IRS Offers Tax Credit Guidance to Businesses Hiring Unemployed Veterans and Certain Youth

Businesses planning to claim the newly-expanded work opportunity tax credit (WOTC) for eligible unemployed veterans and unskilled younger workers hired during the first part of 2009 have until Aug. 17 to request the certification required for these workers, according to the Internal Revenue Service.

Newly-revised Form 8850, now available on IRS.gov, is used by employers to request certification from their state workforce agency. The American Recovery and Reinvestment Act, enacted in February, added unemployed veterans returning to civilian life and “disconnected youth” to the list of groups covered by the credit. Though eligible unemployed veterans and disconnected youth who begin work anytime during 2009 or 2010 may qualify a business for the credit, certification by the state workforce agency is required.

In general, an unemployed veteran is a person discharged or released from the military during the five years preceding the hiring date who received unemployment benefits for at least four weeks during the one-year period ending on the hiring date. A “disconnected youth” is a person age 16 to 24 on the hiring date who has not been regularly employed or attending school and who meets other requirements.

The WOTC offers tax savings to businesses that hire workers belonging to any of 12 targeted groups, including unemployed veterans and disconnected youth. The other 10 include people ages 18 to 39 living in designated communities in 43 states and the District of Columbia, Hurricane Katrina employees, recipients of various types of public assistance, and certain veterans, summer youth workers and ex-felons. The instructions for Form 8850 detail the requirements for each of these groups.

The certification requirement applies to all groups of workers except employees who were Hurricane Katrina victims. Normally, a business must file Form 8850 with the state workforce agency within 28 days after the eligible worker begins work. But under a special rule, businesses have until Aug. 17, 2009, to file this form for unemployed veterans and disconnected youth who begin work on or after Jan. 1, 2009 and before July 17, 2009. Notice 2009-28, posted today on IRS.gov, and the instructions for Form 8850 provide details on this special rule.

IRS Accepting Applications for Low Income Taxpayer Clinic Grants

The Internal Revenue Service announced today that the 2010 Low Income Taxpayer Clinic (LITC) grant application process is now open.

“Low Income Taxpayer Clinics provide an incredibly important service to taxpayers who find themselves in need of assistance. These grants are a wise investment in ensuring that there is a safety net for those having trouble navigating the system,” said Doug Shulman, IRS Commissioner.

The LITC grant program is a federal program administered by the Taxpayer Advocate Service, led by National Taxpayer Advocate Nina E. Olson. The LITC program serves individuals who have a problem with the IRS and whose income is below a certain level. LITCs also provide outreach and education to taxpayers who speak English as a second language. LITCs are independent from the IRS. Most LITCs can provide representation before the IRS or in court on audits, tax collection disputes and other issues for free or for a small fee. Many clinics provide multilingual information about taxpayer rights and responsibilities.

Under the LITC grant program, the IRS awards matching grants of up to $100,000 per year to qualifying organizations to develop, expand or maintain low-income taxpayer clinics. The program is in its eleventh year and continues to expand. To date in 2009, the LITC Program Office has awarded LITC grants to 162 organizations in all 50 states, the District of Columbia, and Puerto Rico.

Examples of qualifying organizations include:
• Clinical programs at accredited law, business or accounting schools, whose students represent low income taxpayers in tax disputes with the IRS, and
• Organizations exempt from tax under Internal Revenue Code Section 501(a) that represent low-income taxpayers in tax disputes with the IRS or refer those taxpayers to qualified representatives.

The application period for these grants will run through July 7, 2009. The grant will cover the 2010 grant cycle, from Jan. 1, 2010, through Dec. 31, 2010. Applications must be electronically filed, postmarked, sent by private delivery service, or hand delivered to the LITC Program Office in Washington, D.C. by July 7, 2009.

Copies of the 2010 Grant Application Package and Guidelines, IRS Publication 3319 (Rev. 5-2009), are available at www.irs.gov/advocate. Applicants may also order application packages from the IRS Distribution Center by calling 1-800-829-3676. Applicants can also file electronically at www.grants.gov. Those applying electronically should use the Funding Number TREAS-GRANTS-052010-001.

Questions about the LITC Program or grant application process can be addressed to the LITC Program Office at (202) 622-4711, not a toll-free call, or by e-mail at LITCProgramOffice@irs.gov.
For more information about the clinics receiving funding in 2009, see Publication 4134, Low Income Taxpayer Clinic List. This publication is available at www.irs.gov, by calling 1-800-TAX-FORM, or at your local IRS office.

