Why we put off filing our taxes and how to stop it

The 2017 tax filing season has been officially underway for just more than a week. Lots of folks have already filed their returns.

The Ally Bank fortune cookie I got at FinCon16 last September was already planning for this filing season.
And yes, after acknowledging the good tax advice, I ate the cookie!

And, according to ecstatic posts on social media, some have received their refunds.

Other taxpayers, however, are waiting to file.

Form-ulaic delay: Why the delay. In a lot of cases, folks haven't yet received their W-2s, 1099s and other documents with the data necessary to fill out 1040s.

As soon as those arrive, which should be soon since today, Jan. 31, is the deadline for many tax statements to be sent, they'll complete their 2016 tax returns.

Still others will wait until April 18 (yes, the filing deadline this year is again tailor-made for procrastinators) or even Oct. 16 (yes, the extended due day is later, too) if they file Form 4868 to get six more months to fill out the appropriate tax forms.

Such tax procrastination comes even from those who will, eventually, get refunds.

So why do we put off tax tasks? Here are three big reasons.

1. Afraid of the tax process: Fear is part of it. That's understandable. Taxes, in general, can be -- are -- scary.

A lot of us are afraid of making a mistake on our taxes. That's understandable, too.

Taxes can be complicated, even when you use tax software or hire a tax professional. And everyone, and everything, makes mistakes, including taxpayers, tax software and tax pros.

But an error or two can be corrected (yay 1040X!), either by you when you catch it early or later when the IRS finds it. It's better to get your taxes done by deadline rather than not file at all.

And fear of tax errors can breed even more errors. By putting off your tax task until the last minute, you're likely to find yourself in a rush, bringing to mind that old saying haste makes waste.

It's better to give yourself (or your tax preparer) enough time to file your return as accurately as possible than to force finish your 1040 at the very last minute.

2. No money: While it's true that some who get refunds also delay filing, most tax procrastinators owe the U.S. Treasury. If you don't have the cash to cover that tax liability, you're not going to be in a big hurry to fill out your return.

So you reason that by putting off your filing, you'll have more time to come up the money to pay your tax bill. That could be true. Or not.

If you're still short as April arrives, file by the deadline anyway and pay what you can.

Then set up a payment plan with the Internal Revenue Service to cover the rest. It's much cheaper in the long run to pay some interest on an installment plan than to face penalties for filing late or not filing at all.

3. Habits are hard to break: Some folks are just in the habit of putting off their taxes. They fully intend to do them, but later. And later it is every year.

I can see that. If you don't file until mid-April every year, you've already got that space set aside in your head and literally on your calendar to deal with your filing then.

And if you push your returns until October, the idea of doing them again early in the next year is inconceivable. You just did that a few months ago!

Justifiable document delays: Some of us have legitimate reasons for postponing tax filing.

We're waiting for tax documents we need to complete our returns. Although most of those, like the W-2 and 1099-MISC, are required to at least be on their way to taxpayers by Jan. 31, if they're sent by snail mail, it could take a week or so for them to arrive.

Other documents get even longer before they must be sent.

Small business owners, especially sole proprietors, also can benefit from not rushing into filing.

You need to make sure you have all your business expense receipts in order, have all the info necessary to claim your mileage and home office, and have taken advantage of your retirement plan contributions.

Extra time to add to a retirement account: While anyone with an IRA, either Roth or traditional, can contribute to that account for the previous tax year by the April filing deadline, self-employed folks have even longer.

You can open and contribute to a simplified employee pension, or SEP, retirement plan up to your return's due date, including the October filing deadline if you sought that extra time.

Not only do the extra six months give you added days to complete your 1040 and Schedule C, you also have more time to come up with the money to go into your self-employed retirement account by the later deadline.

And it definitely is worth contributing to your self-employed retirement plan, regardless of whether you do it sooner or later, for two reasons.

First, your future retirement will be better because of your contributions today to your account.

Second, money you put into your self-employed retirement plan is an above-the-line deduction that can make a difference in lowering your tax bill.

If I have to come up with a $1,000 or so, I'd much rather give it to myself via my SEP-IRA contribution than to Uncle Sam as a bigger tax bill.

Procrastination solutions: Regardless of why you're putting off filing, try to understand your motivations. If they're justified, fine. Take the time you need to do your taxes right.

But if you're just screwing around because you simply don't want to file, get over it. Yes, I say that to myself, too.

Then buckle down and get your tax return to the IRS. The American Institute of CPAs has some suggestions on how to stop procrastinating. 

Whatever your 1040's final result, you'll be done, at least for a while, with your taxes.

You also might find these items of interest:

• 2017 tax filing checklist
• 5 tax tips for Free File users
• 4 filing tips to ensure you get your tax refund ASAP

source http://feedproxy.google.com/~r/DontMessWithTaxes/~3/GdC1pwk6WwA/why-we-procrastinate-in-filing-our-taxes-and-how-to-stop-it.html

The many versions of IRS Form 1099

Jan. 31 is a key annual tax deadline. It’s the date employers must send W-2 and 1099-MISC forms to folks who received at least $600 in compensation the preceding tax year.

Jan. 31 also now is the deadline for employers to also submit that W-2 and 1099-MISC data to the Social Security Administration (SSA).

Earlier reporting to fight fraud: In past years, employers had another month to get the data to Social Security. But in an effort to help the Internal Revenue Service fight tax refund fraud, a provision in the Protecting Americans from Tax Hikes, or PATH, Act now requires businesses to transmit the payment information to the SSA at the same time it sends it out to workers instead of by the end of February.

That will make it easier for the IRS to more quickly confirm that the payment info entered on tax returns is correct. In the past, the IRS simply had to take taxpayers' words for the income entry.

If the IRS later found a discrepancy in the income amounts when it checked the official SSA data, then the tax collector had to follow up with taxpayers.

Or in the case of fake returns filed in order to get fraudulent refunds, eat the money that was erroneously sent out to crooks.

By having the data in employee and SSA/IRS hands simultaneously, refund fraud should at least be slowed.

Other 1099s: While the 1099-MISC is the most important one to independent contractors, there are several other variations of Form 1099.

This table shows the 1099 name and description, as well as what triggers its issuance and when the form is supposed to be supplied to you.

