IRS Tax News

  • 08 Nov 2012 1:58 PM | Anonymous

    Washington – The Internal Revenue Service today alerted employers and other taxpayers that because Hurricane Sandy is designated as a qualified disaster for federal tax purposes,  qualified disaster relief payments made to individuals by their employer or any person can be excluded from those individuals’ taxable income.

    Qualified disaster relief payments include amounts to cover necessary personal, family, living or funeral expenses that were not covered by insurance. They also include expenses to repair or rehabilitate personal residences or repair or replace the contents to the extent that they were not covered by insurance. Again, these payments would not be included in the individual recipient’s gross income.

    The IRS also announced that the designation of Hurricane Sandy as a qualified disaster means that employer-sponsored private foundations may provide disaster relief to employee-victims in areas affected by the hurricane without affecting their tax-exempt status.  Like all charitable organizations, employer-sponsored private foundations should follow the guidance in Publication 3833, Disaster Relief: Providing Assistance Through Charitable Organizations, in providing assistance to employees or their family members affected by Hurricane Sandy. 

    Related Item: Help for Victims of Hurricane Sandy
  • 30 Oct 2012 12:05 PM | Anonymous

    The Internal Revenue Service is issuing a warning about a new tax scam that uses a website that mimics the IRS e-Services online registration page.

    The actual IRS e-Services page offers web-based products for tax preparers, not the general public. The phony web page looks almost identical to the real one.

    The IRS gets many reports of fake websites like this. Criminals use these sites to lure people into providing personal and financial information that may be used to steal the victim’s money or identity.

    The address of the official IRS website is www.irs.gov. Don’t be misled by sites claiming to be the IRS but ending in .com, .net, .org or other designations instead of .gov.

    If you find a suspicious website that claims to be the IRS, send the site’s URL by email to phishing@irs.gov. Use the subject line, 'Suspicious website'.

    Be aware that the IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels.

    If you get an unsolicited email that appears to be from the IRS, report it by sending it to phishing@irs.gov.

    The IRS has information at www.irs.gov that can help you protect yourself from tax scams of all kinds. Search the site using the term “phishing.”

    Links:


    IRS YouTube Videos:

    IRS Podcasts:

  • 18 Oct 2012 2:26 PM | Anonymous

    WASHINGTON undefined The Internal Revenue Service today announced cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for Tax Year 2013.  In general, many of the pension plan limitations will change for 2013 because the increase in the cost-of-living index met the statutory thresholds that trigger their adjustment.  However, other limitations will remain unchanged because the increase in the index did not meet the statutory thresholds that trigger their adjustment. Highlights include:

    • The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $17,000 to $17,500.
    • The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan remains unchanged at $5,500.
    • The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $59,000 and $69,000, up from $58,000 and $68,000 in 2012.  For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $95,000 to $115,000, up from $92,000 to $112,000.  For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $178,000 and $188,000, up from $173,000 and $183,000.
    • The AGI phase-out range for taxpayers making contributions to a Roth IRA is $178,000 to $188,000 for married couples filing jointly, up from $173,000 to $183,000 in 2012.  For singles and heads of household, the income phase-out range is $112,000 to $127,000, up from $110,000 to $125,000.  For a married individual filing a separate return who is covered by a retirement plan at work, the phase-out range remains $0 to $10,000.
    • The AGI limit for the saver’s credit (also known as the retirement savings contribution credit) for low- and moderate-income workers is $59,000 for married couples filing jointly, up from $57,500 in 2012; $44,250 for heads of household, up from $43,125; and $29,500 for married individuals filing separately and for singles, up from $28,750.

    Below are details on both the unchanged and adjusted limitations.

    Section 415 of the Internal Revenue Code provides for dollar limitations on benefits and contributions under qualified retirement plans.  Section 415(d) requires that the Commissioner annually adjust these limits for cost of living increases.  Other limitations applicable to deferred compensation plans are also affected by these adjustments under Section 415.  Under Section 415(d), the adjustments are to be made pursuant to adjustment procedures which are similar to those used to adjust benefit amounts under Section 215(i)(2)(A) of the Social Security Act.

