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Kentucky Flood Victims Have Extended Tax Deadline
Victims of severe storms, flooding, mudslides and tornadoes beginning May 1 in Kentucky may qualify for tax relief from the Internal Revenue Service.
The President has declared Casey, Lewis, Lincoln, Logan, Metcalfe, Rockcastle, Rowan and Woodford counties federal disaster areas qualifying for individual assistance. As a result, the IRS is postponing until June 30 certain deadlines for taxpayers who reside or have a business in the disaster area.
In addition, the IRS will waive the failure to deposit penalties for employment and excise deposits due on or after May 1 and on or before May 17, as long as the deposits were made by May 17.
If an affected taxpayer receives a penalty notice from the IRS, the taxpayer should call the telephone number on the notice to have the IRS abate any interest and any late filing or late payment penalties that would otherwise apply. Penalties or interest will be abated only for taxpayers who have an original or extended filing, payment or deposit due date, including an extended filing or payment due date, that falls within the Postponement Period.
IRS computer systems automatically identify taxpayers located in the covered disaster area and apply automatic filing and payment relief. Affected taxpayers who reside or have a business located outside the covered disaster area must call the IRS disaster hotline at 1-866-562-5227 to request tax relief.
Affected Taxpayers
Taxpayers considered to be affected taxpayers eligible for the postponement of time to file returns, pay taxes and perform other time-sensitive acts are those taxpayers listed in Treas. Reg. § 301.7508A-1(d)(1), and include individuals who live, and businesses whose principal place of business is located, in the covered disaster area. Taxpayers not in the covered disaster area, but whose records necessary to meet a deadline listed in Treas. Reg. § 301.7508A-1(c) are in the covered disaster area, are also entitled to relief. In addition, all relief workers affiliated with a recognized government or philanthropic organization assisting in the relief activities in the covered disaster area and any individual visiting the covered disaster area who was killed or injured as a result of the disaster are entitled to relief.
Grant of Relief
Under section 7508A, the IRS gives affected taxpayers until June 30, 2010, to file most tax returns (including individual, corporate, and estate and trust income tax returns; partnership returns, S corporation returns, and trust returns; estate, gift, and generation-skipping transfer tax returns; and employment and certain excise tax returns), or to make tax payments, including estimated tax payments, that have either an original or extended due date occurring on or after May 1, 2010, and on or before June 30, 2010.
The IRS also gives affected taxpayers until June 30 to perform other time-sensitive actions described in Treas. Reg. § 301.7508A-1(c)(1) and Rev. Proc. 2007-56, 2007-34 I.R.B. 388 (August 20, 2007), that are due to be performed on or after May 1 and on or before June 30.
This relief also includes the filing of Form 5500 series returns, in the manner described in section 8 of Rev. Proc. 2007-56. The relief described in section 17 of Rev. Proc. 2007-56, pertaining to like-kind exchanges of property, also applies to certain taxpayers who are not otherwise affected taxpayers and may include acts required to be performed before or after the period above.
The postponement of time to file and pay does not apply to information returns in the W-2, 1098, 1099 series, or to Forms 1042-S or 8027. Penalties for failure to timely file information returns can be waived under existing procedures for reasonable cause. Likewise, the postponement does not apply to employment and excise tax deposits. The IRS, however, will abate penalties for failure to make timely employment and excise deposits due on or after May 1, 2010, and on or before May 17, 2010, provided the taxpayer made these deposits by May 17.
Forget to File Your Taxes?
If you owe taxes and didn’t file your tax return or request an extension by the April 15 deadline, you may face interest on any unpaid federal taxes you owe and a failure-to-file penalty. The IRS will deny a request for an extension that is filed after midnight on April 15. However, you should still file your tax return, even if it’s late.
The failure-to-file penalty is 5 percent per month, or part of a month, of the balance due, up to a maximum of 25 percent. If the tax return is more than 60 days late, the minimum penalty is $135 or the balance due, whichever is less.
Interest and penalties add to the total amount you owe. The sooner you file, even if you can’t pay all or some of the taxes due, the less you will owe.
