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Virtual currency: IRS issues additional guidance on tax treatment and reminds taxpayers of reporting obligations
October 11, 2019
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WASHINGTON — As part of a wider effort to assist taxpayers and to enforce the tax laws in a rapidly changing area, the Internal Revenue Service today issued two new pieces of guidance for taxpayers who engage in transactions involving virtual currency. 

Expanding on guidance from 2014, the IRS is issuing additional detailed guidance to help taxpayers better understand their reporting obligations for specific transactions involving virtual currency. The new guidance includes Revenue Ruling 2019-24 and frequently asked questions (FAQs).

The new revenue ruling addresses common questions by taxpayers and tax practitioners regarding the tax treatment of a cryptocurrency hard fork. In addition, a set of FAQs address virtual currency transactions for those who hold virtual currency as a capital asset.

“The IRS is committed to helping taxpayers understand their tax obligations in this emerging area,” said IRS Commissioner Chuck Rettig. "The new guidance will help taxpayers and tax professionals better understand how longstanding tax principles apply in this rapidly changing environment. We want to help taxpayers understand the reporting requirements as well as take steps to ensure fair enforcement of the tax laws for those who don’t follow the rules.”

The new guidance supplements the guidance the IRS issued on virtual currency in Notice 2014-21. The IRS is also soliciting public input on additional guidance in this area. 

In Notice 2014-21, the IRS applied general principles of tax law to determine that virtual currency is property for federal tax purposes. The Notice explained, in the form of 16 FAQs, the application of general tax principles to the most common transactions involving virtual currency.

The IRS is aware that some taxpayers with virtual currency transactions may have failed to report income and pay the resulting tax or did not report their transactions properly. The IRS is actively addressing potential non-compliance in this area through a variety of efforts, ranging from taxpayer education to audits to criminal investigations.

For example, in July of this year the IRS announced that it began mailing educational letters to more than 10,000 taxpayers who may have reported transactions involving virtual currency incorrectly or not at all. Taxpayers who did not report transactions involving virtual currency or who reported them incorrectly may, when appropriate, be liable for tax, penalties and interest. In some cases, taxpayers could be subject to criminal prosecution.


Frequently Asked Questions on Virtual Currency Transactions
October 10, 2019

In 2014, the IRS issued Notice 2014-21, 2014-16 I.R.B. 938 (PDF), explaining that virtual currency is treated as property for Federal income tax purposes and providing examples of how longstanding tax principles applicable to transactions involving property apply to virtual currency.  The frequently asked questions (“FAQs”) below expand upon the examples provided in Notice 2014-21 and apply those same longstanding tax principles to additional situations. 

Note: Except as otherwise noted, these FAQs apply only to taxpayers who hold virtual currency as a capital asset.  For more information on the definition of a capital asset, examples of what is and is not a capital asset, and the tax treatment of property transactions generally, see Publication 544, Sales and Other Dispositions of Assets  

Q1.  What is virtual currency?

A1.  Virtual currency is a digital representation of value, other than a representation of the U.S. dollar or a foreign currency (“real currency”), that functions as a unit of account, a store of value, and a medium of exchange.  Some virtual currencies are convertible, which means that they have an equivalent value in real currency or act as a substitute for real currency.  The IRS uses the term “virtual currency” in these FAQs to describe the various types of convertible virtual currency that are used as a medium of exchange, such as digital currency and cryptocurrency.   Regardless of the label applied, if a particular asset has the characteristics of virtual currency, it will be treated as virtual currency for Federal income tax purposes. 

Q2.  How is virtual currency treated for Federal income tax purposes?

A2.  Virtual currency is treated as property and general tax principles applicable to property transactions apply to transactions using virtual currency.  For more information on the tax treatment of virtual currency, see Notice 2014-21.  For more information on the tax treatment of property transactions, see Publication 544, Sales and Other Dispositions of Assets

Q3.  What is cryptocurrency?

A3.  Cryptocurrency is a type of virtual currency that uses cryptography to secure transactions that are digitally recorded on a distributed ledger, such as a blockchain.  A transaction involving cryptocurrency that is recorded on a distributed ledger is referred to as an “on-chain” transaction; a transaction that is not recorded on the distributed ledger is referred to as an “off-chain” transaction. 

Q4.  Will I recognize a gain or loss when I sell my virtual currency for real currency?

A4.  Yes.  When you sell virtual currency, you must recognize any capital gain or loss on the sale, subject to any limitations on the deductibility of capital losses.  For more information on capital assets, capital gains, and capital losses, see Publication 544, Sales and Other Dispositions of Assets.

Q5.  How do I determine if my gain or loss is a short-term or long-term capital gain or loss?

A5.  If you held the virtual currency for one year or less before selling or exchanging the virtual currency, then you will have a short-term capital gain or loss.  If you held the virtual currency for more than one year before selling or exchanging it, then you will have a long-term capital gain or loss.  The period during which you held the virtual currency (known as the “holding period”) begins on the day after you acquired the virtual currency and ends on the day you sell or exchange the virtual currency.  For more information on short-term and long-term capital gains and losses, see Publication 544, Sales and Other Dispositions of Assets

Q6.  How do I calculate my gain or loss when I sell virtual currency for real currency?

A6.  Your gain or loss will be the difference between your adjusted basis in the virtual currency and the amount you received in exchange for the virtual currency, which you should report on your Federal income tax return in U.S. dollars.  For more information on gain or loss from sales or exchanges, see Publication 544, Sales and Other Dispositions of Assets.

Q7.  How do I determine my basis in virtual currency I purchased with real currency?

A7.  Your basis (also known as your “cost basis”) is the amount you spent to acquire the virtual currency, including fees, commissions and other acquisition costs in U.S. dollars.  Your adjusted basis is your basis increased by certain expenditures and decreased by certain deductions or credits in U.S. dollars.  For more information on basis, see Publication 551, Basis of Assets.

Q8.  Do I have income if I provide someone with a service and that person pays me with virtual currency?

A8.  Yes.  When you receive property, including virtual currency, in exchange for performing services, whether or not you perform the services as an employee, you recognize ordinary income.  For more information on compensation for services, see Publication 525, Taxable and Nontaxable Income.

Q9.  Does virtual currency received by an independent contractor for performing services constitute self-employment income?

A9.  Yes.  Generally, self-employment income includes all gross income derived by an individual from any trade or business carried on by the individual as other than an employee.  Consequently, the fair market value of virtual currency received for services performed as an independent contractor, measured in U.S. dollars as of the date of receipt, constitutes self-employment income and is subject to the self-employment tax. 

Q10.  Does virtual currency paid by an employer as remuneration for services constitute wages for employment tax purposes?

A10.  Yes.  Generally, the medium in which remuneration for services is paid is immaterial to the determination of whether the remuneration constitutes wages for employment tax purposes.  Consequently, the fair market value of virtual currency paid as wages, measured in U.S. dollars at the date of receipt, is subject to Federal income tax withholding, Federal Insurance Contributions Act (FICA) tax, and Federal Unemployment Tax Act (FUTA) tax and must be reported on Form W-2, Wage and Tax Statement.  See Publication 15 (Circular E), Employer's Tax Guide, for information on the withholding, depositing, reporting, and paying of employment taxes.

Q11.  How do I calculate my income if I provide a service and receive payment in virtual currency?

A11.  The amount of income you must recognize is the fair market value of the virtual currency, in U.S. dollars, when received.  In an on-chain transaction you receive the virtual currency on the date and at the time the transaction is recorded on the distributed ledger. 

Q12.  How do I determine my basis in virtual currency I receive for services I’ve provided?

A12.  If, as part of an arm’s length transaction, you provided someone with services and received virtual currency in exchange, your basis in that virtual currency is the fair market value of the virtual currency, in U.S. dollars, when the virtual currency is received.  For more information on basis, see Publication 551, Basis of Assets.

Q13.  Will I recognize a gain or loss if I pay someone with virtual currency for providing me with a service?

A13.  Yes.  If you pay for a service using virtual currency that you hold as a capital asset, then you have exchanged a capital asset for that service and will have a capital gain or loss.  For more information on capital gains and capital losses, see Publication 544, Sales and Other Dispositions of Assets

Q14.  How do I calculate my gain or loss when I pay for services using virtual currency?

A14.  Your gain or loss is the difference between the fair market value of the services you received and your adjusted basis in the virtual currency exchanged.  For more information on gain or loss from sales or exchanges, see Publication 544, Sales and Other Dispositions of Assets.

Q15.  Will I recognize a gain or loss if I exchange my virtual currency for other property?

A15.  Yes.  If you exchange virtual currency held as a capital asset for other property, including for goods or for another virtual currency, you will recognize a capital gain or loss.  For more information on capital gains and capital losses, see Publication 544, Sales and Other Dispositions of Assets.

Q16.  How do I calculate my gain or loss when I exchange my virtual currency for other property?

A16.  Your gain or loss is the difference between the fair market value of the property you received and your adjusted basis in the virtual currency exchanged.  For more information on gain or loss from sales or exchanges, see Publication 544, Sales and Other Dispositions of Assets.

Q17.  How do I determine my basis in property I’ve received in exchange for virtual currency?

A17.  If, as part of an arm’s length transaction, you transferred virtual currency to someone and received other property in exchange, your basis in that property is its fair market value at the time of the exchange.  For more information on basis, see Publication 551, Basis of Assets.

Q18.  Will I recognize a gain or loss if I sell or exchange property (other than U.S. dollars) for virtual currency?

A18.  Yes.  If you transfer property held as a capital asset in exchange for virtual currency, you will recognize a capital gain or loss.  If you transfer property that is not a capital asset in exchange for virtual currency, you will recognize an ordinary gain or loss.  For more information on gains and losses, see Publication 544, Sales and Other Dispositions of Assets

Q19.  How do I calculate my gain or loss when I exchange property for virtual currency?

A19.  Your gain or loss is the difference between the fair market value of the virtual currency when received (in general, when the transaction is recorded on the distributed ledger) and your adjusted basis in the property exchanged.  For more information on gain or loss from sales or exchanges, see Publication 544, Sales and Other Dispositions of Assets.

Q20.  How do I determine my basis in virtual currency that I have received in exchange for property?

A20.  If, as part of an arm’s length transaction, you transferred property to someone and received virtual currency in exchange, your basis in that virtual currency is the fair market value of the virtual currency, in U.S. dollars, when the virtual currency is received.  For more information on basis, see Publication 551, Basis of Assets

Q21.  One of my cryptocurrencies went through a hard fork but I did not receive any new cryptocurrency.  Do I have income?

A21.  A hard fork occurs when a cryptocurrency undergoes a protocol change resulting in a permanent diversion from the legacy distributed ledger.  This may result in the creation of a new cryptocurrency on a new distributed ledger in addition to the legacy cryptocurrency on the legacy distributed ledger.  If your cryptocurrency went through a hard fork, but you did not receive any new cryptocurrency, whether through an airdrop (a distribution of cryptocurrency to multiple taxpayers’ distributed ledger addresses) or some other kind of transfer, you don’t have taxable income.

Q22.  One of my cryptocurrencies went through a hard fork followed by an airdrop and I received new cryptocurrency.  Do I have income?

A22.  If a hard fork is followed by an airdrop and you receive new cryptocurrency, you will have taxable income in the taxable year you receive that cryptocurrency. 

Q23.  How do I calculate my income from cryptocurrency I received following a hard fork?

A23.  When you receive cryptocurrency from an airdrop following a hard fork, you will have ordinary income equal to the fair market value of the new cryptocurrency when it is received, which is when the transaction is recorded on the distributed ledger, provided you have dominion and control over the cryptocurrency so that you can transfer, sell, exchange, or otherwise dispose of the cryptocurrency. 

Q24.  How do I determine my basis in cryptocurrency I received following a hard fork?

A24.  If you receive cryptocurrency from an airdrop following a hard fork, your basis in that cryptocurrency is equal to the amount you included in income on your Federal income tax return.  The amount included in income is the fair market value of the cryptocurrency when you received it.  You have received the cryptocurrency when you can transfer, sell, exchange, or otherwise dispose of it, which is generally the date and time the airdrop is recorded on the distributed ledger.  See Rev. Rul. 2019-24.  For more information on basis, see Publication 551, Basis of Assets.  

Q25.  I received cryptocurrency through a platform for trading cryptocurrency; that is, through a cryptocurrency exchange.  How do I determine the cryptocurrency’s fair market value at the time of receipt?

A25.  If you receive cryptocurrency in a transaction facilitated by a cryptocurrency exchange, the value of the cryptocurrency is the amount that is recorded by the cryptocurrency exchange for that transaction in U.S. dollars.  If the transaction is facilitated by a centralized or decentralized cryptocurrency exchange but is not recorded on a distributed ledger or is otherwise an off-chain transaction, then the fair market value is the amount the cryptocurrency was trading for on the exchange at the date and time the transaction would have been recorded on the ledger if it had been an on-chain transaction.

Q26.  I received cryptocurrency in a peer-to-peer transaction or some other type of transaction that did not involve a cryptocurrency exchange.  How do I determine the cryptocurrency’s fair market value at the time of receipt?

A26.  If you receive cryptocurrency in a peer-to-peer transaction or some other transaction not facilitated by a cryptocurrency exchange, the fair market value of the cryptocurrency is determined as of the date and time the transaction is recorded on the distributed ledger, or would have been recorded on the ledger if it had been an on-chain transaction.  The IRS will accept as evidence of fair market value the value as determined by a cryptocurrency or blockchain explorer that analyzes worldwide indices of a cryptocurrency and calculates the value of the cryptocurrency at an exact date and time.  If you do not use an explorer value, you must establish that the value you used is an accurate representation of the cryptocurrency’s fair market value. 

Q27.  I received cryptocurrency that does not have a published value in exchange for property or services.  How do I determine the cryptocurrency’s fair market value?

A27.  When you receive cryptocurrency in exchange for property or services, and that cryptocurrency is not traded on any cryptocurrency exchange and does not have a published value, then the fair market value of the cryptocurrency received is equal to the fair market value of the property or services exchanged for the cryptocurrency when the transaction occurs. 

Q28.  When does my holding period start for cryptocurrency I receive?

A28.  Your holding period begins the day after it is received.  For more information on holding periods, see Publication 544, Sales and Other Dispositions of Assets.

Q29.  Do I have income when a soft fork of cryptocurrency I own occurs?

A29.  No.  A soft fork occurs when a distributed ledger undergoes a protocol change that does not result in a diversion of the ledger and thus does not result in the creation of a new cryptocurrency.  Because soft forks do not result in you receiving new cryptocurrency, you will be in the same position you were in prior to the soft fork, meaning that the soft fork will not result in any income to you.

Q30.  I received virtual currency as a bona fide gift.  Do I have income?

A30.  No.  If you receive virtual currency as a bona fide gift, you will not recognize income until you sell, exchange, or otherwise dispose of that virtual currency.  For more information about gifts, see Publication 559, Survivors, Executors, and Administrators.

Q31.  How do I determine my basis in virtual currency that I received as a bona fide gift?

A31.  Your basis in virtual currency received as a bona fide gift differs depending on whether you will have a gain or a loss when you sell or dispose of it.  For purposes of determining whether you have a gain, your basis is equal to the donor’s basis, plus any gift tax the donor paid on the gift.  For purposes of determining whether you have a loss, your basis is equal to the lesser of the donor’s basis or the fair market value of the virtual currency at the time you received the gift.  If you do not have any documentation to substantiate the donor’s basis, then your basis is zero.  For more information on basis of property received as a gift, see Publication 551, Basis of Assets

Q32.  What is my holding period for virtual currency that I received as a gift?

A32.  Your holding period in virtual currency received as a gift includes the time that the virtual currency was held by the person from whom you received the gift.  However, if you do not have documentation substantiating that person’s holding period, then your holding period begins the day after you receive the gift.  For more information on holding periods, see Publication 544, Sales and Other Dispositions of Assets.

Q33.  If I donate virtual currency to a charity, will I have to recognize income, gain, or loss?

A33.  If you donate virtual currency to a charitable organization described in Internal Revenue Code Section 170(c), you will not recognize income, gain, or loss from the donation.  For more information on charitable contributions, see Publication 526, Charitable Contributions.

Q34.  How do I calculate my charitable contribution deduction when I donate virtual currency?

A34.  Your charitable contribution deduction is generally equal to the fair market value of the virtual currency at the time of the donation if you have held the virtual currency for more than one year.  If you have held the virtual currency for one year or less at the time of the donation, your deduction is the lesser of your basis in the virtual currency or the virtual currency’s  fair market value at the time of the contribution.  For more information on charitable contribution deductions, see Publication 526, Charitable Contributions.

Q35.  Will I have to recognize income, gain, or loss if I own multiple digital wallets, accounts, or addresses capable of holding virtual currency and transfer my virtual currency from one to another?

