WASHINGTON — A crucial filing deadline of May 17 is looming for many tax-exempt organizations that are required by law to file their Form 990 with the Internal Revenue Service or risk having their federal tax-exempt status revoked. 

The Pension Protection Act of 2006 mandates that all non-profit organizations, other than churches and church related organizations, must file an information form with the IRS.  This requirement has been in effect since the beginning of 2007, which made 2009 the third consecutive year under the new law. Any organization that fails to file for three consecutive years automatically loses its federal tax-exempt status.

Form 990-series information returns are due on the 15th day of the fifth month after an organization’s fiscal year ends. Many organizations use the calendar year as their fiscal year, which makes May 15 the deadline for those tax-exempt organizations. May 15 falls on a Saturday this year so the deadline this year is actually Monday, May 17.  Organizations can request an extension of their filing date by filing Form 8868 by the original due date. 

Absent a request for extension, there is no grace period from filing by the original due date.

Small tax-exempt organizations with annual receipts of $25,000 or less can file an electronic notice Form 990-N (e-Postcard). This asks for a few basic pieces of information. Tax-exempts with annual receipts above $25,000 must file a Form 990 or 990-EZ, depending on their annual receipts. Private foundations file form 990-PF.

Any tax-exempt organization that has not filed the required form in the last three years automatically will lose its tax exempt status effective as of the due date of the annual filing. Under the law, the IRS does not have discretion in this matter.

A list of revoked organizations will be available to the public on IRS.gov.

If an organization loses its exemption, it will have to reapply with the IRS to regain its tax-exempt status. Any income received between the revocation date and renewed exemption may be taxable.

For more information, see the Exempt Organizations: Status Revoked for not Filing Annual Returns or Notices page on this website; or the ABC's for Exempt Organizations page.

There are many records you have that may help document items on your tax return. You’ll need this documentation should the IRS select your return for examination. Here are five tips from the IRS about keeping good records.

1. Normally, tax records should be kept for three years.
   
   
2. Some documents — such as records relating to a home purchase or sale, stock transactions, IRA and business or rental property — should be kept longer.
   
   
3. In most cases, the IRS does not require you to keep records in any special manner. Generally speaking, however, you should keep any and all documents that may have an impact on your federal tax return.
   
   
4. Records you should keep include bills, credit card and other receipts, invoices, mileage logs, canceled, imaged or substitute checks, proofs of payment, and any other records to support deductions or credits you claim on your return.
   
   
5. For more information on what kinds of records to keep, see IRS Publication 552, Recordkeeping for Individuals, which is available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

WASHINGTON — As a result of changes made by the recently enacted Affordable Care Act, health coverage provided for an employee's children under 27 years of age is now generally tax-free to the employee, effective March 30, 2010.

The Internal Revenue Service announced today that these changes immediately allow employers with cafeteria plans –– plans that allow employees to choose from a menu of tax-free benefit options and cash or taxable benefits –– to permit employees to begin making pre-tax contributions to pay for this expanded benefit.

IRS Notice 2010-38 explains these changes and provides further guidance to employers, employees, health insurers and other interested taxpayers.

“These changes give employers a unique opportunity to offer a worthwhile benefit to their employees,” IRS Commissioner Doug Shulman said. “We want to make it as easy as possible for employers to quickly implement this change and extend health coverage on a tax-favored basis to older children of their employees.”

This expanded health care tax benefit applies to various workplace and retiree health plans. It also applies to self-employed individuals who qualify for the self-employed health insurance deduction on their federal income tax return.

Employees who have children who will not have reached age 27 by the end of the year are eligible for the new tax benefit from March 30, 2010, forward, if the children are already covered under the employer’s plan or are added to the employer’s plan at any time. For this purpose, a child includes a son, daughter, stepchild, adopted child or eligible foster child. This new age 27 standard replaces the lower age limits that applied under prior tax law, as well as the requirement that a child generally qualify as a dependent for tax purposes.

The notice says that employers with cafeteria plans may permit employees to immediately make pre-tax salary reduction contributions to provide coverage for children under age 27, even if the cafeteria plan has not yet been amended to cover these individuals. Plan sponsors then have until the end of 2010 to amend their cafeteria plan language to incorporate this change.

In addition to changing the tax rules as described above, the Affordable Care Act also requires plans that provide dependent coverage of children to continue to make the coverage available for an adult child until the child turns age 26. The extended coverage must be provided not later than plan years beginning on or after Sept. 23, 2010. The favorable tax treatment described in the notice applies to that extended coverage.

Information on other health care provisions can be found on this website, IRS.gov.

WASHINGTON ― The Internal Revenue Service this week began mailing postcards to more than four million small businesses and tax-exempt organizations to make them aware of the benefits of the recently enacted small business health care tax credit.

Included in the Patient Protection and Affordable Care Act approved by Congress last month and signed into law by President Obama, the credit is one of the first health care reform provisions to go into effect. The credit, which takes effect this year, is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have.

“We want to make sure small employers across the nation realize that –– effective this tax year –– they may be eligible for a valuable new tax credit. Our postcard mailing –– which is targeted at small employers –– is intended to get the attention of small employers and encourage them to find out more," IRS Commissioner Doug Shulman said. “We urge every small employer to take advantage of this credit if they qualify.”

In general, the credit is available to small employers that pay at least half the cost of single coverage for their employees in 2010. The credit is specifically targeted to help small businesses and tax-exempt organizations that primarily employ low- and moderate-income workers.

For tax years 2010 to 2013, the maximum credit is 35 percent of premiums paid by eligible small business employers and 25 percent of premiums paid by eligible employers that are tax-exempt organizations. The maximum credit goes to smaller employers –– those with 10 or fewer full-time equivalent (FTE) employees –– paying annual average wages of $25,000 or less. Because the eligibility rules are based in part on the number of FTEs, not the number of employees, businesses that use part-time help may qualify even if they employ more than 25 individuals. The credit is completely phased out for employers that have 25 FTEs or more or that pay average wages of $50,000 per year or more.

Eligible small businesses can claim the credit as part of the general business credit starting with the 2010 income tax return they file in 2011. For tax-exempt organizations, the IRS will provide further information on how to claim the credit.

The Internal Revenue Service sends millions of letters and notices to taxpayers every year. Here are eight things taxpayers should know about IRS notices – just in case one shows up in your mailbox.

1. Don’t panic. Many of these letters can be dealt with simply and painlessly.
2. There are a number of reasons why the IRS might send you a notice. Notices may request payment of taxes, notify you of changes to your account, or request additional information. The notice you receive normally covers a very specific issue about your account or tax return.
3. Each letter and notice offers specific instructions on what you are asked to do to satisfy the inquiry.
4. If you receive a correction notice, you should review the correspondence and compare it with the information on your return.
5. If you agree with the correction to your account, then usually no reply is necessary unless a payment is due or the notice directs otherwise.
6. If you do not agree with the correction the IRS made, it is important that you respond as requested. You should send a written explanation of why you disagree and include any documents and information you want the IRS to consider, along with the bottom tear-off portion of the notice. Mail the information to the IRS address shown in the upper left-hand corner of the notice. Allow at least 30 days for a response.
7. Most correspondence can be handled without calling or visiting an IRS office. However, if you have questions, call the telephone number in the upper right-hand corner of the notice. Have a copy of your tax return and the correspondence available when you call to help us respond to your inquiry.
8. It’s important that you keep copies of any correspondence with your records.

For more information about IRS notices and bills, see Publication 594, The IRS Collection Process. Information about penalties and interest is available in Publication 17, Your Federal Income Tax for Individuals. Both publications are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

There is still time to claim the First-Time Homebuyer Tax Credit on your 2009 tax return. If you purchased or entered into a binding contract to purchase a home in 2009 or early 2010, you may be eligible to claim the First-Time Homebuyer Credit. Claiming this credit might mean a larger refund. Here are 10 things the IRS wants you to know about the First-Time Homebuyer Credit and how to claim it.

1. You must buy – or enter into a binding contract to buy – a principal residence located in the United States on or before April 30, 2010. If you enter into a binding contract by April 30, 2010, you must close on the home on or before June 30, 2010.
2. To be considered a first-time homebuyer, you and your spouse – if you are married – must not have jointly or separately owned another principal residence during the three years prior to the date of purchase.
3. To be considered a long-time resident homebuyer, you and your spouse – if you are married – must have lived in the same principal residence for any consecutive five-year period during the eight-year period that ended on the date the new home is purchased. Additionally, your settlement date must be after November 6, 2009.
4. The maximum credit for a first-time homebuyer is $8,000. The maximum credit for a long-time resident homebuyer is $6,500.
5. You must file a paper return and attach Form 5405, First-Time Homebuyer Credit and Repayment of the Credit with additional documents to verify the purchase. Though you cannot file electronically, you can still use IRS Free File or tax-preparation software to prepare your return. The return must then be printed out and sent to the IRS, along with all required documentation.
6. If before May 1, 2010, you enter into a binding contract to purchase a home before July 1, 2010, and you are claiming the credit, attach a copy of the pages from the signed binding contract to make a purchase showing all parties' names and signatures, the property address, the purchase price and the date of the contract. 
7. New homebuyers must attach a copy of a properly executed settlement statement used to complete such purchase. Generally, a properly executed settlement statement shows all parties' names and signatures, property address, sales price and date of purchase. However, settlement documents, including the Form HUD-1, can vary from one location to another and may not include the signatures of both the buyer and seller. In areas where signatures are not required on the settlement document, the IRS encourages buyers to sign the settlement statement when they file their tax return -- even in cases where the settlement form does not include a signature line.
8. Buyers of a newly constructed home, where a settlement statement is not available, must attach a copy of the certificate of occupancy showing the owner’s name, property address and date of the certificate.
9. Purchasers of mobile homes who are unable to get a settlement statement must attach a copy of the executed retail sales contract showing all parties' names and signatures, property address, purchase price and date of purchase.
10. If you are a long-time resident claiming the credit, the IRS recommends that you also attach documentation covering the five-consecutive-year period such as Form 1098, Mortgage Interest Statement or substitute mortgage interest statements, property tax records or homeowner’s insurance records.

For more information about the First-Time Homebuyer Tax Credit and the documentation requirements, visit IRS.gov/recovery.

When you invest in energy-efficient products, you may be saving money on both your energy bills and your tax return. The Internal Revenue Service wants you to know about these six energy-related tax credits created or expanded by the American Recovery and Reinvestment Act of 2009.

