Month: August 2018

Hurricane season runs June 1 to November 30. With hurricane season well underway, taxpayers should watch out for disaster-related scams carried out by criminals and scammers who often try to take advantage of the generosity of taxpayers wanting to help victims of major disasters.

Fraudulent schemes normally start with unsolicited contact by telephone, social media, e-mail or in-person using a variety of tactics such as the following:

• Impersonating charities to get money or private information from well-intentioned taxpayers.
• Setting up bogus websites use names similar to legitimate charities to trick people to send money or provide personal financial information.
• Claiming to be working for or on behalf of the IRS to help victims file casualty loss claims and get tax refunds.
• Operating bogus charities and solicit money or financial information by telephone or email.

To find out whether a charity is legitimate use the search feature, “Tax Exempt Organization Search,” on the IRS website. Donations to these charities may be tax-deductible. Also, be sure to:

• Contribute by check or credit card, never give or send cash, to have a record of the tax-deductible donation.
• Not give out personal financial information such as Social Security numbers or credit card and bank account numbers and passwords to anyone who solicits a contribution.

Taxpayers suspecting fraud by email should visit IRS.gov and search for the keywords “Report Phishing.” Disaster victims can call the IRS toll-free disaster assistance telephone number (866-562-5227) and speak to someone who will answer questions about tax relief or disaster-related tax issues.

More information about tax scams and schemes may be found at IRS.gov using the keywords “scams and schemes.” If you have any questions, don’t hesitate to call the office as well.

• By Leon Clinton
• August 28, 2018

Under the Protecting Americans from Tax Hikes (PATH) Act, Individual Taxpayer Identification Numbers (ITINs) that have not been used on a federal tax return at least once in the last three consecutive years will expire December 31, 2018. In addition, ITINs with middle digits 73, 74, 75, 76, 77, 81 or 82 will also expire at the end of the year. These affected taxpayers who expect to file a tax return in 2019 must submit a renewal application as soon as possible.

ITINs are used by people who have tax filing or payment obligations under U.S. law but who are not eligible for a Social Security number. With more than 2 million ITINs set to expire at the end of 2018, taxpayers should submit renewal applications for Form W-7, Application for IRS Individual Taxpayer Identification Number soon to beat the rush and avoid refund delays for next year’s tax returns.

While spouses or dependents residing inside the United States should renew their ITINs, spouses, and dependents residing outside the United States do not need to renew their ITINs unless they anticipate being claimed for a tax benefit (for example, after they move to the United States) or if they file their own tax return. That’s because the deduction for personal exemptions is suspended for tax years 2018 through 2025 by the Tax Cuts and Jobs Act. Consequently, spouses or dependents outside the United States who would have been claimed for this personal exemption benefit and no other benefit do not need to renew their ITINs this year.

To renew an ITIN, a taxpayer must complete a Form W-7 and submit all required documentation. Taxpayers submitting a Form W-7 to renew their ITIN are not required to attach a federal tax return. However, taxpayers must still note a reason for needing an ITIN on the Form W-7.

Federal tax returns that are submitted in 2019 with an expired ITIN will be processed. However, certain tax credits and any exemptions will be disallowed. Once the ITIN is renewed, applicable credits and exemptions will be restored, and any refunds will be issued.

As a reminder, the IRS no longer accepts passports that do not have a date of entry into the U.S. as a stand-alone identification document for dependents from a country other than Canada or Mexico, or dependents of U.S. military personnel overseas. The dependent’s passport must have a date of entry stamp, otherwise additional documents to prove U.S. residency are required.

• By Leon Clinton
• August 26, 2018

Taxpayers who make an effort to comply with the law but are unable to meet their tax obligations due to circumstances beyond their control may qualify for relief from penalties.

If you’ve received a notice stating that the IRS assessed a penalty, the first step taxpayers should take is to check that the information in the notice is correct. Those who can resolve an issue in their notice may get relief from certain penalties, which include failing to:

• File a tax return
• Pay on time
• Deposit certain taxes as required

There are several types of penalty relief:

1. Reasonable cause

This relief is based on all the facts and circumstances in a taxpayer’s situation. The IRS will consider this relief when the taxpayer can show they tried to meet their obligations but were unable to do so. Situations, when this could happen, include a house fire, natural disaster and a death in the immediate family.

2. Administrative Waiver and First Time Penalty Abatement

A taxpayer may qualify for relief from certain penalties if he or she:

• Didn’t previously have to file a return or had no penalties for the three tax years prior to the tax year in which the IRS assessed a penalty.
• Filed all currently required returns or filed an extension of time to file.
• Paid, or arranged to pay, any tax due.

3. Statutory Exception

In certain situations, legislation may provide an exception to a penalty. Taxpayers who received incorrect written advice from the IRS may qualify for a statutory exception.

Taxpayers who received a notice or letter saying the IRS didn’t grant the request for penalty relief may appeal. If you have any questions about IRS penalties, please call.

• By Leon Clinton
• August 24, 2018