charitable rate is set by statute and remains unchanged.
The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.
Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.
A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously. These and other requirements are described in Rev. Proc. 2010-51.
Notice 2018-03, posted today on IRS.gov, contains the standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan.
WASHINGTON — The Internal Revenue Service today announced cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2018. The IRS today issued technical guidance detailing these items in Notice 2017-64.
The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan is increased from $18,000 to $18,500.
The income ranges for determining eligibility to make deductible contributions to traditional Individual Retirement Arrangements (IRAs), to contribute to Roth IRAs and to claim the saver's credit all increased for 2018.
Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If during the year either the taxpayer or their spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income. (If neither the taxpayer nor their spouse is covered by a retirement plan at work, the phase-outs of the deduction do not apply.) Here are the phase-out ranges for 2018:
The income phase-out range for taxpayers making contributions to a Roth IRA is $120,000 to $135,000 for singles and heads of household, up from $118,000 to $133,000. For married couples filing jointly, the income phase-out range is $189,000 to $199,000, up from $186,000 to $196,000. The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
The income limit for the Saver's Credit (also known as the Retirement Savings Contributions Credit) for low- and moderate-income workers is $63,000 for married couples filing jointly, up from $62,000; $47,250 for heads of household, up from $46,500; and $31,500 for singles and married individuals filing separately, up from $31,000.
Section 415 of the Internal Revenue Code (Code) provides for dollar limitations on benefits and contributions under qualified retirement plans. Section 415(d) requires that the Secretary of the Treasury annually adjust these limits for cost of living increases. Other limitations applicable to deferred compensation plans are also affected by these adjustments under Section 415. Under Section 415(d), the adjustments are to be made following adjustment procedures similar to those used to adjust benefit amounts under Section 215(i)(2)(A) of the Social Security Act.
Effective Jan. 1, 2018, the limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) is increased from $215,000 to $220,000. For a participant who separated from service before Jan. 1, 2018, the limitation for defined benefit plans under Section 415(b)(1)(B) is computed by multiplying the participant's compensation limitation, as adjusted through 2017, by 1.0197.
The limitation for defined contribution plans under Section 415(c)(1)(A) is increased in 2018 from $54,000 to $55,000. The Code provides that various other dollar amounts are to be adjusted at the same time and in the same manner as the dollar limitation of Section 415(b)(1)(A). After taking into account the applicable rounding rules, the amounts for 2018 are as follows: The limitation under Section 402(g)(1) on the exclusion for elective deferrals described in Section 402(g)(3) is increased from $18,000 to $18,500.
The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased from $270,000 to $275,000.
The dollar limitation under Section 416(i)(1)(A)(i) concerning the definition of key employee in a top-heavy plan remains unchanged at $175,000.
The dollar amount under Section 409(o)(1)(C)(ii) for determining the maximum account balance in an employee stock ownership plan subject to a five year distribution period is increased from $1,080,000 to $1,105,000, while the dollar amount used to determine the lengthening of the five year distribution period is increased from $215,000 to $220,000.
The limitation used in the definition of highly compensated employee under Section 414(q)(1)(B) remains unchanged at $120,000.
The dollar limitation under Section 414(v)(2)(B)(i) for catch-up contributions to an applicable employer plan other than a plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over remains unchanged at $6,000. The dollar limitation under Section 414(v)(2)(B)(ii) for catch-up contributions to an applicable employer plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over remains unchanged at $3,000.
The annual compensation limitation under Section 401(a)(17) for eligible participants in certain governmental plans that, under the plan as in effect on July 1, 1993, allowed cost of living adjustments to the compensation limitation under the plan under Section 401(a)(17) to be taken into account, is increased from $400,000 to $405,000.
The compensation amount under Section 408(k)(2)(C) regarding simplified employee pensions (SEPs) remains unchanged at $600.
The limitation under Section 408(p)(2)(E) regarding SIMPLE retirement accounts remains unchanged at $12,500.
The limitation on deferrals under Section 457(e)(15) concerning deferred compensation plans of state and local governments and tax-exempt organizations is increased from $18,000 to $18,500.
The limitation under Section 664(g)(7) concerning the qualified gratuitous transfer of qualified employer securities to an employee stock ownership plan is increased from $45,000 to $50,000.
The compensation amount under Section 1.61 21(f)(5)(i) of the Income Tax Regulations concerning the definition of "control employee" for fringe benefit valuation is increased from $105,000 to $110,000. The compensation amount under Section 1.61 21(f)(5)(iii) is increased from $215,000 to $220,000.
The dollar limitation on premiums paid with respect to a qualifying longevity annuity contract under Section 1.401(a)(9)-6, A-17(b)(2)(i) of the Income Tax Regulations is increased from $125,000 to $130,000.
The Code provides that the $1,000,000,000 threshold used to determine whether a multiemployer plan is a systemically important plan under Section 432(e)(9)(H)(v)(III)(aa) is adjusted using the cost-of-living adjustment provided under Section 432(e)(9)(H)(v)(III)(bb). After taking the applicable rounding rule into account, the threshold used to determine whether a multiemployer plan is a systemically important plan under Section 432(e)(9)(H)(v)(III)(aa) is increased for 2018 from $1,012,000,000 to $1,087,000,000.
The Code also provides that several retirement-related amounts are to be adjusted using the cost-of-living adjustment under Section 1(f)(3). After taking the applicable rounding rules into account, the amounts for 2018 are as follows:
The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for married taxpayers filing a joint return is increased from $37,000 to $38,000; the limitation under Section 25B(b)(1)(B) is increased from $40,000 to $41,000; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D) is increased from $62,000 to $63,000.
The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the Retirement Savings Contribution Credit for taxpayers filing as head of household is increased from $27,750 to $28,500; the limitation under Section 25B(b)(1)(B) is increased from $30,000 to $30,750; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D) is increased from $46,500 to $47,250. The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the Retirement Savings Contribution Credit for all other taxpayers is increased from $18,500 to $19,000; the limitation under Section 25B(b)(1)(B) is increased from $20,000 to $20,500; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D) is increased from $31,000 to $31,500.
The deductible amount under Section 219(b)(5)(A) for an individual making qualified retirement contributions remains unchanged at $5,500.