Form Name and Title	Amount(s) to Report	Form Due to Recipient
1099-A Acquisition or Abandonment of Secured Property	All amounts	Jan. 31
1099-B Proceeds From Broker and Barter Exchange Transactions	All amounts	Feb. 15
1099-C Cancellation of Debt	$600 or more	Jan. 31
1099-CAP Changes in Corporate Control and Capital Structure	More than $1,000	Jan. 31
1099-DIV Dividends and Distributions	$10 or more; $600 or more for liquidations	Jan. 31
1099-G Certain Government Payments	$10 or more for refunds and unemployment benefits	Jan. 31
1099-INT Interest Income	$10 or more in most cases	Jan. 31
1099-K Payment Card and Third Party Network Transactions	All amounts for payment card transactions; $20,000 or more and 200 or more third-party network transactions	Jan. 31
1099-LTC Long-Term Care and Accelerated Death Benefits	All amounts	Jan. 31
1099-MISC Miscellaneous Income	$600 or more for compensation; $10 or more for royalties	Jan. 31
1099-OID Original Issue Discount	$10 or more	Jan. 31
1099-PATR Taxable Distributions Received From Cooperatives	$10 or more	Jan. 31
1099-Q Payments From Qualified Education Programs	All amounts	Jan. 31
1099-QA Distributions from ABLE Accounts	All amounts	Jan. 31
1099-R Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.	$10 or more	Jan. 31
1099-S Proceeds From Real Estate Transactions	$600 or more	Feb. 15
1099-SA Distributions From an HSA, Archer MSA, or Medicare Advantage MSA	All amounts	Jan. 31

 

You can find more details on 1099s and other tax forms in the IRS Publication of General Instructions for Certain Information Returns. 

And be on the lookout for all your annual tax statements.

You also might find these marriage related posts of interest:

• 2017 tax filing checklist
• A name change could mean tax trouble if you don't let Social Security Administration know
• Tax ID theft solutions get complicated when Social Security, undocumented immigrant tax numbers meet

source http://feedproxy.google.com/~r/DontMessWithTaxes/~3/-NN2D16LoJ0/the-many-versions-of-irs-form-1099.html

Fake CEO phishing tax scam is back

Remember that tax scam last spring where crooks posing as company executives sent emails asking for workers' payroll data?

It was the one that fooled lots of folks, including a Milwaukee Bucks employee who thought that the message really did come from the NBA franchise's president. That chagrined Bucks' staffer sent the phishing crook 2015 tax year data on the team's employees, including his rank-and-file colleagues and highly-paid professional basketball players.

Well, that tax scam is back.

Email spoofs company CEO: The Internal Revenue Service says the email scam is now making its way across the nation for a second time. Once the crooks get the data, they then file fraudulent tax returns seeking refunds.

This type of phishing is known as a spoofing e-mail. In this instance, it contains the actual name of a company's chief executive officer or other top corporate official in an attempt to prompt employees, eager to do what the big boss asks, to send back workers' personal financial data.

The IRS says the emails are likely to ask scam targets such things as:

• Kindly send me the individual 2016 W-2 (PDF) and earnings summary of all W-2 of our company staff for a quick review.

• Can you send me the updated list of employees with full details (Name, Social Security Number, Date of Birth, Home Address, Salary)?

• I want you to send me the list of W-2 copy of employees wage and tax statement for 2016, I need them in PDF file type, you can send it as an attachment. Kindly prepare the lists and email them to me ASAP.

In light of the scam's resurgence, the IRS urges company payroll officials to double check any executive-level or unusual requests for lists of W-2 forms or Social Security numbers.

Other scams out there, too: The IRS and its Security Summit partners also remind all taxpayers that this is just one of myriad tax scams that are or will appear this filing season.

While the IRS, state tax officials and the tax industry have made significant progress in slowing tax-related identity theft, cyber-criminals are using more sophisticated tactics to try to steal even more data that will allow them to impersonate taxpayers.

The bottom line, this filing season and year round, it so be careful out there. And be especially suspicious of any effort from any source and by any method to get personal and financial information from you.

You also might find these items of interest:

• 4 tax cyber security tips from IRS, NY tax officials
• Phishing criminals pose as potential tax clients to infiltrate tax preparers' systems and steal data
• 5 ways to protect your identity (& money!) during National Tax Security Awareness Week (& year-round!)

source http://feedproxy.google.com/~r/DontMessWithTaxes/~3/ehadmbm3-34/fake-ceo-tax-scam-is-back.html

Californians file most EITC claims, get most money But biggest average tax credit check goes to Mississippi filers

Every year, the Internal Revenue Service makes a concerted effort to hand out more Earned Income Tax Credit (EITC) money. The reason, says the tax agency, is that around 20 percent of eligible filers consistently fail to file for this refundable tax credit.

But what about those who do claim the EITC?

The IRS says that nationwide last year, 27 million U.S. workers and their families got $67 billion thanks to this tax credit for lower- and middle-income workers.

Where EITC money goes: Not surprisingly, the most populated states account for the most EITC claims and actual dollars returned to eligible taxpayers.

Here are the top 10 states as far as actual EITC claims, along with the total money the taxpayers there received:

1. California -- 3 million claims, $7.3 billion paid
2. Texas -- 2.6 million claims, $7.1 billion paid
3. Florida -- 2.1 million claims, $5.2 billion paid
4. New York -- 1.7 million claims, $4.1 billion paid
5. Georgia -- 1.1 million claims, $3 billion paid
6. Illinois -- 994,000 claims, $2.5 billion paid
7. Ohio -- 939,000 claims, $2.3 billion paid
8. North Carolina -- 921,000 claims, $2.3 billion paid
9. Pennsylvania -- 919,000 claims, $2.1 billion paid
10. Michigan -- 788,000 claims, $2 billion paid

Overall, 20 states got more than 1 billion in EITC refunds in 2016. The other 10 states where taxpayer claims exceeded that dollar mark are Alabama, Arizona, Indiana, Louisiana, New Jersey, Mississippi, Missouri, Tennessee, South Carolina and Virginia.

Biggest, smallest average checks: While it's always fun to talk about billions of dollars, the value of any tax break is how much of that enormous amount of money breaks out when you're talking individual, real people.

The overall national average EITC check in 2016 was $2,455.

Mississippi residents did much better than that. The Magnolia State led the EITC payout list with an average check of $2,917.

Vermont EITC claimants, on the other hand, had the smallest average check at $1,957.

So given all these figures, which one gets this week's By the Numbers honor? It's a tough call, but I'm going with the $2,917 that was dispensed to Mississippi EITC claimants. 

More EITC figures: If you don't live in one of the 22 states mentioned here, you can check out where your state landed on the 2016 EITC scale at the full IRS table showing last year's state-by-state EITC claims, total refunds per state and the average check amounts.

Want more data? The Brookings Institute has an incredibly dense EITC interactive database.

There you can display and download ZIP code-level tax return information for states, metro areas, counties, cities, and state legislative and congressional districts for tax years 2011 through 2013. 

You also might find these items of interest:

• Many states offer their own EITCs
• If you make minimum wage, you might qualify for the EITC
• EITC and other credit amounts adjusted in 2017 for inflation

source http://feedproxy.google.com/~r/DontMessWithTaxes/~3/vMVYv0qNq_Y/californians-file-most-eitc-claims-get-most-money-but-biggest-average-tax-credit-check-goes-to-missi.html

Millions of taxpayers are missing out on EITC tax refunds

The Earned Income Tax Credit, or EITC, is one of the filing claims that is delaying federal (and in some cases, state) tax refunds this year.

