By Stacie Clifford Kitts, CPA
The IRS has started their seasonal “Tax Tip” campaign. I do like these tips. They cover many of the general questions that taxpayers ask. In the interest of having a little fun, let’s pick apart Tax Tip 2011-01
- Start gathering your records – I agree. Waiting to the last minute can cost you deductions. Lost receipts or forgotten documents are the bane of tax preparation. Give yourself time to get it together before the filing deadline gets here.
- Be on the lookout for w-2 and 1099’s – well duh IRS, this kind of falls into item number 1 don’t ya think? If you are owed a 1099 or W2, these are delivered or mailed to you by January 31, 2011. So if it’s March and you don’t have your forms, better start making some calls because something is wrong.
- Use free file – This option is cool, but a bit deceiving. Free file is a great product to prepare your federal income return if your income is less than $58,001. Free file is sponsored by brand name – for profit- tax software companies. So keep in mind, you still pay for the use of the software when you prepare your state tax return (only the federal part is prepared for free).
- IRS e-file – Personally I like efiling. It is convenient, fast, accurate, and paperless. Besides, here’s a heads up, E-file is mandatory for some taxpayers. It’s a new age, time to get on the ball and accept modern technological advances.
- Consider other filing options – Yes there are other options – you could prepare your return yourself (not recommended). And, if you qualify, there are ways to get your return filed that don’t cost money. Consider checking out your local VITA program. The IRS Volunteer Income Tax Assistance Program (VITA) and the Tax Counseling for the Elderly (TCE) Programs offer free tax help for taxpayers who qualify.
- Consider direct deposit – I still get taxpayers who want to have their refund checks mailed to them. I can’t really get my head around this one. Generally, there isn’t a good reason to have a check mailed versus having your refund direct deposited.
- Visit the IRS website again and again – okay, lots of helpful information here. No reason not to. I say, do it.
- Remember to checkout IRS publication 17. Well, yes if you want to learn all about income tax by all means here is a publication that will help. Helpful stuff includes: a) What’s new for 2010, b) Reminder, c) When you should file a return, d) When to paper file vs. efile, c) Yada yada yada
- Review! Review! Review! – Well ya check for mistakes. But people really, if you’re not a tax expert, you really aren’t going to know if you blew it. Might I suggest you have a tax professional review your return before you file.
- Don’t panic! – Unless you want too of course – or waited until the last minute. When all else fails, the IRS says you can give them a call at 800-829-1040.
- Tax tip: It’s time to get started; here’s a few things you can do (seattletimes.nwsource.com)
- Some Tax Payers Will Need to File Their 1040 Later Rather Than Sooner This Coming Filing Season (staciesmoretaxtips.wordpress.com)
- Important 2011 tax filing deadlines: Jan. 14, mid-February, April 18, Oct. 17 (dontmesswithtaxes.typepad.com)
- IRS Delays Start of Filing Season for Some Taxpayers (businessweek.com)
The IRS provides free publications and forms as well as other tax material and information to help taxpayers meet their tax obligations. Here are four great ways you can get the information you need to file your tax return. The best thing about these four options is that they won’t cost you a dime!
- IRS.gov The IRS Web site is a one-stop shop for a wide array of tax information. You can even prepare and file your federal tax return – for free – through Free File, a service offered by IRS and its partners who make available free tax preparation software and free electronic filing. But you must go through IRS.gov to use Free File. Have some tax questions? Check out 1040 Central on the Individuals page for the latest news. Read up on the economic recovery tax credits at IRS.gov/recovery. The Online Services section includes several online tools that will help you with your taxes, including the IRS Withholding Calculator, the Alternative Minimum Tax Assistant, and the EITC Assistant. You can even track your refund with Where’s My Refund?.
- Telephone Call the IRS Tax Help Line for Individuals, 800-829-1040, to get answers to your federal tax questions. To order free forms, instructions and publications call 800-829-3676. To hear pre-recorded messages covering various tax topics or check on the status of your refund, call 800-829-4477. TTY/TDD users may call 800-829-4059 to ask tax questions or to order forms and publications.