The applicable dollar amount under Section 219(g)(3)(B)(i) for determining the deductible amount of an IRA contribution for taxpayers who are active participants filing a joint return or as a qualifying widow(er) increased from $99,000 to $101,000. The applicable dollar amount under Section 219(g)(3)(B)(ii) for all other taxpayers who are active participants (other than married taxpayers filing separate returns) increased from $62,000 to $63,000. If an individual or the individual's spouse is an active participant, the applicable dollar amount under Section 219(g)(3)(B)(iii) for a married individual filing a separate return is not subject to an annual cost-of-living adjustment and remains $0. The applicable dollar amount under Section 219(g)(7)(A) for a taxpayer who is not an active participant but whose spouse is an active participant is increased from $186,000 to $189,000. The adjusted gross income limitation under Section 408A(c)(3)(B)(ii)(I) for determining the maximum Roth IRA contribution for married taxpayers filing a joint return or for taxpayers filing as a qualifying widow(er) is increased from $186,000 to $189,000.
The adjusted gross income limitation under Section 408A(c)(3)(B)(ii)(II) for all other taxpayers (other than married taxpayers filing separate returns) is increased from $118,000 to $120,000. The applicable dollar amount under Section 408A(c)(3)(B)(ii)(III) for a married individual filing a separate return is not subject to an annual cost-of-living adjustment and remains $0.
WASHINGTON — Farmers and ranchers who previously were forced to sell livestock due to drought in an applicable region now have an additional year to replace the livestock and defer tax on any gains from the forced sales, according to the Internal Revenue Service. An applicable region is a county designated as eligible for federal assistance plus counties contiguous to that county.
This relief generally applies to capital gains realized by eligible farmers and ranchers on sales of livestock held for draft, dairy or breeding purposes. Sales of other livestock, such as those raised for slaughter or held for sporting purposes, or poultry are not eligible.
To qualify, the sales must be solely due to drought, flooding or other severe weather causing the region to be designated as eligible for federal assistance.
Under these circumstances, livestock generally must be replaced within a four-year period, instead of the usual two-year period. But in addition, the IRS is authorized to further extend this replacement period if the drought continues.
The one-year extension, announced today, gives eligible farmers and ranchers until the end of the tax year after the first drought-free year to replace the sold livestock. Details, including an example of how this provision works, can be found in Notice 2006-82, available on IRS.gov.
The IRS provides this extension to farmers and ranchers located in the applicable region that qualified for the four-year replacement period if any county, parish, city, or district, that is included in the applicable region is listed as suffering exceptional, extreme or severe drought conditions by the National Drought Mitigation Center (NDMC), during any weekly period between Sept. 1, 2016, and Aug. 31, 2017. All or part of 42 states, plus the District of Columbia, are listed.
As a result, farmers and ranchers in the applicable region whose drought sale replacement period was scheduled to expire at the end of this tax year, Dec. 31, 2017, in most cases, will now have until the end of their next tax year. Because the normal drought sale replacement period is four years, this extension immediately impacts drought sales that occurred during 2013. But because of previous drought-related extensions affecting some of these localities, the replacement periods for some drought sales before 2013 are also affected. Additional extensions will be granted if severe drought conditions persist.
Details on this relief, including a list of NDMC-designated counties, are in Notice 2017-53, posted today on IRS.gov. More information on reporting drought sales and other farm-related tax issues can be found in Publication 225, Farmer's Tax Guide, also available on the IRS web site.
WASHINGTON — The Internal Revenue Service announced today the addition of several new features to the online account tool first introduced late last year as part of the IRS’s commitment to improve and expand taxpayer services.
The online account allows individual taxpayers to access the latest information available about their federal tax account through a secure and convenient tool on IRS.gov. When it first launched in December 2016, the tool assisted taxpayers with basic account inquiries such as information about their balance due and access to the various IRS payment options. Since then, the IRS has added new features allowing taxpayers to:
“We are constantly looking for ways to improve taxpayers’ interactions with the IRS and adding these new features to the taxpayer’s online account is an important step in that direction,” said IRS Commissioner John Koskinen. “The IRS is committed to serving taxpayers in multiple ways and now taxpayers who want to interact digitally with us in a secure environment have access to even more helpful features.”
Before accessing the tool, taxpayers must authenticate their identities through the rigorous Secure Access process. This is a two-step authentication process, which means returning users must have their credentials (username and password) plus a security code sent as a text to their mobile phones.
Taxpayers who have registered using Secure Access for Get Transcript Online or Get an IP PIN may use their same username and password. To register for the first time, taxpayers must have their personal and financial information including: Social Security number, specific financial information, such as a credit card number or loan numbers, email address and a text-enabled mobile phone in the user's name. Taxpayers may review the Secure Access process prior to starting registration.
As part of the security process to authenticate taxpayers, the IRS will send verification, activation or security codes via email and text. The IRS warns taxpayers that it will not initiate contact via text or email asking for log-in information or personal data. The IRS texts and emails will only contain one-time codes.
In addition to the online account, the IRS continues to provide several self-service tools and helpful resources available on IRS.gov for individuals, businesses and tax professionals.
WASHINGTON — The Internal Revenue Service today reminded taxpayers living and working abroad that they must file their 2016 federal income tax return by Thursday, June 15.
The special June 15 deadline is available to both U.S. citizens and resident aliens abroad, including those with dual citizenship. For those who can’t meet the June 15 deadline, tax-filing extensions are available and they can even be requested electronically. In addition, a new filing deadline now applies to anyone with a foreign bank or financial account required to file an annual report for these accounts, often referred to as an FBAR.
Here is a rundown of key points to keep in mind:
An income tax filing requirement generally applies even if a taxpayer qualifies for tax benefits, such as the Foreign Earned Income exclusion or the Foreign Tax credit, which substantially reduce or eliminate U.S. tax liability. These tax benefits are only available if an eligible taxpayer files a U.S. income tax return. A taxpayer qualifies for the special June 15 filing deadline if both their tax home and abode are outside the United States and Puerto Rico. Those serving in the military outside the U.S. and Puerto Rico also qualify for the extension to June 15.
Be sure to attach a statement indicating which of these two situations applies. Interest, currently at the rate of four percent per year, compounded daily, still applies to any tax payment received after the original April 18 deadline. For details, see the When To File and Pay section in Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad.
Federal law requires U.S. citizens and resident aliens to report any worldwide income, including income from foreign trusts and foreign bank and securities accounts. In most cases, affected taxpayers need to complete and attach Schedule B to their tax return. Part III of Schedule B asks about the existence of foreign accounts, such as bank and securities accounts, and usually requires U.S. citizens to report the country in which each account is located.
In addition, certain taxpayers may also have to complete and attach to their return Form 8938, Statement of Foreign Financial Assets. Generally, U.S. citizens, resident aliens and certain nonresident aliens must report specified foreign financial assets on this form if the aggregate value of those assets exceeds certain thresholds. See the instructions for this form for details.
