Five “Social” Ways to Get Tax Information You Need

IRS Summertime Tax Tip 2011-09, July 25, 2011

If you use your smartphone to work smarter or you prefer social media resources over hard copy documents, check out the ways the Internal Revenue Service delivers the latest information on tax changes, initiatives, products and services through social media.

1. IRS2Go The IRS launched a smartphone application this year that lets you interact with the IRS using your mobile device. The mobile application can help you get your refund status and tax updates. IRS2Go is available for the iPhone or iTouch and the Android.

2. YouTube The IRS has video channels on YouTube with short, informative videos on various tax-related topics. The videos are in English, American Sign Language and a variety of foreign languages.

3. Twitter IRS tweets include tax-related announcements, news for tax professionals and updates for job seekers. Follow us @IRSnews.

4. Audio files for Podcasts These short audio recordings provide useful information on one tax-related topic per podcast. The audio files are available on iTunes or through the Multimedia Center on IRS.gov (along with their transcripts).

5. Widgets These tools, which can be placed on websites, blogs or social media networks, direct others to IRS.gov for information. The widgets feature the latest tax initiatives and programs and can be found on Marketing Express, the marketing site that allows IRS partners and tax preparers to customize their IRS communications products.

Just remember that the IRS uses these tools to share information with you. Do not post any confidential information on new or social media sites, especially your Social Security number or confidential information. The IRS will not be able to answer personal tax or account questions on any of these sites.

To find links to all of IRS’s social media tools, visit www.irs.gov and click on “IRS New Media.”

Links:

YouTube Video:

Seven Tax Tips for Job Seekers

IRS Summertime Tax Tip 2011-11, July 29, 2011

Many taxpayers spend time during the summer months updating their résumé and attending career fairs. The Internal Revenue Service reminds job seekers that you may be able to deduct some of the expenses on your tax return.

Here are seven things the IRS wants you to know about deducting costs related to your job search:

1. To qualify for a deduction, the expenses must be spent on a job search in your current occupation. You may not deduct expenses you incur while looking for a job in a new occupation.

2. You can deduct employment and outplacement agency fees you pay while looking for a job in your present occupation. If your employer pays you back in a later year for employment agency fees, you must include the amount you receive in your gross income, up to the amount of your tax benefit in the earlier year.

3. You can deduct amounts you spend for preparing and mailing copies of your résumé to prospective employers as long as you are looking for a new job in your present occupation.

4. If you travel to an area to look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area. You can only deduct the travel expenses if the trip is primarily to look for a new job. The amount of time you spend on personal activity compared to the amount of time you spend looking for work is important in determining whether the trip is primarily personal or is primarily to look for a new job.

5. You cannot deduct job search expenses if there was a substantial break between the end of your last job and the time you begin looking for a new one.

6. You cannot deduct job search expenses if you are looking for a job for the first time.

7. The amount of job search expenses that you can claim on your tax return is limited. You can claim the amount that is more than 2 percent of your adjusted gross income.  You figure your deduction on Schedule A.

For more information about job search expenses, see IRS Publication 529, Miscellaneous Deductions. This publication is available onwww.irs.gov or by calling 800-TAX-FORM (800-829-3676).

Links:

Publication 529, Miscellaneous Deductions (PDF)
Tax Center to Assist Unemployed Taxpayers

YouTube Videos:

Job Search Expenses: EnglishSpanishASL

How to Prepare Before a Disaster Strikes

IRS Summertime Tax Tip 2011-03,  July 11, 2011

A home disaster can be stressful enough without reconstructing important records and accounting for belongings. The Internal Revenue Service encourages taxpayers to safeguard their financial and tax records before disaster strikes. Listed below are four simple tips for individuals on preparing for a disaster.

