Taxpayers Have Several Tax Return Preparation Options

As taxpayers look ahead to the April 17 filing deadline this year, they’ll consider how to prepare their returns. Taxpayers have several options:

• Prepare their own return:

E-file — Taxpayers can use commercial tax software to prepare and file their tax returns.   The software uses a question and answer format that makes doing taxes easier. After the taxpayer responds to the questions, the software selects the appropriate tax forms and does the calculations automatically. Once complete, the software securely transmits the return to the IRS.

Free File — Seventy percent of taxpayers have an adjusted gross income of $66,000 or less and are therefore eligible to file using free, brand-name software. Taxpayers can find the right software for them at IRS.gov.

Paper Forms — Free File Fillable Forms have no age, income or residency restrictions for taxpayers who are comfortable completing a paper return. Taxpayers can also find forms on IRS.gov, fill them out in Adobe Acrobat, and then print and mail them to the IRS. Taxpayers may also fill out their forms by hand after they print them. Taxpayers who mail a paper Form 1040, U.S. Individual Income Tax Return, should know that it can take six to eight weeks for the IRS to process their return.

• Free Volunteer Tax Preparation — The Volunteer Income Tax Assistance and Tax Counseling for the Elderly programs provide free tax preparation help for qualifying taxpayers.

Volunteer Income Tax Assistance: This program is also known as VITA. IRS-certified volunteers provide free, basic income tax return preparation with electronic filing to eligible taxpayers who generally earn $54,000 or less.

Tax Counseling for the Elderly: TCE is mainly for people age 60 or older, but offers service to all taxpayers. The program focuses on tax issues unique to seniors. AARP participates in the TCE program through AARP Tax-Aide.

• Tax Preparers — Professional tax preparers across the country provide paid tax preparation services. Taxpayers can visit the Choosing a Tax Professional page on IRS.gov for tips on choosing a preparer who fits their needs.

All taxpayers should keep a copy of their tax return. Taxpayers using a software product for the first time may need their adjusted gross income amount from their prior-year tax return to verify their identity. Taxpayers can learn more about how to verify their identity and electronically sign tax returns at Validating Your Electronically Filed Tax Return.

Avoid the Rush: Track Tax Refunds Online at IRS.gov

With millions of tax refunds being processed, the Internal Revenue Service reminds taxpayers they can get fast answers about their refund by using the “Where’s My Refund?” tool available on IRS.gov and through the IRS2Go app.

More than 70 percent of taxpayers will receive a refund this year. The Internal Revenue Service issues nine out of 10 refunds in less than 21 days, and the fastest way to get a refund is to use IRS e-file and direct deposit.

Questions about tax refunds are the most frequent reason people call the IRS. But the time around Presidents Day is a peak period for telephone calls to the IRS, resulting in longer than normal hold times. IRS telephone assistors can only research a refund’s status if it has been 21 days or more since the taxpayer filed electronically, six weeks since they mailed a paper return or if “Where’s My Refund?” directs a taxpayer to call.

Taxpayers can avoid the rush by using the “Where’s My Refund?” tool. All that is needed is the taxpayer’s Social Security number, tax filing status (single, married, head of household) and exact amount of the tax refund claimed on the return. Alternatively, taxpayers may call 800-829-1954 for the same information. Within 24 hours of filing a return electronically, the tool can tell taxpayers that their returns have been received. That time extends to four weeks if a paper return is mailed to the IRS, which is another reason to use IRS e-file and direct deposit.

Once the tax return is processed, “Where’s My Refund?” will tell a taxpayer when their refund is approved and provide a date when they can expect to receive it. “Where’s My Refund?” is updated once daily, usually overnight, so checking it more often will not produce a different result.

By law, the IRS cannot release refunds containing the Earned Income Tax Credit or the Additional Child Tax Credit before mid-February. “Where’s My Refund?” will be updated Feb. 17 for most early filers who claimed the EITC or ACTC. These taxpayers will not see a refund date on “Where’s My Refund?” or through their software packages until then. EITC and ACTC refunds should be available in taxpayer bank accounts and debit cards starting Feb. 27, if taxpayers used direct deposit and there are no other issues with their tax returns.

As a reminder, taxpayers should remember that ordering a tax transcript will not speed delivery of tax refunds. Transcripts are best used to validate past income and tax-filing status for mortgage, student and small business loan applications as well as help with tax preparation.

Taxpayer Bill of Rights #1- The Right to Be Informed

All taxpayers have basic rights when filing taxes and dealing with the IRS. The Taxpayer Bill of Rights takes the multiple existing rights in the nation’s tax code and groups them into 10 categories. This makes them easier to find, understand and use. This tip is one in a series outlining these rights.

The right to be informed is the first one highlighted in the Taxpayer Bill of Rights. Taxpayers have the right to:

  • Know what they need to do to comply with the tax laws.
  • Have clear explanations of the laws and IRS procedures in all forms, instructions, publications, notices and correspondence.
  • Be informed of IRS decisions about their tax accounts, and to receive clear explanations of the outcomes.

