Seven Tips to Help You Determine if Your Social Security Benefits are Taxable

February 8th, 2012

Many people may not realize the Social Security benefits they received in 2011 may be taxable. All Social Security recipients should receive a Form SSA-1099 from the Social Security Administration which shows the total amount of their benefits. You can use this information to help you determine if your benefits are taxable. Here are seven tips from the IRS to help you:

1. How much – if any – of your Social Security benefits are taxable depends on your total income and marital status.

2. Generally, if Social Security benefits were your only income for 2011, your benefits are not taxable and you probably do not need to file a federal income tax return.

3. If you received income from other sources, your benefits will not be taxed unless your modified adjusted gross income is more than the base amount for your filing status (see below).

4. Your taxable benefits and modified adjusted gross income are figured on a worksheet in the Form 1040A or Form 1040 Instruction booklet. Your tax software program will also figure this for you.

5. You can do the following quick computation to determine whether some of your benefits may be taxable:

  • First, add one-half of the total Social Security benefits you received to all your other income, including any tax-exemp interest and other exclusions from income.
  • Then, compare this total to the base amount for your filing status. If the total is more than your base amount, some of your benefits may be taxable.

6. The 2011 base amounts are:

  • $32,000 for married couples filing jointly.
  • $25,000 for single, head of household, qualifying      widow/widower with a dependent child, or married individuals filing      separately who did not live with their spouse at any time during the year.
  • $0 for married persons filing separately who lived      together during the year.

7. For additional information on the taxability of Social Security benefits, see IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits. You can get a copy of Publication 915 at www.irs.gov or by calling 800-TAX-FORM (800-829-3676).

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Safeguard Your Refund – Choose Direct Deposit

February 6th, 2012

Direct deposit is the fastest, safest way to receive your tax refund. When a taxpayer combines e-file and direct deposit, the IRS will likely issue your refund in as few as 10 days.

Here are four reasons more than 79 million taxpayers chose direct deposit in 2011:

1. Security Thousands of paper checks are returned to the IRS by the U.S. Post Office every year as undeliverable mail. Direct deposit eliminates the possibility of your refund check being lost, stolen or returned to the IRS as undeliverable.

2. Convenience The money goes directly into your bank account. You won’t have to make a special trip to the bank to deposit the money yourself.

3. Ease When you’re preparing your return; simply follow the instructions on your return or in the tax software. Make sure you enter the correct bank account and bank routing numbers.

4. Options You can deposit your refund into multiple accounts. With the split refund option, taxpayers can divide their refunds among as many as three checking or savings accounts and up to three different U.S. financial institutions. Use IRS Form 8888, Allocation of Refund (Including Savings Bond Purchases), to divide your refund. A word of caution: Some financial institutions do not allow a joint refund to be deposited into an individual account. Check with your bank or other financial institution to make sure your direct deposit will be accepted. Additionally, Form 8888 should NOT be used to designate part of your refund to pay your tax preparer.

For more information about direct deposit of your tax refund and the split refund option, check the instructions for your tax form. Helpful tips are also available in IRS Publication 17, Your Federal Income Tax. To get a copy of Publication 17 or Form 8888, visit the IRS Forms and Publications section at the IRS.gov website or call 800-TAX-FORM (800-829-3676).

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Five Tips for Recently Married or Divorced Taxpayers with a Name Change

February 3rd, 2012


If you changed your name after a recent marriage or divorce, the IRS reminds you to take the necessary steps to ensure the name on your tax return matches the name registered with the Social Security Administration. A mismatch between the name shown on your tax return and the SSA records can cause problems in the processing of your return and may even delay your refund.

Here are five tips from the IRS for recently married or divorced taxpayers who have a name change.

1. If you took your spouse’s last name — or if you hyphenated your last names, you may run into complications if you don’t notify the SSA. When newlyweds file a tax return using their new last names, IRS computers can’t match the new name with their Social Security number.