    The limitations that are adjusted by reference to Section 415(d) generally will change for 2013 because the increase in the cost-of-living index met the statutory thresholds that trigger their adjustment.  For example, the limitation under Section 402(g)(1) on the exclusion for elective deferrals described in Section 402(g)(3) is increased from $17,000 to $17,500 for 2013.  This limitation affects elective deferrals to Section 401(k) plans, Section 403(b) plans, and the Federal Government’s Thrift Savings Plan.

    Effective January 1, 2013, the limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) is increased from $200,000 to $205,000.  For a participant who separated from service before January 1, 2013, the limitation for defined benefit plans under Section 415(b)(1)(B) is computed by multiplying the participant's compensation limitation, as adjusted through 2012, by 1.0170.

    The limitation for defined contribution plans under Section 415(c)(1)(A) is increased in 2013 from $50,000 to $51,000.

    The Code provides that various other dollar amounts are to be adjusted at the same time and in the same manner as the dollar limitation of Section 415(b)(1)(A).  After taking into account the applicable rounding rules, the amounts for 2013 are as follows:

    The limitation under Section 402(g)(1) on the exclusion for elective deferrals described in Section 402(g)(3) is increased from $17,000 to $17,500.

    The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased from $250,000 to $255,000.

    The dollar limitation under Section 416(i)(1)(A)(i) concerning the definition of key employee in a top-heavy plan remains unchanged at $165,000.

    The dollar amount under Section 409(o)(1)(C)(ii) for determining the maximum account balance in an employee stock ownership plan subject to a 5 year distribution period is increased from $1,015,000 to $1,035,000, while the dollar amount used to determine the lengthening of the 5 year distribution period is increased from $200,000 to $205,000.

    The limitation used in the definition of highly compensated employee under Section 414(q)(1)(B) remains unchanged at $115,000.

    The dollar limitation under Section 414(v)(2)(B)(i) for catch-up contributions to an applicable employer plan other than a plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over remains unchanged at $5,500.  The dollar limitation under Section 414(v)(2)(B)(ii) for catch-up contributions to an applicable employer plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over remains unchanged at $2,500.

    The annual compensation limitation under Section 401(a)(17) for eligible participants in certain governmental plans that, under the plan as in effect on July 1, 1993, allowed cost of living adjustments to the compensation limitation under the plan under Section 401(a)(17) to be taken into account, is increased from $375,000 to $380,000.

    The compensation amount under Section 408(k)(2)(C) regarding simplified employee pensions (SEPs) remains unchanged at $550.

    The limitation under Section 408(p)(2)(E) regarding SIMPLE retirement accounts is increased from $11,500 to $12,000.

    The limitation on deferrals under Section 457(e)(15) concerning deferred compensation plans of state and local governments and tax-exempt organizations is increased from $17,000 to $17,500.

    The compensation amount under Section 1.61 21(f)(5)(i) of the Income Tax Regulations concerning the definition of “control employee” for fringe benefit valuation purposes remains unchanged at $100,000.  The compensation amount under Section 1.61 21(f)(5)(iii) remains unchanged at $205,000.

    The Code also provides that several pension-related amounts are to be adjusted using the cost-of-living adjustment under Section 1(f)(3).  After taking the applicable rounding rules into account, the amounts for 2013 are as follows:

    The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for married taxpayers filing a joint return is increased from $34,500 to $35,500; the limitation under Section 25B(b)(1)(B) is increased from $37,500 to $38,500; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D), is increased from $57,500 to $59,000.

    The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for taxpayers filing as head of household is increased from $25,875 to $26,625; the limitation under Section 25B(b)(1)(B) is increased from $28,125 to $28,875; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D), is increased from $43,125 to $44,250.

    The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for all other taxpayers is increased from $17,250 to $17,750; the limitation under Section 25B(b)(1)(B) is increased from $18,750 to $19,250; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D), is increased from $28,750 to $29,500.

