IRS Steps up Efforts to Combat Identity Theft

The Internal Revenue Service has increased its battle against identity theft, creating a special section on its Web site dedicated to helping growing numbers of tax fraud victims.


The new section includes tips for taxpayers and a special guide to assistance, ranging from contacting the IRS Identity Protection Specialized Unit to tips to protect against “phishing” schemes. The IRS said it is also taking further steps this tax season to prevent identity theft and detect refund fraud before it occurs.

In late 2011, a group of taxpayers received a special Identity Protection Personal Identification Number, or IP PIN, for use in filing their tax returns for this filing season. The IRS is also working to speed up case resolution, provide more training for employees who are supposed to assist identity theft victims, and increase the agency’s outreach to taxpayers.

Fighting identity theft will be an ongoing battle, however, the IRS acknowledged. Identity thieves continue to create new ways of stealing personal information and using it for their gain. Identity theft cases are among the most complex types of incidents handled by the IRS, but the agency said it is continually reviewing its processes and policies to minimize the incidence of identity theft and to help those who find themselves victimized by it.

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IRS Lets People Check on Tax-Exempt Organizations

The Internal Revenue Service has introduced an online search tool that will allow the public to easily check on information about tax-exempt organizations, such as charities and other nonprofits.

The new online search tool, dubbed Exempt Organizations Select Check, will help users more easily find key information about tax-exempt organizations, such as their federal tax status and filings.

In some ways, the new search tool unites previously available information that had to be found in separate areas of the IRS’s Web site. Users can visit a single location on, select a tax-exempt organization, and check whether the organization is eligible to receive tax-deductible charitable contributions (Publication 78 data, which is incorporated here). Users can also consult the tool to determine the deductibility of contributions, just as they did when Publication 78 was a separate electronic publication rather than part of Select Check.

In addition, users can check whether an organization has had its federal tax exemption automatically revoked under the law for not filing a Form 990-series return or a notice for three consecutive years, known as the Auto-Revocation List.

Users of the tool can also find out whether an organization has filed a Form 990-N (e-Postcard) annual electronic notice. Most small organizations whose annual gross receipts are normally $50,000 or less are required to electronically submit Form 990-N, unless they choose instead to file a completed Form 990 or Form 990-EZ.

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Men and Women Do Retirement Planning Differently

Men tend to focus on the numbers when doing their retirement planning, and women are more likely to plan for retirement based on their lifestyle goals, according to new research.

A study by Ameriprise Financial and Harris Interactive found that men outpace women in planning for the financial aspects of retirement at a ratio of 77 percent to 72 percent. Women are more likely to say they have thought about what they would like to do during retirement, however.

Only 22 percent of Americans report confidence in reaching their retirement goals. Men are significantly more likely than women to express this confidence, 25 percent vs. 19 percent.

Fifty-four percent of men reported setting aside money in their own investments, such as stocks and IRAs, compared to 46 percent of women who say they have done the same. Men are also more likely than women to report that they’ve determined the amount of income they’ll need in retirement, at a ratio of 31 percent to 20 percent. This additional financial preparation may be one reason why men are significantly more likely than women to say they feel on track for retirement (41 percent compared to 34 percent) and express confidence in their overall financial future (22 percent compared to 16 percent).

Women are more likely to report that family and health taking a prominent role in their planning. Women are significantly more likely than men to say they plan to spend more time with family during retirement (41 percent vs. 34 percent) and that proximity to family is a very important factor in determining where they will retire (40 percent vs. 27 percent). They are also more likely than men to place importance on their proximity to friends and other retirees (21 percent vs. 13 percent).

While men and women are preparing differently, they both may be dramatically underestimating how long they will need to live on their retirement savings. Those surveyed estimate that they will spend approximately 17 years in retirement while most financial professionals recommend accumulating enough savings for a 30-year retirement.

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IRS Needs to Improve Controls over Criminal Restitution Payments

The Internal Revenue Service does not have effective internal controls in place to make sure that defendants who have been convicted of tax-related crimes comply with the conditions of their probation and restitution, according to a new report.

The report, by the Treasury Inspector General for Tax Administration, found that the IRS’s inability to properly account for restitution payments resulted in the issuance of erroneous refunds to three defendants and 16 taxpayers totaling approximately $543,000. In addition, the IRS’s systems for monitoring defendants’ compliance with the conditions of their probation and restitution are neither effective nor reliable.

When a defendant pleads guilty or is found guilty of a tax-related crime, the sentence can include various combinations of imprisonment, probation, and monetary penalties such as fines and restitution. Probation and restitution are meant to discourage similar criminal violations by others.

However, the perception has grown that many defendants, despite being convicted of violating tax laws, are escaping all responsibility for the payment of the taxes associated with the offenses they committed, TIGTA noted. TIGTA conducted the review in order to determine whether defendants convicted of tax-related crimes are held responsible for paying the taxes associated with the offenses they committed.
TIGTA’s analysis of data used to monitor defendants identified inaccurate tax account data totaling approximately $330,000 for 25 defendants. TIGTA also determined that the IRS’s Criminal Investigation, or CI, division inconsistently used the refund offset procedure to collect restitution payments. Finally, the IRS was not always granted restitution by the courts in cases where it appeared to be warranted.