1. Residential Energy Property Credit This tax credit is for homeowners who make qualified energy efficient improvements to their existing homes. This credit is 30 percent of the cost of all qualifying improvements. The maximum credit is $1,500 for improvements placed in service in 2009 and 2010 combined. The credit applies to improvements such as adding insulation, energy efficient exterior windows and energy-efficient heating and air conditioning systems.
2. Residential Energy Efficient Property Credit This tax credit will help individual taxpayers pay for qualified residential alternative energy equipment, such as solar hot water heaters, solar electricity equipment and wind turbines installed on or in connection with their home located in the United States and geothermal heat pumps installed on or in connection with their main home located in the United States.The credit, which runs through 2016, is 30 percent of the cost of qualified property. ARRA removes some of the previously imposed annual maximum dollar limits.
3. Plug-in Electric Drive Vehicle Credit ARRA modifies this credit for qualified plug-in electric drive vehicles purchased after Dec. 31, 2009. The minimum amount of the credit for qualified plug-in electric drive vehicles, which runs through 2014, is $2,500 and the credit tops out at $7,500, depending on the battery capacity. ARRA phases out the credit for each manufacturer after they sell 200,000 vehicles.
4. Plug-in Electric Vehicle Credit This is a special tax credit for two types of plug-in vehicles — certain low-speed electric vehicles and two- or three-wheeled vehicles. The amount of the credit is 10 percent of the cost of the vehicle, up to a maximum credit of $2,500 for purchases made after Feb. 17, 2009, and before Jan. 1, 2012.
5. Credit for Conversion Kits This credit is equal to 10 percent of the cost of converting a vehicle to a qualified plug-in electric drive motor vehicle that is placed in service after Feb. 17, 2009. The maximum credit, which runs through 2011, is $4,000.
6. Treatment of Alternative Motor Vehicle Credit as a Personal Credit Allowed Against AMT Starting in 2009, ARRA allows the Alternative Motor Vehicle Credit, including the tax credit for purchasing hybrid vehicles, to be applied against the Alternative Minimum Tax. Prior to the new law, the Alternative Motor Vehicle Credit could not be used to offset the AMT. This means the credit could not be taken if a taxpayer owed AMT or was reduced for some taxpayers who did not owe AMT.

Are you expecting a refund from the IRS this year? Here are the top 10 things you should know about your refund.

1. Refund Options You have three options for receiving your individual federal income tax refund: a paper check, direct deposit or U.S. Savings Bonds. You can now use your refund to buy up to $5,000 in U.S. Series I savings bonds in multiples of $50.
2. Separate Accounts You may use Form 8888, Direct Deposit of Refund to More Than One Account, to request that your refund be allocated by direct deposit among up to three separate accounts, such as checking or savings or retirement accounts. You may also use this form to buy U.S Savings Bonds.
3. Paper Return Processing Time If you file a complete and accurate paper tax return, your refund will usually be issued within six weeks from the date it is received.
4. Returns Filed Electronically If you filed electronically, your refund will normally be issued within three weeks after the acknowledgment date.
5. Check the Status Online The fastest and easiest way to find out about your current year refund is to go to IRS.gov and click the “Where’s My Refund?” link at the IRS.gov home page. To check the status online you will need your Social Security number, filing status and the exact whole dollar amount of your refund shown on your return.
6. Check the Status By Phone You can check the status of your refund by calling the IRS Refund Hotline at 800–829–1954. When you call, you will need to provide your Social Security number, your filing status and the exact whole dollar amount of the refund shown on your return.
7. Delayed Refund There are several reasons for delayed refunds. For things that may delay the processing of your return, refer to Tax Topic 303 at IRS.gov, which includes a Checklist of Common Errors When Preparing Your Tax Return.
8. Larger than Expected Refund If you receive a refund to which you are not entitled, or one for an amount that is more than you expected, do not cash the check until you receive a notice explaining the difference. Follow the instructions on the notice.
9. Smaller than Expected Refund If you receive a refund for a smaller amount than you expected, you may cash the check. If it is determined that you should have received more, you will later receive a check for the difference. If you did not receive a notice and you have questions about the amount of your refund, wait two weeks after receiving the refund, then call 800–829–1040.
10. Missing Refund The IRS will assist you in obtaining a replacement check for a refund check that is verified as lost or stolen. If the IRS was unable to deliver your refund because you moved, you can change your address online. Once your address has been changed, the IRS can reissue the undelivered check.

For more information, visit IRS.gov or call 800-829-1040.

Every year, millions of taxpayers donate money to charitable organizations. The IRS has put together the following list of six things you should know about the tax treatment of tax-exempt organizations.

1. Annual returns are made available to the public. Exempt organizations generally must make their annual returns available for public inspection. This also includes the organization’s application for exemption. In addition, an organization exempt under 501(c)(3) must make available any Form 990-T, Exempt Organization Business Income Tax Return. These documents must be made available to any individual who requests them, and must be made available immediately when the request is made in person. If the request is made in writing, an organization has 30 days to provide a copy of the information, unless it makes the information widely available.
2. Donor lists generally are not public information. The list of donors filed with Form 990, Return of Organization Exempt From Income Tax, is specifically excluded from the information required to be made available for public inspection by the exempt organization. There is an exception, private foundations and political organizations must make their donor list available to the public.
3. How to find tax-exempt organizations. The easiest way to find out whether an organization is qualified to receive deductible contributions is to ask them. You can ask to see an organization's exemption letter, which states the Code section that describes the organization and whether contributions made to the organization are deductible. You can also search for organizations qualified to accept deductible contributions in IRS Publication 78, Cumulative List of Organizations and its Addendum, available at IRS.gov. Taxpayers can also confirm an organization’s status by calling the IRS at 877-829-5000.
4. Which organizations may accept charitable contributions. Not all exempt organizations are eligible to receive tax-deductible charitable contributions. Organizations that are eligible to receive deductible contributions include most charities described in section 501(c)(3) of the Internal Revenue Code and, in some circumstances, fraternal organizations described in section 501(c)(8) or section 501(c)(10), cemetery companies described in section 501(c)(13), volunteer fire departments described in section 501(c)(4), and veterans organizations described in section 501(c)(4) or 501(c)(19).
5. Requirement for organizations not able to accept deductible contributions. If an exempt organization is ineligible to receive tax-deductible contributions, it must disclose that fact when soliciting contributions.
6. How to report inappropriate activities by an exempt organization. If you believe that the activities or operations of a tax-exempt organization are inconsistent with its tax-exempt status, you may file a complaint with the Exempt Organizations Examination Division by completing Form 13909, Tax-Exempt Organization Complaint (Referral) Form. The complaint should contain all relevant facts concerning the alleged violation of tax law. Form 13909 is available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Two New Tax Benefits Aid Employers Who Hire and Retain Unemployed Workers

WASHINGTON — Two new tax benefits are now available to employers hiring workers who were previously unemployed or only working part time. These provisions are part of the Hiring Incentives to Restore Employment (HIRE) Act enacted into law today.

Employers who hire unemployed workers this year (after Feb. 3, 2010 and before Jan. 1, 2011) may qualify for a 6.2-percent payroll tax incentive, in effect exempting them from their share of Social Security taxes on wages paid to these workers after the date of enactment. This reduced tax withholding will have no effect on the employee’s future Social Security benefits, and employers would still need to withhold the employee’s 6.2-percent share of Social Security taxes, as well as income taxes. The employer and employee’s shares of Medicare taxes would also still apply to these wages.

In addition, for each worker retained for at least a year, businesses may claim an additional general business tax credit, up to $1,000 per worker, when they file their 2011 income tax returns.

“These tax breaks offer a much-needed boost to employers willing to expand their payrolls, and businesses and nonprofits should keep these benefits in mind as they plan for the year ahead,” said IRS Commissioner Doug Shulman.

The two tax benefits are especially helpful to employers who are adding positions to their payrolls. New hires filling existing positions also qualify but only if the workers they are replacing left voluntarily or for cause. Family members and other relatives do not qualify.

In addition, the new law requires that the employer get a statement from each eligible new hire certifying that he or she was unemployed during the 60 days before beginning work or, alternatively, worked fewer than a total of 40 hours for someone else during the 60-day period. The IRS is currently developing a form employees can use to make the required statement.

Businesses, agricultural employers, tax-exempt organizations and public colleges and universities all qualify to claim the payroll tax benefit for eligible newly-hired employees. Household employers cannot claim this new tax benefit.

Employers claim the payroll tax benefit on the federal employment tax return they file, usually quarterly, with the IRS. Eligible employers will be able to claim the new tax incentive on their revised employment tax form for the second quarter of 2010. Revised forms and further details on these two new tax provisions will be posted on IRS.gov during the next few weeks.
 

The Health Coverage Tax Credit pays 80 percent of health insurance premiums for eligible taxpayers and their qualified family members. However, many people who could be receiving this valuable credit don’t know about it, and are missing out on big savings that can help them and their families keep their health insurance.

Here are the top eight things the IRS wants you to know about the HCTC:

1. The HCTC pays 80 percent of an eligible taxpayer’s health insurance premiums.
2. The HCTC is a refundable credit, which means it not only reduces a taxpayer’s tax liability but also may result in cash back in his or her pocket at the end of the year.
3. Taxpayers can receive the HCTC monthly—when their health plan premiums are due—or as a yearly tax credit.
4. Nationwide, thousands of people are eligible for the HCTC.
5. You may be eligible for the HCTC if you receive Trade Readjustment Allowances—or unemployment insurance in lieu of TRA—through one of the Trade Adjustment Assistance programs.
6. You also may be eligible for the HCTC if you are a Pension Benefit Guaranty Corporation payee and are 55 years old or older.
7. The most common types of health plans that qualify for the HCTC include COBRA, state-qualified health plans, and spousal coverage. In some cases, non-group/individual plans and health plans associated with Voluntary Employee Benefit Associations established in lieu of COBRA plans also qualify.
8. HCTC candidates receive the HCTC Program Kit by mail. The Kit explains the tax credit and provides a simple checklist to determine eligibility. Also included in the Kit is the HCTC Registration Form.

For more information on the HCTC and how it may benefit you, call the HCTC Customer Contact Center toll free at 1-866-628-HCTC (4282). If you have a hearing impairment, please call 1-866-626-4282 (TTY). You also can visit the HCTC online at www.IRS.gov/hctc.

The tax filing deadline is approaching. If you don’t file your return and pay your tax by the due date you may have to pay a penalty. Here are nine things the IRS wants you to know about the two different penalties you may face if you do not pay or file on time.

1. If you do not file by the deadline, you might face a failure-to-file penalty.
2. If you do not pay by the due date, you could face a failure-to-pay penalty.
3. The failure-to-file penalty is generally more than the failure-to-pay penalty. So if you cannot pay all the taxes you owe, you should still file your tax return and explore other payment options in the meantime.
4. The penalty for filing late is usually 5 percent of the unpaid taxes for each month or part of a month that a return is late. This penalty will not exceed 25 percent of your unpaid taxes.
5. If you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax.
6. You will have to pay a failure-to-pay penalty of ½ of 1 percent of your unpaid taxes for each month or part of a month after the due date that the taxes are not paid. This penalty can be as much as 25 percent of your unpaid taxes.
7. If you filed an extension and you paid at least 90 percent of your actual tax liability by the due date, you will not be faced with a failure-to-pay penalty if the remaining balance is paid by the extended due date.
8. If both the failure-to-file penalty and the failure-to-pay penalty apply in any month, the 5 percent failure-to-file penalty is reduced by the failure-to-pay penalty. However, if you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100% of the unpaid tax.
9. You will not have to pay a failure-to-file or failure-to-pay penalty if you can show that you failed to file or pay on time because of reasonable cause and not because of willful neglect.

Most taxpayers have a choice of either taking a standard deduction or itemizing their deductions. If you have a choice, you can use the method that gives you the lowest tax.

Whether to itemize deductions on your tax return depends on how much you spent on certain expenses last year. Money paid for medical care, mortgage interest, taxes, charitable contributions, casualty losses and miscellaneous deductions can reduce your taxes. If the total amount spent on those categories is more than your standard deduction, you can usually benefit by itemizing.