A35.  No.  If you transfer virtual currency from a wallet, address, or account belonging to you, to another wallet, address, or account that also belongs to you, then the transfer is a non-taxable event, even if you receive an information return from an exchange or platform as a result of the transfer.

Q36.  I own multiple units of one kind of virtual currency, some of which were acquired at different times and have different basis amounts.  If I sell, exchange, or otherwise dispose of some units of that virtual currency, can I choose which units are deemed sold, exchanged, or otherwise disposed of?

A36.  Yes.  You may choose which units of virtual currency are deemed to be sold, exchanged, or otherwise disposed of if you can specifically identify which unit or units of virtual currency are involved in the transaction and substantiate your basis in those units. 

Q37.  How do I identify a specific unit of virtual currency?

A37.  You may identify a specific unit of virtual currency either by documenting the specific unit’s unique digital identifier such as a private key, public key, and address, or by records showing the transaction information for all units of a specific virtual currency, such as Bitcoin, held in a single account, wallet, or address.  This information must show (1) the date and time each unit was acquired, (2) your basis and the fair market value of each unit at the time it was acquired, (3) the date and time each unit was sold, exchanged, or otherwise disposed of, and (4) the fair market value of each unit when sold, exchanged, or disposed of, and the amount of money or the value of property received for each unit.  

Q38.  How do I account for a sale, exchange, or other disposition of units of virtual currency if I do not specifically identify the units?

A38.  If you do not identify specific units of virtual currency, the units are deemed to have been sold, exchanged, or otherwise disposed of in chronological order beginning with the earliest unit of the virtual currency you purchased or acquired; that is, on a first in, first out (FIFO) basis.  

Q39.  If I engage in a transaction involving virtual currency but do not receive a payee statement or information return such as a Form W-2 or Form 1099, when must I report my income, gain, or loss on my Federal income tax return?

A39.  You must report income, gain, or loss from all taxable transactions involving virtual currency on your Federal income tax return for the taxable year of the transaction, regardless of the amount or whether you receive a payee statement or information return. 

Q40.  Where do I report my capital gain or loss from virtual currency?

A40.  You must report most sales and other capital transactions and calculate capital gain or loss in accordance with IRS forms and instructions, including on Form 8949, Sales and Other Dispositions of Capital Assets, and then summarize capital gains and deductible capital losses on Form 1040, Schedule D, Capital Gains and Losses.

Q41.  Where do I report my ordinary income from virtual currency?

A41.  You must report ordinary income from virtual currency on Form 1040, U.S. Individual Tax Return, Form 1040-SS, Form 1040-NR, or Form 1040, Schedule 1, Additional Income and Adjustments to Income (PDF), as applicable.

Q42.  Where can I find more information about the tax treatment of virtual currency?

A42.  Information on virtual currency is available at [www. IRS.gov/virtual currency].  Many questions about the tax treatment of virtual currency can be answered by referring to Notice 2014-21 (PDF) and Rev. Rul. 2019-24. 

Q43.   What records do I need to maintain regarding my transactions in virtual currency?

A43.    The Internal Revenue Code and regulations require taxpayers to maintain records that are sufficient to establish the  positions taken on tax returns.  You should therefore maintain, for example, records documenting receipts, sales, exchanges, or other dispositions of virtual currency and the fair market value of the virtual currency.


New payment option available to taxpayers in private debt collection program
October 9, 2019

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WASHINGTON — Internal Revenue Service officials today announced that a new payment option has been added to the private debt collection program to make it easier for those who owe to pay their tax debts.

Taxpayers now can choose the convenient option of a preauthorized direct debit to make one payment or a series of payments toward their federal tax debt. With direct debit, the taxpayer will give their written permission to the private collection agency (PCA) to authorize a payment on the taxpayer’s behalf to the U.S. Department of the Treasury. This enables the taxpayer to conveniently and securely schedule multiple payments with the ease of a single phone call with their assigned PCA.

When taxpayers choose the preauthorized direct debit option, they’ll complete and sign a written authorization which can be submitted to the PCA by mail or fax. The authorization contains the payment schedule and bank account information.

Once the PCA receives the taxpayer’s signed authorization, it will send a confirmation letter containing the details of the preauthorized direct debit. The PCA will create a check according to the payment schedule made out to the U.S. Department of the Treasury. The check is securely mailed to the IRS within 24 hours.

The new direct debit supplements existing IRS-sponsored payment options and can be changed or canceled up to one business day prior to the scheduled payment. Taxpayers can still opt to use the electronic payment options available on IRS.gov/Paying Your Taxes. Payments by check should be payable to the U.S. Treasury and sent directly to the IRS, not the PCA.

The private debt collection program, enacted by Congress, requires the IRS to contract PCAs to collect certain outstanding tax debts. In June, the IRS began assigning a small number of business accounts to PCAs.These cases meet the requirements under federal law for inclusion in the private debt collection program.

From the start of the program in April 2017 through June 13, 2019, the IRS has given four PCAs more than 1.9 million total cases that represent more than $16.2 billion of the IRS’s balance-due inventory. To date, the PCAs have assisted more than 163,000 taxpayers who either paid their balances in full or set up a payment arrangement.

Be aware of scammers

Taxpayers should be on alert for scammers and identity thieves pretending to be from a PCA.

When representatives from one of the four PCAs contacts a taxpayer, they will state that they are from one of these collection agencies: CBE, Performant, Pioneer or ConServe. These agencies will respect the Taxpayer Bill of Rights and abide by the consumer protection provisions of the Fair Debt Collection Practices Act.

Whether a taxpayer selects the preauthorized direct payment option or mails a check, the IRS reminds taxpayers to be on the lookout for scam telephone calls from anyone claiming to be collecting on behalf of the IRS.

Even with private debt collection, taxpayers will not get unexpected phone calls demanding payment. Before a taxpayer is contacted, the taxpayer will receive two letters; one from the IRS and one from the PCA. Both letters will include a Taxpayer Authentication Number (TAN). The TAN will be used to authenticate the PCA and to verify the identity of the taxpayer, instead of using their social security number. Taxpayers are advised to safeguard their TAN as they would a social security number. Taxpayers can report a suspected phone scam or inappropriate behavior to the Treasury Inspector General for Tax Administration on their website at www.treasury.gov/tigta, or by calling 800-366-4484.


September 26, 2019
IRS Tax Tip 2019-134

With scam artists hard at work all year, taxpayers should watch for new versions of tax-related scams. One such scam involves fake property liens. It threatens taxpayers with a tax bill from a fictional government agency.

Here are some details about the property lien scam that will help taxpayers recognize it:

  • This scheme involves a letter threatening an IRS lien or levy.
  • The scammer mails the letter to a taxpayer.
  • The lien or levy is based on bogus overdue taxes owed to a non-existent agency.
  • The non-existent agencies might have a legitimate-sounding name like the “Bureau of Tax Enforcement.” There is no such agency.
  • This scam may also reference the IRS to confuse potential victims into thinking the letter is from a real agency.

For anyone who doesn’t owe taxes and has no reason to think they do should:

Taxpayers who do owe tax or think they might owe should:

  • Review their tax account information and payment options at IRS.gov. Reviewing tax account information online will show the taxpayer if they indeed owe the IRS and how much. This is the fastest way to get this information.
  • Call the IRS at 800-829-1040 to confirm the notice if they’re still not sure they owe.

More information:


September 6, 2019

IRS announces new procedures to enable certain expatriated individuals a way to come into compliance with their U.S. tax and filing obligations

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WASHINGTON – The Internal Revenue Service today announced new procedures that will enable certain individuals who relinquished their U.S. citizenship to come into compliance with their U.S. tax and filing obligations and receive relief for back taxes.

The Relief Procedures for Certain Former Citizens apply only to individuals who have not filed U.S. tax returns as U.S. citizens or residents, owe a limited amount of back taxes to the United States and have net assets of less than $2 million. Only taxpayers whose past compliance failures were non-willful can take advantage of these new procedures. Many in this group may have lived outside the United States most of their lives and may have not been aware that they had U.S. tax obligations.

Eligible individuals wishing to use these relief procedures are required to file outstanding U.S. tax returns, including all required schedules and information returns, for the five years preceding and their year of expatriation. Provided that the taxpayer’s tax liability does not exceed a total of $25,000 for the six years in question, the taxpayer is relieved from paying U.S. taxes. The purpose of these procedures is to provide relief for certain former citizens. Individuals who qualify for these procedures will not be assessed penalties and interest.   

The IRS is offering these procedures without a specific termination date. The IRS will announce a closing date prior to ending the procedures. Individuals who relinquished their U.S. citizenship any time after March 18, 2010, are eligible so long as they satisfy the other criteria of the procedures.

These procedures are only available to individuals. Estates, trusts, corporations, partnerships and other entities may not use these procedures.

The IRS will host an on-line webinar in the near future providing additional information and practical tips for making a submission to the Relief Procedures for Certain Former Citizens.

Relinquishing U.S. citizenship and the tax consequences that follow are serious matters that involve irrevocable decisions. Taxpayers who relinquish citizenship without complying with their U.S. tax obligations are subject to the significant tax consequences of the U.S. expatriation tax regime. Taxpayers interested in these procedures should read all the materials carefully, including the FAQs, and consider consulting legal counsel before making any decisions.


August 30, 2019
Here’s what tax professionals should know about creating a data security plan

Tax pros must create a written security plan to protect their clients’ data. In fact, the law requires them to make this plan. 

Creating a data security plan is one part of the new Taxes-Security-Together Checklist. The IRS and its Security Summit partners created this checklist. It helps tax professionals protect sensitive data in their offices and on their computers.

Many tax preparers may not realize they are required under federal law to have a data security plan. Each plan should be tailored for each specific office. When creating it, the tax professional should take several factors into consideration. This includes things like the company’s size, the nature of its activities, and the sensitivity of its customer information.

Creating a plan
Tax professionals should make sure to do these things when writing and following their data security plans:

  • Include the name of all information security program managers.
  • Identify all risks to customer information.
  • Evaluate risks and current safety measures.
  • Design a program to protect data.
  • Put the data protection program in place.
  • Regularly monitor and test the program.

Selecting a service provider
Companies should have a written contract with their service provider. The provider must:

  • • Maintain appropriate safety measures. 
    • Oversee the handling of customer information review. 
    • Revise the security program as needed.

More information:


Security Summit warns of new IRS impersonation email scam; reminds taxpayers the IRS does not send unsolicited emails
August 22, 2019

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WASHINGTON — The Internal Revenue Service and its Security Summit partners today warned taxpayers and tax professionals about a new IRS impersonation scam campaign spreading nationally on email. Remember: the IRS does not send unsolicited emails and never emails taxpayers about the status of refunds.

The IRS this week detected this new scam as taxpayers began notifying [email protected] about unsolicited emails from IRS imposters. The email subject line may vary, but recent examples use the phrase “Automatic Income Tax Reminder” or “Electronic Tax Return Reminder.”

The emails have links that show an IRS.gov-like website with details pretending to be  about the taxpayer’s refund, electronic return or tax account. The emails contain a "temporary password" or "one-time password" to "access" the files to submit the refund. But when taxpayers try to access these, it  turns out to be a malicious file. 

“The IRS does not send emails about your tax refund or sensitive financial information,” said IRS Commissioner Chuck Rettig. “This latest scheme is yet another reminder that tax scams are a year-round business for thieves. We urge you to be on-guard at all times.”

This new scam uses dozens of compromised websites and web addresses that pose as IRS.gov, making it a challenge to shut down. By infecting computers with malware, these imposters may gain control of the taxpayer’s computer or secretly download software that tracks every keystroke, eventually giving them passwords to sensitive accounts, such as financial accounts.

The IRS, state tax agencies and the tax industry, which work together in the Security Summit effort, have made progress in their efforts to fight stolen identity refund fraud. But people remain vulnerable to scams by IRS imposters sending fake emails or harrassing phone calls.

The IRS doesn't initiate contact with taxpayers by email, text messages or social media channels to request personal or financial information. This includes requests for PIN numbers, passwords or similar access information for credit cards, banks or other financial accounts.

The IRS also doesn’t call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer. Generally, the IRS will first mail a bill to any taxpayer who owes taxes. See Report Phishing and Online Scams for more details.


IRS Automatically Waives Estimated Tax Penalty for Eligible 2018 Tax Filers
August 14, 2019

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WASHINGTON — The Internal Revenue Service is automatically waiving the estimated tax penalty for the more than 400,000 eligible taxpayers who already filed their 2018 federal income tax returns but did not claim the waiver.

The IRS will apply this waiver to tax accounts of all eligible taxpayers, so there is no need to contact the IRS to apply for or request the waiver.

Earlier this year, the IRS lowered the usual 90% penalty threshold to 80% to help taxpayers whose withholding and estimated tax payments fell short of their total 2018 tax liability. The agency also removed the requirement that estimated tax payments be made in four equal installments, as long as they were all made by Jan. 15, 2019. The 90% threshold was initially lowered to 85% on Jan 16 and further lowered to 80% on March 22.

The automatic waiver applies to any individual taxpayer who paid at least 80% of their total tax liability through federal income tax withholding or quarterly estimated tax payments but did not claim the special waiver available to them when they filed their 2018 return earlier this year.

“The IRS is taking this step to help affected taxpayers,” said IRS Commissioner Chuck Rettig. “This waiver is designed to provide relief to any person who filed too early to take advantage of the waiver or was unaware of it when they filed.”

Refunds planned for eligible taxpayers who paid penalty

Over the next few months, the IRS will mail copies of notices CP 21 granting this relief to affected taxpayers. Any eligible taxpayer who already paid the penalty will also receive a refund check about three weeks after their CP21 notice regardless if they requested penalty relief. The agency emphasized that eligible taxpayers who have already filed a 2018 return do not need to request penalty relief, contact the IRS or take any other action to receive this relief.

For those yet to file, the IRS urges every eligible taxpayer to claim the waiver on their return. This includes those with tax-filing extensions due to run out on Oct. 15, 2019. The quickest and easiest way is to file electronically and take advantage of the waiver computation built into their tax software package. Those who choose to file on paper can fill out Form 2210 and attach it to their 2018 return. See the instructions to Form 2210 for details.

Because the U.S. tax system is pay-as-you-go, taxpayers are required by law to pay most of their tax obligation during the year, rather than at the end of the year. This can be done by having tax withheld from paychecks, pension payments or Social Security benefits, making estimated tax payments or a combination of these methods.

Like last year, the IRS urges everyone to do a “Paycheck Checkup” and review their withholding for 2019. This is especially important for anyone who faced an unexpected tax bill or a penalty when they filed this year. It’s also an important step for those who made withholding adjustments in 2018 or had a major life change. Those most at risk of having too little tax withheld include those who itemized in the past but now take the increased standard deduction, as well as two wage earner households, employees with nonwage sources of income and those with complex tax situations.

To get started, check out the new Tax Withholding Estimator, available on IRS.gov. More information about tax withholding and estimated tax can be found on the agency’s Pay As You Go web page, as well as in Publication 505.


August 13, 2019
IRS Tax Transcript Availability Update

The IRS has updated some IRS.gov content to clarify issues regarding changes to the tax transcript distribution methods. As you may recall, in lieu of faxing tax transcripts, we will send certain transcripts into practitioners’ e-Services secure mailbox. However, there is a time limit for those transcripts to be available in your mailbox. To avoid having to repeat your request, print or download the transcript immediately from your mailbox. Our new language on the About the New Tax Transcript page is highlighted below in yellow:

Employer Information for Tax Return Preparation and Electronic Filing

If you are a taxpayer seeking to file a current or prior year tax return or a tax professional preparing a current or prior year return for a client, please remember that all financial entries on all transcript types are fully visible. If you are seeking a missing Form W-2 or Form 1099 information, there is a process for obtaining those current-year documents.

If an unmasked Wage & Income transcript is necessary for tax return preparation and electronic filing, a tax professional may contact the Practitioner Priority Service line. An unmasked Wage and Income Transcript will fully display employers’ names, addresses and Employer Identification Numbers (EINs) needed for tax software preparation and for electronic filing. If the tax professional has proper taxpayer authorization, but it's not on file, they  can  fax the authorization to the IRS assistor and an unmasked Wage and Income transcript will be sent to the practitioner’s Secure Object Repository (SOR), available through e-Services. Tax professionals must have an e-Services account and pass Secure Access authentication to use the SOR option.

PLEASE NOTE: The requested transcript will remain in the SOR for a limited time. The transcript automatically will  be removed from the SOR after three days once you view it or after 30 days if it is not viewed.  Print or save the transcript if you want to keep a copy.

The unmasked Wage and Income Transcript also is available to those tax professionals with e-Services accounts, approved authorization and access to the Transcript Delivery Service. Reminder: Circular 230 practitioners, i.e. attorneys, Certified Public Accountants and Enrolled Agents, can create an e-Services account and obtain TDS access. Unenrolled practitioners must either be responsible parties or delegates users on the E-File application.

