Tag Archives: IRS

Holder Orders Criminal Probe of IRS Tea-Party Group Focus

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Attorney General Eric Holder ordered a criminal investigation into the Internal Revenue Service’s targeting of small-government advocacy groups for extra scrutiny.

 

“The FBI is coordinating with the Justice Department to see if any laws were broken in connection with those matters related to the IRS,” Holder said at a news conference today.

The IRS has admitted that it singled out groups for extra scrutiny based solely on whether their names included words such as “tea party” and “patriot,” leading to investigations from four congressional committees and raising questions about whether partisan motivation drove the agency’s actions.

The White House said it had no involvement in the matter and that it is awaiting an inspector general’s report before deciding how to respond to treatment of advocacy groups as they sought tax exemptions as nonprofit organizations.

“I am certainly not aware and am confident that no one here was involved in this,” White House spokesman Jay Carney said in Washington. “We have to find out exactly what happened.”

A report by the inspector general who oversees the IRS is due to be released, officials from the inspector general’s office told congressional staff members at a meeting yesterday, said a Democratic aide who requested anonymity to discuss the private conversation.

Holder spoke about the planned investigation by the Justice Department and the Federal Bureau of Investigation at a news conference today in Washington.

IRS Errors
The acting IRS commissioner said the agency’s errors in targeting small-government groups stemmed from the lack of a “sufficient process” and weren’t the result of partisanship.

In an opinion piece in USA Today, Steven Miller wrote that the IRS sought to centralize its handling of applications for tax-exempt status following a “sharp increase” in the number of applications, which more than doubled between 2010 and 2012 (see IRS ‘Mistakes’ Didn’t Stem from Partisanship, Acting Chief Says).

“While centralizing cases for consistency made sense, the way we initially centralized them did not,” he wrote. “The mistakes we made were due to the absence of a sufficient process for working the increase in cases and a lack of sensitivity to the implications of some of the decisions that were made.”

President Barack Obama called it “outrageous” yesterday for the IRS to target groups promoting limited government for special attention (see Obama Calls IRS Targeting of Tea Party Groups ‘Outrageous’).

First Learned
The president said he first learned of the IRS targeting through news reports May 10. On that day Lois Lerner, the IRS official in charge of overseeing tax-exempt groups, acknowledged that the agency had targeted for special review groups promoting limited government and issued an apology.

Calls for congressional probes of the matter followed. They intensified after disclosures over the weekend that the Treasury Department inspector general’s report found that IRS officials knew of the targeting of the groups as early as June 2011, nine months before the agency’s head told lawmakers it wasn’t occurring.

“I think they purposely misled me,” said Senator Orrin Hatch of Utah, the top Republican on the Finance Committee. “This is really, really, very disconcerting to me.”

‘No Place’
The IRS hasn’t explained why it didn’t restart the screening process in June 2011, which was more than six months before it started sending inquiries to the groups.

“Mistakes were made, but they were in no way due to any political or partisan motivation,” Miller wrote.

“We fixed the situation last year, and have made significant progress in moving the centralized cases through our system,” Miller continued, adding that more than half of the cases have been approved or withdrawn. “These applications, which came from all parts of the political spectrum, received the same, even-handed treatment.”

The House Ways and Means Committee will hold a May 17 hearing with Miller and Inspector General J. Russell George as the only witnesses, according to a statement by panel Chairman Dave Camp and the committee’s top Democrat, Sander Levin, both of Michigan.

Representative Charles Boustany, a Louisiana Republican and chairman of the Ways and Means oversight subcommittee, sent a letter to Miller demanding by May 15 all agency communication containing the words “tea party” and “patriot” as well as the names “of all individuals involved in this discrimination.”

‘Improperly Identified’
The IRS said in a statement that Miller was first notified by agency staff on May 3, 2012, that “some specific applications were improperly identified by name” and had been forwarded for further review.

“Those were, I think as everyone can agree, if not criminal, they were certainly outrageous and unacceptable,” said Holder, who said he ordered the investigation on May 10. “We are examining the facts to see if there were criminal violations.”

