New Procedure Helps People Making IRA and Retirement Plan Rollovers

From the IRS –

New Procedure Helps People Making IRA and Retirement Plan Rollovers

WASHINGTON — The Internal Revenue Service today provided a self-certification procedure designed to help   recipients of retirement plan distributions who inadvertently miss the 60-day time limit for properly rolling these amounts into another retirement plan or individual retirement arrangement (IRA).

In Revenue Procedure 2016-47, posted today on IRS.gov, the IRS explained how eligible taxpayers, encountering a variety of mitigating circumstances, can qualify for a waiver of the 60-day time limit and avoid possible early distribution taxes. In addition, the revenue procedure includes a sample self-certification letter that a taxpayer can use to notify the administrator or trustee of the retirement plan or IRA receiving the rollover that they qualify for the waiver.

Normally, an eligible distribution from an IRA or workplace retirement plan can only qualify for tax-free rollover treatment if it is contributed to another IRA or workplace plan by the 60th day after it was received. In most cases, taxpayers who fail to meet the time limit could only obtain a waiver by requesting a private letter ruling from the IRS.

A taxpayer who missed the time limit will now ordinarily qualify for a waiver if one or more of 11 circumstances, listed in the revenue procedure, apply to them. They include a distribution check that was misplaced and never cashed, the taxpayer’s home was severely damaged, a family member died, the taxpayer or a family member was seriously ill, the taxpayer was incarcerated or restrictions were imposed by a foreign country.

Ordinarily, the IRS and plan administrators and trustees will honor a taxpayer’s truthful self-certification that they qualify for a waiver under these circumstances. Moreover, even if a taxpayer does not self-certify, the IRS now has the authority to grant a waiver during a subsequent examination. Other requirements, along with a copy of a sample self-certification letter, can be found in the revenue procedure.

The IRS encourages eligible taxpayers wishing to transfer retirement plan or IRA distributions to another retirement plan or IRA to consider requesting that the administrator or trustee make a direct trustee-to-trustee transfer, rather than doing a rollover. Doing so can avoid some of the delays and restrictions that often arise during the rollover process. For more information about rollovers and transfers, check out the Can You Move Retirement Plan Assets? section in Publication 590-A or the Rollovers of Retirement Plan and IRA Distributions  page on IRS.gov.

IRS Warns of Back-to-School Scams; Encourages Students, Parents, Schools to Stay Alert

From the IRS –

IRS Warns of Back-to-School Scams; Encourages Students, Parents, Schools to Stay Alert

WASHINGTON — The Internal Revenue Service today warned taxpayers against telephone scammers targeting students and parents during the back-to-school season and demanding payments for non-existent taxes, such as the “Federal Student Tax.”

People should be on the lookout for IRS impersonators calling students and demanding that they wire money immediately to pay a fake “federal student tax.” If the person does not comply, the scammer becomes aggressive and threatens to report the student to the police to be arrested. As schools around the nation prepare to re-open, it is important for taxpayers to be particularly aware of this scheme going after students and parents.

“Although variations of the IRS impersonation scam continue year-round, they tend to peak when scammers find prime opportunities to strike”, said IRS Commissioner John Koskinen. “As students and parents enter the new school year, they should remain alert to bogus calls, including those demanding fake tax payments from students.”

The IRS encourages college and school communities to share this information so that students, parents and their families are aware of these scams.

Scammers are constantly identifying new tactics to carry out their crimes in new and unsuspecting ways. This year, the IRS has seen scammers use a variety of schemes to fool taxpayers into paying money or giving up personal information. Some of these include:

  • Altering the caller ID on incoming phone calls in a “spoofing” attempt to make it seem like the IRS, the local police or another agency is calling
  • Imitating software providers to trick tax professionals–IR-2016-103
  • Demanding fake tax payments using iTunes gift cards–IR-2016-99
  • Soliciting W-2 information from payroll and human resources professionals–IR-2016-34
  • “Verifying” tax return information over the phone–IR-2016-40
  • Pretending to be from the tax preparation industry–IR-2016-28

If you receive an unexpected call from someone claiming to be from the IRS, here are some of the telltale signs to help protect yourself.

The IRS Will Never:

  • Call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer. Generally, the IRS will first mail you a bill if you owe any taxes.
  • Threaten to immediately bring in local police or other law-enforcement groups to have you arrested for not paying.
  • Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
  • Ask for credit or debit card numbers over the phone.

