Taxpayers have the right to appeal an IRS decision

A taxpayer might at some point see the IRS make a decision about their taxes. If the taxpayer disagrees with this decision, they have the right to appeal it. The right to appeal an IRS decision in an independent forum is one of 10 basic rights known collectively as the Taxpayer Bill of Rights.

Here are some facts taxpayers should know about the right to appeal an IRS decision:

  • Taxpayers have the right to a fair administrative appeal of most IRS decisions.
  • There is an independent office called the IRS Office of Appeals. This office is separate from the IRS office that first reviewed the case.
  • Generally, the Office of Appeals will not discuss a case with the IRS.
  • Taxpayers also have the right to receive the Office of Appeals’ decision in writing.
  • Taxpayers generally have the right to take their cases to court.
  • Your Appeal Rights and How to Prepare a Protest if You Don’t Agree is a publication that explains how a taxpayer can appeal a tax case when they disagree with the IRS’s findings.
  • If the IRS sends a notice proposing that the taxpayer owes more money, the taxpayer may want to dispute it. If so, the taxpayer may file a petition with the United States Tax Court.
  • Some taxpayers may have a claim for a refund. These taxpayers may take their case to their United States District Court or to the United States Court of Federal Claims. Generally, the taxpayer must file this claim two years from the date of the IRS notice denying the taxpayer’s refund.

 

 

*This message was distributed by IRS Tax Tips, an IRS e-mail service. For more information on federal taxes please visit IRS.gov.

All taxpayers should plan ahead for natural disasters

Floods, wildfires, hurricanes, tornados and other natural disasters happen quickly and often with little warning.  No one can prevent these disasters from happening, but people can prepare for them.

Here are some things taxpayers can do to help protect their financial safety should a disaster occur. Taxpayers should:

Update emergency plans.
A disaster can strike any time. Personal and business situations are constantly evolving, so taxpayers should review their emergency plans annually.

Create electronic copies of documents.
Taxpayers should keep documents in a safe place. This includes bank statements, tax returns and insurance policies. This is especially easy now since many financial institutions provide statements and documents electronically. If original documents are available only on paper, taxpayers should scan them. They should save them on a DVD or CD, or store them in the cloud.

Document valuables. It’s a good idea to photograph or videotape the contents of any home. This is especially true when it comes to items of value. Documenting these items ahead of time makes it easier to claim insurance and tax benefits if a disaster strikes. The IRS has a disaster loss workbook. Using this can help taxpayers compile a room-by-room list of belongings.

Remember the IRS is ready to help. In the case of a federally declared disaster, affected taxpayers can call the IRS at 866-562-5227. The taxpayer can speak with an IRS specialist trained to handle disaster-related issues. Taxpayers can request copies of previously filed tax returns and attachments by filing Form 4506. They can also order transcripts showing most line items through Get Transcript on IRS.gov. They can also call 800-908-9946 for transcripts.

Know what tax relief is available in disaster situations
Taxpayers should be aware that the Tax Cuts and Jobs Acts modified the itemized deduction for casualty and theft losses. After Dec. 31, 2017, net personal casualty and theft losses are deductible only to the extent they’re attributable to a federally declared disaster. Claims must include the FEMA code assigned to the disaster.

Additional IRS Resources:

IRS YouTube Videos:

 

 

*This message was distributed by IRS Tax Tips, an IRS e-mail service. For more information on federal taxes please visit IRS.gov.

Closing your Tax Office for the Year?

If you are planning to close your tax office for the year, here are some reminders:

  1. Update your IRS e-file Application to allow the IRS to communicate with you and prevent your Electronic Filing Identification Number (EFIN) from being inactivated. Verify and if needed, update your firm’s Principals, Responsible Officials, addresses and telephone numbers.
  2. Keep all Forms 8879 and acknowledgment reports for three years.
  3. Keep copies of all clients’ tax returns until the end of the calendar year as the electronic return originator (ERO).
  4. Check your EFIN status page to verify the number of returns you filed matches the number of returns received by the IRS. While your office is closed, it is a good practice to periodically verify your EFIN is not being used by anyone else.

If you are planning to permanently close your tax office, here are some reminders:

  1. The easiest way to notify the IRS of the closing is to use the “Close Office” feature on your IRS e-file Application.
  2. Providers may not sell or transfer EFINs, other identification numbers, or passwords when selling, transferring or otherwise discontinuing an IRS e-file business.