IRS Proposes New Requirements for Tax Return Preparers
The Internal Revenue Service kicked off the 2010 tax filing season today by issuing the results of a landmark six-month study that proposes new registration, testing and continuing education of tax return preparers. With more than 80 percent of American households using a tax preparer or tax software to help them prepare and file their taxes, higher standards for the tax preparer community will significantly enhance protections and service for taxpayers, increase confidence in the tax system and result in greater compliance with tax laws over the long term.
To bring immediate help to taxpayers this filing season, the IRS also announced a sweeping new effort to reach tax return preparers with enforcement and education. As part of the outreach effort, the IRS is providing tips to taxpayers to ensure they are working with a reputable tax return preparer.
Based on the results of the Return Preparer Review released today, the IRS recommends a number of steps that it plans to implement for future filing seasons, including:
- Requiring all paid tax return preparers who must sign a federal tax return to register with the IRS and obtain a preparer tax identification number (PTIN). These preparers will be subject to a limited tax compliance check to ensure they have filed federal personal, employment and business tax returns and that the tax due on those returns has been paid.
- Requiring competency tests for all paid tax return preparers except attorneys, certified public accountants (CPAs) and enrolled agents who are active and in good standing with their respective licensing agencies.
- Requiring ongoing continuing professional education for all paid tax return preparers except attorneys, CPAs, enrolled agents and others who are already subject to continuing education requirements.
- Extending the ethical rules found in Treasury Department Circular 230 — which currently only apply to attorneys, CPAs and enrolled agents who practice before the IRS — to all paid preparers. This expansion would allow the IRS to suspend or otherwise discipline tax return preparers who engage in unethical or disreputable conduct.
Other measures the IRS anticipates taking are highlighted in the full report.
Currently, anyone may prepare a federal tax return for anyone else and charge a fee. While some preparers are currently licensed by their states or are enrolled to practice before the IRS, many do not have to meet any government or professionally mandated competency requirements before preparing a federal tax return for a fee.
Taxpayers Have Until Oct. 15 to File Extended 2008 Tax Returns
The Oct. 15 deadline is fast approaching for millions of taxpayers who requested a six-month extension to file their 2008 tax returns.
It’s also the deadline for special voluntary disclosures by taxpayers with assets in previously undisclosed offshore financial accounts.
In most cases, Oct. 15, 2009, is the last day taxpayers may timely file their 2008 federal tax returns. The IRS expects to receive as many as 10 million tax returns from taxpayers who used Form 4868 to request a six-month extension to file their returns. Some taxpayers, for example, may have requested a filing extension to claim the first-time homebuyer credit for a home purchase that closed after the April 15 deadline.
Some taxpayers can wait until after Oct. 15 to file. This includes those serving in Iraq, Afghanistan or other combat zone localities and people affected by recent natural disasters.
First-Time Homebuyer Credit
First-time homebuyers who purchased a home in 2009 may be able to receive a credit of up to $8,000 for home purchases that closed since the beginning of the year. First-time homebuyers who purchased a home in 2008 may be able to receive a credit of up to $7,500. The 2008 credit must be repaid over 15 years.
The credit is claimed on Form 5405. See the First-Time Homebuyer Credit page on this web site for more details.
E-file and Free File
The IRS encourages taxpayers to e-file. E-file with direct deposit results in a faster refund than by using a paper return. Electronic returns also have fewer errors than paper returns.
Oct. 15 is the last day to take advantage of e-file or the Free File program.
Free File is a fast, easy and free way to prepare and e-file federal taxes online. The Free File program provides free federal income tax preparation and electronic filing for eligible taxpayers through a partnership between the IRS and the Free File Alliance LLC, a group of private sector tax software companies.
Two Free File tax preparation and e-filing programs are available. Traditional Free File is available for taxpayers with adjusted gross incomes of $56,000 or less. Free File Fillable Forms can be used by people who earned more. The Free File page on this web site has more details.
Deadline nears for Special Offshore Voluntary Disclosures
Oct. 15 is the deadline for special voluntary disclosures by taxpayers with assets in previously undisclosed offshore financial accounts.
