Tips on Whether to File a 2016 Tax Return

Most people file a tax return because they have to. Even if a taxpayer doesn’t have to file, there are times they should. They may be eligible for a tax refund and not know it.

Here are five tips on whether to file a tax return:

General Filing Rules.  In most cases, income, filing status and age determine if a taxpayer must file a tax return. Other rules may apply if the taxpayer is self-employed or a dependent of another person. For example, if a taxpayer is single and under age 65, they must file if their income was at least $10,350. There are other instances when a taxpayer must file.

Tax Withheld or Paid.  Did the taxpayer’s employer withhold federal income tax from their pay? Did the taxpayer make estimated tax payments? Did they overpay last year and have it applied to this year’s tax? If the answer is “yes” to any of these questions, they could be due a refund.

Earned Income Tax Credit.  A taxpayer who worked and earned less than $53,505 last year could receive the EITC as a tax refund. They must qualify and may do so with or without a qualifying child. They may be eligible for up to $6,269.

Additional Child Tax Credit.  Did the taxpayer have at least one child that qualifies for the Child Tax Credit? If they do not qualify for the full credit amount, they may be eligible for the Additional Child Tax Credit. Beginning in January 2017, by law, the IRS must hold refunds for any tax return claiming either the EITC or the Additional Child Tax Credit until Feb. 15.

American Opportunity Tax Credit.  To claim the AOTC, the taxpayer, their spouse or their dependent must have been a student enrolled at least half time for one academic period to qualify. The credit is available for four years of post-secondary education. It can be worth up to $2,500 per eligible student.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

Use IRS Free File to File Taxes for Free

Join the millions of Americans who safely file their taxes and save money using IRS Free File. Taxpayers can use either name-brand software or fillable forms – for free. Combining IRS Free File with direct deposit is the quickest and safest way to get a refund.

Here are some tips about IRS Free File:

Get Started at IRS.gov. IRS Free File is available only through IRS.gov. Simply choose a Free File company and then click on that link to prepare and e-file the return.

Find Tax Breaks. The tax software’s question-and-answer format helps eligible taxpayers find tax breaks. This could include tax credits such as the Earned Income Tax Credit. The software then selects the appropriate tax forms and does the calculations automatically. Free File can help with the health care law tax provisions as well.

Free for All. Taxpayers with income of $64,000 or less can use brand-name software. Taxpayers who earned more can use Free File Fillable Forms. This option allows taxpayers to complete IRS forms electronically. It is best for those who are used to doing their own taxes.

Easy Online Extensions. For those who cannot finish their return by the April 18 deadline, it’s easy to use Free File to request a six-month extension. An extension of time to file is not an extension of time to pay. If taxpayers owe federal taxes, they should estimate the amount they owe and pay it with the extension request. This will help avoid penalties and interest.

The IRS partners with leading tax software companies, the Free File Alliance, to make the program available. Some companies offer free state tax return filing as well.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

2017 Tax Filing Season is Officially Open

The Internal Revenue Service said that it successfully started accepting and processing 2016 federal individual income tax returns on schedule. More than 153 million returns are expected to be filed this year.

People have until Tuesday, April 18, 2017 to file their 2016 returns and pay any taxes due. The deadline is later this year due to several factors. The usual April 15 deadline falls on Saturday this year, which would normally give taxpayers until at least the following Monday. However, Emancipation Day, a D.C. holiday, is observed on Monday, April 17, giving taxpayers nationwide an additional day to file. By law, D.C. holidays impact tax deadlines for everyone in the same way federal holidays do. Taxpayers requesting an extension will have until Monday, Oct. 16, 2017 to file.

"Following months of hard work, we successfully opened our processing systems today to start this year’s tax season,” said IRS Commissioner John Koskinen. “Getting to this point is a year-round effort for the IRS and the nation’s tax community. The dedicated employees of the IRS look forward to serving taxpayers this filing season, and I want to thank all of the tax and payroll community for their hard work that makes tax time smoother for the nation.”

The IRS expects more than 70 percent of taxpayers to get tax refunds this year. Last year, 111 million refunds were issued, with an average refund of $2,860.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

Special Rules Help Many People With Disabilities

The Internal Revenue Service wants taxpayers with disabilities and parents of children with disabilities to be aware of the Earned Income Tax Credit (EITC) and correctly claim it if they qualify.

