Tax Returns to Different IRS Centers
The IRS has announced changes that will affect tax professionals when sending tax returns and payments for their clients in 2005 Tax professionals should send:

• Returns from Connecticut without payments to the IRS in Kansas City, Mo.
• Returns from Connecticut with payments to the IRS in St. Louis, Mo.
• Returns from Virginia without payments to the IRS in Fresno, Calif., and
• Returns from Arizona, Utah and Virginia with payments to the IRS in San Francisco.

For taxpayers who file paper returns, the new center addresses will be provided on the envelopes in the tax packages. Taxpayers who file their returns electronically will not be affected by these changes.

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...back to 7 October 2004


Further information:
www.irs.gov/newsroom/article/0,,id=129713,00.html
www.irs.gov/file/article/0,,id=129870,00.html

Deadline for extension filers
The filing deadline for taxpayers who opted for the automatic extension of time to file is August 16. The penalty for missing the deadline is 5% per month of the unpaid tax.

A further two-month extension is available to taxpayers with special circumstances that prevent them from preparing and filing their tax forms by August 16. The form to complete for this purpose is Form 2688. There will be no penalty for later payment when filing by October 15, provided that 90% of their total tax was paid by April 15.

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...back to 5 August 2004


Further information:
www.irs.gov/newsroom/article/0,,id=127850,00.html

National Taxpayer Advocate report to Congress
The National Taxpayer Advocate, Nina E. Olson, has delivered her annual report to Congress that calls for enhanced protection of taxpayer rights by tax administrators and improvements in the offer-in-compromise, collection due process and tax e-filing programs.

The Taxpayer Advocate Service, an independent function within the IRS, helps individuals solve ongoing tax problems with the IRS and recommends changes to mitigate taxpayer problems. The Taxpayer Advocate Service, with a workforce of more than 2,100 employees, is available to assist both individuals and businesses. At least one taxpayer advocate's office is located in each state.

On the subject of electronic filing of tax returns, the report makes a new recommendation for the benefit of taxpayers. Congress and the IRS have set goals of substantially increasing the numbers of taxpayers who file their returns electronically. However, while taxpayers may file paper returns without incurring any return preparation and filing costs (except a postage stamp), taxpayers who file electronically generally must pay to purchase a commercial software or Internet-based product and must pay separately to file their returns. The IRS has an agreement with private software companies that, by its terms, ensures that free e-filing service are provided to at least 60 percent of taxpayers. However, the report calls on the IRS to make a template available on its website that would allow all taxpayers to file their returns electronically without incurring costs. The template would provide taxpayers with the ability to fill in the lines on the Internet-based return, just as with a paper return, but would not contain the added features built into commercial software products and thus would not be intended to compete with private industry.

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...back to 8 July 2004


Further information:
www.irs.gov/newsroom/article/0,,id=105969,00.html
www.irs.gov/advocate/article/0,,id=124943,00.html

Electronic filing breaks all records
The growing popularity of electronic filing is confirmed by the latest statistics from the IRS. Figures to April 30, including the bulk of returns that met the April 15 deadline, show that:

• E-file reached just under 60 million, a 15.4 percent increase, and already 7 million more than the total number of electronic returns for 2002. These numbers will continue to grow through the August 15 extension deadline and the October 15 deadline for those seeking a second extension.
  
  
• Self-prepared tax returns that were e-filed by computer jumped 21.7 percent, topping 14 million.
  
  
• Tax professional use of e-file jumped 15.8 percent, with 41.7 million filing electronic this year.
  
  
• In its second year, the Free File public-private partnership between the IRS and a consortium of tax software companies saw 3.4 million taxpayers use the free on-line filing service, a 22 percent increase from last year.
  
  
• The IRS web site continued to see more use from taxpayers this year, including the "Where's My Refund?" feature. There were more than 19.2 million inquiries to the on-line service to check on refunds, another record.
  
  
• Nearly 47 million taxpayers chose direct deposit of refunds this year, an 11 percent increase from the 2003 record.