But even if you have to wait a few extra weeks to get your refund from Uncle Sam (or your state tax office), filing for the EITC is usually worth it.

It's worth more than $6,000 for some filers. And all or some of that money could be as a tax refund.

Why credits rule: Like all tax credits, the EITC is a dollar-for-dollar offset of any tax you owe. Let's say your tax bill is $1,000 and you have a tax credit of $1,000. That credit means you don't owe the U.S. Treasury anything.

But the EITC also is a refundable credit, and this is even better. With a refundable tax credit, you could get tax cash back even if you don't owe any taxes.

Let's go back to that $1,000 tax bill mentioned a few sentences earlier, but this time you have a refundable credit of $1,200. In this case, you use the credit to erase your $1,000 tax liability and then get the $200 extra as a refund.

For the 2017 filing season that's now underway, the EITC is worth up to $6,269 for some eligible families.

Many overlook the money: You'd think that kind of money would have people clambering (usually figuratively, but sometimes claiming the EITC is rather difficult, so ...) to get those tax dollars. It does. To a degree.

Last year, according to Internal Revenue Service data, more than 27 million eligible workers and families received more than $67 billion in EITC refunds. The average EITC amount in 2016 was about $2,455.

But a whole lot leave their possible tax credit cash on the table.

The IRS says millions of workers who could claim the EITC every year don't. In fact, around 20 percent of potential EITC recipients every year never apply for the credit.

To change that, the IRS holds an annual EITC Awareness Day to get the word out to eligible filers. You guessed it. That EITC day is today!

Here's what you need to know and/or do to get your EITC refund.

Workers only, please: The name of the credit is key. It is available only to folks who get earned income, or what non-tax geeks know as wages or salaries.

Self-employment earnings count, too.

But not any money you made while incarcerated, as part of a work release program or while in a halfway house.

Service personnel issues: Members of the military get some special EITC consideration. (Yes, some of our armed services personnel are paid so little that they are eligible for this tax credit.)

When a service member gets combat pay for serving in a dangerous situation, that money generally is tax free. And that's generally a good thing when it comes to taxes.

But with the EITC, you need to make a certain amount of money (but not too much) to get the credit's maximum benefit. So for EITC calculation purposes, service members can choose to include all or none (it's either or; you can't use just a part of it) of their combat pay.

Kids not required: The EITC often is touted as tax help for lower-income working families. It is. 

But some single taxpayers who don't have any dependent children also can claim the EITC.

In these cases, you must be at least 25 years old, but younger than 65 at the end of the tax year. You also must live in the United States for more than half the year and you can't qualify as another person's dependent.

So if you're a person without any dependent kids, but not a very high-paying job and meet the other requirements, don't ignore the EITC. It could get you some welcome tax cash.

Earning triggers, limits: Now about the earned income requirement. Since this tax break was designed for folks who don't make that much, just what does the IRS consider too much?

Like most other tax situations, it depends on your filing status. And for EITC purposes, the number of kid you have also matters.

For 2016 taxes, you can claim the EITC if your income is less than:

If filing as	Number of Qualifying Children Claimed
	None	1	2	3 or more
Single, Head of Household or Surviving Spouse	$14,880	$39,296	$44,648	$47,955
Married Filing Jointly	$20,430	$44,846	$50,198	$53,505

While having only investment income will disqualify you from claiming the EITC, you can have some. But not too much. If you have more than $3,400 in unearned income, you can't apply for the EITC.

And if you're wondering where the married filing separately status info is, there isn't any. If that's how you're submitting your taxes, you can't file for the EITC.

Maximum EITC amounts:  Finally, the big question. Just how much money can you get from the EITC?

Image: Community Action Partnership of Riverside County

The maximum EITC amounts for eligible 2016 tax return filers are:

• $6,269 with three or more qualifying children,
• $5,572 with two qualifying children,
• $3,373 with one qualifying child and
• $506 if you don't have any qualifying children.

That money could do a lot of taxpayers a lot of good. So if you or someone you know might be eligible for this tax break, please look into claiming the EITC.

You can use the IRS' online EITC Assistant to see if you qualify.

If you do, your tax preparer or tax software can help you determine just how much the EITC might be worth on your 2016 taxes. 

You also might find these items of interest:

• EITC and other credit amounts adjusted in 2017 for inflation
• 10 reasons to file a tax return even if you legally don't have to
• LBJ's war on poverty, aided by the Earned Income Tax Credit

source http://feedproxy.google.com/~r/DontMessWithTaxes/~3/40lGWqPhwwA/millions-of-taxpayers-are-missing-out-on-eitc-tax-refunds.html

Fighting Tax Identity Theft

Our tax filing systems are not perfect!  How does the IRS or a state tax agency really know if the person filing a return is the true owner of the taxpayer identification number used? In IRS Publication 1345, on procedures for authorized e-file providers, the IRS states that if the preparer/e-filer does not know the client, they should get two forms of verification (ideally picture IDs that include the client's name and address (page 11 of Pub 1345)).  That should help. What else is needed?

Perhaps all taxpayers need a PIN like they have for their ATM cards, debit cards, and bank websites. That should help as a person would not be able to file without both the SSN and the PIN. What about for paper returns? The IRS could hold up processing until they match the W-2 with one provided by an employer. Or will some type of biometric identification be needed in the near future?

Here is some information on recent security protocols of the IRS:

• IRS, How New Security Safeguards Will Affect You For 2017
• Melanie Lauridsen, AICPA Insights, ID Theft: Two Prevention "Hassles" Worth Your Time, 1/19/17

What do you think?

source http://21stcenturytaxation.blogspot.com/2017/01/fighting-tax-identity-theft.html

What to know for the 2017 Tax Season

 

The 2017 tax season is underway! There are many things that will affect our industry up in the air since the new administration took office three days before the start of the season. There are a lot of proposed changes by President Trump but they will likely not take effect until next year.

As we move through the tax season, here are the things you need to know that apply to this year’s tax returns.

E-File

The IRS began accepting e-file returns on January 23rd. Some sections of Publication 1345 (Handbook for Authorized IRS e‑file Providers of Individual Income Tax Returns) have been updated, adding additional  ID requirements that protect against fraud.