Senate Majority Leader Harry Reid, a Nevada Democrat, compared what he called the “inexcusable” IRS actions to scrutiny he said was given in the past to the NAACP, the environmental group Greenpeace and a church in California.

Reid said the government must ensure that political groups don’t improperly gain tax-exempt status.

“Preventing overtly political groups like the one run by Karl Rove from masquerading as social welfare organizations is really a critically important task,” Reid said today. He said organizations run by Rove, a former top political strategist for President George W. Bush, have one purpose, “to defeat Democrats.”

Senate Finance Committee Chairman Max Baucus also said his panel would investigate. House Oversight and Government Reform Committee Chairman Darrell Issa has said his panel will hold hearings on the IRS’s actions, which he said represent a clear “abuse of power.”

Representative Mike Turner, an Ohio Republican on Issa’s committee, introduced legislation yesterday criminalizing IRS discrimination against individuals or groups based on political speech or expression. Florida Senator Marco Rubio, a Republican, said he will introduce the measure in his chamber.

The Senate Permanent Subcommittee on Investigations is expanding its inquiry of whether the IRS didn’t enforce the law on tax-exempt groups to include the extra scrutiny it gave to Tea Party-affiliated groups.

‘Ensure Consistency’
Miller, the acting IRS commissioner since November, told lawmakers in July that the agency had grouped together advocacy organizations seeking nonprofit status “to ensure consistency, to ensure quality” without saying that some groups had been scrutinized for having words like “tea party” in their names.

According to a timeline from the inspector general’s report, Miller became involved in the issue as early as March 8, 2012. That was 19 days before his predecessor, Douglas Shulman, testified to Congress that the IRS hadn’t targeted groups based on ideology.

Anti-tax Tea Party groups, some of which include the word “patriot” in their names, formed after Obama took office in January 2009 and helped fuel gains by Republicans in the 2010 midterm election that gave the party control of the U.S. House.

In addition to groups with “tea party” and “patriot” in their names, other organizations selected for the additional IRS review included those in which “statements in the case file criticize how the country is being run,” according to a June 29, 2011, briefing given to Lerner, the timetable says.

The IRS has been under pressure to regulate political spending by nonprofit groups, in particular those falling under Section 501(c)(4) of the U.S. tax code. Organizations qualifying for that status don’t have to disclose donors even when engaging in political activity.

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IRS Ramps up Criminal Investigations

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The Internal Revenue Service’s Criminal Investigation unit released an annual report Friday showing that it increased investigations, prosecutions and convictions of tax evaders and preparers last year.

 

Initiations of criminal investigation amounted to 5,125 cases in fiscal 2012 while the number of investigations completed was 4,937, an increase of 5 percent compared to fiscal 2011. Convictions totaled 2,634 in fiscal 2012 while the conviction rate edged up slightly to 93 percent.

The IRS also investigated and prosecuted more tax preparers last fiscal year. It initiated 443 investigations in fiscal 2012, up from 371 in fiscal 2011. There were 276 prosecution recommendations in fiscal 2012, an increase from 233 in fiscal 2011. Sentencings rose to 172 in fiscal 2012 from 163 in fiscal 2011.

The 28-page report summarizes a wide variety of IRS CI activity on a range of tax-related issues during the year ending Sept. 30, 2012.

“The key to our successes is perseverance and dedication to working complex financial investigations aimed at stopping tax fraud, identity theft, offshore tax evasion, public corruption, money laundering and other financial crimes,” said IRS Chief of Criminal Investigation Richard Weber in a statement. “This annual report showcases some of the many significant cases that were completed by CI during fiscal year 2012 and the many program areas we cover as an organization. These cases are just a few examples of the thousands of investigations initiated by CI last year, as we continue to make our mark as the finest financial investigators in the world.”

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IRS Offshore Disclosure Programs Net $5.5 Billion

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The Internal Revenue Service has collected over $5.5 billion in revenue from taxpayers who came forward and reported on their foreign holdings under its Offshore Voluntary Disclosure Programs, but it could be missing billions more in revenue from tax evaders, according to a new report.

