Free tax guide focuses on tax benefits for members of the military

There are many tax benefits for members of the military and their families, including disabled veterans.

IRS Publication 3, Armed Forces’ Tax Guide, is a free booklet packed with valuable information and tips designed to help service members and their families take advantage of all tax benefits allowed by law. Information available in this publication includes:

• Certain combat pay can be excluded from income
• Armed forces reservist expenses whose reserve-related duties take them more than 100 miles from home can deduct their unreimbursed travel expenses as an adjustment to income rather than as a miscellaneous itemized deduction.
• Members of the armed forces on active duty who move because of a permanent change of station are not required to meet the time and distance tests to deduct eligible unreimbursed moving expenses.
• Low- and moderate-income service members often qualify for family-friendly tax benefits, such as the Earned Income Tax Credit. A special computation method is available for those who receive combat pay.
• Low- and moderate-income service members who contribute to an IRA or 401(k)-type retirement plan, such as the federal government’s Thrift Savings Plan, can often claim the Saver's Credit, also known as the Retirement Savings Contributions Credit, on Form 8880, Credit for Qualified Retirement Savings Contributions.
• Service members stationed outside the U.S. and Puerto Rico qualify for a two- month extension to file a federal income tax return. An extension to file does not mean you have an extension of time to pay any tax due.
• The deadline for filing tax returns, paying taxes, filing claims for refund, and taking other actions with the IRS is extended for those serving in a combat zone.
• Service members may qualify to delay payment of income tax that becomes due before or during their period of service. See Publication 3 for details including how to request relief.

Service members who prepare their own return qualify to electronically file their federal return for free using IRS Free File. In addition, the IRS partners with the military through the Volunteer Income Tax Assistance program to provide free tax preparation to service members and their families at bases in the United States and around the world.

Special tax considerations for veterans with disabilities

Disability compensation and pension payments for disabilities paid either to veterans or their families by the Department of Veterans Affairs are not taxable. In addition, disabled veterans may be eligible to claim a federal tax refund based on:

• an increase in the veteran's percentage of disability from the Department of Veterans Affairs (which may include a retroactive determination) or
• the combat-disabled veteran applying for, and being granted, Combat-Related Special Compensation, after an award for Concurrent Retirement and Disability.

To do so, the disabled veteran must file an amended return, Form 1040X, Amended U.S. Individual Income Tax Return, to correct a previously filed tax return. See Publication 525, Taxable and Nontaxable Income, for more information.

Safeguard your tax records against natural disasters

Natural disasters can come without warning, leaving you with little time to prepare, so it’s important to keep your tax records safe. By taking a few simple steps, you can safeguard your records against natural disasters.

Create an additional set of electronic records

You should keep a duplicate set of records including bank statements, tax returns, identifications and insurance policies in a safe place, such as a waterproof container, and away from the original set.

Keeping an additional set of records is easier now that many financial institutions provide statements and documents electronically, and much financial information is available on the Internet. Even if the original records are only provided on paper, these can be scanned into an electronic format. This way, you can save them to the cloud, download them to a storage device, such as an external hard drive or USB flash drive, or burn them to a CD or DVD.

Document valuables

Another step you can take to prepare for a disaster is photograph or videotape the contents of your home, especially items of higher value. The IRS Publication 584, Casualty, Disaster and Theft Loss Workbook, can help you compile a room-by-room list of belongings.

A photographic record can help prove the fair market value of items for insurance and casualty loss claims. Ideally, photos should be stored with a friend or family member who lives outside the area.

Update emergency plans

You should review your emergency plans annually. Personal and business situations change over time as do preparedness needs. If you own a business, be sure to update your plan when you hire new employees or make changes to your business functions, then share the update with your employees. Make your plans ahead of time and practice them.

IRS ready to help

If disaster strikes, call 1-866-562-5227 to speak with an IRS specialist trained to handle disaster-related issues.

Back copies of previously-filed tax returns and all attachments, including Forms W-2, can be requested by filing Form 4506, Request for Copy of Tax Return. Alternatively, transcripts showing most line items on these returns can be ordered by calling 1-800-908-9946 or by using Form 4506T-EZ, Short Form Request for Individual Tax Return Transcript or Form 4506-T, Request for Transcript of Tax Return.

