(2009 earnings)

* The IRS does not guarantee a specific date that a refund will be deposited into a taxpayer’s financial institution account or when it will be mailed.

Refund Inquiries

Taxpayers who e-filed their 2010 Taxes can get refund information 72 hours after the electronic return data is acknowledged as accepted by the IRS. To check the status of a refund click on Where’s my refund? Taxpayers without internet access can get refund information by calling 1-800-829-1954 or 1-800-829-4477.

The IRS will start accepting tax returns by e-file on that date. If there are any changes or delays we will keep you informed.

Check out the 2010 e-File Refund Cycle Chart for when you can expect your tax refunds.

Subscribe to keep up with any changes or delays.

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It’s also the deadline for special voluntary disclosures by taxpayers with assets in previously undisclosed offshore financial accounts.

In most cases, Oct. 15, 2009, is the last day taxpayers may timely file their 2008 federal tax returns. The IRS expects to receive as many as 10 million tax returns from taxpayers who used Form 4868 to request a six-month extension to file their returns. Some taxpayers, for example, may have requested a filing extension to claim the first-time homebuyer credit for a home purchase that closed after the April 15 deadline.

Some taxpayers can wait until after Oct. 15 to file. This includes those serving in Iraq, Afghanistan or other combat zone localities and people affected by recent natural disasters.

Oct. 15 is also the last day to take advantage of e-file.

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Qualifying taxpayers who buy a home this year before Dec. 1 can get up to $8,000, or $4,000 for married filing separately.

“For first-time homebuyers this year, this special feature can put money in their pockets right now rather than waiting another year to claim the tax credit,” said IRS Commissioner Doug Shulman. “This important change gives qualifying homebuyers cash they do not have to pay back.”

The IRS has posted a revised version of Form 5405, First-Time Homebuyer Credit, on IRS.gov. The revised form incorporates provisions from the American Recovery and Reinvestment Act of 2009. The instructions to the revised Form 5405 provide additional information on who can and cannot claim the credit, income limitations and repayment of the credit.

This year, qualifying taxpayers who buy a home before Dec. 1, 2009, can claim the credit on either their 2008 or 2009 tax returns. They do not have to repay the credit, provided the home remains their main home for 36 months after the purchase date. They can claim 10 percent of the purchase price up to $8,000, or $4,000 for married individuals filing separately.

The amount of the credit begins to phase out for taxpayers whose adjusted gross income is more than $75,000, or $150,000 for joint filers.

For purposes of the credit, you are considered to be a first-time homebuyer if you, and your spouse if you are married, did not own any other main home during the three-year period ending on the date of purchase.

The IRS also alerted taxpayers that the new law does not affect people who purchased a home after April 8, 2008, and on or before Dec. 31, 2008. For these taxpayers who are claiming the credit on their 2008 tax returns, the maximum credit remains 10 percent of the purchase price, up to $7,500, or $3,750 for married individuals filing separately. In addition, the credit for these 2008 purchases must be repaid in 15 equal installments over 15 years, beginning with the 2010 tax year.

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WASHINGTON — The Internal Revenue Service today announced an expedited process that will make it easier for financially distressed homeowners to avoid having a federal tax lien block refinancing of mortgages or the sale of a home.

If taxpayers are looking to refinance or sell a home and there is a federal tax lien filed, there are options. Taxpayers or their representatives, such as their lenders, may request that the IRS make a tax lien secondary to the lien by the lending institution that is refinancing or restructuring a loan. Taxpayers or their representatives may request that the IRS discharge its claim if the home is being sold for less than the amount of the mortgage lien under certain circumstances.

The process to request a discharge or a subordination of a tax lien takes approximately 30 days after the submission of the completed application, but the IRS will work to speed those requests in wake of the economic downturn.

“We don’t want the IRS to be a barrier to people saving or selling their homes. We want to raise awareness of these lien options and to speed our decision-making process so people can refinance their mortgages or sell their homes,” said Doug Shulman, IRS commissioner.

“We realize these are difficult times for many Americans,” Shulman said. “We will ensure we have the resources in place to resolve these issues quickly and homeowners can complete their transactions.”

Filing a Notice of Federal Tax Lien is a formal process by which the government makes a legal claim to property as security or payment for a tax debt. It serves as a public notice to other creditors that the government has a claim on the property.

In some cases, a federal tax lien can be made secondary to another lien, such as a lending institution’s, if the IRS determines that taking a secondary position ultimately will help with collection of the tax debt.  That process is called subordination. Taxpayers or their representatives may apply for a subordination of a federal tax lien if they are refinancing or restructuring their mortgage. Without lien subordination, taxpayers may be unable to borrow funds or reduce their payments. Lending institutions generally want their lien to have priority on the home being used as collateral.

To apply for a certificate of lien subordination, people must follow directions in Publication 784, How to Prepare an Application for a Certificate of Subordination of a Federal Tax Lien. Again, there is no form but there must be a typed letter of request and certain documentation. The request should be mailed to one of 40 Collection Advisory Groups nationwide. See Publication 4235, Collection Advisory Group Addresses, for address information.

Taxpayers or their representatives may apply for a certificate of discharge of a tax lien if they are giving up ownership of the property, such as selling the property, at an amount less than the mortgage lien if the mortgage lien is senior to the tax lien. The IRS may also issue a certificate of discharge in other circumstances if the taxpayer has sufficient equity in other assets, can substitute other assets, or is able to pay the IRS its equity in the property. Without a tax lien discharge, the taxpayer may be unable to complete the home ownership change and the ownership title will remain clouded.

To apply for a tax lien discharge, applicants must follow directions in Publication 783, Instructions on How to Apply for a Certificate of Discharge of a Federal Tax Lien. There is no form but there must be a typed letter of request and certain documentation. The request should be mailed to one of 40 Collection Advisory Groups nationwide. See Publication 4235 for address information.

The IRS also urges people to contact the agency’s Collection Advisory Group early in the home sale or refinancing process so that it can begin work on their requests. People sometimes delay informing lenders of the tax liens, which only serves to delay the transaction.

Currently, there are more than 1 million federal tax liens outstanding tied to both real and personal property. The IRS issues more than 600,000 federal tax lien notices annually.

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“People across the country are missing tax refunds and stimulus checks. We want to get this money into the hands of taxpayers where it belongs,” said IRS Commissioner Doug Shulman. “We are committed to making the process as easy as possible for taxpayers to update their addresses with the IRS and get their checks.”

All a taxpayer has to do is update his or her address once. The IRS will then send out all checks due.

Stimulus Checks

It is crucial that taxpayers who may be due a stimulus check update their addresses with the IRS by Nov. 28, 2008. By law, economic stimulus checks must be sent out by Dec. 31 of this year. The undeliverable economic stimulus checks average $583.

