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BOB FM | 96X | US 106.1 | WNIS | WTAR Community Events | Weather | Crime Line | VDOT/Traffic | Jobs | Military Poker Dates/Register | Tax Tips | Adopt-A-Pet Annual Events: Talkfest | VB Tuna | Pet Palooza | Slammin BBQ Tax NewsView 2005-2006 Tax InformationEITC Awareness Kicks Off Today; Free Tax Help AvailableVA-2008-05, Jan. 31, 2008RICHMOND - The Department of Treasury, the Internal Revenue Service and scores of community partners nationwide today kicked off EITC Awareness Day to promote the refundable tax credit for low-wage workers and options for free tax preparation. January 31 " designated as EITC Awareness Day by the IRS - also marks the deadline for employers sending Forms W-2 to employees which enable them to file their tax returns. More than 60 percent of tax returns claiming the Earned Income Tax Credit are filed during the month of February. More than 22.4 million taxpayers received more than $43.7 billion in EITC on their 2006 federal income tax returns. The IRS estimates that approximately one in four eligible taxpayers fails to claim EITC. Eligibility requirements for the credit can be complex. Also, people who have earned income but may not have a filing requirement, non-English speakers, non-traditional families, the homeless, childless workers and rural residents are among those who may not realize they qualify. "Ensuring that more eligible families receive their EITC is important this year, as it is every year. I encourage people all across America to check to see if you are eligible for the Earned Income Tax Credit," said Treasury Secretary Henry M. Paulson, Jr. "Believe it or not, there are many taxpayers who are eligible to receive the Earned Income Tax Credit, but fail to claim it simply because they are not informed. That is why the many partners involved in today's effort " from Congress, to state local and community leaders " are so critical," said U.S. Treasurer Anna Escobedo Cabral. "The IRS wants all eligible taxpayers to claim this important tax credit. We also want people to know that free help is available. There are volunteers staffing free tax-help sites nationwide. Free File at IRS.gov offers free software and e-filing. And, many professional tax preparers also donate their time and services to low-income taxpayers," said IRS Spokesman Jim Dupree. Many organizations offering free tax help also are encouraging taxpayers to save a little money or open a bank account. The IRS has helped in this effort by creating a split-refund program that allows all taxpayers to divide their refunds among up to three financial accounts, such as checking, savings and retirement. More than 150 coalitions and partners across the nation will mark EITC Awareness Day with a series of news conferences or news releases promoting this refundable tax credit for low-wage taxpayers. These organizations operate free tax preparation sites for low-income individuals, for seniors and for other eligible taxpayers. EITC claimants are eligible for free tax preparation services provided at nearly 12,000 volunteer sites nationwide, they can also link to Free File through IRS.gov if they wish to prepare their own returns or many tax professionals also offer free service as part of their pro bono requirements. The credit was created in 1975 in part to offset the burden of Social Security taxes and to serve as a work incentive. The amount of the credit varies but it is generally determined by income and family size. Some states also have a local version of EITC also can increase a taxpayer’s refund. For the 2007 tax year, the maximum credit is $4,716 for a family with two or more children; $2,853 for a family with one child and $428 if the taxpayer does not reside with children. The maximum amount of earned income allowed is higher for tax year 2007 than it was for 2006. Please see Fact Sheet 2008-11 for all eligibility requirements. Generally, a taxpayer may be able to take the credit for tax year 2007 if the taxpayer:
Nearly 70 percent of all EITC returns are prepared by a third party or tax professional. The IRS reminds tax professionals that they must perform due diligence when preparing an EITC tax return. To help, the IRS created an EITC Tax Preparer Electronic Toolkit which is available at www.eitcfortaxpreparers.com. Taxpayers should seek out reputable tax preparers. People should be wary of tax preparers who offer larger refunds based on EITC fraud or make other enticements based on EITC. False EITC returns have serious consequences and deliberate inaccuracies can result in a lengthy ban on eligibility. This year, the IRS also will keep 70 Taxpayer Assistance Centers open the first three Saturdays during February to help prepare EITC returns. These will be located in areas underserved by volunteer tax preparation sites. Tax preparers and taxpayers can find a wealth of information at IRS.gov. Both can use the EITC Assistant at www.irs.gov/eitc which is an easy-to-use interactive tool to help determine if the taxpayer is qualified for EITC. This step-by-step online program helps answer questions about eligibility, filing status, qualifying children and credit amount. The EITC Assistant also is available in Spanish. In addition to on-line tools, the IRS also produces Publication 596, Earned Income Credit, which explains all the eligibility rules and also includes a worksheet to determine eligibility. The publication is available in English and Spanish. There also is an electronic press kit for the media available at www.irs-eitc.info. This kit provides state-by-state EITC statistics; lists the states that provide local EITC benefits and provides other information of interest. EARNED INCOME TAX CREDIT BENEFITS VIRGINIANS AND STATE ECONOMYEITC is nation's largest poverty-fighting program; federal money often reinvested in local businessesRichmond, Va. - Many low-to-middle income working families and individuals may qualify for the Earned Income Tax Credit (EITC), which can amount to a cash refund of up to $4,716. These same people may also qualify to have their 2007 income tax returns prepared for free. Virginia could see more than $1 billion per year in federal EITC money if everyone who qualified took advantage of the credit. Governor Timothy Kaine has proclaimed January 31 as Earned Income Tax Credit Kickoff Day. Future events are planned to raise public awareness. Important facts: Benefits to recipients:
IRS WARMS OF NEW SCAMSVA-2008-04, Jan. 30, 2008RICHMOND - The Internal Revenue Service today warned taxpayers to beware of several current e-mail and telephone scams that use the IRS name as a lure. The IRS expects such scams to continue through the end of tax return filing season and beyond. The IRS cautioned taxpayers to be on the lookout for scams involving proposed advance payment checks. Although the government has not yet enacted an economic stimulus package in which the IRS would provide advance payments, known informally as rebates to many Americans, a scam which uses the proposed rebates as bait has already cropped up. The goal of the scams is to trick people into revealing personal and financial information, such as Social Security, bank account or credit card numbers, which the scammers can use to commit identity theft. Typically, identity thieves use a victim’s personal and financial data to empty the victim’s financial accounts, run up charges on the victim’s existing credit cards, apply for new loans, credit cards, services or benefits in the victim’s name, file fraudulent tax returns or even commit crimes. Most of these fraudulent activities can be committed electronically from a remote location, including overseas. Committing these activities in cyberspace allows scamsters to act quickly and cover their tracks before the victim becomes aware of the theft. People whose identities have been stolen can spend months or years, and their hard-earned money, cleaning up the mess thieves have made of their reputations and credit records. In the meantime, victims may lose job opportunities, may be refused loans, education, housing or cars, or even get arrested for crimes they didn't commit. The most recent scams brought to IRS attention are described below. Rebate Phone Call At least one scheme using the word "rebate" as part of the lure has been identified. In that scam, consumers receive a phone call from someone identifying himself as an IRS employee. The caller tells the targeted victim that he is eligible for a sizable rebate for filing his taxes early. The caller then states that he needs the target’s bank account information for the direct deposit of the rebate. If the target refuses, he is told that he cannot receive the rebate. This phone call is a scam. No legislation has yet been enacted that would allow the IRS to provide advance payments to taxpayers or that determines the details of those payments. Moreover, the IRS does not force taxpayers to use direct deposit. Those who opt for direct deposit do so by completing the appropriate section of their tax return, with bank routing and account information, when they file; the IRS does not gather the information by telephone. Refund e-Mail The IRS has seen several variations of a refund-related bogus e-mail which falsely claims to come from the IRS, tells the recipient that he or she is eligible for a tax refund for a specific amount, and instructs the recipient to click on a link in the e-mail to access a refund claim form. The form asks the recipient to enter personal information that the scamsters can then use to access the e-mail recipient’s bank or credit card account. In a new wrinkle, the current version of the refund scam includes two paragraphs that appear to be directed toward tax-exempt organizations that distribute funds to other organizations or individuals. The e-mail contains the name and supposed signature of the Director of the IRS’s Exempt Organizations business division. This e-mail is a phony. The IRS does not send unsolicited e-mail about tax account matters to individual, business, tax-exempt or other taxpayers. Filing a tax return is the only way to apply for a tax refund; there is no separate application form. Taxpayers who wish to find out if they are due a refund from their last annual tax return filing may use the "Where’s My Refund?" interactive application on the IRS Web site at IRS.gov. The only official IRS Web site is located at www.irs.gov. Audit e-Mail Another new scam brought to IRS attention contains features not seen before by the IRS. Using a technique calculated to get almost anyone’s attention, the e-mail notifies the recipient that his or her tax return will be audited. This is the first scam of which the IRS is aware that uses this to get the victim to respond. Unusual for a scam e-mail, it may contain a salutation in the body addressed to the specific recipient by name. Most scam e-mails seen by the IRS are sent using the same technique used by spammers, in which hundreds of thousands of messages are sent to potential victims based on Internet address. Because of the volume, the typical scam e-mail is not personalized. This e-mail instructs the recipient to click on links to complete forms with personal and account information, which the scammers will use to commit identity theft. This e-mail is a phony. The IRS does not send unsolicited, tax-account related e-mails to taxpayers. Changes to Tax Law e-Mail This bogus e-mail is addressed to businesses, accountants and "Treasury" managers. It instructs them to download information on tax law changes by clicking on a series of links to publications on businesses, estate taxes, excise taxes, exempt organizations and IRAs and other retirement plans. The IRS believes that clicking on a link downloads malware onto the recipient’s computer. Malware is malicious code that can take over the victim’s computer hard drive, giving someone remote access to the computer, or it could look for passwords and other information and send them to the scamster. There are other types of malware, as well. The urls contained in the link are not legitimate IRS Web addresses. All IRS.gov Web page addresses begin with http://www.irs.gov/. Paper Check Phone Call In a current telephone scam, a