Annette Nellen

Several states require employers to notify employees that they may be eligible for the federal (and perhaps also state) Earned Income Tax Credit (EITC). This year, California law was changed to require employers to also notify employees about the California EITC recently added to the law.

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Annette Nellen

Here is my 15 minute presentation to the San Jose Rotary Club delivered today (May 11) on deciphering campaign tax proposals and helping members increase their tax policy savviness.

Deciphering Campaign Tax Proposals

Presentation delivered to Rotary International San Jose Chapter (District 5170) on May 11, 2016. Read More

Amended Returns

Debra Thompson

Oops! You’ve discovered an error after your tax return has been filed. What should you do? You may need to amend your return.

The IRS usually corrects math errors or requests missing forms (such as W-2s) or schedules. In these instances, do not amend your return. However, do file an amended return if any of the following were reported incorrectly: Read More

Debra Thompson

Millions of Americans forgo critical tax relief each year by failing to claim the Earned Income Tax Credit (EITC), a federal tax credit for individuals who work but do not earn high incomes. Taxpayers who qualify and claim the credit could pay less federal tax, pay no tax or even get a tax refund. Read More

The EITC is for people who work but have lower incomes. If you qualify, it could be worth up to $6,242 in 2015. So you could pay less federal tax or even get a refund. The credit is a refundable credit, so you can receive the benefits of the credit even if you do not owe any taxes. That’s money you can use to make a difference in your life.

Even though this credit can be worth thousands of dollars to a low-income family, the IRS estimates as many as 25 percent of people who qualify for the credit do not claim it simply because they don’t understand the criteria.

If you qualify for but failed to claim the credit on your return for 2012, 2013 and/or 2014, you can still claim it for those years by filing an amended return or an original return if you have Read More

Each year the IRS reports about $1 billion in unclaimed refunds for individuals who did not file a tax return. The IRS estimates that approximately half of the unclaimed refunds are for amounts greater than $600. You may not have filed, thinking that because you don’t itemize and your employer is withholding tax that you don’t need to file. But there is a good chance you are leaving money on the table by not filing. Consider the following:

• Over-Withholding – Your employer may have withheld more than you owe, as withholding is not an exact science. But you have to file to get the excess back.

• Earned Income Tax Credit (EITC) – An EITC is a credit for lower-income taxpayers. If you worked and earned less than $52,427 last year, you could receive the EITC as a refund if Read More

Since 1975, the Earned Income Tax Credit has helped workers with low and moderate incomes get a tax break each year. Four out of five eligible workers claim EITC. Wondering if you can too? Here’s what you should know about this valuable credit:

1. Review your eligibility. If you worked and earned under $52,427 in 2014, you may qualify for the EITC. If your financial or family situation has changed, you should review the EITC eligibility rules because you might qualify for the EITC this year even if you didn’t in the past. If you qualify for the EITC you must file a federal income tax return and claim the credit to get it. This is true even if you are not otherwise required to file a tax return.

2. Know the rules. Before you claim the EITC, you need to understand the rules to be sure Read More

The complexity of completing one’s federal and state income tax returns is not necessarily tied to one’s income level. One of the more complex federal tax rules is the Earned Income Tax Credit (EITC) for low-income workers. Could the individual income tax be simpler? Yes. Here are some ideas.

• Make all income you received subject to tax. What is income? Let’s say it is anything that increases your wealth. So, it would be any payment from the government, debt forgiveness, gross wages, employer-provided health insurance, scholarships, gains from selling assets, etc. What would not be income? Borrowing money (it does not increase your wealth because you have an offsetting liability). Receipt of expense reimbursements from your employer (it makes you whole for what you, in essence loaned to your employer Read More

TaxConnections Blog PostThe IRS has failed to clamp down on improper refundable tax credit payments, according to a new federal audit. In all, the IRS said it wrongly distributed as much as a quarter of Earned Income Tax Credit (EITC) payments, between $11.6 billion and $13.6 billion, according to Treasury’s inspector general for tax administration. Between 2003 and 2012, the IRS erroneously paid out at least $110.8 billion and as much as $132.6 billion, the new report says.

Due to a 2009 executive order, the IRS is supposed to have targets for rolling back those improper payments. But the agency has yet to do so, and the Treasury inspector general says in its audit that the IRS needs to rethink its methods for cutting down on waste in EITC payments.

Russell George, the tax administration inspector general, noted that the IRS had made some strides in stopping inappropriate payments, and in educating taxpayers about EITC eligibility. Still, George said the billions of dollars lost to waste each year was “disturbing.” The IRS must do a better job of reining in improper payments in this and in other programs,” George said in a statement. Senator Orrin Hatch (Utah), the top Republican on the Finance Committee, called on the IRS to “aggressively crack down on these erroneous payments,” insisting the agency’s issue with the EITC “doesn’t bode well” for its oversight of subsidies for President Obama’s healthcare law. Read More

TaxConnections Blog Post - Additional Guidance on Federal Tax Laws for Same-sex couplesIn a previous article (“Tax Implications Resulting from Demise of the Defense of Marriage Act (DOMA)”; August 15, 2013) I explained that the Treasury Department issued a revenue ruling that permits legally married same-sex couples to file a joint federal tax return and utilize the unlimited martial deduction for estate tax purposes and other provisions of the estate and gift tax laws if the state in which they resided sanctioned such unions. If they moved to a state that does not recognize same-sex marriages, they would not be allowed to utilize these provisions.

New Revenue Ruling

On August 29, the Treasury Department issued a new revenue ruling [Rev Rul 2013-17] expanding the previous one. The new ruling will now allow legally same-sex married couples to file a joint return and utilize the unlimited martial deduction for estate tax purposes and other provisions of the estate and gift tax laws even if they move to a state that does not sanction same-sex marriage. In his statement announcing the new ruling, Treasury Secretary, Jacob B. Lew, stated: “today’s ruling provides certainty and clear, coherent tax-filing standards for all same-sex married couples nationwide. This ruling also assures all legally married same-sex couples that they can move freely throughout the country knowing that their federal filing status will not change.” Read More

Agency expands its robo‑audits to get more personal data…

but has so far only netted small change.

The Internal Revenue Service relies on technology more than ever to sniff out tax cheats using robo‑audits and data mining – but so far it has caught lot of minnows, and big fish are still eluding detection. Even as millions of people’s accounts are screened online and matched against their digital files elsewhere, the IRS’s data‑detection tools comes nowhere close to collecting the $400 billion in tax dodges estimated to take place every year. The area in which its robo‑audits have had the most impact is on tax returns for low‑income taxpayers who try to claim the Earned Income Tax Credit (EITC). In total, fraudulent claims totaled $2 billion, just 0.01 percent of the total of individual taxes. The EITC was the biggest single compliance problem cited.

That amount is expected to rise in the tax year ahead as the IRS extends the use of data mining to include the personal data of millions more taxpayers. Its sophisticated data‑matching and pattern‑recognition technology, largely developed by IBM over the past decade, will reach up the income ladder to include more middle‑income and Read More