The “Where’s My Stimulus Payment?” tool on this Web site is the quickest and easiest way for a taxpayer to check the status of a stimulus check and receive instructions on how to update his or her address. Taxpayers without internet access should call 1-866-234-2942.

Regular Refunds

The regular refund checks that were returned to the IRS average $988. These checks are resent as soon as taxpayers update their address.

Taxpayers can update their addresses with the “Where’s My Refund?” tool on this Web site. It enables taxpayers to check the status of their refunds. A taxpayer must submit his or her social security number, filing status and amount of refund shown on their 2007 return. The tool will provide the status of their refund and in some cases provide instructions on how to resolve delivery problems.

Taxpayers checking on a refund over the phone will be given instructions on how to update their addresses. Taxpayers can access a telephone version of “Where’s My Refund?” by calling 1-800-829-1954.

Unsure?

Taxpayers not sure of which type of check they may be due should check on a potential economic stimulus check first because of the looming deadline. See instructions above.

For Most People

The vast majority of checks mailed out by the IRS reach their rightful owner every year. Only a very small percent are returned by the U.S. Postal Service as undeliverable.

Through September 2008, the government distributed 116 million economic stimulus payments with only about 279,000 checks being undeliverable. Meanwhile, the IRS has distributed more than 105 million regular refunds this year with only about 104,000 being undeliverable. In both cases, well under one percent of refunds or stimulus checks were undeliverable.

Avoiding Future Problems

The IRS encourages taxpayers to choose direct deposit when they file their return because it puts an end to lost, stolen or undeliverable checks. Taxpayers can receive refunds directly into personal checking or savings accounts. Direct deposit is available for filers of both paper and electronic returns.

The IRS also encourages taxpayers to file their tax returns electronically because e-file eliminates the risk of lost paper returns. E-file also reduces errors and speeds up refunds.

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Notice 2008-95 provides guidelines to homeowners who received these grants, including the Louisiana Road Home Grants and the Mississippi Development Authority Hurricane Katrina Homeowner Grants.

The Housing and Economic Recovery Act, enacted this summer, included the new provision, aimed at helping grant recipients who previously claimed hurricane-related disaster-loss deductions on their main home. The new law gives affected homeowners the option of adjusting previously claimed deductions by treating their federal reimbursement grants as reimbursement for the losses they suffered on their main home from Hurricanes Katrina, Rita or Wilma.

Before this change, homeowners who claimed casualty loss deductions and received grants in a later tax year as reimbursement for the loss were required by law to pay tax on part or all of the grant to compensate for the tax benefit of the prior deduction. While individual circumstances varied, this meant that some taxpayers ended up paying more tax on the grant than they saved by claiming the deduction.

The notice explains how eligible taxpayers can amend prior-year returns to reduce the casualty loss deduction by the amount of the grant, and explains that taxpayers have one year to pay back any resulting tax due, penalty-free and interest-free. To qualify for this relief, these amended returns must be filed by July 30, 2009, and the entire resulting tax due paid by July 30, 2010, in most cases. The notice also provides special instructions for those taxpayers who have already filed an amended return.

Taxpayers should write the words, “Hurricane Grant Relief” in dark, bold letters at the top of their amended return, Form 1040X, and mail it to: Internal Revenue Service Center, Austin, TX 73301-0255. Amended returns cannot be filed electronically.

The IRS cautioned that, although filing an amended return may be a good option for many, it won’t necessarily be the right choice for everyone. The agency urges affected taxpayers and their representatives to consider carefully which option is best under their particular circumstances.

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On Saturday, Sept. 13, the federal government declared the following: Louisiana parishes a presidential disaster area qualifying for individual assistance: Acadia, Beauregard, Calcasieu, Cameron, Iberia , Jefferson, Jefferson Davis, Lafourche, Plaquemines, Sabine, St. Mary, Terrebonne, Vermilion and Vernon.

Texas taxpayers who were adversely affected by Hurricane Ikequalify for tax relief from the Internal Revenue Service, including the postponement of tax filing and payment deadlines until Jan. 5, 2009.

Following the hurricane’s landfall on Saturday, Sept. 13, the federal government declared the following Texas counties a presidential disaster area qualifying for individual assistance: Angelina, Austin, Brazoria, Chambers, Cherokee, Fort Bend, Galveston, Grimes, Hardin, Harris, Houston, Jasper, Jefferson, Liberty, Madison, Matagorda, Montgomery, Nacogdoches, Newton, Orange, Polk, Sabine, San Augustine, San Jacinto, Trinity, Tyler, Walker, Waller and Washington.

“We are giving taxpayers in these hard-hit areas until early next year to file their returns and make payments,” IRS Commissioner Doug Shulman said. “All Americans have concerns for those affected by this devastating hurricane, and our hope is that this extra time will allow people to stay focused on the rebuilding and clean-up effort.”

Specifically, the relief postpones until Jan. 5, 2009, certain deadlines for taxpayers who reside or have a business in the disaster area. The postponement applies to return filing, tax payment and certain other time-sensitive acts due on or after Sept. 11, 2008, and before Jan. 5, 2009 –– including individual estimated tax returns and corporate tax returns that were due Sept. 15, and extended individual returns due Oct. 15.

In addition, the IRS will waive the failure to deposit penalties for employment and excise deposits due on or after Sept. 11 and before Sept. 26, 2008, as long as the deposits are made on or before Sept. 26. This includes failure to deposit penalties on employment and excise tax deposits that were waived under previous relief for Hurricane Gustav.

The relief extends an initial seven-day postponement of tax filing and payment deadlines for Ike victims that was announced Sept. 12.

IRS computer systems automatically identify taxpayers located in the covered disaster area and apply automatic filing and payment relief. Affected taxpayers who reside or have a business located outside the covered disaster area must call the IRS disaster hotline at 1-866-562-5227 to request tax relief.

If an affected taxpayer receives a penalty notice from the IRS, the taxpayer should call the telephone number on the notice to have the IRS abate any interest and any late filing or late payment penalties that would otherwise apply. Penalties or interest will be abated only for taxpayers who have an original or extended filing, payment or deposit due date, including an extended filing or payment due date, from Sept. 11, 2008, to Jan. 5, 2009.

Covered Disaster Area

The parishes listed above constitute a covered disaster area for purposes of Treas. Reg. § 301.7508A-1(d)(2) and are entitled to the relief detailed below.

Affected Taxpayers

Taxpayers considered to be affected taxpayers eligible for the postponement of time to file returns, pay taxes and perform other time-sensitive acts are listed in Treas. Reg. § 301.7508A-1(d)(1), and include individuals who live, and businesses whose principal place of business is located, in the covered disaster area. Taxpayers not in the covered disaster area –– but whose books, records, or tax professionals’ offices are in the covered disaster area –– are also entitled to relief. In addition, all relief workers affiliated with a recognized government or charitable organization assisting in the relief activities in the covered disaster area are eligible.