The standard deduction amounts are based on your filing status and are subject to inflation adjustments each year. For 2009, they are:

• $5,700 for Single
• $11,400 for Married Filing Jointly
• $8,350 for Head of Household
• $5,700 for Married Filing Separately
• $11,400 for Qualifying Widow(er)

Some taxpayers have different standard deductions The standard deduction amount depends on your filing status, whether you are 65 or older or blind and whether an exemption can be claimed for you by another taxpayer. If any of these apply, you must use the Standard Deduction Worksheet on the back of Form 1040EZ, or in the 1040A or 1040 instructions. The standard deduction amount also depends on whether you plan to claim the additional standard deduction for state and local real estate taxes or state or local excise tax on a new vehicle, and whether you have a net disaster loss from a federally declared disaster. You must file Schedule L, Standard Deduction for Certain Filers to claim these additional amounts.

Limited itemized deductions Your itemized deductions may be limited if your adjusted gross income is more than $166,800 or $83,400 if you are married filing separately. This limit applies to all itemized deductions except medical and dental expenses, casualty and theft losses of personal use and income producing property, gambling losses and investment interest expenses.

Married Filing Separately When a married couple files separate returns and one spouse itemizes deductions, the other spouse cannot claim the standard deduction and should itemize their deductions.

Some taxpayers are not eligible for the standard deduction They include nonresident aliens, dual-status aliens and individuals who file returns for periods of less than 12 months due to a change in accounting periods.

Forms to use The standard deduction can be taken on Forms 1040, 1040A or 1040EZ.  If you qualify for the higher standard deduction for real estate taxes, new motor vehicle taxes, or a net disaster loss, you must attach Schedule L. To itemize your deductions, use Form 1040, U.S. Individual Income Tax Return, and Schedule A, Itemized Deductions.

These forms and instructions may be downloaded from the IRS.gov Web site or ordered by calling 800-TAX-FORM (800-829-3676).

The IRS wants taxpayers who pay state or local real estate taxes but don’t qualify to itemize their tax deductions, to know that they may qualify for an increased standard deduction. This is the last year that the higher standard deduction for real estate taxes is available.

Here are six things you need to know about the higher standard deduction for real estate taxes:

1. The additional deduction amount is equal to the amount of real estate taxes paid, or $500 for single filers or $1,000 for joint filers, whichever is less.
2. The taxes must be imposed on you.
3. You must have paid the taxes during your tax year.
4. The taxes must be levied for general public welfare on the assessed value of the real property and charged uniformly on all property under the jurisdiction of the taxing authority. Many states and counties also impose local benefit taxes for improvements to property, such as assessments for streets, sidewalks and sewer lines. These taxes usually cannot be deducted.
5. Real estate taxes paid on foreign or business property do not qualify for the increased standard deduction.
6. You must file a Form 1040 or 1040A and attach Schedule L, Standard Deduction for Certain Filers, to claim the increased deduction. When claiming the higher standard deduction for real estate taxes, be sure to check the box on line 40b of Form 1040 or line 24b of Form 1040A.

For more information, see Form 1040 or 1040A Instructions and Schedule L instructions. The forms and instructions can be downloaded at IRS.gov or ordered by calling 800-TAX-FORM (800-829-3676).

If your mortgage debt is partly or entirely forgiven during tax years 2007 through 2012, you may be able to claim special tax relief and exclude the debt forgiven from your income. Here are 10 facts the IRS wants you to know about Mortgage Debt Forgiveness.

1. Normally, debt forgiveness results in taxable income. However, under the Mortgage Forgiveness Debt Relief Act of 2007, you may be able to exclude up to $2 million of debt forgiven on your principal residence.
2. The limit is $1 million for a married person filing a separate return.
3. You may exclude debt reduced through mortgage restructuring, as well as mortgage debt forgiven in a foreclosure.
4. To qualify, the debt must have been used to buy, build or substantially improve your principal residence and be secured by that residence.
5. Refinanced debt proceeds used for the purpose of substantially improving your principal residence also qualify for the exclusion.
6. Proceeds of refinanced debt used for other purposes – for example, to pay off credit card debt – do not qualify for the exclusion.
7. If you qualify, claim the special exclusion by filling out Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness, and attach it to your federal income tax return for the tax year in which the qualified debt was forgiven.
8. Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the tax relief provision. In some cases, however, other tax relief provisions – such as insolvency – may be applicable. IRS Form 982 provides more details about these provisions.
9. If your debt is reduced or eliminated you normally will receive a year-end statement, Form 1099-C, Cancellation of Debt, from your lender. By law, this form must show the amount of debt forgiven and the fair market value of any property foreclosed.
10. Examine the Form 1099-C carefully. Notify the lender immediately if any of the information shown is incorrect. You should pay particular attention to the amount of debt forgiven in Box 2 as well as the value listed for your home in Box 7.

For more information about the Mortgage Forgiveness Debt Relief Act of 2007, visit IRS.gov. A good resource is IRS Publication 4681, Canceled Debts, Foreclosures, Repossessions and Abandonments. Taxpayers may obtain a copy of this publication and Form 982 either by downloading them from IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Washington — Unclaimed refunds totaling more than $1.3 billion are awaiting nearly 1.4 million people who did not file a federal income tax return for 2006, the Internal Revenue Service announced today. However, to collect the money, a return for 2006 must be filed with the IRS no later than Thursday, April 15, 2010.

The IRS estimates that the median unclaimed refund for tax-year 2006 is $604.

Some people may not have filed because they had too little income to require filing a tax return even though they had taxes withheld from their wages or made quarterly estimated payments. In cases where a return was not filed, the law provides most taxpayers with a three-year window of opportunity for claiming a refund. If no return is filed to claim the refund within three years, the money becomes property of the U.S. Treasury.

For 2006 returns, the window closes on April 15, 2010. The law requires that the return be properly addressed, mailed and postmarked by that date. There is no penalty for filing a late return qualifying for a refund. Though back-year tax returns cannot be filed electronically, taxpayers can still speed up their refunds by choosing to have them deposited directly into a checking or savings account.

The IRS reminds taxpayers seeking a 2006 refund that their checks will be held if they have not filed tax returns for 2007 or 2008. In addition, the refund will be applied to any amounts still owed to the IRS and may be used to satisfy unpaid child support or past due federal debts such as student loans.

By failing to file a return, people stand to lose more than refunds of taxes withheld or paid during 2006. For example, most telephone customers, including most cell-phone users, qualify for the one-time telephone excise tax refund. Available only on the 2006 return, this special payment applies to long-distance excise taxes paid on phone service billed from March 2003 through July 2006. The government offers a standard refund amount of $30 to $60, or taxpayers can base their refund request on the actual amount of tax paid. For details, see the Telephone Excise Tax Refund page on IRS.gov.

In addition, many low-and-moderate income workers may not have claimed the Earned Income Tax Credit (EITC). The EITC helps individuals and families whose incomes are below certain thresholds, which in 2006 were $38,348 for those with two or more children, $34,001 for people with one child and $14,120 for those with no children. For more information, visit the EITC Home Page.

Current and prior year  tax forms and instructions are available on the Forms and Publications page of IRS.gov or by calling toll-free 1-800-TAX-FORM (1-800-829-3676). Taxpayers who are missing Forms W-2, 1098, 1099 or 5498 for 2006, 2007 or 2008 should request copies from their employer, bank or other payer. If these efforts are unsuccessful, taxpayers  can get a free transcript showing information from these year-end documents by calling 1-800-829-1040, or by filing Form 4506-T, Request for Transcript of Tax Return, with the IRS.

WASHINGTON — The Internal Revenue Service today announced the release of the winter 2010 issue of the Statistics of Income Bulletin, featuring data on: preliminary 2008 individual income taxes, 2007 marginal income tax rates and 2007 sales of capital assets.

Taxpayers filed 142.4 million individual income tax returns for 2008, which was 0.5 percent fewer than the 143.0 million returns filed for 2007. Adjusted gross income (AGI) also declined between 2007 and 2008, falling by 3.7 percent to $8.2 trillion. This was the first time since 2002 that AGI decreased from the previous year. Also between 2007 and 2008, taxable income decreased 5.1 percent to $5.6 trillion, total income tax decreased by 6.2 percent to $1.0 trillion, and total tax liability fell by 6.0 percent to just under $1.1 trillion.

Individual income tax returns reporting a tax liability in 2007 faced an average tax rate of 13.8 percent, the same as in 2006. Taxpayers with AGI of at least $410,096, the top 1 percent of taxpayers, accounted for 22.8 percent of AGI in 2007, an increase of 0.8 percentage points. These taxpayers accounted for 40.4 percent of total income tax reported in 2007, an increase from 39.9 percent in the previous year.

For 2007, taxpayers realized $914.0 billion in net capital gains less losses, reported on 283.1 million asset transactions with overall sales of $5.3 trillion. Passthrough income represented the largest share of net gains less losses, followed by corporate stock.

This issue of the SOI Bulletin also contains articles on the following subjects:

• Projections: A grand total of 238 million tax returns are expected during calendar year 2010.This is 1 percent fewer than estimated 2009 filings of 240.4 million returns.The primary cause is the residual effect of the Economic Stimulus Act of 2008, which in 2009 produced an estimated 14.4 million returns above baseline projections.Grand total return filings are projected to reach 253.6 million by 2016.
• Foreign recipients of U.S. income: U.S.-source income payments to foreign persons rose to $646.5 billion in 2007.Foreign corporations received $472.0 billion (73.0 percent) of the total, while foreign governments and international organizations collected the next largest share, $41.9 billion (6.5 percent).Foreign partnerships and foreign trusts (3.0 percent) and foreign individuals (2.7 percent) received a combined $37.0 billion in gross income.
• Split-Interest trusts: The Pension Protection Act of 2006 brought major revisions to the Split-Interest Trust Information Return for 2007.All split-interest trusts must now disclose the names of charities that receive distributions and the amount and type of distribution.Income from charitable lead trusts and pooled income funds is reported on this return, rather than on Form 1041.Information not pertaining to individuals is now open to the public.In 2008, 123,498 returns were filed; 94 percent were filed for charitable remainder trusts.
• Unrelated business income tax: Charitable and other tax-exempt-organizations reported $11.3 billion in gross unrelated business income for 2006, offset by $10.0 billion in deductions.The resulting net unrelated business taxable income totaled $1.3 billion, which is 6 percent higher than for 2005.These organizations reported unrelated business income tax for 2006 of $556.2 million.
• Interest-Charge Domestic International Sales Corporations:  IC-DISC export gross receipts increased by 266 percent from 2004 ($5.3 billion) to 2006 ($19.3 billion).  Net income (less deficit) rose from $448 million to $1.7 billion, and actual distributions to shareholders increased 317 percent, from $433 million to $1.8 billion. 

Printed copies of the Statistics of Income Bulletin are available from the Superintendent of Documents, U.S. Government Printing Office, P.O. Box 37954, Pittsburgh PA 15250-7954. The annual subscription rate is $53 ($74.20 foreign), single issues cost $39 ($48.75 foreign).

For more information about these data, write to the Director, Statistics of Income (SOI) Division, RAS:S, Internal Revenue Service, P.O. Box 2608, Washington, DC 20013-2608.