2. If you recently divorced and changed back to your previous last name, you’ll also need to notify the SSA of this name change.

3. Informing the SSA of a name change is easy. Simply file a Form SS-5, Application for a Social Security Card, at your local SSA office or by mail and provide a recently issued document as proof of your legal name change.

4. Form SS-5 is available on SSA’s website at http://www.socialsecurity.gov/, by calling 800-772-1213 or at local offices. Your new card will have the same number as your previous card, but will show your new name.

5. If you adopted your spouse’s children after getting married and their names changed, you’ll need to update their names with SSA too. For adopted children without SSNs, the parents can apply for an Adoption Taxpayer Identification Number – or ATIN – by filing Form W-7A, Application for Taxpayer Identification Number for Pending U.S. Adoptions with the IRS. The ATIN is a temporary number used in place of an SSN on the tax return. Form W-7A is available on the IRS.gov website or by calling 800-TAX-FORM (800-829-3676).

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Top Tips Every Taxpayer Should Know about Identity Theft

January 19th, 2012

Identity theft often starts outside of the tax administration system when someone’s personal information is unfortunately stolen or lost. Identity thieves may then use a taxpayer’s identity to fraudulently file a tax return and claim a refund. In other cases, the identity thief uses the taxpayer’s personal information in order to get a job. The legitimate taxpayer may be unaware that anything has happened until they file their return later in the filing season and it is discovered that two returns have been filed using the same Social Security number.

Here are the top 13 things the IRS wants you to know about identity theft so you can avoid becoming the victim of an identity thief.

1. The IRS does not initiate contact with taxpayers by email to request personal or financial information. The IRS does not send emails stating you are being electronically audited or that you are getting a refund.

2. If you receive a scam e-mail claiming to be from the IRS, forward it to the IRS at phishing@irs.gov.

3. Identity thieves get your personal information by many different means, including:

* Stealing your wallet or purse
* Posing as someone who needs information about you through a phone call or
e-mail
* Looking through your trash for personal information
* Accessing information you provide to an unsecured Internet site.

4. If you discover a website that claims to be the IRS but does not begin with ‘www.irs.gov,’ forward that link to the IRS at phishing@irs.gov.

5. To learn how to identify a secure website, visit the Federal Trade Commission at www.onguardonline.gov/tools/recognize-secure-site-using-ssl.aspx.

6. If your Social Security number is stolen, another individual may use it to get a job.  That person’s employer may report income earned by them to the IRS using your Social Security number, thus making it appear that you did not report all of your income on your tax return.  When this occurs, you should contact the IRS to show that the income is not yours.  Your record will be updated to reflect only your information.  You will also be asked to submit substantiating documentation to authenticate yourself. That information will be used to minimize this occurrence in future years.

7. Your identity may have been stolen if a letter from the IRS indicates more than one tax return was filed for you or the letter states you received wages from an employer you don’t know.  If you receive such a letter from the IRS, leading you to believe your identity has been stolen, respond immediately to the name, address or phone number on the IRS notice.

8. If your tax records are not currently affected by identity theft, but you believe you may be at risk due to a lost wallet, questionable credit card activity, or credit report, you need to provide the IRS with proof of your identity.  You should submit a copy of your valid government-issued identification – such as a Social Security card, driver’s license, or passport – along with a copy of a police report and/or a completed IRS Form 14039, Identity Theft Affidavit, which should be faxed to the IRS at 978-684-4542.  Please be sure to write clearly.  As an option, you can also contact the IRS Identity Protection Specialized Unit, toll-free at 800-908-4490.  You should also follow FTC guidance for reporting identity theft at www.ftc.gov/idtheft.

9. Show your Social Security card to your employer when you start a job or to your financial institution for tax reporting purposes.  Do not routinely carry your card or other documents that display your Social Security number.

10. For more information about identity theft – including information about how to report identity theft, phishing and related fraudulent activity – visit the IRS Identity Theft and Your Tax Records Page, which you can find by searching “Identity Theft” on the IRS.gov home page.