Grant of Relief

Under section 7508A, the IRS gives affected taxpayers until Jan. 5,2009, to file most tax returns (including individual, corporate, and estate and trust income tax returns; partnership and S corporation returns; estate, gift, and generation-skipping transfer tax returns; and employment and certain excise tax returns) or to make tax payments, including estimated tax payments, that have either an original or extended due date occurring on or after Sept. 11, 2008, and before Jan. 5, 2009.

The IRS also gives affected taxpayers until Jan. 5, 2009, to perform other time-sensitive actions described in Treas. Reg. § 301.7508A-1(c)(1) and Rev. Proc. 2007-56, 2007-34 I.R.B. 388 (August 20, 2007) that are due on or after Sept. 11,2008, and before Jan. 5, 2009. This includes the filing of Form 5500 series returns, in the manner described in section 8 of Rev. Proc. 2007-56. The relief described in section 17 of Rev. Proc. 2007-56, pertaining to like-kind exchanges of property, also applies to certain taxpayers who are not otherwise affected taxpayers and may include acts required to be performed before or after the period above.

The postponement of time to file and pay does not apply to information returns in the Form W-2, 1098, 1099 series, or to Forms 1042-S or 8027. Penalties for failure to file timely information returns can be waived under existing procedures for reasonable cause. Likewise, the postponement does not apply to employment and excise tax deposits. The IRS, however, will abate penalties for failure to make timely employment and excise deposits, due on or after Sept. 11, 2008, and before Sept. 26, 2008, provided the taxpayer makes these deposits on or before Sept. 26, 2008.

Casualty Losses

Affected taxpayers in a presidentially declared disaster area have the option of claiming disaster-related casualty losses on their federal income tax return for either this year or last year. Claiming the loss on an original or amended return for last year will get the taxpayer an earlier refund, but waiting to claim the loss on this year’s return could result in a greater tax saving, depending on other income factors.

Individuals may deduct personal property losses that are not covered by insurance or other reimbursements, but they must first subtract $100 for each casualty event and then subtract 10 percent of their adjusted gross income from their total casualty losses for the year. For details on figuring a casualty loss deduction, see IRS Publication 547, Casualties, Disasters and Thefts.

Affected taxpayers claiming the disaster loss on last year’s return should put the Disaster Designation “Texas/Hurricane Ike” at the top of the form so that the IRS can expedite the processing of the refund.

Other Relief

The IRS will waive the usual fees and expedite requests for copies of previously filed tax returns for affected taxpayers. Taxpayers should put the assigned Disaster Designation in red ink at the top of Form 4506, Request for Copy of Tax Return, or Form 4506-T, Request for Transcript of Tax Return, as appropriate, and submit it to the IRS.

Affected taxpayers who are contacted by the IRS on a collection or examination matter should explain how the disaster affects them so that the IRS can provide appropriate consideration to their case.

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WASHINGTON — First-time homebuyers should begin planning now to take
advantage of a new tax credit included in the recently enacted Housing and
Economic Recovery Act of 2008.

Available for a limited time only, the credit:

• Applies to home purchases after April 8, 2008, and before July 1, 2009.
• Reduces a taxpayer’s tax bill or increases his or her refund, dollar for
  dollar.
• Is fully refundable, meaning that the credit will be paid out to eligible
  taxpayers, even if they owe no tax or the credit is more than the tax that
  they owe.

However, the credit operates much like an interest-free loan, because it must
be repaid over a 15-year period. So, for example, an eligible taxpayer who buys
a home today and properly claims the maximum available credit of $7,500 on his
or her 2008 federal income tax return must begin repaying the credit by
including one-fifteenth of this amount, or $500, as an additional tax on his or
her 2010 return.

Eligible taxpayers will claim the credit on new IRS Form 5405. This form,
along with further instructions on claiming the first-time homebuyer credit,
will be included in 2008 tax forms and instructions and be available later this
year on IRS.gov, the IRS Web site.

If you bought a home recently, or are considering buying one, the following
questions and answers may help you determine whether you qualify for the credit.

Q. Which home purchases qualify for the first-time homebuyer
credit?

A. Only the purchase of a main home located in the United States qualifies
and only for a limited time. Vacation homes and rental property are not
eligible. You must buy the home after April 8, 2008, and before July 1, 2009.
For a home that you construct, the purchase date is the first date you occupy
the home.

Taxpayers who owned a main home at any time during the three years prior to
the date of purchase are not eligible for the credit. This means that first-time
homebuyers and those who have not owned a home in the three years prior to a
purchase can qualify for the credit.

If you make an eligible purchase in 2008, you claim the first-time homebuyer
credit on your 2008 tax return. For an eligible purchase in 2009, you can choose
to claim the credit on either your 2008 (or amended 2008 return) or 2009 return.

Q. How much is the credit?

A. The credit is 10 percent of the purchase price of the home, with a maximum
available credit of $7,500 for either a single taxpayer or a married couple
filing jointly. The limit is $3,750 for a married person filing a separate
return. In most cases, the full credit will be available for homes costing
$75,000 or more. Whatever the size of the credit a taxpayer receives, the credit
must be repaid over a 15-year period.

Q. Are there income limits?

A. Yes. The credit is reduced or eliminated for higher-income taxpayers.

The credit is phased out based on your modified adjusted gross income (MAGI).
MAGI is your adjusted gross income plus various amounts excluded from income—for
example, certain foreign income. For a married couple filing a joint return, the
phase-out range is $150,000 to $170,000. For other taxpayers, the phase-out
range is $75,000 to $95,000.

This means the full credit is available for married couples filing a joint
return whose MAGI is $150,000 or less and for other taxpayers whose MAGI is
$75,000 or less.

Q. Who cannot take the credit?

A. If any of the following describe you, you cannot take the credit, even if
you buy a main home:

• Your income exceeds the phase-out range. This means joint filers with MAGI
  of $170,000 and above and other taxpayers with MAGI of $95,000 and above.
• You buy your home from a close relative. This includes your spouse,
  parent, grandparent, child or grandchild.
• You stop using your home as your main home.
• You sell your home before the end of the year.
• You are a nonresident alien.
• You are, or were, eligible to claim the District of Columbia first-time
  homebuyer credit for any taxable year.
• Your home financing comes from tax-exempt mortgage revenue bonds.
• You owned another main home at any time during the three years prior to
  the date of purchase. For example, if you bought a home on July 1, 2008, you
  cannot take the credit for that home if you owned, or had an ownership
  interest in, another main home at any time from July 2, 2005, through July 1,
  2008.

Q. How and when is the credit repaid?

A. The first-time homebuyer credit is similar to a 15-year interest-free
loan.  Normally, it is repaid in 15 equal annual installments beginning
with the second tax year after the year the credit is claimed. The repayment
amount is included as an additional tax on the taxpayer’s income tax return for
that year.  For example, if you properly claim a $7,500 first-time
homebuyer credit on your 2008 return, you will begin paying it back on your 2010
tax return. Normally, $500 will be due each year from 2010 to 2024.