The IRS has been urging tax preparers to check on their PTIN and EFIN numbers through E Services to be sure that your numbers are not being used by someone else. —The E-Help Desk number is 866-255-0654.—

Refund Delays

The IRS will begin releasing EITC and ACTC refunds starting Feb. 15, but caution taxpayers that these refunds likely will not start arriving until the week of Feb. 27. The IRS wants taxpayers to know it will take additional time for their refunds to be processed and for financial institutions to accept and deposit the refunds to bank accounts. The IRS reminds taxpayers many financial institutions do not process payments on weekends or holidays, which can affect when refunds reach taxpayers. For EITC and ACTC filers, the three-day holiday weekend involving President’s Day may affect their refund timing.

IRS and Partners Look to Start of 2017 Tax Season; Encourage Use of IRS.gov and E-File; Warn of Refund Delays

Legislative Changes

There are lots of legislative changes to know about mostly thanks to The “Protecting America from Tax Hikes” Act or PATH Act. This bill mandates that the IRS not issue a refund on tax returns claiming the Earned Income Tax Credit or Additional Child Tax Credit until Feb. 15. This additional time helps the IRS stop fraudulent refunds from being issued to identity thieves and fraudulent claims with fabricated wages and withholdings.  The PATH Act —also makes the expansion of Section 179 permanent and phases out bonus depreciations over 5 years.

Here are some other legislative changes, some of which are a part of the PATH Act.

Permanent Extensions

• Itemized Deduction for Sales Taxes
• Educator Expenses (the $250 above the line deduction for educators has been extended & now includes professional development expenses with the cap being indexed to inflation)
• American Opportunity Tax Credit Child Tax Credit
• Research Credit
• Tax-free distributions from individual retirement plans to charities (the Charitable deduction has been limited to $100,000 per year per taxpayer)

Temporary Extensions

• Bonus Depreciation (50% 2015-2017, 40%-2018, 30%-2019)
• Credits
• Exclusion for discharge of debt for primary residence
• Mortgage insurance premium deduction
• Tuition and fees deduction
• Alternative fuel and energy efficiency
• Theatrical production expenses (qualified film and theatrical production expenses)

Return Due Dates

The due dates for this tax year are:

• —January 31: W2 and 1099 Misc.
• —15th day of 3rd Month: Partnership (1065) & S Corporation (1120S) returns
• —15th day of 4th month unless June 30 year-end: C Corporation (1120)
• —April 18, 2017: 2016 Individual returns due

Due Diligence

The IRS takes due-diligence requirements very seriously and has been warning tax preparers to take it seriously as well. Make sure you are compliant on the following:

• Earned Income Tax Credit
• American Opportunity Credit
• Child Tax Credit and
• Additional Child Tax Credit

You should also make sure you are up-to-date on Form 8867  and the tax preparer penalties, which have increased.

Identity Theft

Identity Theft is a big focus for the IRS this season. Here’s a snippet of procedures they’ve changed.

• W2 verification code project expanded
• 16 digit verification code
• Enhanced Software password requirements

—Make sure you check out their Publication, “Protect Your Clients; Protect Yourself” as well as Publication 4557 Safeguarding Taxpayer Data. 

READ: Protect Yourself and Your Clients from Cybercrime

We hope you have a great tax season! Stay in the loop by subscribing IRS Quick Alerts and following us here on the blog, on Twitter (@TaxSchool), Facebook, and LinkedIn.

 

source http://www.theincometaxschool.com/blog/tax-season-2017/

State tax refunds likely to be delayed, too

Most taxpayers who file federal returns also must do the same for their state taxes. And most those state filings tend to conform to federal laws.

That means that, among other things, state deadlines usually are the same as the ones set by the Internal Revenue Service.

This year, it also means that state tax refunds, like their federal counterparts, are likely to be later than usual.

Feb. 15 delay for certain refunds: Millions of taxpayers who claim the federal Earned Income or additional child tax credits already are dealing with delayed refund checks from Uncle Sam.

The IRS is prohibited from issuing them before Feb. 15, and has warned that normal processing procedures are likely to push the actual delivery of affected refunds to the end of next month.

The mandated delay was created to give the IRS more time to double check filings for indications of tax identity theft and refund fraud.

Tougher state tax security, too: The same is likely to happen on the state level.

The IRS crackdown on tax fraud has prompted crooks to find alternative avenues. Many have shifted their felonious focus to tax refund fraud at the state level.

A recent LexisNexis report found that 86 percent of state government tax administration officials consider ID fraud a major problem within the state refund process.

To stem this growing trend, state tax officials are part of the IRS Security Summit team. As such, they are utilizing many of the same added anti-fraud techniques that the IRS employs.

And those procedures tend to slow down refunds.

Expected refund delays in 4 states: This filing season, tax officials in Georgia, New Jersey, New Mexico and Virginia have officially announced that their taxpayers will be getting their state refunds later than usual.

And the delay is for the same reason that the IRS is holding checks. State tax offices also have added extra security procedures in their efforts to fight tax identity theft and refund fraud at the state level.

Below is what those state officials have to say about this year's expected tax refund processing and refund delays.

Georgia Department of Revenue's fraud management system blocked more than $70 million in fraudulently filed refund requests from being released in 2016 and it is implementing additional security safeguards this year. Peach State tax officials say they will not begin processing 2016 individual income tax returns until Feb. 1. Taxpayers are warned that it could take more than 90 days from the day that the tax department receives a return for it to be processed and a refund issued.

New Jersey Division of Taxation officials say that they will issue refunds beginning on March 1. This delay is due to additional security tools that the Garden State tax office is using this filing season to fight tax ID theft and refund fraud. In addition, the N.J. tax office says that electronically-filed refunds may take a minimum of four weeks to validate and process. That process will take a minimum of 12 weeks for paper returns.

New Mexico taxpayers should be prepared to wait up to 12 weeks for their state tax refunds, according to that southwestern state's Taxation and Revenue Department. This maximum delay will affect state returns on which the tax department finds "potential for refund fraud." Plus, when a Land of Enchantment taxpayer's federal return is help by the IRS, any corresponding New Mexico refund request will be held by the state until the IRS issue is resolved.

Virginia's state return deadline is not until May 1, but filing season is open now for Old Dominion taxpayers. Filing early, however, doesn't necessarily mean you'll get your refund quickly. The Virginia Department of Taxation says that "processing of some returns may take longer this year due to enhanced refund review and validation procedures."

Delayed state tax refunds are likely to be a nationwide trend. If you're expecting or depending on a state tax refund, check with your state tax department on its expected processing time this filing season.

You also might find these items of interest:

• States that don't follow IRS deadlines
• Why we're looking at Donald Trump's state taxes
• 5 sales-tax-free states are perfect places to enjoy National Ice Cream Day

source http://feedproxy.google.com/~r/DontMessWithTaxes/~3/wbYqIcmR3oM/state-tax-refunds-likely-to-be-delayed-too.html

Trump's hiring freeze ices out would-be IRS worker

As the Internal Revenue Service began accepting tax returns this week, the agency's commissioner noted that "the dedicated employees of the IRS look forward to serving taxpayers this filing season."