If you get a suspicious phone call from someone claiming to be from the IRS and asking for money, here’s what you should do:

  • Do not give out any information. Hang up immediately.
  • Search the web for telephone numbers scammers leave in your voicemail asking you to call back. Some of the phone numbers may be published online and linked to criminal activity.
  • Contact TIGTA to report the call. Use their “IRS Impersonation Scam Reporting” web page or call 800-366-4484.
  • Report it to the Federal Trade Commission. Use the “FTC Complaint Assistant” on FTC.gov. Please add “IRS Telephone Scam” in the notes.
  • If you think you might owe taxes, call the IRS directly at 800-829-1040.

Understand Your Taxpayer Bill of Rights

From the IRS –

Understand Your Taxpayer Bill of Rights

Every taxpayer has a set of fundamental rights. The “Taxpayer Bill of Rights” takes the many existing rights in the tax code and groups them into 10 categories. You should know these rights when you interact with the IRS. Publication 1, Your Rights as a Taxpayer, highlights a list of your rights and the agency’s obligations to protect them. Here is a summary of the Taxpayer Bill of Rights:

  1. The Right to Be Informed. You have the right to know what is required to comply with the tax laws. You are entitled to clear explanations of the laws and IRS procedures on all tax forms, instructions, publications, notices and correspondence. You have the right to know about IRS decisions affecting your accounts and clear explanations of the outcomes.
  2. The Right to Quality Service. You have the right to receive prompt, courteous and professional assistance in your dealings with the IRS and the freedom to speak to a supervisor about inadequate service. Communications from the IRS should be clear and easy to understand.
  3. The Right to Pay No More Than the Correct Amount of Tax. You have the right to pay only the amount of tax legally due, including interest and penalties. You should also expect the IRS to apply all tax payments properly.
  4. The Right to Challenge the IRS’s Position and Be Heard. You have the right to object to formal IRS actions or proposed actions and provide justification with additional documentation. You should expect that the IRS will consider your timely objections and documentation promptly and fairly. If the IRS does not agree with your position, you should expect a response.
  5. The Right to Appeal an IRS Decision in an Independent Forum.You are entitled to a fair and impartial administrative appeal of most IRS decisions, including certain penalties. You have the right to receive a written response regarding a decision from the Office of Appeals. You generally have the right to take your case to court.
  6. The Right to Finality. You have the right to know the maximum amount of time you have to challenge an IRS position and the maximum amount of time the IRS has to audit a particular tax year or collect a tax debt. You have the right to know when the IRS concludes an audit.
  7. The Right to Privacy. You have the right to expect that any IRS inquiry, examination or enforcement action will comply with the law and be no more intrusive than necessary. You should expect such proceedings to respect all due process rights, including search and seizure protections. The IRS will provide, where applicable, a collection due process hearing.
  8. The Right to Confidentiality. You have the right to expect that your tax information will remain confidential. The IRS will not disclose information unless authorized by you or by law. You should expect the IRS to take appropriate action against employees, return preparers and others who wrongfully use or disclose your return information.
  9. The Right to Retain Representation. You have the right to retain an authorized representative of your choice to represent you in your dealings with the IRS. You have the right to seek assistance from a Low Income Taxpayer Clinic if you cannot afford representation.
  10. The Right to a Fair and Just Tax System. You have the right to expect fairness from the tax system. This includes considering all facts and circumstances that might affect your underlying liabilities, ability to pay or ability to provide information timely. You have the right to receive assistance from the Taxpayer Advocate Service if you are experiencing financial difficulty or if the IRS has not resolved your tax issues properly and timely through its normal channels.

The IRS will include Publication 1 when sending you a notice on a range of issues, such as an audit or collection matter. Publication 1 is available in English and Spanish. All IRS facilities will publicly display the rights for taxpayers.

Moving Expenses Can Be Deductible

From the IRS –

Moving Expenses Can Be Deductible

Did you move due to a change in your job or business location? If so, you may be able to deduct your moving expenses, except for meals. Here are the top tax tips for moving expenses.