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...back to 13 May 2004


Further information:
www.irs.gov/newsroom/article/0,,id=123187,00.html

Applying to become an authorized e-filer
The IRS has launched a new online form to enable tax professionals to apply to become authorized e-filers. The new online application form cuts processing time and reduces errors associated with using the paper Form 8633 Application to Participate in IRS e-file. Once the application is approved by the IRS, tax professionals can e-file returns for their clients.

Further information:
www.irs.gov/newsroom/article/0,,id=122866,00.html
...back to 29 April 2004

More tax tips
A number of additional tax tips are published in 1040 Central, accessible from the IRS homepage. They include

• Your right to appeal if you disagree with the amount of your tax liability or about proposed collection actions.

Further information:
www.irs.gov (and follow the 1040 Central link)
www.irs.gov/newsroom/content/0,,id=104608,00.html
...back to 22 April 2004

E-filing success update
Within a few days of the April 15 tax deadline, the IRS reports that more than 51.7 million returns have been submitted through e-file, a 12 percent increase from last year. Home computer use for e-filing topped 11.8 million, up 20 percent from the same period last year. The Free File program reached 2.9 million returns and tax professionals filed more than 36.6 million returns electronically.

Further information:
www.irs.gov/newsroom/article/0,,id=122672,00.html
...back to 15 April 2004

More tax tips
A number of additional tax tips are published in 1040 Central, accessible from the IRS homepage. The latest tax tips continue to concentrate on filing and payments. They include

• What to do when the IRS writes to you - and it isn't a refund check!
  
  
• When and how to send in an amended tax return
  
  
• How soon to expect your refund, and why it might be delayed
  
  
• What to do if you haven't got enough money at the moment to pay your taxes

Further information:
www.irs.gov (and follow the 1040 Central link)
www.irs.gov/newsroom/content/0,,id=104608,00.html
...back to 15 April 2004

Filing extensions available by phone or computer
The IRS expects to receive almost 9 million extension requests, which must be made by the normal filing deadline. Automatic four-month extensions are available by phone or by computer, as well as through the paper Form 4868.

However, an extension of time to file does not give more time to pay any taxes owed. A person may choose to pay any projected balance due when requesting an extension, and the payment may be made electronically. Even without a payment, the extension is still available.

Interest charges apply to any tax not paid by the regular deadline. The current rate is 5% a year, compounded daily, and is subject to change each calendar quarter. Taxpayers who request an extension may also be liable for a late payment penalty of 0.5% per month if the total tax paid by the regular deadline is less than 90 percent of the actual 2003 tax.

Further information:
www.irs.gov/newsroom/article/0,,id=122535,00.html
...back to 8 April 2004

More tax tips
A number of additional tax tips are published in 1040 Central, accessible from the IRS homepage. As the April 15 filing deadline approaches, the latest tax tips concentrate on filing and payments. They include

• Filing your completed return - where and how to send it
  
  
• Getting your tax payment right - check. money order, electronic, credit card
  
  
• How to get the four-month filing extension, and various payment options
  
  
• Common filing errors to avoid

Further information: www.irs.gov (and follow the 1040 Central link)
www.irs.gov/newsroom/content/0,,id=104608,00.html
...back to 8 April 2004

More tax tips
A number of additional tax tips are published in 1040 Central, accessible from the IRS homepage. They include

• Reminders for those filing tax returns at the last minute, and how to request an extension
  
  
• It's not too late to contribute to an Individual Retirement Arrangement for tax year 2003
  
  
• Checking the status of a tax refund, including the "Where's My Refund" service on the IRS website
  
  
• Using Coverdell Education Savings Accounts to help with school and college expenses
  
  
• Claiming the clean fuel tax deduction for qualifying vehicles powered both by electricity and gasoline

Further information: www.irs.gov (and follow the 1040 Central link)
www.irs.gov/newsroom/content/0,,id=108510,00.html
...back to 1 April 2004

More tax tips
A number of additional tax tips are published in 1040 Central, accessible from the IRS homepage. They include