You may need to adjust your withholding or make quarterly estimated tax
payments to ensure you are not under-withheld.

However, some exceptions apply to the repayment rule. They include:

• If you die, any remaining annual installments are not due. If you filed a
  joint return and then you die, your surviving spouse would be required to
  repay his or her half of the remaining repayment amount.
• If you stop using the home as your main home, all remaining annual
  installments become due on the return for the year that happens. This includes
  situations where the main home becomes a vacation home or is converted to
  business or rental property. There are special rules for involuntary
  conversions.  Taxpayers are urged to consult a professional to determine
  the tax consequences of an involuntary conversion.
• If you sell your home, all remaining annual installments become due on the
  return for the year of sale. The repayment is limited to the amount of gain on
  the sale, if the home is sold to an unrelated taxpayer. If there is no gain or
  if there is a loss on the sale, the remaining annual installments may be
  reduced or even eliminated. Taxpayers are urged to consult a professional to
  determine the tax consequences of a sale.
• If you transfer your home to your spouse, or, as part of a divorce
  settlement, to your former spouse, that person is responsible for making all
  subsequent installment payments.

WASHINGTON — Taxpayers and tax preparers affected in coming days by Hurricane Ike will have an extra seven days to file corporate tax returns and third-quarter estimated taxes otherwise due on Monday, Sept. 15, 2008, the Internal Revenue Service announced today.

Hurricane Ike is expected to make landfall on the Gulf Coast of Texas, not far from Houston, by early Saturday morning.

Because the storm is falling within one business day of the Sept. 15 due dates, taxpayers directly impacted by the storm will have until midnight Sept. 22 to meet their tax filing obligations without incurring late filing and payment penalties.

The IRS is likely to further postpone that deadline and make further tax relief available following damage assessments by the Federal Emergency Management Agency.

Affected taxpayers can mark paper tax returns with the words “Hurricane Ike.” Taxpayers who e-file their returns can use their software’s “disaster” feature, if available.

Taxpayers can keep up to date by visiting the IRS.gov Web site.

The packages will contain everything needed by a person who normally does not have a filing requirement but who must file this year in order to receive an economic stimulus payment. There will be instructions, an example Form 1040A return showing the few lines that need to be completed, and a blank Form 1040A. The packages will be mailed over a three-week period starting July 21.

“All it takes is a few simple steps, and the payment can be on its way. It’s not too late to file, but the sooner people file, the faster they’ll receive their money,” said Doug Shulman, IRS Commissioner.

The mailing is part of an IRS summer campaign to reach out to those people who have no requirement to file a tax return but who may be eligible for a stimulus payment of up to $300 ($600 for married filing jointly). For those eligible for a payment for themselves, there also is a $300 per child payment for eligible children younger than 17.

The IRS has accounted for about 75 percent of the approximately 20 million Social Security and Veterans Affairs beneficiaries identified as being potential stimulus recipients. All but 5.2 million of those have either filed a return, filed a joint return or were not eligible for a stimulus payment (for example, they were claimed as a dependent on another’s return).

To reach the remaining recipients, the IRS is working with national partners, members of Congress and state and local officials to ensure that assistance to eligible people is available.

The agency also reminded people that it has more than 400 local Taxpayer Assistance Centers operating normal business hours Monday through Friday. These centers can provide assistance to retirees and veterans trying to receive their payments. A list of addresses and office hours can be found at Contact My Local Office.

The Economic Stimulus Act of 2008 provided for payments of up to $600 ($1,200 for married filing jointly) for taxpayers who normally file a tax return and have a tax liability. It provided that stimulus recipients could receive another $300 for each eligible child younger than 17.

The Act also created a special category for people who had certain types of income but may not file a tax return because their income is too low or their income is nontaxable.

People in this category must have at least $3,000 in qualifying income to be eligible for the minimum amount of $300 ($600 married filing jointly). Qualifying income is the total of Social Security,

Veterans Affairs and/or Railroad Retirement benefits plus earned income, including nontaxable combat pay.

People receiving only Supplemental Security Income are not eligible. Eligible people must have a Social Security number (unless their spouse is a member of the military) and be neither a dependent nor eligible to be a dependent on another’s tax return.

Receiving the stimulus payment should have no impact on other federal benefits currently being received. The stimulus payment is not taxable. Absent any other filing requirements, filing a tax return to receive a stimulus payment does not mean that retirees and others will have to start filing tax returns again.

As of July 11, the IRS had issued 112.4 million payments totaling $91.8 billion. Payments are based on 2007 tax returns being filed this year. People must file by Oct. 15 in order to receive a payment in 2008. Those who do not file a tax return to obtain their stimulus payment this year may still receive their stimulus payments by filing a 2008 tax return next spring, but then their stimulus payment would be based on their 2008 qualifying income.

Refund e-Mail Scam
There are several variations of the refund scam, in which an e-mail claiming to come from the IRS falsely informs the recipient that he or she is eligible for a tax refund for a specific amount. The bogus e-mail instructs the recipient to click on a link to access a refund claim form. The form requests personal information that the scammers can use to access the e-mail recipient’s bank or credit card account.
This notification is phony. The IRS does not send unsolicited e-mail about tax account matters to taxpayers.
Filing a tax return is the only way to apply for a tax refund; there is no separate application form. Taxpayers who wish to find out if they are due a refund from their last annual tax return filing may use the “Where’s My Refund?” interactive application on the IRS Web site at IRS.gov, the only official IRS Web site.

Economic Stimulus Payments Scam
In this scam, a taxpayer receives an e-mail pretending to come from the IRS which tells the recipient he or she is eligible for an economic stimulus payment. The message recommends direct deposit into the taxpayer’s checking or savings account. To receive the payment, recipients must click on a link to complete and submit an online form by a certain date; otherwise, the e-mail warns, payment may be delayed. The form requests personal and financial data, including checking or savings account numbers that the scammers can use to gain access to the accounts.
In reality, the way members of the public receive their economic stimulus payment is to file a tax return with the IRS, not a special form. Additionally, the IRS does not request personal or financial information via e-mail.
Information on how to obtain an economic stimulus payment may be found in the Economic Stimulus Payment Information Center on the IRS Web site (www.irs.gov). For more information on stimulus-related scams, see IR-2008-11.