In order to deduct moving expenses, your move must meet three requirements:

  1. The move must closely relate to the start of work.  Generally, you can consider moving expenses within one year of the date you start work at a new job location. Additional rules apply to this requirement.
  2. Your move must meet the distance test.  Your new main job location must be at least 50 miles farther from your old home than your previous job location. For example, if your old job was three miles from your old home, your new job must be at least 53 miles from your old home.
  3. You must meet the time test.  After the move, you must work full-time at your new job for at least 39 weeks in the first year. If you’re self-employed, you must meet this test and work full-time for a total of at least 78 weeks during the first two years at your new job site. If your income tax return is due before you’ve met this test, you can still deduct moving expenses if you expect to meet it.

See Publication 521, Moving Expenses, for more information about these rules. It’s available on IRS.gov/forms anytime.

If you can claim this deduction, here are a few more tips from the IRS:

  • Travel.  You can deduct transportation and lodging expenses for yourself and household members while moving from your old home to your new home. You cannot deduct your travel meal costs.
  • Household goods and utilities.  You can deduct the cost of packing, crating and shipping your things. You may be able to include the cost of storing and insuring these items while in transit. You can deduct the cost of connecting or disconnecting utilities.
  • Nondeductible expenses.  You cannot deduct as moving expenses any part of the purchase price of your new home, the cost of selling a home or the cost of entering into or breaking a lease. See Publication 521 for a complete list.
  • Reimbursed expenses.  If your employer later pays you for the cost of a move that you deducted on your tax return, you may need to include the payment as income. You report any taxable amount on your tax return in the year you get the payment.
  • Address Change.  When you move, be sure to update your address with the IRS and the U.S. Post Office. To notify the IRS file Form 8822, Change of Address.

 

Premium Tax Credit – Changes in Circumstances. 

If you or anyone in your family purchased health coverage through the Marketplace and had advance payments of the premium tax credit paid in advance to your insurance company to lower your monthly premiums, it is important to report life changes to the Marketplace when they happen. Moving to a new address is one change you should report. Other things to report include changes in your income, employment, family size, and gaining or losing eligibility for other coverage. Reporting life changes as they happen allows the Marketplace to adjust your advance credit payments. This will help you avoid a smaller refund or unexpectedly owing taxes when you file your tax return.

What to Expect at Tax Time if You Rent Out Your Vacation Home

From the IRS –

What to Expect at Tax Time if You Rent Out Your Vacation Home

Renting out a vacation property to others can be profitable. If you do this, you  must normally report the rental income on your tax return. You may not have to report the rent, however, if the rental period is short and you also use the property as your home. Here are some tips that you should know:

  • Vacation Home.  A vacation home can be a house, apartment, condominium, mobile home, boat or similar property.
  • Schedule E.  You usually report rental income and rental expenses on Schedule E, Supplemental Income and Loss. Your rental income may also be subject to Net Investment Income Tax.
  • Used as a Home.  If the property is “used as a home,” your rental expense deduction is limited. This means your deduction for rental expenses can’t be more than the rent you received. For more about these rules, see Publication 527, Residential Rental Property (Including Rental of Vacation Homes).
  • Divide Expenses.  If you personally use your property and also rent it to others, special rules apply. You must divide your expenses between rental use and personal use. To figure how to divide your costs, you must compare the number of days for each type of use with the total days of use.
  • Personal Use.  Personal use may include use by your family. It may also include use by any other property owners or their family. Use by anyone who pays less than a fair rental price is also considered personal use.
  • Schedule A.  Report deductible expenses for personal use on Schedule A, Itemized Deductions. These may include costs such as mortgage interest, property taxes and casualty losses.
  • Rented Less than 15 Days.  If the property is “used as a home” and you rent it out fewer than 15 days per year, you do not have to report the rental income. In this case you deduct your qualified expenses on Schedule A.

How Identity Theft Can Affect Your Taxes

From the IRS –

How Identity Theft Can Affect Your Taxes

Tax-related identity theft normally occurs when someone uses your stolen Social Security number to file a tax return claiming a fraudulent refund. Many people first find out about it when they do their taxes.