The EITC is a federal income tax credit for workers who don't earn a high income ($53,505 or less for 2016) and meet other eligibility requirements. Because it’s a refundable credit, those who qualify and claim the credit could pay less federal tax, pay no tax or even get a tax refund.

The EITC could put an extra $2 or up to $6,269 into a taxpayer’s pocket. Nevertheless, the IRS estimates that as many as 1.5 million people with disabilities miss out on this valuable credit because they fail to file a tax return. Many of these non-filers fall below the income threshold requiring them to file. Even so, the IRS urges them to consider filing anyway because the only way to receive this credit is to file a return and claim EITC.

To qualify for EITC, the taxpayer must have earned income. Usually, this means income either from a job or from self-employment. But taxpayers who retired on disability can also count as earned income any taxable benefits they receive under an employer’s disability retirement plan. These benefits remain earned income until the disability retiree reaches minimum retirement age. The IRS emphasized that social Security benefits or Social Security Disability Income (SSDI) do not count as earned income.

Additionally, taxpayers may claim a child with a disability or a relative with a disability of any age to get the credit if the person meets all other EITC requirements. Use the EITC Assistant, on IRS.gov, to determine eligibility, estimate the amount of credit and more.

People with disabilities are often concerned that a tax refund will impact their eligibility for one or more public benefits, including Social Security disability benefits, Medicaid, and Food Stamps. The law is clear that tax refunds, including refunds from tax credits such as the EITC, are not counted as income for purposes of determining eligibility for benefits. This applies to any federal program and any state or local program financed with federal funds.

The best way to get the EITC is to file electronically: through a qualified tax professional; using free community tax help sites; or through IRS Free File.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

Taxpayers should e-File

Taxpayers who still file paper returns may find now is the best time to switch to e-file. Last year over 85 percent of taxpayers filed their taxes electronically. E-file is the fastest and safest way to file.

Accurate and Easy. IRS e-file is the best way to file an accurate tax return. The tax software helps taxpayers avoid mistakes by doing the math for them.

Safe and Secure. IRS e-file meets strict security guidelines. It uses modern encryption technology to protect tax returns. The IRS continues to work with states and tax industry leaders to protect tax returns from refund fraud.

Convenient and Often Free. Taxpayers can e-file for free through IRS Free File. Free File is only available on IRS.gov. Taxpayers may qualify to have their taxes e-filed for free through IRS volunteer programs. Volunteer Income Tax Assistance offers free tax preparation for those earning $54,000 or less. Tax Counseling for the Elderly generally helps people who are age 60 or older.

Faster Refunds. In most cases, e-file prevents mistakes and helps people get their refund faster. The quickest way to get a refund is to combine e-file with direct deposit into a bank account.

Prior-Year Tax Return. Taxpayers should keep a copy of their tax return. Beginning in 2017, taxpayers using a software product for the first time may need their Adjusted Gross Income (AGI) amount from their prior-year tax return to verify their identity.

Health Care Coverage Reporting. IRS e-file can help with tax provisions of the health care law. The software will walk users through each line on the tax form that relate to the Affordable Care Act.

Payment Options. If taxpayers owe taxes, they can e-file early and set up an automatic payment on any day until the April 18 deadline. They can pay electronically from their bank account with IRS Direct Pay. Other payment options include electronic funds withdrawal and payment by debit or credit card.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

IRS Issues Updated Withholding Foreign Partnerships and Withholding Foreign Trusts Agreement

Revenue Procedure 2017-21 updates the agreements entered into by withholding foreign partnerships (WPs) and withholding foreign trusts (WTs), as provided in Revenue Procedure 2014-47.  These agreements were to expire on December 31, 2016, but were extended in Revenue Procedure 2017-15 in anticipation of the new agreements being issued in January 2017.  This revenue procedure will apply to WP and WT agreements effective on or after the date of issuance of this revenue procedure.  The WP and WT agreements are updated consistent with recently published guidance, including the qualified intermediary withholding agreement, which was published in Revenue Procedure 2017-15.  The revenue procedure also provides information on submitting an application or request for renewal of a WP or WT agreement. This guidance affects WPs and WTs that currently have a WP or WT agreement with the IRS and WPs or WTs that intend to enter into a WP or WT agreement with the IRS in the future.

