WASHINGTON, DC — The Internal Revenue Service today reminded taxpayers to file their federal tax returns and pay any taxes they owe by the April 15 deadline.

Aware that the economic downturn has affected many people, the agency urged taxpayers in difficult financial situations to file a tax return, pay what they can and work with the IRS to establish a payment plan that will keep them compliant.

Filing and Paying on Time Saves Money

The IRS cautioned that there is a failure-to-file penalty for taxpayers who don’t file their tax returns by April 15 and who owe taxes. Filing by the deadline allows taxpayers to avoid this penalty, even if they can’t pay all or some of their taxes by the deadline. Taxpayers who can’t meet the filing deadline can request an extension of time to file. However, an extension of time to file is not an extension of time to pay.

Taxpayers who can’t pay the full amount would still benefit from filing their return and paying as much as they can by April 15. Interest and failure-to-pay penalties are due on any unpaid balance and increase the amount that the taxpayer owes.

Members of the military and some others serving in combat zones, or in support, can wait until after April 15 to file and pay. As a general rule, those eligible get the extra time penalty-free and interest-free without having to ask for it. Normally, the filing and payment deadline is postponed until 180 days after the service member leaves the combat zone.

Electronic Options

IRS offers various electronic payment options to taxpayers to make it as easy as possible to make a full or partial payment with their return.

Taxpayers can make payments online, by phone using a credit or debit card, or through the Electronic Federal Tax Payment System. Taxpayers who e-file their return may use the electronic funds withdrawal option for submitting an electronic payment. They can e-file before April 15 but schedule their payment for withdrawal on April 15.

Information on these options, including any fees involved, may be found on this Web site, on the Electronic Payment Options Home Page.

Some taxpayers who itemize may now deduct the convenience fee charged for paying individual income taxes with a credit or debit card as a miscellaneous itemized deduction. The deduction is subject to the 2 percent limit on Form 1040, Schedule A.

Taxpayers may also pay any taxes owed by check made out to the “United States Treasury” using Form 1040-V, Payment Voucher, which must be included along with the payment and tax return. Taxpayers who have already submitted their tax return, but still need to pay all or some of their taxes, may mail the check to the IRS with Form 1040-V.

Installment Agreements and Online Applications

Taxpayers who find they can’t make a full payment by the April 15 deadline may consider applying for an installment agreement.

An installment agreement allows taxpayers to pay any remaining balance in monthly installments. Taxpayers who owe $25,000 or less may apply for a payment plan electronically, using the Online Payment Agreement application. Or they may attach Form 9465, Installment Agreement Request, to the front of their tax return. Taxpayers must show the amount of their proposed monthly payment and the date they wish to make their payment each month. The IRS charges $105 for setting up the agreement or $52 if the payments are deducted directly from the taxpayer’s bank account ($43 for qualified lower-income taxpayers).

The IRS will automatically give taxpayers the low income installment agreement fee if they qualify. The taxpayer does not have to request it. Taxpayers are required to pay interest plus a late payment penalty on the unpaid taxes for each month or part of a month after the due date that the tax is not paid. A taxpayer who does not file the return by the due date — including extensions — may have to pay a failure-to-file penalty.

For more information about filing and paying taxes, visit IRS.gov and choose 1040 Central or refer to the Form 1040 Instructions or IRS Publication 17, Your Federal Income Tax. Taxpayers can download forms and publications from IRS.gov or request a free copy by calling toll free 800-TAX-FORM (800-829-3676).

WASHINGTON, DC — The Internal Revenue Service today issued its 2009 “dirty dozen” list of most common tax scams, including schemes involving phishing, hiding income offshore and false claims for refunds.

“Taxpayers should be wary of scams to avoid paying taxes that seem too good to be true, especially during these challenging economic times,” IRS Commissioner Doug Shulman said. “There is no secret trick that can eliminate a person’s tax obligations. People should be wary of anyone peddling any of these scams.”