The IRS will take these actions to make sure taxpayers are informed:

  • Certain notices must include any amount of the tax, interest and certain penalties the taxpayer owes.
  • The IRS must explain why the taxpayers owes any taxes.
  • When the IRS disallows a claim for a refund, the agency must explain the specific reasons why.
  • The IRS posts information on IRS.gov to help taxpayers understand their IRS notice or letter.
  •  If the IRS proposes to assess tax, the agency sends an initial letter. That letter must include:
    • Information on how the taxpayer can appeal the decision
    • An explanation of the entire process from audit through collection.
    • Details on how the Taxpayer Advocate Service can help.
  • The IRS must send an annual statement to taxpayers who enter into a payment plan, which is also known as an installment agreement. The statement will include how much the taxpayer:
    • Owes at the beginning of the year.
    • Paid during the year.
    • Still owes at the end of the year.
  • IRS makes forms and publications available on IRS.gov. Taxpayers can also have hard copies mailed to them by calling 800-829-3676.
  • IRS uses social media to provide helpful tax information to a wide audience of taxpayers.

Ten Tips for Choosing a Tax Preparer

It’s the time of the year when many taxpayers choose a tax preparer to help file a tax return. These taxpayers should choose their tax return preparer wisely.  This is because taxpayers are responsible for all the information on their income tax return. That’s true no matter who prepares the return.

Here are ten tips for taxpayers to remember when selecting a preparer:

  1. Check the Preparer’s Qualifications. Use the IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications. This tool helps taxpayers find a tax return preparer with specific qualifications. The directory is a searchable and sortable listing of preparers.
  2. Check the Preparer’s History. Ask the Better Business Bureau about the preparer. Check for disciplinary actions and the license status for credentialed preparers. For CPAs, check with the State Board of Accountancy. For attorneys, check with the State Bar Association. For Enrolled Agents, go to the verify enrolled agent status page on IRS.gov or check the directory.
  3. Ask about Service Fees. Avoid preparers who base fees on a percentage of the refund or who boast bigger refunds than their competition. When asking about a preparer’s services and fees, don’t give them tax documents, Social Security numbers or other information.
  4. Ask to E-File. Taxpayers should make sure their preparer offers IRS e-file. The quickest way for taxpayers to get their refund is to electronically file their federal tax return and use direct deposit.
  5. Make Sure the Preparer is Available. Taxpayers may want to contact their preparer after this year’s April 17 due date. Avoid fly-by-night preparers.
  6. Provide Records and Receipts. Good preparers will ask to see a taxpayer’s records and receipts. They’ll ask questions to figure things like the total income, tax deductions and credits.
  7. Never Sign a Blank Return. Don’t use a tax preparer who asks a taxpayer to sign a blank tax form.
  8. Review Before Signing. Before signing a tax return, review it. Ask questions if something is not clear. Taxpayers should feel comfortable with the accuracy of their return before they sign it. They should also make sure that their refund goes directly to them – not to the preparer’s bank account. Review the routing and bank account number on the completed return. The preparer should give you a copy of the completed tax return.
  9. Ensure the Preparer Signs and Includes Their PTIN. All paid tax preparers must have a Preparer Tax Identification Number. By law, paid preparers must sign returns and include their PTIN.
  10. Report Abusive Tax Preparers to the IRS. Most tax return preparers are honest and provide great service to their clients. However, some preparers are dishonest. Report abusive tax preparers and suspected tax fraud to the IRS. Use Form 14157, Complaint: Tax Return Preparer. If a taxpayer suspects a tax preparer filed or changed their return without the taxpayer’s consent, they should file Form 14157-A, Return Preparer Fraud or Misconduct Affidavit.

IRS Announces 2018 Pension Plan Limitations Not Affected by Tax Cut and Jobs Act of 2017

WASHINGTON — The Internal Revenue Service today announced that the Tax Cut and Jobs Act of 2017 does not affect the tax year 2018 dollar limitations for retirement plans announced in IR 2017-177 and detailed in Notice 2017-64.

The tax law provides dollar limitations on benefits and contributions under qualified retirement plans, and it requires the Treasury Department to annually adjust these limits for cost of living increases. Those adjustments are to be made using procedures that are similar to those used to adjust benefit amounts under the Social Security Act.

As the recently enacted tax legislation made no changes to the section of the tax law limiting benefits and contributions for retirement plans, the qualified retirement plan limitations for tax year 2018 previously announced in the news release and detailed in guidance remain unchanged.

The tax law also specifies that contribution limits for IRAs, as well as the income thresholds related to IRAs and the saver’s credit, are to be adjusted for changes in the cost of living using procedures that are used to make cost-of-living adjustments that apply to many of the basic income tax parameters.

Although the new law made changes to how these cost of living adjustments are made, after taking the applicable rounding rules into account, the amounts for 2018 in the news release and the guidance remain unchanged.