U.S. citizens and resident aliens living abroad can use IRS Free File to prepare and electronically file their returns for free. This means both U.S. citizens and resident aliens living abroad with adjusted gross incomes (AGI) of $64,000 or less can use brand-name software to prepare their returns and then e-file them for free. A limited number of companies provide software that can accommodate foreign addresses.
A second option, Free File Fillable Forms, the electronic version of IRS paper forms, has no income limit and is best suited to people who are comfortable preparing their own tax return.
Both the e-file and Free File electronic filing options are available until Oct. 16, 2017, for anyone filing a 2016 return. Check out the e-file link on IRS.gov for details on the various electronic filing options. Free File is not available to nonresident aliens required to file Form 1040NR.
Taxpayers abroad who can’t meet the June 15 deadline can still get more time to file, but they need to ask for it. Their extension request must be filed by June 15. Automatic extensions give people until Oct. 16, 2017, to file; however, this does not extend the time to pay tax. An easy way to get the extra time to file is through the Free File link on IRS.gov. In a matter of minutes, anyone, regardless of income, can use this free service to electronically request an extension on Form 4868. To get the extension, taxpayers must estimate their tax liability on this form and pay any amount due. Another option for taxpayers is to pay electronically and get an extension of time to file. IRS will automatically process an extension when taxpayers select Form 4868 and they are making a full or partial federal tax payment using Direct Pay, the Electronic Federal Tax Payment System (EFTPS) or a debit or credit card. There is no need to file a separate Form 4868 when making an electronic payment and indicating it is for an extension. Electronic payment options are available at IRS.gov/payments. International taxpayers who do not have a U.S. bank account should refer to the Foreign Electronic Payments section on IRS.gov for more payment options and information.
Members of the military and eligible support personnel serving in a combat zone have at least 180 days after they leave the combat zone to file their tax returns and pay any taxes due. This includes those serving in Iraq, Afghanistan and other combat zone localities. A complete list of designated combat zone localities can be found in Publication 3, Armed Forces’ Tax Guide, available on IRS.gov. Various circumstances affect the exact length of the extension available to any given taxpayer. Details, including examples illustrating how these extensions are calculated, can be found in the Extensions of Deadlines section in Publication 3.
Starting this year, the deadline for filing the annual Report of Foreign Bank and Financial Accounts (FBAR) is now the same as for a federal income tax return. This means that the 2016 FBAR, Form 114, was normally required to be filed electronically with the Financial Crimes Enforcement Network (FinCEN) by April 18, 2017. But FinCEN is granting filers missing the original deadline an automatic extension until Oct. 16, 2017 to file the FBAR. Specific extension requests are not required. In the past, the FBAR deadline was June 30 and no extensions were available. In general, the FBAR filing requirement applies to anyone who had an interest in, or signature or other authority, over foreign financial accounts whose aggregate value exceeded $10,000 at any time during 2016. Because of this threshold, the IRS encourages taxpayers with foreign assets, even relatively small ones, to check if this filing requirement applies to them. The form is only available through the BSA E-filing System website.
Any income received or deductible expenses paid in foreign currency must be reported on a U.S. tax return in U.S. dollars. Likewise, any tax payments must be made in U.S. dollars.
Both Forms 114 and 8938 require the use of a Dec. 31 exchange rate for all transactions, regardless of the actual exchange rate on the date of the transaction. Generally, the IRS accepts any posted exchange rate that is used consistently. For more information on exchange rates, see Foreign Currency and Currency Exchange Rates.
Taxpayers who relinquished their U.S. citizenship or ceased to be lawful permanent residents of the United States during 2016 must file a dual-status alien return, attaching Form 8854, Initial and Annual Expatriation Statement. A copy of the Form 8854 must also be filed with Internal Revenue Service Philadelphia, PA 19255-0049, by the due date of the tax return (including extensions). See the instructions for this form and Notice 2009-85, Guidance for Expatriates Under Section 877A, for further details.
Any U.S. taxpayer here or abroad with tax questions can refer to the International Taxpayers landing page and use the online IRS Tax Map and the International Tax Topic Index to get answers. These online tools group IRS forms, publications and web pages by subject and provide users with a single entry point to find tax information. Taxpayers who are looking for return preparers abroad should visit the Directory of Federal Tax Return Preparers with Credentials and Select Qualifications.
To help avoid delays with tax refunds, taxpayers living abroad should visit the Helpful Tips for Effectively Receiving a Tax Refund for Taxpayers Living Abroad page.
More information on the tax rules that apply to U.S. citizens and resident aliens living abroad can be found in, Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad, available on IRS.gov.
The IRS is currently reviewing the Jan. 20, 2017, executive order to determine the implications. Taxpayers should continue to file their tax returns as they normally would.
The instruction for individual taxpayers involving the Affordable Care Act has been to indicate on their Form 1040 filing whether they had health insurance, an exemption from coverage or made a shared responsibility payment. In recent years, tax returns silent in that regard were still processed. This year, the IRS put in place system changes that would reject tax returns during processing in instances where the taxpayer didn't provide that information.
The recent executive order directed federal agencies to exercise authority and discretion available to them to reduce potential burden. Consistent with that, the IRS has decided to make changes that would continue to allow electronic and paper returns to be accepted for processing in instances where a taxpayer doesn't indicate their coverage status.
However, legislative provisions of the ACA law are still in force until changed by the Congress, and taxpayers remain required to follow the law and pay what they may owe.
Processing silent returns means that taxpayer returns are not systemically rejected by the IRS at the time of filing, allowing the returns to be processed and minimizing burden on taxpayers, including those expecting a refund. When the IRS has questions about a tax return, taxpayers may receive follow-up questions and correspondence at a future date, after the filing process is completed. This is similar to how we handled this in previous years, and this reflects the normal IRS post-filing compliance procedures that we follow.
WASHINGTON — The Internal Revenue Service, state tax agencies and tax industry leaders today warned tax professionals to be alert to an email scam from cybercriminals posing as clients soliciting their services.
A new variation of this phishing scheme is targeting accounting and tax preparation firms nationwide. The scheme's objective is to collect sensitive information that will allow fraudsters to prepare fraudulent tax returns.
These latest phishing emails come in typically two stages. The first email is the solicitation, which asks tax professionals questions such as "I need a preparer to file my taxes." If the tax professional responds, the cybercriminal sends a second email. This second email typically has either an embedded web address or contains a PDF attachment that has an embedded web address.
n some cases, the phishing emails may appear to come from a legitimate sender or organization (perhaps even a friend or colleague) because they also have been victimized. Fraudsters have taken over their accounts to send phishing emails.