  1. Take advantage of paperless recordkeeping for financial and tax records. Many people receive bank statements and documents electronically and important documents like W-2s and tax returns can be scanned into an electronic format and stored on a flash drive or CD in a safe place. Keep it with other essential documents like home-closing statements, vehicle titles, insurance records and birth, death or marriage certificates and legal paperwork. Some online services can automatically back up computer files and store them offsite. Regardless of how you save your documents(whether it is electronically or on paper) ensure they are safe from the elements, but also encrypted and/or locked up to guard against disclosure or theft.
  2. Document Valuables The IRS has disaster loss workbooks for individuals that can help you compile a room-by-room list of your belongings. One option is to photograph or videotape the contents of your home, especially items of greater value. You should store the photos or video in a safe place away from the geographic area at risk. This will help you recall and prove the market value of items for insurance and casualty loss claims in the event of a disaster.
  3. Update Emergency Plans Make sure you have a means of receiving severe weather information; if you have a NOAA Weather Radio, put fresh batteries in it. Make sure you know what you should do if threatening weather approaches or if a fire occurs.Review your emergency plans annually.
  1. Count on the IRS In the event of a disaster, the IRS stands ready to help. The IRS has valuable information you can request if your records are destroyed. If you have been affected by a federally declared disaster, you can receive copies or transcripts of previously filed tax returns free of charge by submitting Form 4506, Request for Copy of Tax Return, or Form 4506-T, Request for Transcript of Tax Return.  Clearly indicate the official name of the disaster in red at the top of the form, to expedite processing and waive the usual fee for tax return copies.

For more information type “Preparing for a Disaster” in the search box at www.irs.gov.

Links:

Preparing for a Disaster
Publication 584, Casualty, Disaster, and Theft Loss Workbook
Form 4506, Request for Copy of Tax Return (PDF)
Form 4506-T, Request for Transcript of Tax Return (PDF)

YouTube Videos:

Preparing for Disasters: EnglishSpanishASL

Beware of Tax Scams

Tax Tip 2011-58, March 23, 2011

The IRS wants taxpayers to be aware of tax scams. These scams are illegal and can lead to problems for taxpayers including significant penalties, interest and possible criminal prosecution. The schemes take several shapes, ranging from promises of large tax refunds to illegal ways of “untaxing” yourself.

Here are three important guidelines to keep in mind:

  • You are responsible and liable for the content of your tax return.
  • Anyone who promises you a bigger refund without knowing your tax situation could be misleading you, and
  • Never sign a tax return without looking it over to make sure it is accurate.

Beware of these common schemes:

Return Preparer Fraud:

Dishonest tax 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. 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 your tax return you are ultimately responsible for its accuracy and for any tax bill that may arise due to a questionable claim.

To increase confidence in the tax system and improve compliance with the tax law, the IRS is implementing a requirement that all paid tax return preparers register with the IRS and obtain a preparer tax identification number (PTIN). Later this year, registered preparers will have to pass a competency exam and take continuing education courses.

Identity Theft:

It pays to be choosy when it comes to disclosing personal information. Identity thieves have used stolen personal data to access financial accounts, run up charges on credit cards and apply for new loans. The IRS is aware of several identity theft scams involving taxes or scammers posing as the IRS itself. The IRS does not use e-mail to contact taxpayers about issues related to their accounts. If you have any doubt whether a contact from the IRS is authentic, call 800-829-1040 to confirm it.

Frivolous Arguments:

Promoters have been known to make outlandish claims such as that the Sixteenth Amendment concerning congressional power to establish and collect income taxes was never ratified; that wages are not income; that filing a return and paying taxes are merely voluntary; and that being required to file Form 1040 violates the Fifth Amendment right against self-incrimination or the Fourth Amendment right to privacy. Don’t believe these or other similar claims. Such arguments are false and have been thrown out of court. Taxpayers have the right to contest their tax liabilities in court, but no one has the right to disobey the law.

For more information about these and other tax scams visit the IRS Web site at http://www.irs.gov. Remember that for the genuine IRS Web site be sure to use .gov. Don’t be confused by internet sites that end in .com, .net, .org or other designations instead of .gov.

The address of the official IRS governmental Web site is http://www.irs.gov.