    The deductible amount under Section 219(b)(5)(A) for an individual making qualified retirement contributions is increased from $5,000 to $5,500.

    The applicable dollar amount under Section 219(g)(3)(B)(i) for determining the deductible amount of an IRA contribution for taxpayers who are active participants filing a joint return or as a qualifying widow(er) is increased from $92,000 to $95,000.  The applicable dollar amount under Section 219(g)(3)(B)(ii) for all other taxpayers (other than married taxpayers filing separate returns) is increased from $58,000 to $59,000.  The applicable dollar amount under Section 219(g)(7)(A) for a taxpayer who is not an active participant but whose spouse is an active participant is increased from $173,000 to $178,000.

    The adjusted gross income limitation under Section 408A(c)(3)(B)(ii)(I) for determining the maximum Roth IRA contribution for married taxpayers filing a joint return or for taxpayers filing as a qualifying widow(er) is increased from $173,000 to $178,000.  The adjusted gross income limitation under Section 408A(c)(3)(B)(ii)(II) for all other taxpayers (other than married taxpayers filing separate returns) is increased from $110,000 to $112,000.

    The dollar amount under Section 430(c)(7)(D)(i)(II) used to determine excess employee compensation with respect to a single-employer defined benefit pension plan for which the special election under Section 430(c)(2)(D) has been made is increased from $1,039,000 to $1,066,000. 

  • 18 Oct 2012 2:25 PM | Anonymous

    WASHINGTON undefined For tax year 2013, the Internal Revenue Service announced today annual inflation adjustments for more than two dozen tax provisions.

    • The annual exclusion for gifts rises to $14,000 for 2013, up from $13,000 for 2012.
    • The amount used to reduce the net unearned income reported on a child’s tax return subject to the “kiddie tax,” is $1,000, up from $950 for 2012.
    • The foreign earned income exclusion rises to $97,600, up from $95,100 in 2012.

    Details on these inflation adjustments and others such as the low-income housing credit, the dollar limits for high-deductible health plans and other amounts can be found in Revenue Procedure 2012-41, which will be published in Internal Revenue Bulletin 2012-45 on Nov. 5, 2012.

  • 15 Oct 2012 10:34 AM | Anonymous

    Attention: Software Developers, Return Transmitters and Authorized IRS e-file Providers/EROs

    The draft 94x XML 2013 Schema (version 3.0) is now posted to the irs.gov website. Testing can be done with the new Schemas starting on October 17, 2012. We strongly encourage that you test for all new changes. We have also provided the 94x XML Sample Schemas as a guide for you on irs.gov website.      

    The Matrix Chart has been updated and is now available on the irs.gov website.

     For more information see Publication 3823. 

  • 15 Oct 2012 10:33 AM | Anonymous

    Attention: All Modernized e-File (MeF) Business and Individual (BMF & IMF) Transmitters, Software Developers and States

    The Modernized e-File system will be unavailable from approximately 1:00 am until 9:00 am, Eastern on Sunday, Oct 21, 2012 while the IRS performs scheduled maintenance.

    We apologize for any inconvenience caused by this extended timeframe. Thank you in advance for refraining from accessing the MeF Production or Assurance Testing Systems during this period.

    Please check the MeF Status Page  for updates.
  • 12 Oct 2012 3:59 PM | Anonymous

    Doug Shulman, the 47th commissioner of the Internal Revenue Service, has decided to step down on Nov. 9, the last day of his term.

  • 09 Oct 2012 10:11 AM | Anonymous

    Any tax preparer who still needs to take the RTRP test to become a registered tax return preparer may be interested in this upcoming webinar. Participants will receive the latest information from the Return Preparer Office about the new Registered Tax Return Preparer test including why you should schedule your appointment today. This is a live webinar with a question and answer component and participants may earn CE credit. Please view this announcement for full details.

  • 04 Oct 2012 9:54 AM | Anonymous
    If you adopted a child last year and requested an extension of time to file your 2011 taxes, you may be able to
    claim the expanded adoption credit on your federal tax return for qualifying expenses paid to adopt an eligible
    child.