The IRS provides free publications and forms as well as other tax material and information to help taxpayers meet their tax obligations.  Here are four great ways you can get the information you need to file your tax return. The best thing about these four options is that they won’t cost you a dime!

1. IRS.gov The IRS Web site is a one-stop shop for a wide array of tax information. You can even prepare and file your federal tax return – for free – through Free File, a service offered by IRS and its partners who make available free tax preparation software and free electronic filing. But you must go through IRS.gov to use Free File.  Have some tax questions? Check out 1040 Central on the Individuals page for the latest news. Read up on the economic recovery tax credits at IRS.gov/recovery. The Online Services section includes several online tools that will help you with your taxes, including the IRS Withholding Calculator, the Alternative Minimum Tax Assistant, and the EITC Assistant. You can even track your refund with Where’s My Refund?.
2. Telephone Call the IRS Tax Help Line for Individuals, 800-829-1040, to get answers to your federal tax questions. To order free forms, instructions and publications call 800-829-3676. To hear pre-recorded messages covering various tax topics or check on the status of your refund, call 800-829-4477. TTY/TDD users may call 800-829-4059 to ask tax questions or to order forms and publications.
3. Taxpayer Assistance Centers When you believe your tax issue cannot be handled online or by phone and you want face-to-face assistance, you can find help at a local IRS Taxpayer Assistance Center.  Locations, business hours and an overview of services are available at IRS.gov. Just go to the Individuals tab and click on the link for Contact My Local Office in the left tool bar section under IRS Resources.
4. Community Resources Free tax preparation is available through the Volunteer Income Tax Assistance and Tax Counseling for the Elderly programs in many communities. Volunteer return preparation programs provided through IRS and its partners offer free help in preparing simple tax returns for low-to-moderate-income taxpayers. Call 800-906-9887 to find the VITA or TCE site nearest you. You may also call AARP — the largest TCE participant — at 888-227-7669 (888-AARPNOW) or access www.aarp.org to find the nearest Tax-Aide site.

For more information about free services provided by the IRS, review Publication 910, IRS Guide to Free Tax Services available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

The IRS wants military members and their spouses to know they may be eligible to receive free tax return preparation assistance. The U.S. Armed Forces participates in the Volunteer Income Tax Assistance program and provides free tax advice, tax preparation, return filing and other tax assistance to military members and their families.

1. Armed Forces Tax Council The Armed Forces Tax Council oversees the operation of the military tax programs worldwide, conducting outreach with the IRS to military personnel and their families. The AFTC consists of tax program coordinators for the Marine Corps, Air Force, Army, Navy and Coast Guard.

2. Volunteer Tax Sites Volunteer assistors at Military-based VITA sites are trained to address military-specific tax issues, such as combat zone tax benefits and the new Earned Income Tax Credit guidelines.

3. What to Bring To receive this free assistance, you should bring the following records to your military VITA site:

• Valid photo identification
• Social Security cards for you, your spouse and dependents or a social security number verification letter issued by the Social Security Administration
• Birth dates for you, your spouse and dependents
• Current year’s tax package, if you received one
• Wage and earning statement(s) -- Form W-2, W-2G, 1099-R
• Interest and dividend statements (Forms 1099)
• A copy of last year’s federal and state tax returns, if available
• Checkbook to get routing number and account number for direct deposit
• Total amount paid for day care and day care provider’s identifying number
• Other relevant information about income and expenses

4. Joint returns If your filing status is Married Filing Jointly and you wish to file your tax return electronically, both you and your spouse should be present to sign the required forms. If it isn’t possible for both of you to be present, a valid power of attorney that allows tax preparation can be used to sign and file the return.

5. Special Exception There is a special exception to using a power of attorney for spouses in combat zones that permits the filing spouse to e-file a joint return with only a written statement setting forth that the other spouse is in a combat zone and is unable to sign.

For more information, review IRS Publication 3, Armed Forces’ Tax Guide, available on the IRS Web site at IRS.gov or order a free copy by calling 800-TAX-FORM (800-829-3676).

Are you expecting a tax refund from the Internal Revenue Service this year? If so, here are seven things you should know about checking the status of your refund once you have filed your federal tax return.

1. Online Access to Refund Information Where’s My Refund? or ¿Dónde está mi reembolso? are interactive tools on IRS.gov and the fastest, easiest way to get information about your federal income tax refund. Whether you split your refund among several accounts, opted for direct deposit into one account, used part of your refund to buy U.S. savings bonds or asked the IRS to mail you a check, Where’s My Refund? and ¿Dónde está mi reembolso? give you online access to your refund information nearly 24 hours a day, 7 days a week. It’s quick, easy and secure.

2. When to Check Refund Status If you e-file, you can get refund information 72 hours after the IRS acknowledges receipt of your return. If you file a paper return, refund information will generally be available three to four weeks after mailing your return. 

3. What You Need to Check Refund Status When checking the status of your refund, have your federal tax return handy. To get your personalized refund information you must enter:

• Your Social Security Number or Individual Taxpayer Identification Number
• Your filing status which will be Single, Married Filing Joint Return, Married Filing Separate Return, Head of Household, or Qualifying Widow(er)
• Exact whole dollar refund amount shown on your tax return

4. What the Online Tool Will Tell You Once you enter your personal information, you could get several responses, including:

• Acknowledgement that your return was received and is in processing.
• The mailing date or direct deposit date of your refund.
• Notice that the IRS could not deliver your refund due to an incorrect address. In this instance, you may be able to change or correct your address online using Where’s My Refund?.

5. Customized Information Where’s My Refund? also includes links to customized information based on your specific situation. The links guide you through the steps to resolve any issues affecting your refund.  For example, if you do not get the refund within 28 days from the original IRS mailing date shown on Where’s My Refund?, you may be able to start a refund trace.

6. Visually Impaired Taxpayers Where’s My Refund? is also accessible to visually impaired taxpayers who use the Job Access with Speech screen reader used with a Braille display and is compatible with different JAWS modes.

7. Toll-free Number If you do not have internet access, you can check the status of your refund in English or Spanish by calling the IRS Refund Hotline at 800-829-1954 or the IRS TeleTax System at 800-829-4477. When calling, you must provide your or your spouse’s Social Security number, filing status and the exact whole dollar refund amount shown on your return.

Refund checks are normally sent out weekly on Fridays. If you check the status of your refund and are not given the date it will be issued, please wait until the next week before checking back.

The IRS wants parents to be aware of the tax rules that affect their children’s investment income. The following four facts will help parents determine whether their child’s investment income will be taxed at the parents’ rate or the child’s rate.

1. Investment Income Children with investment income may have part or all of this income taxed at their parents’ tax rate rather than at the child’s rate. Investment income includes interest, dividends, capital gains and other unearned income.

2. Age Requirement The child’s tax must be figured using the parents’ rates if the child has investment income of more than $1,900 and meet one of three age requirements for 2009:

• The child was born after January 1, 1992.
• The child was born after January 1, 1991, and before January 2, 1992, and has earned income that does not exceed one-half of their own support for the year.
• The child was born after January 1, 1986, and before January 2, 1991, and a full-time student with earned income that does not exceed one-half of the child’s support for the year.

3. Form 8615 To figure the child's tax using the parents’ rate for the child’s return, fill out Form 8615, Tax for Certain Children Who Have Investment Income of More Than $1,900, and attach it to the child's federal income tax return.

4. Form 8814 When certain conditions are met, a parent may be able to avoid having to file a tax return for the child by including the child’s income on the parent’s tax return. In this situation, the parent would file Form 8814, Parents' Election To Report Child's Interest and Dividends.

More information can be found in IRS Publication 929, Tax Rules for Children and Dependents. This publication and Forms 8615 and 8814 are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Claiming the First-Time Homebuyer Tax Credit on your 2009 tax return might mean a larger refund but it can seem complex. Are you confused about the documentation requirements? The IRS recognizes that the settlement documents can vary from location to location, so here are five tips to clarify the documentation requirements.

1. Settlement Statement: Purchasers of conventional homes must attach a copy of Form HUD-1 or other properly executed Settlement Statement.
2. Properly Executed Settle Statement: Generally, a properly executed settlement statement shows all parties' names and signatures, property address, sales price and date of purchase. However, settlement documents, including the Form HUD-1, can vary from one location to another and may not include the signatures of both the buyer and seller. In areas where signatures are not required on the settlement document, the IRS encourages buyers to sign the settlement statement when they file their tax return -- even in cases where the settlement form does not include a signature line.
3. Retail Sales Contract: Purchasers of mobile homes who are unable to get a settlement statement must attach a copy of the executed retail sales contract showing all parties' names and signatures, property address, purchase price and date of purchase.
4. Certificate of Occupancy: For a newly constructed home, where a settlement statement is not available, attach a copy of the certificate of occupancy showing the owner’s name, property address and date of the certificate.
5. Long-Time Residents: If you are a long-time resident claiming the credit, the IRS recommends that you also attach documentation covering the five-consecutive-year period such as Form 1098, Mortgage Interest Statement or substitute mortgage interest statements, property tax records or homeowner’s insurance records.

For more information about the First-Time Homebuyer Tax Credit and the documentation requirements, visit IRS.gov/recovery.

The IRS offers five tips for taxpayers who have moved or are about to move.  If you’ve changed your home or business address, make sure you update that information with the IRS to ensure you receive any refunds or correspondence from the IRS.

1. How to Change Your Address You can change your address on file with the IRS in several ways:

• Correct the address legibly on the mailing label that comes with your tax package;
• Write the new address in the appropriate boxes on your tax return;
• Use Form 8822, Change of Address, to submit an address or name change any time during the year;
• Give the IRS written notification of your new address by writing to the IRS center where you file your return. Include your full name, old and new addresses, Social Security Number or Employer Identification Number and signature. If you filed a joint return, be sure to include the information for both taxpayers. If you filed a joint return and have since established separate residences, both taxpayers should notify the IRS of your new addresses; and
• Should an IRS employee contact you about your account, you may be able to verbally provide a change of address.

2. Notify Your Employer Be sure to also notify your employer of your new address so you get your W-2 forms on time.

3. Notify the Post Office If you change your address after you’ve filed your return, don’t forget to notify the post office at your old address so your mail can be forwarded.

4. Estimated Tax Payments If you make estimated tax payments throughout the year, you should mail a completed Form 8822, Change of Address, or write the IRS campus where you file your return. You may continue to use your old pre-printed payment vouchers until the IRS sends you new ones with your new address. However, do not correct the address on the old voucher.

5. Postal Service The IRS does use the Postal Service’s change of address files to update taxpayer addresses, but it’s still a good idea to notify the IRS directly.

Visit IRS.gov for more information about changing your address. At IRS.gov, you can also find the address of the IRS center where you file your tax return or download Form 8822, Change of Address. The form is also available by calling 800-TAX-FORM (800-829-3676).