Revenue Procedure 2017-21 will be in IRB 2017-06, dated February 6, 2017.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

Due Date for a Section 35 Health Coverage Tax Credit

Notice 2017-16 provides that under the authority granted to the Secretary by § 35(g)(11)(B), an HCTC election for a month in 2016 may be made at any time before the expiration of the 3-year statute of limitation under § 6511 for such year, including on an amended income tax return.  This extension of time is provided because, prior to its expiration, the HCTC did not require an election and the Treasury Department and the IRS are concerned that eligible taxpayers may not be aware of the requirement to affirmatively elect the HCTC for coverage provided in 2016.

Notice 2017-16 will be in IRB 2017-07, dated 02/13/2017.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

Individual Shared Responsibility Payment Hardship Exemption that May Be Claimed on a Federal Income Tax

Notice 2017-14 provides that the hardship exemption from the individual shared responsibility payment under § 5000A, described by the Department of Health and Human Services, for an individual who is not enrolled in health insurance coverage that qualifies for the health coverage tax credit (HCTC) allowed by § 35 for one more months between July 2016 and December 2016, but who would have been eligible for the HCTC under § 35 if enrolled, may be claimed on a Federal income tax return without obtaining a hardship exemption certification from the Marketplace.

Notice 2017-14 will appear in IRB 2017-06 dated.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

Taxpayer Bill of Rights

Taxpayers have fundamental rights under the law. The “Taxpayer Bill of Rights” presents these rights in 10 categories. This helps taxpayers when they interact with the IRS.

Publication 1, Your Rights as a Taxpayer, highlights a list of taxpayer rights and the agency’s obligations to protect them. Here is a wrap-up of the Taxpayer Bill of Rights:

1. The Right to Be Informed.
2. The Right to Quality Service.
3. The Right to Pay No More than the Correct Amount of Tax.
4. The Right to Challenge the IRS’s Position and Be Heard.
5. The Right to Appeal an IRS Decision in an Independent Forum.
6. The Right to Finality.
7. The Right to Privacy.
8. The Right to Confidentiality.
9. The Right to Retain Representation.
10. The Right to a Fair and Just Tax System.

All taxpayers should keep a copy of their tax return. Beginning in 2017, taxpayers using a 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 can learn more about how to verify their identity and electronically sign tax returns at Validating Your Electronically Filed Tax Return.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 502-896-9222

Who Will Prepare Your Tax Return?

As the start of tax filing season approaches, the Internal Revenue Service is reminding taxpayers to start thinking about who will prepare their 2016 federal tax return. The IRS will begin processing tax returns on Monday, January 23. Many software companies and tax professionals will accept and submit tax returns before the IRS systems open on January 23.

In 2016, more than 131 million individual and family tax returns were e-filed, the most accurate, safest and easiest way to file. The rest of the returns received by the IRS, numbering over 19 million, were either prepared on a computer and printed or prepared by hand then mailed.

The IRS stresses that no matter who prepares it, by signing the return, the taxpayer becomes legally responsible for the accuracy of all information included.

Free Tax Preparation

Each year, millions of tax returns are prepared for free by taxpayers using IRS Free File or by volunteers at community organization sites nationwide.

IRS Free File lets taxpayers who earned less than $64,000 prepare and e-file a return for free. Go to IRS.gov and click on the ‘Filing’ tab for options on using commercial tax software. Those who earned more than $64,000 are still eligible for Free File Fillable Forms, the electronic version of IRS paper forms. This more basic Free File option is best for people who are comfortable preparing their own tax returns.

IRS trained and certified volunteers at thousands of Volunteer Income Tax Assistance and Tax Counseling for the Elderly (VITA and TCE) sites nationwide offer free tax preparation and e-filing. VITA offers free tax return preparation to taxpayers who earn $54,000 or less. The TCE program is mainly for people age 60 or older and focuses on tax issues unique to seniors. AARP participates in the TCE program and helps taxpayers with low to moderate incomes.

To find the closest VITA site, visit IRS.gov and search the word “VITA.” Or  download the IRS2Go app on a smart phone. Site information is also available by calling the IRS at 800-906-9887.
To locate the nearest AARP Tax-Aide site, visit aarp.org, or call 888-227-7669. There are also VITA and TCE sites that provide bilingual help for taxpayers who have limited English skills.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 501-896-2999

New Two-Stage E-mail Scheme

The Internal Revenue Service, state tax agencies and tax industry leaders today warned tax professionals to be alert to an email scam from cybercriminals posing as clients soliciting their services.