The report, issued Friday by the Government Accountability Office, found that as of December 2012, the IRS’s four offshore programs have resulted in more than 39,000 disclosures by taxpayers, producing over $5.5 billion in revenue. The offshore disclosure programs attract taxpayers by offering a reduced risk of criminal prosecution and lower penalties than if the unreported income was discovered by one of IRS’s other enforcement programs.

Tax evasion by individuals with unreported offshore financial accounts was estimated by one IRS commissioner to amount to several tens of billions of dollars, but no precise figure exists. The IRS has operated four offshore programs since 2003 that offered incentives for taxpayers to disclose their offshore accounts and pay delinquent taxes, interest and penalties.

For the 2009 Offshore Voluntary Disclosure Program, nearly all the program participants received the standard offshore penalty of 20 percent of the highest aggregate value of the accounts, meaning the account value was greater than $75,000 and taxpayers used the accounts (that is, made deposits or withdrawals) during the period under review.

The median account balance of the more than 10,000 cases closed so far from the 2009 OVDP was $570,000. Participant cases with offshore penalties greater than $1 million represented about 6 percent of all the 2009 OVDP cases, but accounted for almost half of all offshore penalties.

Taxpayers from these cases disclosed a variety of reasons for having offshore accounts. More than half of them had accounts at the Swiss bank UBS, which signed a deferred prosecution agreement in 2009 with the IRS under which it agreed to pay $780 million in fines, penalties, interest and restitution and later agreed to turn over thousands of names of its U.S. account holders.

Using 2009 OVDP data, the IRS identified bank names and account locations that helped it pursue additional noncompliance. Based on a review of the cases, the GAO found examples of immigrants who stated in their 2009 OVDP applications that they were unaware of their offshore reporting requirements. IRS officials from the Offshore Compliance Initiative office said they have not targeted outreach efforts to new immigrants. Using information from the 2009 OVDP, such as the characteristics of taxpayers who were not aware of their reporting requirements, to increase education and outreach to those populations could promote voluntary compliance, the GAO noted.

The IRS has detected some taxpayers with previously undisclosed offshore accounts who were attempting to circumvent paying the taxes, interest and penalties that would otherwise be owed, but based on GAO reviews of IRS data, the IRS may be missing attempts by other taxpayers attempting to do so.

The GAO analyzed amended returns filed for tax year 2003 through tax year 2008, matched them to other information available to the IRS about taxpayers’ possible offshore activities, and found many more potential quiet disclosures than IRS detected. In addition, the IRS has not researched whether sharp increases in taxpayers reporting offshore accounts for the first time is due to efforts to circumvent the money owed, thereby missing opportunities to help ensure compliance.

From tax years 2007 through 2010, the IRS estimated that the number of taxpayers reporting foreign accounts nearly doubled to 516,000. Taxpayer attempts to circumvent taxes, interest and penalties by not participating in an offshore program, but instead by simply amending past returns or reporting on their current returns previously unreported offshore accounts, result in lost revenues and undermine the programs’ effectiveness, according to the GAO.

Among other suggestions, the GAO recommended that IRS use its offshore data to identify and educate taxpayers who might not be aware of their reporting requirements. The IRS should also explore options for using a methodology to detect and pursue quiet disclosures more effectively and implement the best option. The GAO also suggested that the IRS analyze first-time offshore account reporting trends to identify possible attempts to circumvent monies owed and take action to help ensure compliance.

The IRS agreed with all of the GAO recommendations. “Global tax enforcement is a top priority at IRS, and we have made significant progress on multiple fronts, including ground-breaking international tax agreements and increased cooperation with other governments,” wrote IRS Acting Commissioner Steven T. Miller in response to the report. “In addition, the IRS and the Justice Department have increased efforts regarding criminal investigation of international tax evasion. This combination of efforts helped support the 2009 Offshore Voluntary Disclosure Program (2009 OVDP), the 2011 Offshore Voluntary Disclosure Initiative (OVDI) and the ongoing 2012 Offshore Voluntary Disclosure Program (2012 OVDP). The goal of these programs is to get individuals back into the U.S. tax system and to turn the tide against offshore tax evasion.”