Alternatively, taxpayers or other third parties who require an unmasked transcript for tax return preparation or filing may contact the IRS, present proper authentication to prove their identities and an unmasked transcript will be mailed to the taxpayer’s address of record.


August 6, 2019
IRS launches new Tax Withholding Estimator; Redesigned online tool makes it easier to do a paycheck checkup

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WASHINGTON — The Internal Revenue Service today launched the new Tax Withholding Estimator, an expanded, mobile-friendly online tool designed to make it easier for everyone to have the right amount of tax withheld during the year.

The Tax Withholding Estimator replaces the Withholding Calculator, which offered workers a convenient online method for checking their withholding. The new Tax Withholding Estimator offers workers, as well as retirees, self-employed individuals and other taxpayers, a more user-friendly step-by-step tool for effectively tailoring the amount of income tax they have withheld from wages and pension payments.

“The new estimator takes a new approach and makes it easier for taxpayers to review their withholding,” said IRS Commissioner Chuck Rettig. “This is part of an ongoing effort by the IRS to improve quality services as we continue to pursue modernization and enhancements of our taxpayer relationships.”

The IRS took the feedback and concerns of taxpayers and tax professionals to develop the Tax Withholding Estimator, which offers a variety of new user-friendly features including:

  • Plain language throughout the tool to improve comprehension.
  • The ability to more effectively target at the time of filing either a tax due amount close to zero or a refund amount.
  • A new progress tracker to help users see how much more information they need to input.
  • The ability to move back and forth through the steps, correct previous entries and skip questions that don’t apply.
  • Enhanced tips and links to help the user quickly determine if they qualify for various tax credits and deductions.
  • Self-employment tax for a user who has self-employment income in addition to wages or pensions.
  • Automatic calculation of the taxable portion of any Social Security benefits.
  • A mobile-friendly design.

In addition, the new Tax Withholding Estimator makes it easier to enter wages and withholding for each job held by the taxpayer and their spouse, as well as separately entering pensions and other sources of income. At the end of the process, the tool makes specific withholding recommendations for each job and each spouse and clearly explains what the taxpayer should do next.

The new Tax Withholding Estimator will help anyone doing tax planning for the last few months of 2019. Like last year, the IRS urges everyone to do a Paycheck Checkup and review their withholding for 2019. This is especially important for anyone who faced an unexpected tax bill or a penalty when they filed this year. It’s also an important step for those who made withholding adjustments in 2018 or had a major life change.

Those most at risk of having too little tax withheld include those who itemized in the past but now take the increased standard deduction, as well as two-wage-earner households, employees with nonwage sources of income and those with complex tax situations.

To get started, check out the Tax Withholding Estimator on IRS.gov.


August 1, 2019
Tax Security 2.0 – A ‘Taxes-Security-Together’ Checklist

IRS, Security Summit partners urge tax professionals to review their practices, enhance safeguards to protect taxpayer data

IRS YouTube Videos:

• Tax Security 2.0: Taxes-Security-Together Checklist: English

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WASHINGTON — Leaders from the IRS, state tax agencies and the tax industry today called on tax professionals nationwide to take time this summer to review their current security practices, enhance safeguards where necessary and take steps to protect their businesses from global cybercriminal syndicates prowling the Internet.

Despite major progress by the IRS and the Security Summit partners against identity theft, evolving tactics continue to threaten the tax community and the sensitive data of taxpayers. 

To help combat this, the Security Summit partners created a new “Taxes-Security-Together” Checklist to serve as a starting point for tax professionals. Beginning next week, the IRS and Summit partners will issue a series of five Tax Security 2.0 news releases highlighting “Taxes-Security-Together” Checklist action items.   

“The IRS, the states and the private sector tax industry have taken major steps to protect taxpayers and their data,” said IRS Commissioner Chuck Rettig. “But a major risk remains, regardless of whether you are the sole tax practitioner in your office or part of a multi-partner accounting firm. To help with this, we assembled a security checklist to assist the tax community. We hope tax professionals will use our checklist as a starting point to do everything necessary to protect their client’s data.”

The Security Summit — a partnership between the IRS, states and the private-sector tax community — started in 2015 to combat identity theft and protect taxpayers. Key IRS data show the Summit continues making major progress against tax-related identity theft. Between 2015 and 2018, key indicators showed:

  • The number of taxpayers who reported to the IRS that they were victims of identity theft fell 71 percent. In 2018, the IRS received 199,000 identity theft affidavits from taxpayers compared to 677,000 in 2015. This was the third consecutive year this number declined.
  • The number of confirmed identity theft returns stopped by the IRS declined by 54 percent, falling from 1.4 million in 2015 to 649,000 in 2018.

As the Summit has increased the tax community’s defenses against identity theft and refund fraud, cybercriminals continue to evolve. Increasingly, they look to data thefts at tax professionals’ offices to obtain large amounts of sensitive taxpayer data. Thieves then use stolen data from tax professionals to create fraudulent returns that are harder to detect.

The ‘Taxes-Security-Together’ Checklist

The Summit partners urge the tax community to review these basic security steps this summer. Some tax pros may routinely overlook these checklist items and others need to regularly revisit them. The steps are not only important for tax practitioners, but for taxpayers as well. Everyone has a responsibility to protect sensitive data.

The Taxes-Security-Together checklist highlights key security features 

   *Deploy the “Security Six” measures:

  • Activate anti-virus software.
  • Use a firewall.
  • Opt for two-factor authentication when it’s offered.
  • Use backup software/services.
  • Use Drive encryption.
  • Create and secure Virtual Private Networks.

   *Create a data security plan:

  • Federal law requires all “professional tax preparers” to create and maintain an information security plan for client data. 
  • The security plan requirement is flexible enough to fit any size of tax preparation firm, from small to large. 
  • Tax professionals are asked to focus on key risk areas such as employee management and training; information systems; and detecting and managing system failures.

   *Educate yourself and be alert to key email scams, a frequent risk area involving:

  • Learn about spear phishing emails.
  • Beware ransomware.

   *Recognize the signs of client data theft:

  • Clients receive IRS letters about suspicious tax returns in their name.
  • More tax returns filed with a practitioner’s Electronic Filing Identification Number than submitted. 
  • Clients receive tax transcripts they did not request.

   *Create a data theft recovery plan including:

  • Contact the local IRS Stakeholder Liaison immediately.
  • Assist the IRS in protecting clients’ accounts.
  • Contract with a cybersecurity expert to help prevent and stop thefts. 

Security Summit partners/tax professionals urge review

“The states and our partners have made progress in the fight against tax-related identity theft, but criminals continue to evolve. We cannot let our guard down in this fight because our common enemy is well-funded, technologically skilled and savvy about state and federal tax processes,” said Sharonne Bonardi, president of the Board of Trustees of the Federation of Tax Administrators and Deputy Comptroller in Maryland. “To make this work, we need help from individual tax professionals across the nation.”

Checklist marks third year of Summit campaigns aimed at tax professional community

This year’s Tax Security 2.0 effort involving the Security Checklist is the third summer campaign in a row involving the Summit partners. The effort follows feedback and recommendations from the Electronic Tax Administration Advisory Committee (ETAAC) that encouraged the Summit partners to expand and intensify outreach efforts to the tax professional community on identity theft and security issues. 

This year’s campaign also coincides with this summer’s IRS Nationwide Tax Forums, which will again feature a major focus on security protection for tax professionals. The sessions will provide continuing education credits for sessions led by experts from inside and outside the IRS. The American Coalition for Taxpayer Rights also will again sponsor special sessions with experts from the Pell Center for International Relations and Public Policy at Salve Regina University in Rhode Island. 

Last year, Summit education effort focused on Protect Your Clients, Protect Yourself: Tax Security 101. In 2017, the campaign highlighted email schemes in Don’t Take the Bait.

Separate Summit initiatives focus on identity theft awareness for individual taxpayers and consumer alerts for developing tax scams and schemes. 

Resources available for tax professionals

Tax professionals also can get help with security recommendations by reviewing IRS Publication 4557, Safeguarding Taxpayer Data, and Small Business Information Security: the Fundamentals by the National Institute of Standards and Technology.

Publication 5293, Data Security Resource Guide for Tax Professionals, provides a compilation of data theft information available on IRS.gov. Also, tax professionals should stay connected to the IRS through subscriptions to e-News for Tax Professionals and Social Media.

Tax Security 2.0 – A ‘Taxes-Security-Together’ Checklist – Step 1

IRS, states and industry outline ‘Security Six’ protections to help tax professionals and taxpayers be safer online

IRS YouTube Videos:
Tax Security 2.0, The Taxes-Security-Together Checklist – English

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WASHINGTON — Using a new “Taxes-Security-Together” Checklist, the Internal Revenue Service and the Security Summit partners urged tax professionals to review critical security steps to ensure they are fully protecting their computers and email as well as safeguarding sensitive taxpayer data.

The Security Summit partners – the IRS, states and tax industry – urge tax professionals to take time this summer to give their data safeguards a thorough review. To help the tax community, the Summit created a “Taxes-Security-Together” Checklist as a starting point for analyzing office data security.

In the first of a five-part weekly series, the initial step on the checklist involves the “Security Six” protections. These steps fall into several major security categories. 

“These six steps are simple actions that anyone can take,” said IRS Commissioner Chuck Rettig. “The important thing to remember is that every tax professional, whether a sole practitioner or a partner in a large firm, is a potential target for cybercriminals. No tax business should assume they are too small or too smart to avoid identity thieves.”

Although the Security Summit – a partnership between the IRS, states and the private-sector tax community – is making major progress against tax-related identity theft, cybercriminals continue to evolve, and data thefts at tax professionals’ offices continue. Thieves use stolen data from tax practitioners to create fraudulent returns that are harder to detect.

The Security Summit partnership urges tax professionals across the nation to remember these basic steps to help in the battle against identity theft.

Deploy the ‘Security Six’ steps for basic protections

The following are the basic protections that everyone, especially tax professionals handling sensitive data, should deploy:

1. Anti-virus software

Although details may vary between commercial products, anti-virus software scans computer files or memory for certain patterns that may indicate the presence of malicious software (also called malware). Anti-virus software (sometimes more broadly referred to as anti-malware software) looks for patterns based on the signatures or definitions of known malware from cyber criminals. Anti-virus vendors find new issues and update malware daily, so it is important that people have the latest updates installed on their computer, according to the U.S. Computer Emergency Readiness Team (US-CERT), a division of the Department of Homeland Security.

Once users have installed an anti-virus package, they should scan their entire computer periodically by doing:

  • Automatic scans – Most anti-virus software can be configured to automatically scan specific files or directories in real time and prompt users at set intervals to perform complete scans.
  • Manual scans – If the anti-virus software does not automatically scan new files, users should manually scan files and media received from an outside source before opening them. This manual process includes:

o    Saving and scanning email attachments or web downloads rather than opening them directly from the source.

o    Scanning portable media, including CDs and DVDs, for malware before opening files.

Sometimes the software will produce a dialog box with an alert that it has found malware and asks whether users want it to “clean” the file (to remove the malware). In other cases, the software may attempt to remove the malware without asking first. 

When selecting an anti-virus package, users should learn about its features, so they know what to expect. Keep security software set to automatically receive the latest updates so that it is always current.

A reminder about spyware, a category of malware intended to steal sensitive data and passwords without the user’s knowledge: Strong security software should protect against spyware. But remember, never click links within pop-up windows, never download “free” software from a pop-up, never follow email links that offer anti-spyware software. The links and pop-ups may be installing the spyware they claim to be eliminating.

A reminder about phishing emails: A strong security package also should contain anti-phishing capabilities. Never open an email from a suspicious source, click on a link in a suspicious email or open an attachment – or else you could be a victim of a phishing attack and you and your clients’ data could be compromised  

2. Firewalls

Firewalls provide protection against outside attackers by shielding your computer or network from malicious or unnecessary web traffic and preventing malicious software from accessing your systems. Firewalls can be configured to block data from certain suspicious locations or applications while allowing relevant and necessary data through, according to US-CERT.

Firewalls may be broadly categorized as hardware or software. While both have their advantages and disadvantages, the decision to use a firewall is far more important than deciding which type you use:

  • Hardware – Typically called network firewalls, these external devices are positioned between a computer and the internet (or another network connection). Hardware-based firewalls are particularly useful for protecting multiple computers and control the network activity that attempts to pass through them. 
  • Software – Most operating systems include a built-in firewall feature that should be enabled for added protection even if using an external firewall. Firewall software can also be obtained as separate software from a local computer store, software vendor or ISP. If downloading firewall software from the internet, make sure it is from a reputable source (such as an established software vendor or service provider) and offered via a secure website.

While properly configured firewalls may be effective at blocking some cyber-attacks, don’t be lulled into a false sense of security. Firewalls do not guarantee that a computer will not be attacked. Firewalls primarily help protect against malicious traffic, not against malicious programs (malware), and may not protect the device if the user accidentally installs malware. However, using a firewall in conjunction with other protective measures (such as anti-virus software and safe computing practices) will strengthen resistance to attacks.

The Security Summit reminds tax pros that anti-virus software and firewalls cannot protect data if computer users fall for email phishing scams and divulge sensitive data, such as usernames and passwords. The Summit reminds the tax community that users, not the software, is the first-line of defense in protecting taxpayer data.

3. Two-factor authentication

Many email providers now offer customers two-factor authentication protections to access email accounts. Tax professionals should always use this option to prevent their accounts from being taken over by cybercriminals and putting their clients and colleagues at risk.

Two-factor authentication helps by adding an extra layer of protection beyond a password. Often two-factor authentication means the returning user must enter credentials (username and password) plus another step, such as entering a security code sent via text to a mobile phone. The idea is a thief may be able to steal the username and password but it’s highly unlikely they also would have a user’s mobile phone to receive a security code and complete the process.

The use of two-factor authentication and even three-factor authentication is on the rise, and tax preparers should always opt for a multi-factor authentication protection when it is offered, whether on an email account or tax software account or any password-protected product. 

IRS Secure Access, which protects IRS.gov tools including e-Services, is an example of two-factor authentication. 

Tax pros can check their email account settings to see if the email provider offers two-factor protections.

4. Backup software/services

Critical files on computers should routinely be backed up to external sources. This means a copy of the file is made and stored either online as part of a cloud storage service or similar product. Or, a copy of the file is made to an external disk, such as an external hard drive that now comes with multiple terabytes of storage capacity. Tax professionals should ensure that taxpayer data that is backed up also is encrypted – for the safety of the taxpayer and the tax pro.  

5. Drive encryption

Given the sensitive client data maintained on tax practitioners’ computers, users should consider drive encryption software for full-disk encryption. Drive encryption, or disk encryption, transforms data on the computer into unreadable files for an unauthorized person accessing the computer to obtain data. Drive encryption may come as a stand-alone security software product. It may also include encryption for removable media, such as a thumb drive and its data.

6. Virtual Private Network

If a tax firm’s employees must occasionally connect to unknown networks or work from home, establish an encrypted Virtual Private Networks (VPN) to allow for a more secure connection. A VPN provides a secure, encrypted tunnel to transmit data between a remote user via the Internet and the company network. Search for “Best VPNs” to find a legitimate vendor; major technology sites often provide lists of top services.

How to get started with the ‘Security Six’ 
All tax professionals also should review their professional insurance policy to ensure the business is protected should a data theft occur. Some insurance companies will provide cybersecurity experts for their clients.

These experts can help with technology safeguards and offer more advanced recommendations.  

Having the proper insurance coverage is a common recommendation from tax professionals who have experienced data thefts.

Additional resources

Tax professionals also can get help with security recommendations by reviewing the recently revised IRS Publication 4557, Safeguarding Taxpayer Data, and Small Business Information Security: the Fundamentals by the National Institute of Standards and Technology.

Publication 5293, Data Security Resource Guide for Tax Professionals, provides a compilation data theft information available on IRS.gov. Also, tax professionals should stay connected to the IRS through subscriptions to e-News for Tax Professionals and Social Media.

The Taxes-Security-Together Checklist

During this special Security Summit series, the checklist highlights these key areas for tax professionals:

  • Deploy “Security Six” basic safeguards
  • Create data security plan
  • Educate yourself on phishing scams
  • Recognize the signs of client data theft
  • Create a data theft recovery plan, and call the IRS immediately

Tax Security 2.0 – A ‘Taxes-Security-Together’ Checklist – Step 2

IRS, Security Summit partners remind practitioners that all ‘professional tax preparers’ must create a written data security plan to protect clients

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WASHINGTON — The IRS, state tax agencies and the nation’s tax industry today reminded all “professional tax preparers” that federal law requires them to create a written information security plan to protect their clients’ data.

The reminder came as the IRS and its Security Summit partners urged tax professionals to take time this summer to review their data security protections. To help them in this complex area, the Summit created a special “Taxes-Security-Together” Checklist as a starting point.

“Protecting taxpayer data is not only a good business practice, it’s the law for professional tax preparers,” said IRS Commissioner Chuck Rettig. “Creating and putting into action a written data security plan is critical to protecting your clients and protecting your business.”