A new variation of this phishing scheme is targeting accounting and tax preparation firms nationwide. The scheme's objective is to collect sensitive information that will allow fraudsters to prepare fraudulent tax returns.

These latest phishing emails come in typically two stages. The first email is the solicitation, which asks tax professionals questions such as "I need a preparer to file my taxes." If the tax professional responds, the cybercriminal sends a second email. This second email typically has either an embedded web address or contains a PDF attachment that has an embedded web address.

In some cases, the phishing emails may appear to come from a legitimate sender or organization (perhaps even a friend or colleague) because they also have been victimized. Fraudsters have taken over their accounts to send phishing emails.

The tax professional may think they are downloading a potential client's tax information or accessing a site with the potential client's tax information. In reality, the cybercriminals are collecting the preparer's email address and password and possibly other information.

The IRS urges tax professionals and tax preparation firms to consider creating internal policies or obtain security experts' recommendations on how to address unsolicited emails seeking their services.

Courtesy of IRS

For more information contact Neikirk Mahoney and Smith at 502-896-2999

e-Services Users Validating Identities Online

Recently, the IRS mailed letters to certain e-Services users asking them to revalidate their identities within 30 days. The filing season is approaching, and it is important that users complete this process within the established time frame.

There are two ways e-Services users can accomplish the revalidation:

 Complete the Get Transcript online process as a first time user or;
 Call the e-help desk with the Unique Security Code found on letter 5903
Here’s what users need to know about the online option:

The Get Transcript process is an online option to verify your identity, and is back online after a maintenance outage.
You must complete the entire Get Transcript registration process, including establishing a Get Transcript user name and password.
Go to https://www.irs.gov/transcript and select Get Transcript Online. Then under "First Time Users," select "Get Started.”
If you are new to this system, start the Get Transcript registration process as a First Time User.
You can create a new user name and password or use your e-Services user name and password.
Your user name and password for e-Services will remain unchanged, regardless of the user name and password you use to complete the Get Transcript Online registration.
The Unique Security Code contained in Letter 5903 is for revalidating your identity over the telephone only and cannot be used as a replacement for the Get Transcript Confirmation Code sent to you via e-mail, the Security Code sent to you via text or the Activation Code by mail.
Here’s what users need to know about the phone option:

If you complete the online option successfully you do not need to contact the e-Services Help Desk.
Callers need the Letter 5903 and the Unique Security Code found on the letter.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

2017 Tax Season

The Internal Revenue Service and partners from the states and tax industry today reminded taxpayers that the nation’s 2017 individual income tax filing season opens Jan. 23.

The IRS expects more than 153 million tax returns to be filed this year and taxpayers have until Tuesday, April 18, 2017, to file their 2016 tax returns and pay any tax due. The deadline is extended because the Emancipation Day, a holiday in Washington, D.C., will be observed on Monday, April 17, pushing the nation’s filing deadline to April 18.

"There are a number of important changes this year involving refunds and tax law changes that we encourage people to keep in mind," said IRS Commissioner John Koskinen. “We encourage taxpayers to plan ahead and take a few minutes to review these changes. As we enter the filing season, taxpayers should know that the dedicated workforce of the IRS and the nation's tax community stand ready to help."

Taxpayers that are e-filing can still submit returns to their software provider before Jan. 23. They will hold the return and transmit it to the IRS when the systems open. The IRS also reminds taxpayers that they don’t have to wait until Jan. 23 to contact their tax professional.

In 2016, the IRS issued 111 million individual tax refunds and expects more than 70 percent of taxpayers to receive a refund in 2017. Also, the IRS reminds taxpayers that a new law requires the IRS to hold refunds claiming the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC) until Feb. 15. "We encourage taxpayers to file as they normally would, including returns claiming the EITC or ACTC” Koskinen said. “The IRS and the nation's tax community are committed to making this another smooth filing season."

Courtesy of IRS

For more information contact Niekirk, Mahoney and Smith at 502-896-2999

Secure Your Office

Tax professionals can help protect taxpayer data by looking around their own offices. It’s more important than ever that tax professionals take aggressive steps to protect taxpayer information. Securing office space is as important as securing computers.