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Eight Facts about New IRS Form 8949 and Schedule D

Issue Number:    IRS Tax Tip 2012-28

The IRS has a new form taxpayers must use to report most capital gains and losses from transactions relating to investment property. In previous years, these transactions would have been reported on your IRS Schedule D or D-1, but for tax year 2011, use Form 8949, Sales and Other Dispositions of Capital Assets.

Here are eight important points about the new Form 8949 and IRS Schedule D, Capital Gains and Losses:

1. Short-term capital gains or losses (assets held for one year or less) are now reported on Part I of Form 8949.

2. Long-term capital gains or losses (assets held for more than one year) are now reported on Part II of Form 8949.

3. Fill out Form 8949 before you fill out line 1, 2, 3, 8, 9 or 10 of Schedule D.

4. Most property you own and use for personal purposes, pleasure or investment is a capital asset. Use Form 8949 to report the sale or exchange of a capital asset you are not reporting on another form or schedule (such as Form 6252 or 8824).

5. At the top of each Form 8949 you file, you’ll need to check box A, B or C, based on what is indicated in box 3 of the Form 1099-B or substitute statement.

  • Check box A if your broker reported the transaction to you and the basis of the securities sold also was reported to the IRS
  • Check box B if the transaction was reported to you but box 3 of the Form 1099-B is blank or your statement says the basis was not reported to the IRS.
  • Check box C for all other transactions.

6. If you have a lot of transactions, use as many Forms 8949 as necessary to report all of them, but make sure that each Form 8949 includes only the type of transactions described in the text for the box you checked (A, B or C).

7. The reporting of certain transactions has changed. If you have to adjust your gain or loss, you may have to enter a code in column (b) and an adjustment in column (g). For details, see the 2011 Instructions for Schedule D (and Form 8949).

8. For 2011 transactions, Schedule D-1 is no longer in use. Form 8949 replaces it.

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IRS Upgrades Smartphone App

The Internal Revenue Service has released an expanded version of its smartphone application, IRS2Go, with a new YouTube video feature and additional tax help for taxpayers.

The new IRS2Go 2.0 app is available for both Apple and Android devices, and adds a new YouTube feature, news feed and tax transcript service, in addition to the earlier tools, such as checking on the status of a tax refund, in the original version of the app.

The original version of IRS2Go, which the agency released last tax season, had more than 350,000 downloads. The app offers taxpayers several secure ways to access information and keep current on practical tax information.

The 2.0 version of IRS2Go includes a Watch Us tool that allows users to view IRS YouTube videos on their smartphones. The videos provide short, informative insights into various tax topics. The channel ranks as the fourth most viewed channel among more than 125 federal government YouTube channels. The IRS provides YouTube channels in several languages, including American Sign Language.

Users can also get the latest IRS news releases delivered to their phones as they become available with the new version of the app. In addition, taxpayers can now order their tax return transcripts from the IRS2Go app. The transcript will then be delivered via the U.S. Postal Service to their address of record.

The new version of the IRS2Go app also continues to provide several popular features that were available in the original version last year. Taxpayers can check on the status of their federal tax refunds via the app by providing a few basic pieces of information. An updated refund status is available approximately three days after the IRS acknowledges receipt of an e-filed return, or four weeks after taxpayers or their tax preparers mail a paper return to the IRS.

Taxpayers can also sign up to follow the IRS Twitter newsfeed, @IRSnews, which provides updates on tax law changes and important IRS programs, along with toher information.

Apple users can update or download the free IRS2Go app by visiting the Apple App Store. Android users can visit the Android Marketplace to download the app.

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IRS Expands Help to Struggling Taxpayers

The Internal Revenue Service is expanding its “Fresh Start” initiative to help more unemployed and financially stressed taxpayers with installment agreements and relief from failure-to-file penalties.

Under the new Fresh Start provisions, which expanded on an effort that the IRS began in 2008, certain taxpayers who have been unemployed for 30 days or longer will be able to avoid failure-to-pay penalties. In addition, the IRS said Wednesday it is doubling the dollar threshold for taxpayers eligible for installment agreements to help more people qualify for the program.

To assist those taxpayers who are most in need, the IRS will grant a six-month grace period on failure-to-pay penalties to certain wage earners and self-employed individuals. However, the request for an extension of time to pay will result in relief from the failure-to-pay penalty for tax year 2011 only if the tax, interest and any other penalties are fully paid by Oct. 15, 2012.

The penalty relief will be available to two taxpayer categories: wage earners who have been unemployed at least 30 consecutive days during 2011 or in 2012 up to the April 17 deadline for filing a federal tax return this year; and self-employed individuals who experienced a 25 percent or greater reduction in business income in 2011 due to the economy.

The penalty relief is also subject to certain income limits. A taxpayer’s income must not exceed $200,000 if he or she files as married filing jointly, or not exceed $100,000 if he or she files as single or head of household. The penalty relief is also restricted to taxpayers whose calendar year 2011 balance due does not exceed $50,000.