• obtaining a tax deduction for contributions to qualified charities
• how and when to claim tax deductions for points on a mortgage for a new home and on a refinanced mortgage
• rules for excluding gain from selling your main home
• deducting the expenses for the business use of your home
• obtaining a deduction for expenses incurred in obtaining classroom supplies

Further information:
www.irs.gov (and follow the 1040 Central link)
www.irs.gov/newsroom/content/0,,id=108510,00.html
...back to 25 March 2004

More tax tips
A number of additional tax tips are published in 1040 Central, accessible from the IRS homepage. They include

• qualifying for retirement savings contributions credit
• how to tell if you are liable for the alternative minimum tax
• ten ways to avoid problems at tax time
• don't forget that state, local and foreign income tax, real estate taxes and personal property taxes may be tax deductible.

Further information:
www.irs.gov (and follow the 1040 Central link)
www.irs.gov/newsroom/content/0,,id=108510,00.html
...back to 18 March 2004

More tax tips
A number of additional tax tips are published in 1040 Central, accessible from the IRS homepage. They include

• don't be taken in by tax scams!
  
  
• qualifying for credits for the elderly and disabled
  
  
• qualifying for the child and dependent care credit
  
  
• qualifying for the child tax credit
  
  
• qualifying for education credits, i.e. the Hope Credit and the Lifetime Learning Credit
  
  

Further information:
www.irs.gov (and follow the 1040 Central link)
www.irs.gov/newsroom/content/0,,id=108510,00.html
...back to 11 March 2004

"Where's My Refund" service
Up to February 29, the IRS reports that taxpayers have made about 9.8 million visits to the "Where's My Refund?" service so far this tax season, almost twice as many as a year ago. Taxpayers who file electronically can use the service within 72 hours of submitting their returns. The service is available to paper filers three to four weeks after their returns are mailed.

Further information:
www.irs.gov/newsroom/article/0,,id=120860,00.html
sa.www4.irs.gov/irfof/lang/en/irfofgetstatus.jsp
...back to 4 March 2004

More tax tips
A number of additional tax tips are published in 1040 Central, accessible from the IRS homepage. They include

• claiming tax credits, such as earned income tax credit, child tax credit, child and dependent care credit, adoption credit, credit for the elderly and disabled, education credits, retirement savings contribution credit
• taking advantage of free, IRS-sponsored, volunteer tax return preparation services, such as VITA, local volunteer income tax assistance programs for those with income of $35,000 or less, and TCE, the tax counseling for the elderly program for people age 60 and older
• free help from the IRS when preparing federal tax returns by computer, telephone, fax and in person
• new tax breaks for military personnel and their families
• deferral of taxes for reservists called to active duty and enlistees in the armed forces
• claiming earned income tax credit

Further information:
www.irs.gov (and follow the 1040 Central link)
www.irs.gov/newsroom/content/0,,id=107768,00.html
www.irs.gov/newsroom/content/0,,id=108510,00.html
...back to 4 March 2004

More tax tips
A number of additional tax tips are published in 1040 Central, accessible from the IRS homepage. They include

• what constitutes a gift, and when the giving of gifts is taxable
• the different ways of reporting a child's investment income
• reporting income from foreign sources
• when an "early" or "premature" distribution from an Individual Retirement Arrangement or qualified retirement plan is taxable, and to avoid the charge using a "rollover"
• identifying and reporting capital gains, and when to offset a capital loss

Note that the IRS has made a correction to the text of the tax tip on gambling income and expenses, as reported in last week's newsletter. The withholding rate for winnings of more than $5,000 is 25%, not 27%. If the winner's Social Security number is not provided to the payer, the withholding rate is 28%, not 30%.