11. IRS impersonation schemes flourish during tax season and can take the form of e-mail, phone websites, even tweets.  Scammers may also use a phone or fax to reach their victims.  If you receive a paper letter or notice via mail claiming to be the IRS but you suspect it is a scam, contact the IRS at http://www.irs.gov/contact/index.html to determine if it is a legitimate IRS notice or letter.  If it is a legitimate IRS notice or letter, reply if needed.  If the caller or party that sent the paper letter is not legitimate, contact the Treasury Inspector General for Tax Administration at 1-800-366-4484.  You may also fax the notice/letter you received, plus any related or supporting information, to TIGTA.  Note that this is not a toll-free FAX number 1-202-927-7018.

12. While preparing your tax return for electronic filing, make sure to use a strong password to protect the data file.  Once your return has been e-filed, burn the file to a CD or flash drive and remove the personal information from your hard drive.  Store the CD or flash drive in a safe place, such as a lock box or safe.  If working with an accountant, you should ask them what measures they take to protect your information.

13. If you have information about the identity thief that impacted your personal information negatively, file an online complaint with the Internet Crime Complaint Center (IC3) at www.ic3.gov. The IC3 gives victims of cyber crime a convenient and easy-to-use reporting mechanism that alerts authorities of suspected criminal or civil violations. IC3 sends every complaint to one or more law enforcement or regulatory agencies that have jurisdiction over the matter.

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More Innocent Spouses Qualify for Relief Under New IRS Guidelines

January 8th, 2012

The Internal Revenue Service released new proposed guidelines designed to provide relief to more innocent spouses requesting equitable relief from income tax liability.

A Notice proposing a new revenue procedure, posted today on IRS.gov, revises the threshold requirements for requesting equitable relief and revises the factors used by the IRS in evaluating these requests. The factors have been revised to ensure that requests for innocent spouse relief are granted under section 6015(f) when the facts and circumstances warrant and that, when appropriate, requests are granted in the initial stage of the administrative process. The new guidelines are available immediately and will remain available until the finalized revenue procedure is published. The IRS will immediately begin using these new guidelines when evaluating equitable relief requests.

“The IRS is significantly changing the way we determine innocent spouse relief,” said IRS Commissioner Doug Shulman. “These improvements should dramatically enhance our process to make it fairer for victimized taxpayers facing difficult situations.”

This is the second major change made to the innocent spouse program. In July, the IRS extended help to more innocent spouses by eliminating the two-year time limit that previously applied to requests seeking equitable relief.

The IRS invites public comment on the proposed revenue procedure. There are three ways to submit comments.

  • E-mail to: Notice.Comments@irscounsel.treas.gov.      Include “Notice 2012-8” in the subject line.
  • Mail to: Internal Revenue Service, CC:PA:LPD:PR (Notice      2012-8), Room 5203, P.O. Box 7604, Ben Franklin Station, Washington, DC      20044.
  • Hand deliver to: CC:PA:LPD:PR (Notice 2012-8),      Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue NW,      Washington, DC, between 8 a.m. and 4 p.m., Monday through Friday.

The deadline is Feb. 21, 2012.

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IRS and Treasury Department Publish Temporary Regulations on Treatment of Tangible Property

December 30th, 2011

The Internal Revenue Service and Treasury Department published in the
Federal Register temporary regulations that provide guidance to taxpayers on
the treatment of amounts paid to acquire, produce or improve tangible property
and regarding the accounting for, and dispositions of, property subject to
depreciation. These regulations provide objective standards and bright-line
rules intended to simplify compliance with the capitalization provisions
contained in section 263(a) of the Internal Revenue Code.