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24 IRS Employees Indicted for Fraudulently Obtaining Government Benefits

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Federal prosecutors in Memphis have charged 24 current and former Internal Revenue Service employees with crimes stemming from fraudulently obtaining more than $250,000 in government benefits.

Thirteen of the current and former IRS employees have been charged federally with making false statements to obtain unemployment insurance payments, food stamps, welfare and housing vouchers. All 13, individually charged in separate indictments, are alleged to have falsely stated that they were unemployed while applying for or recertifying those government benefits.

“According to the allegations in the indictment, while these IRS employees were supposed to be serving the public, they were instead brazenly stealing from law-abiding American taxpayers,” said U.S. Attorney Edward L. Stanton III in a statement. “These charges demonstrate our unwavering resolve to work with our law enforcement partners and hold accountable anyone who fraudulently obtains government benefits and violates the public’s trust.”

Eleven other former and current IRS employees were charged by the District Attorney General’s Office with theft of property over $1,000, a class D felony.

“The taxes that we pay are supposed to support our nation and assist individuals in need, not free-loaders who are gaming the system,” said District Attorney General Amy Weirich in a statement. “Taxpayers can take comfort in knowing that we take these matters seriously and that we will prosecute these individuals to the fullest extent possible.”

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IRS to Serve Summons at Wells Fargo Seeking Identities of U.S. Taxpayers with Offshore Accounts at CIBC First Caribbean Bank

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A federal court in San Francisco has entered an order authorizing the Internal Revenue Service to serve a summons seeking information about U.S. taxpayers who may hold offshore accounts at Canadian Imperial Bank of Commerce First Caribbean International Bank, seeking records of FCIB’s U.S. correspondent account at Wells Fargo.

The order, signed Monday evening by Senior District Judge Thelton E. Henderson, will allow the IRS to identify U.S. taxpayers who hold or held interests in financial accounts at FCIB and other financial institutions that used FCIB’s Wells Fargo correspondent account.

Under a petition filed by the Justice Department, the court granted the IRS permission to serve what is known as a “John Doe” summons on Wells Fargo. The IRS uses John Doe summonses to obtain information about possible violations of federal tax laws by individuals whose identities are unknown. The John Doe summons approved by the court will direct Wells Fargo to produce records identifying U.S. taxpayers with accounts at FCIB and other banks that used FCIB’s correspondent account.

According to the declaration of IRS Revenue Agent Cheryl R. Kiger filed in support of the petition, FCIB is based in Barbados and has branches in 18 Caribbean countries. While FCIB does not have U.S. branches, it maintains a correspondent account in the United States at Wells Fargo Bank.

A correspondent account is a bank deposit account maintained by one bank for another bank. Financial transactions involving U.S. dollars flow through U.S. banks. Therefore, foreign banks that do business in U.S. dollars, but have no office in the U.S., obtain a correspondent account at a U.S. bank in order to engage in such transactions. These transactions leave a trail in the U.S. that the IRS can access through the records of the correspondent bank accounts. These correspondent bank accounts have records of money deposited, money paid out through checks and money moved through the correspondent account by wire transfers. All of this information the IRS can obtain through a John Doe summons issued to the U.S. bank holding the correspondent account.

“This summons marks another milestone in international tax enforcement,” said IRS Acting Commissioner Steven T. Miller in a statement. “Our work here shows our resolve to pursue these cases in all parts of the world, regardless of whether the person hiding money overseas chooses a bank with no offices on U.S. soil.”

As alleged in Agent Kiger’s declaration, the IRS learned that U.S. taxpayers were using FCIB to help them keep their offshore accounts undetected by the IRS and not to pay U.S. federal income tax on money placed in those offshore accounts. Kiger’s declaration describes her review of the information submitted by more than 120 FCIB customers who participated in the IRS’s Offshore Voluntary Disclosure Program. According to the Kiger declaration, many of the FCIB customers in the John Doe class may have been under-reporting income, evading income taxes, or otherwise violating the internal revenue laws of the United States.

