Summertime is the perfect time for a mid-year tax checkup. A tax checkup will help you avoid being surprised with a potentially large tax bill and may help uncover ways you can save throughout the rest of the year. It is also a good time to account for any life changes that may affect your overall tax liability.

Get Organized
Collect and keep your records and receipts. Record keeping can help you identify sources of income, track deductible expenses, and make preparing a complete and accurate tax return easier.
Notify the IRS if your address changes and notify the Social Security Administration of a legal name change.
Create and/or sign into your individual IRS online account to view your federal tax records, manage communication preferences, make payments and more.

Perform A Paycheck Check-up
Pay close attention to your paystubs to help prevent end-of year surprises. Make sure the earnings are correct and that you have the proper amount of tax withheld. As time passes, life events like marriage, divorce, having a child, buying a home, or a change in income may affect your taxes. The IRS’s Tax Withholding Estimator will help you assess your income tax, credits, adjustments, and deductions, and determine whether you need to change your tax withholding. If a change is recommended, the estimator will provide instructions to update your withholding with your employer either online or by submitting a new Form W-4, Employee’s Withholding Allowance Certificate.

Remember, most income is taxable. This includes the following sources and more:
Read More

In the latest NTA BLOG, National Taxpayer Advocate Erin M. Collins urges Congress to increase funding for IRS taxpayer services and business systems/IT modernization to better meet taxpayer needs.

In the blog, the National Taxpayer Advocate notes that the Inflation Reduction Act passed last August provided the IRS with $80 billion in additional funding over the next ten years, but only 10 percent of the funding was directed toward taxpayer services and IT modernization. Ninety percent was directed toward enforcement and operations support.

“The top tax administration priority now should be to improve taxpayer service, particularly after the struggles of the last few years, and to do that, the IRS needs more funding in the Taxpayer Services and Business Systems Modernization accounts,” Collins writes.

The blog outlines four alternative ways Congress can ensure the IRS receives enough funding to effectively serve taxpayers, and it provides concrete examples of how poor customer service and antiquated technology has led to problems.

Collins emphasizes that improving service and technology can help the IRS save money on enforcement.

Collins says, “The most efficient way to improve compliance is by encouraging and helping taxpayers to do the right thing on the front end. That is much cheaper and more effective than trying to audit our way out of the tax gap one taxpayer at a time on the back end.”

Please visit the NTA BLOG to read more details about the National Taxpayer’s call to Congress to meet taxpayer needs and support an effective, fair, and equitable tax administration. We encourage you to share this important information with your audience.

National Taxpayer Advocate

As part of the Tax Cuts and Jobs Act (TCJA) passed in December 2017, the Child Tax Credit (CTC) (Internal Revenue Code (IRC) § 24) was amended to require a Social Security number (SSN) for all qualifying children for whom the credit is being claimed. The stated purpose for the TCJA amendment was to prevent taxpayers who are not eligible to obtain a work-eligible SSN from improperly or fraudulently claiming the CTC or the American Opportunity Tax Credit (AOTC). This requirement raised concerns for some taxpayers—most notably the Amish—some of whom will refrain from obtaining SSNs for their children altogether or for themselves until later in life, due to their deeply held religious beliefs. Prior to this amendment, IRC § 24 only required that a taxpayer identification number (TIN) be provided, and the IRS developed a procedure that allowed Amish taxpayers to claim the dependent exemption under IRC § 151 and the CTC without placing an identifying number on the dependent line of the return. These procedures, described below, have been in place for over 30 years.

After I raised this issue back in the summer of 2018, and after the IRS reversed course several times, IRS Chief Counsel issued program manager technical advice (PMTA) on March 29, 2019, concluding “… the [IRS] need not provide administrative relief for these taxpayers.”  The IRS revised its guidance on April 15, 2019, to reflect the Chief Counsel’s advice and is disallowing the CTC where qualifying children do not have SSNs on the basis of religious beliefs. Under the TCJA, the maximum CTC for 2018 was $2,000 per child. However, without an SSN, the taxpayer can only receive a partial $500 credit allowed for a dependent—a significant reduction of 75 percent.

Read More

When you get married, your tax situation changes. Your marital status as of Dec. 31 determines your tax filing options for the entire year. If you’re married at year-end, you have two filing status choices:

1. filing jointly with your new spouse, Married Filing Jointly, or
2. filing separate from your spouse, Married Filing Separately

Most married couples file jointly because it is simpler and makes you eligible for many tax deductions and tax credits. However, if either spouse owes back taxes, whether federal or state, or owes certain other non-tax debts, such as delinquent child support or student loans in default, the IRS may offset your joint tax refund to satisfy the individual debts. Also, individuals who file a joint return incur “joint and several liability” explained later. Filing separately may seem like a good idea if you’re aware of prior tax and other liabilities of your spouse and don’t want to be responsible for them, but there’s potentially a downside. Filing separately may make you ineligible to claim certain tax deductions and tax credits, such as the child-care credit and the earned income tax credit (EITC). Refer to IRS Publication 501 for more information.

Read More

As we approach the filing season, I thought it would be a good idea to discuss an issue that affects many taxpayer returns, namely the IRS processes for identifying and stopping refund fraud. Attempted refund fraud has become a significant problem in our tax system. According to the most recent figures available, in calendar year (CY) 2016, identity theft (IDT), refund fraud alone, cost the government roughly $1.7 billion. I fully support the IRS’s efforts to reduce refund fraud and protect revenue. However, I have expressed concern over several years that the refund fraud false positive rate (FPR) is too high and that the IRS takes far too long to process legitimate taxpayers’ returns once it has determined that they have been inaccurately selected. For some taxpayers who rely on their tax refund to pay for necessary living expenses, their anxiety increases every day that their refund is delayed.

One of the main drivers behind these issues is the timing between when the IRS selects returns to be analyzed for possible refund fraud, and when it receives payor information that would either verify or disprove this possibility. But before we get into specific concerns surrounding the IRS’s fraud detection program, here is a little background on how the systems that select possible fraudulent returns work.

Read More