Substitute Form 1040 Fax Scam
This scam consists of a cover letter and form that are faxed, rather than e-mailed. The cover letter is addressed “Dear Valued Tax Payer (sic)” and appears to be signed by an IRS employee. The letter says that the IRS is updating its files and that recipients who supply the requested information will receive a nominal tax refund. It also states that those who fail to immediately return the completed form risk additional tax and withholding. The attached form is labeled a substitute Form 1040 and is titled “Certificate of Current Status of Beneficial Owner For United States Tax Recertification & Withholding.” It requests a large amount of detailed personal and financial information, such as mother’s maiden name (often used in security screening), bank account numbers, estimated assets and more. It asks the recipient to sign and fax back the completed form, as well as a copy of the recipient’s driver’s license and passport.
The letter, signature and form are all fraudulent. Moreover, the IRS does not send unsolicited faxes to taxpayers and does not request such detailed personal and financial information.

This is a variant of earlier scams. For more information, see news releases IR-2004-104 and IR-2004-75.

Company Report Scam
This e-mail appears to come from an IRS.gov e-mail address, addresses recipients by name and references the company the recipient works for. These personalized details may convince the recipient that the e-mail is legitimate. The e-mail says that the IRS has a report on the company and asks the recipient to review a copy by clicking on a link to download the report. However, when the link is clicked, malware is downloaded to the recipient’s computer.
There are various types of malware, which can hijack a victim’s computer hard drive to give someone remote access to the computer, search for passwords and other information and send them to the scammer, or cause other types of identity theft or damage.
The IRS does not compile reports on companies or send e-mails to company staff asking them to review a report. Generally, the IRS does not send unsolicited e-mails to taxpayers.

Tax Court Scam
In this scam, an e-mail that appears to come from the U.S. Tax Court contains a petition involving a court case between the IRS and the recipient. The document instructs the recipient to download other files. The downloads transfer malware, or malicious code, to the recipient’s computer.
There are various types of malware, which, for example, can hijack a victim’s computer hard drive to give someone remote access to the computer, or can search for passwords and other information and send them to the scammer.
The truth is that the Tax Court is not e-mailing notices to anyone who currently has a case before the court. Visit the court’s Web site at http://www.ustaxcourt.gov/ for more information. Recipients are advised to avoid clicking on any links in the e-mail and to delete the e-mail.

How Scams Work
To lure their victims, phishing scams use the name of a known institution, such as the IRS, to either offer a reward for taking a simple action, such as providing information, or threaten or imply an unpleasant consequence, such as losing a refund, for failing to take the requested action.

The goal of the scams is to trick people into revealing personal and financial information, such as Social Security, bank account or credit card numbers, which the scammers can use to commit identity theft.
Typically, identity thieves use a victim’s personal and financial data to empty the victim’s financial accounts, run up charges on the victim’s existing credit cards, apply for new loans, credit cards, services or benefits in the victim’s name, file fraudulent tax returns or even commit crimes. Most of these fraudulent activities can be committed electronically from a remote location, including overseas. Committing these activities in cyberspace allows scammers to act quickly and cover their tracks before the victim becomes aware of the theft.
People whose identities have been stolen can spend months or years — and their hard-earned money — cleaning up the mess thieves have made of their reputations and credit records. In the meantime, victims may lose job opportunities or may be refused loans, education, housing or cars.

What to Do
Anyone wishing to access the IRS Web site should type www.irs.gov into their Internet address window, rather than clicking on a link in an e-mail or opening an attachment, either of which may download malicious code or send the recipient to a phony Web site.

Those who have received a questionable e-mail claiming to come from the IRS may forward it to the following address: phishing@irs.gov. Use the instructions contained in an article on IRS.gov titled “How to Protect Yourself from Suspicious E-Mails or Phishing Schemes.”

Following the instructions will help the IRS track the suspicious e-mail to its origins and shut down the scam. Find the article by visiting IRS.gov and entering the words “suspicious e-mails” into the search box in the upper right corner of the front page.
Those who have received a questionable telephone call that claims to come from the IRS may also use the phishing@irs.gov mailbox to notify the IRS.
The IRS has issued previous warnings on scams that use the IRS name to lend the scam legitimacy. More information on identity theft, phishing and telephone scams using the IRS name, logo or spoofed (copied) Web site is available on the IRS Web site at IRS.gov. Enter the terms “phishing,” “identity theft” or “e-mail scams” into the search box in the upper right corner of the front page.

This glitch could effect millions who are expecting their tax rebate checks, to not receive them until possibly late July.

One of the main problems is tax payers who took out a RAL (refund anticipation loans) and also some tax payers who allowed their tax preparer to take the fees right from their refund.

When a person gets a RAL the bank sets up a temporary bank account for the tax payer. Then when the IRS approves the tax payer’s refund the bank sends the tax payer their money minus the RAL fees. When the bank receives the refund from the IRS they then move the money to their own account and close the temporary account.

Well, since the IRS is paying the Rebates via direct deposit (for those who used direct deposit of their refunds) the IRS sent the rebates to millions of closed bank accounts.

The IRS prior to April 15th made a few statements regarding who could and could not use direct deposit, but failed to provide details on the refund anticipation loan issue until May 7!

The glitch is due to a technical problem, according to major tax preparation firms and the major tax preparers say the government is to blame for taxpayers’ confusion.

“The IRS decided how people were going to get paid,” said Nancy Mays, an H&R Block spokesperson. “This is not in any way an H&R Block issue.”

At TurboTax.com, the software company noted the economic stimulus program became law Feb. 13 and the IRS only announced its rebate schedule in mid-March.

“My expectation is for folks who filed early, in late January or the mid-February time frame, they would not have known. We would not have known,” said Julie Miller, a spokesperson for Intuit Inc, the company that produces TurboTax.

Anyone who used TurboTax’s Refund Transfer service will have to wait for a paper check.

Other issues are that tax payers did not receive the right rebate amounts. Some are missing the $300 per child while others didn’t get the $1,200 for married couples.

Some of our customers here at FlieYourTaxesNow.com have reported that they have received their rebate checks OK, while others are still waiting.

Read more at the IRS Frequently Asked Questions. You can also call the Tax Rebate Hot Line number at 866-234-2942, be prepared to wait on the line for a long time.

Faced with a deluge of phone calls, the IRS is urging taxpayers to go to its Web site, www.irs.gov, for more information. ”We encourage people to be as patient as they can,” Lemons says. “Calling on the phone won’t help people get their payments any quicker.”

Do not be alarmed if you did not get your rebate today, the IRS will be sending them out in batches. Refer to the chart here (scroll down – sorry theme problems) to see the expected date of your tax rebate based on the last two digits of your SSN.

“Starting Monday, the effects of the stimulus will begin to reach millions of households across our country,” Bush said Friday in remarks on the South Lawn of the White House.

My Poll on this website shows that most people will be using their rebates to pay bills and the AP reports that most of your tax rebates will go toward gas prices since the price is expected to hit $4 a gallon soon. Ouch!!

The extension gives taxpayers until Oct. 15 to file the tax return. An extension does not give the taxpayer an extension of time to pay. Those who owe taxes can make a payment when they file the extension either by mailing a check or by several electronic payment methods, such as electronic funds withdrawals from bank accounts and credit card payments.