In assessing how secure your office is, consider these questions:

Are all the places where taxpayer information is located protected from unauthorized access and potential danger such as theft, flood and tornado?
Do you have written procedures that prevent unauthorized access and unauthorized processes?
Do you leave taxpayer information, including data on hardware and media, unsecured? Check on desks, photocopiers, mailboxes, vehicles and trashcans. What about in rooms in the office or at home where unauthorized access could occur?
Who authorizes and/or controls delivery and removal of taxpayer information, including data on hardware and media?
Are the doors to file rooms and/or computer rooms locked?
Do you provide secure disposal of taxpayer information? Do you use items such as shredders, burn boxes or secure temporary file areas for information until it can be properly disposed?
The answers can be very important to protecting your clients and your business. To learn more about how to protect both, review Publication 4557, Safeguarding Taxpayer Data.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

Employers and Coverage Providers

Under the Affordable Care Act, insurance companies, self-insured companies, and large businesses and businesses that provide health insurance to their employees must submit information returns to the IRS and individuals reporting on health coverage.

Here is some information about the types of forms, the purpose of each, and noteworthy dates

Form 1095-C, Employer-Provided Health Insurance Offer and Coverage

 This form is filed by applicable large employers, which generally are employers with 50 or more full-time employees, including full-time equivalents. • ALEs send this form to certain employees, with information about what coverage the employer offered.
Employers that offer health coverage referred to as “self-insured coverage” send this form to individuals they cover, with information about who was covered and when.
This form is submitted to the IRS with Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns.
The deadline for filing this form with the IRS is February 28, 2017, or March 31, 2017 if filing electronically.
The deadline for furnishing this form to the employee is March 2, 2017, which is a 30-day extension from the original due date of January 31.

Form 1095-B, Health Coverage Information Return

This form is filed by providers of minimum essential coverage, including employers that are not applicable large employers, but who offer employer-sponsored self-insured health coverage.
It is used to report information to covered individuals about each person enrolled in coverage – this form is sent to the person identified as the responsible individual on the form.
This form is submitted to the IRS with Form 1094-B, Transmittal of Health Coverage Information Returns.
The deadline for filing this form with the IRS is February 28, 2017, or March 31, 2017 if filing electronically.
The deadline for furnishing this form to the covered individual is March 2, 2017, which is a 30-day extension from the original due date of January 31.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

Boost your Tax Refund

Rethink filing status to boost your refund
One of the first decisions you make when completing your tax return, your filing status, can affect your refund's size, especially if you're married. While most married couples file jointly -- 96 percent did in 2009 -- a joint return is not always the most beneficial way to boost your refund. Married-filing-separately status requires more effort, but the time you invest offers tax savings under the right circumstances. Calculating your taxes both ways will point you in the higher refund direction.

Don't shy away from tax deductions
Keeping a trip log for your volunteer work, job-hunting and doctor's appointments may seem like a waste of time, but those miles add up and represent deductions. Parking, toll and bus or taxi receipts support your claim, while a record of the miles you drove lets you write off the cost of using your car through the standard mileage rate. Good travel records could help you reach the needed minimum percentage of adjusted gross income for miscellaneous deductions.

Moving for a new job 50 miles or more away can boost your tax refund because you can deduct moving, storage and travel expenses related to your relocation. You have to work full time at the new job for at least 39 weeks the first year; however, you can take the deduction in the year you move if you expect to meet this time test within the following tax year.

Maximize your IRA contributions
You have until April 15th to open a traditional IRA for the previous tax year. That gives you the flexibility of claiming the credit on your return, filing early and using your refund to open the account. Traditional IRA contributions reduce your taxable income. You can take advantage of the maximum contribution and, if you're at least 50 years old, the catch-up provision, to add to your IRA.

Timing can boost your tax refund

Taxpayers who watch the calendar improve their chances of getting a larger refund. If you can, pay January's mortgage payment before December 31st and get the added interest for your mortgage interest deduction.

Schedule health-related treatments and exams in the last quarter of the year to boost your medical expense deduction potential.

Become credit savvy and refund happy
Credits work better than deductions as refund boosters. For each credit dollar, your taxes go down a dollar. Yet, 20% of eligible Americans don't claim the earned income tax credit. If you're working and meet the guidelines, you may be eligible for EITC even if you're single with no children. If you have kids, the child-care credit may help you.

For those with children in college, credits related to higher education expenses, such as the American Opportunity Tax Credit, could provide tax relief. “The American Opportunity Credit is great because up to $1,000 is refundable.

Courtesy of TruboTax

For more information contact Neikirk, Mahoney and Smith at 502-896-999