The IRS is working hard to stop identity theft with a strategy of prevention, detection and victim assistance. Here are nine key points:

  1. Taxes. Security. Together. The IRS, the states and the tax industry need your help. We can’t fight identity theft alone. The Taxes. Security. Together. awareness campaign is an effort to better inform you about the need to protect your personal, tax and financial data online and at home.
  2. Protect your Records. Keep your Social Security card at home and not in your wallet or purse. Only provide your Social Security number if it’s absolutely necessary. Protect your personal information at home and protect your computers with anti-spam and anti-virus software. Routinely change passwords for internet accounts.
  3. Don’t Fall for Scams.  Criminals often try to impersonate your bank, your credit card company, even the IRS in order to steal your personal data. Learn to recognize and avoid those fake emails and texts. Also, the IRS will not call you threatening a lawsuit, arrest or to demand an immediate tax payment. Normal correspondence is a letter in the mail. Beware of threatening phone calls from someone claiming to be from the IRS.
  4. Report Tax-Related ID Theft to the IRS. If you cannot e-file your return because a tax return already was filed using your SSN, consider the following steps: • File your taxes by paper and pay any taxes owed. • File an IRS Form 14039 Identity Theft Affidavit. Print the form and mail or fax it according to the instructions. You may include it with your paper return. • File a report with the Federal Trade Commission using the FTC Complaint Assistant; • Contact one of the three credit bureaus so they can place a fraud alert or credit freeze on your account;
  5. IRS Letters. If the IRS identifies a suspicious tax return with your SSN, it may send you a letter asking you to verify your identity by calling a special number or visiting a Taxpayer Assistance Center. This is to protect you from tax-related identity theft.
  6. IP PIN. If you are a confirmed ID theft victim, the IRS may issue an IP PIN. The IP PIN is a unique six-digit number that you will use to e-file your tax return. Each year, you will receive an IRS letter with a new IP PIN.
  7. Report Suspicious Activity. If you suspect or know of an individual or business that is committing tax fraud, you can visit IRS.gov and follow the chart on How to Report Suspected Tax Fraud Activity.
  8. Combating ID Theft.  In 2015, the IRS stopped 1.4 million confirmed ID theft returns and protected $8.7 billion. In the past couple of years, more than 2,000 people have been convicted of filing fraudulent ID theft returns.
  9. Service Options. Information about tax-related identity theft is available online. We have a special section on IRS.gov devoted to identity theft and a phone number available for victims to obtain assistance.

For more on this Topic, see the Taxpayer Guide to Identity Theft.

IRS Tax Tips provide valuable information throughout the year. IRS.gov offers tax help and info on various topics including common tax scams, taxpayer rights and more.

Additional IRS Resources:

  • Publication 5027, Identity Theft Information for Taxpayers
  • Publication 5199, Tax Preparer Guide to Identity Theft
  • Publication 4524, Security Awareness-Identity Theft Flyer
  • Publication 4523, Beware of Phishing Schemes

IRS YouTube Videos:

  • IRS Identity Theft FAQ: Going After the Bad Guys – English | Spanish | ASL
  • Phishing-Malware – English | Spanish | ASL

 

IRS Warns Taxpayers of Summer Surge in Automated Phone Scam Calls

From the IRS –

IRS Warns Taxpayers of Summer Surge in Automated Phone Scam Calls; Requests for Fake Tax Payments Using iTunes Gift Cards

WASHINGTON — The Internal Revenue Service today warned taxpayers to stay vigilant against an increase of IRS impersonation scams in the form of automated calls and new tactics from scammers demanding tax payments on iTunes and other gift cards.

The IRS has seen an increase in “robo-calls” where scammers leave urgent callback requests through the phone telling taxpayers to call back to settle their “tax bill.” These fake calls generally claim to be the last warning before legal action is taken. Once the victim calls back, the scammers may threaten to arrest, deport or revoke the driver’s license of the victim if they don’t agree to pay.

“It used to be that most of these bogus calls would come from a live-person. Scammers are evolving and using more and more automated calls in an effort to reach the largest number of victims possible,” said IRS Commissioner John Koskinen. “Taxpayers should remain alert for this summer surge of phone scams, and watch for clear warning signs as these scammers change tactics.”

In the latest trend, IRS impersonators are demanding payments on iTunes and other gift cards. The IRS reminds taxpayers that any request to settle a tax bill by putting money on  any form of gift card is a clear indication of a scam.

Some examples of the varied tactics seen this year are:

  • Demanding payment for a “Federal Student Tax”–IR-2016-81
  • Demanding immediate tax payment for taxes owed on an iTunes or other type of gift card
  • Soliciting W-2 information from payroll and human resources professionals–IR-2016-34
  • “Verifying” tax return information over the phone–IR-2016-40
  • Pretending to be from the tax preparation industry–IR-2016-28

Since these bogus calls can take many forms and scammers are constantly changing their strategies, knowing the telltale signs is the best way to avoid becoming a victim.