- Taxpayer Assistance Centers When you believe your tax issue cannot be handled online or by phone and you want face-to-face assistance, you can find help at a local IRS Taxpayer Assistance Center. Locations, business hours and an overview of services are available at IRS.gov. Just go to the Individuals tab and click on the link for Contact My Local Office in the left tool bar section under IRS Resources.
- Community Resources Free tax preparation is available through the Volunteer Income Tax Assistance and Tax Counseling for the Elderly programs in many communities. Volunteer return preparation programs provided through IRS and its partners offer free help in preparing simple tax returns for low-to-moderate-income taxpayers. Call 800-906-9887 to find the VITA or TCE site nearest you. You may also call AARP — the largest TCE participant — at 888-227-7669 (888-AARPNOW) or access www.aarp.org to find the nearest Tax-Aide site.
For more information about free services provided by the IRS, review Publication 910, IRS Guide to Free Tax Services available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
The IRS wants military members and their spouses to know they may be eligible to receive free tax return preparation assistance. The U.S. Armed Forces participates in the Volunteer Income Tax Assistance program and provides free tax advice, tax preparation, return filing and other tax assistance to military members and their families.
1. Armed Forces Tax Council The Armed Forces Tax Council oversees the operation of the military tax programs worldwide, conducting outreach with the IRS to military personnel and their families. The AFTC consists of tax program coordinators for the Marine Corps, Air Force, Army, Navy and Coast Guard.
2. Volunteer Tax Sites Volunteer assistors at Military-based VITA sites are trained to address military-specific tax issues, such as combat zone tax benefits and the new Earned Income Tax Credit guidelines.
3. What to Bring To receive this free assistance, you should bring the following records to your military VITA site:
- Valid photo identification
- Social Security cards for you, your spouse and dependents or a social security number verification letter issued by the Social Security Administration
- Birth dates for you, your spouse and dependents
- Current year’s tax package, if you received one
- Wage and earning statement(s) — Form W-2, W-2G, 1099-R
- Interest and dividend statements (Forms 1099)
- A copy of last year’s federal and state tax returns, if available
- Checkbook to get routing number and account number for direct deposit
- Total amount paid for day care and day care provider’s identifying number
- Other relevant information about income and expenses
4. Joint returns If your filing status is Married Filing Jointly and you wish to file your tax return electronically, both you and your spouse should be present to sign the required forms. If it isn’t possible for both of you to be present, a valid power of attorney that allows tax preparation can be used to sign and file the return.
5. Special Exception There is a special exception to using a power of attorney for spouses in combat zones that permits the filing spouse to e-file a joint return with only a written statement setting forth that the other spouse is in a combat zone and is unable to sign.
For more information, review IRS Publication 3, Armed Forces’ Tax Guide, available on the IRS Web site at IRS.gov or order a free copy by calling 800-TAX-FORM (800-829-3676).
IRS Patrol: Free File Now Available to Almost All Taxpayers; Software Can Help Find New Economic Recovery Tax Breaks that Could Be Overlooked
WASHINGTON — The Internal Revenue Service and its private-sector partners are making Free File available starting today. Most taxpayers can have free use of helpful tax preparation software and free electronic filing of the federal tax returns.
There are many new tax breaks this filing season and Free File software can make it easier for people to find all the credits and deductions they are due. Taxpayers must go through www.IRS.gov homepage or www.IRS.gov/freefile to access the free options.
“If cost is a barrier or if you’re wondering about free options, check out IRS.gov for Free File options. There’s something there for almost everybody,” said David R. Williams, director, Electronic Tax Administration and Refundable Credits. “Free File is a great choice for either the novice taxpayers who need some assistance or the experienced taxpayers who prefer to do the work themselves. It’s fast; it’s safe; it’s free.”
The Free File program provides free federal income tax preparation and electronic filing for eligible taxpayers through a partnership between the Internal Revenue Service (IRS) and the Free File Alliance LLC, a group of approximately 20 private sector tax software companies.
Free File comes in two formats: Traditional Free File, which is available to taxpayers who meet specific criteria and Free File Fillable Forms, which is available to almost all taxpayers.