Under the special provisions issued in March, taxpayers with these accounts originally had until Sept. 23, 2009, to come forward. Those taxpayers who do not voluntarily disclose their accounts by Oct. 15 face harsh civil penalties, where applicable, and possible criminal prosecution.
Tax professionals or individuals who want to initiate a voluntary disclosure should call their local IRS Criminal Investigation office. Individuals or their representatives may either contact the nearest Special Agent in Charge, IRS Criminal Investigation, stating their wish to make a voluntary disclosure, or provide a letter outlining information needed to assist the IRS in determining their acceptance into the voluntary disclosure program.
See the Voluntary Disclosure page on IRS.gov for more details.
Taxpayers with questions on the offshore issue may also call the IRS Voluntary Disclosure Hotline (215-516-4777).
Where to Send Your Amended Income Tax Return (1040X)
Mail your return to the Internal Revenue Service Center shown in the next column that applies to you. If you are filing Form 1040X in response to a notice you received from the IRS, mail it to the address shown on the notice. If you are filing Form 1040X due to hurricane grant relief, mail it to the following address.
| For hurricane grant relief (any state) | Department of the Treasury Internal Revenue Service Center Austin, TX 73301-0255 |
| Alabama, Florida, Georgia, North Carolina, South Carolina, Virginia | Department of the Treasury Internal Revenue Service Center Atlanta, GA 39901 |
| Alaska, Arizona, California, Colorado, Hawaii, Idaho, Illinois, Iowa, Kansas, Minnesota, Montana, Nebraska, Nevada, New Mexico, North Dakota, Oklahoma, Oregon, South Dakota, Utah, Washington, Wisconsin, Wyoming | Department of the Treasury Internal Revenue Service Center Fresno, CA 93888-0422 |
| District of Columbia, Maine, Maryland, Massachusetts, New Hampshire, Vermont | Department of the Treasury Internal Revenue Service Center Andover, MA 05501-0422 |
| Arkansas, Connecticut, Delaware, Indiana, Michigan, Missouri, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, West Virginia | Department of the Treasury Internal Revenue Service Center Kansas City, MO 64999 |
| Kentucky, Louisiana, Mississippi, Tennessee, Texas | Department of the Treasury Internal Revenue Service Center Austin, TX 73301 |
Recommendation: Require Electronic Filing
Every year, the Electronic Tax Administration Advisory Committee (ETAAC) presents recommendations tax process improvements to Congress in June. The 14-member ETAAC provides an organized public forum for discussion of electronic tax administration issues and the overriding goal that paperless filing should be the preferred and most-convenient method of filing tax and information returns.
In its recommendation, the ETAAC explains that many professional tax accountants who file tax forms on behalf of clients still do so by paper, and will not electronically file unless mandated to do so. Therefore, the committee is repeating its 2007 recommendation that Congress empower the IRS to require paid preparers who, using tax software, prepare more than fifty individual returns per year to file all returns electronically. This requirement should be buffered by allowing waivers, minimum penalties for non-compliance, and appropriate opt-out provisions.
ETAAC Annual Report to Congress, June 19, 2008.
Form 990 Redesign
Form 990 is one of the most important tax filing reports for a charitable organization. On this form, charities and other non-profits must report the entirety of their fiscal operations. The forms are available to the public for review by investors and prospective contributors. The IRS will be redesigning the form this year, and we’re expecting many questions from the affected organizations.
The Internal Revenue has posted public comments on draft instructions to the 2008 Form 990, the annual return most tax-exempt organizations must use to report information about their operations. The instructions are for the redesigned Form 990 that organizations will file for their 2008 tax year (returns filed in 2009), which was released in final form in December 2007 (IRS News Release IR-2007-2004).
The IRS sought comments from the public on the 2008 Form 990 instructions, in an effort to make sure the final instructions address the needs of the tax-exempt community. The comment period closed on June 1, 2008.