Tax schemes are illegal and can lead to problems for both scam artists and taxpayers who risk significant penalties, interest and possible criminal prosecution.

The IRS urges taxpayers to avoid these common schemes:

1. Phishing

Phishing is a tactic used by Internet-based scam artists to trick unsuspecting victims into revealing personal or financial information. The criminals use the information to steal the victim’s identity, access bank accounts, run up credit card charges or apply for loans in the victim’s name.

Phishing scams often take the form of an e-mail that appears to come from a legitimate source, including the IRS. The IRS never initiates unsolicited e-mail contact with taxpayers about their tax issues. Taxpayers who receive unsolicited e-mails that claim to be from the IRS can forward the message to phishing@irs.gov. Further instructions are available at IRS.gov. To date, taxpayers have forwarded scam e-mails reflecting thousands of confirmed IRS phishing sites. If you believe you have been the target of an identity thief, information is available at IRS.gov.

2. Hiding Income Offshore

The IRS aggressively pursues taxpayers and promoters involved in abusive offshore transactions. Taxpayers have tried to avoid or evade U.S. income tax by hiding income in offshore banks, brokerage accounts or through other entities. Recently, the IRS provided guidance to auditors on how to deal with those hiding income offshore in undisclosed accounts. The IRS draws a clear line between taxpayers with offshore accounts who voluntarily come forward and those who fail to come forward.

Taxpayers also evade taxes by using offshore debit cards, credit cards, wire transfers, foreign trusts, employee-leasing schemes, private annuities or life insurance plans. The IRS has also identified abusive offshore schemes including those that involve use of electronic funds transfer and payment systems, offshore business merchant accounts and private banking relationships.

3. Filing False or Misleading Forms

The IRS is seeing scam artists file false or misleading returns to claim refunds that they are not entitled to. Frivolous information returns, such as Form 1099-Original Issue Discount (OID), claiming false withholding credits are used to legitimize erroneous refund claims. The new scam has evolved from an earlier phony argument that a “strawman” bank account has been created for each citizen. Under this scheme, taxpayers fabricate an information return, arguing they used their “strawman” account to pay for goods and services and falsely claim the corresponding amount as withholding as a way to seek a tax refund.

4. Abuse of Charitable Organizations and Deductions

The IRS continues to observe the misuse of tax-exempt organizations. Abuse includes arrangements to improperly shield income or assets from taxation and attempts by donors to maintain control over donated assets or income from donated property. The IRS also continues to investigate various schemes involving the donation of non-cash assets, including easements on property, closely-held corporate stock and real property. Often, the donations are highly overvalued or the organization receiving the donation promises that the donor can purchase the items back at a later date at a price the donor sets. The Pension Protection Act of 2006 imposed increased penalties for inaccurate appraisals and new definitions of qualified appraisals and qualified appraisers for taxpayers claiming charitable contributions.

5. Return Preparer Fraud

Dishonest return preparers can cause many headaches for taxpayers who fall victim to their ploys. Such preparers derive financial gain by skimming a portion of their clients’ refunds and charging inflated fees for return preparation services. They attract new clients by promising large refunds. Taxpayers should choose carefully when hiring a tax preparer. As the saying goes, if it sounds too good to be true, it probably is. No matter who prepares the return, the taxpayer is ultimately responsible for its accuracy. Since 2002, the courts have issued injunctions ordering dozens of individuals to cease preparing returns, and the Department of Justice has filed complaints against dozens of others, which are pending in court.

6. Frivolous Arguments

Promoters of frivolous schemes encourage people to make unreasonable and unfounded claims to avoid paying the taxes they owe. The IRS has a list of frivolous legal positions that taxpayers should stay away from. Taxpayers who file a tax return or make a submission based on one of the positions on the list are subject to a $5,000 penalty. More information is available on IRS.gov.