 

If you need assistance, please contact the e-help desk toll-free at (866) 255-0654.

 

For more information, refer to Publication 3112.

 

 

 

 

*This message was distributed by IRS Newswire, an IRS e-mail service. For more information on federal taxes please visit IRS.gov.

Tax Preparers: Register for 2019 IRS Nationwide Tax Forums

The IRS reminds tax professionals to sign up for this summer’s 2019 IRS Nationwide Tax Forums. Tax professionals attending can earn up to 19 continuing education credits.

The forums are three-day events featuring presentations by tax experts from the IRS and association partners. Topics on important tax issues currently facing tax professionals include cybersecurity, changes to the tax law, and ethics. Attendees have access to the Case Resolution Program and dozens of exhibitors. They also have the opportunity to hear directly from IRS Commissioner Chuck Rettig, who is scheduled to deliver the keynote speech at all the forums.

Tax professionals can visit www.irstaxforum.com for more information and to register.

There are five IRS Nationwide Tax Forums in cities across the country. Each Forum features more than 40 seminars and workshops.

The IRS Nationwide Tax Forums are designed specifically for tax professionals, including:

  • Enrolled agents
  • Certified public accountants
  • Certified financial planners
  • Annual Filing Season Program participants
  • Uncredentialled tax professionals

Here are the dates, locations and registration deadlines for the five forums this year:

  • National Harbor, Maryland, near Washington, D.C. – July 9-11
    • Registration deadline: June 25
  • Chicago – July 23-25
    • Registration deadline: July 9
  • New Orleans – Aug 6-8
    • Registration deadline: July 23
  • Orlando – Aug 13-15
    • Registration deadline: July 30
  • San Diego – Sept. 17-19
    • Registration deadline: Sept. 3

Tax professionals who pre-register by June 15, 2019 will receive an early bird rate of $235 per person. The standard rate of $255 is available starting June 16, and ends two weeks prior to the start of each forum. Attendees registering on-site or after the deadlines will pay $370.

 

 

*This message was distributed by IRS Tax Tips, an IRS e-mail service. For more information on federal taxes please visit IRS.gov.

Some taxpayers may need to amend their tax return

Taxpayers who discover an error after filing may need to amend their tax return. Taxpayers should file an amended return if there’s a change in filing status, income, deductions or credits.

The IRS may correct mathematical or clerical errors on a return. They also may accept returns without certain required forms or schedules. In these instances, there’s no need to file an amended return.

Taxpayers who need to amend should remember these simple tips:

  • Use the Interactive Tax Assistant.  The ITA titled Should I File an Amended Return? can help taxpayers determine if they should file an amended return to correct an error or make other changes to their original return.
  • Wait to file for corrected refund for tax year 2018. Taxpayers who are due refunds from their original 2018 tax return should wait to get it before filing Form 1040X to claim an additional refund. Amended returns may take up to 16 weeks to process.
  • File on paper. Taxpayers use Form 1040X, Amended U.S. Individual Income Tax Return, to correct their tax return. Taxpayers can’t file amended returns electronically. Taxpayers will mail Form 1040X to the address listed in the form’s instructions. However, taxpayers filing Form 1040X in response to an IRS notice, should mail it to the address shown on the notice.
  • Amend to correct errors. Taxpayers should file an amended tax return to correct errors or make changes to an original tax return. For example, taxpayers should amend their return to change their filing status. They should also file a 1040X to correct their income, deductions and credits.
  • Don’t amend for math errors. Taxpayers generally don’t need to file an amended return to correct math errors on their original return. The IRS will automatically correct these.
  • Don’t amend for missing forms. Taxpayers also don’t need to file an amended return if they forgot to attach tax forms. The IRS will mail a request to the taxpayer for missing forms.
  • File within three-year time limit. Taxpayers usually have three years from the date they filed the original tax return to file Form 1040X to claim a refund. Taxpayers can file it within two years from the date they paid the tax, if that date is later.
  • Pay additional tax as soon as possible. Taxpayers who will owe tax should file Form 1040X and pay the tax immediately to avoid potential penalties and interest on the unpaid taxes. They should consider using IRS Direct Pay to pay any tax directly from a checking or savings account at no cost.
  • Track amended return. Generally, taxpayers can track the status of their amended tax return three weeks after they file, using ‘Where’s My Amended Return? on IRS.gov.

More information:
Tax Topic 308 – Amended Returns

 

 

 

*This message was distributed by IRS Tax Tips, an IRS e-mail service. For more information on federal taxes please visit IRS.gov.

IRS expands retirement plan Determination Letter Program and Self- Correction Program

WASHINGTON — The Internal Revenue Service today announced the expansion of areas for issuing determination letters for certain retirement plans. Revenue Procedure 2019-20 details the addition of two areas for which retirement plan sponsors may now request determination letters.

In addition, through recently issued guidance, the IRS is also making it easier for plan administrators to correct plan errors.

Highlights of these changes:

Determination Letter Program

The Treasury Department and the IRS received numerous requests to expand the determination letter program. Revenue Procedure 2019-20 expands the determination letter program for two specific categories:

  • Statutory Hybrid Plans – plan sponsors may submit determination letter applications for statutory hybrid plans for the 12-month period beginning Sept.1, 2019, and ending Aug. 31, 2020.
  • Plan Mergers – plan sponsors may submit determination letter applications for certain merged plans on an ongoing basis.

As provided in prior guidance, plan sponsors will continue to be able to submit a determination letter application for initial plan qualification and for qualification upon plan termination.

Employee Plans Compliance Resolution System

On April 19, 2019, the IRS issued Revenue Procedure 2019-19, which expands the Self-Correction Program for retirement plans to enable plan sponsors to fix certain plan document and operational failures (including plan loan issues) without having to file a Voluntary Correction Program submission with the IRS.

Starting on April 19, the Self-Correction Program permits the self-correction of certain plan document failures, provides correction options and possible relief from deemed distributions associated with certain failures involving plan loans made to participants, and provides additional opportunities for correcting certain operational failures by plan amendment.

The IRS provides three correction programs for employee plans:

  • Self-Correction Program (SCP) – permits plan sponsors to correct certain plan failures without contacting the IRS or paying a user fee.
  • Voluntary Correction Program (VCP) – allows plan sponsors to correct failures not eligible for self-correction or to obtain the IRS’s written agreement that specified failures were properly corrected.
  • Audit Closing Agreement Program – enables plan sponsors to resolve failures discovered during an IRS audit.

 

 

*This message was distributed by IRS Newswire, an IRS e-mail service. For more information on federal taxes please visit IRS.gov.

Six things taxpayers should know about the sharing economy and their taxes

From renting spare rooms and vacation homes to car rides or using a bike…name a service and it’s probably available through the sharing economy. Taxpayers who participate in the sharing economy can find helpful resources in the IRS Sharing Economy Tax Center on IRS.gov. It  helps taxpayers understand how this activity affects their taxes. It also gives these taxpayers information to help them meet their tax obligations.

Here are six things taxpayers should know about how the sharing economy might affect their taxes:

  1. The activity is taxable.
    Sharing economy activity is generally taxable. It is taxable even when:
  • The activity is only part time
  • The activity is something the taxpayer does on the side
  • Payments are in cash
  • The taxpayer receives an information return – like a Form 1099 or Form W2
  1. Some expenses are deductible.
    Taxpayers who participate in the sharing economy may be able to deduct certain expenses. For example, a taxpayer who uses their car for business may qualify to claim the standard mileage rate, which is 58 cents per mile for 2019.3. There are special rules for rentals.
    If a taxpayer rents out their home or apartment, but also lives in it during the year, special rules generally apply to their taxes. Taxpayers can use the Interactive Tax Assistant tool, Is My Residential Rental Income Taxable and/or Are My Expenses Deductible? to determine if their residential rental income is taxable.

    4. Participants may need to make estimated tax payments.
    The U.S. tax system is pay-as-you-go. This means that taxpayers involved in the sharing economy often need to make estimated tax payments during the year. These payments are due on April 15, June 15, Sept. 15 and Jan. 15. Taxpayers use Form 1040-ES to figure these payments.

    5. There are different ways to pay.
    The fastest and easiest way to make estimated tax payments is through IRS Direct Pay. Alternatively, taxpayers can use the Electronic Federal Tax Payment System.

    6. Taxpayers should check their withholding.
    Taxpayers involved in the sharing economy who are employees at another job can often avoid making estimated tax payments by having more tax withheld from their paychecks. These taxpayers can use the Withholding Calculator on IRS.gov to determine how much tax their employer should withhold. After determining the amount of their withholding, the taxpayer will file Form W-4 with their employer to request the additional withholding.

IRS YouTube Videos:
Your Taxes in the Sharing Economy – English | ASL

 

 

*This message was distributed by IRS Tax Tips, an IRS e-mail service. For more information on federal taxes please visit IRS.gov.

Don’t fall for myth-leading information about tax refunds

Now that the April tax-filing deadline has come and gone, many taxpayers are eager to get details about their tax refunds. When it comes to refunds, there are several common myths going around social media.

Here are five of these common myths:

Myth 1: Getting a refund this year means there’s no need to adjust withholding for 2019
To help avoid an unexpected tax outcome next year, taxpayers should make changes now to prepare for next year. One way for a taxpayer to do this is to adjust their tax withholding with their employer. The IRS encourages people to do a Paycheck Checkup using the IRS Withholding Calculator to determine whether their employer is withholding the right amount. This is especially important for anyone who got an unexpected result from filing their tax return this year. This could have happened because the taxpayer’s employer withheld too much or too little tax from the employee’s paycheck in 2018.

Myth 2: Calling the IRS or a tax professional will provide a better refund date
Many people mistakenly think that talking to the IRS or calling their tax professional is the best way to find out when they will get their refund. In reality, the best way to check the status of a refund is online through the “Where’s My Refund?” tool at IRS.gov or with the IRS2Go mobile app. Taxpayers without Internet access can call the automated refund hotline at 800-829-1954. “Where’s My Refund?” has the same information available to IRS telephone assistors, so there is no need to call unless “Where’s My Refund?” says to do so.

Myth 3: Ordering a tax transcript is a ‘secret way’ to get a refund date
Doing so will not help taxpayers find out when they will get their refund. “Where’s My Refund?” tells the taxpayer their tax return has been received and if the IRS has approved or sent the refund.

Myth 4: ‘Where’s My Refund?’ must be wrong because there’s no deposit date yet
Updates to “Where’s My Refund?” ‎on both IRS.gov and the IRS2Go mobile app are made once each day. These updates are usually made overnight. Even though the IRS issues most refunds in less than 21 days, it’s possible a refund may take longer. This means that in some cases, a taxpayer who filed later may receive their refund sooner than someone who filed earlier in the season. The IRS contacts a taxpayer by mail when it needs more information to process their tax return. Taxpayers should also remember to consider the time it takes for the banks to post the refund to the taxpayer’s account. Taxpayers waiting for a refund in the mail should plan for the time it takes a check to arrive.

Myth 5: ‘Where’s My Refund?’ must be wrong because a refund amount is less than expected
There are several factors that could cause a tax refund to be larger or smaller than expected. Situations that could decrease a refund include:

  • The taxpayer made math errors or mistakes
  • The taxpayer owes federal taxes for a prior year
  • The taxpayer owes state taxes, child support, student loans or other delinquent federal nontax obligations
  • The IRS holds a portion of the refund while it reviews an item claimed on the return

The IRS will mail the taxpayer a letter of explanation if these adjustments are made. Some taxpayers may also receive a letter from the Department of Treasury’s Bureau of the Fiscal Service if their refund was reduced to offset certain financial obligations.

 

 

*This message was distributed by IRS Tax Tips, an IRS e-mail service. For more information on federal taxes please visit IRS.gov.

Extension filers should avoid these errors when filing their tax return

Just like taxpayers who file their taxes by the April deadline, those who filed an extension should also do everything to make sure their tax return is complete and accurate. Errors on a tax return can mean it will take longer for the IRS to process the return, which in turn, could delay a refund.

Taxpayers should remember they can avoid many common errors by filing electronically or by using IRS Free File. Filing electronically is the most accurate way to file a tax return.

Taxpayers who filed an extension and who are filing their taxes this summer should avoid making these common errors:

  • Missing or inaccurate Social Security numbers. The taxpayer should be sure to enter each SSN on a tax return exactly as printed on the Social Security card.
  • Misspelled names. Taxpayers should spell all names listed on a tax return exactly as listed on the individuals’ Social Security cards.
  • Filing status.  Some taxpayers claim the wrong filing status, such as Head of Household instead of Single. The Interactive Tax Assistant on IRS.gov can help taxpayers choose the correct status. E-file software also helps prevent these mistakes.
  • Math mistakes. Math errors are common on paper returns. These can range from simple addition and subtraction to more complex calculations. Taxpayers should always double check their math. Better yet, they should consider filing electronically. Tax preparation software does all the math automatically.
  • Mistakes made when figuring credits. Taxpayers can make mistakes when figuring things like their Earned Income Tax Credit and Child and Dependent Care Credit. Taxpayers should follow the instructions carefully, and double check the information they enter when filing electronically. The IRS Interactive Tax Assistant can help determine if a taxpayer is eligible for certain tax credits.
  • Incorrect bank account numbers. Taxpayers who are due a refund should choose direct deposit as this will get their money right in their bank account. However, the IRS cautions taxpayers to use the right routing and account numbers on the tax return. It’s a good idea to double and triple check the numbers they enter.
  • Unsigned forms. An unsigned tax return isn’t valid. Both spouses must sign a joint return. Taxpayers can avoid this error by filing their return electronically and digitally signing it before sending it to the IRS. Taxpayers who are using a tax software product for the first time will need their adjusted gross income from their 2017 tax return to file electronically. Taxpayers who are using the same tax software they used last year usually will not need to enter prior-year information to electronically sign their 2018 tax return.
  • An expired ITIN. The IRS  treats  a return filed with an expired Individual Tax Identification Number as filed on time, but there may be delays in processing it. Taxpayers will receive a notice explaining that an ITIN must be current before the IRS will pay a refund. Once the taxpayer renews the ITIN, the IRS will process the tax return and pay any allowed refund.

 

*This message was distributed from IRS Tax Tips. For more information on federal taxes please visit IRS.gov.

With new SALT limit, IRS explains tax treatment of state and local tax refunds

WASHINGTON — The Internal Revenue Service on Friday, March 29th clarified the tax treatment of state and local tax refunds arising from any year in which the new limit on the state and local tax (SALT) deduction is in effect.

In Revenue Ruling 2019-11 (PDF), posted on IRS.gov, the IRS provided four examples illustrating how the long-standing tax benefit rule interacts with the new SALT limit to determine the portion of any state or local tax refund that must be included on the taxpayer’s federal income tax return. Friday’s announcement does not affect state tax refunds received in 2018 for tax returns currently being filed.

The Tax Cuts and Jobs Act (TCJA), enacted in December 2017, limited the itemized deduction for state and local taxes to $5,000 for a married person filing a separate return and $10,000 for all other tax filers. The limit applies to tax years 2018 to 2025.

As in the past, state and local tax refunds are not subject to tax if a taxpayer chose the standard deduction for the year in which the tax was paid. But if a taxpayer itemized deductions for that year on Schedule A, Itemized Deductions, part or all of the refund may be subject to tax, to the extent the taxpayer received a tax benefit from the deduction.

Taxpayers who are impacted by the SALT limit—those taxpayers who itemize deductions and who paid state and local taxes in excess of the SALT limit—may not be required to include the entire state or local tax refund in income in the following year. A key part of that calculation is determining the amount the taxpayer would have deducted had the taxpayer only paid the actual state and local tax liability—that is, no refund and no balance due.

In one example described in the ruling, a single taxpayer itemizes and claims deductions totaling $15,000 on the taxpayer’s 2018 federal income tax return. A total of $12,000 in state and local taxes is listed on the return, including state and local income taxes of $7,000. Because of the limit, however, the taxpayer’s SALT deduction is only $10,000. In 2019, the taxpayer receives a $750 refund of state income taxes paid in 2018, meaning the taxpayer’s actual 2018 state income tax liability was $6,250 ($7,000 paid minus $750 refund). Accordingly, the taxpayer’s 2018 SALT deduction would still have been $10,000, even if it had been figured based on the actual $6,250 state and local income tax liability for 2018. The taxpayer did not receive a tax benefit on the taxpayer’s 2018 federal income tax return from the taxpayer’s overpayment of state income tax in 2018. Thus, the taxpayer is not required to include the taxpayer’s 2019 state income tax refund on the taxpayer’s 2019 return.

See the ruling for details on all four examples.

Friday’s ruling has no impact on state or local tax refunds received in 2018 and reportable on 2018 returns taxpayers are filing this season. For information, including worksheets for reporting these refunds, see the 2018 instructions (PDF) for Form 1040 U.S. Individual Income Tax Return, and Publication 525, Taxable and Nontaxable Income.

 

 

*This message was distributed by IRS Newswire, an IRS e-mail service. For more information on federal taxes please visit IRS.gov.