Links:

Tax fraud alerts

The Truth about Frivolous Tax Arguments

Return Preparer Compliance and Enforcement

Four Tax Tips about Tip Income

IRS Tax Tip 2011-14 January 20, 2011

If you work in an occupation where tips are part of your total compensation, you need to be aware of several facts relating to your federal income taxes. Here are four things the IRS wants you to know about tip income:

1. Tips are taxable. Tips are subject to federal income, Social Security and Medicare taxes. The value of non–cash tips, such as tickets, passes or other items of value, is also income and subject to tax.

2. Include tips on your tax return. You must include in gross income all cash tips you receive directly from customers, tips added to credit cards, and your share of any tips you receive under a tip–splitting arrangement with fellow employees.

3. Report tips to your employer. If you receive $20 or more in tips in any one month, you should report all of your tips to your employer. Your employer is required to withhold federal income, Social Security and Medicare taxes.

4. Keep a running daily log of your tip income. You can use IRS Publication 1244, Employee’s Daily Record of Tips and Report to Employer, to record your tip income.

Information Source: http://www.irs.gov/newsroom/article/0,,id=234601,00.html

Links:
IRS Publication 1244

IRS Publication 531

Keeping Good Records Reduces Stress at Tax Time

IRS Summertime Tax Tip 2010-18

You may not be thinking about your tax return right now, but summer is a great time to start planning for next year and to make sure your records are organized. Maintaining good records now can make filing your return a lot easier and it will help you remember transactions you made during the year.

Here are a few things the IRS wants you to know about recordkeeping.

Keeping well-organized records also ensures you can answer questions if your return is selected for examination or prepare a response if you receive an IRS notice. In most cases, the IRS does not require you to keep records in any special manner. Generally speaking, you should keep any and all documents that may have an impact on your federal tax return.

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

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

For more information about recordkeeping, check out IRS Publications 552, Recordkeeping for Individuals, 583, Starting a Business and Keeping Records, and Publication 463, Travel, Entertainment, Gift, and Car Expenses. These publications are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Links:

Publications 552, Recordkeeping for Individuals ( PDF)

Publications 583, Starting a Business and Keeping Records ( PDF)

Publication 463, Travel, Entertainment, Gift, and Car Expenses ( PDF)

Nine Tips for Taxpayers Who Owe Money to the IRS

IRS Summertime Tax Tip 2010-15

Did you end up owing taxes this year? The vast majority of Americans get a tax refund from the IRS each spring, but those who receive a bill may not know that the IRS has a number of ways for people to pay. Here are nine tips for taxpayers who owe money to the IRS.

  1. If you get a bill this summer for late taxes, you are expected to promptly pay the tax owed including any penalties and interest. If you are unable to pay the amount due, it is often in your best interest to get a loan to pay the bill in full rather than to make installment payments to the IRS.
  2. You can also pay the bill with your credit card. The interest rate on a credit card or bank loan may be lower than the combination of interest and penalties imposed by the Internal Revenue Code. To pay by credit card contact one of the following processing companies: Official Payments Corporation at 888-UPAY-TAX (also www.officialpayments.com/fed) or Link2Gov at 888-PAY-1040 (also www.pay1040.com) or RBS WorldPay, Inc at 888-9PAY-TAX (also www.payUSAtax.com).
  3. You can pay the balance owed by electronic funds transfer, check, money order, cashier’s check or cash. To pay using electronic funds transfer you can take advantage of the Electronic Federal Tax Payment System by calling 800-555-4477 or online at www.eftps.gov.
  4. An installment agreement may be requested if you cannot pay the liability in full. This is an agreement between you and the IRS to pay the amount due in monthly installment payments. You must first file all returns that are required and be current with estimated tax payments.
  5. If you owe $25,000 or less in combined tax, penalties and interest, you can request an installment agreement using the Online Payment Agreement application at IRS.gov.
  6. You can also complete and mail an IRS Form 9465, Installment Agreement Request, along with your bill in the envelope that you have received from the IRS.  The IRS will inform you usually within 30 days whether your request is approved, denied, or if additional information is needed. If the amount you owe is $25,000 or less, provide the highest monthly amount you can pay with your request.
  7. You may still qualify for an installment agreement if you owe more than $25,000, but a Form 433F, Collection Information Statement, is required to be completed before an installment agreement can be considered. If your balance is over $25,000, consider your financial situation and propose the highest amount possible, as that is how the IRS will arrive at your payment amount based upon your financial information.
  8. If an agreement is approved, a one-time user fee will be charged.  The user fee for a new agreement is $105 or $52 for agreements where payments are deducted directly from your bank account.  For eligible individuals with incomes at or below certain levels, a reduced fee of $43 will be charged.
  9. Taxpayers who have a balance due, may want to consider changing their W-4, Employee’s Withholding Allowance Certificate, with their employer. There is a withholding calculator available on IRS.gov to help taxpayers determine the amount that should be withheld.