“The Department of Justice and the IRS are committed to global enforcement to stop the use of foreign bank accounts to evade U.S. taxes,” said Kathryn Keneally, Assistant Attorney General for the Justice Department’s Tax Division, in a statement. “This John Doe summons is a visible indication of how we are using the many tools available to us to pursue this activity wherever it is occurring. Those who are still hiding should get right with their country and their fellow taxpayers before it is too late.”

A deliberate failure to report a foreign account can result in a penalty of up to 50 percent of the amount in the account at the time of the violation.

In a similar case in January, the U.S. District Court for the Southern District of New York entered an order authorizing the IRS to serve a John Doe summons on UBS AG, seeking records of Swiss bank Wegelin & Co.’s United States correspondent account at UBS, which will allow the IRS and the Justice Department to determine the identity of U.S. taxpayers who hold or held interests in financial accounts at Wegelin and other Swiss financial institutions to evade federal income taxes .

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IRS Warns Donors about Charity Scams Following Recent Tragedies in Boston and Texas

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It’s sad but true. Following major disasters and tragedies, scam artists impersonate charities to steal money or get private information from well-intentioned taxpayers. Fraudulent schemes involve solicitations by phone, social media, email or in-person.

Scam artists use a variety of tactics. Some operate bogus charities that contact people by telephone to solicit money or financial information. Others use emails to steer people to bogus websites to solicit funds, allegedly for the benefit of tragedy victims. The fraudulent websites often mimic the sites of legitimate charities or use names similar to legitimate charities. They may claim affiliation with legitimate charities to persuade members of the public to send money or provide personal financial information. Scammers then use that information to steal the identities or money of their victims.

The IRS offers the following tips to help taxpayers who wish to donate to victims of the recent tragedies at the Boston Marathon and a Texas fertilizer plant:

  • Donate to qualified charities.  Use the Exempt Organizations Select Check tool at IRS.gov to find qualified charities. Only donations to qualified charitable organizations are tax-deductible. You can also find legitimate charities on the Federal Emergency Management Agency (FEMA) Web site at fema.gov.
  • Be wary of charities with similar names.  Some phony charities use names that are similar to familiar or nationally known organizations. They may use names or websites that sound or look like those of legitimate organizations.
  • Don’t give out personal financial information.  Do not give your Social Security number, credit card and bank account numbers and passwords to anyone who solicits a contribution from you. Scam artists use this information to steal your identity and money.
  • Don’t give or send cash.  For security and tax record purposes, contribute by check or credit card or another way that provides documentation of the donation.
  • Report suspected fraud.  Taxpayers suspecting tax or charity-related fraud should visit IRS.gov and perform a search using the keywords “Report Phishing.”

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IRS Offers Tips for Taxpayers Who Missed the Tax Deadline

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The IRS has some advice for taxpayers who missed the tax filing deadline.

  • File as soon as possible.  If you owe federal income tax, you should file and pay as soon as you can to minimize any penalty and interest charges. There is no penalty for filing a late return if you are due a refund.
  • Penalties and interest may be due.  If you missed the April 15 deadline, you may have to pay penalties and interest. The IRS may charge penalties for late filing and for late payment. The law generally does not allow a waiver of interest charges. However, the IRS will consider a reduction of these penalties if you can show a reasonable cause for being late.
  • E-file is your best option.  IRS e-file programs are available through Oct. 15. E-file is the easiest, safest and most accurate way to file. With e-file, you will receive confirmation that the IRS has received your tax return. If you e-file and are due a refund, the IRS will normally issue it within 21 days.
  • Free File is still available.  Everyone can use IRS Free File. If your income is $57,000 or less, you qualify to e-file your return using free brand-name software. If you made more than $57,000 and are comfortable preparing your own tax return, use Free File Fillable Forms to e-file. This program uses the electronic versions of paper IRS forms. IRS Free File is available only through IRS.gov.
  • Pay as much as you can.  If you owe tax but can’t pay it all at once, you should pay as much as you can when you file your tax return. Pay the remaining balance due as soon as possible to minimize penalties and interest charges.
  • Installment Agreements are available.  If you need more time to pay your federal income taxes, you can request a payment agreement with the IRS. Apply online using the IRS Online Payment Agreement Application tool or file Form 9465, Installment Agreement Request.
  • Refunds may be waiting.  If you’re due a refund, you should file as soon as possible to get it. Even if you are not required to file, you may be entitled to a refund. This could apply if you had taxes withheld from your wages, or you qualify for certain tax credits. If you don’t file your return within three years, you could forfeit your right to the refund.