Further information:
www.irs.gov (and follow the 1040 Central link)
www.irs.gov/newsroom/content/0,,id=107768,00.html
...back to 26 February 2004

More tax tips
A number of additional tax tips are published in 1040 Central, accessible from the IRS homepage. They include

• reporting and winnings and losses from gambling
• reporting tips (and the related employer withholding requirement)
• reporting alimony received, claiming a deduction for alimony paid
• reporting social security benefits when received in addition to other income, and arranging for tax to be withheld from payments of benefits
• types of income taxed partially or not at all

Further information:
www.irs.gov (and follow the 1040 Central link)
www.irs.gov/newsroom/content/0,,id=107768,00.html
...back to 19 February 2004

More tax tips
A number of additional tax tips are published in 1040 Central, accessible from the IRS homepage. They include

• whether or not you can contribute to a Roth IRA
• understanding changes to the tax law before completing tax returns, for both individuals and businesses.

Further information:
www.irs.gov (and follow the 1040 Central link)
www.irs.gov/newsroom/content/0,,id=107768,00.html
...back to 12 February 2004

$2.5 billion in unclaimed tax refunds
The IRS has announced that unclaimed refunds totaling more than $2.5 billion are awaiting nearly 2 million people who failed to file a 2000 income tax return. In order to collect the money, however, a return must be filed with an IRS office no later than April 15, 2004.

The IRS estimates that half of those who could claim refunds would receive more than $529. 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.

Further information:
www.irs.gov/newsroom/article/0,,id=120309,00.html
...back to 12 February 2004

More tax tips
A number of additional tax tips are published in 1040 Central, accessible from the IRS homepage. They include

• how to file your tax return for free, using Free File
• how to pay your taxes electronically
• how to make a correct claim for Child Tax Credit
• what to do if you haven't received Form W-2 from your employer
• what to do if you haven't received a Form 1099 series form from the payer

Further information:
www.irs.gov (and follow the 1040 Central link)
www.irs.gov/newsroom/content/0,,id=106439,00.html
...back to 5 February 2004

Choosing a Tax Return Preparer
The choice of a return preparer should be made as carefully as choosing a doctor or lawyer, according the IRS. The taxpayer is ultimately responsible for all the information on the tax return, even if someone else prepares it.

The IRS has issued a warning to taxpayers that some preparers fraudulently claim inflated personal or business expenses, false deductions, unallowable credits or excessive exemptions on returns prepared for their clients. Preparers may also manipulate income figures to obtain fraudulent tax credits, such as the Earned Income Tax Credit. However, when the IRS detects the false return, it is the taxpayer who must pay the additional taxes and interest and may be subject to penalties and criminal prosecution.

In selecting a return preparer, the IRS recommends:

• Avoid tax preparers who claim they can obtain larger refunds than other preparers.
• Avoid preparers who base their fee on a percentage of the amount of the refund.
• Use a reputable tax professional that signs your tax return and provides you with a copy for your records.
• Consider whether the individual or firm will be around to answer questions about the preparation of your tax return months, or even years, after the return has been filed.
• Review your return before you sign it and ask questions on entries you don't understand.
• No matter who prepares your tax return, you (the taxpayer) are ultimately responsible for all of the information on your tax return. Therefore, never sign a blank tax form.
• Ask questions. Do you know anyone who has used the tax professional? Were they satisfied with the service they received?
• Tax evasion is a risky crime, a felony, punishable by 5 years imprisonment and a $250,000 fine.

Further information: www.irs.gov/newsroom/article/0,,id=120198,00.html
...back to 5 February 2004

More tax tips
A number of additional tax tips are published in 1040 Central, accessible from the IRS homepage. They include

• filing electronically in order to obtain a tax refund quicker, even within 10 days using direct deposit
• how to file a return for a prior tax year
• making sure that the name on the tax return matches that registered with the Social Security Administration
• how to tell the IRS of a change to home or business address
• IRS toll-free telephone and tele-fax number for individuals and businesses to obtain help and guidance

Further information:
www.irs.gov (and follow the 1040 Central link)
www.irs.gov/newsroom/content/0,,id=106439,00.html
...back to 29 January 2004

Improvements to Free File
A number of improvements have been made to the Free File program that gives taxpayers free access to the benefits of online tax preparation and e-filing.

Free File was used by 2.8 million taxpayers last year and offers, through a number of tax software companies, free online preparation and e-filing services to at least 60 percent of the nation's 130 million taxpayers.