For more information about installment agreements and other payment options visit IRS.gov.  IRS Publications 594, The IRS Collection Process and 966, Electronic Choices to Pay All Your Federal Taxes also provide additional information regarding your payment options.  These publications and Form 9465 can be obtained from IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Links:

Publication 594, The IRS Collection Process ( PDF)

Publication 966, Electronic Choices to Pay All Your Federal Taxes ( PDF)

Form 9465, Installment Agreement ( PDF)

Does the IRS Owe You Money?

IRS Summertime Tax Tip 2010-13

The Internal Revenue Service may have money for you. Was your income below the limit that requires you to file a tax return? If so, you may still be due a refund.

If you have not filed a prior year tax return and are due a refund, you should consider filing the return to claim that refund. If you are missing a refund for a previously filed tax return, you should contact the IRS to check the status of your refund and confirm your current address.

Unclaimed Refunds
Some people may have had taxes withheld from their wages but were not required to file a tax return because they had too little income. Others may not have had any tax withheld but would be eligible for the refundable Earned Income Tax Credit.

  • To collect this money a return must be filed with the IRS no later than three years from the due date of the return.
  • If no return is filed to claim the refund within three years, the money becomes the property of the U.S. Treasury.
  • There is no penalty assessed by the IRS for filing a late return qualifying for a refund.
  • Current and prior year tax forms and instructions are available on the Forms and Publications page of IRS.gov or by calling 800-TAX-FORM (800-829-3676).
  • Information about the Earned Income Tax Credit and how to claim it is also available on IRS.gov.

Undeliverable Refunds
Were you expecting a refund check but didn’t get it?

  • Refund checks are mailed to your last known address. Checks are returned to the IRS if you move without notifying the IRS or the U.S. Postal Service.
  • You may be able to update your address with the IRS on the “Where’s My Refund?” feature available on IRS.gov. You will be prompted to provide an updated address if there is an undeliverable check outstanding within the last 12 months.
  • You can also ensure the IRS has your correct address by filing Form 8822, Change of Address, which is available on IRS.gov or can be ordered by calling 800-TAX-FORM (800-829-3676).
  • If you do not have access to the Internet and think you may be missing a refund, you should first check your records or contact your tax preparer. If your refund information appears correct, call the IRS toll-free assistance line at 800-829-1040 to check the status of your refund and confirm your address.

Link:

Form 8822, Change of Address

Ten Tips for Taxpayers Making Charitable Donations

IRS Summertime Tax Tip 2010-21

Did you make a donation to a charity this year? If so, you may be able to take a deduction for it on your 2010 tax return.

Here are the top 10 things the IRS wants every taxpayer to know before deducting charitable donations.

1. Charitable contributions must be made to qualified organizations to be deductible. You can ask any organization whether it is a qualified organization and most will be able to tell you. You can also check IRS Publication 78, Cumulative List of Organizations, which lists most qualified organizations. IRS Publication 78 is available at IRS.gov.

2. Charitable contributions are deductible only if you itemize deductions using Form 1040, Schedule A.

3. You generally can deduct your cash contributions and the fair market value of most property you donate to a qualified organization. Special rules apply to several types of donated property, including clothing or household items, cars and boats.

