W-2, how the IRS is trying to strengthen protection of these documents

IRS, Partners Move to Strengthen Anti-Fraud Effort with Form W-2 Verification Code
When you get your Form W-2 in early 2017, you may notice a new entry – a 16-digit verification code. This is part of an effort conducted by the Internal Revenue Service to protect taxpayers and strengthen anti-fraud efforts.

The expanded use of the W-2 Verification Code is a way to validate the wage and tax withholding information on the tax form. For taxpayers, taking a moment to add this code when filling out their taxes helps the IRS authenticate the information. This in turn helps protect against identity theft and unnecessary refund delays.

For 2017, the IRS and its partners in the payroll service provider industry will place the code on 50 million Forms W-2. This is up from two million forms in 2016.

The IRS, state tax agencies and the nation’s tax industry – partners in combating identity theft – ask for your help in their efforts. Working in partnership with you, we can make a difference.

That’s why we launched a public awareness campaign that we call Taxes. Security. Together. We’ve also launched a series of security awareness tips that can help protect you from cybercriminals.

One area where we need your help is with the W-2 Verification Code. If your W-2 contains the code, please enter it when prompted if using software to prepare your return. Or, please make sure your tax preparer enters it.

If the code is not included, your tax return will still be accepted. However, initial results indicate the verification code shows promise in reducing tax fraud. It helps IRS processing systems authenticate the real taxpayer. Identity thieves sometimes file false Forms W-2 to support their fraudulent tax returns.

This initiative will affect only those Forms W-2 prepared by payroll service providers. The verification code’s location on the form will vary. Enter the code on electronically filed returns only. Most software providers will prompt you to enter the code.

Standard Mileage rates for 2017

2017 Standard Mileage Rates for Business, Medical and Moving Announced   

WASHINGTON — The Internal Revenue Service today issued the 2017 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2017, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

• 53.5 cents per mile for business miles driven, down from 54 cents for 2016
• 17 cents per mile driven for medical or moving purposes, down from 19 cents for 2016
• 14 cents per mile driven in service of charitable organizations

The business mileage rate decreased half a cent per mile and the medical and moving expense rates each dropped 2 cents per mile from 2016. The charitable rate is set by statute and remains unchanged.   The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.

These and other requirements are described in Rev. Proc. 2010-51. Notice 2016-79, posted today on IRS.gov, contains the standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan.

Tax Season

2017 Tax Filing Season Begins Jan. 23 for Nation’s Taxpayers, Tax Returns due April 18

IRS YouTube Video April 18 is When Your Taxes are Due in 2017 | English

                                                             

WASHINGTON ― The Internal Revenue Service announced today that the nation’s tax season will begin Monday, Jan. 23, 2017 and reminded taxpayers claiming certain tax credits to expect a longer wait for refunds.

The IRS will begin accepting electronic tax returns that day, with more than 153 million individual tax returns expected to be filed in 2017. The IRS again expects more than four out of five tax returns will be prepared electronically using tax return preparation software.

Many software companies and tax professionals will be accepting tax returns before Jan. 23 and then will submit the returns when IRS systems open. The IRS will begin processing paper tax returns at the same time. There is no advantage to filing tax returns on paper in early January instead of waiting for the IRS to begin accepting e-filed returns.

The IRS reminds taxpayers that a new law requires the IRS to hold refunds claiming the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC) until Feb. 15. In addition, the IRS wants taxpayers to be aware it will take several days for these refunds to be released and processed through financial institutions. Factoring in weekends and the President’s Day holiday, the IRS cautions that many affected taxpayers may not have actual access to their refunds until the week of Feb. 27.

“For this tax season, it’s more important than ever for taxpayers to plan ahead,” IRS Commissioner John Koskinen said. “People should make sure they have their year-end tax statements in hand, and we encourage people to file as they normally would, including those claiming the credits affected by the refund delay. Even with these significant changes, IRS employees and the entire tax community will be working hard to make this a smooth filing season for taxpayers.”

The IRS also reminds taxpayers that they should keep copies of their prior-year tax returns for at least three years. Taxpayers who are changing tax software products this filing season will need their adjusted gross income from their 2015 tax return in order to file electronically. The Electronic Filing Pin is no longer an option. Taxpayers can visit IRS.Gov/GetReady for more tips on preparing to file their 2016 tax return.