7. False Claims for Refund and Requests for Abatement

This scam involves a request for abatement of previously assessed tax using Form 843, Claim for Refund and Request for Abatement. Many individuals who try this have not previously filed tax returns. The tax they are trying to have abated has been assessed by the IRS through the Substitute for Return Program. The filer uses Form 843 to list reasons for the request. Often, one of the reasons given is “Failed to properly compute and/or calculate Section 83-Property Transferred in Connection with Performance of Service.”

8. Abusive Retirement Plans

The IRS continues to uncover abuses in retirement plan arrangements, including Roth Individual Retirement Arrangements (IRAs). The IRS is looking for transactions that taxpayers are using to avoid the limitations on contributions to IRAs as well as transactions that are not properly reported as early distributions. Taxpayers should be wary of advisers who encourage them to shift appreciated assets into IRAs or companies owned by their IRAs at less than fair market value to circumvent annual contribution limits. Other variations have included the use of limited liability companies to engage in activity which is considered prohibited.

9. Disguised Corporate Ownership

Some taxpayers form corporations and other entities in certain states for the primary purpose of disguising the ownership of a business or financial activity. Such entities can be used to facilitate underreporting of income, fictitious deductions, non-filing of tax returns, participating in listed transactions, money laundering, financial crimes, and even terrorist financing. The IRS is working with state authorities to identify these entities and to bring the owners of these entities into compliance.

10. Zero Wages

Filing a phony wage- or income-related information return to replace a legitimate information return has been used as an illegal method to lower the amount of taxes owed. Typically, a Form 4852 (Substitute Form W-2) or a “corrected” Form 1099 is used as a way to improperly reduce taxable income to zero. The taxpayer also may submit a statement rebutting wages and taxes reported by a payer to the IRS. Sometimes fraudsters even include an explanation on their Form 4852 that cites statutory language on the definition of wages or may include some reference to a paying company that refuses to issue a corrected Form W-2 for fear of IRS retaliation. Taxpayers should resist any temptation to participate in any of the variations of this scheme.

11. Misuse of Trusts

For years, unscrupulous promoters have urged taxpayers to transfer assets into trusts. While there are many legitimate, valid uses of trusts in tax and estate planning, some promoted transactions promise reduction of income subject to tax, deductions for personal expenses and reduced estate or gift taxes. Such trusts rarely deliver the promised tax benefits and are being used primarily as a means to avoid income tax liability and hide assets from creditors, including the IRS.

The IRS has recently seen an increase in the improper use of private annuity trusts and foreign trusts to divert income and deduct personal expenses. As with other arrangements, taxpayers should seek the advice of a trusted professional before entering into a trust arrangement.

12. Fuel Tax Credit Scams

The IRS is receiving claims for the fuel tax credit that are unreasonable. Some taxpayers, such as farmers who use fuel for off-highway business purposes, may be eligible for the fuel tax credit. But some individuals are claiming the tax credit for nontaxable uses of fuel when their occupation or income level makes the claim unreasonable. Fraud involving the fuel tax credit is considered a frivolous tax claim, potentially subjecting those who improperly claim the credit to a $5,000 penalty.

How to Report Suspected Tax Fraud Activity

Suspected tax fraud can be reported to the IRS using Form 3949-A, Information Referral. Form 3949-A is available for download from the IRS Web site at IRS.gov. The completed form or a letter detailing the alleged fraudulent activity should be addressed to the Internal Revenue Service, Fresno, CA 93888. The mailing should include specific information about who is being reported, the activity being reported, how the activity became known, when the alleged violation took place, the amount of money involved and any other information that might be helpful in an investigation. The person filing the report is not required to self-identify, although it is helpful to do so. The identity of the person filing the report can be kept confidential.

Whistleblowers also may provide allegations of fraud to the IRS and may be eligible for a reward by filing Form 211, Application for Award for Original Information, and following the procedures outlined in Notice 2008-4, Claims Submitted to the IRS Whistleblower Office under Section 7623.

WASHINGTON, DC — The Internal Revenue Service offers last minute reminders to taxpayers who have not yet filed a tax return, paid what they owe or requested an extension of time to file as the April 15 tax filing and payment deadline approaches.

File and Pay on Time
Taxpayers who owe taxes and don’t file their tax return by the deadline may face interest on the unpaid taxes and a failure-to-file penalty. Interest and penalties add to the total amount a taxpayer owes. Filing by the deadline allows taxpayers to avoid the failure-to-file penalty, even if they can’t pay all or some of their taxes by the deadline. Taxpayers who can’t file their return by the deadline can request an extension of time to file. However, an extension of time to file is not an extension of time to pay.

Taxpayers who file on time but don’t pay all or some of their taxes by the deadline could face interest on the unpaid amount and a failure-to-pay penalty. Taxpayers who can’t pay the full amount should pay as much as they can by the deadline to minimize any interest and penalties due. In addition, taxpayers may take advantage of a variety of electronic and other payment options, such as using charge or debit cards to pay their taxes, to make it easier.

Taxpayers may also pay any taxes owed by check made out to the “United States Treasury” using Form 1040-V, Payment Voucher, which must be included along with the payment and tax return. Taxpayers who have already submitted their tax return, but still need to pay all or some of their taxes, may mail the check to the IRS with Form 1040-V.

File Electronically
Taxpayers can take advantage of e-filing, which is fast, accurate and easy. Most available tax preparation programs check for errors and necessary information, increasing the accuracy of the return and reducing the need for correspondence with the IRS to clarify errors or omissions. With most programs, taxpayers can usually file a state tax return at the same time they electronically file their federal return. Once the return is accepted for processing, the IRS electronically acknowledges receipt of the return. Generally, when someone files electronically, their refund will be issued in about half the time it would take if they had filed a paper return. Those who choose direct deposit will get their refund in even less time.

Use IRS Free File
Free electronic filing from nearly 20 companies is available to taxpayers whose 2008 adjusted gross income was $56,000 or less. That means 70 percent of all taxpayers, or 98 million filers, can take advantage of the IRS-sponsored Free File program. The only way to access this program is through this Web site. There is no charge for this service.

This year, the IRS and its partners are offering a new option, Free File Fillable Forms, which opens up Free File to virtually everyone, even those whose incomes exceed $56,000.

Free File Fillable Forms allow taxpayers to fill out and file their tax forms electronically, just as they would on paper. It allows taxpayers to enter their tax data, perform basic math calculations, sign electronically, print their returns for recordkeeping and e-file their returns. This option may be right for those who are comfortable with the tax law, know what forms they want to use or don’t need assistance to complete their returns.

Choose Direct Deposit
Whether filing electronically or on paper, taxpayers can opt to have their federal tax refund deposited directly into their bank account. Taxpayers who choose direct deposit will get their refunds faster than those who receive a paper check. Taxpayers who both e-file and use direct deposit will receive their refunds even faster. And, a refund that is directly deposited in a savings or checking account cannot be stolen or lost in the mail.

Using direct deposit is easy. Paper return filers just enter bank account and routing numbers in the boxes provided on Form 1040, 1040A or 1040EZ.

Taxpayers can split their deposits into up to three different accounts. Most e-file and tax preparation software allows taxpayers to split refunds. Paper return filers need to file Form 8888, Direct Deposit of Refund to More Than One Account, to split a refund among different accounts.

Make Sure Your Paper Return is Error-Free
Those who file a paper return can avoid most potential delays in processing the return and can avoid additional correspondence with the IRS to clarify errors by making certain they:

• Double-check their figures.
• Make sure all Social Security numbers are correct.
• Sign their form.
• Attach all required schedules.
• Send their return or request an extension by the April 15 filing deadline.

Pay Electronically
Electronic payment options are convenient, safe and secure methods for paying taxes or user fees. Taxpayers can make payments online, by phone using a credit or debit card, or through the Electronic Federal Tax Payment System. Taxpayers who e-file their return may use the electronic funds withdrawal option for submitting an electronic payment. They can e-file before April 15 but schedule their payment for withdrawal on April 15.

Some taxpayers who itemize may now deduct the convenience fee charged for paying individual income taxes with a credit or debit card as a miscellaneous itemized deduction. The deduction is subject to the 2 percent limit on Form 1040, Schedule A. Taxpayers should not add the convenience fee to their tax payment.

For those who can’t file or pay on time, the IRS provides extensions of time to file and payment plans.

Request an Extension of Time to File
Taxpayers who can’t meet the deadline to file their tax return can get an automatic six-month extension of time to file from the IRS by filing Form 4868, Automatic Extension of Time to File, but they must submit the request by April 15. Taxpayers can e-file the extension request from a home computer or through a tax professional who uses e-file at no cost. Several companies offer free e-filing of extensions through the Free File Alliance; these companies are listed on IRS.gov.

The extension gives taxpayers until Oct. 15 to file the tax return. However, an extension of time to file does is not an extension of time to pay. Those who owe taxes can make a payment when they file the extension either by mailing a check made out to the U.S. Department of the Treasury or by several electronic payment methods, such as electronic funds withdrawals from bank accounts and credit card payments.

Apply for an Installment Agreement
An installment agreement allows taxpayers to pay any remaining balance in monthly installments. Taxpayers who owe $25,000 or less may apply for a payment plan electronically, using the Online Payment Agreement application. Or they may attach Form 9465, Installment Agreement Request, to the front of their tax return. Taxpayers must show the amount of their proposed monthly payment and the date they wish to make their payment each month. The IRS charges $105 for setting up the agreement or $52 if the payments are deducted directly from the taxpayer’s bank account ($43 for qualified lower-income taxpayers).The IRS will automatically give taxpayers the low income installment agreement fee if they qualify. The taxpayer does not have to request it. Taxpayers are required to pay interest plus a late payment penalty on the unpaid taxes for each month or part of a month after the due date that the tax is not paid. A taxpayer who does not file the return by the due date — including extensions — may have to pay a failure-to-file penalty.

Avoid Scams
There are numerous scams in which people receive unsolicited e-mails, phone calls or faxes that claim to come from the IRS or include an IRS logo or send recipients to a phony IRS Web site, and which request personal and financial information that may be used to commit identity theft. Typically, identity thieves use someone’s personal data to empty the victim’s financial accounts, run up charges on the victim’s existing credit cards, apply for new loans, credit cards, services or benefits in the victim’s name, file fraudulent tax returns or even commit crimes.

Anyone who receives one of these bogus e-mails, phone calls or faxes should avoid responding, clicking on any links or opening attachments. Recipients may forward the e-mails or report the calls to phishing@irs.gov.

For more information about filing and paying taxes, visit IRS.gov and choose 1040 Central or refer to the Form 1040 Instructions or IRS Publication 17, Your Federal Income Tax. Taxpayers can download forms and publications from IRS.gov or request a free copy by calling toll free 800-TAX-FORM (800-829-3676).

WASHINGTON, DC — Credit or debit card convenience fees charged for paying federal individual income taxes electronically are deductible for some taxpayers who itemize, the Internal Revenue Service announced today.

Federal law bars the IRS from paying any fees associated with these credit or debit transactions. Card processors normally charge taxpayers for convenience fees when they use their credit or debit card to pay taxes. Fees vary but average about 2.5 percent of the tax payment.

In reassessing a previous position, the IRS decided that the convenience fees associated with the payment of federal tax, including payment of estimated tax, can be included as a miscellaneous itemized deduction. However, only those miscellaneous expenses that exceeded 2 percent of the taxpayer’s adjusted gross income can be deducted.