Creating a data security plan is the second item on the “Taxes-Security-Together” Checklist. The first step for tax professionals involved deploying the “Security Six” basic steps to protect computers and email.

Although the Security Summit -- a partnership between the IRS, states and the private-sector tax community -- is making major progress against tax-related identity theft, cybercriminals continue to evolve, and data thefts at tax professionals’ offices remain a major threat. Thieves use stolen data from tax practitioners to create fraudulent returns that can be harder for the IRS and Summit partners to detect.

Create a data security plan under federal law 

The Security Summit partners noted that many in the tax professional community do not realize they are required under federal law to have a data security plan. 

The Financial Services Modernization Act of 1999, also known as the Gramm-Leach-Bliley (GLB) Act, gives the Federal Trade Commission authority to set information safeguard regulations for various entities, including professional tax return preparers. According to the FTC Safeguards Rule, tax return preparers must create and enact security plans to protect client data. Failure to do so may result in an FTC investigation. The IRS also may treat a violation of the FTC Safeguards Rule as a violation of IRS Revenue Procedure 2007-40, which sets the rules for tax professionals participating as an Authorized IRS e-file Provider.

The FTC-required information security plan must be appropriate to the company’s size and complexity, the nature and scope of its activities and the sensitivity of the customer information it handles. According to the FTC, each company, as part of its plan, must:

  • designate one or more employees to coordinate its information security program;
  • identify and assess the risks to customer information in each relevant area of the company’s operation and evaluate the effectiveness of the current safeguards for controlling these risks;
  • design and implement a safeguards program and regularly monitor and test it;
  • select service providers that can maintain appropriate safeguards, make sure the contract requires them to maintain safeguards and oversee their handling of customer information; and
  • evaluate and adjust the program in light of relevant circumstances, including changes in the firm’s business or operations, or the results of security testing and monitoring. 

The FTC says the requirements are designed to be flexible so that companies can implement safeguards appropriate to their own circumstances. The Safeguards Rule requires companies to assess and address the risks to customer information in all areas of their operations.

Please note: The FTC currently is re-evaluating the Safeguards Rule and has proposed new regulations. Be alert to any changes in the Safeguards Rule and its effect on the tax preparation community.

IRS Publication 4557, Safeguarding Taxpayer Data, details critical security measures that all tax professionals should enact. The publication also includes information on how to comply with the FTC Safeguards Rule, including a checklist of items for a prospective data security plan. Tax professionals are asked to focus on key areas such as employee management and training; information systems; and detecting and managing system failures. 

Additional data protection provisions may apply

The IRS and certain Internal Revenue Code (IRC) sections also focus on protection of taxpayer information and requirements of tax professionals. Here are a few examples:

  • IRS Publication 3112 - IRS e-File Application and Participation, states: Safeguarding of IRS e-file from fraud and abuse is the shared responsibility of the IRS and Authorized IRS e-file Providers. Providers must be diligent in recognizing fraud and abuse, reporting it to the IRS, and preventing it when possible. Providers must also cooperate with the IRS’ investigations by making available to the IRS upon request information and documents related to returns with potential fraud or abuse.
  • IRC, Section 7216 - This IRS code provision imposes criminal penalties on any person engaged in the business of preparing or providing services in connection with the preparation of tax returns who knowingly or recklessly makes unauthorized disclosures or uses information furnished to them in connection with the preparation of an income tax return.
  • IRC, Section 6713 - This code provision imposes monetary penalties on the unauthorized disclosures or uses of taxpayer information by any person engaged in the business of preparing or providing services in connection with the preparation of tax returns.
  • IRS Revenue Procedure 2007-40 - This legal guidance requires authorized IRS e-file providers to have security systems in place to prevent unauthorized access to taxpayer accounts and personal information by third parties. It also specifies that violations of the GLB Act and the implementing rules and regulations put into effect by the FTC, as well as violations of non-disclosure rules addressed in IRC sections 6713 and 7216, are considered violations of Revenue Procedure 2007-40. These violations are subject to penalties or sanctions specified in the Revenue Procedure.

Many state laws govern or relate to the privacy and security of financial data, which includes taxpayer data. They extend rights and remedies to consumers by requiring individuals and businesses that offer financial services to safeguard nonpublic personal information. For more information on state laws that businesses must follow, consult state laws and regulations.

Where to report data theft for the IRS, states

To notify the IRS in case of data theft, contact the appropriate local IRS Stakeholder Liaison.

In some states, data thefts must be reported to various authorities. Email the Federation of Tax Administrators at [email protected] to get information on how to report victim information to the states.

Additional resources

Tax professionals also can get help with security recommendations by reviewing the recently revised IRS Publication 4557, Safeguarding Taxpayer Data, and Small Business Information Security: the Fundamentals by the National Institute of Standards and Technology.

Publication 5293, Data Security Resource Guide for Tax Professionals, provides a compilation of data theft information available on IRS.gov. Also, tax professionals should stay connected to the IRS through subscriptions to e-News for Tax Professionals and Social Media

The Taxes-Security-Together Checklist

During this special Security Summit series, the checklist highlights these key areas for tax professionals:

  • Deploy “Security Six” basic safeguards
  • Create data security plan
  • Educate yourself on phishing scams
  • Recognize the signs of client data theft
  • Create a data theft recovery plan, and call the IRS immediately

August 1, 2019

IRS: Truckers should e-file highway use tax return by Sept. 3

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WASHINGTON — The Internal Revenue Service today issued a reminder for owners of most heavy highway vehicles that the time to file Form 2290, Heavy Highway Vehicle Use Tax Return, began July 1, 2019.

The highway use tax applies to highway motor vehicles with a taxable gross weight of 55,000 pounds or more. This generally includes large trucks, truck tractors and buses. The tax is based on the weight of the vehicle and a variety of special rules apply. These special rules are explained in the instructions to Form 2290.

In 2019, the IRS expects to receive almost 900,000 Heavy Highway Vehicle Use Tax Returns. Though some taxpayers have the option of filing Form 2290 on paper, taxpayers with 25 or more taxed vehicles must e-file Form 2290.

The deadline to file Form 2290 and pay the tax is Sept. 3, 2019, for vehicles used on the road during July. Truckers have the additional time since the normal deadline of Aug. 31 falls on a Saturday this year and Monday, Sept. 2, is a federal holiday.

The IRS encourages all owners to take advantage of the speed and convenience of e-file and paying any tax due. There is no need to visit an IRS office because the form can be filed and any required tax payment can be made online. Filers can use a credit or debit card to pay the Heavy Highway Vehicle Use Tax. Visit IRS.gov for a list of IRS-approved e-file providers and to find an approved provider for Form 2290 on the 2290 e-file partner’s page.

Generally, e-filers receive their IRS-stamped Schedule 1 electronically minutes after filing. They can then print the Schedule 1 and provide it to their state department of motor vehicles, without visiting an IRS office.

For those who want face-to-face service, all IRS Taxpayer Assistance Centers now operate by appointment and taxpayers can call 844-545-5640 to schedule one. See the Taxpayer Assistance Center page on IRS.gov for details.

The IRS will host a webinar, “Understanding Form 2290-Heavy Highway Vehicle Use Tax,” Aug. 15 at 2 p.m. Eastern time. Pre-register for this free 60-minute webinar. Closed captioning is available. Tax professionals can earn one continuing professional education credit for attending.

For more information about the highway use tax, visit the Trucking Tax Center at IRS.gov/trucker.


July 31, 2019

IRS, Treasury issue guidance on making or revoking the bonus depreciation elections 

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WASHINGTON — The Internal Revenue Service today issued a Revenue Procedure (LINK) allowing a taxpayer to make a late election, or to revoke an election, under section 168(k) for certain property acquired by the taxpayer after September 27, 2017, and placed in service by the taxpayer during its taxable year that includes September 28, 2017.

The Tax Cuts and Jobs Act made several changes to bonus depreciation. For example, the additional first year depreciation deduction percentage was increased from 50 to 100 percent. The property eligible for the additional first year depreciation deduction was expanded to include certain used depreciable property and certain film, television, or live theatrical productions; the placed-in-service date was extended to before January 1, 2027. Finally, the date on which a specified plant is planted or grafted by the taxpayer was extended to before January 1, 2027.

There are three additional first year depreciation deduction elections. A taxpayer can elect not to deduct the additional first year depreciation for all qualified property that is in the same class of property and placed in service by the taxpayer in the same tax year.   Secondly a taxpayer can elect to deduct 50-percent, instead of 100-percent, additional first year depreciation for all qualified property acquired after September 27, 2017, and placed in service by the taxpayer during its taxable year that includes September 28, 2017.

Finally, a taxpayer can elect to deduct additional first year depreciation for any specified plant that is planted after September 27, 2017 and before January 1, 2027, or grafted after and before those dates to a plant that has already been planted.  If the taxpayer makes this election, the additional first year depreciation deduction is allowable for the specified plant in the taxable year in which that plant is planted or grafted. 

The Revenue Procedure applies to these elections for the taxable year that includes September 28, 2017.  If a taxpayer did not make these elections timely for that taxable year, the Revenue Procedure allows the taxpayer to make late elections by filing an amended return or a Form 3115 for a limited period of time.  If a taxpayer did make these elections timely for that taxable year, the Revenue Procedure also allows the taxpayer to revoke the elections by filing an amended return or a Form 3115 for a limited period of time.

Updates on the implementation of the TCJA can be found on the Tax Reform page of IRS.gov.


July 30, 2019

EA Inactivation and Termination Letters

This year’s enrolled agent renewal cycle has finished and we are now beginning our annual clean-up of those who have SSNs ending in 0, 1, 2, or 3 and did not renew.

Those who did not renew during the 2016 and 2019 cycles will be moved to terminated status. (2,700+)

Those who did not renew during the 2019 cycle will be moved to inactive status. (4,900+)

Letters will be sent to all beginning this week advising them of our action.

Anyone in inactive status can still submit a late renewal for approval; with proof of CE.

Anyone in terminated status must re-take the Special Enrollment Exam to apply for re-enrollment.

If an EA disagrees and has a record of previously renewing their EA status, they should contact 855-472-5540 


July 26, 2019

IRS has begun sending letters to virtual currency owners advising them to pay back taxes, file amended returns; part of agency’s larger efforts

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WASHINGTON — The Internal Revenue Service has begun sending letters to taxpayers with virtual currency transactions that potentially failed to report income and pay the resulting tax from virtual currency transactions or did not report their transactions properly. 

"Taxpayers should take these letters very seriously by reviewing their tax filings and when appropriate, amend past returns and pay back taxes, interest and penalties," said IRS Commissioner Chuck Rettig. "The IRS is expanding our efforts involving virtual currency, including increased use of data analytics. We are focused on enforcing the law and helping taxpayers fully understand and meet their obligations."

The IRS started sending the educational letters to taxpayers last week. By the end of August, more than 10,000 taxpayers will receive these letters. The names of these taxpayers were obtained through various ongoing IRS compliance efforts.

For taxpayers receiving an educational letter, there are three variations: Letter 6173, Letter 6174 or Letter 6174-A, all three versions strive to help taxpayers understand their tax and filing obligations and how to correct past errors.

Taxpayers are pointed to appropriate information on IRS.gov, including which forms and schedules to use and where to send them. 

Last year the IRS announced a Virtual Currency Compliance campaign to address tax noncompliance related to the use of virtual currency through outreach and examinations of taxpayers. The IRS will remain actively engaged in addressing non-compliance related to virtual currency transactions through a variety of efforts, ranging from taxpayer education to audits to criminal investigations.

Virtual currency is an ongoing focus area for IRS Criminal Investigation.

IRS Notice 2014-21 states that virtual currency is property for federal tax purposes and provides guidance on how general federal tax principles apply to virtual currency transactions. Compliance efforts follow these general tax principles. The IRS will continue to consider and solicit taxpayer and practitioner feedback in education efforts and future guidance.

The IRS anticipates issuing additional legal guidance in this area in the near future.

Taxpayers who do not properly report the income tax consequences of virtual currency transactions are, when appropriate, liable for tax, penalties and interest. In some cases, taxpayers could be subject to criminal prosecution.

More information on virtual currencies can be found on IRS.gov. 


July 23, 2019

Tax professionals specializing in estate and trust returns must have a Preparer Tax Identification Number (PTIN) and renew it annually. The PTIN is required of paid professionals who prepare or assist in preparing certain federal tax returns, which includes Form 1041, U.S. Income Tax Return for Estates and Trusts. Failing to enter a PTIN or entering an expired or suspended PTIN can result in a $50 penalty per return and could cause processing delays for clients.

The IRS urged the estate and trust community, especially financial institutions offering services to clients, to ensure that staff who prepare or assist in preparing Forms 1041 have PTINs. PTINs cannot be shared among staff. Each paid professional must have his or her own PTIN. Obtaining or renewing a PTIN takes only a few minutes and can be done online. Preparers can obtain a PTIN for 2019 now and renew that PTIN between October and December for 2020. Visit www.irs.gov/ptin to start.


July 12, 2019

Time is running out for some combat-injured veterans to claim tax refunds of up to $3,200  

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WASHINGTON — The Internal Revenue Service is reminding veterans who received disability severance payments after 1991 and claimed it as income that time may be running out to claim their refund.

Veterans should take action soon if they received a notice (letters 6060-A and 6060-D) and have not already filed Form 1040X, Amended U.S. Individual Income Tax Return, to claim a refund or credit of the overpayment attributable to the disability severance payment should do so soon. 

“We appreciate the service and sacrifice of our nation’s combat-injured veterans, and the IRS is pleased to help deliver refunds under this special provision,” said IRS Commissioner Chuck Rettig. “Time is running out this month for many people who qualify for this refund. We urge combat-injured veterans to take time review the provisions to see if they are eligible.”

The Combat-Injured Veterans Tax Fairness Act of 2016 provides that most veterans who received a one-time, lump-sum, disability severance payment when they separated from military service are entitled to a refund if that payment was claimed as income. The payment must have been received after Jan. 17, 1991, and before Jan. 1, 2017. Eligible veterans should have received a mailed notice from the Department of Defense in July of 2018 explaining how to claim their tax refunds.

Some veterans have yet to act    

Deadlines are soon approaching as the time available for claiming these tax refunds is limited to:

  • One year from the date of the Department of Defense notice, or
  • Three years after the due date for filing the original return for the year the disability severance payment was made, or
  • Two years after tax was paid for the year the disability severance payment was made.

Veterans claiming their refund have the normal limitations period for claiming a refund or one year from the date of their letter from the DoD, whichever expires later. As taxpayers can usually only claim tax refunds within three years from the due date of the return, this alternative time frame is especially important since some of the claims may be for refunds of taxes paid as far back as 1991. While many veterans have claimed their refunds in the past year, many others have not, and time is running short. 

Two options for claiming the tax refund:

  • Option 1: File a claim based on the actual amount of the overpayment attributable to your lump sum disability severance payment, or
  • Option 2: Choose to claim the standard refund amount listed below that corresponds to the year the disability severance payment was made. Simply write “Disability Severance Payment” on Form 1040X, line 15, and enter the standard refund amount listed below on line 15, column B, and on line 22, leaving the remaining lines blank.

Veterans can submit a claim based on the actual amount of their disability severance payment by completing Form 1040X and carefully following the instructions. An original return is not necessary if the information for that tax year available. Veterans without the required information to complete the Form 1040X, you can request a transcript online at IRS.gov/transcript

Option 2, claiming a standard refund amount, is the easiest way to request a refund because it does not require finding the original tax return or requesting information about the return from the IRS. It may result in a larger or smaller refund based on the actual amount from the return. The standard refund amounts are:

  • $1,750 for tax years 1991 – 2005
  • $2,400 for tax years 2006 – 2010
  • $3,200 for tax years 2011 – 2016

Special Instructions

Carefully follow the instructions in the notice mailed by the Department of Defense in July 2018:

  • Complete and file IRS Form 1040X, Amended U.S. Individual Income Tax Return, for the tax year the disability severance payment was made
  • Write either “Veteran Disability Severance” or “St. Clair Claim” across the top of the front page of the Form 1040X
  • All amended returns are filed on paper, so veterans should mail their completed Form 1040X, with a copy of the DoD letter, to:

Internal Revenue Service
333 W. Pershing Street, Stop 6503, P5
Kansas City, MO  64108 

Eligible but never received a DoD notice 

Veterans who did not receive the notice from the Department of Defense and received a disability severance payment after Jan. 17, 1991, that was reported as taxable income, can still file a claim. They must include the necessary documentation to file with their Form 1040X. Veterans should contact the National Archives, National Personnel Records Center, or the Department of Veterans Affairs to obtain the required documentation for submission with their Form 1040X. 