Approximately 70 percent of the nation’s taxpayers, some 98 million people who meet the $57,000 income limit, are eligible for the user-friendly Traditional Free File. Traditional Free File provides step-by-step software help that asks simple questions and puts the answers on the correct tax forms.
Traditional Free File can help taxpayers identify new tax credits or deductions under the American Recovery and Reinvestment Act for which they may be eligible. There are many new and expanded benefits for energy conservation, new car purchases, college tuition and first-time homebuyers.
Taxpayers must go through IRS.gov to access Free File. Each company sets its own eligibility criteria. For example, generally, eligibility criteria are based on state residency, age, income or military service. However, an individual or family with income of $57,000 will find tax preparation software they can use.
Taxpayers either can read over the company offers by clicking “I Will Choose a Company” or get a little help in making the selection by clicking “Help Me Find a Company.” With a little information, the tool will display those company offers for which taxpayers may be eligible.
Several companies offer their software in Spanish. Several also offer state tax preparation, although fees may apply. Taxpayers are under no obligation to make any purchases from the software companies.
For taxpayers who are comfortable preparing their own tax returns, there’s Free File Fillable Forms. Almost everyone is eligible for this service. There are no income limits and almost all tax forms are available.
This service provides electronic versions of IRS paper forms. Taxpayers can complete the tax forms online and file electronically. The fillable forms perform simple math functions, but do not use the question-and-answer software format. Free File Fillable Forms does not support state forms or state electronic filing.
Both Free File versions are highly popular among users. According to a recent survey, 98 percent of Traditional Free File users and 96 percent of Free File Fillable Forms users polled said they would recommend the Free File products to family and friends.
Taxpayers who use Traditional Free File or Free File Fillable Forms can enjoy all the benefits of IRS e-file – also for free.
By using the free e-file option, taxpayers also get the benefits of a fast refund, reduced error rate and a quick acknowledgement. By using e-file and direct deposit, taxpayers can get a refund in as few as 10 days. If people owe taxes, they also can control their payments and set a date such as April 15 for electronic payment. The error rate for an e-filed return is 1 percent, compared to 20 percent for a paper return. Unlike paper filers, e-filing taxpayers also will receive an acknowledgement that the IRS has received and accepted or rejected their returns.
Taxpayers who are eligible for the $8,000 or the $6,500 first-time homebuyer credit will not be able to e-file because they must attach proof of purchase to their tax return. However, these taxpayers still can use Free File to prepare their tax forms and then print and mail the returns to the IRS.
Free File is available 24-hours a day through April 15. For taxpayers who request an extension to file their federal returns, Free File will be available through October 15.
E-File Director’s Message: English | Spanish
Free File and Fillable Forms: English | Spanish |ASL
Ask Your Tax Preparer to e-File: English
First Time Filing a Tax Return?: English
E-File and Direct Deposit: English | Spanish |ASL
For these and other videos: YouTube/IRSVideos
WASHINGTON — IRS e-file, the popular electronic tax return delivery service used by two-thirds of the nation’s taxpayers, opens for business January 15 and marks 20 years of safely and securely transmitting nearly 800 million individual federal tax returns.
The Internal Revenue Service debuted e-file nationally in 1990, delivering 4.2 million tax returns. Last year, IRS e-file delivered 95 million tax returns, 66 percent of all returns filed.
“Electronic filing is more and more popular every year, and most taxpayers now e-file. IRS e-file means faster refunds. It means the option to file now and pay later if you owe additional tax. It means peace of mind knowing the IRS received the return because we send an acknowledgement. Those are the reasons this has been a popular service,” said Doug Shulman, IRS Commissioner. “IRS e-file is safe, it’s easy and everyone should try it.”
Last year, more than 49 million taxpayers missed out on the e-file benefits. The IRS urges taxpayers, especially those people already using tax software, to take the next step and e-file their return or ask their preparer to e-file their return. The IRS urges tax preparers who electronically file some of their clients’ tax returns to consider filing all tax returns through e-file.
The IRS is working on faster acknowledgements of accepted or rejected returns. Last year, taxpayers received an acknowledgement within 48 hours that the IRS had accepted or rejected their return. Paper filers do not receive any acknowledgement. Also, if the IRS rejects an e-filed return, it will provide more specific explanations of the errors that caused the rejection. This will enable taxpayers to make corrections and quickly resubmit their returns.