The draft 2008 Form 990 instructions are organized according to a consistent format. There is a general overview of the form or schedule explaining its purpose, an explanation of who must file that particular schedule, and then line-by-line instructions to aid in answering each question on the form or schedule.
The draft instructions also contain a number of new tools designed to make it easier for the organization to answer the questions and to promote more uniform reporting. These tools include a comprehensive glossary of terms; a sequencing list to help organizations determine the order in which to fill out parts of the form; a compensation table to help organizations determine how and where to report items of compensation; and many illustrative examples. These aids were developed in response to comments received last year in connection with the draft Form 990.
File Your Taxes for Free
In many cases, taxpayers meeting certain qualifications are able to file income tax returns online for free. This is a program sponsored by the IRS but usually well hidden from the public. Many of the free file options have income requirements, so choose carefully to ensure that you won’t be in for any surprises after you finish filling out your tax forms online.
Here are the companies offering free services under the Free File Alliance.
CompleteTax: Free federal tax preparation and e-file if your Adjusted Gross Income is $32,000 or less. Form 4868 Extensions offered.
Free TaxACT: Free federal online tax preparation and e-file if your adjusted gross income is $54,000 or less and you are age 19 through 54 years old. Includes Form 982 (Mortgage Forgiveness Debt Relief). Form 4868 Extensions offered.
CitizenTax: Free federal online tax preparation and e-file if your adjusted gross income is $54,000 or less, and you are age 55 or under, and live in AL, AR, AZ, CA, CO, CT, DC, DE, FL, GA, HI, IA, ID, IL, IN, KS, KY, LA, MA, MD, ME, MI, MN, MO, MT, NC, ND, NE, NJ, NM, NY, OH, OK, OR, PA, RI, SC, TX, UT, VA, VT, WI or WV.
Tax$imple – Deluxe Version: Free federal online tax preparation and e-file if your adjusted gross income is $54,000 or less and you are age 65 years old or younger and you live in the following states: AL, AZ, CA, CO, CT, DC, DE, GA, HI, IA, ID, IL, IN, KS, KY, LA, MA, MD, ME, MI, MN, MO, MS, MT, NC, ND, NE, NH, NJ, NM, NV, NY, OH, OK, OR, PA, RI, SC, SD, TN, UT, VA, VT, WA, WI, WV, WY. Form 4868 Extensions offered.
123Easytaxfiling: Free federal online tax preparation and e-file if your adjusted gross income is $54,000 or less and you live in the following states: AL, AR, AZ, CA, CO, CT, GA, IA, IL, IN, KY, LA, MA, MD, MI, MN, MO, NC, NE, NJ, NY, OH, OK, OR, PA, SC, VA, WI or WV. Form 4868 Extensions offered.
efiletaxreturns.net: Free federal tax preparation and e-file if your adjusted gross income is between $5,000 and $54,000, and you live in the following states: AL, AR, AZ, CA, CO, CT, DC, DE, GA, HI, IA, ID, IL, IN, KS, KY, LA, MA, MD, ME, MI, MN, MO, MS, MT, NC, ND, NE, NH, NJ, NM, NY, OH, OK, OR, PA, RI, SC, SD, UT, VA, VT, WI, or WV.
H&R Block’s TaxCut Free File: Free federal online tax preparation and e-file if your adjusted gross income is $54,000 or less and you are age 50 or under.
eSmartTax By Liberty Tax Service: Free federal online tax preparation and e-file if your adjusted gross income is $54,000 or less and you are age 50 or under. Includes Form 982 (Mortgage Forgiveness Debt Relief). Form 4868 Extensions offered.
FileYourTaxes.com: Free Federal online tax preparation and e-File if you are age 25 and under with an Adjusted Gross Income between $10,000 and $50,000, or your Adjusted Gross Income is $50,000 or less and you live in the following states: AL, AR, AZ, CA, CO, DC, DE, GA, IA, ID, IL, IN, KS, KY, LA, MA, MD, ME, MI, MO, MS, NC, NE, NJ, NM, NY, OH, OK, OR, PA, UT, VA, or WI. Includes Form 982 (Mortgage Forgiveness Debt Relief). Form 4868 Extensions offered.
average1040.com: Free federal online tax preparation and e-file if your adjusted gross income is $54,000 or less and you live in AL, AR, AZ, GA, IA, ID, IL, KY, MA, MI, MN, MO, MS, MT, NC, ND, NY, OH, OK, OR, PA, RI, VT or WV.