Early Registration Discount Now Available for Tax Forums

As the Nationwide Tax Forums are about to begin, the IRS invites tax professionals and financial planners to make their reservations for one of six forums being held throughout the country. Those who sign up by the pre-registration date pay less than the full fee, a savings of $129.

The Nationwide Tax Forums are three-day events that provide tax professionals with the most up-to-date tax information on changes in the tax law and its administration at presentations by IRS experts and partnering organizations. Forums offer an opportunity to receive up to 18 continuing professional education (CPE) credits through a variety of training seminars and workshops.

2009 Registration Fees, Dates and Locations

The cost of enrollment is $206 per person, per city for pre-registration and then $335 up to and including on-site registration. Pre-registration ends two weeks prior to the start of each forum.

Las Vegas July 7-9, pre-register by June 23
San Diego July 14-16 pre-register by June 30
Orlando, Fla. August 4-6, pre-register by July 21
New York August 25-27, pre-register by August 11
Dallas September 8-10, pre-register by August 25
Atlanta September 22-24, pre-register by September 8

This year, 40 separate seminars and three workshops are being offered, each of which qualifies for CPE credit for enrolled agents and certified public accountants. Additionally, 17 of the 40 qualify for continuing education credit for certified financial planners, pending review and acceptance by the Certified Financial Planner Board.

Members of the following participating associations qualify for discounted enrollment costs:
• American Bar Association
• American Institute of Certified Public Accountants
• National Association of Enrolled Agents
• National Association of Tax Professionals
• National Society of Accountants
• National Society of Tax Professionals

In addition to the seminars, the forums also feature a two-day expo with representatives from the IRS, tax, financial and business communities offering their products, services and expertise. Practitioners are invited to bring an active case to the forums to work with IRS personnel on site for resolution.

In a survey of 2008 attendees the forums received a 99 percent satisfaction rate. Attendees stated that their participation enabled them to offer greater technical expertise to meet their clients’ needs. 2009 marks the 19th year that the IRS has used these forums to help educate and interact with the tax professional community.

IRS Launches Tax Return Preparer Review

IRS Commissioner Doug Shulman announced today that by the end of 2009, he will propose a comprehensive set of recommendations to help the Internal Revenue Service better leverage the tax return preparer community with the twin goals of increasing taxpayer compliance and ensuring uniform and high ethical standards of conduct for tax preparers.

Some of the potential recommendations could focus on a new model for the regulation of tax return preparers; service and outreach for return preparers; education and training of return preparers; and enforcement related to return preparer misconduct. The Commissioner will submit recommendations to the Treasury Secretary and the President by the end of the year.

“Tax return preparers help Americans with one of their biggest financial transactions each year. We must ensure that all preparers are ethical, provide good service and are qualified,” Shulman said. “At the end the day, tax preparers and the associated industry must be part of our overall game plan to strengthen the integrity of the tax system.”

The first part of this groundbreaking effort will involve fact finding and receiving input from a large and diverse constituent community that includes those that are licensed by state and federal authorities — such as enrolled agents, lawyers and accountants — as well as unlicensed tax preparers and software vendors. The effort will also seek input and dialog with consumer groups and taxpayers.

“We plan to have a transparent and open dialogue about the issues,” Shulman said. “At this early and critical stage of the process, we need to hear from the broadest possible range of stakeholders.”

Later this year, the IRS plans to hold a number of open meetings in Washington and around the country with constituent groups.

More information, including schedules and agendas for public meetings, will be posted on the “Tax Professionals” page on this Web site and will be communicated to stakeholder groups.

IRS Offers Advice for Newlyweds

It may not be high on the wedding planning to-do list, but there are a few, simple steps that can help keep tax issues from interrupting newly-wedded bliss. Here are some practical things to attend to when the honeymoon's over:

¨ Report any name change to the Social Security Administration, so your name and SSN will match when you file your next tax return.

¨ Report any address change to the U.S. Postal Service. You may also notify the IRS directly by filing IRS Form 8822, Change of Address.

¨ Report any name and address changes to your employer to ensure receipt of your paychecks and Form W-2 during tax season.

¨ Consider whether you'll file joint or separate tax returns.

¨ Check your withholding status using the automated “IRS Withholding Calculator” available on the “Individuals” page at the IRS.gov Web site.

¨ If you're buying a home, find out which expenses may be deductible and which are not at IRS.gov.

1 Month Left to Take Advantage of Free File from IRS

The Free File Alliance today encouraged eligible taxpayers to take advantage of its free tax preparation and e-filing services before the April 15 tax deadline. More than 98 million taxpayers with an adjusted gross income of $56,000 or less can visit the IRS Web site to receive step-by-step help preparing and e-filing their federal taxes through the Free File Alliance.