4. If your contribution entitles you to receive merchandise, goods, or services in return – such as admission to a charity banquet or sporting event – you can deduct only the amount that exceeds the fair market value of the benefit received.

5. Be sure to keep good records of any contribution you make, regardless of the amount. For any contribution made in cash, you must maintain a record of the contribution such as a bank record – including a cancelled check or a bank or credit card statement – a written record from the charity containing the date and amount of the contribution and the name of the organization, or a payroll deduction record.

6. Only contributions actually made during the tax year are deductible. For example, if you pledged $500 in September but paid the charity only $200 by Dec. 31, your deduction would be $200.

7. Include credit card charges and payments by check in the year they are given to the charity, even though you may not pay the credit card bill or have your bank account debited until the next year.

8. For any cash or property contribution of $250 or more, you must have written acknowledgment from the organization to substantiate your donation. This written proof must include the amount of cash or a description of any property you contributed, and whether the organization provided any goods or services in exchange for the gift, including a good faith estimate of the value of the goods or services you received.

9. To deduct charitable contributions of items valued at $500 or more you must complete a Form 8283, Noncash Charitable Contributions, and attached the form to your return.

10. An appraisal generally must be obtained if you claim a deduction for a contribution of noncash property worth more than $5,000. In that case, you must also fill out Section B of Form 8283 and attach the form to your return.

For more information see IRS Publication 526, Charitable Contributions, and for information on determining value, refer to Publication 561, Determining the Value of Donated Property. These publications are available at IRS.gov or by calling 800-TAX-FORM begin_of_the_skype_highlighting 800-TAX-FORM end_of_the_skype_highlighting (800-829-3676 begin_of_the_skype_highlighting 800-829-3676 end_of_the_skype_highlighting).

Links:

Publication 78, Cumulative List of Organizations

Publication 526, Charitable Contributions ( PDF)

Publication 561, Determining the Value of Donated Property ( PDF)

Six Facts about the American Opportunity Tax Credit

IRS Summertime Tax Tip 2010-23

There is still time left to take advantage of the American Opportunity Tax Credit, a credit that will help many parents and college students offset the cost of college. This tax credit is part of the American Recovery and Reinvestment Act of 2009 and is available through December 31, 2010. It can be claimed by eligible taxpayers for college expenses paid in 2009 and 2010.

Here are six important facts the IRS wants you to know about the American Opportunity Tax Credit:

1. This credit, which expands and renames the existing Hope Credit, can be claimed for qualified tuition and related expenses that you pay for higher education in 2009 and 2010. Qualified tuition and related expenses include tuition, related fees, books and other required course materials.

2. The credit is equal to 100 percent of the first $2,000 spent per student each year and 25 percent of the next $2,000. Therefore, the full $2,500 credit may be available to a taxpayer who pays $4,000 or more in qualifying expenses for an eligible student.

3. The full credit is generally available to eligible taxpayers who make less than $80,000 or $160,000 for married couples filing a joint return. The credit is gradually reduced, however, for taxpayers with incomes above these levels.

4. Forty percent of the credit is refundable, so even those who owe no tax can get up to $1,000 of the credit for each eligible student as cash back.

5. The credit can be claimed for qualified expenses paid for any of the first four years of post-secondary education.

6. You cannot claim the tuition and fees tax deduction in the same year that you claim the American Opportunity Tax Credit or the Lifetime Learning Credit. You must choose to either take the credit or the deduction and should consider which is more beneficial for you.

Complete details on the American Opportunity Tax Credit and other key tax provisions of the Recovery Act are available at IRS.gov/recovery.

Links:

The American Recovery and Reinvestment Act of 2009: Information Center

Tax Benefits for Education: Information Center
Publication 970, Tax Benefits for Education
YouTubeVideo: Education Credits (Parents): English | Spanish | ASL

Audio File for Podcast: American Opportunity Tax Credit