Many states are also offering Free File services for their own income tax returns.

Further information:
www.irs.gov/newsroom/article/0,,id=119865,00.html
www.irs.gov/newsroom/article/0,,id=119855,00.html
www.irs.gov/efile/article/0,,id=118986,00.html
...back to 29 January 2004

Mail tax returns to the correct address
Taxpayers in Alabama, Arkansas, Delaware, Michigan, Montana, Tennessee, Rhode Island, Utah, Wyoming and some parts of New York are reminded by the IRS that their returns for 2003 must be sent to a new address. There may only be a problem for those who did not receive an instruction booklet in the mail and plan on mailing a paper tax return. Taxpayers who received a tax instruction booklet from the IRS in the mail will not be affected if they use the labels included with the booklet, and neither will those who e-file.

Further information:
www.irs.gov/newsroom/article/0,,id=119752,00.html
...back to 22 January 2004

More tax tips
A number of additional tax tips are published in 1040 Central, accessible from the IRS homepage. They include

• how to find the IRS publication that provides guidance on the subjects important to you
• using Publication 17 to obtain an overview of common tax issues in one place
• access to tax publications and telephone assistance in Spanish
• how to obtain a copy of a tax return as originally filed or as subsequently adjusted by the IRS
• how to order IRS forms and publications

Further information:
www.irs.gov (and follow the 1040 Central link)
www.irs.gov/newsroom/content/0,,id=106439,00.html
...back to 22 January 2004

More tax tips
A number of additional tax tips are published in 1040 Central, accessible from the IRS homepage. They include

• the benefits of using 1040 Central to find current advice on tax filing
• good recordkeeping, and the types of documents that should be kept
• in what circumstances it is better to itemize expenses on the tax return
• how to decide which return to use - 1040EZ, 1040A or 1040

Further information:
www.irs.gov (and follow the 1040 Central link)
www.irs.gov/newsroom/content/0,,id=106439,00.html
...back to 15 January 2004

Applications for Individual Taxpayer Identification Numbers
Individual taxpayer identification numbers (ITINs) are issued to individuals who are not US citizens or permanent residents and are not eligible for a US social security number. The IRS has changed the procedures for obtaining ITINs to ensure that they are only issued for tax administration purposes and not for personal identification.

From December 17, new ITIN applicants must use a revised Form W-7 Individual Taxpayer Identification Number Application and provide proof that the ITIN will be used for tax administration purposes. The document that will be accepted as proof of identity are listed on the form. For applicants seeking an ITIN in order to file a tax return, the return must be filed along with the W-7.

The requirement to file a tax return with the application does not apply, among others, to non-US residents who need an ITIN to report income under a tax treaty.

A public comment period on the revised form and application process will be conducted up to June 15, 2004.

Further information:
www.irs.gov/newsroom/article/0,,id=112728,00.html
...back to 18 November 2003

Tax year end approaches
The IRS has issued a lengthy reminder to taxpayers that time is running out for taking advantage of the tax changes introduced retrospectively earlier in the year. Some of the measures listed are:

• checking the amount of Child Tax Credit for the year, not forgetting the additional Advance Child Tax Credit paid in the summer
• teachers may claim up to $250 for out-of-pocket classroom expenses
• itemizing deductions on Schedule A of Form 1040 instead of claiming the standard deductions
• making gifts of up to $11,000 per person

Further information:
www.irs.gov/newsroom/article/0,,id=117868,00.html
www.irs.gov/newsroom/article/0,,id=109816,00.html
...back to 13 November 2003

Changes to IRS Centers
The IRS has advised tax professionals that tax returns and payments for clients in ten states must be sent to different processing centers starting 2004. The states affected are the Metro New York area, Alabama, Arkansas, Delaware, Michigan, Montana, Rhode Island, Tennessee, Utah and Wyoming.

Further information:
www.irs.gov/newsroom/article/0,,id=113423,00.html
www.irs.gov/pub/irs-utl/2004_wtf_tppub1045_rev_1.0_7-10-03.pdf
...back to 6 November 2003