IRS Commissioner John Koskinen's staff, however, apparently is not going to be as large this year as he had planned.

Some federal job seekers got an icy reception after President Donald Trump instituted a federal hiring freeze this week. (Icy branch photo by J. Carmichael via Wikimedia Commons)

On Jan. 23, the same day that the 2017 tax filing season officially began, President Donald Trump instituted an immediate hiring freeze across federal agencies. IRS included.

Now folks who had hoped to join the tax collector's ranks are getting the bad news.

Job, then no job: Terry, a Central Texan who had applied for a job with the Austin IRS office, shared his disappointment and the message he got via Facebook on Tuesday, Jan. 24, a day after Trump's freeze order.

Terry said he posted the message on social media so that it could be shared, but I've decided to redact his last name anyway.

"This is Trump's America. Cutting jobs in the first 5 days of office. I've been waiting more than 2 months for this opportunity and in under a few days it has been taken from me," Terry said as a preface to the image of the IRS' rescission of the job offer.

Others in under the wire: Unfortunately for Terry and others who no doubt got or will get similar messages, the IRS didn't accelerate its hiring process like other government agencies did after the presidential election.

According to media reports out of Washington, D.C., the U.S. Fish and Wildlife Service, Transportation Security Administration, National Park Service, National Oceanic and Atmospheric Administration, U.S. Patent and Trademark Office, and parts of the Agriculture and Labor departments scrambled to fill as many open slots as possible before Trump was sworn in as the country's 45th president on Jan. 20.

They suspected cuts were coming when, soon after last November's election, Trump's transition team asked Congress to approve a stop-gap federal spending bill.

By funding the Uncle Sam's operations only through March 31, the new Administration will have an early chance to shape agency budgets for the balance of fiscal 2017, as well as for the full 2018 fiscal year.

More staff cuts possible: Based on Trump's hiring freeze memo, federal workers might want to start polishing their resumes.

In addition to the hiring freeze, expected budget cuts are likely to result in staff reductions.

Richard G. Thissen, president of the National Active and Retired Federal Employees Association, warned that the freeze "would undermine the efficiency of government operations by creating hiring backlogs and inadequate staffing levels, and it is unlikely to save any money."

Hiring freeze + filing season = not good: IRS Koskinen touched on those issues during a Jan. 5 press conference to discuss the upcoming filing season.

"A hiring freeze would affect the filing season because it would interfere with our ongoing ability to hire temporary and seasonal employees," the commissioner said back then.

He added that his office had "very positive discussions" with the Trump transition team, including discussions about the inability to hire additional staff. "I think they understand that that would be an unintended consequence of a government-wide hiring freeze," Koskinen said.

Maybe they did. Maybe they didn't. Maybe they don't care.

Those same points were made in a Jan. 9 letter that 107 House and Senate Democrats sent to Trump asking that he reconsider the hiring freeze.

Hiring freezes implemented by previous Democratic and Republican administrations did not result in a smaller federal workforce, wrote the members of Congress, but instead decreased efficiency, transparency and accountability.

In addition, argued the lawmakers, a hiring freeze would "exacerbate the serious workforce skills challenges facing a federal government that must address a variety of evolving 21st Century issues including cybersecurity, terrorism, consumer safety, and environmental threats."

Either Trump didn't read the letter or he dismissed it. Either way, the hiring freeze is particularly distressing news for both IRS employees (current and those who had hoped to be) and taxpayers.

Already facing budget challenges: In recent years, the IRS has had to deal with repeated budget cuts. A June 2015 Government Accountability Office report found that total appropriations for the IRS declined from a high of $12.1 billion in fiscal year 2010 to $11.3 billion in fiscal year 2014, a reduction of about 7 percent. The agency's budget was reduced by an additional $346 million from fiscal year 2014 to fiscal year 2015.

Since it has had less money, the IRS has trimmed services.

Fewer staffers have meant long hold times for taxpayers who call the agency's help lines. The IRS also has instituted appointments at its walk-in Taxpayer Assistance Centers because it doesn't have enough people to deal with everyone who shows up at the nationwide offices.

The lack of funds and staff are major reasons why the agency is pushing a Future State plan that calls for even more impersonal online interactions with taxpayers.

Support from potential new Treasury Secretary: Trump's hiring freeze, which many see as the first step by Republicans to dramatically overhaul the federal workforce, also could undercut some assurances his Treasury Secretary nominee gave Senators earlier this month.

Prospective Treasury chief Steven Mnuchin told Senate Finance Committee members on Jan. 19 that he wanted to beef up the IRS. He also told the Senate tax-writing panel that despite what was at the time just a threat to temporarily halt federal hires, he believes he can convince Trump to increase IRS staff.

Koskinen repeatedly has said that the IRS consistently provides a good return on the federal investment in the agency. At a National Press Club address last March, Koskinen said "it now costs us about 35 cents to collect $100 in federal revenue. I think that's a pretty good deal for the American people."

Mnuchin apparently has heard, and accepts, that fiscal argument.

"I can assure you that the president-elect understands the concept of when we add people, we make money," Mnuchin said. "He'll get that completely. That's a very quick conversation with Donald Trump."

Given Trump's hiring freeze action, maybe Mnuchin should have that quick talk with the new prez soon. Like before we get too deep into the 2017 filing season.

You also might find these items of interest:

• IRS hiring up to 700 new enforcement agents (2016)
• 'Working at the IRS sucks,' according to employees
• IRS to close operations in California, Kentucky and Texas

Related articles

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Kellyanne Conway Announces Trump Won't Release His Tax Returns

Tuition and Taxes: 4 Things Every Student Needs to Know at Tax Time

GOP will get to work on dismantling healthcare

source http://feedproxy.google.com/~r/DontMessWithTaxes/~3/f3dtnJx4DIQ/trump-hiring-freeze-effect-on-irs.html

10 reasons to file a tax return even if you don't have to

Do you have to file a return? Don't shoot the messenger, but the answer usually is yes.

If you are a U.S. citizen or resident who made money last year, whether you must tell the Internal Revenue Service about it depends on three things:

1. Your gross income,
2. Your filing status, and
3. Your age.

The IRS created the table below to give you an idea of whether you should start getting your filing material together.

A quick filing note for some older New Year's Day babies. The IRS says that if you were born on Jan. 1, 1952, you are considered to be age 65 at the end of 2016. That one day shift lets you make a little more before you have to mess with filing.

Other filing factors: There are other things to take into account when it comes to filing if someone can claim you as a tax dependent.

Also, if you netted at least $400 from self-employment endeavors, then you need to file in order to pay your self-employment tax. This amount, calculated on Schedule SE, is the self-employed person's version of the payroll taxes that are taken out of salaried workers' checks.