The IRS has posted detailed information on IRS.gov. Veterans with questions about claiming a tax refund for disability severance payment, can call the IRS toll free at (833) 558-5245 ext. 378 between 7 a.m. and 7 p.m. local time (Alaska and Hawaii follow Pacific time).


July 2, 2019

Taxpayers should be on the lookout for new versions of these two scams

With scam artists hard at work all year, taxpayers should be on the lookout for a surge of evolving phishing emails and telephone scams.

Taxpayers should watch for new versions of two tax-related scams. One involves Social Security numbers related to tax issues. The other threatens taxpayers with a tax bill from a fictional government agency. Here are some details about these scams to help taxpayers recognize them:

The SSN scheme

  • The latest twist includes scammers claiming to be able to suspend or cancel the victim’s Social Security number. This scam is similar to and often associated with the IRS impersonation scam.
  • It is yet another attempt by con artists to frighten taxpayers into returning robocall voicemails.
  • Scammers may mention overdue taxes in addition to threatening to cancel the taxpayer’s SSN.

Fake tax agency

  • This scheme involves a letter threatening an IRS lien or levy. 
  • The scammer mails the letter to the taxpayer.
  • The lien or levy is based on bogus overdue taxes owed to a non-existent agency.
  • The fake agency is called the “Bureau of Tax Enforcement.” There is no such agency.
     
  • The lien notification scam also likely references the IRS to confuse potential victims into thinking the letter is from a legitimate agency.

Both these schemes show classic signs of being scams. The IRS and its Security Summit partners – the state tax agencies and the tax industry – remind everyone to stay alert to scams that use the IRS or reference taxes. Being alert is especially important in late spring and early summer as tax bills and refunds arrive.

Share this tip on social media -- #IRSTaxTip: Taxpayers should be on the lookout for new versions of these two scams. https://go.usa.gov/xyYHB


June 20, 2019

Millions more ITINs set to expire in 2019; IRS says renew early to prevent refund delays

IRS YouTube Videos:
Individual Taxpayer Identification Number (ITIN) – English | Spanish

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WASHINGTON — Nearly 2 million Individual Taxpayer Identification Numbers (ITINs) are set to expire at the end of 2019 as the Internal Revenue Service continues to urge affected taxpayers to submit their renewal applications early to avoid refund delays next year.

“We urge taxpayers with expiring ITINs to take action and renew the number as soon as possible. Renewing before the end of the year will avoid unnecessary delays related to their refunds,” said IRS Commissioner Chuck Rettig. “To help with this process, the IRS is sharing this material in multiple languages. We encourage partner groups to share this important information to reach as many people with ITINs as possible.”   

Under the Protecting Americans from Tax Hikes (PATH) Act, ITINs that have not been used on a federal tax return at least once in the last three consecutive years will expire Dec. 31, 2019. In addition, ITINs with middle digits 83, 84, 85, 86 or 87 that have not already been renewed will also expire at the end of the year. These affected taxpayers who expect to file a tax return in 2020 must submit a renewal application as soon as possible. 

ITINs are used by people who have tax filing or payment obligations under U.S. law but who are not eligible for a Social Security number. ITIN holders who have questions should visit the ITIN information page on IRS.gov and take a few minutes to understand the guidelines.

The IRS continues a nationwide education effort to share information with ITIN holders. To help taxpayers, the IRS offers a variety of informational materials, including flyers and fact sheets, available in several languages, including English, Spanish, Traditional Chinese, Russian, Vietnamese, Korean and Haitian/Creole on IRS.gov.

Who should renew an ITIN

  • Taxpayers whose ITIN is expiring and who expect to have a filing requirement in 2020 must submit a renewal application. Others do not need to take any action. ITINs with the middle digits 83, 84, 85 or 86, 87 (For example: 9NN-83-NNNN) need to be renewed even if the taxpayer has used it in the last three years. The IRS will begin sending the CP-48 Notice, You must renew your Individual Taxpayer Identification Number (ITIN) to file your U.S. tax return, in early summer to affected taxpayers. The notice explains the steps to take to renew the ITIN if it will be included on a U.S. tax return filed in 2020. Taxpayers who receive the notice after acting to renew their ITIN do not need to take further action unless another family member is affected. 
  • ITINs with middle digits of 70 through 82 have previously expired. Taxpayers with these ITINs can still renew at any time, if they have not renewed already.

Family option remains available

Taxpayers with an ITIN that has middle digits 83, 84, 85, 86 or 87, as well as all previously expired ITINs, have the option to renew ITINs for their entire family at the same time. Those who have received a renewal letter from the IRS can choose to renew the family’s ITINs together, even if family members have an ITIN with middle digits that have not been identified for expiration. Family members include the tax filer, spouse and any dependents claimed on the tax return.

How to renew an ITIN

To renew an ITIN, a taxpayer must complete a Form W-7 and submit all required documentation. Taxpayers submitting a Form W-7 to renew their ITIN are not required to attach a federal tax return. However, taxpayers must still note a reason for needing an ITIN on the Form W-7. See the Form W-7 instructions for detailed information.

Spouses and dependents residing outside of the U.S. only need to renew their ITIN if filing an individual tax return, or if they qualify for an allowable tax benefit (e.g., a dependent parent who qualifies the primary taxpayer to claim head of household filing status.) In these instances, a federal return must be attached to the Form W-7 renewal application.

There are three ways to submit the Form W-7 application package. Taxpayers can:

  • Mail the form, along with original identification documents or copies certified by the agency that issued them, to the IRS address listed on the Form W-7 instructions. The IRS will review the identification documents and return them within 60 days.
  • Work with Certified Acceptance Agents (CAAs) authorized by the IRS to help taxpayers apply for an ITIN. CAAs can authenticate all identification documents for primary and secondary taxpayers, verify that an ITIN application is correct before submitting it to the IRS for processing and authenticate the passports and birth certificates for dependents. This saves taxpayers from mailing original documents to the IRS.
  • In advance, call and make an appointment at a designated IRS Taxpayer Assistance Center to have each applicant’s identity authenticated in person instead of mailing original identification documents to the IRS. Each family member applying for an ITIN or renewal must be present at the appointment and must have a completed Form W-7 and required identification documents. See the TAC ITIN authentication page for more details.

Avoid common errors now and prevent delays next year

Federal tax returns that are submitted in 2020 with an expired ITIN will be processed. However, certain tax credits and any exemptions will be disallowed. Taxpayers will receive a notice in the mail advising them of the change to their tax return and their need to renew their ITIN. Once the ITIN is renewed, applicable credits and exemptions will be restored, and any refunds will be issued.

Additionally, several common errors can slow down some ITIN renewal applications. These mistakes generally center on:

  • mailing identification documentation without a Form W-7,
  • missing information on the Form W-7, or
  • insufficient supporting documentation, such as U.S. residency documentation or official documentation to support name changes.

The IRS urges any applicant to check over their form carefully before sending it to the IRS.

As a reminder, the IRS no longer accepts passports that do not have a date of entry into the U.S. as a stand-alone identification document for dependents from a country other than Canada or Mexico, or dependents of U.S. military personnel overseas. The dependent’s passport must have a date of entry stamp, otherwise the following additional documents to prove U.S. residency are required:

  • U.S. medical records for dependents under age 6,
  • U.S. school records for dependents under age 18, and
  • U.S. school records (if a student), rental statements, bank statements or utility bills listing the applicant’s name and U.S. address, if over age 18.

To expand ITIN services, the IRS continues to encourage more individuals to apply for the Acceptance Agent Program

To increase the availability of ITIN services nationwide, particularly in communities with high ITIN usage, the IRS is actively recruiting Certified Acceptance Agents and accepting applications year-round. Interested individuals are encouraged to review all CAA program changes and requirements and submit an application to become a Certified Acceptance Agent.

For more information, visit the ITIN information page on IRS.gov.


 

June 4, 2019

IRS takes additional steps to protect taxpayer data; plans to end faxing and third-party mailings of certain tax transcripts
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WASHINGTON — As part of its ongoing efforts to protect taxpayers from identity thieves, the Internal Revenue Service today announced it will stop its tax transcript faxing service in June and will amend the Form 4506 series to end third-party mailing of tax returns and transcripts in July. 

Tax transcripts are summaries of tax return information. Transcripts have become increasingly vulnerable as criminals impersonate taxpayers or authorized third parties. Identity thieves use tax transcripts to file fraudulent returns for refunds that are difficult to detect because they mirror a legitimate tax return.

The halt to the faxing and third-party service this summer are two more steps the IRS is taking to protect taxpayer data. In September 2018, the IRS began to mask personally identifible information for every individual and entity listed on the transcript. See New Tax Transcript and Customer File Number. At that time, the IRS announced it intended to stop its faxing and third-party mailing service, and has since worked with tax professionals to assure they have what they need for tax preparation and representation.

Faxing service ends June 28

Starting June 28, 2019, the IRS will stop faxing tax transcripts to both taxpayers and third parties, including tax professionals. This action affects individual and business transcripts.

Individual taxpayers have several options to obtain a tax transcript. They may: 

  • Use IRS.gov or the IRS2Go app to access Get Transcript Online; after verifying their identities, taxpayers may immediately download or print their transcript, or
  • Use IRS.gov or the IRS2Go app to access Get Transcript by Mail; transcript will be delivered within 10 days to the address of record, or
  • Call 800-908-9946 for an automated Get Transcript by Mail feature, or
  • Submit Form 4506-T or 4506T-EZ to have a transcript mailed to the address of record. 

Tax professionals also have several options to obtain tax transcripts necessary for tax preparation or representation as follows: 

  • Request that the IRS mail a transcript to the taxpayer’s address of record, or
  • Use e-Services’ Transcript Delivery System online to obtain masked individual transcripts and business transcripts, or
  • Obtain a masked individual transcript or a business transcript by calling the IRS, faxing authorization to the IRS assistor and the IRS assistor will place the document in the tax practitioner’s e-Services secure mailbox.
  • When needed for tax preparation purposes, tax practitioners may:
    • Obtain an unmasked wage and income transcript by calling the IRS, faxing authorization to the IRS assistor and the IRS assistor will place the document in the tax practitioner’s e-Services secure mailbox, or
    • Obtain an unmasked wage and income transcript if authorization is already on file by using e-Service’s Transcript Delivery System.

Certain third-party mailings stop July 1 

Effective July 1, 2019, the IRS will no longer provide transcripts requested on Form 4506, Form 4506-T and Form 4506T-EZ to third parties, and the forms will be amended to remove the option for mailing to a third-party. These forms are often used by lenders and others to verify income for non-tax purposes. Among the largest users are colleges and universities verifying income for financial aid purposes. Tax professionals also are large volume users.

Taxpayers may continue to use these forms to obtain a copy of their tax return or obtain a copy of their tax transcripts. This change will NOT affect use of the IRS Data Retrieval Tool through the Free Application for Federal Student Aid (FAFSA) process. 

Third parties who use these forms for income verification have other alternatives. The IRS offers an Income Verification Express Service (IVES) which has several hundred participants, who, with proper authorization, order transcripts. Lenders or higher education institutions can either contract with existing IVES participants or become IVES participants themselves. The tax transcript is an official IRS record. Taxpayers may choose to provide transcripts to requestors instead of authorizing the third party to request these transcrpts from the IRS on their behalf.

Tax professionals who are attorneys, Certified Public Accountants or Enrolled Agents (i.e., Circular 230 practitioners) and do not have an e-Services account may create one and, with proper authorization from clients, can access the e-Services’ Transcript Delivery System. Unenrolled tax practitioners must have an e-File application on file and be listed as delegated users to access TDS.

Customer File Number helps match transcripts

Because the taxpayer’s name and Social Security number are now partially masked, the IRS also created a Customer File Number space that can be used to help third parties match transcripts to taxpayers. Third parties can assign a Customer File Number, such as a loan application number or a student identification number. The number will populate on the transcript and help match it to the client/student. 

Learn more about the Customer File Number at About the New Tax Transcript and the Customer File Number.


May 8, 2019

New requirement applies to any business seeking a tax ID number; IRS offers data security tips during National Small Business Week

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WASHINGTON — During National Small Business Week, the Internal Revenue Service wants small business taxpayers and the self-employed to know that, starting May 13, an important change will affect the way it issues employer identification numbers, or EINs. 

With identity theft on the rise in the business community, the agency also offered business taxpayers tips and resources for protecting their data from theft.  

National Small Business Week is May 5-11. For more than 50 years, the week has recognized the important contributions of America’s entrepreneurs and small business owners. 

EINs and responsible parties

Beginning May 13, only individuals with tax identification numbers – either a Social Security number (SSN) or an individual taxpayer identification number (ITIN) – may request an employer identification number. This new requirement, which was first announced by the IRS in March, will provide greater security to the EIN process by requiring an individual to be the responsible party and will also improve transparency.

An EIN is a nine-digit tax identification number assigned to sole proprietors, corporations, partnerships, estates, trusts, employee retirement plans and other entities for tax-filing and reporting purposes.

The change prohibits entities from using their own EINs to obtain additional EINs. The new requirement applies to both the paper Form SS-4, Application for Employer Identification Number, and online EIN applications.

Data security

Individuals are not the only ones who need to protect their identities. Businesses and other organizations, especially trusts, estates and partnerships, can also be victims of identity theft. For example, criminals may file Forms 1120 (corporations), 1120S (S corporations) or Schedules K-1 in their names. Last year, 2,450 businesses reported that they were victims of tax-related identity theft, a 10-percent increase over 2017.

Businesses and other organizations can help combat identity theft by educating their employees, clients and customers. They can share Publication 4524, Taxes. Security. Together: Security Awareness for Taxpayers, or create their own messages urging employees, clients or customers to protect their data and beware of phishing emails, the most common tactic used by criminals to steal data.

Businesses should also educate their payroll and human resources employees about a dangerous phishing scam. The Form W-2 scam tricks payroll and human resources employees into sharing employee wage and income information by posing as a company executive. See Form W-2/SSN Data Theft: Information for Businesses and Payroll Service Providers.

Businesses that retain sensitive financial data should review and update their security plan. Publication 4557, Safeguarding Taxpayer Data, provides a good starting point and includes helpful recommendations.


 

May 7, 2019

Many tax-exempt organizations have until May 15 to file information returns; IRS warns against including personal data

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WASHINGTON — The Internal Revenue Service reminded certain tax-exempt organizations that Wednesday, May 15, 2019, is the filing deadline for Form 990-series information returns.

These types of information returns are normally due on the 15th day of the fifth month after the end of an organization’s accounting period. For organizations operating on a calendar year, the deadline is May 15, 2019. 

No Social Security numbers on Forms 990

The IRS generally does not ask organizations for Social Security numbers (SSNs) and cautions filers against providing them on the form. By law, the IRS and most tax-exempt organizations are required to publicly disclose most parts of Form 990 filings, including schedules and attachments. Public release of SSNs and other personally identifiable information about donors, clients or benefactors could give rise to identity theft. More information on this can be found in the “general instructions” section of theInstructions for Form 990, Return of Organization Exempt from Income Tax.

The IRS also urges tax-exempt organizations to file forms electronically, noting the error rate for electronically-filed returns is only 1 percent.Electronic filing also provides acknowledgement that the IRS has received the return and reduces normal processing time, making compliance with reporting and disclosure requirements easier.

Tax-exempt forms that must be made public by the IRS are clearly marked “Open to Public Inspection” on the top right corner of the first page. These include Form 990, Form 990-EZ, Form 990-PF and others.

Forms to file

Small tax-exempt organizations with average annual gross receipts of $50,000 or less may file an electronic notice called a Form 990-N (e-Postcard). This form requires only a few basic pieces of information. Tax-exempt organizations with average annual gross receipts above $50,000 must file a Form 990 or 990-EZ, depending on their receipts and assets. Private foundations must file Form 990-PF.

Organizations that need additional time to file a Form 990, 990-EZ or 990-PF may obtain an automatic six-month extension. Use Form 8868, Application for Extension of Time to File an Exempt Organization Return, to request an extension. The request must be filed by the due date of the return. Note that no extension is available for filing the Form 990-N (e-Postcard).

Many organizations risk loss of tax-exempt status

By law, organizations that fail to file annual reports for three consecutive years will see their federal tax exemptions automatically revoked as of the due date of the third year for which they are required to file. The Pension Protection Act of 2006 mandates that most tax-exempt organizations file annual Form 990-series information returns or notices with the IRS. The law, which went into effect at the beginning of 2007, also imposed a new annual filing requirement for small organizations. Churches and church-related organizations are not required to file annual reports.

Check tax-exempt status online

The IRS publishes a list of organizations identified as having automatically lost tax-exempt status for failing to file information returns for three consecutive years. Organizations that have had their exemptions automatically revoked can apply for reinstatement of their tax-exempt status and pay the appropriate user fee.

The IRS now offers an enhanced, mobile friendly search tool, called Tax Exempt Organization Search (TEOS). TEOS provides easy access to publicly available information about exempt organizations. Users can find key information about the federal tax status and filings of certain tax-exempt organizations, including whether organizations have had their federal tax exemptions automatically revoked and if an organization is eligible to receive tax-deductible contributions.