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IRS Increases Examinations of High-Income Taxpayers

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The Internal Revenue Service has stepped up its examinations in the past year of taxpayers with high adjusted gross incomes, according to newly released IRS figures.

 

The IRS released its 2012 IRS Data Book on Monday, providing a snapshot of agency activities for the fiscal year. The report describes activities conducted by the IRS from Oct. 1, 2011, to Sept. 30, 2012, and includes information about returns filed, taxes collected, enforcement, taxpayer assistance and the IRS budget and workforce, among others.

The IRS said it examined just under 1 percent of all tax returns filed and about 1 percent of all individual income tax returns during fiscal year 2012. “Overall, in FY 2012, individual income tax returns in higher AGI classes were more likely to be examined than returns in lower AGI classes,” said the IRS.

The IRS examined about 12.1 percent of the 337,477 tax returns reporting income of $1 million or more, compared to 2.8 percent of those reporting at least $200,000 and under $1 million, and 0.4 percent of those reporting income under $200,000 who didn’t file a Schedule C, E, F or Schedule 2106, and 1.1 percent of those with income under $200,000 and filing Schedule E or Form 2106. Of the 1.5 million individual tax returns examined, nearly 54,000 resulted in additional refunds. In addition, the IRS examined 1.6 percent of corporation income tax returns, excluding S corporation returns, in fiscal 2012.

During fiscal year 2012, the IRS collected almost $2.5 trillion in federal revenue and processed 237 million returns, of which almost 145 million were filed electronically. Out of the 146 million individual income tax returns filed, almost 81 percent were e-filed. More than 120 million individual income tax return filers received a tax refund, which totaled almost $322.7 billion. On average, the IRS spent 48 cents to collect $100 in tax revenue during the fiscal year, the lowest cost since 2008. The IRS also provided taxpayer assistance through 372 million visits to IRS.gov and assisted almost 97 million taxpayers through its toll-free telephone helpline or at walk-in sites.

“In 2012, the IRS responded to many challenging situations, providing assistance to taxpayers in a variety of circumstances,” wrote IRS Acting Commissioner Steven T. Miller, summing up the year. “For example, we gave filing and payment relief to victims of Hurricane Isaac and later Hurricane Sandy. We also continued to add flexibilities to our collection program under the Fresh Start initiative, to help taxpayers facing economic hardships.”

However, Miller acknowledged that one of the biggest challenges confronting the IRS today is tax refund fraud caused by identity theft. “The IRS has more than doubled the number of staff dedicated to preventing refund fraud and assisting taxpayers victimized by identity theft, with more than 3,000 employees working in this area,” he noted. “As a result of these increased efforts, the IRS during FY 2012 was able to prevent the issuance of more than 3 million fraudulent refunds worth more than $20 billion. Despite these efforts, much more work remains on identity theft as well as on overall refund fraud.”

Miller also noted that the IRS made significant progress last year on international enforcement, specifically in its efforts to combat the practice of illegally hiding assets and income in offshore accounts. “We have continued our two-pronged approach: offering a voluntary disclosure program for those who want to come in and get right with the government, while at the same time pursuing tax evaders and the promoters and banks assisting them,” he said.

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IRS Grants Taxpayers Late-Payment Penalty Relief Due to Delayed Forms

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The Internal Revenue Service is giving relief from late-payment tax penalties to individuals and businesses that request a tax-filing extension because they are attaching to their returns any of the forms that couldn’t be filed until after January.

The relief applies to the late-payment penalty, normally 0.5 percent per month, charged on tax payments made after the regular filing deadline. This relief applies to any of the forms delayed until February or March, primarily due to the January enactment of the American Taxpayer Relief Act.

