Time Running Out to Claim $1 Billion in Tax Refunds

Taxpayers who did not file a tax return for 2013 may be one of the nearly 1 million who may be due a refund from that year. Taxpayers must claim their part of almost $1 billion by this year’s April 18 tax deadline. To claim a refund, taxpayers must file a 2013 federal income tax return. Here are some facts about unclaimed refunds:

The unclaimed refunds apply to people who did not file a federal income tax return for 2013. The IRS estimates that half the potential refunds are more than $763.
Some people, such as students and part-time workers, may not have filed because they had too little income to require them to file a tax return. They may have a refund waiting if they had taxes withheld from their wages or made quarterly estimated payments. A refund could also apply if they qualify for certain tax credits, such as the Earned Income Tax Credit.
The law generally provides a three-year window to claim a tax refund. For 2013 returns, the window closes on April 18, 2017.
The law requires that taxpayers properly address, mail and postmark their tax returns by April 18, 2017, to claim their refund.
After three years, unclaimed refunds become property of the U.S. Treasury. There is no penalty for filing a late return if taxpayers are due a refund.
The IRS may hold 2013 refunds if taxpayers have not filed tax returns for 2014 and 2015. The U.S. Treasury will apply the refund to any federal or state tax owed. Refunds may also be held  to offset unpaid child support or past due federal debts such as student loans.
Taxpayers who are missing Forms W-2, 1098, 1099 or 5498 for prior years should ask for copies from employers, banks or other payers. Taxpayers unable to get these copies can request a wage and income transcript either online or by mail.  Taxpayers can also file Form 4506-T to get a transcript.
The three-year window also usually applies to a refund from an amended return. In general, you must file Form 1040X, Amended U.S. Individual Income Tax Return, within three years from the date you filed your original tax return. You can also file it within two years from the date you paid the tax, if that date is later than the three-year rule. That means the deadline for most people to amend their 2013 tax return and claim a refund will expire on April 18, 2017.

Courtesy of IRS

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

Debt Cancellation May be Taxable

If a lender cancels part or all of a debt, a taxpayer must generally consider this as income. However, the law allows an exclusion that may apply to homeowners who had their mortgage debt canceled in 2016.

Main Home. If the canceled debt was a loan on a taxpayer’s main home, they may be  able to exclude the canceled amount from their income.

Loan Modification. If a taxpayer’s lender canceled or reduced part of their mortgage balance through a loan modification or ‘workout,’ the taxpayer may be able to exclude that amount from their income.

Refinanced Mortgage. The exclusion may apply to amounts canceled on a refinanced mortgage.

Other Canceled Debt. Other types of canceled debt such as second homes, rental and business property, credit card debt or car loans do not qualify for this special exclusion.

Courtesy of IRS

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

Get Prior Year Tax Information from the IRS

There are many reasons to keep a copy of a tax return from a prior year. The IRS urges all taxpayers to keep copies of their tax returns for at least three years.

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.

Those who need a copy of their tax return should check with their software provider or tax preparer. Prior year tax returns are available from IRS for a fee.

Tax Transcripts

Taxpayers who cannot get a copy of a prior year return may order a tax transcript from the IRS. A transcript summarizes return information and includes AGI. They are free and available for the most current tax year after the IRS has processed the return. People can also get them for the past three years.

In applying for home mortgages or college financial aid, transcripts are often necessary. Mortgage companies, however, normally arrange to get one for a homeowner or potential homeowner. For people applying for college financial aid, they should use the IRS Data Retrieval Tool on the Department of Education website. This tool will easily import the tax transcript onto the financial aid application.

Taxpayers can get two types of transcripts from the IRS:

Tax Return Transcript.  A return transcript shows most line items on a tax return as originally filed. People who need their 2015 adjusted gross income for filing purposes will select this type of transcript and look for “adjusted gross income.”
Tax Account Transcript.  This type of transcript shows adjustments or amendments made by taxpayers or by the IRS to a filed return.

Courtesy of IRS

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

IRS Has Refunds Totaling $1 Billion for People Who Have Not Filed a 2013 Federal Income Tax Return

The Internal Revenue Service announced today that unclaimed federal income tax refunds totaling more than $1 billion may be waiting for an estimated 1 million taxpayers who did not file a 2013 federal income tax return.

To collect the money, taxpayers must file a 2013 tax return with the IRS no later than this year's tax deadline, Tuesday, April 18.

"We’re trying to connect a million people with their share of 1 billion dollars in unclaimed refunds for the 2013 tax year,” said IRS Commissioner John Koskinen. “People across the nation haven’t filed tax returns to claim these refunds, and their window of opportunity is closing soon. Students and many others may not realize they’re due a tax refund. Remember, there’s no penalty for filing a late return if you’re due a refund.”

The IRS estimates the midpoint for potential refunds for 2013 to be $763; half of the refunds are more than $763 and half are less.

In cases where a tax return was not filed, the law provides most taxpayers with a three-year window of opportunity for claiming a refund. If they do not file a return within three years, the money becomes the property of the U.S. Treasury. For 2013 tax returns, the window closes April 18, 2017. The law requires taxpayers to properly address mail and postmark the tax return by that date.