April 18 Filing Deadline

The filing deadline to submit 2016 tax returns is Tuesday, April 18, 2017, rather than the traditional April 15 date. In 2017, April 15 falls on a Saturday, and this would usually move the filing deadline to the following Monday – April 17. However, Emancipation Day – a legal holiday in the District of Columbia – will be observed on that Monday, which pushes the nation’s filing deadline to Tuesday, April 18, 2017. Under the tax law, legal holidays in the District of Columbia affect the filing deadline across the nation.

“The opening of filing season reflects months and months of work by IRS employees,” Koskinen said. “This year, we had a number of important legislative changes to program into our systems, including the EITC refund date, as well as dealing with resource limitations. Our systems require extensive programming and testing beforehand to ensure we’re ready to accept and process more than 150 million returns.”

The IRS also has been working with the tax industry and state revenue departments as part of the Security Summit initiative to continue strengthening processing systems to protect taxpayers from identity theft and refund fraud. A number of new provisions are being added in 2017 to expand progress made during the past year.

Refunds in 2017

Choosing e-file and direct deposit for refunds remains the fastest and safest way to file an accurate income tax return and receive a refund.

The IRS still anticipates issuing more than nine out of 10 refunds in less than 21 days, but there are some important factors to keep in mind for taxpayers.

Beginning in 2017, a new law requires the IRS to hold refunds on tax returns claiming the Earned Income Tax Credit or the Additional Child Tax Credit until mid-February. Under the change required by Congress in the Protecting Americans from Tax Hikes (PATH) Act, the IRS must hold the entire refund — even the portion not associated with the EITC and ACTC — until at least Feb. 15. This change helps ensure that taxpayers get the refund they are owed by giving the IRS more time to help detect and prevent fraud.

As in past years, the IRS will begin accepting and processing tax returns once the filing season begins. All taxpayers should file as usual, and tax return preparers should also submit returns as they normally do – including returns claiming EITC and ACTC.

The IRS will begin releasing EITC and ACTC refunds starting Feb. 15. However, the IRS cautions taxpayers that these refunds likely won’t arrive in bank accounts or on debit cards until the week of Feb. 27 (assuming there are no processing issues with the tax return and the taxpayer chose direct deposit). This additional period is due to several factors, including banking and financial systems needing time to process deposits.

After refunds leave the IRS, it takes additional time for them to be processed and for financial institutions to accept and deposit the refunds to bank accounts and products. The IRS reminds taxpayers many financial institutions do not process payments on weekends or holidays, which can affect when refunds reach taxpayers. For EITC and ACTC filers, the three-day holiday weekend involving President’s Day may affect their refund timing.

Where's My Refund? ‎on IRS.gov and the IRS2Go phone app will be updated with projected deposit dates for early EITC and ACTC refund filers a few days after Feb. 15. Taxpayers will not see a refund date on Where's My Refund? ‎or through their software packages until then. The IRS, tax preparers and tax software will not have additional information on refund dates, so Where’s My Refund? remains the best way to check the status of a refund.

Help for Taxpayers

The IRS reminds taxpayers they have a variety of options to get help filing and preparing their tax return on IRS.gov. Taxpayers can also, if eligible, locate help from a community volunteer. Go to IRS.gov and click on the Filing tab for more information.

Seventy percent of the nation’s taxpayers are eligible for IRS Free File. Commercial partners of the IRS offer free brand-name software to about 100 million individuals and families with incomes of $64,000 or less.

Online fillable forms provides electronic versions of IRS paper forms to all taxpayers regardless of income that can be prepared and filed by people comfortable with completing their own returns.

Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) offer free tax help to people who qualify. Go to irs.gov and enter “free tax prep” in the search box to learn more and find a nearby VITA or TCE site, or download the IRS2Go smartphone app to find a free tax prep provider.

The IRS also reminds taxpayers that a trusted tax professional can provide helpful information and advice about the ever-changing tax code. Tips for choosing a return preparer and details about national tax professional groups are available on IRS.gov.

Renewal Reminder for Individual Taxpayer Identification Numbers (ITINS) ITINs are used by people who have tax-filing or payment obligations under U.S. law but are not eligible for a Social Security number. Under a recent change in law, any ITIN not used on a tax return at least once in the past three years will expire on Jan. 1, 2017. In addition, any ITIN with middle digits of either 78 or 79 (9NN-78-NNNN or 9NN-79-NNNN) will also expire on that date.