    Qualified adoption expenses are reasonable and necessary expenses directly related to the legal adoption of
    the child and may include adoption fees, court costs, attorney fees and travel expenses.

    The adoption credit for tax year 2011 can be as much as $13,360 per eligible child. If you adopt a U.S. child
    whom a state, county or the District of Columbia has determined has special needs, you may be entitled to the
    full credit regardless of whether you paid any actual qualified adoption expenses.

    Here are some things to remember if you still need to file your 2011 tax return or amend your 2011 tax return:

    • You can use IRS Free File or other software to prepare your return, but you must print and mail the tax
    return to the IRS, along with all required documentation.
    • Required documents may include a final adoption decree, placement agreement from an authorized
    agency, court documents and/or the state’s determination for special needs children.
    • The credit for qualified adoption expenses is subject to income limitations, and may be reduced or
    eliminated depending on your income.
    • You can get the credit as a tax refund even after your tax liability has been reduced to zero.
    • To claim the credit, you must file a paper tax return and Form 8839, Qualified Adoption Expenses, and
    attach all supporting documents to your return.
    • If you filed your tax return for 2011 and did not claim an allowable adoption credit, you can file an
    amended return to get a refund. Use Form 1040X, Amended U.S. Individual Income Tax Return, along
    with Form 8839 and the required documents to claim the credit.

    It is necessary for the IRS to review all documents submitted. Normally, it takes six to eight weeks to process a
    return claiming the adoption credit.
  • 04 Oct 2012 9:42 AM | Anonymous
    It’s a common misconception that unless you receive a Form W-2G, Certain Gambling Winnings, at a casino,
    your gambling winnings don’t have to be reported on your federal tax return. However gambling winnings, like
    any other income not specifically exempted from law, are taxable and must be reported on your federal tax
    return, regardless of whether or not documentation was provided at the time the money was earned (or won).
    Fortunately, if you itemize your deductions, there are ways to offset your gambling winnings with any losses
    that you may have incurred up to the amount of your winnings. Below are five tips that every taxpayer who
    gambles should know:

    1. Gambling income includes, but is not limited to, winnings from lotteries, raffles, horse races, and
    casinos. It includes cash winnings and the fair market value of prizes such as cars and trips.

    2. If you receive a certain amount of gambling winnings or if you have any winnings that are subject to
    federal tax withholding, the payer is required to issue you a Form W-2G. The payer must give you this
    form if you receive:

    • $1,200 or more in gambling winnings from bingo or slot machines;
    • $1,500 or more in proceeds (the amount of winnings minus the amount of the wager) from keno;
    • More than $5,000 in winnings (reduced by the wager or buy-in) from a poker tournament;
    • $600 or more in gambling winnings (except winnings from bingo, keno, slot machines, and poker
    tournaments) and the payout is at least 300 times the amount of the wager; or
    • Any other gambling winnings subject to federal income tax withholding.

    3. Generally, you report all gambling winnings on the Other income line (line 21) of Form 1040, U.S.
    Federal Income Tax Return.

    4. You can claim your gambling losses up to the amount of your winnings on Form 1040, Schedule A,
    Itemized Deductions, under Other Miscellaneous Deductions. You must report the full amount of your
    winnings as income and claim your allowable losses separately. You cannot deduct gambling losses
    that are more than your winnings. You cannot reduce your gambling winnings by your gambling losses
    and report the difference.

    5. Keep accurate records. If you are going to deduct gambling losses, you must have receipts, tickets,
    statements, and documentation such as a diary or similar record of your losses and winnings. Your
    records should show your winnings separately from your losses. Refer to IRS Publication 529,
    Miscellaneous Deductions, for more details about the type of information you should write in your diary
    and what kinds of proof you should retain in your records.

    For more information on gambling income and losses, see IRS Publication 529, Miscellaneous Deductions or
    Publication 525, Taxable and Nontaxable Income, both available at IRS.gov or by calling 800-TAX-FORM
    (800-829-3676).
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