A planned power outage around the Labor Day weekend will affect a number of IRS systems and limit the availability of several services between Thursday, Aug. 30 and Tuesday, Sept. 4.

Today, the Internal Revenue Service issued Revenue Procedure 2012-35, IRB 2012-37, revising the scope of the IRS letter-forwarding program. Revenue Procedure 2012-35 provides that the IRS will no longer forward letters on behalf of plan sponsors or administrators of qualified retirement plans or qualified termination administrators (QTAs) of abandoned plans under the Department of Labor’s Abandoned Plan Program who are attempting to locate missing plan participants and beneficiaries. 

Since the IRS letter-forwarding program began, numerous alternative missing person locator resources, including the Internet, have become available to assist a plan sponsor or plan administrator in locating a missing participant or beneficiary owed a retirement benefit, enabling the program change.  

In particular, this change affects retirement plan sponsors and administrators who are searching for plan participants or beneficiaries in order to correct failures that require payment of additional benefits in accordance with the Employee Plans Compliance Resolution System (EPCRS), as described in Revenue Procedure 2008-50, 2008-35 IRB 464. Accordingly, in future guidance on EPCRS, the IRS intends to provide an extended correction period for plan sponsors and administrators affected by this change in the letter-forwarding program.  

Revenue Procedure 2012-35 applies to requests postmarked on or after August 31, 2012. Requests that are postmarked prior to that date will continue to be processed pursuant to Revenue Procedure 94-22, 1994-1 CB 608.

Whether you’re a recent high school graduate going to college for the first time or a returning student, it will soon be time to head to campus, and payment deadlines for tuition and other fees are not far behind.

The IRS offers some tips about education tax benefits that can help offset some college costs for students and parents. Typically, these benefits apply to you, your spouse or a dependent for whom you claim an exemption on your tax return. 

• American Opportunity Credit. This credit, originally created under the American Recovery and Reinvestment Act, is still available for 2012. The credit can be up to $2,500 per eligible student and is available for the first four years of post secondary education at an eligible institution. Forty percent of this credit is refundable, which means that you may be able to receive up to $1,000, even if you don't owe any taxes. Qualified expenses include tuition and fees, course related books, supplies and equipment.
• Lifetime Learning Credit. In 2012, you may be able to claim a Lifetime Learning Credit of up to $2,000 for qualified education expenses paid for a student enrolled in eligible educational institutions. There is no limit on the number of years you can claim the Lifetime Learning Credit for an eligible student.

You can claim only one type of education credit per student in the same tax year. However, if you pay college expenses for more than one student in the same year, you can choose to take credits on a per-student, per-year basis. For example, you can claim the American Opportunity Credit for one student and the Lifetime Learning Credit for the other student.

• Student loan interest deduction. Generally, personal interest you pay, other than certain mortgage interest, is not deductible. However, you may be able to deduct interest paid on a qualified student loan during the year. It can reduce the amount of your income subject to tax by up to $2,500, even if you don’t itemize deductions.

These education benefits are subject to income limitations, and may be reduced or eliminated depending on your income. For more information, visit the Tax Benefits for Education Information Center at IRS.gov or check out Publication 970, Tax Benefits for Education, which can be downloaded at IRS.gov or ordered by calling 800-TAX-FORM (800-829-3676).

Links:

• American Opportunity Tax Credit
• Tax Benefits for Education: Information Center
• Publication 970, Tax Benefits for Education
• The American Recovery and Reinvestment Act of 2009: Information Center
• Form 8863, Education Credits (American Opportunity and Lifetime Learning Credits)

YouTube Videos:

• Education Tax Credits and Deductions - English | Spanish | ASL

Podcast:

• Education Tax Credits and Deductions - English

The Internal Revenue Service reminds truckers and other owners of heavy highway vehicles that in most cases, their next federal highway use tax return is due on Aug. 31, 2012.

The Internal Revenue Service reminds taxpayers that it's not too late to adjust their 2012 tax withholding to avoid big tax refunds or tax bills when they file their tax return next year.

Taxpayers should act soon to adjust their tax withholding to bring the taxes they must pay closer to what they actually owe and put more money in their pocket right now.

Most people have taxes withheld from each paycheck or pay taxes on a quarterly basis through estimated tax payments. Each year millions of American workers have far more taxes withheld from their pay than is required. Many people anxiously wait for their tax refunds to make major purchases or pay their financial obligations. The IRS encourages taxpayers not to tie major financial decisions to the receipt of their tax refund - especially if they need their tax refund to arrive by a certain date.

Here is some information to help bring the taxes you pay during the year closer to what you will actually owe when you file your tax return.

Employees 

• New Job. When you start a new job your employer will ask you to complete Form    W-4, Employee's Withholding Allowance Certificate. Your employer will use this form to figure the amount of federal income tax to withhold from your paychecks. Be sure to complete the Form W-4 accurately.
• Life Event. You may want to change your Form W-4 when certain life events happen to you during the year. Examples of events in your life that can change the amount of taxes you owe include a change in your marital status, the birth of a child, getting or losing a job, and purchasing a home. Keep your Form W-4 up-to-date.

You typically can submit a new Form W–4 at anytime you wish to change the number of your withholding allowances. However, if your life event results in the need to decrease your withholding allowances or changes your marital status from married to single, you must give your employer a new Form W-4 within 10 days of that life event.

Self-Employed

• Form 1040-ES. If you are self-employed and expect to owe a thousand dollars or more in taxes for the year, then you normally must make estimated tax payments to pay your income tax, Social Security and Medicare taxes. You can use the worksheet in Form 1040-ES, Estimated Tax for Individuals, to find out if you are required to pay estimated tax on a quarterly basis. Remember to make estimated payments to avoid owing taxes at tax time.