The IRS reminds taxpayers seeking a 2013 refund that their checks may be held if they have not filed tax returns for 2014 and 2015. In addition, the refund will be applied to any amounts still owed to the IRS, or a state tax agency, and may be used to offset unpaid child support or past due federal debts, such as student loans.

Courtesy of IRS

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

Get Credit for Making a Home Energy Efficient

Taxpayers who made certain energy efficient improvements to their home last year may qualify for a tax credit this year. Here are some key facts to know about home energy tax credits:

Non-Business Energy Property Credit

• Part of this credit is worth 10 percent of the cost of certain qualified energy-saving items added to a taxpayer’s main home last year. Qualified improvements include adding insulation, energy-efficient exterior windows and doors, and certain roofs. Do not include the cost to install these items.
• The other part of the credit is not a percentage of the cost. It includes the installation costs of certain high-efficiency heating and air-conditioning systems, high-efficiency water heaters and stoves that burn biomass fuel. The credit amount for each type of property has a different dollar limit.
• This credit has a maximum lifetime limit of $500. Taxpayers may only use $200 of this limit for windows.
• A taxpayer’s main home must be located in the U.S. to qualify for the credit. The non-business energy property credit is only available for existing homes.
• Be sure to have the written certification from the manufacturer that their product qualifies for this tax credit. They usually post it on their website or include it with the product’s packaging. Taxpayers can use this to claim the credit. Do not attach it to a tax return. Keep it with tax records.
• Taxpayers may claim the credit on their 2016 tax return if they didn’t reach the lifetime limit in past years. Under current law, Dec. 31, 2016, was the deadline for qualifying improvements to the taxpayer’s main U. S. home.

Residential Energy Efficient Property Credit

• This tax credit is 30 percent of the cost of alternative energy equipment installed on or in a home. This includes the cost of installation.
• Qualified equipment includes solar hot water heaters, solar electric equipment, wind turbines and fuel cell property.
• There is no dollar limit on the credit for most types of property. If the credit is more than the tax owed, carry forward the unused portion of this credit to next year’s tax return.
• The home must be in the U.S. It does not have to be a taxpayer’s main home, unless the alternative energy equipment is qualified fuel cell property. The residential energy efficient property credit is available for both existing homes and homes under construction.
• This credit is available through 2016.

Courtesy of IRS

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

IRS Can Help Taxpayers Get Form W-2

Most taxpayers got their W-2 Forms by the end of January. Form W-2, Wage and Tax Statement, shows the income and taxes withheld from an employee’s pay for the year. Taxpayers need it to file an accurate tax return.

If a taxpayer hasn’t received their form by mid-February, here’s what they should do:

Contact their Employer. Taxpayers should ask their employer (or former employer) for a copy of their W-2. Be sure the employer has the correct address.
Call the IRS. If a taxpayer is unable to get a copy from their employer, they may call the IRS after Feb. 27. The IRS will send a letter to the employer on the taxpayer’s behalf. The taxpayer will need the following when they call:
Their name, address, Social Security number and phone number;
Their employer’s name, address and phone number;
The dates they worked for the employer; and
An estimate of their wages and federal income tax withheld in 2016. Use a final pay stub for these amounts.
File on Time. Taxpayers should file their tax return by April 18, 2017. If they still haven’t received their W-2, they should use Form 4852, Substitute for Form W-2, Wage and Tax Statement. They should estimate their wages and taxes withheld as best as possible. To request more time to file, use Form 4868, Application for Automatic Extension of Time to File. Taxpayers can also e-file a request for more time. Do it for free using IRS Free File. However, remember, an extension of time to file your return is not an extension of time to pay taxes owed.
Correct a Tax Return if Necessary. Taxpayers may need to correct their tax return if they get a missing W-2 after they file. If the tax information on the W-2 is different from what they originally reported, they may need to file an amended tax return. Use Form 1040X, Amended U.S. Individual Income Tax Return, to make the change.

Courtesy of IRS

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

Use Free File for Help with Tax Returns

The Internal Revenue Service today reminded the millions of taxpayers who have yet to file their taxes that IRS Free File remains available either online at IRS.gov/FreeFile or through the mobile app, IRS2Go. The IRS2Go app is available for Android and iOS devices.
The IRS Free File service makes brand-name tax software products and electronic filing available to most taxpayers for free. Some products offer both free federal and free state return preparation.
The IRS has developed a series of tips, the Tax Time Guide, to help taxpayers navigate common tax issues as this year’s April 18 deadline approaches. This is the second in a series of 10 tips.
Taxpayers have the option to prepare their return at any time and schedule a tax payment as late as the April 18deadline. Taxpayers who cannot meet the April tax filing deadline can also use IRS Free File to request an automatic six-month extension until Monday, Oct. 16, 2017.
Through a partnership between the IRS and the Free File Alliance, a group of 12 leading tax software companies makes their branded products available for free. Since 2003, more than 49 million people have used IRS Free File, saving $1.4 billion based on a conservative $30 fee estimate.
Anyone who earned $64,000 or less last year qualifies to choose from among 12 software products. Those earning more than $64,000 can use IRS Free File Fillable Forms, the electronic version of IRS paper forms. The Fillable Forms option is best for people who are comfortable preparing their own tax returns.

Courtesy of IRS

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