 

March 28, 2019

IRS revises EIN application process; seeks to enhance security

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WASHINGTON — As part of its ongoing security review, the Internal Revenue Service announced today that starting May 13 only individuals with tax identification numbers may request an Employer Identification Number (EIN) as the “responsible party” on the application. 

An EIN is a nine-digit tax identification number assigned to sole proprietors, corporations, partnerships, estates, trusts, employee retirement plans and other entities for tax filing and reporting purposes.

The change will prohibit entities from using their own EINs to obtain additional EINs. The requirement will apply to both the paper Form SS-4, Application for Employer Identification Number, and online EIN application.

Individuals named as responsible party must have either a Social Security number (SSN) or an individual taxpayer identification number (ITIN). By making the announcement weeks in advance, entities and their representatives will have time to identify the proper responsible official and comply with the new policy.

The Form SS-4 Instructions provide a detailed explanation of who should be the responsible party for various types of entities. Generally, the responsible party is the person who ultimately owns or controls the entity or who exercises ultimate effective control over the entity. In cases where more than one person meets that definition, the entity may decide which individual should be the responsible party. 

Only governmental entities (federal, state, local and tribal) are exempt from the responsible party requirement as well as the military, including state national guards.

There is no change for tax professionals who may act as third-party designees for entities and complete the paper or online applications on behalf of clients. 

The new requirement will provide greater security to the EIN process by requiring an individual to be the responsible party and improve transparency. If there are changes to the responsible party, the entity can change the responsible official designation by completing Form 8822-B, Change of Address or Responsible Party. A Form 8822-B must be filed within 60 days of a change.


March 25, 2019

IRS expands penalty waiver for those whose tax withholding and estimated tax payments fell short in 2018; key threshold lowered to 80 percent 

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WASHINGTON — The Internal Revenue Service today provided additional expanded penalty relief to taxpayers whose 2018 federal income tax withholding and estimated tax payments fell short of their total tax liability for the year.

The IRS is lowering to 80 percent the threshold required to qualify for this relief. Under the relief originally announced Jan. 16, the threshold was 85 percent. The usual percentage threshold is 90 percent to avoid a penalty.

“We heard the concerns from taxpayers and others in the tax community, and we made this adjustment in an effort to be responsive to a unique scenario this year,” said IRS Commissioner Chuck Rettig. “The expanded penalty waiver will help many taxpayers who didn’t have enough tax withheld. We continue to urge people to check their withholding again this year to make sure they are having the right amount of tax withheld for 2019.”

This means that the IRS is now waiving the estimated tax penalty for any taxpayer who paid at least 80 percent of their total tax liability during the year through federal income tax withholding, quarterly estimated tax payments or a combination of the two.

Today’s revised waiver computation will be integrated into commercially-available tax software and reflected in the forthcoming revision of the instructions for Form 2210, Underpayment of Estimated Tax by Individuals, Estates, and Trusts.

Taxpayers who have already filed for tax year 2018 but qualify for this expanded relief may claim a refund by filing Form 843, Claim for Refund and Request for Abatement and include the statement “80% Waiver of estimated tax penalty” on Line 7.  This form cannot be filed electronically.

Today’s expanded relief will help many taxpayers who owe tax when they file, including taxpayers who did not properly adjust their withholding and estimated tax payments to reflect an array of changes under the Tax Cuts and Jobs Act (TCJA), the far-reaching tax reform law enacted in December 2017. 

The IRS and partner groups conducted an extensive outreach and education campaign throughout 2018 to encourage taxpayers to do a “Paycheck Checkup” to avoid a situation where some might have had too much or too little tax withheld when they file their tax returns. If a taxpayer did not submit a revised W-4 withholding form to their employer or increase their estimated tax payments, they may have not had enough tax withheld during the tax year. 

Additional information

Because the U.S. tax system is pay-as-you-go, taxpayers are required, by law, to pay most of their tax obligation during the year, rather than at the end of the year. This can be done by either having tax withheld from paychecks or pension payments, or by making estimated tax payments.

Usually, a penalty applies at tax filing if too little is paid during the year. This penalty is an interest based amount approximately equivalent to the federal interest on the amount not paid in a timely manner. Normally, the penalty would not apply for 2018 if tax payments during the year met one of the following tests: 

  • The person’s tax payments were at least 90 percent of the tax liability for 2018 or
  • The person’s tax payments were at least 100 percent of the prior year’s tax liability, in this case from 2017. However, the 100 percent threshold is increased to 110 percent if a taxpayer’s adjusted gross income is more than $150,000, or $75,000 if married and filing a separate return. 

For waiver purposes only, today’s relief lowers the 90 percent threshold to 80 percent. This means that a taxpayer will not owe a penalty if they paid at least 80 percent of their total 2018 tax liability. If the taxpayer paid less than 80 percent, then they are not eligible for the waiver and the penalty will be calculated as it normally would be, using the 90 percent threshold. For further details, see Notice 2019-25, posted today on IRS.gov.

Like last year, the IRS urges everyone to take a Paycheck Checkup and review their withholding for 2019. This is especially important for anyone now facing an unexpected tax bill when they file. This is also an important step for those who made withholding adjustments in 2018 or had a major life change to ensure the right tax is still being withheld. Those most at risk of having too little tax withheld from their pay include taxpayers who itemized in the past but now take the increased standard deduction, as well as two-wage-earner households, employees with nonwage sources of income and those with complex tax situations.

To help taxpayers get their withholding right in 2019, the updated Withholding Calculator is now available on IRS.gov.

The IRS has many useful resources for anyone interested in learning more about tax reform, including Publication 5307, Tax Reform: Basics for Individuals and Families, and Publication 5318, Tax Reform What’s New for Your Business. For other tips and resources, visit IRS.gov/taxreform or check out the Get Ready page on IRS.gov .


 

March 20, 2019

IRS concludes "Dirty Dozen" list of tax scams for 2019: Agency encourages taxpayers to remain vigilant year-round

IRS YouTube Videos:

WASHINGTON — The Internal Revenue Service today wrapped up issuing its annual "Dirty Dozen" list of tax scams. The IRS reminds taxpayers to remain vigilant to these often aggressive and evolving schemes throughout the year.

This year's “Dirty Dozen” list highlights a wide variety of schemes that taxpayers may encounter at any time, although many may peak during tax-filing season. The schemes run the gamut from simple refund inflation scams to complex tax shelter deals. A common theme throughout all: Scams put taxpayers at risk.

The IRS highlighted the “Dirty Dozen” scam list in separate news releases over 12 weekdays. Taxpayers are encouraged to review the list in a special section on IRS.gov and be on the lookout for these ruses throughout the year.

Taxpayers should remember that they are legally responsible for what is on their tax return even if it is prepared by someone else. Consumers can help protect themselves by choosing a reputable tax preparer. For more, see the Choosing a Tax Professional page.

Here is a recap of this year's ‘Dirty Dozen’ scams:

Phishing: Taxpayers should be alert to potential fake emails or websites looking to steal personal information. The IRS will never initiate contact with taxpayers via email about a bill or tax refund. Don’t click on one claiming to be from the IRS. Be wary of emails and websites that may be nothing more than scams to steal personal information. (IR-2019-26)

Phone Scams: Phone calls from criminals impersonating IRS agents remain an ongoing threat to taxpayers. The IRS has seen a surge of these phone scams in recent years as con artists threaten taxpayers with police arrest, deportation and license revocation, among other things. (IR-2019-28)

Identity Theft: Taxpayers should be alert to tactics aimed at stealing their identities, not just during the tax filing season, but all year long. The IRS, working in conjunction with the Security Summit partnership of state tax agencies and the tax industry, has made major improvements in detecting tax return related identity theft during the last several years. But the agency reminds taxpayers that they can help in preventing this crime. The IRS continues to aggressively pursue criminals that file fraudulent tax returns using someone else’s Social Security number. (IR-2019-30)

Return Preparer Fraud: Be on the lookout for unscrupulous return preparers. The vast majority of tax professionals provide honest, high-quality service. There are some dishonest preparers who operate each filing season to scam clients, perpetuate refund fraud, identity theft and other scams that hurt taxpayers. (IR-2019-32)

Inflated Refund Claims: Taxpayers should take note of anyone promising inflated tax refunds. Those preparers who ask clients to sign a blank return, promise a big refund before looking at taxpayer records or charge fees based on a percentage of the refund are probably up to no good. To find victims, fraudsters may use flyers, phony storefronts or word of mouth via community groups where trust is high. (IR-2019-33)

Falsifying Income to Claim Credits: Con artists may convince unsuspecting taxpayers to invent income to erroneously qualify for tax credits, such as the Earned Income Tax Credit. Taxpayers should file the most accurate tax return possible because they are legally responsible for what is on their return. This scam can lead to taxpayers facing large bills to pay back taxes, interest and penalties. (IR-2019-35)

Falsely Padding Deductions on Returns: Taxpayers should avoid the temptation to falsely inflate deductions or expenses on their tax returns to pay less than what they owe or potentially receive larger refunds. Think twice before overstating deductions, such as charitable contributions and business expenses, or improperly claiming credits, such as the Earned Income Tax Credit or Child Tax Credit. (IR-2019-36)

Fake Charities: Groups masquerading as charitable organizations solicit donations from unsuspecting contributors. Be wary of charities with names similar to familiar or nationally-known organizations. Contributors should take a few extra minutes to ensure their hard-earned money goes to legitimate charities. IRS.gov has the tools taxpayers need to check out the status of charitable organizations. (IR-2019-39)

Excessive Claims for Business Credits: Avoid improperly claiming the fuel tax credit, a tax benefit generally not available to most taxpayers. The credit is usually limited to off-highway business use, including use in farming. Taxpayers should also avoid misuse of the research credit. Improper claims often involve failures to participate in or substantiate qualified research activities or satisfy the requirements related to qualified research expenses. (IR-2019-42)

Offshore Tax Avoidance: Successful enforcement actions against offshore cheating show it’s a bad bet to hide money and income offshore. People involved in offshore tax avoidance are best served by coming in voluntarily and getting caught up on their tax-filing responsibilities. (IR-2019-43)

Frivolous Tax Arguments: Frivolous tax arguments may be used to avoid paying tax. Promoters of frivolous schemes encourage taxpayers to make unreasonable and outlandish claims about the legality of paying taxes despite being repeatedly thrown out in court. The penalty for filing a frivolous tax return is $5,000. (IR-2019-45)

Abusive Tax Shelters: Abusive tax structures including trusts and syndicated conservation easements are sometimes used to avoid paying taxes. The IRS is committed to stopping complex tax avoidance schemes and the people who create and sell them. The vast majority of taxpayers pay their fair share, and everyone should be on the lookout for people peddling tax shelters that sound too good to be true. When in doubt, taxpayers should seek an independent opinion regarding complex products they are offered. (IR-2019-47)


March 19, 2019

IRS 2019 Dirty Dozen #7, #8, #9

  • IRS’ 2019 "Dirty Dozen" tax scams list highlights inflating deductions, credits – See IR-2019-36
  • IRS cautions taxpayers on scams involving disasters, charitable causes — 2019 "Dirty Dozen" list continues – See IR-2019-39
  • Avoid improper claims for business credits; topic makes this year’s IRS ‘Dirty Dozen’ list – See IR-2019-42

March 19, 2019
IRS warns of new phone scam using Taxpayer Advocate Service numbers

IRS YouTube Videos:

Tax Scams – English | Spanish | ASL
Dirty Dozen – English | Spanish | ASL 

IR-2019-44

WASHINGTON — The Internal Revenue Service today warned the public about a new twist on the IRS impersonation phone scam whereby criminals fake calls from the Taxpayer Advocate Service (TAS), an independent organization within the IRS. 

Similar to other IRS impersonation scams, thieves make unsolicited phone calls to their intended victims fraudulently claiming to be from the IRS. In this most recent scam variation, callers “spoof” the telephone number of the IRS Taxpayer Advocate Service office in Houston or Brooklyn. Calls may be ‘robo-calls’ that request a call back. Once the taxpayer returns the call, the con artist requests personal information, including Social Security number or individual taxpayer identification number (ITIN).

TAS can help protect your taxpayer rights. TAS can help if you need assistance resolving an IRS problem, if your problem is causing financial difficulty, or if you believe an IRS system or procedure isn’t working as it should. TAS does not initiate calls to taxpayers “out of the blue.” Typically, a taxpayer would contact TAS for help first, and only then would TAS reach out to the taxpayer. 

In other variations of the IRS impersonation phone scam, fraudsters demand immediate payment of taxes by a prepaid debit card or wire transfer. The callers are often hostile and abusive. 

Alternately, scammers may tell would-be victims that they are entitled to a large refund but must first provide personal information. Other characteristics of these scams include:

  • Scammers use fake names and IRS badge numbers to identify themselves.
  • Scammers may know the last four digits of the taxpayer’s Social Security number.
  • Scammers spoof caller ID to make the phone number appear as if the IRS or another local law enforcement agency is calling.
  • Scammers may send bogus IRS emails to victims to support their bogus calls.
  • Victims hear background noise of other calls to mimic a call site.
  • After threatening victims with jail time or with, driver’s license or other professional license revocation, scammers hang up. Others soon call back pretending to be from local law enforcement agencies or the Department of Motor Vehicles, and caller ID again supports their claim.

Here are some things the scammers often do, but the IRS will not do. Taxpayers should remember that any one of these is a tell-tale sign of a scam.

The IRS will never:

  • Call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer. Generally, the IRS will first mail a bill to any taxpayer who owes taxes.
  • Threaten to immediately bring in local police or other law-enforcement groups to have the taxpayer arrested for not paying.
  • Demand that taxes be paid without giving taxpayers the opportunity to question or appeal the amount owed.
  • Ask for credit or debit card numbers over the phone.
  • Call about an unexpected refund. 

For taxpayers who don’t owe taxes or don’t think they do:

  • Please report IRS or Treasury-related fraudulent calls to [email protected] (Subject: IRS Phone Scam).
  • Do not give out any information. Hang up immediately. The longer the con artist is engaged; the more opportunity he/she believes exists, potentially prompting more calls.
  • Contact TIGTA to report the call. Use their IRS Impersonation Scam Reporting web page. Alternatively, call 800-366-4484.
  • Report it to the Federal Trade Commission. Use the “FTC Complaint Assistant” on FTC.gov. Please add "IRS Telephone Scam" in the notes.

For those who owe taxes or think they do:

  • Call the IRS at 800-829-1040. IRS workers can help.
  • View tax account online. Taxpayers can see their past 24 months of payment history, payoff amount and balance of each tax year owed.

Stay alert to scams that use the IRS or other legitimate companies and agencies as a lure. Tax scams can happen any time of year, not just at tax time. For more information visit Tax Scams and Consumer Alerts on IRS.gov.


March 12, 2019
The Dirty Dozen represents the worst of the worst tax scams.

WASHINGTON — Kicking off the annual “Dirty Dozen” list of tax scams, the Internal Revenue Service today warned taxpayers of the ongoing threat of internet phishing scams that lead to tax-related fraud and identity theft.

The IRS warns taxpayers, businesses and tax professionals to be alert for a continuing surge of fake emails, text messages, websites and social media attempts to steal personal information. These attacks tend to increase during tax season and remain a major danger of identity theft.

To help protect taxpayers against these and other threats, the IRS highlights one scam on 12 consecutive week days to help raise awareness. Phishing schemes are the first of the 2019 “Dirty Dozen” scams.

“Taxpayers should be on constant guard for these phishing schemes, which can be tricky and cleverly disguised to look like it’s the IRS,” said IRS Commissioner Chuck Rettig. “Watch out for emails and other scams posing as the IRS, promising a big refund or personally threatening people. Don’t open attachments and click on links in emails. Don’t fall victim to phishing or other common scams.”

The IRS also urges taxpayers to learn how to protect themselves by reviewing safety tips prepared by the Security Summit, a collaborative effort between the IRS, state revenue departments and the private-sector tax community.

“Taking some basic security steps and being cautious can help protect people and their sensitive tax and financial data,” Rettig said.

New variations on phishing schemes

The IRS continues to see a steady stream of new and evolving phishing schemes as criminals work to victimize taxpayers throughout the year. Whether through legitimate-looking emails with fake, but convincing website landing pages, or social media approaches, perhaps using a shortened URL, the end goal is the same for these con artists: stealing personal information.

In one variation, taxpayers are victimized by a creative scheme that involves their own bank account. After stealing personal data and filing fraudulent tax returns, criminals use taxpayers' bank accounts to direct deposit tax refunds. Thieves then use various tactics to reclaim the refund from the taxpayer, including falsely claiming to be from a collection agency or the IRS. The IRS encourages taxpayers to review some basic tips if they see an unexpected deposit in their bank account.