The IRS Will Never:

  • Call to demand immediate payment over the phone, nor will the agency call about taxes owed without first having mailed you a bill.
  • Threaten to immediately bring in local police or other law-enforcement groups to have you arrested for not paying.
  • Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
  • Require you to use a specific payment method for your taxes, such as a prepaid debit card, gift card or wire transfer.
  • Ask for credit or debit card numbers over the phone.

If you get a phone call from someone claiming to be from the IRS and asking for money and you don’t owe taxes, here’s what you should do:

Back to School? Learn about Tax Credits for Education

From the IRS –

Back to School? Learn about Tax Credits for Education

If you pay for college in 2016, you may receive some tax savings on your federal tax return, even if you’re studying outside of the U.S. Both the American Opportunity Tax Credit and the Lifetime Learning Credit may reduce the amount of tax you owe, but only the AOTC is partially refundable.

Here are a few things you should know about education credits:

  • American Opportunity Tax Credit ‒ The AOTC is worth up to $2,500 per year for an eligible student. This credit is available for the first four years of higher education. Forty percent of the AOTC is refundable. That means, if you’re eligible, you can get up to $1,000 of the credit as a refund, even if you do not owe any tax.
  • Lifetime Learning Credit ‒ The LLC is worth up to $2,000 per tax return. There is no limit on the number of years that you can claim the LLC for an eligible student.
  • Qualified expenses ‒ You may use only qualified expenses paid to figure your credit. These expenses include the costs you pay for tuition, fees and other related expenses for an eligible student to enroll at, or attend, an eligible educational institution. Refer to IRS.gov for more on the rules that apply to each credit.
  • Eligible educational institutionsEligible educational schools are those that offer education beyond high school. This includes most colleges and universities. Vocational schools or other postsecondary schools may also qualify. If you aren’t sure if your school is eligible:
    • Ask your school if it is an eligible educational institution, or
    • See if your school is on the U.S. Department of Education’s Accreditation database.
  • Form 1098-T ‒ In most cases, you should receive Form 1098-T, Tuition Statement, from your school by February 1. This form reports your qualified expenses to the IRS and to you. The amounts shown on the form may be either:  (1) the amount you paid for qualified tuition and related expenses, or (2) the amount that your school billed for qualified tuition and related expenses; therefore, the amounts shown on the form may be different than the amounts you actually paid. Don’t forget that you can only claim an education credit for the qualified tuition and related expenses that you paid in the tax year and not just the amount that your school billed.
  • Income limits ‒ The education credits are subject to income limitations and may be reduced, or eliminated, based on your income.

Miscellaneous Deductions Can Trim Taxes

From the IRS –

 Miscellaneous Deductions Can Trim Taxes


Miscellaneous deductions may reduce your tax bill. These may include certain expenses you paid for in your work if you are an employee. You must itemize deductions when you file to claim these costs. Many taxpayers claim the standard deduction, but you might pay less tax if you itemize. Here are some IRS tax tips you should know about these deductions:

The Two Percent Limit. You can deduct most miscellaneous costs only if their sum is more than two percent of your adjusted gross income. These include expenses such as:

  • Unreimbursed employee expenses.
  • Job search costs for a new job in the same line of work.
  • Tools for your job.
  • Union dues.
  • Work-related travel and transportation.
  • The cost you paid to prepare your tax return. These fees include the cost you paid for tax preparation software. They also include any fee you paid for e-filing of your return.

Deductions Not Subject to the Limit. Some deductions are not subject to the two percent limit. They include:

  • Certain casualty and theft losses. In most cases, this rule is for damaged or stolen property you held for investment. This may include property such as stocks, bonds and works of art.
  • Gambling losses up to the total of your gambling winnings.
  • Losses from Ponzi-type investment schemes.

You can’t deduct some expenses. For example, you can’t deduct personal living or family expenses. Claim allowable miscellaneous deductions on Schedule A, Itemized Deductions. For more about this topic see Publication 529, Miscellaneous Deductions. You can get it on IRS.gov/forms at any time.

IRS Tax Tips provide valuable information throughout the year. IRS.gov offers tax help and info on various topics including common tax scams, taxpayer rights and more.