Taxpayers who meet those eligibility criteria will need to complete a new Form 1127A to seek the 2011 penalty relief. The new form is available on

The failure-to-pay penalty is generally half of 1 percent per month, with an upper limit of 25 percent. Under the newly expanded Fresh Start relief, taxpayers can avoid that penalty until Oct. 15, 2012, which is six months beyond this year’s filing deadline. However, the IRS noted that it is still legally required to charge interest on unpaid back taxes and does not have the authority to waive this charge, which is currently 3 percent on an annual basis.

Even with the new penalty relief becoming available, the IRS is strongly encouraging taxpayers to file their returns on time by April 17 or file for an extension. Failure-to-file penalties applied to unpaid taxes remain in effect and are generally 5 percent per month, with a 25 percent cap.

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Swiss Lawmakers Vote to Accept U.S. Tax Plan

Swiss lawmakers have passed a tax proposal seen as key to settling a U.S. probe into Swiss banks with hidden offshore accounts.

The proposal, which clarifies how Switzerland would hand over data on Americans suspected of dodging taxes at home, seeks to backstop an expected deal over U.S. probes into 11 banks including Credit Suisse and Julius Baer, likely to comprise a data handover and fine payment.

Switzerland’s lower house on Monday passed the proposal by 110 votes to 56 votes, sealing an initial backing taken last week. Switzerland’s upper house passed the plan in December.

Specifically, the plan would allow Switzerland to hand over data on suspected tax evaders, even if U.S. tax authorities cannot identify alleged offenders by name or bank account.

The move represented a weakening of Switzerland’s long-cherished secrecy laws, which have underpinned its finance industry on which the economy relies heavily.

Provided a 100-day waiting period without a call for a referendum, attention is likely to shift to the U.S.-Swiss talks, which is meant to sweep Swiss bank accounts clean of offenders and make good on past transgressions.

According to a source familiar with the matter, Swiss and U.S. talks are continuing, with sticking points still in the deal’s details.

Switzerland’s SIF, negotiating the deal for the Swiss government, would not comment on parliament’s decision.

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IRS Offers Advice for Avoiding Phony Tax Scheme

The Internal Revenue Service is providing tips to help taxpayers avoid a new tax scam involving bogus college tax credits.

The IRS issued a warning about the new scheme on Friday (see IRS Warns of New Emerging Tax Scam). Scammers have been targeting senior citizens, members of church groups, working families and other potential victims this tax season.

The schemes promise large tax refunds to people who have little or no income and normally don’t have a tax filing requirement. Promoters claim they can obtain for their victims a tax refund or nonexistent stimulus payment based on the American Opportunity Tax Credit, even if the victim was not enrolled in or paying for college.

The schemes can be extremely costly for the victims. Promoters may charge them exorbitant upfront fees to file the tax claims and are often gone before victims discover that they have been scammed.

The IRS warned taxpayers to be careful of the scams because, regardless of who prepared their tax return, the taxpayer is legally responsible for the accuracy of their tax return and must repay any refunds received in error, plus any penalties and interest. They may even face criminal prosecution.

To avoid becoming ensnared in these schemes, the IRS said taxpayers should beware of any of the following:

•    Fictitious claims for refunds or rebates based on false statements of entitlement to tax credits.
•    Unfamiliar for-profit tax services selling refund and credit schemes to the membership of local churches.
•    Internet solicitations that direct individuals to toll-free numbers and then solicit social security numbers.
•    Homemade flyers and brochures implying credits or refunds are available without proof of eligibility.
•    Offers of free money with no documentation required.
•    Promises of refunds for “Low Income – No Documents Tax Returns.”
•    Claims for the expired Economic Recovery Credit Program or for economic stimulus payments.  •    Unsolicited offers to prepare a return and split the refund.
•    Unfamiliar return preparation firms soliciting business from cities outside of the normal business or commuting area.

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Standard Deduction vs. Itemizing: Seven Facts to Help You Choose

Issue Number:    IRS Tax Tip 2012-43

Each year, millions of taxpayers choose whether to take the standard deduction or to itemize their deductions. The following seven facts from the IRS can help you choose the method that gives you the lowest tax.

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

2. Standard deduction amounts -Your standard deduction is based on your filing status and is subject to inflation adjustments each year. For 2011, the amounts are:
        Single     $5,800
        Married Filing Jointly   $11,600
        Head of Household   $8,500
        Married Filing Separately  $5,800
        Qualifying Widow(er)  $11,600

3. 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 another taxpayer can claim an exemption for you. If any of these apply, use the Standard Deduction Worksheet on the back of Form 1040EZ, or in the 1040A or 1040 instructions.

4. Limited itemized deductions – Your itemized deductions are no longer limited because of your adjusted gross income.

5. Married filing separately – When a married couple files separate returns and one spouse itemizes deductions, the other spouse cannot claim the standard deduction and therefore must itemize to claim their allowable deductions.

6. 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.

7. Forms to use – The standard deduction can be taken on Forms 1040, 1040A or 1040EZ. 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 website at or ordered by calling 800-TAX-FORM (800-829-3676).

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