And yes, it is possible that you could owe SE taxes, but no income tax.

You can find more about filing requirements in the IRS' general tax guide, https://www.irs.gov/pub/irs-pdf/p17.pdf Publication 17. You also can use the IRS' online IRS https://www.irs.gov/uac/do-i-need-to-file-a-tax-return online tool to determine whether you need to file this year.

When you should file: OK, you've discovered you technically don't have to file a return. Great, right?

To borrow a favorite word from our new president, Wrong!

Sometimes even if you don't have to file a tax return, it's to your benefit to do so.

Here are 10 situations when you should file a federal income tax return:

1. You had federal income tax withheld.
2. You made estimated tax payments.
3. You qualify for the Earned Income Tax Credit (EITC). This tax break for lower- and middle-income workers is refundable, meaning you can get a tax refund even if you don't owe any tax. The amount of the credit and the income thresholds are adjusted annually for inflation.
4. You qualify for the additional child tax credit. Like the EITC, the additional child tax credit is refundable. 
5. You qualify for the Affordable Care Act's premium tax credit. Most people who qualify for this credit get it in advance when they purchase their health insurance via a marketplace. But you do have the option of paying your premiums yourself and then claiming the credit when, you got it, you file your return.
6. You qualify for the health coverage tax credit (HCTC). The The HCTC is a tax credit that pays a percentage of health insurance premiums for certain eligible taxpayers and their qualifying family members. The HCTC is a separate tax credit with different eligibility rules than the premium tax.
7. You qualify for the American opportunity tax credit. This educational tax break could give you a credit of up to $2,500 and portion of it -- up to $1,000 -- is refundable to some qualifying filers.
8. You qualify for the credit for federal tax on fuels. Yes, this is rather arcane, but some folks are affected by this. Get more info in Form 4136 instructions.
9. To establish a placeholder for tax deductions and/or credits you need to carry forward. TurboTax points out that, for example, you can't claim a home office deduction so large that it would produce a loss. Instead, you claim zero business income for the year and carry any leftover deduction into the next year. But in order to claim that extra write-off in future years when you do have more income, Smart Money writer Bill Bischoff says you need to file for that initial claim.
10. To start the audit statute of limitations clock ticking. The IRS generally can go back three years to look at your old tax filings. But that time frame doesn't start until you actually file a 1040. So even if you didn't make quite enough to trigger the filing requirement, you might want to make sure the IRS can't come back, say, 10 years later to ask about why you didn't file in 2017.

Remember, the only way to get any tax money you're owed because of over-withholding or credits for which you qualify is to file for them.

And if any of these 10 circumstances applies to you, then consider filing.

Mandated refund delay: Remember, though, that if you're filing because you are eligible for the EITC or additional child tax credit, the IRS has to hold your refund until Feb. 15, and more realistically until the end of next month.

The delay is the law, not just because the IRS wants to make your life more difficult. So yell at your Representative and Senators, not the tax agency.

But the delay is for a good reason. The IRS can use the extra time to double check the filing and make sure it's from you, the legitimate tax filer, and not by some identity thief looking to steal your tax cash via a fraudulent refund.

So double check whether you must file and, just as importantly, whether you should.

You also might find these items of interest:

• Tax filing checklist for 2017
• 5 tax tips for Free File users
• New on more W-2 forms this year: a verification code

source http://feedproxy.google.com/~r/DontMessWithTaxes/~3/FIMDtcOvwbo/10-reasons-to-file-a-tax-return-even-if-you-dont-have-to.html

New on more W-2 forms this year: a verification code

Tax filing season 2017 opens today! Yes, that is cheering you're hearing. It's from folks who file their taxes early, usually because they are getting refunds.

They also are fortunate that they have all the materials they need to fill out their returns.

The key document for most taxpayers is their W-2 form. Employers aren't required to get these out until the end of the month, but some companies are quite efficient.

And some taxpayers this year are going to discover something new on their W-2s.

Verification code addition: Around 50 million of these officially named Wage and Income Statements will have a verification code. This is a dramatic expansion of the program, which began last year and showed up then on only about 2 million W-2s.

This 16-digit code is part of the Internal Revenue Service's continuing effort to fight tax fraud.

It is being added to more W-2s thanks to an IRS partnership with certain payroll service providers.

The IRS says that when taxpayers take the time to add the code to their returns, it will help the agency validate that they are the real filers and authenticate the income information they are submitting.

Finding the code: So where will the code appear on a W-2? It varies, says the IRS.

On some payroll firms' W-2 forms, the verification code will appear on copies B and C of the form, in a separate labeled box.

As a refresher -- it has been a year, after all, since we filed taxes -- your W-2's  Copy B is the one with the declaration that it is "To be filed with employee's federal tax return." Copy C notes that it it "For employee's records."

But if your W-2 doesn't have a specially designated box for the code, simply check the document for the phrase "Verification Code" and then note the four groups of four alphanumeric characters, separated by hyphens: XXXX-XXXX-XXXX-XXXX.

What to do with the code: If your W-2 does have a verification code, the form will include these instructions to taxpayer and tax preparers:

Verification Code. If this field is populated, enter this code when it is requested by your tax return preparation software. It is possible your software or preparer will not request the code. The code is not entered on paper-filed returns.

Some taxpayers will find that their W-2 forms will have a specific "Verification Code" box or line, but it will be blank.

In these cases, don't worry. You don't need to bug your employer or the payroll company for the number. They simply have created the forms to accommodate the new code, but you weren't one of the 50 million to get one this year.

Requested but not required: Even if you do have a code but forget to add it to your return when you file or enter it incorrectly, the IRS says no problem.

The verification code is still in its test phase. As such, the code will not be included in Forms W-2 or W-2 data submitted by participating payroll service providers to the Social Security Administration or to any state or local revenue departments.

That means, says the IRS, that for now any verification code omissions or errors won't slow down the IRS' processing of returns.

But if you do have a W-2 code, do try to remember to include it when prompted by your tax software when you prepare your return.

This time it's a test, but if these expanded codes show as much promise in helping to reduce tax identity theft and refund fraud as did the initial results from the 2016 filing season, the IRS will roll the code out to all filers.

When that happens, which I suspect will be in a very near filing season, you'll be required to enter the verification code before the IRS will accept your return. And you, as a willing test participant in filing season 2017, will already be ready for it.

source http://feedproxy.google.com/~r/DontMessWithTaxes/~3/DtuP2Ae526E/new-on-more-w-2-forms-this-year-a-verification-code.html

It's official: We're not seeing Trump's taxes

Not to run Donald J. Trump's penchant for tax secrecy into the ground -- OK, maybe just dig a shallow little hole and kick some on dirt on it -- but I couldn't resist the latest bit of info about the new prez's still concealed tax returns.