Schemes aimed at tax pros, payroll offices, human resources personnel

The IRS has also seen more advanced phishing schemes targeting the personal or financial information available in the files of tax professionals, payroll professionals, human resources personnel, schools and organizations such as Form W-2 information. These targeted scams are known as business email compromise (BEC) or business email spoofing (BES) scams.

Depending on the variation of the scam (and there are several), criminals will pose as:

  • a business asking the recipient to pay a fake invoice
  • as an employee seeking to re-route a direct deposit
  • or as someone the taxpayer trusts or recognizes, such as an executive, to initiate a wire transfer.

The IRS warned of the direct deposit variation of the BEC/BES scam in December 2018, and continues to receive reports of direct deposit scams reported to [email protected]. The Direct Deposit and other BEC/BES variations should be forwarded to the Internet Crime Complaint Center (IC3). The IRS requests that Form W-2 scams be reported to:[email protected] (Subject: W-2 Scam). 

Criminals may use the email credentials from a successful phishing attack, known as an email account compromise, to send phishing emails to the victim’s email contacts. Tax preparers should be wary of unsolicited email from personal or business contacts especially the more commonly observed scams, like new client solicitations.

Malicious emails and websites can infect a taxpayer’s computer with malware without the user knowing it. The malware downloads in the background, giving the criminal access to the device, enabling them to access any sensitive files or even track keyboard strokes, exposing login victim’s information.

For those participating in these schemes, such activity can lead to significant penalties and possible criminal prosecution. Both the Treasury Inspector General for Tax Administration (TIGTA), which handles scams involving IRS impersonation, and the IRS Criminal Investigation Division work closely with the Department of Justice to shut down scams and prosecute the criminals behind them.

Tax professional alert

Numerous data breaches across the country mean the tax preparation community must be on high alert to unusual activity, particularly during the tax filing season. Criminals increasingly target tax professionals, deploying various types of phishing emails in an attempt to access client data. Thieves may use this data to impersonate taxpayers and file fraudulent tax returns for refunds.

As part of the Security Summit initiative, the IRS has joined with representatives of the software industry, tax preparation firms, payroll and tax financial product processors and state tax administrators to combat identity theft refund fraud to protect the nation's taxpayers.

The Security Summit partners encourage tax practitioners to be wary of communicating solely by email with potential or existing clients, especially if unusual requests are made. Data breach thefts have given thieves millions of identity data points including names, addresses, Social Security numbers and email addresses. If in doubt, tax practitioners should call to confirm a client’s identity.

Reporting phishing attempts

If a taxpayer receives an unsolicited email or social media attempt that appears to be from either the IRS or an organization closely linked to the IRS, such as the Electronic Federal Tax Payment System (EFTPS), they should report it by sending it to [email protected]. Learn more by going to the Report Phishing and Online Scams page on IRS.gov.

Tax professionals who receive unsolicited and suspicious emails that appear to be from the IRS and/or are tax-related (like those related to the e-Services program) also should report it to: [email protected].

The IRS generally does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels

Compiled annually, the “Dirty Dozen” lists a variety of common scams that taxpayers may encounter anytime but many of these schemes peak during filing season as people prepare their returns or hire someone to help with their taxes. Don’t fall prey.

For a detailed description of each scam, please refer to the list below:

  • IRS’ 2019 "Dirty Dozen" tax scams list highlights inflating deductions, credits – See IR-2019-36
  • Schemes involving falsifying income, creating bogus documents make IRS’ "Dirty Dozen" list for 2019 – See IR-2019-35
  • IRS: Be on the lookout for promises of inflated tax refunds — 2019 IRS "Dirty Dozen" list continues – See IR-2019-33
  • IRS: Choose tax preparers carefully; Tax return preparer fraud makes IRS’ 2019 "Dirty Dozen" list of tax scams – See IR-2019-32
  • Identity theft remains on IRS’ "Dirty Dozen" list despite progress – See IR-2019-30
  • IRS: Be vigilant against phone scams; Annual "Dirty Dozen" list continues –  See IR-2019-28
  • IRS kicks off annual list of most prevalent tax scams: Agency warns taxpayers of  pervasive phishing schemes in its "Dirty Dozen" campaign –  See IR-2019-26

February 28, 2019
IRS waives estimated tax penalty for farmers, fishermen who file returns and pay tax by April 15

IR-2019-28

WASHINGTON — The Internal Revenue Service will waive the estimated tax penalty for any qualifying farmer or fisherman who files his or her 2018 federal income tax return and pays any tax due by Monday, April 15, 2019. The deadline is Wednesday, April 17, 2019, for taxpayers residing in Maine or Massachusetts. 

The IRS is providing this relief because, due to certain rule changes, many farmers and fishermen may have difficulty accurately determining their tax liability by the March 1 deadline that usually applies to them. For tax year 2018, an individual who received at least two-thirds of his or her total gross income from farming or fishing during either 2017 or 2018 qualifies as a farmer or fisherman.

To be eligible for the waiver, qualifying taxpayers must attach Form 2210-F, available on IRS.gov, to their 2018 income tax return. This form can be submitted either electronically or on paper. The taxpayer’s name and identifying number, usually a Social Security number, must be entered at the top of the form. The waiver box—Part I, Box A—should be checked. The rest of the form should be left blank. 

Click here for Notice 2019-17, which announces a waiver of the addition to tax under section 6654 for underpayment of estimated income tax by qualifying farmers and fishermen for the 2018 tax year.  This addition to tax is waived for any qualifying farmer or fisherman who, by the normal deadline for filing the 2018 federal income tax return (April 15, 2019 for most taxpayers), files his or her 2018 federal income tax return, attaches a specified waiver form to the return, and pays in full any tax reported on the return as payable.

Further details can be found in Notice 2019-17, posted today on IRS.gov


February 26, 2019 - Publication 1/2

Tax Time Guide: Most people affected by major tax reform changes; Special publication, other online resources can help     

IRS YouTube Videos:

Message to Taxpayers -- English
Mortgage Interest Deduction -- English | Spanish
Itemized Deductions Changes – English 

IR-2019-22

WASHINGTON –– With major tax law changes impacting every taxpayer, the Internal Revenue Service has developed a special electronic publication and other online resources designed to help people understand how tax reform affects them this year and the years ahead.

This news release is part of a series called the Tax Time Guide, a resource to help taxpayers file an accurate tax return. Additional help is available in Publication 17, Your Federal Income Tax, and the tax reform information page.

Last fall, the IRS released an online publication, called Tax Reform: Basics for Individuals and Families. Available at IRS.gov/getready, Publication 5307  provides an overview of these and other key changes affecting tax returns:

  • Tax rates lowered. Starting in 2018, there are seven income tax brackets, ranging from 10 percent to 37 percent.
  • Standard deduction nearly doubled over last year. For 2018, the basic standard deduction is $12,000 for singles, $18,000 for heads of household and $24,000 for married couples filing a joint tax return. Higher amounts apply to people who are blind or filers who are at least age 65. The increased standard deduction, coupled with other changes, mean that more than half of those who itemized their deductions – for mortgage interest, charitable contributions and state and local taxes – in tax year 2017 may instead take the higher standard deduction in 2018, according to IRS projections.
  • Various deductions limited or discontinued. For example, the state and local tax deduction is limited to $10,000, $5,000 if married and filing a separate return, and new limits apply to mortgage interest. In addition, the miscellaneous itemized deduction for job-related costs and certain other expenses is not available.
  • Child Tax Credit doubled, and more people now qualify. The maximum credit is now $2,000 for each qualifying child under age 17. In addition, the income limit for getting the full credit is $400,000 for joint filers and $200,000 for other taxpayers.
  • New credit for other dependents. A $500 credit is available for each dependent who does not qualify for the Child Tax Credit. This includes older children and qualifying relatives, such as a parent.
  • Personal and dependency exemptions suspended. This means that an exemption can no longer be claimed for a tax filer, spouse and dependents.

Another helpful resource is the newly-revised edition of Publication 17, Your Federal Income Tax, the agency’s comprehensive tax guide for individual taxpayers. Besides providing further details on each of these changes, this publication is also packed with tax-filing information and tips on a wide variety of topics, ranging from what income needs to be reported and how to report it, to claiming dependents and using IRAs to save for retirement.

Publications 17 and 5307 are just two of many helpful resources available at no charge on IRS.gov. Among other things, people can find answers to their tax questions and ways to resolve tax issues online. The Let Us Help You page helps answer most questions, and the IRS Services Guide links to these and other IRS services. The IRS TaxMap can also be used to find answers to tax questions. IRS.gov/TaxMap searches Publication 17 and all other publications, instructions, and web pages on IRS.gov for content on the searched topic.

Taxpayers can find answers to questions, forms and instructions and easy-to-use tools online at IRS.gov. They can use these resources to get help when it’s needed from the convenience of home or office.

More resources:

  • FS-2019-2; Be Tax Ready – understanding tax reform changes affecting individuals and families

February 26, 2019 - Publication 2/2
Be Tax Ready – understanding tax reform changes affecting individuals and families

FS-2019-2, February 2019

The Tax Cuts and Jobs Act (TCJA), enacted in late 2017, produced the most sweeping tax law change in more than 30 years. The TCJA, often referred to as tax reform, affects nearly every taxpayer — and the 2018 federal return they’ll file in 2019.

For taxpayers preparing to file their 2018 tax return or getting ready to meet with their tax professional, understanding the changes from the Tax Cuts and Jobs Act can help them “Be Tax Ready.” More information is available in IRS Publication 5307, Tax Reform Basics for Individuals and Families.

Federal income tax withholding changes

The Tax Cuts and Jobs Act changed the way taxable income is calculated and reduced the tax rates on that income. The IRS issued new 2018 withholding tables last year to reflect these changes. Since taxpayers need to pay most of their tax during the year, as income is earned or received, the tables show payroll service providers and employers how much tax to withhold from employee paychecks.

Most taxpayers probably started seeing withholding changes in their paychecks early in 2018. IRS encouraged taxpayers throughout 2018 to use the IRS Withholding Calculator to perform a Paycheck Checkup and adjust their tax withholding by filing Form W-4, Employee’s Withholding Allowance Certificate, with their employer if too much or too little tax was being withheld for the year. Taxpayers can also make estimated or additional tax payments to avoid an unexpected tax bill and possibly a penalty.

Taxpayers who pay too much tax during the year will claim a credit or refund for the overpayment while those who have too little tax, either through withholding or paid through estimated payments, may owe tax.

Taxpayers should review their tax withholding in 2019 and make any adjustments with their employer as early in the year as possible. This can help protect against having too little tax withheld and facing a lower refund or unexpected tax bill and even a penalty next year.

In addition to lowering the tax rates, other changes in the law that affect taxpayers and their families include suspending personal exemptions, increasing the standard deduction, increasing the child tax credit, and limiting or discontinuing certain deductions.

Deduction for personal exemptions suspended

For 2018, taxpayers can’t claim a personal exemption deduction for themselves, their spouse or dependents. This means that taxpayers will not be able to reduce income subject to tax by an exemption amount for each person included on their tax return as they have in previous years. However, changes to the standard deduction amount and child tax credit may offset at least part of this change for most families and, in some cases, may result in a larger refund.

Standard deduction nearly doubled

The standard deduction is a dollar amount that reduces the income on which a taxpayer is taxed. It varies by filing status. The Tax Cuts and Jobs Act nearly doubled standard deductions.

Starting in 2018, the standard deduction for each filing status is:

Single......................................................................$12,000........(up from $6,350 in 2017)

Married filing jointly. Qualifying widow(er).............$24,000........(up from $12,700 in 2017)

Married filing separately..........................................$12,000........(up from $6,350 in 2017)

Head of household..................................................$18,000........(up from $9,350 in 2017)

The amounts are higher for taxpayers who are blind or over age 65.

More than nine out of 10 taxpayers use tax software or a paid preparer to file their taxes. Generally, taxpayers answer a series of questions in an interview format and the software or preparer chooses the best option (standard deduction or itemized deductions) for them. The new tax law hasn’t changed this process and the IRS has worked extensively with software developers and tax preparers to ensure that they are prepared to help.

Itemized deductions modified or discontinued

Almost everyone who usually itemizes deductions filing Schedule A, Itemized Deductions, is affected by changes from the Tax Cuts and Jobs Act. Many individuals who itemized last year may now find it more beneficial to take the now higher standard deduction - and may have a simpler time filing their taxes.

Deduction for state and local income, sales and property taxes modified. A taxpayer’s deduction for state and local income, sales and property taxes is limited to a combined, total deduction of $10,000 ($5,000 if married filing separately). Anything above this amount is not deductible.

Deduction for home equity interest modified. Interest paid on most home equity loans is not deductible unless the interest is paid on loan proceeds used to buy, build or substantially improve a main home or second home. For example, interest on a home equity loan used to build an addition to an existing home is typically deductible, while interest on the same loan used to pay personal living expenses, such as credit card debts, is not.

Deduction for casualty and theft losses modified. A taxpayer’s net personal casualty and theft losses must now be attributable to a federally declared disaster to be deductible.

Miscellaneous itemized deductions suspended. Previously, when a taxpayer itemized, they could deduct the amount of their miscellaneous itemized deductions that exceeded 2 percent of their adjusted gross income. These expenses are no longer deductible. This includes unreimbursed employee expenses such as uniforms, union dues and the deduction for business-related meals, entertainment and travel. It also includes deductions for tax preparation fees and investment expenses.

See the 2018 Instructions for Schedule A, Itemized Deductions, and Publication 5307 for other itemized deduction changes not listed here.

Benefits for dependents expanded or changed

Child tax credit and additional child tax credit. More families with children under 17 now qualify for a larger child tax credit. For 2018, the maximum credit increased to $2,000 per qualifying child. Up to $1,400 of the credit can be refundable for each qualifying child as the additional child tax credit. In addition, the income threshold at which the child tax credit begins to phase out is increased to $200,000 ($400,000 if married filing jointly).

Beginning with tax year 2018, a child must have a Social Security number issued by the Social Security Administration before the due date of the tax return (including extensions) to be claimed as a qualifying child for the child tax credit or additional child tax credit. Children with an ITIN can’t be claimed for either credit.

Credit for other dependents. A new credit of up to $500 is available for qualifying dependents other than children who can be claimed for the child tax credit. This means that a taxpayer may be able to claim this credit for children age 17 or over, including college students, children with ITINs, or other older relatives in the household. The qualifying dependent must be a U.S. citizen, U.S. national, or U.S. resident alien. The credit is calculated with the child tax credit in the form instructions. The total of both credits is subject to a single phase-out when adjusted gross income exceeds $200,000 ($400,000 if married filing jointly).

See 2018 Publication 972, Child Tax Credit, for more information. 

Deduction and exclusion for moving expenses suspended

The deduction for moving expenses is suspended. During the suspension, no deduction is allowed for use of an automobile as part of a move. Also, employers will include moving expense reimbursements as taxable income in the employees’ wages because the new law suspends the former exclusion from income for qualified moving expense reimbursements from an employer. These changes do not apply to members of the U.S. Armed Forces on active duty.

Alternative minimum tax (AMT) exemption amount increased

The AMT exemption amount is increased to $70,300 ($109,400 if married filing jointly or qualifying widow(er); $54,700 if married filing separately). The income level at which the AMT exemption begins to phase out has increased to $500,000 ($1 million if married filing jointly). See the 2018 Instructions for Form 6251, Alternative Minimum Tax – Individuals for more information.

Reporting 2018 health care coverage

Taxpayers must continue to report coverage, qualify for an exemption, or report an individual shared responsibility payment for tax year 2018. Most taxpayers have qualifying health coverage or a coverage exemption for all 12 months in the year and will check the box on the front of their tax return. For tax year 2018, the IRS will not consider a return complete and accurate if a taxpayer does not report full-year coverage, claim a coverage exemption, or report a shared responsibility payment on the tax return. Taxpayers remain obligated to follow the law and pay what they may owe at the point of filing.

The shared responsibility payment is reduced to zero under the Tax Cuts and Jobs Act for tax year 2019 and all subsequent years. See IRS.gov/aca for more information.

Retirement plans

Recharacterization of a Roth conversion. Individuals can no longer recharacterize a conversion from a traditional IRA, SEP or SIMPLE to a Roth IRA. The new law also prohibits recharacterizing amounts rolled over to a Roth IRA from other retirement plans, such as 401(k) or 403(b) plans. A regular contribution made to a Roth IRA or to a traditional IRA is still treated as having been made to the other type of IRA. See IRA FAQS – Recharacterization of IRA Contributions and IRS.gov/taxreform for more information.

Plan loans to an employee that leaves employment. If a taxpayer terminates employment (or if the plan is terminated) with an outstanding plan loan, a plan sponsor may offset that person’s account balance with the outstanding balance of the loan. If a plan loan is offset, a taxpayer has until the due date, including extensions, to rollover the loan balance to an IRA or eligible retirement plan. See Retirement Plans FAQs regarding Loans and IRS.gov/taxreform for more information.