Some taxpayers can wait until after April 15 to file a return, pay any taxes due and make IRA contributions for 2007. As a general rule, those eligible get the extra time without having to ask for it. Eligible taxpayers include:

Members of the military serving in Iraq, Afghanistan or other combat zone localities. Normally, the postponement is until 180 days after the service member leaves the combat zone.

Disaster-area taxpayers in four states affected by recent floods, storms and tornadoes. The postponement is until May 6 in parts of Illinois, May 19 in parts of Georgia and parts of Missouri and May 27 in parts of Arkansas.

IRS expects to receive 10.3 million extension requests during 2008 compared with 10 million extensions received during 2007. The IRS expects to receive almost 2 million extension requests electronically this year.

Taxpayers can get an automatic six-month extension of time to file their tax returns by filing Form 4868, Automatic Extension of Time to File.

It is also important for extension filers to remember that Oct, 15 is not only the due date for their tax returns, it is also the last date on which a return can be filed that will result in an economic stimulus payment. Taxpayers who file earlier, however, will get their economic stimulus payments sooner.

Taxpayers can e-file the extension from a home computer or through a tax professional who uses e-file.

Source – IRS Newswire

Please see our Tax Extension FAQ for more information

WASHINGTON — Military personnel serving in combat zones have the option of including their nontaxable combat pay on their 2007 or 2008 income tax returns if it helps their eligibility for the 2008 economic stimulus payments.

To receive the stimulus payment this year, combat zone personnel or their spouses must file a 2007 income tax return by Oct. 15. Otherwise, they can claim the economic stimulus payment on next year’s income tax return.

“The last thing we want our troops in Iraq or other war zones to worry about are their tax returns. But we do want the troops, and their families stateside, to know they may qualify for the economic stimulus payment,” said Linda E. Stiff, Acting Commissioner of the Internal Revenue Service.

Starting in May, the IRS will issue economic stimulus payments of up to $600 ($1,200 for married couples) plus a $300 payment for each qualifying child younger than 17. The payments are based on 2007 income tax returns. The payments for individuals will begin to phase out starting at $75,000 in adjusted gross income ($150,000 for married couples).

Even individuals and families who normally do not file a tax return because they have no filing requirement may qualify for an economic stimulus payment. They may be eligible for the minimum payment of $300 ($600 for married couples) plus the $300 for each qualifying child younger than 17.

People must have at least $3,000 in qualifying income to get a payment. Qualifying income is defined as any combination of earned income (such as wages or taxable income from self-employment), nontaxable combat pay and certain benefits from Social Security, Veterans Affairs and Railroad Retirement.

Military personnel who normally would not file an income tax return because their 2007 income is not taxable can file a simple Form 1040A with the IRS if they want to receive the economic stimulus payment. They should report their nontaxable combat pay on Line 40b of the Form 1040A to show at least $3,000 in qualifying income. The Department of Defense lists the amount of excluded combat pay on line 12, box Q of Forms W-2 received by military personnel.

If a military person is serving in a combat zone, his or her normal tax filing requirement is extended until at least 180 days after leaving a combat zone. However, spouses or others with a power of attorney can prepare and file a 2007 income tax return on their behalf so that the stimulus payment is received this year.

The IRS has developed Package 1040A-3, an 8-page publication containing tax tips, a sample Form 1040A and a blank Form 1040A.

To ensure that a stimulus payment will be received in 2008, the return must be filed by Oct. 15 to allow sufficient time for processing.

There are a number of special tax code provisions that apply to members of the military serving in combat zones. They include:

• All military pay earned by enlisted personnel or warrant officers is excluded from gross income;
• Monthly pay of up to $6,867.60 earned by commissioned officers is excluded from 2007 gross income;
• All military pay earned by enlisted personnel hospitalized because of injuries sustained in a combat zone is excluded from gross income during the period of hospitalization. The exclusion is limited to two years after the date of the termination of combatant activities in the combat zone;
• Commissioned officers hospitalized because of injuries sustained in a combat zone have a monthly maximum exclusion of $6,867.60 for 2007 and have the same two-year limitation.
• Military personnel who miss a tax filing deadline because they are in a combat zone have 180 days after they leave that combat zone to file a tax return, if they have taxable income.

All the provisions also apply to members of the Reserves and the National Guard.

The IRS reminds filers that they can get their stimulus payments faster by using direct deposit when they file their tax return.

In addition, the IRS urges people to file electronically. For people who normally are not required to file a tax return, the IRS and the Free File Alliance have a special program set up to allow for free electronic filing.

Source IRS Newswire

WASHINGTON — The Internal Revenue Service announced today that it will begin sending more than 130 million economic stimulus payments starting May 2. The initial round of weekly payments will be completed by early July.

Stimulus payments will be made by direct deposit to people who choose to receive their 2007 income tax refunds through direct deposit. All others will receive their economic stimulus payments in the form of a paper check.

“To receive an economic stimulus payment, people just need to file their tax returns as they usually do,” said IRS Acting Commissioner Linda E. Stiff. “The payments will be automatic for the vast majority of taxpayers. Some lower-income workers and recipients of certain Social Security and veterans benefits who don’t normally need to file a tax return will need to do so in order to receive a stimulus payment. IRS.gov has all the information people need to help them obtain a stimulus payment.”

Stimulus payments will be sent out in the order of the last two digits of the Social Security number used on the tax return.

Because the IRS will use the Social Security number to determine when checks are mailed, taxpayers may receive their checks at different times than their neighbors or other family members. On a jointly filed return, the first Social Security number listed will determine the mail-out time.

The IRS expects to make about 34 million payments within the first three weeks after the payment schedule begins May 2. With more than 130 million households expected to receive stimulus payments, more than 25 percent of the payments will be made in the first three weeks.

Taxpayers who choose direct deposit on their federal income tax returns can expect to receive their economic stimulus payments between May 2 and May 16 provided their returns were received and processed by April 15, 2008. For taxpayers who did not choose direct deposit on their tax return but whose returns were processed by April 15, the paper checks will be in the mail starting May 16, with the initial mailings completed by around July 11.

The IRS is also announcing today the availability of an on-line rebate calculator on IRS.gov to help taxpayers determine if they are eligible to receive an economic stimulus payment and if they are, how much they can expect. Anyone who has prepared a 2007 income tax return can use the calculator. It will ask taxpayers a series of questions, so they should have their 2007 tax returns handy. After answering the questions, the calculator will provide the projected dollar value of the payment.

Below are the schedules for economic stimulus payments related to tax returns processed by April 15, 2008.

A small percentage of tax returns will require additional time to process and to compute a stimulus payment amount. For these returns, stimulus payments may not be issued in accordance with the schedule above, even if the tax return was processed by April 15.