We are not now or ever -- that's never, just in case you're unsure in our new alternate facts world -- going to see his tax returns.

Click image to watch interview on YouTube.

During an interview this morning on ABC's "This Week with George Stephanopoulos" political news show, White House counselor Kellyanne Conway said the issue is a non-issue and that her boss is not going to show us his 1040s.

Conway characterized the continuing interest in Trump's taxes as an attempt to re-litigate the presidential campaign. By not sharing at least some of his filings with the public, the now 45th president broke a 40-year tradition.

But since he broke so much this election cycle, it doesn't matter. At least not to him or his retinue.

Who cares? "The White House response is that he’s not going to release his tax returns," Conway said.

Because audit Trump.

Oh, wait. Because nobody cares.

Yep, that's the Trump Administration's story and they're sticking to it.

"We litigated this all through the election. People didn't care," Conway told Stephanopoulos. "They voted for him, and let me make this very clear: Most Americans are very focused on what their tax returns will look like while President Trump is in office, not what his look like. … People want to know that they're going to get tax relief and he has promised that."

As for possible tax law changes -- Trump now joins House leadership in seeking three income tax brackets topping out at 33 percent -- Conway said the Administration is hoping that "the Democratic Senate will support his tax relief package the way the Democratic Senate in 2001 did for President Bush."

I think she mean the Democrats in the Senate, or else she knows something else about last November's vote counts in the Upper Chamber's races that we don't.

Poll and petition indicate interest: I also think Conway was making the classic political and PR sidestep from a topic she didn't want to talk about to one that she hopes people will latch onto instead.

It's true that people are interested in tax reform and possible lower -- or higher in some cases -- taxes. But despite the new Administration's contention, people still are interested in Trump's tax returns.

A poll released earlier this month found that Americans in both parties want to see his taxes.

So do the folks who've signed the first We the People petition filed with the White House after Trump was sworn in on Jan. 20. It wants, among other things, for him to reveal what's in his tax filings. As of 7 p.m. Central Time tonight, more than 232,000 people had signed the online petition.

Speculation continues: Until Trump does reveal his returns, speculation will continue as to what's on them. Russian business ties? Not as much money as he proclaims? Or something even more damaging?

That last possibility is being floated by, among others, Matthew Yglesias of Vox. He writes:

Trump is pretty clearly hiding something damning in his tax returns. I don't know what it is, and most likely neither does Mitch McConnell or Paul Ryan or anyone in their caucuses. Like most people, I am curious what it is. And I bet McConnell and Ryan and rank-and-file Republican Party members are curious too.

Yglesias also calls out McConnell, Ryan and the rest of the Republican Party for letting Trump get away with not sharing his returns.

Congressional Republicans, writes Yglesias, have the ability to force tax disclosure by Trump, but, he continues:

[T]hey've all reached the conclusion that whatever damning information it is that Trump is hiding, it's important enough to Trump to not be worth crossing him over, but not so important that the American people should see what it is. 

I'm not sure what kind of fact that could be. But since it seems that we are never going to figure out what it is — and that the reason we're not going to figure it out has nothing to do with this alleged audit — I sure hope they’re right that the underlying substance isn't that bad.

Do you agree with Conway and her boss or Yglesias and the White House petitioners?

And just for fun, what to you think is on The Donald's returns that he might not want the rest of us to see?

source http://feedproxy.google.com/~r/DontMessWithTaxes/~3/3Rt-MbWu27s/its-official-were-not-seeing-trumps-taxes.html

1st White House petition of Trump era seeks peek at 45th president's tax returns

When Donald J. Trump assumed the U.S. presidency at noon on Friday, Jan. 20, he and his staff also took over the White House website.

This is the only glimpse of Donald Trump's taxes the new president has provided, a photo via Twitter of him signing his purported 2014 federal return on Oct. 15, 2015.

Although the 45th president's people made some major changes to the content Trump's predecessor had posted, they did leave one feature untouched, the We the People petition generator.

This option lets people petition the White House for action on whatever is near and dear to their hearts. President Obama got some wild requests, such as the one asking for construction of a Star Wars style Death Star. Obama et al said no.

First Trump petition focuses on his taxes: I'm sure President Trump will find the first one posted during his administration particularly memorable.

It asks that "Donald Trump's full tax returns, with all information needed to verify emoluments clause compliance" be released "immediately."

Trump has steadfastly refused to reveal his taxes because, he says, they are being audited by the Internal Revenue Service. Many tax experts, and a couple of former IRS commissioners, have said the tax agency's examination of returns does not preclude them from being made public.

But that's Trump's story and he's sticking to it.

Other Trump tax petitions: The We the People request for release of Trump's taxes is the most popular petition so far, but others have gone online since the self-proclaimed billionaire was sworn in at noon on Jan. 20.

Another asks that he divest or put into a blind trust all his business and financial assets. It has 50,658 signatures.

Another 2,891 signers of yet another petition also seek the release of Trump's tax returns and want him to resign as president.

Those, however, pale in comparison to the first We the People submission of the Trump Administration. As of late tonight (Saturday, Jan. 21), the initial petition of the Trump presidency seeking a look at his tax filings had 173,241 signatures.

Action promised: In retaining We the People, the new administration also kept Obama's rules for the petition site. It's still protocol that if a petition gets 100,000 signatures in 30 days, the White House will review it and issue an official response within the next two months.

Now we wait for the Trump Administration's reply to the tax release request from the U.S. citizenry.

I think we all know what that will be.

Trump and/or his staff will no doubt say that no one outside the media really cares about his taxes.

Poll finds interest in Trump taxes: That's not true, though. Before the We the People petition was filed, an ABC News-Washington Post poll found that 40 percent of the public cares "a lot" about Trump releasing his tax records.

Even Trump supporters want a look at his 1040s. 

The media outlets that commissioned the Langer Research Associates poll reported on Jan. 16 that:

Seventy-four present overall say he should release his tax returns; that includes 49 percent of his own supporters, as well as nearly all of Clinton's (94 percent) and 83 percent of those who had another preference, or none.

The number who favor release of the documents is higher than it was in two related questions in ABC/Post polls during the election campaign. In May [2016], 64 percent said he should release the returns, and in September [2016], 63 percent said he was not justified in withholding them.

In one key support group for Trump, noncollege-educated white men, 58 percent say he should release the tax returns; that rises to 81 percent of college-educated white women and 88 percent of nonwhites. By another measure, 69 percent in the red states -- those Trump won -- say he should release these records, as do 81 percent in Clinton's blue states.

Forty-one percent, overall, say they "care a lot" about Trump releasing the records -- 47 percent in the blue states, 36 percent in the states Trump won. At a news conference last week [Jan. 11 from Trump Tower in Manhattan], Trump said: "The only one that cares about my tax returns are the reporters." As far as other Americans, he said: "I don't think they care at all."