Publication 505, Tax Withholding and Estimated Tax, has information for employees and self-employed individuals, and also explains the rules in more detail. The forms and publication are available at IRS.gov or by calling 1-800-TAX-FORM (1-800-829-3676). 

Links:

• Form W-4, Employee's Withholding Allowance Certificate
• Form 1040-ES, Estimated Tax for Individuals
• Form W-4P, Withholding Certificate for Pension or Annuity Payments
• Publication 505, Tax Withholding and Estimated Tax

YouTube Videos:

• Estimated Tax Payments - English | Spanish | ASL 

Learn how to correct common mistakes in 401(k) plans. Avaneesh Bhagat, Voluntary Compliance group manager, and Sherri Morris, Voluntary Compliance tax law specialist, will present this phone forum. Please email any specific issue you would like the speakers to address to ep.phoneforum@irs.gov by August 31, 2012.

Registration Link - after registering, you will receive forum access instructions in an email.

Date: September 7, 2012

Time:

Eastern	Central	Mountain	Pacific
2:00 p.m.	1:00 p.m.	12:00 p.m.	11:00 a.m.

Continuing Professional Education Credits:

• Enrolled Agents and Enrolled Retirement Plan Agents may earn CPE credit for attending the entire phone forum. It ‘s also intended to meet the CPE requirements for Enrolled Actuaries, but the final decision rests with the Joint Board for the Enrollment of Actuaries. Other professional groups should consult their licensing agencies for acceptability of credit.
• You must register individually and use your own assigned User ID to receive CPE credit.
• You must use an individual phone line and attend the entire forum to receive CPE credit.
• If you meet the attendance requirement, we’ll email you a Certificate of Completion about a week after the forum.

If you have any questions, please contact us at ep.phoneforum@irs.gov.

Individuals who are not real estate professionals are generally subject to passive activity loss limitations even if they materially participate in the rental.

Real estate professionals report rental real estate activities in which they materially participated as nonpassive. But, real estate professionals who do not materially participate in the rental activity are generally subject to passive activity loss limitations.

Publication 925, Passive Activity and At-Risk Rules, has more information on who qualifies as a real estate professional and passive activity limits.

Related link:

• Passive Activity Loss Audit Technique Guide

Beginning Oct. 1, all IRS e-file provider applications must be submitted online. 

The online application process takes 4-6 weeks to complete.

Related link:

• IRS e-file Application - Answers to Frequently Asked Questions

IRS is replacing and upgrading a computing center electrical plant over the Labor Day weekend.

e-Services will be unavailable beginning approximately noon ET on Friday, Aug. 31 until approximately noon ET on Tuesday, Sept. 4

MeF will be unavailable beginning approximately 3:00 p.m. ET on Friday, Aug. 31 until approximately noon ET on Tuesday, Sept. 4.

Contributing money and property are ways that you can support a charitable cause, but in order for your donation to be tax-deductible, certain conditions must be met. Read on for six things the IRS wants taxpayers to know about deductibility of donations.

1. Tax-exempt status. Contributions must be made to qualified charitable organizations to be deductible. Ask the charity about its tax-exempt status, or look for it on IRS.gov in the Exempt Organizations Select Check, an online search tool that allows users to select an exempt organization and check certain information about its federal tax status as well as information about tax forms an organization may file that are available for public review. This search tool can also be used to find which charities have had their exempt status automatically revoked.

2. Itemizing. Charitable contributions are deductible only if you itemize deductions using Form 1040, Schedule A.

3. Fair market value. Cash contributions and the fair market value of most property you donate to a qualified organization are usually deductible. Special rules apply to several types of donated property, including cars, boats, clothing and household items. If you receive something in return for your donation, such as merchandise, goods, services, admission to a charity banquet or sporting event only the amount exceeding the fair market value of the benefit received can be deducted.

4. Records to keep. You should keep good records of any donation you make, regardless of the amount. All cash contributions must be documented to be deductible – even donations of small amounts. A cancelled check, bank or credit card statement, payroll deduction record or a written statement from the charity that includes the charity’s name, contribution date and amount usually fulfill this record-keeping requirement.

5. Large donations. All contributions valued at $250 and above require additional documentation to be deductible. For these, you should receive a written statement from the charity acknowledging your donation. The statement should specify the amount of cash donated and/or provide a description and fair market value of the property donated. It should also say whether the charity provided any goods or services in exchange for your donation. If you donate non-cash items valued at $500 or more, you must also complete a Form 8283, Noncash Charitable Contributions, and attach the form to your return. If you claim a contribution of noncash property worth more than $5,000, you typically must obtain a property appraisal and attach it to your return along with Form 8283.

6. Timing. If you pledge to donate to a qualified charity, keep in mind that for most taxpayers contributions are only deductible in the tax year they are actually made. For example, if you pledged $500 in September but paid the charity just $200 by Dec. 31 of that same year, only $200 of the pledged amount may qualify as tax-deductible for that tax year. End-of-year donations by check or credit card usually qualify as tax-deductible for that tax year, even though you may not pay the credit card bill or have your bank account debited until after Dec. 31.

Bottom line: your support of a qualified charitable organization may provide you with a money-saving tax deduction, but conditions do apply. For more information, see IRS Publication 526, Charitable Contributions, and for information on determining value, refer to Publication 561, Determining the Value of Donated Property. These publications are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Links:

• Exempt Organizations Select Check
• Schedule A (Form 1040), Itemized Deductions
• Form 8283, Noncash Charitable Contributions
• Publication 526, Charitable Contributions
• Publication 561, Determining the Value of Donated Property
• Tax Topic 506 - Charitable Contributions

YouTube Videos:

• Charitable Contributions - English | Spanish | ASL
• Fair market Value of Charitable Donations - English | Spanish | ASL