IRS e-file offers the fastest, safest way for people to receive their tax refunds. By using e-file and direct deposit, taxpayers can get their refunds in as few as 10 days. Taxpayers even can opt to have their refund deposited into two or three financial accounts or purchase a U.S. Savings Bond.
For those who owe additional tax, e-file is still the best option. People can file now and pay later, as long as the payment is received by April 15. Taxpayers can set the date for an automatic withdrawal from their financial accounts or they can pay by credit card. People also can e-file and pay by check by simply attaching the payment to a voucher that is mailed to the IRS.
Other e-file benefits include a reduced error rate (1 percent compared to nearly 20 percent on a paper return), which means a decreased likelihood of hearing from the IRS. Also, federal tax returns are delivered to the IRS through a highly secure, encrypted transmission system. Just like paper returns, e-filed returns remain confidential.
There are three ways to use e-file: through tax preparers, through most tax preparation software or through IRS Free File. The IRS does not charge for e-file. Many tax preparers and software products also offer free e-filing with their services.
As people become more comfortable using computers and the Internet for financial transactions, the IRS has seen a huge growth in the number of people who are preparing their own tax returns with the help of software. For people seeking free electronic options, IRS Free File offers something for almost everyone through two formats.
Traditional Free File provides free tax preparation software and free electronic filing to individuals or families who earn less than $57,000. Traditional Free File is a public-private partnership in which approximately 20 tax software manufacturers make their tax preparation software and e-filing available for free.
Everyone can use Free File Fillable Forms. This service, now in its second year, provides free online tax forms that can be completed and filed electronically. These are electronic versions of IRS paper forms. This program is ideal for people who are comfortable preparing their own returns with little assistance.
People looking for a tax preparer who files electronically and for more information on e-file can review IRS e-file for Individuals. Taxpayers also can locate an e-file authorized tax professional nearest to them by doing a zip code search.
By Stacie Clifford Kitts, CPA
Knowing when to prepare your own return and when to hire a professional can be confusing. I suppose if you have some training in the world of tax preparation that preparing your own return is a fine idea. However, the IRS’s release of the “Free File” tax tips listed below made me think that it might be a good idea to talk about when you should contact a professional.
Now, if your only source of income is a W2 from a single employer, you have not changed jobs during the year, you don’t own your home, you don’t have any questions about dependents, and your income is relatively low, then I think you are pretty safe preparing your own tax return. Although I suggest that you buy some tax software to walk you through the process or check out the IRS’s Free File Program.
Okay, sooo if you are unsure of how to treat a certain situation or your return is more complicated than the example above, you might want to consider contacting a professional when:
- You are itemizing deductions – unless you have a good grip on alternative minimum taxes, you could cause yourself some additional tax by improperly prepaying property taxes or state income tax. There is also the possibility that you could miss out on some current year deductions by not prepaying some property or state income taxes…confused? Well now is the time to call the professional.
- You have a rental property – do you know the rules about passive activities, participation rules, grouping activities?…NO.. Then it’s time to call the professional.
- You are self-employed – do you know what constitutes space for a home office? How about when meals are limited and when they are not? How about gifts or vehicle expenses – actual vs mileage…Ya know, if you are self-employed you should just call a professional.
- You sold assets or have investment income – Do you know the difference between outside and inside basis? For that matter, do you know what basis means? Do you know what the following tax forms are for, 1099-S, 1099B, 1099INT, 1099Div, 1099G,Schedule K-1…NO…It’s time to call the professional.
- You supported someone who is not your child – do you know the dependant rules? Honesty, you might think that you do, but these rules can be complicated – if you supported someone who is not your child, you should contact a professional.
Well, I think that’s enough for now. If you are still interested in preparing your own return, here are some IRS free file tips:
The IRS Presents:
The IRS Free File service provides free federal income tax return preparation and electronic filing for all taxpayers. All you need is access to a computer and the Internet and you can prepare and e-file your federal tax return for free.
Free File is offered through a partnership between the IRS and the Free File Alliance, a group of private-sector tax software companies. Since Free File’s debut in 2003, more than 27 million returns have been prepared and e-filed through this program.
Free File offers two options. The first is Traditional Free File, which includes approximately 20 tax preparation software products from which to choose. Taxpayers with 2009 incomes of $57,000 or less are eligible for this service. The second option is Free File Fillable Forms, which is an electronic version of IRS paper forms. All taxpayers can use Free File Fillable Forms to prepare and file tax forms electronically.
Use the following steps to file your return through IRS Free File:
Step 1. Get Started Access IRS.gov and click the Free File logo or go to www.irs.gov/freefile. You must access Free File companies through the official IRS Web site to qualify for the free service.
Step 2. Determine Your Eligibility If your 2009 income was $57,000 or less, you’re eligible for Traditional Free File’s easy-to-use, step-by-step software. If your income was higher, you are eligible for Free File Fillable Forms.
Step 3. Link to Free File Company Service If you opt for Traditional Free File, you can choose one of the approximate 20 offerings by reviewing which one fits your situation. You can click “I Will Choose A Free File Company” or “Help Me Find A Free File Company.” To get started with Free File Fillable Forms, just click the “Choose Free File Fillable Forms” button.
Step 4. Prepare and e-file your Federal Income Tax Return Either Traditional Free File or Free File Fillable Forms will allow you to file your return electronically, for free.
Both the fillable-forms option and the “full service” Free File offerings are only available through IRS.gov. Whether you are new to Free File or a returning taxpayer, you must access Free File through IRS.gov; otherwise, the provider may charge a fee.
• IRS.gov You can access free tax information at IRS.gov. At 1040 Central on the Individuals page, you can obtain forms, instructions and publications, learn about IRS e-file, determine your eligibility for the Earned Income Tax Credit, read about the latest tax changes and find answers to Frequently Asked Questions. In the Online Services section, you can access numerous applications to help with your taxes, including Free File, the IRS Withholding Calculator, the Alternative Minimum Tax Assistant, the EITC Assistant and more. You can also check the status of your refund by clicking on Where’s My Refund?
• Telephone Call the IRS Tax Help Line for Individuals, 800-829-1040, to get answers to your federal tax questions. To order free forms, instructions and publications call 800-829-3676. To hear pre-recorded messages covering various tax topics or check on the status of your refund, call 800-829-4477. TTY/TDD users may call 800-829-4059 to ask tax questions or to order forms and publications.
• Taxpayer Assistance Centers When you believe your tax issue cannot be handled online or by phone, and you want face-to-face assistance, you can find help at a local Taxpayer Assistance Center. Locations, business hours and an overview of services are available at IRS.gov. Just go to the “individuals” tab and click on the link for Contact My Local Office in the left tool bar section under IRS Resources.
• Community Resources Free tax preparation is available through the Volunteer Income Tax Assistance and Tax Counseling for the Elderly programs in many communities. Volunteer return preparation programs provided through IRS and its partners offer free help in preparing simple tax returns for low- to moderate-income taxpayers. Call 800-906-9887 to find the VITA or TCE site nearest you. You may also call AARP — the largest TCE participant — at 888-227-7669 (888-AARPNOW) or access http://www.aarp.org/ to find the nearest Tax-Aide site.
For more information about services provided by the IRS, review Publication 910, IRS Guide to Free Tax Services available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
The Armed Forces Tax Council oversees the operation of the military tax programs worldwide, conducting outreach with the IRS to military personnel and their families. The AFTC consists of tax program coordinators for the Marine Corps, Air Force, Army, Navy and Coast Guard.
Volunteer assistors at Military-based VITA sites are trained to address military-specific tax issues, such as combat zone tax benefits and the new Earned Income Tax Credit guidelines.
To receive this free assistance, you should bring the following records to your military VITA site:
Valid photo identification
Social Security cards for you, your spouse and dependents or a social security number verification letter issued by the Social Security Administration
Birth dates for you, your spouse and dependents
Current year’s tax package, if you received one
Wage and earning statement(s) — Form W-2, W-2G, 1099-R
Interest and dividend statements (Forms 1099)
A copy of last year’s federal and state tax returns, if available
Checkbook (to get routing number and account number for direct deposit)
Total amount paid for day care and day care provider’s identifying number
Other relevant information about income and expenses
If your filing status is Married Filing Jointly and you wish to file your tax return electronically, both you and your spouse should be present to sign the required forms. If it isn’t possible for both to be present, a valid power of attorney that allows tax preparation can be used to sign and file the return.