“With the tax deadline rapidly approaching, Free File can help taxpayers complete their taxes quickly and easily with no cost,” said Tim Hugo, executive director of the Free File Alliance. “The Free File Alliance offers vital assistance for Americans struggling in today’s economic climate. The program can even deliver a refund in as few as 10 days, giving Americans the cash they need to pay the bills.”

Taxpayers who would like to take advantage of the Free File service can visit the IRS website, www.irs.gov. By clicking on the “free file” icon on the left side of the page, users can find e-filing offers from participating companies and choose the one that best fits their needs. Taxpayers are then transferred to the company's website, where they receive the necessary help to prepare, complete and electronically file their federal income tax returns, just as they would on paper.

The Free File service is simple and user-friendly, and if used with direct deposit, it can provide a refund in as little as 10 days. Three of the 19 participating software companies now offer the service in Spanish.

SCAM Alert

Remember, the IRS does not send out unsolicited email messages. There are phishing scams out there trying to steal taxpayer information. A common “hook” involves emails claiming to be from the IRS asking for a taxpayer’s personal information in order to process a refund. If the IRS needs to contact a taxpayer, we’ll send them a letter in the mail via the US Postal Service. Scam emails may be forwarded to phishing@irs.gov. Taxpayers are advised to delete the messages. Do not open attachments, click on links, or reply with personal information.

A Pro-growth Flat Tax

By E. Ralph Hostetter

The Internal Revenue Service requires all income to be recorded and reported. All taxes on personal income from nannies to chief operating officers must be collected and reported on a quarterly basis and remitted to the IRS. This includes taxes on the self-employed.

American publisher, multi-millionaire and former presidential candidate Steve Forbes is proposing another method for collecting and reporting personal income taxes. He calls his plan a “Pro-Growth Flat Tax.” Here's how Forbes describes it, "I am talking about across-the-board tax cuts that are deep and wide and permanent...that get the suffocating weight of the IRS off peoples’ backs. I start by scrapping the tax code.... Junk it. Throw it out. Bury it."

Rep. Rob Portman, R-Ohio, describes "Title 26" of the U.S. Tax Code and its associated regulations as containing about 5.6 million words - seven times as many as the Holy Bible. "Taxpayers spend about 5.4 billion hours a year trying to comply with its more than 2,500 pages of regulations," he says. Rep. Jo Ann Emerson, R-Mo., says, "The Bible, guide of our lives, is 1,291 pages and contains 774,746 words. But the tax code and its regulations, which are referred to by some as ‘a person's worst nightmare come true,’ are 9,471 pages and over seven million words." The U.S. Government Printing Office is offering a printed version of the entire U.S. Tax Code with all 16,845 pages.

Under a new, pro-growth “flat tax,” a family of four would pay no taxes on the first $36,000 of income. Taxes would be charged at 17 percent after personal income reached $36,000 per year and would continue to be charged at 17 percent as income increased. There would be no tax on Social Security income, no tax on pension income, no tax on personal savings. Capital gains taxes would be zeroed out. Barriers to risk-taking would be lowered.

Political corruption would be reduced in Washington as trading tax loopholes for campaign cash would cease. At present, for example, there exists for 2001 a substantial tax gap of $345 billion between the taxes that were due and what was actually paid. Enforcement efforts and late payments brought the gap down to $290 billion.

Disturbing tax issues were exposed during President Obama's efforts to appoint candidates for some Cabinet positions. Three of his nominees for Cabinet posts were found to be delinquent on their taxes. Treasury Secretary Timothy Geithner was appointed and confirmed in spite of his failure to pay $34,000 in self-employment taxes he knew he was required to pay. Lobbyist and former South Dakota Sen. Thomas Daschle, nominee for Secretary of Health and Human Services, and Nancy Killefer, nominee for Chief Performance Officer, both withdrew from consideration because of their tax problems.

If three of these government officials were tax cheats, how many other government officials in high positions have failed to pay their taxes as well? Apparently many high-level government officials have come to believe they are exempt from taxation. Complicated investigations and tax audits cost both the taxpayer and the government billions of dollars each year. IRS requires 93,000 employees to staff its offices and provide all its legal services.

There are two principal arguments favoring a flat tax. The infrastructure necessary to operate IRS would be less. The bureaucracy itself would be much smaller.

E. Ralph Hostetter, a prominent businessman and publisher, also is an award-winning columnist and vice chairman of the Free Congress Foundation Board of Directors. He welcomes e-mail comments at eralphhostetter@yahoo.com.

