IRS Summertime Tax Tip 2014-09: Five Basic Tax Tips for New Businesses

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IRS Tax Tips July 23, 2014

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IRS Summertime Tax Tip 2014-08: Top Ten Tax Facts if You Sell Your Home

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IRS Tax Tips July 21, 2014

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HCTT-2014-15 — Mid-Year Premium Tax Credit Checkup

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IRS Tax Tips July 18, 2014

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IRS Summertime Tax Tip 2014-07: Special Tax Benefits for Members of the Armed Forces

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IR-2014-78, National Taxpayer Advocate Mid-Year Report

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IRS Newswire July 16, 2014

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HCTT-2014-14 — IRS.gov has information about the health care law and its effect on your taxes

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IRS Summertime Tax Tip 2014-06: Tips on Travel While Giving to Charity

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IRS Summertime Tax Tip 2014-05: Top 10 Reasons to Visit IRS.gov this Summer

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IRS Summertime Tax Tip 2014-04: Avoid Summertime Tax Scams

Ah, summertime! Warm days, rest and recreation and…tax scams. Thieves don’t stop victimizing unsuspecting taxpayers with their scams after April 15. Identity theft, phone and phishing scams happen year-round. Those three top the IRS’s ‘Dirty Dozen’ list of tax scams this year. Here’s some important information you should know about these common tax scams:

  1. Identity Theft.  Identity thieves steal personal and financial information to commit fraud or other crimes. This can include your Social Security number or bank information. An identity thief may file a phony tax return to claim a fraudulent refund.

    The IRS has a special identity protection page on IRS.gov. It has many resources you can use to reduce your risk of becoming a victim. The page can also tell you what steps to take if you are a victim of identity theft and need help. This includes how and when you should contact the IRS Identity Protection Specialized Unit.

  2. Phone Scams.  In these scams, thieves pose as the IRS and call would-be victims with one goal in mind: to steal their money. Callers will tell you that you owe taxes and demand immediate payment. They will tell you that you must pay the bogus tax bill with a pre-loaded debit card or wire transfer. The callers are often abusive and threaten arrest or deportation. They may know the last four digits of your Social Security number. They also rig caller ID to falsely show that the call is from the IRS.

    Keep in mind that if a person owes taxes, the IRS will first contact them by mail, not by phone. The IRS doesn’t ask for payment with a pre-paid debit card or wire transfer. If you owe, or think you might owe federal taxes and you get one of these calls, hang up. Call the IRS at 800-829-1040. The IRS will work with you to pay what you owe. If you don’t owe taxes, call and report the incident to the Treasury Inspector General for Tax Administration at 800-366-4484.

  3. Phishing Scams.  Criminals use the IRS as bait in a phishing scam. Scammers typically send emails that purport to come from the IRS. They often lure their targets with a false promise of a refund or the threat of an audit. They may also set up a phony website that looks like the real IRS.gov. These phony sites often have the IRS seal and other graphics to make them appear official. Their goal is to get their victim to reveal personal and financial information. They use the information they get to steal identities and commit fraud.

    The IRS doesn’t contact people by email about their tax account. Nor does the agency use email, social media, texting or fax to initiate contact or ask for personal or financial information. If you get an email like this, do not click on a link or open any attachments. You should instead forward it to the IRS at phishing@irs.gov. For more on this topic visit IRS.gov and select the ‘Reporting Phishing’ link at the bottom of the page.

Don’t let tax scams take the fun out of your summer. Be alert to phone and phishing email scams that use the IRS as a lure. Visit the genuine IRS website, IRS.gov, for more on what you can do to avoid becoming a victim and how to report tax fraud.

IRS Summertime Tax Tip 2014-03: IRS Tip Sheet on Gambling Income and Losses

Whether you like to play the ponies, roll the dice or pull the slots, your gambling winnings are taxable. You must report all your gambling income on your tax return. If you’re a casual gambler, odds are good that these basic tax tips can help you at tax time next year:

  1. Gambling income.  Gambling income includes winnings from lotteries, horse racing and casinos. It also includes cash prizes and the fair market value of prizes like cars and trips.
  2. Payer tax form.  If you win, you may get a Form W-2G, Certain Gambling Winnings, from the payer. The IRS also gets a copy of the W-2G. The payer issues the form depending on the type of game you played, the amount of your winnings and other factors. You’ll also get the form if the payer withholds taxes from what you won.
  3. How to report winnings.  You must report all your gambling winnings as income. This is true even if you don’t receive a Form W-2G. You normally report your winnings for the year on your tax return as ‘other income.’
  4. How to deduct losses.  You can deduct your gambling losses on Schedule A, Itemized Deductions. The amount you can deduct is limited to the amount of the gambling income you report on your return.
  5. Keep gambling receipts.  You should keep track of your wins and losses. This includes keeping items such as a gambling log or diary, receipts, statements or tickets.

For more on this topic see Publications 525, Taxable and Nontaxable Income, and 529, Miscellaneous Deductions. Both are available on IRS.gov or by calling 800-TAX-FORM (800-829-3676).

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IRS Summertime Tax Tip 2014-02: Summer Weddings Mean Tax Changes

Taxes may not be high on your summer wedding plan checklist. But you should be aware of the tax issues that come along with marriage. Here are some basic tips that can help keep those issues to a minimum:

  • Name change.  The names and Social Security numbers on your tax return must match your Social Security Administration records. If you change your name, report it to the SSA. To do that, file Form SS-5, Application for a Social Security Card. You can get the form on SSA.gov, by calling 800-772-1213 or from your local SSA office.
  • Change tax withholding.  A change in your marital status means you must give your employer a new Form W-4, Employee’s Withholding Allowance Certificate. If you and your spouse both work, your combined incomes may move you into a higher tax bracket. Use the IRS Withholding Calculator tool at IRS.gov to help you complete a new Form W-4. See Publication 505, Tax Withholding and Estimated Tax, for more information.
  • Changes in circumstances.  If you receive advance payment of the premium tax credit in 2014, it is important that you report changes in circumstances, such as changes in your income or family size, to your Health Insurance Marketplace. You should also notify the Marketplace when you move out of the area covered by your current Marketplace plan. Advance payments of the premium tax credit provide financial assistance to help you pay for the insurance you buy through the Health Insurance Marketplace. Reporting changes will help you get the proper type and amount of financial assistance so you can avoid getting too much or too little in advance.
  • Address change.  Let the IRS know if your address changes. To do that, file Form 8822, Change of Address, with the IRS. You should also notify the U.S. Postal Service. You can ask them online at USPS.com to forward your mail. You may also report the change at your local post office.
  • Change in filing status.  If you’re married as of Dec. 31, that’s your marital status for the whole year for tax purposes. You and your spouse can choose to file your federal income tax return either jointly or separately each year. You may want to figure the tax both ways to find out which status results in the lowest tax.

    Note for same-sex married couples: If you are legally married in a state or country that recognizes same-sex marriage, you generally must file as married on your federal tax return. This is true even if you and your spouse later live in a state or country that does not recognize same-sex marriage. See irs.gov for more information on this topic.

For more information, visit IRS.gov. You can also get IRS forms and publications on IRS.gov or by calling 800-TAX-FORM (800-829-3676).

IRS Summertime Tax Tip 2014-01: What to do if You Get a Notice from the IRS

Each year the IRS mails millions of notices. Here’s what you should do if you receive a notice from the IRS:

  1. Don’t ignore it. You can respond to most IRS notices quickly and easily. And it’s important that you reply promptly.
  2. IRS notices usually deal with a specific issue about your tax return or tax account. For example, it may say the IRS has corrected an error on your tax return. Or it may ask you for more information.
  3. Read it carefully and follow the instructions about what you need to do.
  4. If it says that the IRS corrected your tax return, review the information in the notice and compare it to your tax return.

    If you agree, you don’t need to reply unless a payment is due.

    If you don’t agree, it’s important that you respond to the IRS. Write a letter that explains why you don’t agree. Make sure to include information and any documents you want the IRS to consider. Include the bottom tear-off portion of the notice with your letter. Mail your reply to the IRS at the address shown in the lower left part of the notice. Allow at least 30 days for a response from the IRS.

  5. You can handle most notices without calling or visiting the IRS. If you do have questions, call the phone number in the upper right corner of the notice. Make sure you have a copy of your tax return and the notice with you when you call.
  6. Keep copies of any notices you get from the IRS.
  7. Don’t fall for phone and phishing email scams that use the IRS as a lure. The IRS first contacts people about unpaid taxes by mail – not by phone. The IRS does not contact taxpayers by email, text or social media about their tax return or tax account.

For more on this topic visit IRS.gov. Click on ‘Responding to a Notice’ at the bottom left of the home page. Also see Publication 594, The IRS Collection Process. You can get it on IRS.gov or call 800-TAX-FORM (800-829-3676) to get it by mail.

IR-2014-77: New 1023-EZ Form Makes Applying for 501(c)(3) Tax-Exempt Status Easier; Most Charities Qualify

WASHINGTON — The Internal Revenue Service today introduced a new, shorter application form to help small charities apply for 501(c)(3) tax-exempt status more easily.

“This is a common-sense approach that will help reduce lengthy processing delays for small tax-exempt groups and ultimately larger organizations as well,” said IRS Commissioner John Koskinen. “The change cuts paperwork for these charitable groups and speeds application processing so they can focus on their important work.”

The new Form 1023-EZ, available today on IRS.gov, is three pages long, compared with the standard 26-page Form 1023. Most small organizations, including as many as 70 percent of all applicants, qualify to use the new streamlined form. Most organizations with gross receipts of $50,000 or less and assets of $250,000 or less are eligible.

“Previously, all of these groups went through the same lengthy application process — regardless of size,” Koskinen said. “It didn’t matter if you were a small soccer or gardening club or a major research organization. This process created needlessly long delays for groups, which didn’t help the groups, the taxpaying public or the IRS.”

The change will allow the IRS to speed the approval process for smaller groups and free up resources to review applications from larger, more complex organizations while reducing the application backlog. Currently, the IRS has more than 60,000 501(c)(3) applications in its backlog, with many of them pending for nine months.

Following feedback this spring from the tax community and those working with charitable groups, the IRS refined the 1023-EZ proposal for today’s announcement, including revising the $50,000 gross receipts threshold down from an earlier figure of $200,000.

“We believe that many small organizations will be able to complete this form without creating major compliance risks,” Koskinen said. “Rather than using large amounts of IRS resources up front reviewing complex applications during a lengthy process, we believe the streamlined form will allow us to devote more compliance activity on the back end to ensure groups are actually doing the charitable work they apply to do.”

The new EZ form must be filed online. The instructions include an eligibility checklist that organizations must complete before filing the form.

The Form 1023-EZ must be filed using pay.gov, and a $400 user fee is due at the time the form is submitted. Further details on the new Form 1023-EZ application process can be found in Revenue Procedure 2014-40, posted today on IRS.gov.

There are more than a million 501(c)(3) organizations recognized by the IRS.

IR-2014-76: Unused ITINS to Expire After Five Years; New Uniform Policy Eases Burden on Taxpayers, Protects ITIN Integrity

WASHINGTON — Individual Taxpayer Identification Numbers (ITINs) will expire if not used on a federal income tax return for five consecutive years, the Internal Revenue Service announced today. To give all interested parties time to adjust and allow the IRS to reprogram its systems, the IRS will not begin deactivating ITINs until 2016.

The new, more uniform policy applies to any ITIN, regardless of when it was issued. Only about a quarter of the 21 million ITINs issued since the program began in 1996 are being used on tax returns. The new policy will ensure that anyone who legitimately uses an ITIN for tax purposes can continue to do so, while at the same time resulting in the likely eventual expiration of millions of unused ITINs.

Developed in consultation with taxpayers, their representatives and other stakeholders, the new policy replaces the existing one that went into effect on Jan. 1, 2013.

Under the old policy, announced in November 2012, ITINs issued after Jan. 1, 2013 would have automatically expired after five years, even if used properly and regularly by taxpayers. Though ITINs issued before 2013 were unaffected by that change, the IRS said at the time that it would explore options for deactivating or refreshing the information relating to these older ITINs.

ITINs play a critical role in the tax administration system and assist with the collection of taxes from foreign nationals, resident and nonresident aliens and others who have filing or payment obligations under U.S. law. Designed specifically for tax administration purposes, ITINs are only issued to people who are not eligible to obtain a Social Security Number.

Under the new policy:

  • An ITIN will expire for any taxpayer who fails to file a federal income tax return for five consecutive tax years.
  • Any ITIN will remain in effect as long as a taxpayer continues to file U.S. tax returns. This includes ITINs issued after Jan. 1, 2013. These taxpayers will no longer face mandatory expiration of their ITINs and the need to reapply starting in 2018, as was the case under the old policy.
  • To ease the burden on taxpayers and give their representatives and other stakeholders time to adjust, the IRS will not begin deactivating unused ITINs until 2016. This grace period will allow anyone with a valid ITIN, regardless of when it was issued, to still file a valid return during the upcoming tax-filing season.
  • A taxpayer whose ITIN has been deactivated and needs to file a U.S. return can reapply using Form W-7. As with any ITIN application, original documents, such as passports, or copies of documents certified by the issuing agency must be submitted with the form.

Further details, including information on how and when taxpayers with expired ITINs will be notified, will be posted on IRS.gov at a later date.

IR-2014-75: New IRS Filing Season Program Unveiled for Tax Return Preparers

WASHINGTON — The Internal Revenue Service announced today that guidance will soon be issued outlining a new voluntary program designed to encourage education and filing season readiness for paid tax return preparers. The program will be in place to help taxpayers during the 2015 filing season.