There is a special exception to using a power of attorney for spouses in combat zones that permits the filing spouse to e-file a joint return with only a written statement setting forth that the other spouse is in a combat zone and is unable to sign.
For more information, review IRS Publication 3, Armed Forces’ Tax Guide, available on the IRS Web site at IRS.gov or order a free copy by calling 800-TAX-FORM (800-829-3676).
Link – Publication 3, Armed Forces’ Tax Guide (PDF 1010.5K)
Published by the IRS
WASHINGTON — Nearly 12,000 free tax preparation sites will be open nationwide this year as the Internal Revenue Service continues to expand its partnerships with nonprofit and community organizations performing vital tax preparation services for low-income and elderly taxpayers.
The IRS Volunteer Income Tax Assistance (VITA) Program offers free tax help to people who earn less than $42,000. The Tax Counseling for the Elderly (TCE) Program offers free tax help to taxpayers who are 60 and older.
Today, partners and local officials will be hosting news conferences or issuing news releases nationwide to highlight the Earned Income Tax Credit and their free tax preparation programs. The EITC is already the government’s largest cash assistance program targeted to low-income Americans. However, not all eligible taxpayers may be aware or claim the credit.
Taxpayers need to bring to the VITA/TCE sites the following items:
Valid Social Security cards for the taxpayer, spouse and dependents
Birth dates for primary, secondary and dependents on the tax return
Current year’s tax package, if received
Wage and earning statement(s) Form W-2, W-2G, 1099-R, from all employers
Interest and dividend statements from banks (Forms 1099)
A copy of last year’s federal and state returns, if available
Bank routing numbers and account numbers for direct deposit
Other relevant information about income and expenses
Total paid for day care
Day care provider’s identifying number
To file taxes electronically on a Married Filing Jointly tax return, both spouses must be present to sign the required forms.
Trained community volunteers can help eligible taxpayers with all special credits, such as the Child Tax Credit or Credit for the Elderly. Also, many sites have language specialists to assist people with limited English skills.
In addition to free tax return preparation assistance, most sites use free electronic filing (e-filing). Individuals taking advantage of the e-file program will receive their refunds in half the time compared to returns filed on paper — even faster if taxpayers have their refund deposited directly into their bank accounts.
As part of the IRS-sponsored TCE Program, AARP offers the Tax-Aide counseling program at nearly 8,000 sites nationwide during the filing season. Trained and certified AARP Tax-Aide volunteer counselors help people of low-to-middle income with special attention to people age 60 and older. To locate the nearest AARP Tax-Aide site, call 1-888-227-7669 or visit AARP’s Internet site.
The military also partners with the IRS to provide free tax assistance to military personnel and their families. The Armed Forces Tax Council (AFTC) consists of the tax program coordinators for the Army, Air Force, Navy, Marine Corps and Coast Guard. The AFTC oversees the operation of the military tax programs worldwide, and serves as the main conduit for outreach by the IRS to military personnel and their families. Volunteers are trained and equipped to address military specific tax issues, such as combat zone tax benefits and the effect of the EITC guidelines.
If taxpayers owe, they can make a payment April 15 by authorizing an electronic funds withdrawal (direct debit) from a checking or savings account, paying by credit (Discover Card®, American Express®, MasterCard® or VISA® Card), or by check or money order (made out to the United States Treasury) using Form 1040-V, Payment Voucher.
The Internal Revenue Service offers an online program called “freefile.”
Fees for state income tax returns may apply. However, some companies offer free state tax return preparation and e-filing. (IRS web site). Check back for more details regarding free state income tax return e-filing.
If you want to learn more about “freefile,” visit the Internal Revenue Service web site at www.irs.gov/efile
Remember to always consult with your tax advisor regarding your income tax needs.
Stacie Clifford CPA is licensed by the California Board of Accountancy.