IRS Has Nearly $43 Million for Carolinians Who Have Not Filed a 2005 Federal Income Tax Return

GREENSBORO — Unclaimed refunds totaling approximately $43 million are awaiting more than 53,000 taxpayers in the Carolinas who did not file a federal income tax return for 2005, the Internal Revenue Service announced today

In order to collect the money, a return for 2005 must be filed with the IRS no later than Tuesday, April 15, 2009, said Mark Hanson, IRS Spokesperson for the Carolinas.

Especially in these tough economic times, people should not lose out on money that is rightfully theirs," said IRS Commissioner Doug Shulman. “People should check their records, especially if they had taxes withheld from their paychecks but were not required to file a tax return. They may be leaving money on the table, including valuable tax credits that can mean even more money in their pockets."

Nationwide, the IRS estimates that half of those who could claim refunds for tax year 2005 would receive more than $581. Some individuals may not have filed because they had too little income to require filing a tax return even though they had taxes withheld from their wages or made quarterly estimated payments. In cases where a return was not filed, the law provides most taxpayers with a three-year window of opportunity for claiming a refund.

If no return is filed to claim the refund within three years, the money becomes property of the U.S. Treasury. For 2005 returns, the window closes on April 15, 2009. The law requires that the return be properly addressed, postmarked and mailed by that date. There is no penalty assessed by the IRS for filing a late return qualifying for a refund.

The IRS reminds taxpayers seeking a 2005 refund that their checks will be held if they have not filed tax returns for 2006 or 2007. In addition, the refund will be applied to any amounts still owed to the IRS and may be used to satisfy unpaid child support or past due federal debts such as student loans.

By failing to file a return, individuals stand to lose more than refunds of taxes withheld or paid during 2005. Many low-income workers may not have claimed the Earned Income Tax Credit (EITC). Generally, unmarried individuals qualified for the EITC if in 2005 they earned less than $35,263 and had more than one qualifying child living with them, earned less than $31,030 with one qualifying child, or earned less than $11,750 and had no qualifying child. Limits are slightly higher for married individuals filing jointly.

Current and prior year tax forms and instructions are available on the Forms and Publications web page of IRS.gov or by calling 1-800-TAX-FORM (1-800-829-3676). Information about the Earned Income Tax Credit and how to claim it is also available on IRS.gov. Taxpayers who need help also can call the toll-free IRS help line at 1-800-829-1040.

Expanded Tax Break Available for 2009 First-Time Homebuyers

The Internal Revenue Service announced that taxpayers who qualify for the first-time homebuyer credit and purchase a home this year before Dec. 1 have a special option available for claiming the tax credit either on their 2008 tax returns due April 15 or on their 2009 tax returns next year.

Qualifying taxpayers who buy a home this year before Dec. 1 can get up to $8,000, or $4,000 for married filing separately.

“For first-time homebuyers this year, this special feature can put money in their pockets right now rather than waiting another year to claim the tax credit," said IRS Commissioner Doug Shulman. “This important change gives qualifying homebuyers cash they do not have to pay back.”

The IRS has posted a revised version of Form 5405, First-Time Homebuyer Credit, on IRS.gov. The revised form incorporates provisions from the American Recovery and Reinvestment Act of 2009. The instructions to the revised Form 5405 provide additional information on who can and cannot claim the credit, income limitations and repayment of the credit.

This year, qualifying taxpayers who buy a home before Dec. 1, 2009, can claim the credit on either their 2008 or 2009 tax returns. They do not have to repay the credit, provided the home remains their main home for 36 months after the purchase date. They can claim 10 percent of the purchase price up to $8,000, or $4,000 for married individuals filing separately.

The amount of the credit begins to phase out for taxpayers whose adjusted gross income is more than $75,000, or $150,000 for joint filers.

For purposes of the credit, you are considered to be a first-time homebuyer if you, and your spouse if you are married, did not own any other main home during the three-year period ending on the date of purchase.

The IRS also alerted taxpayers that the new law does not affect people who purchased a home after April 8, 2008, and on or before Dec. 31, 2008. For these taxpayers who are claiming the credit on their 2008 tax returns, the maximum credit remains 10 percent of the purchase price, up to $7,500, or $3,750 for married individuals filing separately. In addition, the credit for these 2008 purchases must be repaid in 15 equal installments over 15 years, beginning with the 2010 tax year.

Standard Deduction for Non-Itemizers

Why E-File

First-Time Homebuyer Credit

Here is a tip from the IRS…

Tax Time

IRS E-file and free file are now available. Most taxpayers should have W-2s within the next few weeks (employers are required to make forms W-2 available by Jan. 31). If people haven’t already done so, it may be a good time to figure out how they plan to file.

More information here. Information and video will be added continually through April 15.