Taxpayers using forms claiming such tax benefits as depreciation deductions and a variety of business credits qualify for this relief. A complete list of eligible forms can be found in Notice 2013-24, posted today on IRS.gov.

Individuals and businesses qualify for this relief if they properly request an extension to file their 2012 returns. Eligible taxpayers need not make any special notation on their extension request, but as usual, they must properly estimate their expected tax liability and pay the estimated amount by the original due date of the return.

The return must be filed and payment for any additional amount due must be made by the extended due date. Interest still applies to any tax payment made after the original deadline.

Further details on the tax relief, including instructions for responding to penalty notices, is available in Notice 2013-24.

The affected forms include:

•    Form 3800, General Business Credit
•    Form 4136, Credit for Federal Tax Paid on Fuels
•    Form 4562, Depreciation and Amortization (Including Information on Listed
•    Property)
•    Form 5074, Allocation of Individual Income Tax to Guam or the Commonwealth
•    of the Northern Mariana Islands
•    Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign
•    Corporations
•    Form 5695, Residential Energy Credits
•    Form 5735, American Samoa Economic Development Credit
•    Form 5884, Work Opportunity Credit
•    Form 6478, Alcohol and Cellulosic Biofuels Credit
•    Form 6765, Credit for Increasing Research Activities
•    Form 8396, Mortgage Interest Credit
•    Form 8582, Passive Activity Loss Limitations
•    Form 8820, Orphan Drug Credit
•    Form 8834, Qualified Plug-in Electric and Electric Vehicle Credit
•    Form 8839, Qualified Adoption Expenses
•    Form 8844, Empowerment Zone and Renewal Community Employment Credit
•    Form 8845, Indian Employment Credit
•    Form 8859, District of Columbia First-Time Homebuyer Credit
•    Form 8863, Education Credits (American Opportunity and Lifetime Learning
•    Credits)
•    Form 8864, Biodiesel and Renewable Diesel Fuels Credit
•    Form 8874, New Markets Credits
•    Form 8900, Qualified Railroad Track Maintenance Credit
•    Form 8903, Domestic Production Activities Deduction
•    Form 8908, Energy Efficient Home Credit
•    Form 8909, Energy Efficient Appliance Credit
•    Form 8910, Alternative Motor Vehicle Credit
•    Form 8911, Alternative Fuel Vehicle Refueling Property Credit
•    Form 8912, Credit to Holders of Tax Credit Bonds
•    Form 8923, Mine Rescue Team Training Credit
•    Form 8932, Credit for Employer Differential Wage Payments
•    Form 8936, Qualified Plug-in Electric Drive Motor Vehicle Credit

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IRS Reminds Taxpayers to Report 2010 Roth Conversions on 2012 Returns

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Issue Number:    IR-2013-21

The Internal Revenue Service reminds taxpayers who converted amounts to a Roth IRA or designated Roth account in 2010 that in most cases they must report half of the resulting taxable income on their 2012 returns.

Normally, Roth conversions are taxable in the year the conversion occurs. For example, the taxable amount from a 2012 conversion must be included in full on a 2012 return. But under a special rule that applied only to 2010 conversions, taxpayers generally include half the taxable amount in their income for 2011 and half for 2012, unless they chose to include all of it in income on their 2010 return.

Roth conversions in 2010 from traditional IRAs are shown on 2012 Form 1040, Line 15b, or Form 1040A, Line 11b. Conversions from workplace retirement plans, including in-plan rollovers to designated Roth accounts, are reported on Form 1040, Line 16b, or Form 1040A, Line 12b.

Taxpayers who also received Roth distributions in either 2010 or 2011 may be able to report a smaller taxable amount for 2012. For details, see the discussion under 2012 Reporting of 2010 Roth Rollovers and Conversions on IRS.gov. In addition, worksheets and examples can be found in Publication 590 for Roth IRA conversions and Publication 575 for conversions to designated Roth accounts.

Taxpayers who made Roth conversions in 2012 or are planning to do so in 2013 or later years must file Form 8606 to report the conversion.

As in 2010 and 2011, income limits no longer apply to Roth IRA conversions.

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