The tax professional may think they are downloading a potential client's tax information or accessing a site with the potential client's tax information. In reality, the cybercriminals are collecting the preparer's email address and password and possibly other information. The IRS urges tax professionals and tax preparation firms to consider creating internal policies or obtain security experts' recommendations on how to address unsolicited emails seeking their services.
One tip: Never respond to or click on a link in an unsolicited email or PDF attachment from an unknown sender. As the IRS, states and the tax industry make progress in the fight against identity theft, cybercriminals are becoming more sophisticated in their efforts to steal additional client information. Criminals need more data in their effort to impersonate clients and file fraudulent returns to claim refunds, and schemes like this can help in this effort.
Read more at Protect Your Clients; Protect Yourself, the Security Summit initiative to increase awareness about the tax professional community.
|IF YOU...||THEN YOU...|
Are a U.S. citizen or a non-U.S. citizen living in the United States
Must have qualifying health care coverage, qualify for a health coverage exemption , or make a payment when you file your income tax return.
Had coverage or an employer offered coverage to you in the previous year
Will receive one or more of the following forms;
This information will help you complete your tax return.
Had health coverage through an employer or under a government program – such as Medicare, Medicaid and coverage for veterans – for the entire year
Just have to check the full-year coverage box on your Form 1040 series return and do not have to read any further.
Did not have coverage for any month of the year
Were eligible for an exemption from coverage for a month
Must claim the exemption or report an exemption already obtained from the Marketplace by completing Form 8965, Health Coverage Exemptions, and submitting it with your tax return.
Did not have coverage and were not eligible for an exemption from coverage for any month of the year
Are responsible for making an individual shared responsibility payment when you file your return.
Are responsible for making an individual shared responsibility payment
Will report it on your tax return and make the payment with your income taxes.
Need qualifying health care coverage for the current year
Can visit HealthCare.gov to find out about the dates of open and special enrollment periods for purchasing qualified health coverage.
Enroll in health insurance through the Marketplace for yourself or someone else on your tax return.
Might be eligible for the premium tax credit .
Received the benefit of more advance payments of the premium tax credit than the amount of credit for which you qualify on your tax return
Will repay the amount in excess of the credit you are allowed subject to a repayment cap.
Did not enroll in health insurance from the Marketplace for yourself or anyone else on your tax return
Cannot claim the premium tax credit .
Are eligible for the premium tax credit
Can choose when you enroll in coverage to get premium assistance sent to your insurer each month to lower your monthly payments or get all the benefit of the credit when you claim it on your tax return.
Are claiming the premium tax credit and did not benefit from advance payments of the premium tax credit
Must file a tax return and IRS Form 8962 , Premium Tax Credit (PTC) and claim the credit on the line labeled - Net premium tax credit.
Choose to get premium assistance when you enroll in Marketplace coverage
Will have payments sent on your behalf - to your insurance provider. These payments are called advance payments of the premium tax credit .
Get the benefit of advance payments of the premium tax credit and experience a significant life change, such as a change in income or marital status
Should report these changes in circumstances to your Marketplace when they happen.
Get the benefit of advance payments of the premium tax credit
Will report the payments on your tax return and reconcile the amount of the payments with the amount of credit for which you are eligible.
WASHINGTON — The Internal Revenue Service and partners from the states and tax industry today reminded taxpayers that the nation’s 2017 individual income tax filing season opens Jan. 23.
The IRS expects more than 153 million tax returns to be filed this year and taxpayers have until Tuesday, April 18, 2017, to file their 2016 tax returns and pay any tax due. The deadline is extended because the Emancipation Day, a holiday in Washington, D.C., will be observed on Monday, April 17, pushing the nation’s filing deadline to April 18.
"There are a number of important changes this year involving refunds and tax law changes that we encourage people to keep in mind," said IRS Commissioner John Koskinen. “We encourage taxpayers to plan ahead and take a few minutes to review these changes. As we enter the filing season, taxpayers should know that the dedicated workforce of the IRS and the nation's tax community stand ready to help."
Taxpayers that are e-filing can still submit returns to their software provider before Jan. 23. They will hold the return and transmit it to the IRS when the systems open. The IRS also reminds taxpayers that they don’t have to wait until Jan. 23 to contact their tax professional.
In 2016, the IRS issued 111 million individual tax refunds and expects more than 70 percent of taxpayers to receive a refund in 2017. Also, the IRS reminds taxpayers that a new law requires the IRS to hold refunds claiming the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC) until Feb. 15. "We encourage taxpayers to file as they normally would, including returns claiming the EITC or ACTC” Koskinen said. “The IRS and the nation's tax community are committed to making this another smooth filing season."
More than four out of five returns are expected to be filed electronically, with a similar proportion of refunds issued through direct deposit. The IRS encourages taxpayers to plan ahead and take advantage of the online resources available on IRS.gov .
Choosing e-file and direct deposit for refunds remains the fastest and safest way to file an accurate income tax return and receive a refund. The IRS anticipates issuing more than nine out of 10 refunds in less than 21 days from the time returns are received.
The IRS Free File program, available at IRS.gov, opens Friday, Jan. 13. Commercial partners of the IRS offer free brand-name software to about 100 million individuals and families with incomes of $64,000 or less. Seventy percent of the nation’s taxpayers are eligible for IRS Free File.
All taxpayers regardless of income will again have access to free online fillable forms, which provide electronic versions of IRS paper forms to complete and file. This option is available through IRS.gov and is free.
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 , the IRS made significant inroads against fraudulent returns in 2016. While working to stop the issuance of fraudulent refunds, the IRS remains focused on releasing legitimate refunds as quickly as possible in 2017. Thus far, Summit efforts have led to a 50 percent decline in the number of new reports of stolen identities on federal tax returns. Late last year, Summit leaders detailed new and expanded safeguards for taxpayers in the upcoming 2017 tax season. The 2017 focus revolves around “trusted customer” features that will help ensure the authenticity of the taxpayer and the tax return - before, during and after a tax return is filed. The additional protections will build on the 2016 successes that prevented fraudulent returns and protected tax refunds.
Again this year, meeting the tax obligation of the Affordable Care Act for the vast majority of taxpayers will simply mean checking a box to verify everyone on their return has health coverage. For others, IRS.gov/aca features useful information, tips and interactive online tools to help taxpayers with the premium tax credit, the individual shared responsibility requirement and other tax-related provisions of the ACA.
The Affordable Care Act requires that a taxpayer and each member of their family either has qualifying health coverage for each month of the year, qualifies for an exemption , or makes an individual shared responsibility payment when filing their tax returns.