1. Almost everything you own and use for personal purposes, pleasure or investment is a capital asset.
2. When you sell a capital asset, the difference between the amount you sell it for and your basis – which is usually what you paid for it – is a capital gain or a capital loss.
3. You must report all capital gains.
4. You may deduct capital losses only on investment property, not on property held for personal use.
5. Capital gains and losses are classified as long-term or short-term, depending on how long you hold the property before you sell it. If you hold it more than one year, your capital gain or loss is long-term. If you hold it one year or less, your capital gain or loss is short-term.
6. If you have long-term gains in excess of your long-term losses, you have a net capital gain to the extent your net long-term capital gain is more than your net short-term capital loss, if any.
7. The tax rates that apply to net capital gain are generally lower than the tax rates that apply to other income. For 2009, the maximum capital gains rate for most people is15%. For lower-income individuals, the rate may be 0% on some or all of the net capital gain. Special types of net capital gain can be taxed at 25% or 28%.
8. If your capital losses exceed your capital gains, the excess can be deducted on your tax return and used to reduce other income, such as wages, up to an annual limit of $3,000, or $1,500 if you are married filing separately.
9. If your total net capital loss is more than the yearly limit on capital loss deductions, you can carry over the unused part to the next year and treat it as if you incurred it in that next year.
10. Capital gains and losses are reported on Schedule D, Capital Gains and Losses, and then transferred to line 13of Form 1040.

For more information about reporting capital gains and losses, see the Schedule D instructions, Publication 550, Investment Income and Expenses or Publication 17, Your Federal Income Tax. All forms and publications are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

WASHINGTON — Taxpayers wishing to claim their Haiti relief donations on the tax return they are filling out this season must make those donations by the end of this month, according to the Internal Revenue Service.

Individuals and corporations have until midnight on Sunday, Feb. 28, to make cash contributions to charities providing earthquake relief in Haiti. These contributions can be claimed on either a 2009 or 2010 return, but not both. Contributions made after that date but before the end of the year can only be claimed on a 2010 return.

Contributions made by text message, check, credit card or debit card qualify for this special option. Donations charged to a credit card before the end of February count for 2009. This is true even if the credit card bill isn’t paid until after Feb. 28. Also, checks count for 2009 as long as they are mailed by the end of this month and clear your financial institution shortly thereafter.

Taxpayers can benefit from their donations most quickly by filing their 2009 returns early, filing electronically and choosing direct deposit. Refunds take as few as ten days and can be directly deposited into a savings, checking or brokerage account, or used to purchase Series I U.S. savings bonds.

This special provision, enacted Jan. 22, does not apply to contributions of property. Eligible contributions must be made specifically for the relief of victims in areas affected by the Jan. 12 earthquake in Haiti. Gifts made directly to individual victims are not deductible. Notice 1396, a one-page notice describing this provision, is available on IRS.gov and is printed in English, Spanish, French and Haitian Creole.

To get a tax benefit, individuals must itemize their deductions on Schedule A. Those who claim the standard deduction, including all short-form filers, are not eligible.

Taxpayers should be sure their contributions go to qualified charities. Most organizations eligible to receive tax-deductible donations are listed in a searchable online database available on IRS.gov under Search for Charities. Some organizations, such as churches or governments, may be qualified even though they are not listed on IRS.gov. Donors can find out more about organizations helping Haitian earthquake victims from agencies such as USAID.

The IRS reminds donors that contributions to foreign organizations generally are not deductible. IRS Publication 526, Charitable Contributions, provides information on making contributions to charities.

Federal law requires that taxpayers keep a record of any deductible donations they make. For donations by text message, a telephone bill will meet the recordkeeping requirement if it shows the name of the donee organization, the date of the contribution and the amount of the contribution. In addition, for text message donations of $250 or more, taxpayers must obtain a written acknowledgement from the charity.  For cash contributions made by other means, be sure to keep a bank record, such as a cancelled check, or a receipt from the charity showing the name of the charity and the date and amount of the contribution. Publication 526 has further details on the recordkeeping rules for cash contributions.

Seven Facts to Help You Understand the Alternative Minimum Tax  

The Alternative Minimum Tax attempts to ensure that anyone who benefits from certain tax advantages pays at least a minimum amount of tax.

Here are seven facts the Internal Revenue Service wants you to know about the AMT and changes to this special tax for 2009.

1. Tax laws provide tax benefits for certain kinds of income and allow special deductions and credits for certain expenses. These benefits can drastically reduce some taxpayers’ tax obligations. Congress created the AMT in 1969, targeting taxpayers who could claim so many deductions they owed little or no income tax.

2. Because the AMT is not indexed for inflation, a growing number of middle-income taxpayers are discovering they are subject to the AMT.

3. You may have to pay the AMT if your taxable income for regular tax purposes plus any adjustments and preference items that apply to you are more than the AMT exemption amount.

4. The AMT exemption amounts are set by law for each filing status.

5. For tax year 2009, Congress raised the AMT exemption amounts to the following levels:

• $70,950 for a married couple filing a joint return and qualifying widows and widowers;
• $46,700 for singles and heads of household;
• $35,475 for a married person filing separately.

6. The minimum AMT exemption amount for a child whose unearned income is taxed at the parents' tax rate has increased to $6,700 for 2009.

7. If you claim a regular tax deduction on your 2009 tax return for any state or local sales or excise tax on the purchase of a new motor vehicle, that tax is also allowed as a deduction for the AMT.

Taxpayers can find more information about the Alternative Minimum Tax and how it impacts them by accessing IRS Form 6251, Alternative Minimum Tax —Individuals, and its instructions at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Seven Tax Tips for Disabled Taxpayers  

Taxpayers with disabilities may qualify for a number of IRS tax credits and benefits. Parents of children with disabilities may also qualify. Listed below are seven tax credits and other benefits that are available if you or someone else listed on your federal tax return is disabled.

1. Standard Deduction Taxpayers who are legally blind may be entitled to a higher standard deduction on their tax return.
2. Gross Income Certain disability-related payments, Veterans Administration disability benefits, and Supplemental Security Income are excluded from gross income.
3. Impairment-Related Work Expenses Employees, who have a physical or mental disability limiting their employment, may be able to claim business expenses in connection with their workplace. The expenses must be necessary for the taxpayer to work.
4. Credit for the Elderly or Disabled This credit is generally available to certain taxpayers who are 65 and older as well as to certain disabled taxpayers who are younger than 65 and are retired on permanent and total disability.
5. Medical Expenses If you itemize your deductions using Form 1040 Schedule A, you may be able to deduct medical expenses. See IRS Publication 502, Medical and Dental Expenses.
6. Earned Income Tax Credit EITC is available to disabled taxpayers as well as to the parents of a child with a disability. If you retired on disability, taxable benefits you receive under your employer’s disability retirement plan are considered earned income until you reach minimum retirement age. The EITC is a tax credit that not only reduces a taxpayer’s tax liability but may also result in a refund. Many working individuals with a disability who have no qualifying children, but are older than 25 and younger than 65 do -- in fact -- qualify for EITC. Additionally, if the taxpayer’s child is disabled, the age limitation for the EITC is waived. The EITC has no effect on certain public benefits. Any refund you receive because of the EITC will not be considered income when determining whether you are eligible for benefit programs such as Supplemental Security Income and Medicaid.
7. Child or Dependent Care Credit Taxpayers who pay someone to come to their home and care for their dependent or spouse may be entitled to claim this credit. There is no age limit if the taxpayer’s spouse or dependent is unable to care for themselves.

For more information on tax credits and benefits available to disabled taxpayers, see Publication 3966, Living and Working with Disabilities or Publication 907, Tax Highlights for Persons with Disabilitiesavailable on IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Is this Income Taxable?   

While most income you receive is generally considered taxable, there are some situations when certain types of income are partially taxed or not taxed at all.

To ensure taxpayers are familiar with the difference between taxable and non-taxable income, the Internal Revenue Service offers these common examples of items that are not included in your income:

• Adoption Expense Reimbursements for qualifying expenses
• Child support payments
• Gifts, bequests and inheritances
• Workers' compensation benefits
• Meals and Lodging for the convenience of your employer
• Compensatory Damages awarded for physical injury or physical sickness
• Welfare Benefits
• Cash Rebates from a dealer or manufacturer

Some income may be taxable under certain circumstances, but not taxable in other situations. Examples of items that may or may not be included in your income are:

• Life Insurance If you surrender a life insurance policy for cash, you must include in income any proceeds that are more than the cost of the life insurance policy. Life insurance proceeds, which were paid to you because of the insured person’s death, are not taxable unless the policy was turned over to you for a price.
• Scholarship or Fellowship Grant If you are a candidate for a degree, you can exclude amounts you receive as a qualified scholarship or fellowship. Amounts used for room and board do not qualify.
• Non-cash Income Taxable income may be in a form other than cash. One example of this is bartering, which is an exchange of property or services. The fair market value of goods and services exchanged is fully taxable and must be included as income on Form 1040 of both parties.

All other items—including income such as wages, salaries and tips—must be included in your income unless it is specifically excluded by law.

These examples are not all-inclusive. For more information, see Publication 525, Taxable and Nontaxable Income, which can be obtained at IRS.gov or by calling the IRS at 800-TAX-FORM (800-829-3676).

Four Steps to Follow If You Are Missing a W-2  

Getting ready to file your tax return?  Make sure you have all your documents before you start. You should receive a Form W-2, Wage and Tax Statement from each of your employers.  Employers have until February 1, 2010 to send you a 2009 Form W-2 earnings statement. If you haven’t received your W-2, follow these four steps:

1. Contact your employer If you have not received your W-2, contact your employer to inquire if and when the W-2 was mailed.  If it was mailed, it may have been returned to the employer because of an incorrect or incomplete address.  After contacting the employer, allow a reasonable amount of time for them to resend or to issue the W-2.

2. Contact the IRS If you do not receive your W-2 by February 16th, contact the IRS for assistance at 800-829-1040. When you call, you must provide your name, address, city and state, including zip code, Social Security number, phone number and have the following information:

• Employer’s name, address, city and state, including zip code and phone   number
• Dates of employment
• An estimate of the wages you earned, the federal income tax withheld, and when you worked for that employer during 2009. The estimate should be based on year-to-date information from your final pay stub or leave-and-earnings statement, if possible.

3. File your return You still must file your tax return or request an extension to file by April 15, even if you do not receive your Form W-2. If you have not received your Form W-2 by April 15th, and have completed steps 1 and 2, you may use Form 4852, Substitute for Form W-2, Wage and Tax Statement. Attach Form 4852 to the return, estimating income and withholding taxes as accurately as possible.  There may be a delay in any refund due while the information is verified.

4. File a Form 1040X On occasion, you may receive your missing W-2 after you filed your return using Form 4852, and the information may be different from what you reported on your return. If this happens, you must amend your return by filing a Form 1040X, Amended U.S. Individual Income Tax Return.

Form 4852, Form 1040X, and instructions are available on the IRS Web site, IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Five Tips for Avoiding Refund Delays Relating to Your Economic Recovery Payment   

The $250 Economic Recovery Payments that were issued in 2009 by the Social Security Administration, Department of Veterans Affairs and Railroad Retirement Board must be included when claiming the Making Work Pay Tax Credit on 2009 tax returns. Many people who worked during 2009 and also received a $250 Economic Recovery Payment in 2009 are slowing down their tax refunds by not properly including the payments when claiming the Making Work Pay Tax Credit.