Online Taxes @ OLT.com: Free tax return preparation and e-file if your Adjusted Gross Income is $54,000 or less and you are age 50 or younger. Includes Form 982 (Mortgage Forgiveness Debt Relief). Form 4868 Extensions offered.
Free1040TaxReturn.com: Free Federal online tax preparation and e-File if your adjusted gross income is $54,000 or less and you are age 76 or under and live in the following states: AL, AR, AZ, CA, CO, CT, DE, HI, GA, IA, ID, IL, IN, KS, KY, LA, MA, MD, ME, MI, MN, MO, MS, NC, ND, NE, NJ, NM, NY, OH, OK, PA, SC, UT, VA, VT, WI, or WV. Form 4868 Extensions offered.
TurboTax® Freedom Edition: Free tax return preparation and e-file if your Adjusted Gross Income is $30,000 or less or you will claim EITC, or you are active duty military with an AGI of $54,000 or less. Includes Form 982 (Mortgage Forgiveness Debt Relief). Form 4868 Extensions offered.
ezTaxReturn.com: Free federal tax preparation and e-file if your adjusted gross income is $54,000 or less and you live in: AL, AZ, CA, GA, IL, LA, MA, MI, MS, NC, NJ, NY, OH, PA, VA or WI.
1040NOW.NET: Free federal tax preparation and e-file if your adjusted gross income is $54,000 or less and you are age 72 or under and you live in AL, AR, AZ, CA, CO, CT, DC, DE, GA, HI, IA, ID, IL, IN, KS, KY, LA, MA, MD, ME, MI, MN, MO, MS, MT, NC, ND, NE, NJ, NM, NY, OH, OK, OR, PA, RI, SC, UT, VA, VT, WI or WV. Includes Form 982 (Mortgage Forgiveness Debt Relief).
TaxSlayer Free Returns.com: Free federal online tax preparation and e-file if your Adjusted Gross Income is $54,000 or less and you are 25 years old or younger or 68 years old or older or active military. Also, your return is free if you qualify for EITC or your AGI is $10,000 or less. Includes Form 982 (Mortgage Forgiveness Debt Relief). Form 4868 Extensions offered.
FreeTaxUSA.com: Free federal online tax prep and e-file if your adjusted gross income is $54,000 or less and you live in AL, AZ, CA, CO, CT, DE, GA, IA, ID, IL, IN, KS, KY, LA, MD, MI, MO, MS, NC, NE, NJ, NM, NV, NY, OH, OK, OR, PA, SC, UT, VA, or WV. Form 4868 Extensions offered.
Free Tax Return: Free federal tax preparation and e-file if your adjusted gross income is $54,000 or less and you live in the following states: AK, AZ, CA, CO, DC, DE, GA, HI, IA, ID, IL, IN, KS, KY, LA, MA, MI, MN, MT, NC, ND, NE, NH, NM, NV, NY, OH, OR, PA, RI, SC, SD, TN, UT, VA, VT, WI, WV or WY.
Online Tax Pros: Free tax return preparation and e-file if your adjusted gross income is between $11,000 and $54,000. Also provided en Espanol. Form 4868 Extensions offered.
IRS Where’s My Refund Feature is Broken
The IRS website is in a constant state of disarray. The functions they provide are often unavailabe at the most inopportune moments. As of this moment, the Where’s My Refund feature, which allows you to enter some personal information about your tax return and the IRS will supposedly instantly provide your refund’s status, is not working.
When clicking on the Where’s My Refund? link, a download file dialog box appears, asking the visitor to download a DLL file. This is not the correct behavior. We’ll keep monitoring the site to determine when this function is working properly again.
In the mean time, if you haven’t received your refund, find consolation in the fact that you’re not the only one.