More than 90 percent of all tax returns are prepared using tax return preparation software. This software generally includes tax law help along with reminders and prompts about tax breaks and responsibilities. The IRS reminds taxpayers that a trusted tax professional can also provide helpful information about the tax law. Information on tips about selecting a preparer and national tax professional groups are available on IRS.gov.
The IRS urges all taxpayers to make sure they have all their year-end statements in hand before they file their return. This includes Forms W-2 from employers, Forms 1099 from banks and other payers, and for those claiming the premium tax credit, Form 1095-A from the Marketplace. Doing so will help avoid refund delays and the need to file an amended return later.
The IRS expects to issue more than nine out of 10 refunds in less than 21 days. However, the Protecting Americans from Tax Hikes (PATH) Act mandates the IRS hold refunds on tax returns claiming the EITC or the Additional Child Tax Credit (ACTC) until mid-February. The change helps ensure that taxpayers get the refund they are owed by giving the IRS more time to help detect and prevent tax fraud.
The IRS will begin releasing EITC and ACTC refunds starting Feb. 15, but cautions taxpayers that these refunds likely will not start arriving in bank accounts or on debit cards until the week of Feb. 27. The IRS wants taxpayers to know it will take additional time for their refunds to be processed and for financial institutions to accept and deposit the refunds to bank accounts. The IRS reminds taxpayers many financial institutions do not process payments on weekends or holidays, which can affect when refunds reach taxpayers. For EITC and ACTC filers, the three-day holiday weekend involving President’s Day may affect their refund timing.
Where's My Refund? on IRS.gov and the IRS2Go phone app will be updated with projected deposit dates for early EITC and ACTC refund filers a few days after Feb. 15. Taxpayers 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 Where’s My Refund? remains the best way to check the status of a refund.
The PATH Act requires that certain ITINs expire on Jan. 1, 2017. Any ITIN not used on a tax return at least once in the past three years and any ITIN with middle digits of either 78 or 79 (9NN-78-NNNN or 9NN-79-NNNN) must be renewed before a return can be processed. Anyone filing a tax return with an expired ITIN could experience return processing and refund delay as well as denial of some tax benefits until the ITIN is renewed.
An ITIN renewal application could take as long as 11 weeks to process during tax filing season. ITINs are used by people who have tax-filing or payment obligations under U.S. law but are not eligible for a Social Security number.
The IRS reminds taxpayers they have a variety of options to get help filing and preparing their tax return on IRS.gov. Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) offer free tax help to people who qualify. Go to irs.gov and enter “free tax prep” in the search box to find a nearby VITA or TCE site. The IRS2Go Mobile App can help find free tax preparation assistance, check your refund status and more!
All taxpayers should keep a copy of their tax return. Beginning in 2017, taxpayers using a 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 can learn more about how to verify their identity and electronically sign tax returns at Validating Your Electronically Filed Tax Return .
The IRS also reminds taxpayers that a trusted tax professional can provide helpful information and advice about the ever-changing tax code. Tips for choosing a return preparer and details about national tax professional groups are available on IRS.gov.
WASHINGTON — As tax season approaches, the Internal Revenue Service, the states and the tax industry reminded taxpayers to be on the lookout for an array of evolving tax scams related to identity theft and refund fraud.
Every tax season, there is an increase in schemes that target innocent taxpayers by email, by phone and on-line. The IRS and Security Summit partners remind taxpayers and tax professionals to be on the lookout for these deceptive schemes.
“Whether it's during the holidays or the approach of tax season, scam artists look for ways to use tax agencies and the tax industry to trick and confuse people,” said IRS Commissioner John Koskinen. “There are warning signs to these scams people should watch out for, and simple steps to avoid being duped into giving these criminals money, sensitive financial information or access to computers."
This marks the fourth reminder to taxpayers during the “National Tax Security Awareness Week.” This week, the IRS, the states and the tax community are sending out a series of reminders to taxpayers and tax professionals as part of the ongoing Security Summit effort.
Requesting fake tax payments: The IRS has seen automated calls where scammers leave urgent callback requests telling taxpayers to call back to settle their “tax bill.” These fake calls generally claim to be the last warning before legal action is taken. Taxpayers may also receive live calls from IRS impersonators. They may demand payments on prepaid debit cards, iTunes and other gift cards or wire transfer. The IRS reminds taxpayers that any request to settle a tax bill using any of these payment methods is a clear indication of a scam. (IR-2016-99 )
Targeting students and parents and demanding payment for a fake “Federal Student Tax”: Telephone scammers are targeting students and parents demanding payments for fictitious taxes, such as the “Federal Student Tax.” If the person does not comply, the scammer becomes aggressive and threatens to report the student to the police to be arrested. (IR-2016-107 )
Sending a fraudulent IRS bill for tax year 2015 related to the Affordable Care Act: The IRS has received numerous reports around the country of scammers sending a fraudulent version of CP2000 notices for tax year 2015. Generally, the scam involves an email or letter that includes the fake CP2000. The fraudulent notice includes a payment request that taxpayers mail a check made out to “I.R.S.” to the “Austin Processing Center” at a Post Office Box address. (IR-2016-123 )
Soliciting W-2 information from payroll and human resources professionals: Payroll and human resources professionals should be aware of phishing email schemes that pretend to be from company executives and request personal information on employees. The email contains the actual name of the company chief executive officer. In this scam, the “CEO” sends an email to a company payroll office employee and requests a list of employees and financial and personal information including Social Security numbers (SSN). (IR-2016-34 )
Imitating software providers to trick tax professionals: Tax professionals may receive emails pretending to be from tax software companies. The email scheme requests the recipient download and install an important software update via a link included in the e-mail. Upon completion, tax professionals believe they have downloaded a software update when in fact they have loaded a program designed to track the tax professional’s key strokes, which is a common tactic used by cyber thieves to steal login information, passwords and other sensitive data. (IR-2016-103 )
“Verifying” tax return information over the phone: Scam artists call saying they have your tax return, and they just need to verify a few details to process your return. The scam tries to get you to give up personal information such as a SSN or personal financial information, including bank numbers or credit cards. (IR-2016-40 )
Pretending to be from the tax preparation industry: The emails are designed to trick taxpayers into thinking these are official communications from the IRS or others in the tax industry, including tax software companies. The phishing schemes can ask taxpayers about a wide range of topics. E-mails or text messages can seek information related to refunds, filing status, confirming personal information, ordering transcripts and verifying PIN information. (IR-2016-28 )
If you receive an unexpected call, unsolicited email, letter or text message from someone claiming to be from the IRS, here are some of the tell-tale signs to help protect yourself.
The IRS Will Never:
If you get a suspicious phone call from someone claiming to be from the IRS and asking for money, here’s what you should do:
If you receive an unsolicited email that appears to be from either the IRS or an organization closely linked to the IRS, such as the Electronic Federal Tax Payment System (EFTPS), report it by sending it to firstname.lastname@example.org .
The IRS also provides a variety of resources for tax professionals about security threats posed by identity theft issues targeting the industry through its Protect Your Clients; Protect Yourself campaign.
Taxpayers and Tax Professionals can help spread the word on this week’s messages using the hashtag #TaxSecurity in social media platforms.
WASHINGTON — The Internal Revenue Service today issued an urgent alert to tax professionals who use IRS e-services to beware of an email asking them to update their accounts and directing them to a fake website.
The subject line for the fraudulent email is “Security Awareness for Tax Professionals.” The “From” line is “Your e-Services Team.” It has both an IRS logo and an e-services logo that hyperlinks to a URL verified as a phishing site. The spoofing site poses as an e-services registration page.
The scammers are attempting to exploit current IRS efforts to strengthen the e-services authentication process and its ongoing communications with tax professionals about their accounts. Scammers are attempting to steal e-services usernames and passwords or additional personal data through a registration page.
If e-services users have already clicked on the fake logo and provided their username and password, they should contact the e-services help desk to reset their accounts. If the same password is used for other accounts, these should be changed as well. As an extra precaution, users should perform a deep security scan on their computers, re-evaluate their security controls and be alert to any other signs of identity theft or data compromise.
Tax professionals should always go directly to IRS.gov to access e-services and never click on any links provided in emails.
Tax professionals who receive a suspicious email should send it as an attachment to Phishing@irs.gov and then delete it. Recipients should not click on any links.
The scammer email tells recipients that information was stolen from certain user accounts in 2015 from a state-sponsored actor. It says users are being asked to upgrade their e-service account to ensure protection of their information. It asks them to click on the login to access their accounts for security upgrade.
The IRS is in the process of upgrading e-services security and has been in communication with tax professionals about updating their accounts.
The IRS, state tax agencies and tax industry partners working together through the Security Summit have an awareness campaign underway called Protect Your Clients; Protect Yourself . The objective is to remind tax professionals they increasingly are the targets of identity thieves seeking ever larger amounts of taxpayer data to file fraudulent tax returns.
Security Summit partners recommend tax professionals:
Review Protect Your Clients, Protect Yourself for various steps you can take to protect your customers’ information and your business.
WASHINGTON — The Internal Revenue Service, state tax agencies and industry partners today finalized plans for 2017 to improve identity theft protections for individual and business taxpayers after making significant inroads this year against fraudulent returns.
Public and private sector leaders announced today that their collective efforts through the Security Summit initiative have led to a marked improvement in the battle against identity theft during 2016. This is highlighted by the number of new people reporting stolen identities on federal tax returns falling by more than 50 percent, with nearly 275,000 fewer victims compared to a year ago.
At a Washington press conference, Summit leaders also detailed new and expanded safeguards for taxpayers in the upcoming 2017 tax season. The 2017 focus revolves around “trusted customer” features that will help ensure the authenticity of the taxpayer and the tax return — before, during and after a tax return is filed. The additional protections will build on the 2016 successes that prevented fraudulent returns and protected tax refunds.
“We’ve made remarkable progress this year in our efforts to protect taxpayers following the unprecedented coordination with the states, the tax industry and the financial sector,” said IRS Commissioner John Koskinen. “Working together, this coalition has expanded its activities in many different areas, and we are focused on strengthening our systems and processes even more for the upcoming tax season.”
“It is gratifying to see how many different ways we have already identified and begun to implement changes,” said Dawn Cash, Commissioner, Oklahoma Tax Commission and President, Board of Trustees of the Federation of Tax Administrators. “Taxpayers in states across the country are benefiting from this important work.”
Security Summit initiatives put in place in 2016 had a dramatic impact on the collective ability to identify and stop fraudulent returns. Key IRS statistics show decreases because Summit efforts were successful at preventing fraudulent returns from entering tax processing systems. This meant fewer bad returns, fewer bad refunds and fewer taxpayers becoming victims.
Among the examples seen by the IRS:
“We've come a long way in a short time following the creation of the Security Summit,” Koskinen said. “But much more work remains to be done, and the partnership has agreed to take even more steps to protect taxpayers in 2017.”
For the 2017 filing season, the IRS and Summit partners will take additional actions. As with 2016, many of the new features will not be visible to taxpayers but will provide the IRS and states with the information they need to identify and stop fraudulent identity theft returns.
Among the new or expanded features for 2017 that will protect taxpayers and the tax system:
Taken together, these “trusted customer” features will help the IRS and states do an even better job of detecting fraudulent returns and protecting taxpayers.
As part of that effort, the Summit partners will launch a new Identity Theft Tax Refund Fraud Information Sharing and Analysis Center, or ISAC. This project, in its initial stages for 2017, will serve as an improved early warning system — identifying emerging identity theft schemes and quickly sharing that information among Summit partners so that all of the participants can enact safeguards.
Summit partners believe an ISAC ultimately promises significant gains in detecting and preventing identity theft refund fraud and will provide better data to law enforcement to investigate and prosecute identity thieves. This effort will provide all Summit partners with a threat assessment capability, early warnings about problems and insights about identity theft fraud schemes through nimble and agile information sharing.
The Security Summit will continue its campaigns to increase awareness about data security to both taxpayers and tax preparers. Last year, the Summit partners launched the “Taxes.Security. Together. ” campaign to encourage taxpayers to take greater data security precautions and to learn how to recognize and avoid phishing emails that seek to trick people into providing sensitive data such as Social Security or credit card numbers.
This year, the Summit partners expanded the campaign to include tax professionals, who increasingly are being targeted by criminal syndicates. Summit partners initiated a new campaign called “Protect Your Clients; Protect Yourself ” and urge tax professionals to use the best security practices available. Tax professionals should review Publication 4557, Safeguarding Taxpayer Data, to see an action check-list for ensuring data security.
As tax season approaches, the IRS and Summit partners will share more tips for tax professionals in upcoming weeks. And for taxpayers, the “Taxes.Security.Together” campaign will resume for a second year in the weeks leading up to the opening of the 2017 filing season in January with important information that taxpayers can use to protect their sensitive taxpayer and financial data.
WASHINGTON — The Internal Revenue Service today reminded employers and small businesses of a new Jan. 31 filing deadline for Forms W-2. The IRS must also hold some refunds until Feb. 15.