Here are five tips from the IRS that will help you avoid these refund delays:

1. If you worked during 2009, you may be eligible to claim the Making Work Pay Tax Credit that was established by the American Recovery and Reinvestment Act of 2009 and is worth up to $400 for individuals and $800 for married couples.
2. The Economic Recovery Payments are not taxable income; however, anyone who receives social security, veteran or railroad retirement benefits, as well as certain other government retirement benefits, must reduce the Making Work Pay Tax Credit they claim by the amount of any payment they received in 2009.
3. Taxpayers with earned income should claim the credit by attaching Schedule M to their 2009 income tax return.
4. To help avoid delays when you claim the credit, make sure you properly report your Economic Recovery Payment on IRS Schedule M, Making Work Pay and Government Retiree Credits.
5. If you are not certain whether you received the $250 payment, you should verify that information by contacting the appropriate agency before preparing and filing your tax return and claiming the Making Work Pay Tax Credit.

More information about the Economic Recovery Payment and the Making Work Pay Tax Credit can be found at IRS.gov/recovery.  Schedule M and the related instructions can be obtained at IRS.gov or can be ordered by calling 800-TAX-FORM (800-829-3676).

Issue Number:    IRS Tax Tip 2010-26

Eight Facts about the New Vehicle Sales and Excise Tax Deduction  

If you bought a new vehicle in 2009, you may be entitled to a special tax deduction for the sales and excise taxes on your purchase.

Here are eight important facts the Internal Revenue Service wants you to know about this deduction:

1. State and local sales and excise taxes paid on up to $49,500 of the purchase price of each qualifying vehicle are deductible.
2. Qualified motor vehicles generally include new cars, light trucks, motor homes and motorcycles.
3. To qualify for the deduction, the new cars, light trucks and motorcycles must weigh 8,500 pounds or less. New motor homes are not subject to the weight limit.
4. Purchases must occur after Feb. 16, 2009, and before Jan. 1, 2010.
5. Purchases made in states without a sales tax — such as Alaska, Delaware, Hawaii, Montana, New Hampshire and Oregon — may also qualify for the deduction. Taxpayers in these states may be entitled to deduct other qualifying fees or taxes imposed by the state or local government. The fees or taxes that qualify must be assessed on the purchase of the vehicle and must be based on the vehicle’s sales price or as a per unit fee.
6. This deduction can be taken regardless of whether the buyers itemize their deductions or choose the standard deduction. Taxpayers who do not itemize will add this additional amount to the standard deduction on their 2009 tax return.
7. The amount of the deduction is phased out for taxpayers whose modified adjusted gross income is between $125,000 and $135,000 for individual filers and between $250,000 and $260,000 for joint filers.
8. Taxpayers who do not itemize must complete Schedule L, Standard Deduction for Certain Filers to claim the deduction.

For more information about these rules and other eligibility requirements visit IRS.gov/recovery.

Five Tax Changes for 2009   

As you get ready to prepare your 2009 tax return, the Internal Revenue Service wants to make sure you have all the details about tax law changes that may impact your tax return.

Here are the top five changes that may show up on your 2009 return.

1. The American Recovery and Reinvestment Act

ARRA provides several tax provisions that affect tax year 2009 individual tax returns due April 15, 2010. The recovery law provides tax incentives for first-time homebuyers, people who purchased new cars, those that made their homes more energy efficient, parents and students paying for college, and people who received unemployment compensation.

2. IRA Deduction Expanded

You may be able to take an IRA deduction if you were covered by a retirement plan and your 2009 modified adjusted gross income is less than $65,000 or $109,000 if you are married filing a joint return.

3. Standard Deduction Increased for Most Taxpayers

The 2009 basic standard deductions all increased. They are:

• $11,400 for married couples filing a joint return and qualifying widows and widowers
• $5,700 for singles and married individuals filing separate returns
• $8,350 for heads of household

Taxpayers can now claim an additional standard deduction based on the state or local sales or excise taxes paid on the purchase of most new motor vehicles purchased after February 16, 2009. You can also increase your standard deduction by the state or local real estate taxes paid during the year or net disaster losses suffered from a federally declared disaster.

4. 2009 Standard Mileage Rates

The standard mileage rates changed for 2009. The standard mileage rates for business use of a vehicle:

• 55 cents per mile

The standard mileage rates for the cost of operating a vehicle for medical reasons or a deductible move:

• 24 cents per mile

The standard mileage rate for using a car to provide services to charitable organizations remains at 14 cents per mile.

5. Kiddie Tax Change

The amount of taxable investment income a child can have without it being subject to tax at the parent's rate has increased to $1,900 for 2009.

For more information about these and other changes for tax year 2009, visit IRS.gov.

Links:

• FS-2010-4 , 2009 Tax Law Changes Provide Saving Opportunities for Nearly Everyone
• The American Recovery and Reinvestment Act of 2009: Information center
• 1040 Central
• Form 1040 instructions ( PDF 941K )

IRS YouTube Videos:

• Tax Filing Season 2010 English | Spanish | ASL
• Earned Income Tax Credit English | Spanish | ASL
• Education Credits - Parents    English | ASL
• Education Tax Credit-Claim it-Students     English | Spanish | ASL  
• Energy Tax Credits Claim It     English | Spanish | ASL  
• Haiti Earthquake Donations     English | Spanish | ASL  
• Making Work Pay - Claim It     English | ASL  
• New Homebuyer Credit-Claim It     English | Spanish
• New Homebuyer Credit-Military     English  
• Split Refunds-Savings Bonds     English | Spanish
• Unemployment Compensation     English | Spanish
• Vehicle Tax Deduction - Claim It     English | Spanish | ASL    

Be Sure to Know Whether You Qualify for the Earned Income Tax Credit  

The Earned Income Tax Credit, commonly referred to as EITC, can be a financial boost for working people adversely impacted by hard economic times. However, one in four eligible taxpayers could miss out on the credit because they don’t check it out. Here are the top 10 things the Internal Revenue Service wants you to know about this valuable credit, which has been making the lives of working people a little easier for 35 years.

1. Just because you didn’t qualify last year, doesn’t mean you won’t this year. As your financial, marital or parental situations change from year-to-year, you should review the EITC eligibility rules to determine whether you qualify.
2. If you qualify, it could be worth up to $5,657 this year. EITC not only reduces the federal tax you owe, but could result in a refund. The amount of your EITC is based on the amount of your earned income and whether or not there are qualifying children in your household. New EITC provisions mean more money for larger families.
3. If you qualify, you must file a federal income tax return and specifically claim the credit in order to get it – even if you are not otherwise required to file.
4. Your filing status cannot be Married Filing Separately.
5. You must have a valid Social Security Number. You, your spouse – if filing a joint return – and any qualifying child listed on Schedule EIC must have a valid SSN issued by the Social Security Administration.
6. You must have earned income. You have earned income if you work for someone who pays you wages, you are self-employed, you have income from farming, or – in some cases – you receive disability income.
7. Married couples and single people without kids may qualify. If you do not have qualifying children, you must also meet the age and residency requirements as well as dependency rules.
8. Special rules apply to members of the U.S. Armed Forces in combat zones. Members of the military can elect to include their nontaxable combat pay in earned income for the EITC. If you make this election, the combat pay remains nontaxable.
9. It’s easy to determine whether you qualify. The EITC Assistant, an interactive tool available on IRS.gov, removes the guesswork from eligibility rules. Just answer a few simple questions to find out if you qualify and estimate the amount of your EITC.
10. Free help is available at volunteer assistance sites and IRS Taxpayer Assistance Centers to help you prepare and claim your EITC. If you are preparing your taxes electronically, the software program you use will figure the credit for you. If you qualify for the credit you may also be eligible for Free File. You can access Free File at IRS.gov.

For more information about the EITC, see IRS Publication 596, Earned Income Credit. This publication – available in both English and Spanish – can be downloaded from IRS.gov or ordered by calling 800-TAX-FORM (800-829-3676).

10 ways to lower your 2009 taxes now

Putting more in your 401k, buying a house or car, or giving to charity are among the moves that, if made by Dec. 31, will help shrink your tax bill next spring.

A reader wrote me recently: "I have discovered only three ways to cut my taxes: reduce income, give more to charity and incur major medical expenses. Is there anything else I can do?"

The reader has the right idea: Anything that reduces your income or maximizes your credits and deductions will lower your tax bill.

Do you qualify for homebuyer tax credit?

And now is the perfect time of year to make some moves that can help you shrink your tax liability for 2009 -- and make key decisions about your employee benefits that can cut your taxes for 2010. Here are 10 ways to lower your taxes:

Boost your 401k contributions: Any money you contribute to a 401k lowers your taxable income. You can contribute up to $16,500 to a 401k in 2009 (plus an extra $5,500 if you're 50 or older). You still have a few months to boost your regular contributions, or you can add any year-end bonus you receive to help max out your contributions before 2009 is over.

Make the most of your flexible spending account: Contributions to a flexible spending account avoid income tax and Social Security tax, which can save you 35% or more compared with spending after-tax money. Most employers require you to use your FSA money by Dec. 31 or by March 15 of the following year, so make sure you're on track to spend the money in your account before the deadline (otherwise it disappears). See " 25 ways to spend your flex account" for more information.

You'll be making key decisions about next year's FSA account over the next few months, and you may want to boost your contributions if your employer is increasing your out-of-pocket health care costs for next year -- as many of them are.

The maximum-contribution limits vary by employer, but many let you set aside $3,000 a year in pretax money for a health care flexible spending account and up to $5,000 in a dependent-care FSA.

Buy a house: The economic-stimulus plan provides a tax credit of up to $8,000 for purchasing a first home between Jan. 1 and Nov. 30.

Two important notes: If you haven't signed a contract to buy a house, you may be out of luck because of the time it takes to close the purchase. But -- and this is important -- Congress may extend this tax break into 2010. A decision is expected soon.

You're considered a first-time homebuyer if you (and your spouse, if you're married) haven't owned a home in the past three years. The credit begins to phase out if your modified adjusted gross income tops $75,000 (or $150,000 if married filing jointly), and it disappears if your income exceeds $95,000 if you're single (or $170,000 if married filing jointly).

A special rule lets you receive the money quickly: After you close on the house, you can claim the credit for the 2009 purchase on an amended 2008 tax return. But unlike the 2008 version of the tax break, you don't have to pay back the credit, as long as you live in your home for at least three years. See " Take advantage of these stimulus breaks soon" for more information.

Buy a car: The stimulus plan also provides a tax break for new-car buyers. If you buy a new car between Feb. 17 and Dec. 31, you can deduct state and local sales taxes and excise taxes paid on up to $49,500 of the cost of the car. If you live in a state that doesn't have a sales tax, you still get a tax break if your state imposes a flat fee on the purchase of vehicles or a fee based on the price you pay.

The tax break applies to new (not used) cars, light trucks, motor homes and motorcycles. To qualify, your modified adjusted gross income must be less than $135,000 if you're single, or $260,000 if married filing jointly (the deduction starts to phase out if you earn more than $125,000 if single, or $250,000 if married filing jointly).

Sell losing investments: Capital losses are first used to offset capital gains, and then up to $3,000 of the net loss can be deducted against income, such as your salary. Any excess loss is carried forward to future years.

Maximize your tax credits and deductions: Tax credits can lower your tax bill dollar for dollar. If you contribute to a 401k, IRA or other retirement-savings plan, you may qualify for the retirement savers' tax credit, which can trim your tax bill by up to $1,000 per person

The dependent-care tax credit is also valuable -- and often overlooked -- if you pay someone to care for your child while you work. Keep in mind that even summer day camp counts if your child is younger than 13 and you or your spouse work.

And tax deductions are valuable, too, which lower your taxable income and in turn reduce your tax bill.

Pay college bills: The stimulus also improved the tax breaks for paying college bills. The new American Opportunity credit replaces the Hope credit for 2009 and 2010. It increases the size of the maximum credit from $1,800 to $2,500. The income limits to qualify have increased, too -- from $58,000 to $90,000 if you're single and from $116,000 to $180,000 if you're married filing jointly.

You can claim the American Opportunity credit in the first four years of college (not just the first two years, as was the case with the Hope credit).

Money you use to pay for college from a 529 or Coverdell education-savings account (both of which can already be used tax-free for college bills) doesn't count toward the American Opportunity credit. You need to pay at least $4,000 in tuition, fees and course materials, such as textbooks, from a source other than a 529 or Coverdell to qualify for the full credit.

Give to a charity: You can write off charitable contributions if you itemize your deductions. But people often scramble in late December to decide which organizations to support. Now is a good time to start thinking about who should benefit from your largesse.

When tallying up your charitable contributions for the year, don't forget to count gifts of cash as well as appreciated stock and noncash donations. You can also include out-of-pocket costs to help a charity, such as 14 cents a mile in transportation costs to do charitable work or the cost of ingredients for a casserole you make for a nonprofit's soup kitchen.

For more, see " Give and grow rich with charitable deductions."

Max out tax breaks for the self-employed: If you're self-employed or have just a little freelance income, be sure to make the most of the tax breaks.

You'll be able to deduct the cost of equipment you use in your business, such as a computer, printer, fax machine and copier, as well as a dedicated phone line, office supplies, business travel and advertising. You may even be able to deduct a portion of your rent or mortgage, homeowners insurance and utilities if you have a qualified home office.

You can also make tax-deductible contributions to a retirement plan for the self-employed, such as a simplified employee pension or a solo 401k, and can deduct your health insurance premiums if you aren't eligible for health insurance from an employer or your spouse's employer. (You can't deduct more than the net income of your business.) For more information about what you can deduct and what forms you need to file, see " Tax toolkit for the self-employed."

Keep track of medical expenses: As you mentioned, incurring big medical expenses can result in a lower tax bill. But it can be tough to get much of a break for medical costs.

You qualify for the tax break only if you itemize your deductions, and you can write off expenses only if they exceed 7.5% of your adjusted gross income.

Do you qualify for homebuyer tax credit?

That means if you're earning $50,000 per year, you can deduct out-of-pocket medical expenses beyond $3,750. If you have $5,000 of qualified costs, you're left with a deduction of just $1,250. But even that partial deduction can make a difference. If you're in the 25% bracket, a $1,250 deduction can lower your tax bill by $313.

Keep the receipts of money spent on medical bills in your tax file throughout the year because you could end up with a surprisingly large deduction if you have a medical emergency or a major expense that isn't covered by insurance, such as fertility treatments, orthodontia, laser eye surgery or any experimental medical procedures that your insurer won't cover.

10 Important Facts about the Extended First-Time Homebuyer Credit  

If you are in the market for a new home, you may still be able to claim the First-Time Homebuyer Credit. Congress recently passed The Worker, Homeownership and Business Assistance Act Of 2009, extending the First-Time Homebuyer Credit and expanding who qualifies.

Here are the top 10 things the IRS wants you to know about the expanded credit and the qualifications you must meet in order to qualify for it.

1. You must buy – or enter into a binding contract to buy a principal residence – on or before April 30, 2010.
2. If you enter into a binding contract by April 30, 2010 you must close on the home on or before June 30, 2010.
3. For qualifying purchases in 2010, you will have the option of claiming the credit on either your 2009 or 2010 return.
4. A long-time resident of the same home can now qualify for a reduced credit. You can qualify for the credit if you’ve lived in the same principal residence for any five-consecutive year period during the eight-year period that ended on the date the new home is purchased and the settlement date is after November 6, 2009.
5. The maximum credit for long-time residents is $6,500. However, married individuals filing separately are limited to $3,250.
6. People with higher incomes can now qualify for the credit. The new law raises the income limits for homes purchased after November 6, 2009. The full credit is available to taxpayers with modified adjusted gross incomes up to $125,000, or $225,000 for joint filers.
7. The IRS will issue a December 2009 revision of Form 5405 to claim this credit. The December 2009 form must be used for homes purchased after November 6, 2009 – whether the credit is claimed for 2008 or for 2009 – and for all home purchases that are claimed on 2009 returns.
8. No credit is available if the purchase price of the home exceeds $800,000.
9. The purchaser must be at least 18 years old on the date of purchase. For a married couple, only one spouse must meet this age requirement.
10. A dependent is not eligible to claim the credit.

For more information about the expanded First-Time Home Buyer Credit, visit IRS.gov/recovery.

Links:

• First-Time Homebuyer Credit
• IR-2009-108 , First-Time Homebuyer Credit Extended to April 30, 2010; Some Current Homeowners Now Also Qualify

YouTube Videos:

• Recovery: New Homebuyer Credit - November 2009
• Consejo Tributario: Consejos Tributarios de Fin de Año Noviembre 2009

Overview

First-time homebuyers may be able to take advantage of a tax credit for homes purchased in 2008 or 2009. The credit:

• Applies to purchases that close after April 8, 2008, and before Dec. 1, 2009.
• Applies only to homes used as a taxpayer's principal residence.
• Reduces a taxpayer's tax bill or increases his or her refund, dollar for dollar.
• Is fully refundable, meaning the credit will be paid out to eligible taxpayers, even if they owe no tax or the credit is more than the tax owed.

The credit is claimed using Form 5405 .

For 2008 Home Purchases

The Housing and Economic Recovery Act of 2008 established a tax credit for first-time homebuyers that can be worth up to $7,500. For homes purchased in 2008, the credit is similar to a no-interest loan and must be repaid in 15 equal, annual installments beginning with the 2010 income tax year.

For 2009 Home Purchases

The American Recovery and Reinvestment Act of 2009 expanded the first-time homebuyer credit by increasing the credit amount to $8,000 for purchases made in 2009 before Dec. 1.

For home purchased in 2009, the credit does not have to be paid back unless the home ceases to be the taxpayer's main residence within   a three-year period   following the purchase.

First-time homebuyers who purchase a home in 2009 can claim the credit on either   a 2008 tax return, due April 15, 2009, or   a 2009 tax return, due April 15, 2010. The credit may not be claimed before the closing date. But, if the closing   occurs after April 15, 2009, a taxpayer can still claim it on a 2008 tax return by requesting an extension of time to file or by filing an amended return. News release 2009-27 has   more information on these options .

IR-2009-76, Aug. 21, 2009

WASHINGTON — The Internal Revenue Service today announced the availability of video and audio products to help taxpayers take full advantage of the 2009 tax provisions in the American Recovery and Reinvestment Act.

The IRS has launched a YouTube video site and an iTunes podcast site to better serve taxpayers.

People can visit the video site at www.youtube.com/irsvideos to view information about the Recovery, tax tips and how-to videos. These videos will be in English, Spanish, American Sign Language and other languages.

The YouTube focus will be on the provisions of the American Recovery and Reinvestment Act. Videos will highlight the $8,000 first-time homebuyer’s credit for those who purchase a house this year, the sales or excise tax deduction on new car purchases and the expanded credits for education and energy conservation.

The IRS YouTube channel will debut with seven Recovery videos in English and ASL and eight in Spanish. Also, included will be a video on using the IRS Withholding Calculator. Many workers received the Making Work Pay tax credit in April through their tax withholding at work. However, people who have more than one job or working spouses should especially check their withholding to ensure neither too much nor too little is being withheld. People can use the calculator to help determine if they should make adjustments.

People can visit the audio site at iTunes to listen to IRS podcasts about ARRA tax credits. People without an iTunes account can hear those same podcasts, in English and Spanish, on IRS.gov’s Multimedia Center .

IR-2009-75, Aug. 19, 2009

WASHINGTON — The Internal Revenue Service and the Department of Justice today announced the successful negotiation of an agreement that will result in the IRS receiving an unprecedented amount of information on United States holders of accounts at the Swiss bank UBS.

As a result of this agreement, the IRS will receive substantially all of the accounts that it was interested in when it initiated the John Doe summons against UBS.

Under the agreement, the IRS will submit a treaty request to the Swiss government describing the accounts for which it is requesting information. The Swiss government will then direct UBS to initiate procedures to turn over information on thousands of accounts to the IRS. The IRS will receive information on accounts of various amounts and types, including bank-only accounts, custody accounts in which securities or other investment assets were held and offshore company nominee accounts through which an individual indirectly held beneficial ownership in the accounts.

Also, the agreement retains the U.S. Government’s right, if the results are significantly lower than expected and other measures fail, to seek appropriate judicial remedies, including resuming actions to enforce the John Doe summons.

The agreement involves a number of simultaneous legal actions:

• The judicial enforcement of the John Doe summons will be dismissed. While this enforcement motion will be withdrawn, the underlying summons remains in effect.
• Upon receiving the treaty request, the Swiss government will direct UBS to notify account holders that their information is included in the IRS treaty request. It is expected that these notices will be sent on a rolling basis with some being sent over the coming weeks and others over the coming months. Receipt of this notice will not by itself preclude the account holder from coming into the IRS under the Voluntary Disclosure Program.

In addition, the Swiss Government has agreed to review and process additional requests for information for other banks regarding their account holders to the extent that such a request is based on a pattern of facts and circumstances equivalent to those of the UBS case.

Information provided to the IRS through this process will be thoroughly examined for all potential civil and criminal tax violations. The IRS will assess any additional tax, interest and a number of applicable penalties. This includes the penalty for the willful failure to file an FBAR. This penalty can be up to 50 percent of the value of the account for each year an FBAR was not filed.

The IRS will also recommend criminal prosecution in those cases where the facts warrant such an action. To date, the IRS and the Department of Justice have successfully prosecuted four United States customers of UBS whose information was provided to the IRS by UBS as part of the Deferred Prosecution Agreement.
Individuals whose information is obtained by the IRS through this process will, by longstanding policy, not be eligible for the voluntary disclosure program.

IR-2009-74, Aug. 17, 2009

WASHINGTON — The Internal Revenue Service today announced the second in a series of public forums will be held on Wednesday, Sept. 2, in Washington, D.C., and feature a panel of federal and state officials, moderated by IRS Commissioner Doug Shulman.

The panel will include representatives from the Treasury Inspector General for Tax Administration (TIGTA) and the U.S. Government Accountability Office (GAO). Representatives from the states of California, Maryland, Oregon and New York will also participate on the panel.

Shulman announced a far-reaching review of paid preparers on June 4 to produce a comprehensive set of recommendations by the end of this year to boost taxpayer compliance and strengthen industry standards.

“This is the next important step in our open dialogue with interested parties in this effort,” Shulman said. “I’m very pleased with the quality of the feedback we’ve received so far. I’m confident these forums will ensure that all ideas are on the table when it’s time to form our recommendations.”

The forum will convene at 9 a.m. ET in the IRS Headquarters at 1111 Constitution Ave. NW, Washington, DC 20224. Anyone interested in attending should confirm attendance by sending an e-mail message to CL.NPL.Communications@irs.gov .

The first public forum was held on July 30 in Washington, D.C., and featured a panel of consumer groups and another panel of tax professional organizations. A third forum will be held in Chicago on Sept. 30 featuring independent return preparers and software industry representatives.

The IRS issued Notice 2009-60 on July 24 as an added call for public comments to ensure that all interested individuals and entities have the opportunity to contribute ideas.

Written comments must be received by Aug. 31, 2009.   They should be submitted to CCPA:LPD:PR (Notice 2009-60), Room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, D.C. 20044.

Comments may also be e-mailed to Notice.Comments@irscounsel.treas.gov . Please include “Notice 2009-60” in the subject line of any e-mail messages. More details can be found in the notice.

IR-2009-73, Aug. 14, 2009

WASHINGTON — The Internal Revenue Service today announced that interest rates for the calendar quarter beginning Oct. 1, 2009, will remain the same. The rates will be:

• four (4) percent for overpayments [three (3) percent in the case of a corporation];
• four (4) percent for underpayments;
• six (6) percent for large corporate underpayments; and
• one and one-half (1.5) percent for the portion of a corporate overpayment exceeding $10,000.

Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points. Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points.   The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.

The interest rates announced today are computed from the federal short-term rate during July 2009 to take effect Aug. 1, 2009, based on daily compounding.

IR-2009-72, Aug. 13, 2009

WASHINGTON — Time is running out for many small businesses wishing to take advantage of the expanded business loss carryback option included in this year’s recovery law, the Internal Revenue Service said today. Eligible individuals have until Oct. 15 to choose this expanded carryback option. Eligible calendar-year corporations have until Sept. 15.

This carryback provision offers small businesses that lost money in 2008 an excellent way to quickly get some much needed cash if they were   profitable in previous years.   This option is only available for a limited time,   so   small businesses   should   consider   it carefully and   act before it’s too late.

Under the American Recovery and Reinvestment Act (ARRA), enacted in February, many small businesses that had expenses exceeding their income for 2008 can choose to carry the resulting loss back for up to five years, instead of the usual two. This means that a business that had a net operating loss (NOL) in 2008 could carry that loss as far back as tax-year 2003, rather than the usual 2006. Not only could this mean a special tax refund, but the refund could be larger, because the loss is being spread over as many as five tax years, rather than just two.

This option may be particularly helpful to any eligible small business with a large loss in 2008. A small business that chooses this option can benefit by:

• Offsetting the loss against income earned in up to five prior tax years,
• Getting a refund of taxes paid up to five years ago,
• Using up part or all of the loss now, rather than waiting to claim it on future tax returns.

Under ARRA, eligible taxpayers can choose to carry back a NOL arising in a taxable year beginning or ending in 2008 for three, four or five years instead of two. The option is available for an eligible small business (ESB) that has no more than an average of $15 million in gross receipts over a three-year period ending with the tax year of the NOL. This choice may be made for only one tax year.

Most taxpayers still have time to choose this special carryback and get a refund. A calendar-year corporation that qualifies as an ESB must file a claim by Sept. 15, 2009. For individuals, the deadline is Oct. 15, 2009. This includes a sole proprietor that qualifies as an ESB, an individual partner in a partnership that qualifies as an ESB and a shareholder in an S corporation that qualifies as an ESB. Deadlines vary for fiscal-year taxpayers, depending upon when their fiscal year ends and whether they are making the choice for the tax year that ends or begins in 2008.

Individuals can accelerate a refund by filing Form 1045 , Application for Tentative Refund. Similarly, corporations with NOLs may also accelerate a refund by using Form 1139 , Corporation Application for Tentative Refund. Normally, refunds are issued within 45 days. These forms, along with answers to frequently-asked questions about this special carryback, and other details can be found on the IRS Website.

IR-2009-71, August 4, 2009

WASHINGTON — The Internal Revenue Service reminds consumers to avoid identity theft scams that use the IRS name, logo or Web site in an attempt to convince taxpayers that the scam is a genuine communication from the IRS. Scammers may use other federal agency names, such as the U.S. Department of the Treasury.

In an identity theft scam, a fraudster, often posing as a trusted government, financial or business institution or official, tries to trick a victim into revealing personal and financial information, such as credit card numbers and passwords, bank account numbers and passwords, Social Security numbers and more. Generally, identity thieves use someone’s personal data to steal his or her 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 and even file fraudulent tax returns.

The scams may take place through e-mail, fax or phone. When they take place via e-mail, they are called “phishing” scams.

The IRS does not discuss tax account matters with taxpayers by e-mail.

The IRS urges consumers to avoid falling for the following recent schemes:

Making Work Pay Refund

This phishing e-mail, which claims to come from the IRS, references the president and the Making Work Pay provision of the 2009 economic recovery law . It says that there is a refundable credit available to workers, consumers and retirees that can be paid into the recipient’s bank account if the recipient registers their account information with the IRS. The e-mail contains links to register the account and to claim the tax refund.

In reality, most taxpayers receive their Making Work Pay tax credit, which was designed for wage earners, in their paychecks as a result of decreased tax withholding, not as a lump sum distribution from a federal fund. Additionally, consumers and retirees who are not wage earners are not eligible for this tax credit.

Inherited Funds / Lottery Winnings / Cash Consignment

In this phishing scheme, recipients receive an e-mail claiming to come from the U.S. Department of the Treasury notifying them that they will receive millions of dollars in recovered funds or lottery winnings or cash consignment if they provide certain personal information, including phone numbers, via return e-mail. The e-mail may be just the first step in a multi-step scheme, in which the victim is later contacted by telephone or further e-mail and instructed to deposit taxes on the funds or winnings before they can receive any of it. Alternatively, they may be sent a phony check of the funds or winnings and told to deposit it but pay 10 percent in taxes or fees. Thinking that the check must have cleared the bank and is genuine, some people comply. However, the scammers, not the Treasury Department, will get the taxes or fees.

Form W-8BEN

In this scam, fraudsters modify a genuine IRS form, the W-8BEN , Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding, to request detailed personal and financial information. This could include nationality, passport number, bank account and PIN numbers, spouse’s name and mother’s maiden name, or other personal or financial information or security measures for financial accounts. The scammers may use the genuine form number and name or may make up a new form number, such as W-4100B2.

They either e-mail or fax the form or letter. If only a letter, the letter itself contains the request for the personal and financial information. The letter, which claims to come from the IRS, states that the recipient will face additional taxes unless he or she quickly faxes the required information to the number provided by the scammer.

In reality, taxpayers file the genuine Form W-8BEN with their financial institutions, not with the IRS. Additionally, the genuine W-8BEN does not request the taxpayer’s passport number, bank account number, security or similar information.

Refund Scam

The bogus e-mail, which claims to come from the IRS, tells the recipient that he or she is eligible to receive a tax refund for a given amount. It instructs the recipient to click on a link contained in the e-mail to access and complete a form for the tax refund. The form requires the entry of personal and financial information. The refund scam is the most common one seen by the IRS. Several recent variations on this scam have claimed to come from the Exempt Organizations area of the IRS. Some others have included the name and purported signature of a genuine or a made-up IRS executive.

Taxpayers do not have to complete a special form to obtain a refund. Taxpayer refunds are based on the tax return they submit to the IRS.        

How to Spot a Scam

Many e-mail scams are fairly sophisticated and hard to detect. However, there are signs to watch for, such as an e-mail that:

• Requests detailed or an unusual amount of personal and/or financial information, such as name, SSN, bank or credit card account numbers or security-related information, such as mother’s maiden name, either in the e-mail itself or on another site to which a link in the e-mail sends the recipient.
• Dangles bait to get the recipient to respond to the e-mail, such as mentioning a tax refund or offering to pay the recipient to participate in an IRS survey.
• Threatens a consequence for not responding to the e-mail, such as additional taxes or blocking access to the recipient’s funds.
• Gets the Internal Revenue Service or other federal agency names wrong.
• Uses incorrect grammar or odd phrasing (many of the e-mail scams originate overseas and are written by non-native English speakers).
• Uses a really long address in any link contained in the e-mail message or one that does not start with the actual IRS Web site address (www.irs.gov). To see the actual link address, or url, move the mouse over the link included in the text of the e-mail.

What to Do

The IRS does not initiate taxpayer contact via unsolicited e-mail or ask for personal identifying or financial information via e-mail. If you receive a suspicious e-mail claiming to come from the IRS, take the following steps:

• Do not open any attachments to the e-mail, in case they contain malicious code that will infect your computer.
• Do not click on any links, for the same reason. Also, be aware that the links often connect to a phony IRS Web site that appears authentic and then prompts the victim for personal identifiers, bank or credit card account numbers or PINs. The phony Web sites appear legitimate because the appearance and much of the content are directly copied from an actual page on the IRS Web site and then modified by the scammers for their own purposes.
• Contact the IRS at 1-800-829-1040 to determine whether the IRS is trying to contact you.
• Forward the suspicious e-mail or url address to the IRS mailbox phishing@irs.gov , then delete the e-mail from your inbox.

Genuine IRS Web site

The only genuine IRS Web site is IRS.gov. All IRS.gov Web page addresses begin with http://www.irs.gov/ . Anyone wishing to access the IRS Web site should initiate contact by typing the IRS.gov address into their Internet address window, rather than clicking on a link in an e-mail.

IR-2009-70, Aug. 3, 2009

WASHINGTON — The Internal Revenue Service is encouraging business taxpayers, associations and other interested parties to submit to the Industry Issue Resolution (IIR) Program tax issues for resolution that involve a controversy, dispute or an unnecessary burden on business taxpayers.

The objective of the IIR program is to resolve through issuance of new and improved guidance business tax issues common to significant numbers of taxpayers. In past years, issues have been submitted by associations and others representing both small and large business taxpayers, resulting in tax guidance that has affected thousands of taxpayers.

Submissions received are reviewed semi-annually with selections next being made from issues submitted by Aug. 31, 2009.

The IIR program recently accepted for review the topic of technical terminations of publicly traded partnerships.

Guidance issued as a result of the IIR program includes:

• Auto Last In First Out (LIFO) for automobile wholesalers, manufacturers and dealers regarding the proper treatment of the dollar-value, LIFO inventory method for pooling purposes of crossover vehicles, which have characteristics of trucks and cars. ( Revenue Procedure 2008-23 )
• Valuation of Parts Inventory by Heavy Equipment Distributors. ( Revenue Procedure 2006-14 )
• Clarification regarding circumstances when facsimile signatures may be used to sign employment tax forms. ( Revenue Procedure 2005-39 )
• An explanation of the circumstances under which insurance companies that make incentive payments to health care providers will be permitted to include those payments in unpaid losses and how a taxpayer may obtain permission to change their accounting method for such payments. ( Revenue Procedure 2004-41 )

For each issue selected, an IIR team, consisting of IRS and Treasury personnel, gathers relevant facts from taxpayers or other interested parties affected by the issue. Their goal is to recommend guidance to resolve the issue. This benefits both taxpayers and the IRS by saving time and expense that would otherwise be expended on resolving the issue through examinations.

IIR project selections are based on the criteria set forth in Revenue Procedure 2003-36 . For each issue selected, a multi-functional team of IRS, Chief Counsel, and Treasury personnel will be assembled. The teams will gather and analyze the relevant facts from industry groups and taxpayers for each issue and recommend guidance.

Requests for guidance on tax issues under the IIR program can be submitted at any time to IIR@irs.gov