All or part of an economic stimulus payment may be applied to back taxes or certain other debts of the taxpayer, such as delinquent child support and student loans. In such cases, the IRS will send a letter to the taxpayer explaining the offset.

To accommodate people whose tax returns are processed after April 15, the IRS will continue sending weekly payments. People who file tax returns after April 15 and receive a refund can expect to receive their economic stimulus payments in about two weeks after receiving their tax refunds, but not before the date they would have received their payment if the return had been processed by April 15. To ensure taxpayers receive their stimulus payment this year, they must file a tax return by Oct. 15.

Two bureaus of the Treasury Department are involved in making the payments. The IRS will calculate the amount of each economic stimulus payment based on the tax year 2007 income tax returns it receives. The IRS will then forward the information to the Financial Management Service (FMS), which is the bureau of the Treasury Department that makes federal payments such as Social Security benefits, federal income tax refunds and, now, economic stimulus payments.

The IRS reminds taxpayers that they can get their stimulus payments faster by using direct deposit when they file their tax return.

In addition, the IRS urges taxpayers to file electronically.

Source: IRS Newswire

WASHINGTON — The Internal Revenue Service today issued a notice providing procedures for vehicle manufacturers to certify that a fuel cell vehicle meets the requirements for a tax credit. It also provides guidance to taxpayers who purchase certified vehicles regarding what they must do to use the credit.

Under the law, the new qualified fuel cell motor vehicle credit is available to purchasers of qualified vehicles. The amount of the new qualified fuel cell motor vehicle credit is based on the weight of the vehicle and on when the vehicle is placed in service. An additional credit may be available for a fuel cell passenger automobile or light truck based on a comparison of the city fuel economy rating of that vehicle with the 2002 model year city fuel economy of a vehicle in its weight class.

For fuel cell vehicles that weigh not more than 8,500 pounds, the base credit amount is $8,000 if the vehicle is placed in service on or before Dec. 31, 2009. The base credit amount is reduced to $4,000 if the vehicle is placed in service after that date.

The amount of the credit available for heavy vehicles varies from $10,000 to $40,000, depending on the weight of the vehicle.

The notice also provides guidance to taxpayers who purchase vehicles regarding the conditions under which they may rely on the vehicle manufacturer’s certification. The purchaser may claim a credit for the certified amount for a fuel cell vehicle if it is placed in service by the taxpayer after Dec. 31, 2005, and is purchased on or before Dec. 31, 2014.

To certify a vehicle, the manufacturer must submit to the IRS a certification that includes, among other items, the make, model, model year, proposed credit amount and a statement affirming that the vehicle is propelled by power derived from one or more cells that convert chemical energy into electricity.

Related Items:

Notice 2008-33
Source – IRS Newswire

WASHINGTON – The Internal Revenue Service today issued its
2008 list of the 12 most egregious tax schemes and scams, highlighted by
Internet phishing scams and several frivolous tax arguments.

Topping this year s list of scams is phishing, which
encompasses numerous Internet-based ploys to steal financial information
from taxpayers.   New to the Dirty Dozen this year is a
scheme, which IRS auditors discovered, that relates to unreasonable and/or
excessive fuel tax credit claims.

Taxpayers should be wary of scams and promises to avoid paying taxes
that seem too good to be true, Acting IRS Commissioner Linda Stiff
said.  There is no secret formula that can eliminate a person s tax
obligations.   People should be wary of anyone peddling any of
these scams.

Tax schemes can lead to problems for both scam artists and
taxpayers.   Tax return preparers and promoters also risk
significant penalties, interest and possible criminal prosecution.

The IRS urges taxpayers to avoid these common schemes:

1.  Phishing

Phishing is a tactic used by Internet-based thieves to trick
unsuspecting victims into revealing personal information they can then use
to access the victims financial accounts.   These criminals use
the information obtained to empty the victims bank accounts, run up
credit card charges and apply for loans or credit in the victims names.
Phishing scams often take the form of an e-mail that appears to come from
a legitimate source. Some scam e-mails falsely claim to come from the
IRS.   To date, taxpayers have forwarded more than 33,000 of
these scam e-mails, reflecting more than 1,500 different schemes, to the
IRS.   The IRS never uses e-mail to contact taxpayers about
their tax issues.   Taxpayers who receive unsolicited e-mail
that claims to be from the IRS can forward the message to a special
electronic mailbox, phishing@irs.gov, using instructions
contained in an article titled How to
Protect Yourself from Suspicious E-Mails or Phishing
Schemes. Remember: the only official IRS Web site is located at www.irs.gov.

2.  Scams Related to the Economic Stimulus
Payment

Some scam artists are trying to trick individuals into revealing
personal financial information that can be used to access their financial
accounts by making promises relating to the economic stimulus payment,
often called a rebate.   To obtain the payment, eligible individuals
in most cases will not have to do anything more than file a 2007 federal
tax return.   But some criminals posing as IRS representatives
are trying to trick taxpayers into revealing their personal financial
information by falsely telling them they must provide information to get a
payment.  For instance, a potential victim is told by phone or e-mail
that he or she is eligible for a rebate but must provide a bank account
number (or similar information) to get the payment.   If the
target is unwilling, the victim is then told that he cannot receive the
rebate unless the information is provided.   Individuals should
remember that the only way to get a stimulus payment is to file a 2007 tax
return.  The IRS urges taxpayers to be extra-vigilant.  
The IRS will not contact taxpayers by phone or e-mail about their stimulus
payment. 

3.  Frivolous Arguments

Promoters of frivolous schemes encourage people to make unreasonable
and unfounded claims to avoid paying the taxes they owe.   Most
recently, the IRS expanded its list of frivolous legal positions that
taxpayers should stay away from.   Taxpayers who file a tax
return or make a submission based on one of these positions on the list
are subject to a $5,000 penalty.   The most recent update of the
list of frivolous positions includes: misinterpretation of the 9th
Amendment to the U.S. Constitution regarding objections to military
spending, erroneous claims that taxes are owed only by persons with a
fiduciary relationship to the United States, a nonexistent Mariner s Tax
Deduction related to invalid deductions for meals and the misuse of the
fuel tax credit (see below).   The complete
list of frivolous arguments is on the IRS Web site at IRS.gov. 

4.  Fuel Tax Credit Scams

The IRS is receiving claims for the fuel tax credit that are
unreasonable.   Some taxpayers, such as farmers who use fuel for
off-highway business purposes, may be eligible for the fuel tax
credit.  But some individuals are claiming the tax credit for
nontaxable uses of fuel when their occupation or income level makes the
claim unreasonable.   Fraud involving the fuel tax credit was
recently added to the list of frivolous tax claims, potentially subjecting
those who improperly claim the credit to a $5,000 penalty.