caller claims to be an IRS employee who is calling because the IRS sent a check to the individual being called. The caller states that because the check has not been cashed, the IRS wants to verify the individual’s bank account number. The caller may have a foreign accent. In reality, the IRS leaves it entirely up to the individual to choose to cash or not cash a paper check. The IRS has no business need to know, and does not ask for, bank account or similar information, except when taxpayers indicate on their tax return that they are opting for the direct electronic deposit of their refund. In that case, however, it is the individual’s responsibility to provide the IRS with the correct bank routing and account numbers on the tax return; the IRS does not contact taxpayers to verify the information. What to Do Anyone wishing to access the IRS Web site should initiate contact by typing the IRS.gov address into their Internet address window, rather than clicking on a link in an e-mail or opening an attachment. Those who have received a questionable e-mail claiming to come from the IRS may forward it to a mailbox the IRS has established to receive such e-mails, phishing@irs.gov, using instructions contained in an article on IRS.gov titled "How to Protect Yourself from Suspicious E-Mails or Phishing Schemes." Following the instructions will help the IRS track the suspicious e-mail to its origins and shut down the scam. Find the article by visiting IRS.gov and entering the words "suspicious e-mails" into the search box in the upper right corner of the front page. Those who have received a questionable telephone call that claims to come from the IRS may also use the phishing@irs.gov mailbox to notify the IRS of the scam. The IRS has issued previous warnings on scams that use the IRS to lure victims into believing the scam is legitimate. More information on identity theft, phishing and telephone scams using the IRS name, logo or spoofed (copied) Web site is available on the IRS Web site at IRS.gov. Enter the terms "phishing," "identity theft" or "e-mail scams" into the search box in the upper right corner of the front page. WILLIAMSBURG RESIDENT SELECTED FOR IRS TAXPAYER ADVOCAY PANELA Virginia man was recently selected by the Treasury Department to serve on the nationwide Taxpayer Advocacy Panel (TAP). Panel members listen to taxpayers, identify issues and make suggestions for improving IRS service and customer satisfaction.James Brock, a resident of Williamsburg, Virginia, is one of 98 volunteers serving on the panel. He will represent local taxpayers as well as work on national issues. Upon his selection, Brock, a Retired Actuary said, "I have been privileged to counsel many start-up and existing businesses through the Williamsburg Chapter of SCORE (Counselors to America’s Small Business). I saw TAP as another opportunity to contribute to the growth and success of small businesses." TAP members devote 300 to 500 hours yearly to the panel. Members work with IRS executives on priority topics and also serve as a conduit for grassroots issues between the public and the IRS. Some of the professions represented on the panel include teachers, engineers, attorneys, public administrators, home makers, accountants, law enforcement officers, professors, retired military and small business owners. "The new panel members play a critical role by helping to ensure the IRS provides quality taxpayer service to all taxpayers", said Nina Olson, IRS National Taxpayer Advocate and head of the Taxpayer Advocate Service. "As the IRS remains committed to improving services and assistance to taxpayers, the input from the citizen volunteers at TAP has never been more important. The Taxpayer Advocate Service is committed to making sure the IRS seeks out and considers panel member's views on key initiatives impacting taxpayers before decisions are made." Taxpayers can contact James Brock and the Taxpayer Advocacy Panel by calling 1-888-912-1227 or via the Internet at www.improveirs.org. Taxpayers can also write to the Panel at: Taxpayer Advocacy Panel, 1000 S. Pine Island Road, Room 340, Plantation, FL 33324. IRS E-File Opens for 2008 Filing Season for Most TaxpayersVA-2008-02, Jan. 10, 2008RICHMOND - Most taxpayers may file their 2007 tax returns electronically beginning on Jan. 11 as the Internal Revenue Service opens the e-file program. Last year, more than 1.9 million Virginia taxpayers filed their Federal income tax returns electronically. Benefits of E-File: Taxpayers who use IRS e-file and who choose direct deposit can receive their refund in as little as ten days. With e-file there is no paper return going to the IRS and with direct deposit, there is no paper refund going to the taxpayer. It’s all electronic. Tax return information is protected through encryption. Taxpayers receive an acknowledgement within 48 hours that the IRS has accepted the return. "IRS e-file is the fastest, easiest and most accurate way to file a tax return," said IRS Spokesman Jim Dupree. "We strongly encourage taxpayers to take advantage of the benefits that electronic filing offers." IRS e-file allows taxpayers to file their return now and pay later if they owe taxes. It allows taxpayers to file both the federal and most state returns at the same time. Taxpayers may use IRS e-file through their tax preparer, or with a computer using tax preparation software. This software is available on the Internet for online use or for download. Many retail stores sell the software for offline use. The IRS does not charge taxpayers to e-file their completed returns, but some tax preparers and software manufactures may charge a fee. To get all the benefits of e-file, taxpayers must make sure that when they are done with their return, they take the final step of e-filing it. Taxpayers who use a paid preparer should make sure their preparer is taking this final step, too. Why? In addition to error checks inherent in the return-preparation software, additional checks are done during the transmission process. That's why the error rate is so low for e-filed returns. In fact, the error rate is significantly reduced from 20 percent with paper returns to about 1 percent with e-filed returns. Free File: Free File, which is a form of e-file, is a free federal tax preparation and electronic filing program for eligible taxpayers developed through a partnership between the IRS and the Free File Alliance LLC. The Alliance is a group of private-sector tax- software companies. Since Free File’s debut in 2003, a total of more than 18 million returns have been prepared and e-filed through the program. Free File allows taxpayers with an Adjusted Gross Income (AGI) of $54,000 or less in 2007 to e-file their federal tax returns for free. That means 70 percent of all taxpayers – 97 million taxpayers – can take advantage of the Free File program. E-File Usage Grows Every Year: IRS e-file totaled nearly 80 million tax returns in 2007. Almost 57 percent of all returns were filed electronically. Last year, there was a surge in e-file from home computers. There were also significant increases in e-filing by people with a balance due using credit cards and Electronic Funds Transfer (EFT) payment options. The IRS began the e-file program in 1986 as a pilot project in three cities: Cincinnati, Phoenix and Raleigh-Durham, N.C. That year, there were 25,000 tax returns filed electronically. The e-file program expanded nationwide in 1990 and 4.2 million tax returns were filed. IRS e-file has undergone tremendous growth each year. Taxpayers Affected by AMT Legislation: As many as 13.5 million taxpayers who use five forms related to the Alternative Minimum Tax legislation will have to wait to file tax returns until the IRS completes the reprogramming of its systems for the new law. IRS has targeted Feb. 11 as the potential starting date for taxpayers to begin submitting the five-related returns affected by the legislation. Returns that include the following forms should not be filed until Feb. 11, 2008:
If returns with these forms are e-filed before Feb. 11, they will not be accepted. IRS Works to Quickly, Accurately Implement AMT PatchVA-2007-29, Dec. 20, 2007RICHMOND - The Internal Revenue Service announced it will immediately begin the final reprogramming steps for its income-tax processing systems to prepare for the upcoming tax season following final passage of the Alternative Minimum Tax “patch” Wednesday by the House. "Our people will do everything they can to quickly update our systems for this major change and make this filing season as smooth as possible for everyone,” said Linda Stiff, IRS Acting Commissioner. “Our goal is to process tax returns accurately and to issue refunds to taxpayers as quickly as possible." The AMT and AMT-related tax calculations affect a number of core IRS processing systems that will need to be updated. The IRS is continuing to aggressively explore options for the 2008 filing season in order to minimize the impact of processing delays on taxpayers. Additional details will be available to the public as soon as plans are finalized. To help the tax professional and software communities prepare for the upcoming filing season, revised copies of the 12 tax forms impacted by the AMT legislation will be posted to IRS.gov within 72 hours after the AMT patch is signed into law. As more details on the AMT situation develop, the IRS encourages taxpayers to visit IRS.gov for more information. Tax Tips for Holiday Charitable GivingVA-2007-028, December 7, 2007RICHMOND -The spirit of giving seems to grow during the holiday season, and many donations are made to charitable causes at this special time of year. The IRS reminds taxpayers to keep some important points in mind when making donations with the expectation of deducting them on a federal tax return. Taxpayers can deduct donations only if they make them to a qualified tax exempt organization. Generally, organizations other than churches and governments must apply to the IRS to become qualified as tax exempt. "Taxpayers can search for many charitable organizations online at IRS.gov with Publication 78," said IRS spokesperson Jim Dupree. “Qualified organizations include nonprofit groups that are religious, charitable, educational, scientific, or literary in purpose, or that work to prevent cruelty to children or animals. Generally, organizations will be able to tell you whether they are tax exempt under the Internal Revenue Code and eligible to accept tax-deductible donations." Dupree added that it is necessary to file Form 1040 and itemize deductions on Schedule A to receive a charitable contribution deduction. Be sure to keep good records, too. To deduct any charitable donation of money, a taxpayer must have a bank record, credit card statement or a written communication from the charity showing the name of the charity and the date and amount of the contribution. A bank record includes canceled checks, bank or credit union statements. Bank or credit union statements should show the name of the charity and the date and amount donated. Credit card statements should show the name of the charity, the transaction posting date and the amount donated. Prior law allowed taxpayers to support their donations of money with personal bank registers, diaries or notes made around the time of the donation. Those types of records are no longer sufficient. More information about charitable donations can be found in IRS Publication 526, available online at IRS.gov, or requested by calling, toll-free, 1-800-TAX-FORM. IRS Has $1.9 Million in Refund Checks Looking for a Home in VirginiaVA-2007-27, November 14, 2007RICHMOND - The Internal Revenue Service is looking for 2,413 Virginia taxpayers who are due refund checks worth over $1.9 million after those checks were returned as undeliverable. The refund checks, averaging about $822 can be claimed as soon as taxpayers update their addresses with the IRS. Some taxpayers have more than one check waiting. "Taxpayers should not miss out on getting their money back," said IRS Spokesman Jim Dupree. "The IRS makes it as easy as possible for taxpayers to update their addresses and claim their refunds.' The "Where’s My Refund?" tool on IRS.gov enables taxpayers to check the status of their refunds. A taxpayer must submit his or her social security number, filing status and amount of refund shown on their 2006 return. The tool will provide the status of their refund and in some cases provide instructions on how to resolve delivery problems. Taxpayers can access a telephone version of "Where’s My Refund?" by calling 1-800-829-1954. Most Refunds The number of undeliverable refunds each year is a relatively small portion of all refunds returned to taxpayers. So far in 2007, the IRS has processed nearly 105 million refunds, totaling about $240 billion, either by mail or direct deposit. In fact, undeliverable refunds account for less than one-tenth of 1 percent of all refunds, or about one in a thousand. A refund check is normally returned as undeliverable when a taxpayer moves without updating his or her address with either the U.S. Postal Service or the IRS. Telephone Tax Refund The list of Virginia taxpayers due undeliverable refunds this year rose about 7.8 percent from 2,238 last year. This increase is due in part to the Telephone Excise Tax Refund. The refund is a one-time payment available on 2006 federal income tax returns. It was designed to return to taxpayers previously collected long-distance telephone taxes. Individuals, businesses and tax-exempt organizations are eligible to request it. Updating Your Address Refund checks are mailed to a taxpayer’s last known address. Checks are returned to the IRS if a taxpayer moves without notifying the IRS or the U.S. Postal Service. Taxpayers can update their addresses with the IRS on the "Where’s My Refund?" feature. Also, taxpayers checking on a refund will be prompted to provide an updated address if there is an undelivered check outstanding within the last 12 months. Taxpayers checking on a refund over the phone will be given instructions on how to update their address. A taxpayer can also ensure the IRS has his or her correct address by filing Form 8822, Change of Address. Download the form from IRS.gov or request it by calling 1-800-TAX-FORM (1-800-829-3676). Those who do not have access to the Internet and think they may be missing a refund should first check their records or contact their tax preparer, then call the IRS toll-free assistance line at 1-800-829-1040 to update their address. Direct Deposit Can Stop Lost Refunds Signing up for Direct Deposit can put an end to undelivered refunds, as well lost or stolen refund checks. Taxpayers can receive refunds directly into personal checking or savings accounts. Direct Deposit is available for filers of both paper and electronic returns. Taxpayers can sign up for direct deposit on their tax form. Links: Another Record-Breaking Number of Virginia Taxpayers Choose to Electronically File in 2007VA-2007-26, November 8, 2007RICHMOND - The Internal Revenue Service this year received nearly 80 million tax returns through e-file, breaking the record set last year. Virginians set their own record by electronically filing over 1.9 million tax returns. In Virginia, the 2007 level is up about 9 percent from the 1.8 million returns filed during the same period last year. Nationwide, the 2007 level is also up about 9 percent from the 73 million returns filed for the same period last year. Of the 139.3 million returns filed in 2007, 79.98 million or about 57.4 percent were filed electronically. "It was another record-breaking year for e-file," said IRS Acting Commissioner Linda E. Stiff. "Paper returns continue to drop year after year. E-file is the safe, accurate way for more and more taxpayers to quickly complete their taxes and get a refund faster." Nearly 770,731 returns have been e-filed by Virginia taxpayers doing their own returns, up from 699,845 during the same period last year. Nearly 1.2 million returns were e-filed by tax professionals, up from 1.1 million last year. Nationwide, more than 22.6 million returns have been e-filed by taxpayers doing their own returns, up from 20.3 million during the same period last year. More than 57.4 million returns were e-filed by tax professionals, up from nearly 52.9 million last year. Direct Deposit, IRS.gov also Set Records Meanwhile, more people this year chose to have their tax refunds directly deposited than ever before. For the year to date, the IRS has directly deposited 61.4 million refunds, up 8 percent from last year. The IRS Web site, IRS.gov, also experienced a record year. The IRS recorded 196.2 million visits to IRS.gov this year, a more than 10 percent increase from the 177.5 million visits for the same period last year. IRS and State of Virginia to Share Employment Tax Examination ResultsVA-2007-25, November 6, 2007RICHMOND — Officials from the Internal Revenue Service and more than two dozen state workforce agencies today announced they have entered into agreements to share the results of employment tax examinations. The agreements, part of the Questionable Employment Tax Practice (QETP) initiative, provide a centralized, uniform means for the IRS and state employment officials to exchange data, thereby leveraging resources and encouraging businesses to comply with federal and state employment tax requirements. So far, 29 states have entered into individual information-sharing agreements with the IRS. “These agreements present a united front for the IRS and its state partners to improve compliance in the employment tax arena,” said Kathy Petronchak, Commissioner of the IRS Small Business/Self-Employed Division. “Combining resources will help IRS and the states reduce fraudulent filings, uncover employment tax avoidance schemes and ensure proper worker classification.” The states that have signed partnership agreements with the IRS thus far are: Arizona, Arkansas, California, Colorado, Connecticut, Hawaii, Idaho, Kentucky, Louisiana, Maine, Massachusetts, Michigan, Minnesota, Nebraska, New Hampshire, New Jersey, New York, North Dakota, Ohio, Oklahoma, Rhode Island, South Carolina, South Dakota, Texas, Utah, Vermont, Virginia, Washington and Wisconsin. In addition to coordinating compliance activities, the agreements call for collaborative outreach and education activities designed to help businesses understand their employment and unemployment tax responsibilities. The state agencies, the U.S. Department of Labor, the National Association of State Workforce Agencies, the Federation of Tax Administrators and the IRS worked together on various facets of the exchange agreements. The exchange agreements are the first result of the QETP initiative. The QETP team will use the results of the project to find new opportunities for collaboration and to work toward improved employment tax compliance. Tax-filing Extension Expires Oct. 15; Don’t Overlook Tax Breaks, Choose e-file or Free File, IRS UrgesVA-2007-24, October 5, 2007RICHMOND - The Internal Revenue Service today urged taxpayers whose tax-filing extension runs out on Oct. 15 to double check their returns for often-overlooked tax breaks and then file their returns electronically using IRS e-file or the Free File system. Many of the more than 10.2 million taxpayers who requested an automatic six-month extension this year have yet to file. IRS e-file is fast, accurate and secure, making it an ideal option for those rushing to meet the Oct. 15 deadline. The IRS verifies receipt of an e-filed return, and people who file electronically make fewer mistakes too. A record 58 percent of the 135.3 million returns received so far this year have been filed electronically. In addition, the IRS urges all taxpayers with incomes at or below $52,000 to file their returns for free using the Free File link on IRS.gov. Seven in 10 taxpayers qualify to use the software and electronic-filing services made available through the Free File Alliance, a public-private partnership between the IRS and a consortium of tax-preparation software manufacturers. Telephone customers can also use Free File to request this year’s one-time telephone excise tax refund. Taxpayers who have purchased their own software or use a paid tax preparer are also urged to file their returns electronically. Almost 78.8 million individual taxpayers have already used IRS e-file, a 9 percent increase over last year at this time. Taxpayers who file electronically can e-file and e-pay in a single step by authorizing an electronic funds withdrawal or making a credit card payment. The IRS does not charge a fee for processing an electronic funds withdrawal. However, credit-card payments are subject to convenience fees charged by the authorized service providers. Paper filers, as well as electronic filers, who cannot pay what they owe, may be able to set up a payment agreement with the IRS. Check out the Online Payment Agreement section on IRS.gov for more information. Anyone expecting a refund can get it sooner by choosing direct deposit. Nearly three in five refunds have been direct-deposited this year, a new record. This year for the first time, taxpayers can choose to have their refunds deposited into as many as three accounts. Before filing, the IRS urges taxpayers to take a moment to check out these often-overlooked tax breaks: ·Telephone Excise Tax Refund: This is a one-time refund of long-distance excise taxes available on tax year 2006 income-tax returns. The refund applies to charges billed from March 2003 through July 2006. The government offers a standard refund amount of $30 to $60, or taxpayers can base their refund request on the actual amount of tax paid. Even if a taxpayer does not normally have to file a return, Form 1040EZ-T (also available through Free File) can be used to request this refund. Earned Income Tax Credit: Earned income of less than $38,348 in 2006 may qualify a taxpayer to claim the earned income tax credit. This credit, worth up to $4,536, is available to low and moderate-income workers and working families. A special interactive “EITC Assistant” is available on IRS.gov to help taxpayers determine whether they are eligible. ·Savers credit: Low-and moderate income workers who contributed to a retirement plan, such as an IRA or 401(k), may be able to take the savers credit. This credit is available in addition to any other tax savings that apply. Use Form 8880 to claim the credit. ·Extender tax breaks: Several popular tax breaks were renewed too late to be included on 2006 federal income tax forms. Accordingly, many taxpayers need to follow special instructions to claim the deduction for state and local sales taxes, the tuition and fees deduction, as well as the educator expense deduction. In addition, many who qualify for the tuition and fees deduction may reap greater tax savings by, instead, claiming the Hope credit or the lifetime learning credit for a particular student. Some taxpayers can wait until after Oct.15, to file. This includes those serving in Iraq, Afghanistan or other combat zone localities and people affected by several recent natural disasters. Phone Customers Can Still Request Excise Tax Refund, IRS SaysVA-2007-23, August 21, 2007RICHMOND - Telephone customers can still request this year’s one-time excise tax refund, according to the Internal Revenue Service. Most phone customers, including most cell-phone users, qualify for the refund. The refund covers the three-percent tax paid on long-distance and bundled service. It can add $30 to $60 — or even more — onto a taxpayer’s refund. So far this year, 92.1 million taxpayers, 71.6 percent of all individual tax return filers, have requested telephone tax refunds totaling $4 billion. Eligible phone customers can request the refund on their 2006 income-tax return. This includes those who haven’t filed yet or those who obtained a tax-filing extension earlier this year. People who don’t need to file a regular income-tax return can use a special short form — Form 1040EZ-T— to request the refund. Individuals with low income, including many senior citizens, may qualify to use this special form. The government stopped collecting the long-distance excise tax last August after several federal court decisions held that the tax does not apply to long-distance service as it is billed today. The tax continues to apply to local-only phone service. Federal officials also authorized a one-time refund of the three-percent tax collected on long-distance or bundled service billed after Feb. 28, 2003, and before Aug. 1, 2006. Bundled service is local and long-distance service provided under a plan that does not separately list the charge for local service. Bundled service includes, for example, phone plans that provide both local and long-distance service for either a flat monthly fee or a charge that varies with the time for which the service is used. It is the type of service provided by many cell-phone companies. If you paid the tax and haven’t filed yet, here are some tips to help you figure the refund correctly and get it quickly:
New Rule Will Not Affect Teacher Salaries in Upcoming School YearVA-2007-22, August 7, 2007RICHMOND - Moving to clear up confusion about a recent tax law change, the Internal Revenue Service today reassured teachers and other school employees that new deferred-compensation rules will not affect the way their pay is taxed during the upcoming school year. Recently, the IRS has received inquiries from teachers who had been told that they had to make certain decisions about their pay, this month, or risk severe penalties. At issue is a 2004 law change that applies to people who decide to defer compensation from one year to a future year. In April, the Treasury Department and the IRS issued final rules implementing this law change. Under the 2004 law, when teachers and other employees are given an annualization election – that is, they are allowed to choose between being paid only during the school year and being paid over a 12-month period – and they choose the 12-month period, they are deferring part of their income from one year to the next. For instance, a teacher who chooses to get paid over a 12-month period, running from August of one year through July of the next year, rather than over the August to May school year, falls under this law. The IRS clarified that the new rules do not require school districts to offer teachers an annualization election. Thus, school districts that have not been offering teachers this election are not required to start. School districts that offer annualization elections may have to make some changes in their procedures. The IRS announced that the new deferred-compensation rules will not be applied to annualization elections for school years beginning before Jan. 1, 2008, so school districts and teachers will have time to make any changes that are needed. More information, including answers to frequently-asked questions is posted on IRS.gov. IRS to Notify Virginia Small Tax-Exempt Organizations of New Information Reporting RequirementVA-2007-21, July 13, 2007RICHMOND - The Internal Revenue Service today announced that it began mailing educational letters this month to more than 16,800 Virginia small tax-exempt organizations that may be required to submit a new annual notice, Form 990-N, “Electronic Notice (e-Postcard) for Tax-Exempt Organizations Not Required to File Form 990 or 990-EZ.” Over 650,000 educational letters will be mailed out nationwide. IRS expects to mail the letters over a period of several months, finishing in December. With the enactment of the Pension Protection Act of 2006 (PPA), the majority of small tax-exempt organizations are now required to submit the e-Postcard. Previously, tax-exempt organizations with gross receipts of $25,000 or less were not required to submit information returns. The first e-Postcards are due in calendar year 2008. The IRS intends to have an option available for free electronic submission of the e-Postcard. “We’re sending these educational letters to all the small exempt organizations in our records because we want to make sure they all know about the new requirement,” said Lois G. Lerner, director of the IRS Exempt Organizations division. “The new e-Postcard reporting requirement is simple and straightforward, but organizations shouldn’t ignore it, or they risk losing their tax-exempt status.” Any organization that fails to meet its annual reporting requirement for three consecutive years automatically loses its tax-exempt status under the new law. An organization that wants to regain its exempt status will then have to reapply for recognition as a tax-exempt organization. Short, Easy, Free and Electronic “The IRS calls the new form an e-Postcard because it is short, easy and electronic,” Lerner said. “And organizations will be able to submit it free of charge.” The e-Postcard requires small organizations to provide a legal name and mailing address, any other names used, a Web address if one exists, the name and address of a principal officer and a statement confirming the organization’s annual gross receipts are normally $25,000 or less. In addition to sending out educational letters, IRS is encouraging everyone –– individual volunteers, tax practitioners and larger organizations –– to spread the word about the new e-Postcard reporting requirement. “People do a lot to help their communities by volunteering their time and money to local charities. We're asking them to also offer a helping hand by making sure that charities know about the law change," Lerner said. "We don’t want those organizations to lose their tax-exempt status because they didn’t know about the new reporting requirement.” The IRS is developing a free reporting system for the e-Postcard and an application to make the information available to the public on IRS.gov. Information about these systems will be announced as soon as it becomes available. Further details, including exceptions to the reporting requirement and a copy of the educational letter, are available in the charities and non-profits section of IRS.gov. . IRS Expands Project to Ensure Eligible Public School Employees Are Allowed to Participate in Retirement AnnuitiesVA-2007-19, June 21, 2007RICHMOND — The Internal Revenue Service is expanding an outreach effort to ensure that public schools throughout the United States are complying with the universal availability requirement for retirement annuities they may offer. Some schools and school districts may be overlooking offering employees the opportunity to participate in these retirement plans. To assess the level of compliance, the IRS’s Employee Plans Compliance Unit (EPCU), has started sending questionnaires to public school districts in all 50 states under the auspices of the 403(b) Universal Availability project. This expansion builds upon a pilot project that began in June 2006 with questionnaires that were sent to public schools and districts in New Jersey , Missouri and Washington . In the initial phase of the expansion, the IRS has begun contacting school districts in Alaska , Florida , Hawaii , Illinois , Nevada , Pennsylvania , Tennessee and Virginia . School districts in the remaining states will be contacted as part of the project through 2008. “Our pilot project in three states showed fairly widespread noncompliance by schools with the universal availability requirement for 403(b) plans,” said Joseph Grant, Director of the IRS Employee Plans division. “But we believe most of it was due to a lack of understanding about what the law requires, not a deliberate failure to comply.” Typical noncompliance involves excluding participation by certain classes of employees, such as substitute teachers, janitors, cafeteria workers and nurses. The law requires that all public school employees normally expected to work 20 hours per week must be offered the opportunity to participate in a 403(b) plan if the school or district sponsors one. Schools that receive the questionnaire should answer it completely and accurately. If a potential problem is identified, the IRS will correspond with the school or district to help it analyze its 403(b) plan to determine whether it is in noncompliance. If school officials find a problem, they should use one of the correction methods outlined in the IRS’s follow-up letter. If a school makes the necessary corrections timely, the IRS will not impose a sanction. “We know from our pilot project and from talking to representatives from schools and districts across the country that most of the problems stem from either misunderstanding the law or from confusion because of differing rules in various states,” said Grant. “The project will give schools the chance to identify problems with their plans and to correct them on their own.” A 403(b) plan is a retirement plan for certain employees of public schools, employees of certain tax-exempt organizations, and certain ministers. For more information on this and other EPCU projects, visit the EPCU Web page at www.irs.gov/ep. IRS Warns Taxpayers of New E-mail ScamsVA-2007-18, May 31, 2007RICHMOND — The Internal Revenue Service today alerted taxpayers to the latest versions of an e-mail scam intended to fool people into believing they are under investigation by the agency’s Criminal Investigation division. The e-mail purporting to be from IRS Criminal Investigation falsely states that the person is under a criminal probe for submitting a false tax return to the California Franchise Board. The e-mail seeks to entice people to click on a link or open an attachment to learn more information about the complaint against them. The IRS warned people that the e-mail link and attachment is a Trojan Horse that can take over the person’s computer hard drive and allow someone to have remote access to the computer. The IRS urged people not to click the link in the e-mail or open the attachment. Similar e-mail variations suggest a customer has filed a complaint against a company and the IRS can act as an arbitrator. The latest versions appear aimed at business taxpayers as well as individual taxpayers. The IRS does not send out unsolicited e-mails or ask for detailed personal and financial information. Additionally, the IRS never asks people for the PIN numbers, passwords or similar secret access information for their credit card, bank or other financial accounts. “Everyone should beware of these scam artists,” said Kevin M. Brown, Acting IRS Commissioner. “Always exercise caution when you receive unsolicited e-mails or e-mails from senders you don’t know.” Recipients of questionable e-mails claiming to come from the IRS should not open any attachments or click on any links contained in the e-mails. Instead, they should forward the e-mails to phishing@irs.gov (the instructions may be found on IRS.gov by entering the term “phishing” in the search box). The IRS also sees other e-mail scams that involve tricking victims into revealing private personal and financial information over the Internet is known as “phishing” for information. The IRS and the Treasury Inspector General for Tax Administration work with the U.S. Computer Emergency Readiness Team (US-CERT) and various Internet service providers and international CERT teams to have the phishing sites taken offline as soon as they are reported. Since the establishment of the mail box last year, the IRS has received more than 17,700 e-mails from taxpayers reporting more than 240 separate phishing incidents. To date, investigations by TIGTA have identified host sites in at least 27 different countries, as well as in the United States . Other fraudulent e-mail scams try to entice taxpayers to click their way to a fake IRS Web site and ask for bank account numbers. Another widespread e-mail tells taxpayers the IRS is holding a refund (often $63.80) for them and seeks financial account information. Still another email claims the IRS’s ‘anti-fraud commission’ is investigating their tax returns. More information is available on IRS.gov. IRS Accepting Applications for Low Income Taxpayer Clinic Matching GrantsVA-2007-17, May 23, 2007RICHMOND — National Taxpayer Advocate Nina E. Olson announced that the 2008 Low Income Taxpayer Clinic (LITC) grant application process is now open. The LITC grant program is a federal program administered by the Taxpayer Advocate Service, an independent organization within the IRS that helps taxpayers resolve problems with the IRS and recommends changes to prevent taxpayer problems. Under the LITC grant program, the IRS awards matching grants of up to $100,000 per year to develop, expand or maintain low income taxpayer clinics. The program is in its ninth year and continues to expand. To date in 2007, the LITC Program Office has awarded LITC grants to 154 organizations in 49 states, the District of Columbia , Puerto Rico and Guam . Four local organizations received grants this year and are currently running clinics. The Virginia Low Income Tax Clinics are:
Copies of the 2008 Grant Application Package and Guidelines, IRS Publication 3319 (Rev. 5-2007), are available on the Taxpayer Advocate Service Web site at http://www.irs.gov/advocate . Applicants may also order application packages from the IRS Distribution Center by calling 1-800-829-3676. Applicants can also file electronically at http://www.grants.gov –– those applying through this site should use the Funding Number TREAS-GRANTS-052008-001. Questions about the LITC Program or grant application process can be addressed to the LITC Program Office at (202) 622-7186, not a toll-free call, or by e-mail at LITCProgramOffice@irs.gov. IRS Gives Northeast Storms Victims until April 26 to File Tax ReturnsIR-2007-92, April 18, 2007WASHINGTON — Taxpayers affected by the major storm that hit the Northeastern United States April 16 now have until Thursday, April 26 to file their tax returns, the Internal Revenue Service said today. Earlier this week, the IRS gave taxpayers directly impacted by the storm an additional two days beyond the April 17 deadline to meet their tax filing obligations without incurring late filing and payment penalties. After further assessment of conditions across the region affected by the April 16 storm, the IRS has decided to allow affected taxpayers an additional seven days to fulfill their tax filing obligations. Power outages and public transportation problems made it impossible in some cases for some taxpayers and tax professionals to meet the April 17 filing deadline. Affected taxpayers can mark their paper tax returns with the words “April 16 Storm”. Taxpayers who e-file their returns can use their software’s “disaster” feature, if available. Additional detailed information related to this storm, including Frequently Asked Questions, is available at the IRS Web site at IRS.gov. Taxpayers, Tax Professionals with TurboTax Problems Have Until Midnight April 19 to e-fileVA-2 007-16, April 18, 2007RICHMOND — Taxpayers who were unable to e-file their tax returns Tuesday using Intuit Inc. software products have until midnight on Thursday, April 19, to file their returns, the Internal Revenue Service announced Wednesday. Potentially up to several hundred thousand last-minute tax filers were affected by company server problems on Tuesday evening, and they or their accountants may have been unable to electronically file returns. Intuit confirmed Wednesday that those problems had been resolved, and it was successfully accepting e-file returns on Wednesday. The company said affected taxpayers and tax professionals include those using “TurboTax,” “ProSeries,” “Lacerte” and Intuit’s Free File offering,“TurboTax Freedom.” Intuit product users who were unable to file their returns through the company’s servers Tuesday should e-file as soon as possible. The IRS will not apply late filing penalties to taxpayers who were affected by this problem. Overall, the IRS has seen a strong year for e-filing. Taxpayers filed more than 75 million returns electronically through April 17, shattering last year’s record of 73.2 million. E-file and Free File will remain available through Oct. 15, 2007, to taxpayers who have requested a six-month filing extension. IRS Grants Six-Month Filing, Payment Extension Following Virginia Tech ShootingVA-2007-15, April 17, 2007RICHMOND — The Internal Revenue Service today granted a six-month tax filing and payment extension to those affected by the shootings Monday at Virginia Tech, in Blacksburg , Va. This relief applies to the victims, their families, emergency responders and university students and employees. “Taxes are the last thing the Virginia Tech family should be worried about at this time,” IRS Commissioner Mark W. Everson said. “Our hearts go out to the people affected by this tragic event.” The relief announced today allows taxpayers affected by the events at Virginia Tech to have until Oct. 15, 2007, to file and make payments associated with their 2006 individual tax returns due April 17. No filing and payment penalties will be due for those who qualify for this extension as long as the returns are filed and payments are made by Oct. 15, 2007. In order to claim this relief, taxpayers need to call the IRS at 1-866-562-5227 and identify themselves to the IRS before they file and or make payment. Please note that taxpayers with questions not related to the Virginia Tech situation should visit IRS.gov or contact the regular IRS toll-free number at 1-800-829-1040. IRS Offers Last-Minute RemindersVA-2007-14, April 16, 2007RICHMOND — With the April 17 tax return filing and tax payment deadline imminent, the Internal Revenue Service offers last-minute tips for those who haven’t yet filed or paid. Taxpayers can minimize any possible interest assessments and late filing or late payment penalties by filing and paying by the due date. File Electronically Filing electronically is fast, accurate and easy. The electronic filing program checks for errors and necessary information, increasing the accuracy of the return and reducing the need for correspondence with the IRS to clarify errors or omissions. The computer software leads the user step-by-step. Most people can usually file a state tax return at the same time they electronically file their federal return. Once the return is accepted for processing, the IRS electronically acknowledges receipt of the return. Generally, when someone files electronically, their refund will be issued in about half the time it would take if they had filed a paper return. Those who choose direct deposit will get their refund in even less time. More information on e-file is available on the IRS Web site at IRS.gov Use IRS Free File Nearly 20 companies are offering free electronic filing to taxpayers whose 2006 adjusted gross income was $52,000 or less. That means 70 percent of all taxpayers, 95 million individuals, can take advantage of the IRS-sponsored Free File program. Free File cannot be accessed through tax preparation Web sites that inaccurately say they are part of the Free File Alliance. The only way to access this program is through the IRS’s own secure, official Web site, IRS.gov, where a link to Free File may be found on the home page. Don’t Overlook These Benefits
Those who file a paper return can improve their chances of avoiding common errors that might result in a delay in the processing of their return or increase the need for correspondence with the IRS to clarify errors or omissions if they:
Taxpayers who file electronically can e-file and e-pay in a single step by authorizing an electronic funds withdrawal or by credit card. Electronic payment options are convenient, safe and secure methods for paying taxes or user fees. Taxpayers can charge taxes on their American Express, MasterCard, Visa or Discover cards, using an IRS-authorized service provider listed on IRS.gov. The service providers charge a convenience fee based on the amount of tax the taxpayer is paying. Taxpayers should not add the convenience fee to their tax payment. A link to the “electronic IRS” is located on IRS.gov. For those who can’t file or pay on time, the IRS has alternative options. Request an Extension of Time to File If a taxpayer can't meet the filing deadline to file their tax return, they can get an automatic six month extension of time to file from the IRS, but they must submit the request by April 17. The extension gives taxpayers until October 15 to file the tax return. However, an extension of time to file does not give the taxpayer an extension of time to pay, which must be separately requested. Those who owe taxes can make a payment when they file the extension either by mailing a check made out to the U.S. Department of the Treasury or by several electronic payment methods, such as electronic funds withdrawals from bank accounts and credit card payments. Taxpayers can get an automatic six-month extension of time to file their tax returns by filing Form 4868, Automatic Extension of Time to File. Taxpayers can e-file the extension request from a home computer or through a tax professional who uses e-file. Taxpayers can e-file their extensions at no cost. Several companies offer free e-filing of extensions through the Free File Alliance; these companies are listed on IRS.gov. Request an Extension of Time to Pay Based on the circumstances, a taxpayer could qualify for an extension of time to pay. The IRS is willing to allow extensions of time to pay in order to assist in tax debt repayment. A taxpayer can request an extension from 30 to 120 days depending on the specific situation. Taxpayers qualifying for an extension of time to pay of 30 to 120 days generally will pay less in penalties and interest than if the debt were repaid through an installment agreement. Taxpayers can request an extension of time to pay using the Online Payment Agreement option available on IRS.gov. Apply for an Installment Agreement The IRS may allow taxpayers to pay any remaining balance in monthly installments through an installment agreement. Taxpayers who owe $25,000 or less may apply for a payment plan electronically, using the Online Payment Agreement application. Alternatively, taxpayers may attach a Form 9465, Installment Agreement Request, to the front of their tax return. Taxpayers must show the amount of their proposed monthly payment and the date they wish to make their payment each month. The IRS charges a $105 fee for setting up an installment agreement. The fee is reduced to $52 for those who establish a direct debit installment agreement and $43 for those with an income below a certain level (more information is available on Form 13844). Taxpayers are required to pay interest plus a late payment penalty on the unpaid taxes for each month, or part of a month, after the due date that the tax is not paid. A taxpayer who does not file the return by the due date — including extensions — may have to pay a failure-to-file penalty. More information can be found on the “Payment Plans, Installment Agreements” page on IRS.gov. For more information about filing and paying taxes, visit IRS.gov and choose “1040 Central” or refer to the Form 1040 Instructions or IRS Publication 17, Your Federal Income Tax. Taxpayers can download forms and publications at IRS.gov or request a free copy by calling toll free 800-TAX-FORM (800-829-3676). April 17 Tax Deadline Rapidly ApproachingVA-2007-13, April 5, 2007RICHMOND — The Internal Revenue Service today issued a reminder that 2006 federal tax returns must be filed, and any taxes owed must be paid, by no later than April 17, 2007. Traditionally, the deadline for filing and paying is April 15. This year, however, taxpayers nationwide will have extra time to file and pay because April 15 falls on a Sunday and the following day, Monday, April 16, is Emancipation Day, a legal holiday in the District of Columbia . Previously, the April 17 deadline applied just to individuals in the District of Columbia and six eastern states who are served by an IRS processing facility in Massachusetts , where the Massachusetts state holiday Patriots Day will be observed on April 16. Under a federal statute enacted decades ago, holidays observed in the District of Columbia have impact nationwide on tax issues, not just in D.C. Under recently-enacted city legislation, April 16 is a holiday in the District of Columbia . Officials recently became aware of the intersection of the national filing day and the local observance of the new Emancipation Day holiday after most forms and publications for the current tax filing season went to print. The April 17, 2007 deadline will apply to any of the following:
Most taxpayers will not have to change their plans in response to this announcement. Three out of four individual filers get refunds. Typically, returns claiming refunds are filed early in the tax season. Even with the extra time, taxpayers can skip the last-minute rush and avoid needless mistakes by filing as early as possible, taking advantage of the speed and convenience of electronic filing, choosing direct deposit for any refunds and paying any taxes due by direct debit or credit card. IRS.gov has further details on electronic filing and payment options and links to companies providing these services Many Cell Phone Customers May Be Overlooking Telephone Tax Refund; Before You File, See if You Qualify, IRS AdvisesVA-2007-12, March 27, 2007RICHMOND — Many cell-phone users appear to be overlooking the telephone tax refund in the mistaken belief that this one-time refund only applies to land-line customers. According to the Internal Revenue Service, most cell-phone users qualify for the federal telephone excise tax refund. In most cases, the refund is also available to land-line, fax and Internet phone customers as well. The method of phone signal transmission does not affect the refund. The telephone-tax refund can add $30 to $60 — or even more — onto a taxpayer’s refund. “Many taxpayers are overlooking this special refund and the chance to get a bigger refund,” said IRS Commissioner Mark W. Everson. “We encourage taxpayers to spend a few extra minutes reviewing their tax return to make sure they are making an accurate request. A little extra time can mean a bigger refund check.” The government stopped collecting the long-distance excise tax last August after several federal court decisions held that the tax does not apply to long-distance service as it is billed today. The tax continues to apply to local-only phone service. Federal officials also authorized a one-time refund of the three-percent tax collected on long-distance or bundled service billed after Feb. 28, 2003, and before Aug. 1, 2006. Bundled service is local and long-distance service provided under a plan that does not separately list the charge for local service. Bundled service includes, for example, phone plans that provide both local and long-distance service for either a flat monthly fee or a charge that varies with the time for which the service is used. It is the type of service provided by many cell-phone companies. “We want all taxpayers entitled to this refund to get it, whether they are using a tax preparer or doing the return themselves,” Everson said. So far this year, about three in 10 tax returns received by the IRS are not requesting the telephone-tax refund. If you paid the tax and haven’t filed yet, here are some tips to help you figure the refund correctly and get it quickly:
IRS Invites Taxpayers to Apply for Taxpayer Advocacy Panel; Applications Now Being Accepted; Deadline is April 30VA-2007-11, March 26, 2007WASHINGTON — The Internal Revenue Service is inviting civic-minded individuals to help improve the nation’s tax agency by applying to be members of the Taxpayer Advocacy Panel. The Panel provides a forum for citizens from each state to make suggestions regarding IRS decision making. The mission of the Panel is to listen to taxpayers, identify taxpayers’ issues, and make recommendations for improving IRS service and customer satisfaction. Taxpayer Advocacy Panel (TAP) members:
To qualify as a TAP member, applicants must be U.S. citizens and be able to commit 300 to 500 hours during the year to the Panel. In addition, they must be current with their tax obligations and pass a criminal background check. This year TAP is accepting applications from U.S. citizens who reside in the following locations: Alabama, Arkansas, California, Colorado, Delaware, Georgia, Hawaii, Idaho, Illinois, Indiana, Louisiana, Maine, Massachusetts, Michigan, Mississippi, Montana, Nebraska, New Hampshire, North Carolina, North Dakota, New Mexico, Nevada, Ohio, Oklahoma, Pennsylvania, Puerto Rico, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Vermont, Virginia, West Virginia, Wisconsin, Utah, Washington, Wyoming. The application form will be available, and may be submitted electronically online, at www.improveirs.org from March 19, 2007 through April 30, 2007. If you do not have access to a computer, call 1-888-912-1227 to request a paper application form. All applications, both electronic and paper, must be received no later than April 30, 2007. IRS Has $68 Million for Virginians Who Have Not Filed a 2003 Tax ReturnVA-2007-10, March 8, 2007RICHMOND — Unclaimed refunds totaling more than $68 million are awaiting about 54,000 Virginia taxpayers who failed to file a federal income tax return for 2003, the Internal Revenue Service announced today. However, in order to collect the money, a return for 2003 must be filed with an IRS office no later than Tuesday, April 17, 2007. The IRS estimates that half of those who could claim refunds would receive more than $615. In some cases, individuals had taxes withheld from their wages, or made payments against their taxes out of self-employed earnings, but had too little income to require filing a tax return. Some taxpayers may also be eligible for the refundable Earned Income Tax Credit. “Everybody who needs to should file their tax return. But you simply can’t get the money we owe you unless you file a return,” said IRS Commissioner Mark W. Everson. In cases where a return was not filed, the law provides most taxpayers with a three-year window of opportunity for claiming a refund. If no return is filed to claim the refund within three years, the money becomes property of the U.S. Treasury. For 2003 returns, the window closes on April 17, 2007. The law requires that the return be properly addressed, postmarked and mailed by that date. There is no penalty assessed by the IRS for filing a late return qualifying for a refund. The IRS reminds taxpayers seeking a 2003 refund that their checks will be held if they have not filed tax returns for 2004 or 2005. In addition, the refund will be applied to any amounts still owed to the IRS and may be used to satisfy unpaid child support or past due federal debts such as student loans. By failing to file a return, individuals stand to lose more than refunds of taxes withheld or paid during 2003. Many low-income workers may not have claimed the Earned Income Tax Credit (EITC). Although eligible taxpayers may get a refund when their EITC is more than what they owe in tax, those who file returns more than three years late would be able only to apply it toward the taxes they owe (if any). They would not be able to receive a refund if the credit exceeded their tax. Generally, unmarried individuals qualified for the EITC if in 2003 they earned less than $33,692 and had more than one qualifying child living with them, earned less than $29,666 with one qualifying child, or earned less than $11,230 and had no qualifying child. Limits are slightly higher for married individuals filing jointly. Current and prior year tax forms and instructions are available on the Forms and Publications page of the IRS Web site at IRS.gov or by calling 1-800-TAX-FORM (1-800-829-3676). Information about the Earned Income Tax Credit and how to claim it is also available on IRS.gov. Taxpayers who need help also can call the toll-free IRS help line at 1-800-829-1040. 221,000 Virginia Taxpayers Miss Out on Telephone Tax Refunds; IRS Urges People to Check before FilingVA-2007-09, March 1, 2007RICHMOND –– The Internal Revenue Service is urging taxpayers to check to see if they qualify for the telephone excise tax refund after nearly 221,000 Virginia early filers did not request the one-time refund, which could have resulted in nearly $6,622,000 in refunds. In the first release of this year’s weekly filing season statistics, about 33 percent of all Virginia taxpayers did not request the telephone tax refund. “Many taxpayers are overlooking this special refund and the chance to get a bigger refund,” said IRS Spokesman Jim Dupree. “We encourage taxpayers to spend a few extra minutes reviewing their tax return to make sure they are making an accurate request. A little extra time can mean a bigger refund check.” The government stopped collecting the long-distance excise tax last August after several federal court decisions held that the tax does not apply to long-distance service as it is billed today. Federal officials also authorized a one-time refund of the federal excise tax collected on service billed during the previous 41 months, stretching from the beginning of March 2003 to the end of July 2006. The tax continues to apply to local-only phone service. To make the refund easier to figure, the government established a standard refund amount, based on personal exemptions, ranging from $30 to $60. If taxpayers have phone bills and other records, they can request the actual amount of excise tax paid. Though using the standard amount is optional, it is easy to figure and approximates the eligible amount for most individual taxpayers. Taxpayers only have to fill out one line on their return, and they don’t need to present proof to the IRS. Fraudulent Telephone Tax Refunds, Abusive Roth IRAs Top Off 2007 “Dirty Dozen” Tax ScamsVA-2007-07 February 21, 2007RICHMOND — The Internal Revenue Service today identified 12 of the most blatant scams affecting American taxpayers and warned people not to fall for schemes peddled by scamsters. This year the “Dirty Dozen” highlights five new scams that IRS auditors and criminal investigators have uncovered. Topping off the list are fraudulent refunds being claimed in connection with the special Telephone Excise Tax Refund available to most taxpayers this filing season. The IRS is actively investigating instances of this scam involving tax preparers who are preparing inflated refund requests. Also new to the Dirty Dozen this year are abuses pertaining to Roth IRAs, the American Indian Employment Credit, domestic shell corporations and structured entities. “Taxpayers shouldn’t let their guard down,” IRS Commissioner Mark W. Everson said. “Don’t get taken by scam artists making outrageous promises. If you use a tax professional, pick someone who is reputable. Taxpayers should remember they are ultimately responsible for what is on their tax return even if some unscrupulous preparers have steered them in the wrong direction.” Involvement in tax schemes leads to problems for scam artists and taxpayers. Tax return preparers and promoters risk significant penalties, interest and possible criminal prosecution. The IRS urges taxpayers to avoid these common schemes: 1. Telephone Excise Tax Refund Abuses: Early filings show some individual taxpayers have requested large and apparently improper amounts for the special telephone tax refund. In some cases, taxpayers appear to be requesting a refund of the entire amount of their phone bills, rather than just the three-percent tax on long-distance and bundled service to which they are entitled. Some tax preparers are helping their clients file apparently improper requests. The IRS is investigating potential abuses in this area and will take prompt action against taxpayers who claim improper refund amounts and against the return preparers who help them. 2. Abusive Roth IRAs: Taxpayers should be wary of advisers who encourage them to shift under-valued property to Roth Individual Retirement Arrangements (IRAs). In one variation, a promoter has the taxpayer move under-valued common stock into a Roth IRA, circumventing the annual maximum contribution limit and allowing otherwise taxable income to go untaxed. 3. Phishing is a technique used by identity thieves to acquire personal financial data in order to gain access to the financial accounts of unsuspecting consumers, run up charges on their credit cards or apply for loans in their names. These Internet-based criminals pose as representatives of a financial institution –– or sometimes the IRS itself –– and send out fictitious e-mail correspondence in an attempt to trick consumers into disclosing private information. A typical e-mail notifies a taxpayer of an outstanding refund and urges the taxpayer to click on a hyperlink and visit an official-looking Web site. The Web site then solicits a social security and credit card number. It is important to note the IRS does not use e-mail to initiate contact with taxpayers about issues related to their accounts. If a taxpayer has any doubt whether a contact from the IRS is authentic, the taxpayer should call 1-800-829-1040 to confirm it. 4. Disguised Corporate Ownership: Domestic shell corporations and other entities are being formed and operated in certain states for the purpose of disguising the ownership of the business or financial activity. Once formed, these anonymous entities can be, and are being, used to facilitate underreporting of income, non-filing of tax returns, listed transactions, money laundering, financial crimes and possibly terrorist financing. The IRS is working with state authorities to identify these entities and to bring their owners into compliance. 5. Zero Wages: In this scam, which first appeared in the Dirty Dozen in 2006, a Form 4852 (Substitute Form W-2) or a “corrected” Form 1099 showing zero or little income is submitted with a federal tax return. The taxpayer may include a statement rebutting wages and taxes reported by the payer to the IRS. An explanation on the Form 4852 may cite statutory language behind Internal Revenue Code sections 3401 and 3121 or may include some reference to the paying company refusing to issue a corrected Form W-2 for fear of IRS retaliation. 6. Return Preparer Fraud: Dishonest return preparers can cause many headaches for taxpayers who fall victim to their schemes. Such preparers make their money by skimming a portion of their clients’ refunds and charging inflated fees for return preparation services. They attract new clients by promising large refunds. Some preparers promote filing fraudulent claims for refunds on items such as fuel tax credits to recover taxes paid in prior years. Taxpayers should choose carefully when hiring a tax preparer. As the old saying goes, “If it sounds too good to be true, it probably is.” Remember that no matter who prepares the return, the taxpayer is ultimately responsible for its accuracy. Since 2002, the courts have issued injunctions ordering dozens of individuals to cease preparing returns, and the Department of Justice has filed complaints against dozens of others. During fiscal year 2006, 109 tax return preparers were convicted of tax crimes and sentenced to an average of 18 months in prison. 7. American Indian Employment Credit: Taxpayers submit returns and claims reducing taxable income by substantial amounts citing an American Indian employment or treaty credit. Although there is an Indian Employment Credit available for businesses that employ Native Americans or their spouses, there is no provision for its use by employees. In a somewhat similar scam, unscrupulous promoters have informed Native Americans that they are not subject to federal income taxation. The promoters solicit individual Indians to file Form W-8 BEN seeking relief from all withholding of federal taxation. A recent “phishing” variation has promoters using false IRS letterheads to solicit personal financial information that they claim the IRS needs in order to process their "non-tax" status. 8. Trust Misuse: For years unscrupulous promoters have urged taxpayers to transfer assets into trusts. They promise reduction of income subject to tax, deductions for personal expenses and reduced estate or gift taxes. However, some trusts do not deliver the promised tax benefits. There are currently more than 150 active abusive trust investigations underway and 49 injunctions have been obtained against promoters since 2001. As with other arrangements, taxpayers should seek the advice of a trusted professional before entering into a trust. 9. Structured Entity Credits: Promoters of this newly identified scheme are setting up partnerships to own and sell state conservation easement credits, federal rehabilitation credits and other credits. The purported credits are the only assets owned by the partnership and once the credits are fully used, an investor receives a K-1 indicating the initial investment is a total loss, which is then deducted on the investor’s individual tax return. Forming such an entity is not a viable business purpose. In other words, the investments are not valid, and the losses are not deductible. 10. Abuse of Charitable Organizations and Deductions: The IRS continues to observe the use of tax-exempt organizations to improperly shield income or assets from taxation. This can occur when a taxpayer moves assets or income to a tax-exempt supporting organization or donor-advised fund but maintains control over the assets or income. Contributions of non-cash assets continue to be an area of abuse, especially with regard to overvaluation of contributed property. In addition, the IRS is noticing the return of private tuition payments being disguised as charitable contributions to religious organizations. 11. Form 843 Tax Abatement: This scam rests on faulty interpretation of the Internal Revenue Code. It involves the filer requesting abatement of previously assessed tax using Form 843. Many using this scam have not previously filed tax returns and the tax they are trying to have abated has been assessed by the IRS through the Substitute for Return Program. The filer uses the Form 843 to list reasons for the request. Often, one of the reasons is: "Failed to properly compute and/or calculate IRC Sec 83-Property Transferred in Connection with Performance of Service." 12. Frivolous Arguments: Promoters have been known to make the following outlandish claims: the Sixteenth Amendment concerning congressional power to lay and collect income taxes was never ratified; wages are not income; filing a return and paying taxes are merely voluntary; and 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. These arguments are false and have been thrown out of court. While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law. IRS Still Watches Scams That Fall Off the List Five of last year’s Dirty Dozen tax scams rotated off the list for 2007. While the IRS has seen a decline in the occurrence of some of these scams –– abusive credit counseling agencies, for example –– other problems, such as offshore abusive transactions continue to be an area of particular concern for the agency. The absence of a particular scheme from the Dirty Dozen should not be taken as an indication that the IRS is unaware of it or not taking steps to counter it. How to Report Suspected Tax Fraud Activity Suspected tax fraud can be reported to the IRS using IRS Form 3949-A, Information Referral. Form 3949-A is available for download from the IRS Web site at IRS.gov, or by mail by calling 1-800-829-3676. The completed form or a letter detailing the alleged fraudulent activity should be addressed to the Internal Revenue Service, Fresno , CA 93888 . The mailing should include specific information about who is being reported, the activity being reported, how the activity became known, when the alleged violation took place, the amount of money involved and any other information that might be helpful in an investigation. The person filing the report is not required to self-identify, although it is helpful to do so. The identity of the person filing the report can be kept confidential. The person may also be entitled to a reward. IRS Moves to Prevent Telephone Tax Refund Abuse; Help Taxpayers Make Accurate RequestsVA-2007-06, Feb. 7, 2007WASHINGTON — The Internal Revenue Service announced today it is taking additional steps to prevent abuse by tax preparers and help taxpayers make accurate requests for the one-time telephone excise tax refund. This week, IRS Criminal Investigation special agents and IRS revenue agents are conducting special site visits with tax preparers across the nation to prevent inflated requests made for the one-time telephone tax refund. Visits began this week to 22 different tax preparers who have handled more than 1,500 tax returns. “We are taking this unusual step to confront blatant abuse of this important refund program,” said IRS Commissioner Mark W. Everson. “We want tax preparers to prepare accurate tax returns. If they don’t, we will move swiftly to impose civil penalties and, where warranted, seek criminal sanctions.” The government stopped collecting the long-distance excise tax last August after several federal court decisions held that the tax does not apply to long-distance service as it is billed today. The IRS also authorized a one-time refund of the federal excise tax collected on service billed during the previous 41 months, stretching from the beginning of March 2003 to the end of July 2006. The tax continues to apply to local-only phone service. The IRS has monitored telephone excise tax refund requests for potential problems since the tax-filing season opened in early January. The IRS has seen some problems with returns from tax preparers that may indicate criminal intent. Some tax-return preparers are requesting thousands of dollars of refunds for their clients in instances where clients are entitled to only a tiny fraction of that amount. In some cases, taxpayers requested a refund in the thousands of dollars, suggesting that the taxpayer paid more for telephone service than they received in income. In several instances, taxpayers requested a refund of $30,000 – hundreds of times of what could be reasonably expected. Some refund requests appear to be for the entire amount of the taxpayer’s phone bill, rather than just the three-percent long-distance tax. Taxpayers who request more of a refund than they are entitled to receive will have their refunds held and they may be subject to an audit. To make the refund easier to figure, the IRS established a standard refund amount, based on personal exemptions, ranging from $30 to $60. If taxpayers have phone bills and other records, they can request the actual amount of excise tax paid. Though using the standard amount is optional, it is easy to figure and approximates the eligible amount for most individual taxpayers. You only have to fill out one line on your return, and you don’t need to present proof to the IRS. At the same time, the IRS issued a new reminder today for taxpayers who are not filing for the refund even though they may qualify. In early returns filed this year, more than one-third of early filers did not request the telephone tax refund. Other taxpayers are making mistakes when requesting the refund. The IRS encourages taxpayers to see if they qualify for the telephone tax refund and to make sure they fill out tax returns accurately and completely. The best and most reliable information on this refund can be found in the Telephone Excise Tax Refund section on the front page of IRS.gov, the tax agency’s popular Web site. Here, taxpayers can download forms, find answers to frequently-asked questions and link to participating private-sector Free File partners offering free electronic-filing services. Paulson, IRS Launch Campaign to Help Low-Income Taxpayers Take Advantage of Tax Credit, Free Tax HelpVA -2007-06, February 1, 2007WASHINGTON — Treasury Secretary Henry M. Paulson, Treasurer Anna Escobedo Cabral and IRS Commissioner Mark W. Everson and the IRS’ national partners launched Earned Income Tax Credit (EITC) Awareness Day at a Treasury Department press conference today. The event kicks off a nationwide campaign to inform taxpayers about this important credit for working families and the availability of free tax help. “The Earned Income Tax Credit helps Americans who work hard but need extra support to make ends meet – people who are often on the first step of the economic ladder, gaining the experience and skills to land a better job and earn a higher income in the future,” said Secretary Paulson. “Our goal is not just to help people get by. Our goal is to help people get ahead.” More than 150 coalitions and partners across the nation marked EITC Awareness Day with a series of news conferences or news releases promoting this valuable tax credit for low-wage taxpayers. These organizations operate free tax preparation sites for low-income individuals, for seniors and for other eligible taxpayers. The Treasury officials were joined by partners Mayor Otis Johnson of Savannah, Georgia, Brian Gallagher, chief executive officer of United Way of America, Elsie Meeks, executive director of First Nations Oweesta Corporation and Linda Eatmon-Jones, coordinator, DC CASH, for the kickoff event at the Treasury Department. The Earned Income Tax Credit provides a refundable credit of up to $4,536 for eligible families. EITC claimants are eligible for free tax preparation services provided at 12,000 volunteer sites nationwide or they can also link to Free File through IRS.gov if they wish to prepare their own return. In addition to providing help claiming the EITC, these free tax sites can help qualified taxpayers request their one-time telephone excise tax credit. “The IRS wants all eligible taxpayers to claim the EITC. Trained volunteers working at these free tax preparation sites can help ensure that taxpayers receive all the deductions and credits they are due. And, if you want to do your own taxes, there is always Free File which is available at IRS.gov,” said Commissioner Everson. Many organizations offering free tax help also are encouraging taxpayers to save a little money or open a bank account. The IRS is helping in this effort by creating a new split-refund program that allows all taxpayers to divide their refund among up to three financial accounts, such as checking, savings and retirement. “Tax time is an ideal time to think about savings. For many taxpayers, tax refunds are the largest checks they will receive throughout the year, and the new split-refund program gives individuals and families the opportunity to build a nest egg for the future,” said Treasurer Cabral. During tax year 2005, more than 22 million returns received over $41 billion in EITC. However, the IRS also estimates that as many as 25 percent of eligible taxpayers fail to claim this tax credit. Eligible people who fail to claim EITC include Spanish speakers, individuals who are self-employed or have service jobs in private households, childless taxpayers, rural residents, and recipients of other types of public assistance such as food stamps. The credit was created in 1975 in part to offset the burden of Social Security taxes and to serve as a work incentive. The amount of the credit varies but it is generally determined by income and family size. Many states also have a local version of EITC which also can increase a taxpayer’s refund. Tax preparers and taxpayers can find a wealth of information at IRS.gov. Both can use the EITC Assistant at www.irs.gov/eitc which is an easy-to-use interactive tool to help determine if the taxpayer is qualified for EITC. This step-by-step online program helps answer questions about eligibility, filing status, qualifying children and credit amount. The EITC Assistant also is available in Spanish. For the 2006 tax year, the maximum credit is $4,536 for a family with two or more children; $2,747 for a family with one child and $412 if the taxpayer does not reside with children. The maximum amount of earned income allowed is higher for tax year 2006 than it was for 2005. Please see Fact Sheet 2007-13 for all eligibility requirements. Generally, a taxpayer may be able to take the credit for tax year 2006 if the taxpayer:
The IRS reminds tax professionals that they must perform due diligence when preparing an EITC tax return. To help, the IRS created an EITC Tax Preparer Electronic Toolkit which is available at www.eitcfortaxpreparers.com. In addition to on-line tools, the IRS also produces Publication 596, Earned Income Credit, which explains all the eligibility rules and also includes a worksheet to determine eligibility. The publication is available in English and Spanish. EITC Awareness Day QuotesWays and Means Committee Chairman Charles Rangel of New York :“The Earned Income Tax Credit is a proven work incentive and valuable tax benefit for lifting working low-income families out of poverty. Everyone eligible for EITC needs to know that they have a right to claim it. As part of increasing EITC awareness during the 2007 tax return filing season, Oversight Subcommittee Chairman Lewis will conduct a hearing on EITC outreach in the coming weeks. I applaud the IRS for its efforts to bring the EITC to the forefront as taxpayers begin filing their tax returns this month,” said Rep. Charles Rangel of New York . Senate Finance Committee Chairman Max Baucus of Montana : “The EITC has lifted millions of working families out of poverty – including tens of thousands in my home state of Montana – and has helped them remain a part of the workforce,” said Sen. Max Baucus. “I remain a strong supporter of all efforts to increase participation and decrease errors in this successful program.” U.S. Rep. Ralph Regula of Ohio , Ranking Member of the Subcommittee on Financial Services of the House Committee on Appropriations: "The EITC is the government’s largest cash assistance program for low-income Americans and taxpayers. I am pleased the IRS and its Ohio partners are offering these services to help people get their tax questions answered and to take advantage of credits that can really help ease their tax burden,” said Rep. Ralph Regula California First Lady Maria Shriver: "I'm proud to bring about awareness and connect Californians to the Earned Income Tax Credit to help working families take advantage of it. These dollars are too important to our families to send them back to Washington , D.C. This tax credit is real money for people who really need it,” said Maria Shriver, California First Lady. United Way of America President and CEO Brian Gallagher: “Often the financial health of an individual or family is at the root of many larger, more pervasive social conditions,” said Brian Gallagher, president and CEO of United Way of America . “Throughout the nation, United Way has partnered with the IRS and other public, private and community leaders to work to improve access to EITC and other savings mechanisms. We know efforts such as this can give families much-needed financial stability and, ultimately, improve our nation’s communities.” New York Mayor Michael Bloomberg: “For five years New York City has coordinated the country’s most comprehensive campaign to increase filings of the Earned Income Tax Credit, and this year we expanded those efforts by sending filled out forms to those who qualified in 2003 and 2004 but didn’t claim it,” said Mayor Michael Bloomberg. “We have worked with a coalition of more than 150 non-profit, government and private partners to reach the 1 million New Yorkers who qualify for this critical credit. Now we’re excited about replicating the EITC Campaign model in the newly-created Office of Financial Empowerment to reduce poverty through innovative programs and strategic partnerships. We applaud Commissioner Mark Everson and the IRS for working hard to help New Yorkers claim the tax refunds they deserve.” Free File Alliance Executive Director Tim Hugo: "The Free File Alliance has helped millions of low and moderate income taxpayers prepare their taxes for free over the last several years," said Tim Hugo, Executive Director of the Free File Alliance. "Using the Free File service on IRS.gov is a clear and consumer-friendly way for taxpayers to determine whether they qualify for the EITC and other tax credits or deductions." Some Telephone Tax Refund Requests May Be Too High; IRS Will Deny Improper RequestsJanuary 26, 2007RICHMOND — The Internal Revenue Service said today that early filings show some individual taxpayers have requested large and apparently improper amounts for the special telephone tax refund. The IRS is investigating potential abuses in this area and will take prompt action against taxpayers who claim improper refund amounts and the return preparers who help them. “While the vast majority of taxpayers are claiming the telephone tax refund correctly, we are seeing some clear abuse involving overstated refund requests,” said IRS Commissioner Mark W. Everson. “People requesting an inflated amount will likely see their refund frozen, may have their entire tax return audited and even face criminal prosecution where warranted.” The government stopped collecting the long-distance excise tax last August after several federal court decisions held that the tax does not apply to long-distance service as it is billed today. Federal officials also authorized a one-time refund of tax collected on service billed during the previous 41 months, stretching from the beginning of March 2003 to the end of July 2006. The tax continues to apply to local-only phone service. The IRS checked a sample of returns filed through mid-January and found that some individual taxpayers requested telephone tax refunds that appear to be excessive:
The IRS is making it as easy as possible for taxpayers to get this special refund. Research and contacts with telephone service providers indicated that standard refund amounts, ranging from $30 to $60, based on the number of exemptions claimed on their tax return, would approximate the eligible amount for most taxpayers. Taxpayers do not need to present proof for requesting the standard amount. Alternatively, they can figure the refund using the actual amount of tax paid, based on their phone bills and other records. These documents should not be sent along with the refund request but should be retained in case the IRS questions the amount requested. The IRS reminds taxpayers that the best way to avoid mistakes and get a refund quickly is to file a return electronically and have the refund deposited directly into a checking or savings account. Electronic-filing software helps taxpayers figure tax breaks, such as the telephone tax refund, accurately and report them properly. Free e-file services are available to low and moderate-income taxpayers (incomes of $52,000 or less) through the Free File link on IRS.gov. Another way to avoid mistakes is to stay away from unscrupulous promoters and tax preparers who make false claims about the telephone tax refund and suggest that many, if not most, phone customers can get hundreds of dollars or more back under this program. The best and most reliable information on this unique refund can be found in the Telephone Excise Tax Refund section on the front page of IRS.gov, the tax agency’s popular Web site. Here, taxpayers can download forms, find answers to frequently-asked questions and link to participating private-sector Free File partners offering free electronic-filing services. IRS Plans Feb. 3 Start Date for Processing Extender ClaimsRICHMOND — The Internal Revenue Service plans a Feb. 3 start date for processing tax returns that claim key tax provisions enacted in December.The IRS announced today that it will begin processing both e-file and paper tax returns on Feb. 3 that include claims for the major “extender” provisions, including deductions for state and local sales taxes, higher education tuition and fees, and educator expenses. Any other tax returns for individuals that do not claim the extender provision can be filed as normal this month. The Feb. 3 date allows the IRS enough time to update its systems to accommodate the tax law changes without disrupting other operations tied to the tax filing season. “The vast majority of taxpayers will not be affected by these changes, and they will not notice any difference as they start filing tax returns this month,” IRS Commissioner Mark W. Everson said. “The IRS urges people claiming the extender deductions to file electronically to reduce the chance of making an error.” Based on filings last year, about 930,000 tax returns claimed any of the three main extender provisions by Feb. 1. Overall, the IRS expects to process about 136 million individual tax returns this year. The IRS is taking a number of steps to help taxpayers get the information they need to take advantage of the extended deductions and tax law provisions enacted after IRS forms went to print. Taxpayers can visit IRS.gov for updated information on the late legislation. Publication 600, State and Local General Sales Tax, is posted on IRS.gov. This month, the IRS is also conducting a special mailing of Publication 600, which will include the state and local sales tax tables and instructions for claiming the sales tax deduction on Schedule A (Form 1040), to 6 million taxpayers who have received the 2006 Form 1040 package in the mail. The IRS reminded taxpayers that both paper and electronic returns will not be processed if submitted before Feb. 3. Tax returns filed on paper will be accepted but will not be processed until after IRS processing systems are updated on Feb. 3. < |