Disaster relief. Laws enacted in 2017 and 2018 make it easier for retirement plan participants to access their retirement plan funds to recover from disaster losses incurred in federally declared disaster areas in 2016, 2017 and 2018. See the Disaster Relief for Retirement Plans and IRAs page for more information.

529 plans and ABLE accounts

ABLE accounts and rollovers from a 529 plan. The TCJA increases the amount of contributions allowed to an ABLE account and adds special rules for the increased contribution limit. It also allows an ABLE account’s designated beneficiary to claim the Saver's Credit for contributions to the account. Rollovers in limited amounts are now allowed from a 529 qualified tuition program account of the designated beneficiary to the ABLE account of the designated beneficiary or his or her family member. For more information on ABLE accounts, see Publication 907, Tax Highlights for Persons with Disabilities.

529 plans and K-12 education. TCJA expands the type of education for which a taxpayer can use 529 plan funds. The new law allows distributions from 529 plans to be used to pay up to a total of $10,000 of tuition per beneficiary (regardless of the number of contributing plans) each year at an elementary or secondary (K-12) public, private or religious school of the beneficiary’s choosing. For more information, see Publication 970, Tax Benefits for Education.

Changes affecting small business taxpayers

Qualified business income deduction

Many owners of sole proprietorships, partnerships, trusts and S corporations may deduct 20 percent of their qualified business income. The new deduction -- referred to as the Section 199A deduction or the qualified business income deduction -- is available for tax years beginning after Dec. 31, 2017. Eligible taxpayers can claim it for the first time on the 2018 tax return they file in 2019. A set of FAQs provides more information on the deduction, income and other limitations.

Changes to depreciation and expensing for businesses

The Tax Cuts and Job Act changed some laws regarding depreciation and expensing that can affect a business’s tax situation. Businesses can immediately expense more under the new law. There is a temporary 100 percent expensing for certain business assets. There are also changes to depreciation limitations on luxury automobiles and personal use property. More details are in FS-2018-9, New rules and limitations for depreciation and expensing under the Tax Cuts and Jobs Act.

Publication 5318, Tax Reform: What’s New for Your Business, provides information about changes to deductions, depreciation, expensing, credits, fringe benefits and other items that may affect businesses.


 

February 25, 2019
IRS Resources for Taxpayers for the 2019 Filing Season, IRS Resources for Tax Professionals

Click here to view the IRS Resources for Taxpayers
Click here to view the IRS Resources for Tax Professionals


February 7, 2019
IRS: Don’t be victim to a ‘ghost’ tax return preparer

IR-2019-09

WASHINGTON – Today, towards the end of the second full week of the 2019 tax filing season, the Internal Revenue Service warned taxpayers to avoid unethical tax return preparers, known as ghost preparers.

By law, anyone who is paid to prepare or assist in preparing federal tax returns must have a valid 2019 Preparer Tax Identification Number, or PTIN. Paid preparers must sign the return and include their PTIN.

But ‘ghost’ preparers do not sign the return. Instead, they print the return and tell the taxpayer to sign and mail it to the IRS. Or, for e-filed returns, they prepare but refuse to digitally sign it as the paid preparer.          

According to the IRS, similar to other tax preparation schemes, dishonest and unscrupulous ghost tax return preparers look to make a fast buck by promising a big refund or charging fees based on a percentage of the refund. These scammers hurt honest taxpayers who are simply trying to do the right thing and file a legitimate tax return.

Ghost tax return preparers may also:

  • Require payment in cash only and not provide a receipt.
  • Invent income to erroneously qualify their clients for tax credits or claim fake deductions to boost their refunds.
  • Direct refunds into their own bank account rather than the taxpayer’s account. 

The IRS urges taxpayers to review their tax return carefully before signing and ask questions if something is not clear. And for any direct deposit refund, taxpayers should make sure both the routing and bank account number on the completed tax return are correct. 

The IRS offers tips to help taxpayers choose a tax return preparer wisely. The Choosing a Tax Professional page has information about tax preparer credentials and qualifications. The IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications can help identify many preparers by type of credential or qualification.

Taxpayers can report abusive tax preparers to the IRS. Use Form 14157, Complaint: Tax Return Preparer. If a taxpayer suspects a tax preparer filed or changed their tax return without their consent, they should file Form 14157-A, Tax Return Preparer Fraud or Misconduct Affidavit.


 

January 28, 2019
IRS kicks off 2019 tax-filing season as tax agency reopens;
 Use IRS.gov to avoid phone delays
View this message on the IRS website by click here.

IR-2019-07

WASHINGTON ― The Internal Revenue Service successfully opened the 2019 tax-filing season today as the agency started accepting and processing federal tax returns for tax year 2018. Despite the major tax law changes made by the Tax Cuts and Jobs Act, the IRS was able to open this year’s tax-filing season one day earlier than the 2018 tax-filing season.

More than 150 million individual tax returns for the 2018 tax year are expected to be filed, with the vast majority of those coming before the April tax deadline. Through mid-day Monday, the IRS had already received several million tax returns during the busy opening hours.

"I am extremely proud of the entire IRS workforce. The dedicated IRS employees have worked tirelessly to successfully implement the biggest tax law changes in 30 years and launch tax season for the nation," said IRS Commissioner Chuck Rettig. “Although we face various near- and longer-term challenges, our employees are committed to doing everything we can to help taxpayers and get refunds out quickly."

Following the government shutdown, the IRS is working to promptly resume normal operations.

“The IRS will be doing everything it can to have a smooth filing season,” Rettig said. “Taxpayers can minimize errors and speed refunds by using e-file and IRS Free File along with direct deposit.”

The IRS expects the first refunds to go out in the first week of February and many refunds to be paid by mid- to late February like previous years. The IRS reminds taxpayers to check “Where’s My Refund?" for updates. Demand on IRS phones during the early weeks of tax season is traditionally heavy, so taxpayers are encouraged to use IRS.gov to find answers before they call.

April deadline; help for taxpayers through e-file, Free File

The filing deadline to submit 2018 tax returns is Monday, April 15, 2019, for most taxpayers. Because of the Patriots’ Day holiday on April 15 in Maine and Massachusetts and the Emancipation Day holiday on April 16 in the District of Columbia, taxpayers who live in Maine or Massachusetts have until April 17 to file their returns.

With major changes made by the Tax Cuts and Jobs Act, the IRS encouraged taxpayers seeking more information on tax reform to consult two online resources: Publication 5307, Tax Reform: Basics for Individuals and Families, and Publication 5318; Tax Reform What’s New for Your Business. For other tips and resources, visit IRS.gov/taxreform or check out the Get Ready page on IRS.gov.

The IRS expects about 90 percent of returns to be filed electronically. Choosing e-file and direct deposit remains the fastest and safest way to file an accurate income tax return and receive a refund. 

The IRS Free File program, available at IRS.gov, gives eligible taxpayers a dozen options for filing and preparing their tax returns using brand-name products. IRS Free File is a partnership with commercial partners offering free brand-name software to about 100 million individuals and families with incomes of $66,000 or less. About 70 percent of the nation’s taxpayers are eligible for IRS Free File. People who earned more than $66,000 may use Free File Fillable Forms, the electronic version of IRS paper forms.

 Most refunds sent in less than 21 days; EITC/ACTC refunds starting Feb. 27

The IRS expects to issue more than nine out of 10 refunds in less than 21 days. However, it’s possible a tax return may require additional review and take longer. “Where’s My Refund?” has the most up to date information available about refunds. The tool is updated only once a day, so taxpayers don’t need to check more often.

The IRS also notes that refunds, by law, cannot be issued before Feb. 15 for tax returns that claim the Earned Income Tax Credit or the Additional Child Tax Credit. This applies to the entire refund — even the portion not associated with the EITC and ACTC. While the IRS will process the EITC and ACTC returns when received, these refunds cannot be issued before Feb. 15. Similar to last year, the IRS expects the earliest EITC/ACTC related refunds to actually be available in taxpayer bank accounts or on debit cards starting on Feb. 27, 2019, if they chose direct deposit and there are no other issues with the tax return.

“Where’s My Refund?” ‎on IRS.gov and the IRS2Go mobile app remain the best way to check the status of a refund. “Where’s My Refund?” will be updated with projected deposit dates for most early EITC and ACTC refund filers on Feb. 17, so those filers will not see a refund date on “Where's My Refund?” ‎or through their software packages until then. The IRS, tax preparers and tax software will not have additional information on refund dates, so these filers should not contact or call about refunds before the end of February.

This law was changed to give the IRS more time to detect and prevent fraud. Even with the EITC and ACTC refunds and the additional security safeguards, the IRS still expects to issue more than nine out of 10 refunds in less than 21 days. However, it’s possible a particular tax return may require additional review and a refund could take longer. Even so, taxpayers and tax return preparers should file when they’re ready. For those who usually file early in the year and are ready to file a complete and accurate return, there is no need to wait to file.

New Form 1040

Form 1040 has been redesigned for tax year 2018. The revised form consolidates Forms 1040, 1040A and 1040-EZ into one form that all individual taxpayers will use to file their 2018 federal income tax return.

The new form uses a “building block” approach that can be supplemented with additional schedules as needed. Taxpayers with straightforward tax situations will only need to file the Form 1040 with no additional schedules. People who use tax software will still follow the steps they’re familiar with from previous years. Since nearly 90 percent of taxpayers now use tax software, the IRS expects the change to Form 1040 and its schedules to be seamless for those who e-file.

Free tax help
Low- and moderate-income taxpayers can get help filing their tax returns for free. Tens of thousands of volunteers around the country can help people correctly complete their returns.

To get this help, taxpayers can visit one of the more than 12,000 community-based tax help sites that participate in the Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs. To find the nearest site, use the VITA/TCE Site Locator on IRS.gov or the IRS2Go mobile app.

Filing assistance
No matter who prepares a federal tax return, by signing the return, the taxpayer becomes legally responsible for the accuracy of all information included. IRS.gov offers a number of tips about selecting a preparer and information about national tax professional groups.

The IRS urges all taxpayers to make sure they have all their year-end statements in hand before filing. This includes Forms W-2 from employers and Forms 1099 from banks and other payers. Doing so will help avoid refund delays and the need to file an amended return.

Online tools
The IRS reminds taxpayers they have a variety of options to get help filing and preparing their tax returns on IRS.gov, the official IRS website. Taxpayers can find answers to their tax questions and resolve tax issues online. The Let Us Help You page helps answer most tax questions, and the IRS Services Guide links to these and other IRS services.

Taxpayers can go to IRS.gov/account to securely access information about their federal tax account. They can view the amount they owe, pay online or set up an online payment agreement; access their tax records online; review the past 18 months of payment history; and view key tax return information for the current year as filed. Visit IRS.gov/secureaccess to review the required identity authentication process.

The IRS urges taxpayers to take advantage of the many tools and other resources available on IRS.gov.

The IRS continues to work with state tax agencies and the private-sector tax industry to address tax-related identity theft and refund fraud. As part of the Security Summit effort, stronger protections for taxpayers and the nation’s tax system are in effect for the 2019 tax filing season.

The new measures attack tax-related identity theft from multiple sides. Many changes will be invisible to taxpayers but will help the IRS, states and the tax industry provide additional protections, and tighter security requirements will better protect tax software accounts and personal information.

Renew ITIN to avoid refund delays
Many Individual Taxpayer Identification Numbers (ITINs) expired on Dec. 31, 2018. This includes any ITIN not used on a tax return at least once in the past three years. Also, any ITIN with middle digits of 73, 74, 75, 76, 77, 81 and 82 (Example: 9NN-73-NNNN) is now expired. ITINs that have middle digits 70, 71, 72 or 80 expired Dec. 31, 2017, but taxpayers can still renew them. Affected taxpayers should act soon to avoid refund delays and possible loss of eligibility for some key tax benefits until the ITIN is renewed. An ITIN is used by anyone who has tax-filing or payment obligations under U.S. tax law but is not eligible for a Social Security number.

It can take up to 11 weeks to process a complete and accurate ITIN renewal application. For that reason, the IRS urges anyone with an expired ITIN needing to file a tax return this tax season to submit their ITIN renewal application soon.

Sign and validate electronically filed tax returns
All taxpayers should keep a copy of their tax return. Some taxpayers using a tax filing software product for the first time may need their adjusted gross income (AGI) amount from their prior-year tax return to verify their identity.

Taxpayers using the same tax software they used last year will not need to enter their prior year information to electronically sign their 2017 tax return. Taxpayers can learn more about how to verify their identity and electronically sign tax returns at Validating Your Electronically Filed Tax Return.

Marc J. Zine
Senior Stakehold Liaison - IRS
Tax Professional & Industry Organizations 
Phone 916-974-5281
Fax 877-477-8639
[email protected]
www.irs.gov/newsroom

Quick Links

Please click here for for the IRS Telephone Directory for California

Click here to download: IRS Tax Forum Fact Sheet: Identify Theft Information for Tax Professionals

Tax practitioners also can sign up for e-News for Tax Professionals or e-News for Payroll Professionals

Franchise Tax Board: February 2018 Newsletter


This Just In!
2018 Dirty Dozen

  1. Phishing Schemes Make IRS ‘Dirty Dozen’ List of Tax Scams for 2018; Individuals, Businesses, Tax Pros Urged to Remain Vigilant
    IR-2018-39, March 5, 2018 — Following continuing threats to taxpayers, the Internal Revenue Service today listed email “phishing” schemes as a top filing season concern and part of the annual listing of the “Dirty Dozen” tax scams for 2018.
  1. Phone Scams Pose Serious Threat; Remain on IRS ‘Dirty Dozen’ List of Tax Scams
    IR-2018-40, March 6, 2018 — The IRS reminded taxpayers to be careful with continuing aggressive phone scams as criminals pose as IRS agents in hopes of stealing money.
  1. Despite Major Progress, Identity Theft Still on IRS ‘Dirty Dozen’ Tax Scams List
    IR-2018-42, Mar. 7, 2018 — Even though reports of tax-related identity theft have declined markedly in recent years, the Internal Revenue Service warns that this practice is still widespread and remains serious enough to earn a spot on the agency’s annual “Dirty Dozen” list of tax scams.
  1. Tax Return Preparer Fraud Ranks on 2018 ‘Dirty Dozen’: Taxpayers Urged to Choose Reputable Tax Preparers
    IR-2018-45, March 8, 2018 — With more than half of the nation's taxpayers relying on someone else to prepare their tax return, the IRS reminded consumers to be on the lookout for unscrupulous tax preparers looking to make a fast buck from honest people seeking tax assistance.
  1. Fake charities make 2018 ‘Dirty Dozen’ list; taxpayers should be alert to scams involving disasters, worthwhile causes
    IR-2018-47, March 9, 2018 — The IRS today warned taxpayers against scam groups masquerading as charitable organizations, luring people to make donations to groups or causes that don't actually qualify for a tax deduction.
  1. Taxpayers alerted against falsely inflated refunds in ‘Dirty Dozen’ list; Seniors, many others at risk
  1. IRS ‘Dirty Dozen’ list of tax scams for 2018 contains warning to avoid improper claims for business credits
    IR-2018-49, March 13, 2018 — The IRS today warned that taxpayers should avoid making improper claims for business credits, a common scam used by unscrupulous tax preparers.
  1. Falsely padding deductions highlighted in IRS 2018 ‘Dirty Dozen’ tax scams
    IR-2018-54, March 14, 2018 — As part of the “Dirty Dozen” list of tax scams, the IRS today warned taxpayers to avoid falsely inflating deductions or expenses on tax returns.
  1. Falsified income, fake Forms 1099 part of IRS ‘Dirty Dozen’
    IR-2018-55, March 15, 2018  — As part of this year’s “Dirty Dozen” list of tax scams, the IRS warned taxpayers to be on the lookout for schemes that falsify income, including elaborate ruses involving bogus Forms 1099.
  1. IRS warns against frivolous tax arguments; Part of ‘Dirty Dozen’ scams list
    IR-2018-58, March 16, 2018 — The IRS today continued releasing the 2018 list of “Dirty Dozen” tax scams with a warning to taxpayers about using frivolous tax arguments to avoid paying taxes.
  1. IRS 2018 ‘Dirty Dozen’ tax scams: Abusive tax shelters make the list
    IR-2018-62, March 19, 2018 — The IRS today warned taxpayers to be wary of abusive tax shelters, which remain on the "Dirty Dozen” tax scams.
  1. “Offshore Avoidance” news release has not yet been posted to the IRS Newsroom at this time, but can be downloaded here.

Posted 2.23.2018

Three Popular Tax Benefits Retroactively Renewed for 2017; IRS Ready to Accept Returns Claiming These Benefits; e-file for Fastest Refunds

Posted 2.8.2018
Key IRS Identity Theft Indicators Continue Dramatic Decline in 2017; Security Summit Marks 2017 Progress Against Identify Theft ~ HOWEVER: