March 1 Tax Deadline

The Internal Revenue Service reminds farmers and fishermen about the March 1 deadline to take advantage of special rules that can allow them to forgo making quarterly estimated tax payments.

Taxpayers with income from farming or fishing have until March 1 to file their 2016 Form 1040 and pay the tax due to avoid making estimated tax payments. This rule generally applies if farming or fishing income was at least two-thirds of the total gross income in either the current or the preceding tax year.

Ways to Pay:

IRS Direct Pay – IRS Direct Pay offers individual taxpayers an easy way to quickly pay the tax amount due or make quarterly estimated tax payments directly from checking or savings accounts without any fees or pre-registration. Direct Pay is available 24 hours a day, seven days a week and taxpayers can schedule a payment up to 30 days in advance. Last year, IRS Direct Pay received more than nine million tax payments from individual taxpayers totaling more than $31.6 billion. When a taxpayer uses the tool they receive instant confirmation after they submit their payment.  Direct Pay cannot be used to pay the federal highway use tax, payroll taxes or other business taxes.
EFTPS – The Electronic Federal Tax Payment System allows individual and business taxpayers to pay their federal taxes electronically. Taxpayers must enroll and receive a PIN in the mail to use EFTPS. Visit IRS.gov/payments to check out other payment options.
Farmers and fishers choosing not to file by March 1 should have made an estimated tax payment by Jan. 17 to avoid a penalty.

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

Name Change?

A name change can have an impact on taxes. All the names on a taxpayer’s tax return must match Social Security Administration records. A name mismatch can delay a tax refund. Here’s what taxpayers should know if they changed their name:

Reporting Name Changes. Got married and now using a new spouse’s last name or hyphenate a name? Divorced and now back to using a former last name? In either case, taxpayers should notify the SSA of a name change. That way the new name on IRS records will match the SSA records.

Making Dependent’s Name Change. Notify the SSA if a dependent had a name change. For example, if a taxpayer adopted a child and the child’s last name changed. If the child does not have a Social Security number, the taxpayer may use an Adoption Taxpayer Identification Number on their tax return. An ATIN is a temporary number.

Getting a New SS Card. File Form SS-5, Application for a Social Security Card. The form is on SSA.gov or by calling 800-772-1213.

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

Capital Gains and Losses – 10 Helpful Facts to Know

Capital Assets. Capital assets include property such as a home or a car. It also includes investment property, like stocks and bonds.

Gains and Losses. A capital gain or loss is the difference between the basis and the amount the seller gets when they sell an asset.

Net Investment Income Tax. Taxpayers must include all capital gains in their income.

Deductible Losses. Taxpayers can deduct capital losses on the sale of investment property but can’t deduct losses on the sale of property they hold for their personal use.

Limit on Losses. If a taxpayer’s capital losses are more than their capital gains, they can deduct the difference as a loss on their tax return.

Carryover Losses. If a taxpayer’s total net capital loss is more than the limit they can deduct, they can carry it over to next year’s tax return.

Long and Short Term. Capital gains and losses are either long-term or short-term.

Net Capital Gain.  If a taxpayer’s long-term gains are more than their long-term losses, the difference between the two is a net long-term capital gain.

Tax Rate. The tax rate on a net capital gain usually depends on the taxpayer’s income.

Forms to File. Taxpayers often will need to file Form 8949, Sales and Other Dispositions of Capital Assets. Taxpayers

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

Itemize or Choose the Standard Deduction

Most taxpayers claim the standard deduction when they file their federal tax return. However, some filers may be able to lower their tax bill by itemizing. Find out which way saves the most money by figuring taxes both ways.

The IRS offers the following six tips to help taxpayers decide:

1. Use IRS Free File. Most taxpayers qualify to use free, brand-name software to prepare and file their federal tax returns electronically.

2. Figure Your Itemized Deductions.  Taxpayers need to add up deductible expenses they paid during the year. Special rules and limits apply.

3. Know The Standard Deduction. If a taxpayer doesn’t itemize, then the basic standard deduction for 2016 depends on their filing status. If a taxpayer is 65 or older, or blind, the standard deduction is higher than the previous amounts. The deduction may be limited if the taxpayer can be claimed as a dependent.

4. Check the Exceptions. There are some situations where the law does not allow a person to claim the standard deduction. This rule applies if the taxpayer is married filing a separate return and their spouse itemizes.

5. Use the IRS ITA Tool. Go to IRS.gov and use the Interactive Tax Assistant tool. It can help determine whether a taxpayer can use the standard deduction. It can also help a filer figure their eligibility for certain itemized deductions

6. File the Right Forms.  For a taxpayer to itemize their deductions, they must file Form 1040 and Schedule A, Itemized Deductions. Filers can take the standard deduction on Forms 1040, 1040A or 1040EZ.

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

IRS Summarizes "Dirty Dozen" List of Tax Scams for 2017

Phishing: Taxpayers need to be on guard against fake emails or websites looking to steal personal information. The IRS will never initiate contact with taxpayers via email about a bill or refund. Don’t click on one claiming to be from the IRS. Be wary of emails and websites that may be nothing more than scams to steal personal information. (IR-2017-15)

Phone Scams: Phone calls from criminals impersonating IRS agents remain an ongoing threat to taxpayers. The IRS has seen a surge of these phone scams in recent years as con artists threaten taxpayers with police arrest, deportation and license revocation, among other things. (IR-2017-19)

Identity Theft: Taxpayers need to watch out for identity theft especially around tax time. The IRS continues to aggressively pursue the criminals that file fraudulent returns using someone else’s Social Security number. Though the agency is making progress on this front, taxpayers still need to be extremely cautious and do everything they can to avoid being victimized. (IR-2017-22)

Return Preparer Fraud: Be on the lookout for unscrupulous return preparers. The vast majority of tax professionals provide honest high-quality service. There are some dishonest preparers who set up shop each filing season to perpetrate refund fraud, identity theft and other scams that hurt taxpayers. (IR-2017-23)

Fake Charities: Be on guard against groups masquerading as charitable organizations to attract donations from unsuspecting contributors. Be wary of charities with names similar to familiar or nationally known organizations. Contributors should take a few extra minutes to ensure their hard-earned money goes to legitimate and currently eligible charities. IRS.gov has the tools taxpayers need to check out the status of charitable organizations. (IR-2017-25)

Inflated Refund Claims: Taxpayers should be on the lookout for anyone promising inflated refunds. Be wary of anyone who asks taxpayers to sign a blank return, promises a big refund before looking at their records or charges fees based on a percentage of the refund. Fraudsters use flyers, advertisements, phony storefronts and word of mouth via community groups where trust is high to find victims. (IR-2017-26)

Excessive Claims for Business Credits: Avoid improperly claiming the fuel tax credit, a tax benefit generally not available to most taxpayers. The credit is usually limited to off-highway business use, including use in farming. Taxpayers should also avoid misuse of the research credit. Improper claims often involve failures to participate in or substantiate qualified research activities and/or satisfy the requirements related to qualified research expenses. (IR-2017-27)

Falsely Padding Deductions on Returns: Taxpayers should avoid the temptation to falsely inflate deductions or expenses on their returns to pay less than what they owe or potentially receive larger refunds. Think twice before overstating deductions such as charitable contributions and business expenses or improperly claiming credits such as the Earned Income Tax Credit or Child Tax Credit. (IR-2017-28)

Falsifying Income to Claim Credits: Don’t invent income to erroneously qualify for tax credits, such as the Earned Income Tax Credit. Taxpayers are sometimes talked into doing this by con artists. Taxpayers should file the most accurate return possible because they are legally responsible for what is on their return. This scam can lead to taxpayers facing large bills to pay back taxes, interest and penalties. In some cases, they may even face criminal prosecution. (IR-2017-29)

Abusive Tax Shelters: Don’t use abusive tax structures to avoid paying taxes. The IRS is committed to stopping complex tax avoidance schemes and the people who create and sell them. The vast majority of taxpayers pay their fair share, and everyone should be on the lookout for people peddling tax shelters that sound too good to be true. When in doubt, taxpayers should seek an independent opinion regarding complex products they are offered. (IR-2017-31)

Frivolous Tax Arguments: Don’t use frivolous tax arguments to avoid paying tax. Promoters of frivolous schemes encourage taxpayers to make unreasonable and outlandish claims even though they have been repeatedly thrown out of court. While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law or disregard their responsibility to pay taxes. The penalty for filing a frivolous tax return is $5,000. (IR-2017-33)

Offshore Tax Avoidance: The recent string of successful enforcement actions against offshore tax cheats and the financial organizations that help them shows that it’s a bad bet to hide money and income offshore. Taxpayers are best served by coming in voluntarily and getting caught up on their tax-filing responsibilities. The IRS offers the Offshore Voluntary Disclosure Program  to enable people to catch up on their filing and tax obligations. (IR-2017-35)

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

Video Relay Scam Targeting Deaf and Hard of Hearing

Every day scammers come up with new ways to steal taxpayers’ identities and personal information. Some scammers pretend to be from the IRS with one goal in mind: to steal money.

Be aware that con artists will use video relay services (VRS) to try to scam deaf and hard of hearing individuals. Don’t become a victim. Deaf and hard of hearing taxpayers should avoid giving out personal and financial information to anyone they do not know. Always confirm that the person requesting personal information is who they say they are.

Do not automatically trust calls just because they are made through VRS. VRS interpreters do not screen calls for validity.

The IRS has procedures in place for taxpayers who are experiencing tax issues. If you receive a call through VRS from someone claiming to be from the IRS, keep this in mind:

The IRS Will Never:

Demand immediate payment and require the payment be made a specific way, such as by prepaid debit card, gift card or wire transfer. In most cases, the IRS will not call taxpayers about taxes owed without first having mailed a letter to the taxpayer.
Threaten that local police or other law-enforcement groups will immediately arrest taxpayers for not paying a tax bill.
Demand that taxpayers pay taxes without giving them the opportunity to question or appeal the amount owed.
Ask for credit or debit card numbers over the phone.

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

IRS Committed to Stopping Offshore Tax Cheating

Over the years, numerous individuals have been identified as evading U.S. taxes by attempting to hide income in offshore banks, brokerage accounts or nominee entities. Then access the funds using debit cards, credit cards or wire transfers. Others have employed foreign trusts, employee-leasing schemes, private annuities or insurance plans for the same purpose.

The IRS uses information gained from its investigations to pursue taxpayers with undeclared accounts, as well as bankers and others suspected of helping clients hide their assets overseas.

While there are legitimate reasons for maintaining financial accounts abroad, there are reporting requirements that need to be fulfilled. U.S. taxpayers who maintain such accounts and who do not comply with reporting requirements are breaking the law and risk significant  fines, as well as the possibility of criminal prosecution.

Since 2009, tens of thousands of individuals have come forward to voluntarily disclose their foreign financial accounts, taking advantage of special opportunities to comply with the U.S. tax system and resolve their tax obligations. And, with new foreign account reporting requirements being phased in over the next few years, hiding income offshore is increasingly more difficult.

At the beginning of 2012, the IRS reopened the Offshore Voluntary Disclosure Program  following continued strong interest from taxpayers and tax practitioners after the closure of the 2011 and 2009 programs. This program will be open for an indefinite period until otherwise announced.

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

Tax Benefits for Parents

Taxpayers with children may qualify for certain tax benefits. Parents should consider child-related tax benefits when filing their federal tax return:

Dependent. Most of the time, taxpayers can claim their child as a dependent.

Child Tax Credit.  Generally, taxpayers can claim the Child Tax Credit for each qualifying child under the age of 17.

Child and Dependent Care Credit. Taxpayers may be able to claim this credit if they paid for the care of one or more qualifying persons. Dependent children under age 13 are among those who qualify.

Earned Income Tax Credit. Taxpayers who worked but earned less than $53,505 last year should look into the EITC. They can get up to $6,269 in EITC. Taxpayers may qualify with or without children.

Adoption Credit. It is possible to claim a tax credit for certain costs paid to adopt a child.

Education Tax Credits. An education credit can help with the cost of higher education.

Student Loan Interest. Taxpayers may be able to deduct interest paid on a qualified student loan. They can claim this benefit even if they do not itemize deductions.

Self-employed Health Insurance Deduction. Taxpayers who were self-employed and paid for health insurance may be able to deduct premiums paid during the year.

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

Be Prepared to Validate Identity if Calling the IRS

The Internal Revenue Service said mid-February marks the agency’s busiest time of the year for telephone calls. The IRS is reminding taxpayers who have questions about their tax accounts to be prepared to validate their identity when speaking with an IRS assistor. This will help avoid the need for a repeat call.

The IRS recognizes the importance of protecting taxpayers’ identities. That’s why IRS call center assistors take great care to make certain that they only discuss personal information with the taxpayer or someone authorized to speak on the taxpayer’s behalf.

Customer service representatives can answer refund questions beginning 21 days after the return was filed. Taxpayers should use “Where’s My Refund?” to track the status of their refund. Taxpayers who are e-filing their return and need their prior year adjusted gross income should use the Get Transcript tool on IRS.gov. IRS telephone assistors cannot provide prior-year adjusted gross income over the phone for filing purposes.

By law, the IRS is required to hold EITC and ACTC refunds until Feb. 15. However, taxpayers may not see those refunds until the week of Feb. 27. Due to differing timeframes with financial institutions, weekends and the Presidents Day holiday, these refunds likely will not start arriving in bank accounts or on debit cards until the week of Feb. 27 -- if there are no processing issues with the tax return and the taxpayer chose direct deposit.

The IRS phone assistors do not have additional information on refund dates beyond what taxpayers have access to on "Where's My Refund?”. Given high call volumes, taxpayers should not call unless directed to do so by the refund tool. In addition, a common myth is that people can get their refund date earlier by ordering a tax transcript. There is no such "secret" option to find a refund date by calling the IRS or ordering a transcript; just check "Where's My Refund?" once a day.

Courtesy of IRS

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

Excessive Claims for Business Credits Makes the IRS “Dirty Dozen” List of Tax Scams

Compiled annually, the “Dirty Dozen” lists a variety of common scams that taxpayers may encounter any time but many of these schemes peak during filing season as people prepare their returns or hire people to help with their taxes.

Fuel Tax Credit Scams

Fraud involving the fuel tax credit is considered a frivolous tax claim and can result in a penalty of $5,000. Furthermore, illegal scams can lead to significant penalties and interest and possible criminal prosecution. IRS Criminal Investigation works closely with the Department of Justice (DOJ) to shutdown scams and prosecute the criminals behind them.

The fuel tax credit is generally limited to off-highway business use or use in farming.  Consequently, the credit is not available to most taxpayers. Still, the IRS routinely finds unscrupulous preparers who have enticed sizable groups of taxpayers to erroneously claim the credit to inflate their refunds.

Research Credit Scams

The research credit is an important feature in the tax code to encourage research and experimentation by the private sector.

The IRS continues to see significant misuse of the research credit. Improper claims for this credit generally involve a failure to participate in or substantiate qualified research activities and/or a failure to satisfy the requirements related to qualified research expenses.

To qualify for the credit, a taxpayer’s research activities must, among other things, involve a process of experimentation using science that is intended to improve a product or process the taxpayer holds for sale or lease.  However, there are certain activities, including research after commercial production, adaptation of an existing business product or process, foreign research and research that is funded by the customer that are specifically excluded from the credit. Qualified activities also do not include activities where there is no uncertainty about the taxpayer’s method or capability to achieve a desired result.

To claim a research credit, taxpayers must evaluate and document their research activities over a period of time to establish the amount of qualified research expenses paid for each qualified research activity. While taxpayers may estimate some research expenses, taxpayers must have a factual basis for the assumptions used to create the estimates.

Unsupported claims for the research credit may subject taxpayers to penalties. Taxpayers should carefully review reports or studies prepared by third  parties to ensure they accurately reflect the taxpayer’s activities. Third parties who are involved in the preparation of improper claims or research credit studies also may be subject to penalties.

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

Five Things to Know About the Child Tax Credit

The Child Tax Credit is a tax credit that may save taxpayers up to $1,000 for each eligible qualifying child. Taxpayers should make sure they qualify before they claim it.

1. Qualifications. For the Child Tax Credit, a qualifying child must pass several tests:
Age.
Relationship.
Support.
Dependent.
Joint return.
Citizenship.
Residence.

2. Limitations. The Child Tax Credit is subject to income limitations. The limits may reduce or eliminate a taxpayer’s credit depending on their filing status and income.

3. Additional Child Tax Credit.  If a taxpayer qualifies and gets less than the full Child Tax Credit, they could receive a refund, even if they owe no tax, with the Additional Child Tax Credit.

4. Schedule 8812. If a taxpayer qualifies to claim the Child Tax Credit, they need to check to see if they must complete and attach Schedule 8812, Child Tax Credit, with their tax return. Taxpayers can visit IRS.gov to view, download or print IRS tax forms anytime.

5. IRS E-file. The easiest way to claim the Child Tax Credit is with IRS E-file. This system is safe, accurate and easy to use. Taxpayers can also use IRS Free File to prepare and e-file their taxes for free. Go to IRS.gov/filing to learn more.

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

Fake Charities on the IRS “Dirty Dozen” List

"Fake charities set up by scam artists to steal your money or personal information are a recurring problem," said IRS Commissioner John Koskinen. "Taxpayers should take the time to research organizations before giving their hard-earned money.”

Compiled annually, the “Dirty Dozen” lists a variety of common scams that taxpayers may encounter anytime, but many of these schemes peak during filing season as people prepare their returns or hire someone to prepare their taxes.

Another long-standing type of abuse or fraud involves scams that occur in the wake of significant natural disasters.

Following major disasters, it’s common for scam artists to impersonate charities to get money or private information from well-intentioned taxpayers. Scam artists can use a variety of tactics. Some scammers operating bogus charities may contact people by telephone or email to solicit money or financial information. They may even directly contact disaster victims and claim to be working for or on behalf of the IRS to help the victims file casualty loss claims and get tax refunds.

Fraudsters may attempt to get personal financial information or Social Security numbers that can be used to steal the victims’ identities or financial resources. Bogus websites may solicit funds for disaster victims.

To help disaster victims, the IRS encourages taxpayers to donate to recognized charities. Disaster victims can call the IRS toll-free disaster assistance telephone number (866-562-5227). Phone assistors will answer questions about tax relief or disaster-related tax issues.

Courtesy of IRS

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

Early Withdrawals from Retirement Plans

Many people find it necessary to take out money early from their IRA or retirement plan. Doing so, however, can trigger an additional tax on top of income tax taxpayers may have to pay. Here are a few key points to know about taking an early distribution:

Early Withdrawals. An early withdrawal normally is taking cash out of a retirement plan before the taxpayer is 59½ years old.

Additional Tax. If a taxpayer took an early withdrawal from a plan last year, they must report it to the IRS. They may have to pay income tax on the amount taken out. If it was an early withdrawal, they may have to pay an additional 10 percent tax.

Nontaxable Withdrawals. The additional 10 percent tax does not apply to nontaxable withdrawals. These include withdrawals of contributions that taxpayers paid tax on before they put them into the plan. A rollover is a form of nontaxable withdrawal. A rollover occurs when people take cash or other assets from one plan and put the money in another plan. They normally have 60 days to complete a rollover to make it tax-free.

Check Exceptions. There are many exceptions to the additional 10 percent tax. Some of the rules for retirement plans are different from the rules for IRAs.

File Form 5329. If someone took an early withdrawal last year, they may have to file Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts, with their federal tax return. Form 5329 has more details.

Use IRS e-file. Early withdrawal rules can be complex. IRS e-file is the easiest and most accurate way to file a tax return. The tax software that taxpayers use to e-file will pick the right tax forms, do the math and help get the tax benefits they are due. Seven out of 10 taxpayers qualify to use IRS Free File tax software. Free File is only available through the IRS website at IRS.gov/freefile.

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

W-2 Scam Targeting Payroll

The Internal Revenue Service, state tax agencies and the tax industry issued an urgent alert today to all employers that the Form W-2 email phishing scam has evolved beyond the corporate world and is spreading to other sectors, including school districts, tribal organizations and nonprofits.

In a related development, the W-2 scammers are coupling their efforts to steal employee W-2 information with an older scheme on wire transfers that is victimizing some organizations twice.

“This is one of the most dangerous email phishing scams we’ve seen in a long time. It can result in the large-scale theft of sensitive data that criminals can use to commit various crimes, including filing fraudulent tax returns. We need everyone’s help to turn the tide against this scheme,’’ said IRS Commissioner John Koskinen.

When employers report W-2 thefts immediately to the IRS, the agency can take steps to help protect employees from tax-related identity theft. The IRS, state tax agencies and the tax industry, working together as the Security Summit, have enacted numerous safeguards in 2016 and 2017 to identify fraudulent returns filed through scams like this. As the Summit partners make progress, cybercriminals need more data to mimic real tax returns.

In the latest twist, the cybercriminal follows up with an “executive” email to the payroll or comptroller and asks that a wire transfer also be made to a certain account. Although not tax related, the wire transfer scam is being coupled with the W-2 scam email, and some companies have lost both employees’ W-2s and thousands of dollars due to wire transfers.

The IRS, states and tax industry urge all employers to share information with their payroll, finance and human resources employees about this W-2 and wire transfer scam. Employers should consider creating an internal policy, if one is lacking, on the distribution of employee W-2 information and conducting wire transfers.

Courtesy of IRS

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

How Exemptions and Dependents Can Reduce Taxable Income

Most taxpayers can claim an exemption for themselves and reduce their taxable income on their tax return. They may also be able to claim an exemption for each of their dependents. Each exemption normally allows them to deduct $4,050 on their 2016 tax return. Here are seven key points to keep in mind on dependents and exemptions:

1. Personal Exemptions.  Taxpayers can usually claim exemptions for themselves and their spouses on a jointly filed tax return.

2. Exemptions for Dependents.  A dependent is either a child or a relative who meets a set of tests. Taxpayers can normally claim dependents as exemptions.

3. No Exemption on Dependent’s Return. If a taxpayer can claim a person as a dependent, then that dependent cannot claim a personal exemption on his or her own tax return.

4. Dependents May Have to File. A dependent may have to file a tax return. This depends on certain factors like total income, whether they are married and if they owe certain taxes.

5. Exemption Phase-Out.  Taxpayers earning above a certain amount will lose part or all the $4,050 exemption.

Courtesy of IRS

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

Things to Remember When Choosing a Tax Preparer

1. Check the Preparer’s Qualifications. Use the IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications. This tool helps taxpayers find a tax return preparer with the qualifications that they prefer. The Directory is a searchable and sortable listing of preparers with a credentials or filing season qualifications.

2. Check the Preparer’s History. Ask the Better Business Bureau about the preparer. Check for disciplinary actions and the license status for credentialed preparers. For CPAs, check with the State Board of Accountancy.

3. Ask about Service Fees. Avoid preparers who base fees on a percentage of the refund or who boast bigger refunds than their competition. When inquiring about a preparer’s services and fees, don’t give them tax documents, Social Security numbers and other information. Some preparers have improperly used this information to file returns without the taxpayer’s permission.

4. Ask to E-file. Taxpayers should make sure their preparer offers IRS e-file. Paid preparers who do taxes for more than 10 clients generally must file electronically.

5. Make Sure the Preparer is Available.

6. Provide Records and Receipts. Good preparers will ask to see a taxpayer’s records and receipts. They’ll ask questions to figure the total income, tax deductions, credits, etc. Taxpayers should not use a preparer who will e-file their return using their last pay stub instead of a Form W-2.

7. Never Sign a Blank Return. Don’t use a tax preparer who asks a taxpayer to sign a blank tax form.

8. Review Before Signing. Before signing a tax return, review it. Ask questions if something is not clear. Taxpayers should feel comfortable with the accuracy of their return before they sign it.

9. Ensure the Preparer Signs and Includes Their PTIN. All paid tax preparers must have a Preparer Tax Identification Number (PTIN).

10. Report Abusive Tax Preparers to the IRS. Most tax return preparers are honest and provide great service to their clients. However, some preparers are dishonest. Report abusive tax preparers and suspected tax fraud to the IRS.

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

Grandparents May Be Eligible for EITC

The Internal Revenue Service wants working grandparents raising grandchildren 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 certain 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.

Grandparents and other relatives care for millions of children, but are often not aware that they could claim the children under their care for the EITC. A grandparent who is working and has a grandchild who is a qualifying child living with him or her may qualify for the EITC, even if the grandparent is 65 years of age or older. Generally, to be a qualified child for EITC purposes, the grandchild must meet the dependency requirements.

Special rules and restrictions apply if the child’s parents or other family members also qualify for the EITC. Details including numerous helpful examples can be found in Publication 596, available on IRS.gov. There are also special rules, described in the publication, for individuals receiving disability benefits and members of the military.

Working grandparents are encouraged to find out, not guess, if they qualify for this very important credit. To qualify for EITC, the taxpayer must have earned income either from a job or from self-employment and meet basic rules. Also, certain disability payments may qualify as earned income for EITC purposes. EITC eligibility also depends on family size. The IRS recommends using the EITC Assistant, on IRS.gov, to determine eligibility, estimate the amount of credit and more.

Courtesy of IRS

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