Wrong, Mr. President.

Apparently 173,241 and counting Americans do care about your taxes.

You also might find these items of interest:

• 8 tax bills already introduced in the 115th Congress
• No Trump taxes make list of top 10 tax topics of 2016 and what to expect in 2017
• Trump pledges to donate hotel profits from foreign government payments to the U.S. Treasury

source http://feedproxy.google.com/~r/DontMessWithTaxes/~3/tGQxG4YYBTU/1st-white-house-petition-of-trump-era-seeks-peek-at-45th-presidents-tax-returns.html

Prospects for federal tax reform in 2017

We have a new Congress and new President - all of the same party.  Tax reform discussions and hearings have been held for the past six years. In June 2016, the House Republicans released their "blueprint" for tax reform. So, will we see tax reform in 2017? If yes, what might it look like?

I offer my update and thoughts in an AICPA Insights piece.

What do you think?

source http://21stcenturytaxation.blogspot.com/2017/01/prospects-for-federal-tax-reform-in-2017.html

5 tax tips for Free File users

Free File 2017 has been open for a week. Have you tried it out yet?

The partnership between Uncle Sam and the private tax software industry has been around since 2003. This year, a dozen companies are offering their services to eligible taxpayers.

The Internal Revenue Service and the Free File Alliance say these participating software manufactures should meet the filing needs of 70 percent of the around 153,000 million taxpayers expected to send in 2016 returns this year.

Does free tax preparation and e-filing appeal to you? Check it out.

But first check out these five things you should know about Free File.

1. You won't get your refund any quicker.
Even though Free File has been accepting returns since Friday, Jan. 13, these 1040s (and 1040As and 1040EZs) have simply been placed in the IRS' processing queue. The tax agency won't start dealing with them until the full, official opening of the 2017 filing season on Monday, Jan. 23.

And the online program's Free Fillable Forms isn't available until next week.

Even more frustrating for some taxpayers is that the IRS is required by law to hold certain returns until mid-February. If you claim the Earned Income Tax Credit (EITC) or additional child tax credit and get a refund, then the IRS can't send you your tax cash until at least Feb. 15.

It gets worse. In reality, given IRS processing capabilities and possible normal delays at your bank if you're getting your refund as a direct deposit, it could be the end of February before you get your refund.

So if you thought using Free File would help you circumvent this delay, think again.

2. Fillable, but not guided.
Now about those fillable forms mentioned in tip #1. These electronic tax forms, which you can find at the Fillable Forms site starting at 11 a.m. Eastern Time on Jan. 23, are very handy if your taxes aren't that complicated or you're comfortable doing your own taxes.

The IRS will make available next week the most common tax forms available for you to open on your computer, enter your information and then e-file at no cost.

But the fillable forms don't walk you through your taxes like most tax software does.

And while it does do math on each from, it doesn't automatically transfer that data to other forms. That means, for example, you have to move your Schedule A calculations to the appropriate places on your 1040 yourself.

Also note that unlike some of the official Free File options, there are no fillable state forms available since this service is offered by Uncle Sam's tax agency.

But if you're fine doing your federal tax return on paper, you should find using the Fillable Forms counterparts online a breeze.

Once you enter all your tax info onto the computer-friendly forms, you then can e-file your return at no cost.

Why would you do Fillable Forms instead of using Free File proper? The answer is in Free File tip #3.

3. Your income matters.
This is obvious, given that we are (or soon will be) filing our income tax returns. But it matters more when it comes to Free File.

The IRS and Free File Alliance want to get as many people as possible using their online tax prep and e-filing program. In fact, the tax agency is a fan of tax software in general. When people use the programs, they tend to make fewer mistakes and the method makes it easier for the IRS to process the computer prepared and e-filed returns.

But Free File's original mandate was to make electronic tax help available to taxpayers who might not be able to pay a tax professional or even afford tax software.

In keeping with that goal, there is an income limit for Free File uses. It's usually bumped up a bit each year to account for inflation.

For this 2017 tax filing season, you can use Free File if your adjusted gross income (AGI) last year was $64,000 or less. That's $2,000 more than last year's threshold.

You can find your AGI on last year's (2015 tax year) return in the following places:

• Line 4 if you filed a Form 1040EZ,
• Line 21 if you filed a Form 1040A, or
• Line 37 if you filed a Form 1040.

The good thing is that you don't have to worry about sorting out a threshold based on your filing status. The $64,000 limit applies regardless of whether you're a single, head of household or married taxpayer.

And if you do exceed that income limit, this is where Fillable Forms (tip #2) comes into play.

4. Your state return might not be free.
Some of the participating tax software companies once again throw in free state return preparation and e-filing. But not all.

And even those who do might set other eligibility requirements for state returns.

If getting your state taxes filed for free is important to you, carefully check out the Free File options for each provider before making your choice. The IRS' online search tool can help you filter your filing needs to find the Free File provider that works best for your tax situation, like getting your state returns done at the same time.

Note, however, that you'll likely need to complete your federal filing first. Most of the 43 states that require their residents to pay some form of income tax use the federal data as the starting point or a key reference when filling out state returns.

5. You'll need some material/info to Free File.
Finally, while Free File is easy, it's not totally hassle free. You still need documentation to complete your tax return using the online system.

In addition to the standard stuff like a W-2 or assorted 1099s, to use Free File you'll also need:

Personal Information, including that copy of last year's tax return you dug out of your files to check your AGI. You're going to need verify your identity to e-file and your 2015 AGI is one way to do that. You'll also need valid Social Security numbers for yourself, your spouse and any dependents.

Receipts confirming other income, such as Social Security payments, unemployment benefits, investment income and if you run your own small business, all receipts pertaining to that enterprise.

Affordable Care Act compliance documents, such as Form 1095A, Health Insurance Marketplace Statement; Form 8962, Premium Tax Credit; and Form 8965, Health Coverage Exemption and ECN. Yes, the new Republican House and Senate have taken steps to repeal Obamacare, but it was in effect last year, so you need to comply with its requirements when filing your 2016 return.

You can check out the rest of the items you'll need to use Free File this year at the IRS' special What You Need to Get Started web page. Most of the material also is part of the ol' blog's 2017 tax return filing checklist.

So what do you think? Will you use Free File or Fillable Forms this year? Or do you prefer buying your own software or heading to a tax professional's office for filing help?

Whatever method your choose, it's that time. So if you haven't already started assessing your tax-filing options, do so now.

You also might find these items of interest:

• Happy Tax New Year 2017
• Important 2017 tax dates, deadlines
• 5 ways to protect your tax identity -- and refund!

source http://feedproxy.google.com/~r/DontMessWithTaxes/~3/2Imb0M4Hc6A/5-tips-for-free-file-users.html