The temporary regulations generally are effective for expenditures made on
or after Jan. 1, 2012, and therefore these regulations do not affect taxpayers’
2011 tax returns.  The IRS and Treasury Department anticipate publishing
additional guidance that will advise taxpayers regarding how to obtain
automatic consent to change to a method of accounting provided in the temporary
regulations for taxable years beginning on or after Jan. 1, 2012.  These
automatic consent requests may be filed beginning with taxpayers’ 2012 tax
returns.  Taxpayers may not request a change to a method described in the
temporary regulations on their 2011 tax returns.

The temporary regulations also were released as a notice of proposed
rulemaking, offering taxpayers the opportunity to comment on the rules.
Written comments are requested by March 26, 2012, and a public hearing on the
regulations is scheduled for April 4, 2012.

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Interest Rates Remain the Same for the First Quarter of 2012

December 5th, 2011

The Internal Revenue Service announced that interest rates will remain
the same for the calendar quarter beginning Jan. 1, 2012. The rates will be:

  • three (3) percent for overpayments [two (2) percent in
    the case of a corporation];
  • three (3) percent for underpayments;
  • five (5) percent for large corporate underpayments; and
  • one-half (0.5) percent for the portion of a corporate
    overpayment exceeding $10,000.

The 3 percent rate also applies to estimated tax underpayments for the first
calendar quarter in 2012 and for the first 15 days in April 2012.

Under the Internal Revenue Code, the rate of interest is determined on a
quarterly basis. For taxpayers other than corporations, the overpayment and
underpayment rate is the federal short-term rate plus 3 percentage points.
Generally, in the case of a corporation, the underpayment rate is the federal
short-term rate plus 3 percentage points and the overpayment rate is the
federal short-term rate plus 2 percentage points.

The rate for large corporate underpayments is the federal short-term rate
plus 5 percentage points. The rate on the portion of a corporate overpayment of
tax exceeding $10,000 for a taxable period is the federal short-term rate plus
one-half (0.5) of a percentage point. Further, the federal short-term rate that
applies during the third month following the taxable year also applies during
the first 15 days of the fourth month following the taxable year.

The interest rates announced today are computed from the federal short-term
rate during October 2011 to take effect Nov. 1, 2011, based on daily
compounding.

Revenue Ruling 2011-32, announcing the rates of interest, is attached and will
appear in Internal Revenue Bulletin No. 2011-52, dated Dec. 27, 2011.

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IRS Seeks to Return $153 Million in Undelivered Checks to Taxpayers; Recommends e-file, Direct Deposit to Avoid Future Delivery Problems

December 2nd, 2011

In an annual reminder to taxpayers, the Internal Revenue Service announced
that it is looking to return $153.3 million in undelivered tax refund
checks. In all, 99,123 taxpayers are due refund checks this year that could not
be delivered because of mailing address errors.

Undelivered refund checks average $1,547 this year.

Taxpayers who believe their refund check may have been returned to the IRS
as undelivered should use the “Where’s
My Refund?” tool on IRS.gov. The tool will provide the status of their
refund and, in some cases, instructions on how to resolve delivery problems.

Taxpayers checking on a refund over the phone will receive instructions on
how to update their addresses. Taxpayers can access a telephone version of
“Where’s My Refund?” by calling 1-800-829-1954.

While only a small percentage of checks mailed out by the IRS are returned
as undelivered, taxpayers can put an end to lost, stolen or undelivered checks
by choosing direct deposit when they file either paper or electronic returns.
Last year, more than 78.4 million taxpayers chose to receive their refund
through direct deposit. Taxpayers can receive refunds directly into their bank
account, split a tax refund into two or three financial accounts or even buy a
savings bond.

The IRS also recommends that taxpayers file their tax returns
electronically, because e-file eliminates the risk of lost paper returns.
E-file also reduces errors on tax returns and speeds up refunds. Nearly 8 out
of 10 taxpayers chose e-file last year. E-file combined with direct deposit is
the best option for taxpayers to avoid refund problems; it’s easy, fast and
safe.