This means that anyone with an expiring ITIN and a need to file a tax return in the upcoming filing season should file a renewal application in the next few weeks to avoid lengthy refund and processing delays. Failure to renew early could result in refund delays and denial of some tax benefits until the ITIN is renewed.

An ITIN renewal application filed now will be processed before one submitted at the height of tax season from mid-January to February. Currently, a complete and accurate renewal application can be processed in as little as seven weeks. But this timeframe is expected to expand to as much as 11 weeks during tax season, which runs from mid-January through April.

Several common errors are currently slowing down or holding up ITIN renewal applications. The mistakes generally center on missing information, and/or insufficient supporting documentation. ITIN renewal applicants should be sure to use the latest version of Form W-7, revised September 2016. The most current version of the form, along with its instructions, are posted on IRS.gov.

Non Profit, Form 990 filing

With over 300 pages of instructions and 300 possible questions to answer, the IRS Form 990, Return of Organization Exempt From Income Tax is a complex and extensive form. It is filed annually by most exempt organizations, including charities. Here are five things you may not know or may have forgotten about Form 990:   

1. It is a misnomer to call Form 990 an “income tax return.” There is no income tax calculation in the core Form 990 or within any of the accompanying schedules. The fact that it is not an income tax return becomes very important when attempting to apply the Internal Revenue Code to the filing of Form 990. Generally, where the Internal Revenue Code and the related regulations only reference an “income tax return,” the code or regulation in question will not normally apply to Form 990. It is very important, however, to remember that organizations subject to unrelated business income taxes (UBIT) file a separate Form 990-T, Exempt Organization Business Income Tax Return, which can be subject to the Internal Revenue Code and the regulations related to the filing of an income tax return.

2. There are 16 possible schedules that can be attached to the core Form 990. These schedules run the gamut from Schedule A, which is a required attachment for all Section 501(c)(3) organizations, to Schedule R that reports related entities, certain transactions with related entities, as well as certain unrelated partnerships. There is a schedule for foreign activities as well as for hospitals (Schedules F and H, respectively). There is, however, only one schedule that must be attached to every Form 990 that is filed: Schedule O, which is used to report required and supplemental information to the form.

3. Some organizations get tripped up on reporting of lobbying expenses. Lobbying expenses are those amounts paid for activities intended to influence legislation, be it foreign, national, state or local. The IRS makes the distinction between direct lobbying and grassroots lobbying. Direct lobbying applies to instances in which organizations attempt to influence legislators. Grassroots lobbying is when the organization attempts to influence legislation through influencing the general public, such as urging supporters to contact legislators with a position on specific legislation. Lobbying expenditures are reported within the Statement of Functional Expenses on Line 11d on the core form. However, not all lobbying expenditures are to be reported on this line. Salaries paid to an employee of the filing where the employee is engaged in lobbying is not to be reported on 11d.  Section 501(c) organizations and Section 527 organizations are subject to limitations on lobbying and use Schedule C to furnish additional information.

4. Your organization is being watched. Form 990 is heavily scrutinized, not only by the IRS, but also by state regulatory entities that use it to investigate exempt organizations operating in their states. In over 40 states, Form 990 is filed as part of the charitable fundraising registration process. In addition, the form is made widely available and used by charitable rating agencies. Readers have various motives for looking at the form, so it is important to look at it with an eye toward how all potential readers will react to the information being presented.

5. In many instances, you cannot just check a box and be done. It is vital to read the instructions carefully. To give just one example, consider Section B of Part VII of Form 990, in which organizations report the five highest compensated independent contractors. The compensation to report is not limited to those contractors receiving a Form 1099 from the filing organization. You must report in Section B the top five that were paid more than $100,000 for services (not purchases of tangible personal property or rental or real property) rendered to the organization regardless of the need to prepare a Form 1099 for the service provider. The measurement date for the $100,000 is for the year ending within the year being filed. In other words, a June 30, 2016 fiscal year-end organization should look to the payments for services made during the year ending Dec. 31, 2015.                                                              Thanks to Bill Turco, CPA for pulling this information together!