5.  Hiding Income Offshore

Individuals continue to try to avoid paying U.S.taxes by illegally
hiding income in offshore bank and brokerage accounts or using offshore
debit cards, credit cards, wire transfers, foreign trusts, employee
leasing schemes, private annuities or life insurance plans.  
The IRS and the tax agencies of U.S. states and possessions continue to
aggressively pursue taxpayers and promoters involved in such abusive
transactions.

6.  Abusive Retirement Plans

The IRS continues to uncover abuses in retirement plan arrangements,
including Roth Individual Retirement Arrangements (IRAs).  The IRS is
looking for transactions that taxpayers are using to avoid the limitations
on contributions to Roth IRAs.   Taxpayers should be wary of
advisers who encourage them to shift appreciated assets into Roth IRAs or
companies owned by their Roth IRAs at less than fair market
value.   In one variation of the scheme, a promoter has the
taxpayer move a highly appreciated asset into a Roth IRA at cost value,
which is below annual contribution limits even though the fair market
value far exceeds the amount allowed.

7.  Zero Wages

Filing a phony wage- or income-related information return to replace a
legitimate information return has been used as an illegal method to lower
the amount of taxes owed.   Typically, a Form 4852 (Substitute
Form W-2) or a corrected Form 1099 is used as a way to improperly reduce
taxable income to zero.   The taxpayer also may submit a
statement rebutting wages and taxes reported by a payer to the IRS.
Sometimes fraudsters even include an explanation on their Form 4852 that
cites statutory language on the definition of wages or may include some
reference to a paying company that refuses to issue a corrected Form W-2
for fear of IRS retaliation. Taxpayers should resist any temptation to
participate in any of the variations of this scheme.

8.  False Claims for Refund and Requests for
Abatement

This scam involves a request for abatement of previously assessed
tax using Form 843, Claim for Refund and Request for Abatement.  
Many individuals who try this have not previously filed tax
returns.   The tax they are trying to have abated has been
assessed by the IRS through the Substitute for Return Program.  
The filer uses Form 843 to list reasons for the request. Often, one of the
reasons given is “Failed to properly compute and/or calculate Section
83-Property Transferred in Connection with Performance of Service.”

9.  Return Preparer Fraud

Dishonest tax return preparers can cause many problems for taxpayers
who fall victim to their schemes.   These scam artists make
their money by skimming a portion of their clients refunds and charging
inflated fees for return preparation services. They attract new clients by
promising large refunds.   Some preparers promote the filing of
fraudulent claims for refunds on items such as fuel tax credits to recover
taxes paid in prior years. Taxpayers should choose carefully when hiring a
tax preparer, especially one who promises something that seems too good to
be true.

10.  Diguised Corporate Ownership

Some people are going as far as forming domestic shell corporations in
certain states for the purpose of disguising the ownership of a business
or financial activity.   Once formed, these anonymous entities
can be used to facilitate underreporting of income, non-filing of tax
returns, engaging in listed transactions, money laundering, financial
crimes and even terrorist financing.   The IRS is working with
state authorities to identify these entities and to bring the owners of
these entities into compliance.

11.  Misuse of Trusts

For years, unscrupulous promoters have urged taxpayers to transfer
assets into trusts. They promise reduction of income subject to tax,
deductions for personal expenses and reduced estate or gift
taxes.   However, some trusts do not deliver the promised tax
benefits.   As with other arrangements, taxpayers should seek
the advice of a trusted professional before entering into a trust.

12.  Abuse of Charitable Organizations and
Deductions

The IRS continues to observe the misuse of tax-exempt organizations.
Misuse includes arrangements to improperly shield income or assets from
taxation, attempts by donors to maintain control over donated assets or
income from donated property and overvaluation of contributed
property.   In addition, IRS examiners are seeing an upturn in
instances where taxpayers try to disguise private tuition payments as
contributions to charitable or religious organizations.

IRS Watches Scams That Fall Off the List

While the IRS has seen a decline in the occurrence of some of these
scams, other problems, such as abuse of the American Indian Employment
Credit and misuse of structured entity credits, continue to be areas of
concern.   The absence of a particular scheme from the Dirty
Dozen should not be taken as an indication that the IRS is unaware of it
or not taking steps to counter it.

How to Report Suspected Tax Fraud Activity

Suspected tax fraud can be reported to the IRS using IRS Form 3949-A,
Information Referral. Form 3949-A is available for download from the IRS
Web site at IRS.gov.   The completed form or a letter detailing
the alleged fraudulent activity should be addressed to the Internal
Revenue Service, Fresno, CA 93888.  The mailing should include
specific information about who is being reported, the activity being
reported, how the activity became known, when the alleged violation took
place, the amount of money involved and any other information that might
be helpful in an investigation.   The person filing the report
is not required to self-identify, although it is helpful to do so. The
identity of the person filing the report can be kept confidential.

Whistleblowers also could provide allegations of fraud to the IRS and
may be eligible for a reward by filing Form 211, Application
for Award for Original Information, and following the procedures outlined
in Notice 2008-4, Claims Submitted to the IRS Whistleblower Office under Section
7623.

WASHINGTON — More than 130 million American households will begin receiving Internal Revenue Service letters next week reminding them to file a 2007 tax return in order to receive a 2008 economic stimulus payment.

The mailings by the IRS will begin the first week in March and continue throughout the month. The informational notice, titled Economic Stimulus Payment Notice, alerts people that they may be eligible for a one-time stimulus payment of up to $600 ($1,200 married filing jointly) starting in May. There also is a $300 per child payment for qualifying children younger than 17.

“This special letters remind people that they won’t need to do anything more than file a 2007 tax return in order to put the stimulus payment process in motion,” Acting IRS Commissioner Linda Stiff said.

The notice is informational and does not seek any financial information. The main mailings, which will take place in three weekly batches, will go to taxpayers who filed a tax return last year.

“To receive a payment in 2008, individuals who qualify will not have to do anything more than file a 2007 tax return. The IRS will determine eligibility, figure the amount and send the payment,” the notice states. “This payment should not be confused with any 2007 income tax refund that is owed to you by the federal government. Income tax refunds for 2007 will be made separately from this one-time payment.”

“This payment should not be confused with any 2007 income tax refund that is owed to you by the federal government. Income tax refunds for 2007 will be made separately from this one-time payment.”

However, some people must take an extra step this year to receive a stimulus payment. In late March, the IRS will send a special mailing to certain recipients of Social Security and Veterans Affairs benefits. Generally, those benefits are nontaxable and recipients do not file tax returns. In order to receive a stimulus payment, people in this group need to file a tax return if they have at least $3,000 from a combination of certain Social Security benefits, Veterans benefits and earned income. The minimum stimulus payment for these people is $300 ($600 for married filing jointly).

The IRS has created a sample of Form 1040A with information on how to fill out a few lines that will enable eligible people who do not normally file a tax return to receive the stimulus payment.

More details on the special mailings for recipients of Social Security and veterans benefits will be available soon.

IRS – Newswire