Lafayette Online » 2008 tax returns

IRS says file by April 15 even if you cannot pay

admin — Tue, 14 Apr 2009 20:13:57 +0000

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).

IRS warns about top twelve tax scams of 2009

admin — Mon, 13 Apr 2009 18:46:58 +0000

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.

T minus 5 days; IRS offers reminders as tax filing deadline looms

admin — Fri, 10 Apr 2009 17:55:50 +0000

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.

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.

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.

Credit, debit card fees related to tax payment now deductible

admin — Tue, 07 Apr 2009 19:33:13 +0000

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.

First-time homebuyers have several options to maximize tax credit

admin — Thu, 19 Mar 2009 01:28:39 +0000

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.”

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.

IRS marks Super Saturday March 21 to help taxpayers file

admin — Tue, 17 Mar 2009 19:20:36 +0000

WASHINGTON, DC — The Internal Revenue Service and scores of its community partners will open their doors on Saturday, March 21, to help people who need free tax preparation, a question answered or a payment schedule arranged.

The IRS will open more than 250 local offices from 9 a.m. to 2 p.m. Community partners will open approximately 1,000 sites on March 21. Tax return preparation is limited to people who earn $42,000 or less. There is no income limitation for people needing IRS assistance for other services at Taxpayer Assistance Centers.

In Greater Lafayette, help will be available at the US Internal Revenue Service offices at 955 Mezzanine Drive (see map below for directions).

View Larger Map

“Because of the economic downturn, many financially distressed taxpayers may be in need of free services. Our Super Saturday service will make it a little easier for people to get that help. Although our Taxpayer Assistance Centers are not normally open on Saturdays, we’re trying to go the extra mile in these difficult times,” said Doug Shulman, IRS Commissioner. “Our Super Saturday service will help people get their refunds quickly. Also, if you think you owe taxes and can’t pay, please come in and talk to us about it. There are steps we can take to help.”

Locations and hours of operation of Super Saturday sites are available at IRS.gov, keyword Super Saturday. People without computer access can call 1-800-906-9887 to find a nearby IRS or partner office. IRS customer service telephone lines, 1-800-829-1040, also will be available on Super Saturday from 9 a.m. to 2 p.m. to answer tax questions.

People who earn $42,000 or less can have their tax return prepared by the IRS or a community volunteer at participating locations. Filing a tax return may also be the fastest way to get some extra money. More than 80 percent of all taxpayers receive a refund. IRS employees and the community volunteers can help people get all the tax credits and deductions for which they are eligible. Taxpayers who electronically file their tax returns and who use direct deposit can receive their refunds in as few as 10 days.

Because of lost jobs or reduced income, many people may be eligible for certain tax credits for the first time. For example, the Earned Income Tax Credit is for people who work but who do not earn a lot of money. The EITC adds an extra $2,000 benefit on average. It is the government’s largest anti-poverty program. The additional child tax credit and the first-time homebuyers’ credit are important benefits also affected by a taxpayer’s income.

People who owe taxes but who cannot pay should contact the IRS as soon as possible. Regardless of income, people who need payment options can get help at an IRS office. The IRS can help set up an installment payment plan or a deferred payment plan. It is important that people contact the agency so they can avoid penalties and interest that will make their tax bill even higher.

People who want their tax returns prepared should bring the following information:

Valid driver’s license or photo identification (self & spouse, if applicable)
Social Security cards for all persons listed on the return
Dates of birth for all persons listed on the return
All income statements: Forms W-2, 1099, Social Security, Unemployment, or other benefits statements, self-employment records and any documents showing taxes withheld
Dependent child care information: payee’s name, address and Social Security Number or Taxpayer Identification Number
Proof of account at financial institution for direct debit or deposit (i.e. cancelled/voided check or bank statement)
Prior year tax return (if available)
Any other pertinent documents or papers

For those who don’t want to make a trip, the IRS also offers other free services for tax preparation including the Free File program on IRS.gov.

For people with computer access, the IRS web site remains the best place to go for answers, access to forms and publications and other free services. For example, taxpayers will find the latest details on the American Recovery and Reinvestment Act of 2009 on the IRS.gov homepage.

People also can track their refunds through “Where’s My Refund?” – another free service offered by the agency. People without computer access can still use “Where’s My Refund?” by calling 1-800-829-1954. Taxpayers should have their tax return handy to use the “Where’s My Refund?” application.

New law extends net operating loss carryback for small businesses; IRS to ensure refunds paid timely

admin — Tue, 17 Mar 2009 19:08:01 +0000

WASHINGTON, DC — The Internal Revenue Service announced today that small businesses with deductions exceeding their income in 2008 can use a new net operating loss tax provision to get a refund of taxes paid in prior years.

To accommodate the change in tax law, the IRS today updated the instructions for two key forms – Forms 1045 and 1139 — that small businesses can use to make use of the special carryback provision for tax year 2008. These forms are used to accelerate the payment of refunds.

The new provision, enacted as part of the American Recovery and Reinvestment Act of 2009, enables small businesses with a net operating loss (NOL) in 2008 to elect to offset this loss against income earned in up to five prior years. Typically, an NOL can be carried back for only two years. The IRS released legal guidance today in Revenue Procedure 2009-19 outlining specific details. Some taxpayers must make the election to use this special carryback by April 17, 2009.

“The new net operating loss provisions could throw a lifeline to struggling businesses, providing them with a quick infusion of cash,” said IRS Commissioner Doug Shulman. “We want to make it as easy as possible for small businesses to take advantage of these key tax benefits.”

With the economic downturn and the new law, the IRS expects record numbers of small businesses to be eligible for the refunds. The IRS is putting in special steps to ensure timely processing of these refunds to help small businesses during this difficult period.

Small businesses with large losses in 2008 may be able to benefit fully from those losses now, rather than waiting until claiming them on future tax returns.

The normal two-year carryback remains available if the small business does not elect the special carryback provision. If the loss exceeds the income for the carryback period, the taxpayer can continue to carry forward the remaining balance of the NOL for up to 20 years.

For small businesses that use a fiscal year, this special carryback may be used for an NOL in either a tax year that ends in 2008 or a tax year that begins in 2008. Once a taxpayer makes this election, it may not be changed.

To qualify for the new five-year carryback provision, a small business must have no greater than an average of $15 million in gross receipts over a three-year period ending with the tax year of the NOL. Businesses with more than $15 million in gross receipts still qualify to carry back their 2008 NOL for two years.

There are several methods that a small business uses to elect the new provision as detailed in the Revenue Procedure.

If a small business previously elected to waive the carryback of 2008 NOL but now wants to elect this special carryback, the small business may revoke its previous election to waive the carryback. The election revocation must be made on or before April 17, 2009.

Generally small businesses that are not corporations (including sole proprietorships filing schedule C with their Form 1040) may accelerate a refund by using Form 1045, Application for Tentative Refund.

Corporations with NOLs may also accelerate a refund by using Form 1139, Corporation Application for Tentative Refund.

The IRS will be closely monitoring these filings and will provide additional staff as needed to process these forms. The IRS will work to issue refunds within 45 days or even earlier to the degree possible.

In addition, Frequently Asked Questions have been posted on the IRS.gov web site. Small businesses that file Form 1040 can also call 1-800-829-1040 with NOL questions. Corporations can contact 1-800-829-4933 with NOL questions.

Form 1045 or Form 1139, whichever the taxpayer uses, generally must be filed within one year after the end of the tax year of the NOL. In addition, the current year’s tax return must be filed by the date the Form 1045 or Form 1139 is filed. Form 1045 and Form 1139 are filed at the same place the taxpayer’s return is filed, as listed on the return instructions.

Accelerated refunds paid via Form 1045 or Form 1139 is described as “tentative” because the applications for refunds are potentially subject to review at a later date. Form 1045 Instructions and Form 1139 Instructions on www.IRS.gov provide more information on the accelerated refund option.

IRS: Taxpayers filing earlier, banking larger refunds in 2009

admin — Fri, 06 Mar 2009 17:24:59 +0000

WASHINGTON, DC — Taxpayers are filing earlier and receiving larger refunds so far this year, according to early filing season statistics released today by the Internal Revenue Service.

As of Feb. 27, 2009, the IRS had received 56 million individual tax returns, a slight increase over the previous year. And, the average individual refund was $2,869, a 9 percent increase or $232 more than the same time last year.

As of Feb. 27, 2009, the IRS had received 56 million individual tax returns, a slight increase over the previous year.

The IRS notes that possible reasons for the larger refunds may include taxpayers benefiting from the recovery rebate credit and other tax breaks such as the first-time homebuyer credit and the additional standard deduction for real estate taxes. The average refund amount generally will decrease slightly as the filing season progresses.

More taxpayers choose to receive their refunds through direct deposit each year. As of Feb. 27, more than 84 percent of all refunds were issued through direct deposit, up from 81 percent for the same period last year.

While the IRS has issued almost 3 percent more refunds this year compared to the same time last year, the number of taxpayers who choose to receive their refunds quickly and safely through direct deposit is up almost 7 percent compared to the same time last year. On Feb. 27, the average direct deposit refund totaled $3,063.

The IRS cautioned that year-to-year analysis of total returns filed will be an anomaly this year because last year’s results include those returns filed for the economic stimulus payment. As the year progresses, the IRS expects to receive and process more individual income tax returns during 2009 than in 2007 but fewer than in 2008.

Ivy Tech students provide free tax filing assistance

admin — Mon, 02 Feb 2009 17:35:25 +0000

LAFAYETTE, Ind. — IRS-certified Ivy Tech accounting students will provide free tax help to qualified income tax filers now through April 11. Tax assistance will be available Ivy Hall Room 2337 located on the Ivy Tech campus at 3101 S. Creasy Lane in Lafayette. Tax filers must make an appointment by calling 269-5848. Times are available Monday, Tuesday, Thursday and Saturday.

The students have been trained and certified under the IRS Volunteer Income Tax Assistance (VITA) program. The program offers free assistance to filers with household incomes under $42,000 who cannot prepare their own tax returns. Volunteer students will also help filers with any special credits such as Earned Income Tax Credit, Child Tax Credit, and Credit for the Elderly.

Returns will be electronically submitted to the IRS at no cost. To electronically file a joint tax return, both spouses must be present to sign the required forms. Tax filers can expect to receive any tax refunds within 7 to 14 days in most cases.

Taxpayers should bring a government-issued photo identification, Social Security cards and birth dates for all persons listed on the tax return, income and tax forms (W-2, 1099, pension, Social Security), information on property taxes or any rent paid, any IRS notices, a copy of last year’s tax return, amount paid for child care and child care provider’s tax ID number, any college tuition statement or college bookstore receipts, and a blank or cancelled check if direct deposit is desired.

The IRS provides the computer software used to prepare the tax returns. Volunteers complete an IRS training and certification course in basic income tax return preparation. Training includes how to set up a tax preparation office, interact with clients, and prepare individual returns. Special training is provided to help older Americans with the proper method of reporting pension and Social Security income. Students are also enrolled in an independent study accounting course and receive college credits.

Each return is reviewed. Students must complete a verification checklist before submitting the return electronically. At the end of the program, the students will evaluate their efforts and make recommendations for future programs.

Ivy Tech Community College is the state’s largest public post-secondary institution and the nation’s largest singly-accredited statewide community college system with more than 120,000 students enrolled annually. Ivy Tech has campuses throughout Indiana. It serves as the state’s engine of workforce development, offering affordable degree programs and training that are aligned with the needs of its community along with courses and programs that transfer to other colleges and universities in Indiana. It is accredited by the Higher Learning Commission and a member of the North Central Association.

IRS E-File opens for 2009 with new features to expand taxpayer access, help speed refunds

admin — Thu, 15 Jan 2009 05:22:06 +0000

WASHINGTON, DC — The Internal Revenue Service today announced the Jan. 16 opening of an expanded IRS e-file program for 2008 federal tax returns, highlighted by new features that will allow expanded access to electronic filing and help people looking for faster refunds.

IRS Commissioner Doug Shulman encouraged taxpayers to explore e-file this year as the best option to file accurate tax returns and get fast refunds during the current economic downturn. The e-file program also includes new improvements to the Free File program that will allow nearly all taxpayers to e-file for free.

“These are tough times, and e-file is the best way for people to get cash in their pocket quickly,” said IRS Commissioner Doug Shulman. “Filing electronically with direct deposit can get refunds to taxpayers in as few as 10 days. Combined with important changes in the Free File program, we believe e-file is a better option than ever before for the nation’s taxpayers.”

Last year the average refund was $2,429. The IRS realizes people need their refunds quickly. Shulman urged people who haven’t e-filed before to consider the e-file option this year.

IRS e-file totaled nearly 90 million tax returns in 2008. Almost 58 percent of all returns were filed electronically. Last year, there was a surge in e-file from home computers. Nearly 27 million people prepared their own e-file return. That’s an increase of more than 19 percent from the previous year.

IRS e-file meets the needs of nearly all taxpayers, no matter how complicated or simple their returns are. E-file helps taxpayers take advantage of the tax credits available to them to maximize their refunds during these tough economic times.

A variety of tax software products are available commercially that offer e-file. This year, several of them will not charge additional fees for e-filing for the first time.

In addition, most taxpayers qualify for free tax preparation offered through Free File on IRS.gov. Regardless of income level, taxpayers who are comfortable with filling out paper tax forms and who don’t need extra assistance can use the IRS’s new Free File Fillable Forms. These new online versions of paper tax forms that can be e-filed are available for the first time by visiting the IRS.gov Free File site.

Benefits of e-File

Taxpayers who use e-file and who choose direct deposit can receive their refund in as few as 10 days. That’s because with e-file, there’s no paper return going to the IRS. And with direct deposit, there’s no paper refund going to the taxpayer. So it’s all electronic and much faster than paper.

IRS e-file allows taxpayers to file their returns now and pay later if they owe taxes. It allows taxpayers to file both federal and most state returns at the same time.

Taxpayers may use IRS e-file through their tax preparers, or with a computer using tax preparation software. This software is available on the Internet for online use or for download. Many retail stores sell the software for offline use. The IRS does not charge taxpayers to e-file their completed returns, but some tax preparers and software manufactures may charge a fee. However, this year a number of large software companies are waiving this additional fee.

To get all the benefits of electronic filing, taxpayers must make sure that when they are done with their returns, they take the final step of e-filing them. Taxpayers who use a paid preparer should make sure their preparers are taking this final step, too. In addition to error checks contained in the return-preparation software, additional checks are done during the e-file transmission process. That’s why the error rate is so low for e-filed returns. In fact, the error rate is significantly reduced from 20 percent with paper returns to about 1 percent with e-filed returns.

E-filed tax return information is protected through encryption. Also, taxpayers receive an acknowledgement within 48 hours that the IRS has accepted their return.

Free File

Free File, which is a form of e-file, is a free federal tax preparation and electronic filing program for eligible taxpayers developed through a partnership between the IRS and the Free File Alliance LLC. The Alliance is a group of private-sector tax software companies. Since Free File’s debut in 2003, a total of more than 24 million returns have been prepared and e-filed through the program.

Free File offers 20 different software options that can assist taxpayers with an Adjusted Gross Income (AGI) of $56,000 or less in 2008 to e-file their federal tax returns for free. That means 70 percent of all taxpayers – 98 million taxpayers – can take advantage of tax software that will help them complete their returns through the Free File program. Three companies are offering their products in Spanish.

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

Free File Fillable Tax Forms allows taxpayers to fill out and file their tax forms electronically, just as they would on paper. This option does not include an “interview” process like the other Free File offerings, but it does allow taxpayers to enter their tax data, perform basic math calculations, sign electronically, print their returns for recordkeeping and e-file their returns. This “self-service” 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.

Both the fillable-forms option and the previously available “full service” Free File offerings are available only through the IRS.gov Web site. Both new and returning taxpayers must access Free File through IRS.gov. Otherwise, the e-file provider may charge them a fee. Look for details on IRS.gov beginning Jan. 16.

Almost 4.8 million tax returns were filed through Free File last year, an increase of 24 percent over the previous year’s total of nearly 3.9 million returns.

History of IRS e-File

The IRS began the e-file program in 1986 as a pilot project in three cities: Cincinnati, Phoenix and Raleigh-Durham, N.C. That year, there were 25,000 tax returns filed electronically. The e-file program expanded nationwide in 1990 and 4.2 million tax returns were filed. IRS e-file has undergone tremendous growth each year, with nearly 90 million tax returns e-filed last year.

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