The public should be aware that the IRS does not contact taxpayers by e-mail
to alert them of pending refunds and does not ask for personal or financial
information through email.  Such messages are common phishing scams.
The agency urges taxpayers receiving such messages not to release any personal
information, reply, open any attachments or click on any links to avoid
malicious code that can infect their computers.  The best way for an
individual to verify if she or he has a pending refund is going directly to
IRS.gov and using the “Where’s My Refund?” tool.

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IRS Issues Proposed Regulations That Would Require Tax Preparers to File Due Diligence Checklist with All EITC Claims Submitted in 2012

October 10th, 2011

The Internal Revenue Service announced that it is issuing proposed
regulations that would require paid tax return preparers, beginning in 2012, to
file a due diligence checklist, Form 8867, with any federal return claiming the
Earned Income Tax Credit (EITC). It is the same form that is currently required
to be completed and retained in a preparer’s records.

The due diligence requirement, enacted by Congress over a decade ago, was designed
to reduce errors on returns claiming the EITC, most of which are prepared by
tax professionals.

The IRS created Form 8867, Paid Preparer’s Earned Income Credit Checklist, to help preparers meet the
requirement by obtaining eligibility information from their clients. Preparers
have been required to keep copies of the form, or comparable documentation,
which is subject to review by the IRS. To help ensure compliance with the law
and that eligible taxpayers receive the right credit amount, the proposed
regulations would require preparers, effective Jan. 1, 2012, to file the Form
8867 with each return claiming the EITC.

Further details can be found in REG-140280-09. Comments on the proposed
regulations are due by Nov. 10, 2011, and a public hearing on the proposed
regulations is scheduled for Nov. 7, 2011.

The EITC benefits low-and moderate-income workers and working families and
the tax benefit varies by income, family size and filing status. Unlike most
deductions and credits, the EITC is refundable –– taxpayers can get it even if
they owe no tax. For 2011 tax returns, the maximum credit will be $5,751.

Although as many as one in five eligible taxpayers fail to claim the EITC,
some of those who do claim it either compute it incorrectly or are ineligible.
The IRS is proposing this step as part of its efforts to ensure that the credit
is afforded to taxpayers who qualify. For 2009, over 26 million people received
nearly $59 billion through the EITC. Tax professionals prepare close to 66
percent of these claims.

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Keep Good Records Now to Reduce Tax-Time Stress

August 26th, 2011

You may not be thinking about your tax return right now, but summer is a
great time to start planning for next year. Organized records not only make
preparing your return easier, but may also remind you of relevant transactions,
help you prepare a response if you receive an IRS notice, or substantiate items
on your return if you are selected for an audit.

Here are a few things you should know about recordkeeping.

1. In most cases, the IRS does not require you to keep records in any
special manner. Generally, you should keep any and all documents that may have
an impact on your federal tax return. It’s a good idea to have a designated
place for tax documents and receipts.

2. Individual taxpayers should usually keep the following records supporting
items on their tax returns for at least three years:

  • Bills
  • Credit card and other receipts
  • Invoices
  • Mileage logs
  • Canceled, imaged or substitute checks or any other
    proof of payment
  • Any other records to support deductions or credits you
    claim on your return

You should normally keep records relating to property until at least three
years after you sell or otherwise dispose of the property. Examples include:

  • A home purchase or improvement
  • Stocks and other investments
  • Individual Retirement Arrangement transactions
  • Rental property records

3. If you are a small business owner, you must keep all your employment tax
records for at least four years after the tax becomes due or is paid, whichever
is later. Examples of important documents business owners should keep Include:

  • Gross receipts: Cash register tapes, bank deposit
    slips, receipt books, invoices, credit card charge slips and Forms
    1099-MISC
  • Proof of purchases: Canceled checks, cash register tape
    receipts, credit card sales slips and invoices
  • Expense documents: Canceled checks, cash register
    tapes, account statements, credit card sales slips, invoices and petty
    cash slips for small cash payments
  • Documents to verify your assets: Purchase and sales
    invoices, real estate closing statements and canceled checks

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