A new federal law, aimed at making it easier for the IRS to detect and prevent refund fraud, will accelerate the W-2 filing deadline for employers to Jan. 31. For similar reasons, the new law also requires the IRS to hold refunds involving two key refundable tax credits until at least Feb. 15. Here are details on each of these key dates.
The Protecting Americans from Tax Hikes (PATH) Act, enacted last December, includes a new requirement for employers. They are now required to file their copies of Form W-2, submitted to the Social Security Administration, by Jan. 31. The new Jan. 31 filing deadline also applies to certain Forms 1099-MISC reporting non-employee compensation such as payments to independent contractors.
In the past, employers typically had until the end of February, if filing on paper, or the end of March, if filing electronically, to submit their copies of these forms. In addition, there are changes in requesting an extension to file the Form W-2. Only one 30-day extension to file Form W-2 is available and this extension is not automatic. If an extension is necessary, a Form 8809 Application for Extension of Time to File Information Returns must be completed as soon as you know an extension is necessary, but by January 31. Please carefully review the instructions for Form 8809, for more information.
"As tax season approaches, the IRS wants to be sure employers, especially smaller businesses, are aware of these new deadlines," said IRS Commissioner John Koskinen. "We are working with the payroll community and other partners to share this information widely."
The new accelerated deadline will help the IRS improve its efforts to spot errors on returns filed by taxpayers. Having these W-2s and 1099s earlier will make it easier for the IRS to verify the legitimacy of tax returns and properly issue refunds to taxpayers eligible to receive them. In many instances, this will enable the IRS to release tax refunds more quickly than in the past.
The Jan. 31 deadline has long applied to employers furnishing copies of these forms to their employees and that date remains unchanged.
Due to the PATH Act change, some people will get their refunds a little later. The new law requires the IRS to hold the refund for any tax return claiming either the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) until Feb. 15. By law, the IRS must hold the entire refund, not just the portion related to the EITC or ACTC.
Even with this change, taxpayers should file their returns as they normally do. Whether or not claiming the EITC or ACTC, the IRS cautions taxpayers not to count on getting a refund by a certain date, especially when making major purchases or paying other financial obligations. Though the IRS issues more than nine out 10 refunds in less than 21 days, some returns are held for further review.
Notice 2016-58 announces the special per diem rates effective October 1, 2016, which taxpayers may use to substantiate the amount of expenses for lodging, meals, and incidental expenses when traveling away from home. This notice provides the special transportation industry rate, the rate for the incidental expenses only deduction, and the rates and list of high-cost localities for purposes of the high-low substantiation method.
Notice 2016-58 will be in IRB 2016-41, dated October 11, 2016.
WASHINGTON — The Internal Revenue Service and its Security Summit partners today issued an alert to taxpayers and tax professionals to be on guard against fake emails purporting to contain an IRS tax bill related to the Affordable Care Act.
The IRS has received numerous reports around the country of scammers sending a fraudulent version of CP2000 notices for tax year 2015. Generally, the scam involves an email that includes the fake CP2000 as an attachment. The issue has been reported to the Treasury Inspector General for Tax Administration for investigation.
The CP2000 is a notice commonly mailed to taxpayers through the United States Postal Service. It is never sent as part of an email to taxpayers. The indicators are:
The fraudulent CP2000 notice included a payment request that taxpayers mail a check made out to “I.R.S.” to the “Austin Processing Center” at a Post Office Box address. This is in addition to a “payment” link within the email itself.
IRS impersonation scams take many forms: threatening telephone calls, phishing emails and demanding letters. Learn more at Reporting Phishing and Online Scams .
Taxpayers or tax professionals who receive this scam email should forward it to email@example.com and then delete it from their email account.
Taxpayers and tax professionals generally can do a keyword search on IRS.gov for any notice they receive. Taxpayers who receive a notice or letter can view explanations and images of common correspondence on IRS.gov at Understanding Your IRS Notice or Letter .
To determine if a CP2000 notice you received in the mail is real, see the Understanding Your CP2000 Notice , which includes an image of a real notice.
A CP2000 is generated by the IRS Automated Underreporter Program when income reported from third-party sources such as an employer does not match the income reported on the tax return. It provides extensive instructions to taxpayers about what to do if they agree or disagree that additional tax is owed.
It also requests that a check be made out to “United States Treasury” if the taxpayer agrees additional tax is owed. Or, if taxpayers are unable to pay, it provides instructions for payment options such as installment payments.
The IRS and its Security Summit partners – the state tax agencies and the private-sector tax industry – are conducting a campaign to raise awareness among taxpayer and tax professionals about increasing their security and becoming familiar with various tax-related scams. Learn more at Taxes. Security. Together. or Protect Your Clients; Protect Yourself .
Taxpayers and tax professional should always beware of any unsolicited email purported to be from the IRS or any unknown source. They should never open an attachment or click on a link within an email sent by sources they do not know.
WASHINGTON — As part of the ongoing Security Summit efforts, the Internal Revenue Service today released a new YouTube video urging tax professionals to take the necessary steps toward guarding their data and protecting clients from identity theft.
The video featuring IRS Commissioner John Koskinen warns tax professionals that cybercriminals increasingly are targeting their offices and their data. The video spotlights the "Protect Your Clients; Protect Yourself" campaign recently launched by the Security Summit. The campaign seeks to raise awareness about cybercriminal activity and provide tax professionals the information needed to improve safeguards. A series of fact sheets and tips on security, scams and identity theft prevention measures for the tax professional community will be released throughout this summer and fall.
"The tax community handles large volumes of sensitive personal and financial information," Koskinen said. "Many tax professionals are doing their part with strong security practices. But as these threats rapidly evolve, we need every tax professional to stay on top of their security to protect taxpayers as well as their businesses.”
This new effort is an expansion of the Security Summit’s 2015 Taxes. Security. Together. campaign aimed at increasing public awareness for using security software, creating stronger passwords and avoiding phishing emails. The Summit is a joint effort between the IRS, state tax agencies and the tax preparation community to combat refund fraud and identity theft.
Fact Sheet 2016-23 , “Tax Professionals: Protect Your Clients; Protect Yourself from Identity Theft,” urges preparers to follow the security recommendations found in Publication 4557 , Safeguarding Taxpayer Data. The fact sheet outlines the critical steps necessary to protect taxpayer information and to build customer confidence and trust.
Security Awareness Tax Tips focusing on tax professionals also are available. The first one issued in August encouraged tax professionals to monitor their PTINs for suspicious activity.