The Annual Filing Season Program will allow unenrolled return preparers to obtain a record of completion when they voluntarily complete a required amount of continuing education (CE), including a course in basic tax filing issues and updates, ethics and other federal tax law courses.

“This voluntary program will be a step to help protect taxpayers during the 2015 filing season,” said IRS Commissioner John Koskinen. “About 60 percent of tax return preparers operate without any type of oversight or education requirements. Our program will give unenrolled return preparers a way to stay to up-to-date on tax laws and changes, which we believe will improve service to taxpayers.”

Tax return preparers who elect to participate in the program and receive a record of completion from the IRS will be included in a database on IRS.gov that will be available by January 2015 to help taxpayers determine return preparer qualifications.

The database will also contain information about practitioners with recognized credentials and higher levels of qualification and practice rights. These include attorneys, certified public accountants (CPAs), enrolled agents, enrolled retirement plan agents (ERPAs) and enrolled actuaries who are registered with the IRS.

“It’s also important to note this program is not to replace the important tax work done by certified public accountants, enrolled agents and attorneys,” Koskinen said. “Tax professionals with recognized credentials will be publicly listed on IRS.gov, and we plan to help inform taxpayers about the professional options available.”

Anyone who prepares all, or substantially all, of any federal tax return or refund claim for compensation is required to obtain a preparer tax identification number (PTIN). The pending guidance will also explain that tax return preparers with a valid PTIN who do not obtain a record of completion as part of the Annual Filing Season Program, or are not an attorney, CPA, enrolled agent, ERPA or enrolled actuary, may still prepare tax returns, but will not be included in the public directory.

In 2011, the Treasury Department and the IRS issued regulations that mandated testing and CE for paid tax return preparers and created a Registered Tax Return Preparer (RTRP) credential. The RTRP designation was for preparers with valid PTINs, who passed an IRS competency test and completed 15 hours of CE.

Earlier this year, the Court of Appeals for the D.C. Circuit upheld the lower court’s determination that the IRS regulations from 2011 mandating competency testing and CE for paid tax return preparers were invalid. The IRS continues to believe regulation of paid tax return preparers is important for the proper functioning of the U.S. tax system. To that end, the Administration’s Fiscal Year 2015 Budget includes a proposal to explicitly authorize the IRS to regulate all paid tax return preparers.

Prior to the 2013 court decision, over 62,000 return preparers passed an IRS-administered competency test and completed the requirements to become Registered Tax Return Preparers. The Annual Filing Season Program will exempt RTRPs and others who have successfully completed certain recognized national or state tests from the filing season refresher course that will be required for other participants.

The Annual Filing Season Program will be an interim step to help taxpayers and encourage education for unenrolled tax return preparers. The IRS will assess the feasibility of administering a uniform voluntary examination in future years in order to ensure basic return preparer competency.

Annual Filing Season Program — Record of Completion Requirements

In general, non-exempt return preparers with a valid PTIN for the program year will need to complete 18 hours of CE annually from IRS-approved CE providers to obtain an IRS record of completion. The hours will need to include:

  • 6 hours of federal tax filing season refresher course (with a required comprehension test at completion)
  • 10 hours of federal tax law topics
  • 2 hours of ethics

For the first year, a transition rule will apply to prorate the required hours. For a return preparer to obtain a record of completion for the 2015 filing season, a total of 11 hours will need to be earned in 2014, including the six hour refresher course, three hours of other federal tax law topics and two hours of ethics.

Once the official guidance is issued, IRS-approved CE providers will begin to offer qualifying federal tax filing season refresher courses. A list of all IRS-approved CE providers is available and includes a new column to indicate which providers are planning to offer the qualifying courses. The list is updated daily. For 2015, qualifying courses will be offered through Dec. 31, 2014.

The IRS will begin issuing records of completion to those who have met the requirements in mid-October 2014 after the 2015 PTIN renewal season starts.

Consent to Circular 230 restrictions

As a prerequisite to receiving a record of completion, an individual will be required to consent to the duties and restrictions relating to practice before the IRS in subpart B and section 10.51 of Treasury Department Circular No. 230.

Modification to limited practice permissions

The pending guidance will also announce that effective for tax returns and claims for refunds prepared or signed after Dec. 31, 2015, only unenrolled tax return preparers who have a record of completion under the Annual Filing Season Program for the calendar year of preparation and the calendar year of representation will be permitted to represent taxpayers before the IRS during an examination of a return that they signed or prepared.

Attorneys, CPAs and enrolled agents will continue to have unlimited representation rights and can represent clients before any office of the IRS.

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