Not everyone who pays the fees will be able to deduct them. Taxpayers first must be eligible to file a Form 1040 Schedule A to itemize their expenses. And, taxpayers must have enough miscellaneous expenses to exceed the 2 percent threshold. These expenses include items such as tax preparation costs, job search expenses and unreimbursed employee expenses.

For details on claiming miscellaneous deductions and figuring the 2 percent limit, see Publication 529.The fees are deductible in the tax year they occur. For example, fees charged to payments made during 2009 can be claimed on the 2009 return filed next year.

Most individuals still pay their federal tax obligations by check, but last year more than 4 million taxpayers electronically paid their taxes.

There are free options available. Taxpayers can have funds electronically withdrawn from their bank accounts or use the Electronic Federal Tax Payment System (EFTPS). Payments can be made either on-line or by phone, 24 hours a day, 7 days a week. Further details on these options are in the instructions for Form 1040 and under Electronic Payment Options for Individuals on IRS.gov.

WASHINGTON, DC — As part of the Treasury Department’s consumer outreach effort and with the April 15 individual tax filing deadline approaching, the Internal Revenue Service today began a concerted effort to educate taxpayers about additional options at their disposal to claim the new $8,000 first-time homebuyer credit for 2009 home purchases. For people who recently purchased a home or are considering buying in the next few months, there are several different ways that they can get this tax credit even if they’ve already filed their tax return.

The Treasury Department encourages taxpayers to explore these options to maximize their credit and get their money back as fast as possible.

First-time homebuyers represent a significant portion of existing single-family home sales. The expansion in the first-time homebuyer credit will make it easier for first-time homebuyers to enter the housing market this year.

“The new credit can get money in the pockets of first-time homebuyers quickly,” said IRS Commissioner Doug Shulman. “For people who recently purchased a home or are considering buying in the next few months, there are several different ways that they can get this tax credit even if they’ve already filed their tax return.”

First-time homebuyers represent a significant portion of existing single-family home sales. The expansion in the first-time homebuyer credit will make it easier for first-time homebuyers to enter the housing market this year.

Under the American Recovery and Reinvestment Act of 2009, qualifying taxpayers who purchase a home before Dec. 1 receive up to $8,000, or $4,000 for married individuals filing separately. People can claim the credit either on their 2008 tax returns due April 15 or on their 2009 tax returns next year.

The filing options to consider are:

• File an extension — Taxpayers who haven’t yet filed their 2008 returns but are buying a home soon can request a six-month extension to October 15. This step would be faster than waiting until next year to claim it on the 2009 tax return. Even with an extension, taxpayers could still file electronically, receiving their refund in as few as 10 days with direct deposit.
• File now, amend later — Taxpayers due a sizable refund for their 2008 tax return but who also are considering buying a house in the next few months can file their return now and claim the credit later. Taxpayers would file their 2008 tax forms as usual, then follow up with an amended return later this year to claim the homebuyer credit.
• Amend the 2008 tax return — Taxpayers buying a home in the near future who have already filed their 2008 tax return can consider filing an amended tax return. The amended tax return will allow them to claim the homebuyer credit on the 2008 return without waiting until next year to claim it on the 2009 return.
• Claim the credit in 2009 rather than 2008 — For some taxpayers, it may make more financial sense to wait and claim the homebuyer credit next year when they file the 2009 tax return rather than claiming it now on the 2008 tax return. This could benefit taxpayers who might qualify for a higher credit on the 2009 tax return. This could include people who have less income in 2009 than 2008 because of factors such as a job loss or drop in investment income.

The IRS reminds taxpayers the amount of the credit begins to phase out for taxpayers whose modified adjusted gross income is more than $75,000, or $150,000 for joint filers. Taxpayers can claim 10 percent of the purchase price up to $8,000, or $4,000 for married individuals filing separately.

IRS.gov provides more information, including guidance for people who bought their first homes in 2008. To learn more about the overall implementation of the Recovery Act, visit www.Recovery.gov.