Preparers should also sign up for e-News for Tax Professionals , the IRS Tax Pro Twitter account and the Return Preparer Office’s Facebook page to stay informed about this campaign and about scams and schemes in general. The IRS also created a “Protect Your Clients; Protect Yourself” page at https://www.irs.gov/protectyourclients
WASHINGTON — The Internal Revenue Service today provided a self-certification procedure designed to help recipients of retirement plan distributions who inadvertently miss the 60-day time limit for properly rolling these amounts into another retirement plan or individual retirement arrangement (IRA).
In Revenue Procedure 2016-47 , posted today on IRS.gov, the IRS explained how eligible taxpayers, encountering a variety of mitigating circumstances, can qualify for a waiver of the 60-day time limit and avoid possible early distribution taxes. In addition, the revenue procedure includes a sample self-certification letter that a taxpayer can use to notify the administrator or trustee of the retirement plan or IRA receiving the rollover that they qualify for the waiver.
Normally, an eligible distribution from an IRA or workplace retirement plan can only qualify for tax-free rollover treatment if it is contributed to another IRA or workplace plan by the 60th day after it was received. In most cases, taxpayers who fail to meet the time limit could only obtain a waiver by requesting a private letter ruling from the IRS.
A taxpayer who missed the time limit will now ordinarily qualify for a waiver if one or more of 11 circumstances, listed in the revenue procedure, apply to them. They include a distribution check that was misplaced and never cashed, the taxpayer's home was severely damaged, a family member died, the taxpayer or a family member was seriously ill, the taxpayer was incarcerated or restrictions were imposed by a foreign country.
Ordinarily, the IRS and plan administrators and trustees will honor a taxpayer's truthful self-certification that they qualify for a waiver under these circumstances. Moreover, even if a taxpayer does not self-certify, the IRS now has the authority to grant a waiver during a subsequent examination. Other requirements, along with a copy of a sample self-certification letter, can be found in the revenue procedure.
The IRS encourages eligible taxpayers wishing to transfer retirement plan or IRA distributions to another retirement plan or IRA to consider requesting that the administrator or trustee make a direct trustee-to-trustee transfer, rather than doing a rollover. Doing so can avoid some of the delays and restrictions that often arise during the rollover process. For more information about rollovers and transfers, check out the Can You Move Retirement Plan Assets? section in Publication 590-A or the Rollovers of Retirement Plan and IRA Distributions page on IRS.gov.
WASHINGTON — The Internal Revenue Service today alerted tax professionals to an emerging phishing email scam that pretends to be from tax software providers and tries to trick recipients into clicking on a bogus link.
The email scheme is the latest in a series of attempts by fraudsters to use the IRS or other tax issues as a cover to trick people into giving up sensitive information such as passwords, Social Security numbers or credit card numbers or to make unnecessary payments.
In the new scheme identified as part of the IRS Security Summit process, tax professionals are receiving emails pretending to be from tax software companies. The email scheme requests the recipient to download and install an important software update via a link included in the e-mail.
Once recipients click on the embedded link, they are directed to a website prompting them to download a file appearing to be an update of their software package. The file has a naming convention that uses the actual name of their software followed by an ".exe extension."
Upon completion, tax professionals believe they have downloaded a software update when in fact they have loaded a program designed to track the tax professional's key strokes, which is a common tactic used by cyber thieves to steal login information, passwords and other sensitive data.
Although the IRS knows of only a handful of cases to date, tax professionals are encouraged to be on the lookout for these scams and never to click on unexpected links in emails. Similar email schemes using tax software names have targeted individual taxpayers .
The IRS recently launched a new campaign to raise awareness among tax professionals about security threats posed by identity theft issues targeting their industry. The Protect Your Clients; Protect Yourself campaign features an ongoing effort to urge tax professionals to step up their security protections and be aware they increasingly are targets of cybercriminals.
The IRS urges all tax preparers to take the following steps:
Tax professionals should review Publication 4557 , Safeguarding Taxpayer Data, A Guide for Your Business, which provides a checklist to help safeguard taxpayer information and enhance office security.
WASHINGTON — Aggressive and threatening phone calls by criminals impersonating IRS agents remain a major threat to taxpayers, but now the IRS is receiving new reports of scammers calling under the guise of verifying tax return information over the phone.
The latest variation being seen in the last few weeks tries to play off the current tax season. Scam artists call saying they have your tax return, and they just need to verify a few details to process your return. The scam tries to get you to give up personal information such as a Social Security number or personal financial information, such as bank numbers or credit cards.
"These schemes continue to adapt and evolve in an attempt to catch people off guard just as they are preparing their tax returns," said IRS Commissioner John Koskinen. "Don't be fooled. The IRS won't be calling you out of the blue asking you to verify your personal tax information or aggressively threatening you to make an immediate payment."
The IRS reminds taxpayers to guard against all sorts of con games that continually change. The IRS, the states and the tax industry came together in 2015 and launched a public awareness campaign called Taxes. Security. Together. to help educate taxpayers about the need to maintain security online and to recognize and avoid "phishing" and other schemes.
The IRS continues to hear reports of phone scams as well as e-mail phishing schemes across the country.
"These schemes touch people in every part of the country and in every walk of life. It's a growing list of people who've encountered these. I've even gotten these calls myself," Koskinen said.
This January, the Treasury Inspector General for Tax Administration (TIGTA) announced they have received reports of roughly 896,000 phone scam contacts since October 2013 and have become aware of over 5,000 victims who have collectively paid over $26.5 million as a result of the scam. Just this year, the IRS has seen a 400 percent increase in phishing schemes.
Scammers make unsolicited calls claiming to be IRS officials. They demand that the victim pay a bogus tax bill. They con the victim into sending cash, usually through a prepaid debit card or wire transfer. They may also leave "urgent" callback requests through phone "robo-calls," or via a phishing email . They've even begun politely asking taxpayers to verify their identity over the phone.
Many phone scams use threats to intimidate and bully a victim into paying. They may even threaten to arrest, deport or revoke the license of their victim if they don't get the money.
Scammers often alter caller ID numbers to make it look like the IRS or another agency is calling. The callers use IRS titles and fake badge numbers to appear legitimate. They may use the victim's name, address and other personal information to make the call sound official.
Here are some things the scammers often do but the IRS will not do. Any one of these five things is a tell-tale sign of a scam.
The IRS will never:
If you get a phone call from someone claiming to be from the IRS and asking for money or to verify your identity, here's what you should do:
If you don't owe taxes, or have no reason to think that you do:
If you know you owe, or think you may owe tax:
Stay alert to scams that use the IRS as a lure. Tax scams can happen any time of year, not just at tax time. For more, visit "Tax Scams and Consumer Alerts" on IRS.gov.
Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights . Explore your rights and our obligations to protect them on IRS.gov.
Last updated 4/10/2020 5:10:13 PM