The Internal Revenue Service has announced that the filing deadline for individuals filing their returns next year will be April 18 for most taxpayers. 
  
The IRS explained in Revenue Ruling 2015-13 that, in most years, the filing deadline is April 15. In some years, the District of Columbia's observation of Emancipation Day can affect the nation's filing deadline (District of Columbia holidays impact tax deadlines in the same way that federal holidays do). Because Emancipation Day falls onSaturday, April 16, in 2016 it will be observed on Friday, April 15, which pushes the tax filing deadline to the next business day – Monday, April 18, 2016. Although most individual taxpayers will have until April 18, 2016 to file and pay their taxes, Patriots' Day will be observed next year on Monday, April 18 in Maine and Massachusetts. This means individual taxpayers in Maine and Massachusetts will have until April 19, 2016 to file and pay their taxes. 
  
Revenue Ruling 2015-13 will be published in Internal Revenue Bulletin 2015-22 on June 1, 2015. 

The IRS announced May 21 it is refunding the fees that tax return preparers paid to take the RTRP competency test. 
  
Letters will be mailed to refund recipients on May 28 and checks will be mailed June 2, the IRS said. Preparers should allow until Aug. 2, 2015, to receive the refunds, the agency said in answers to Frequently Asked Questions, released with the statement. 
  
Return preparers took the test between November 2011 and January 2013, and paid a fee of $116. About 89,000 tests were paid for and taken, the IRS said, with some preparers taking the test more than once. 
  
The exam fee refunds are being made because the U.S. Court of Appeals for the District of Columbia decided in February 2014 in Loving v. IRS that the IRS lacked the statutory authority to require testing and continuing education.

WASHINGTON – The Internal Revenue Service today announced that interest rates will remain the same for the calendar quarter beginning April 1, 2015.  The rates will be: 

• three (3) percent for overpayments [two (2) percent in the case of a corporation];
• one-half (0.5) percent for the portion of a corporate overpayment exceeding $10,000
• three (3) percent for underpayments; and
• five (5) percent for large corporate underpayments.

Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis.  For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points. 

Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.

The interest rates announced today are computed from the federal short-term rate determined during January 2015 to take effect Feb. 1, 2015, based on daily compounding.

Revenue Ruling 2015-05 announcing the rates of interest is attached and will appear in Internal Revenue Bulletin 2015-13, dated March 30, 2015.

AccountingToday.com 

Approximately 800,000 taxpayers who received health care coverage through the federal insurance marketplace Healthcare.gov were sent the wrong information on their Form 1095-A and are being urged to wait to file their taxes until the first week of March when they receive the correct information from the federal government.

“About 20 percent of the tax filers who had Federally-facilitated Marketplace coverage in 2014 and used tax credits to lower their premium cost —about 800,000 (< 1% of total tax filers) —will soon receive an updated Form 1095-A because the original version they were issued listed an incorrect benchmark plan premium amount,” said a blog post on the Web site of the Centers for Medicare and Medicaid Services. “Based upon preliminary estimates, we understand that approximately 90-95% of these tax filers haven’t filed their tax return yet. We are advising them to wait until the first week of March when they receive their new form or go online for correct information before filing. For those who have filed their taxes—approximately 50,000 (< 0.05% of total tax filers) —the Treasury Department will provide additional information soon.”

Read the full article here. 

If your client receives Social Security benefits but did not receive or misplaced either form SSA-1099 or SSA-1042S, he or she may now view, print or replace the form online by creating a my Social Security account.

This filing season, for the first time, a client who enrolled in health care coverage through the federal marketplace or a state marketplace will receive one or more Forms 1095-A. Enter the information from Form 1095-A on Form 8962 to claim the premium tax credit or to reconcile advance payments of the premium tax credit on your client’s tax return. 

WASHINGTON —The Internal Revenue Service today made it easier for small business owners to comply with the final tangible property regulations.

Requested by many small businesses and tax professionals, the simplified procedure is available beginning with the 2014 return taxpayers are filling out this tax season. The new procedure allows small businesses to change a method of accounting under the final tangible property regulations on a prospective basis for the first taxable year beginning on or after Jan. 1, 2014.

Also, the IRS is waiving the requirement to complete and file a Form 3115 for small business taxpayers that choose to use this simplified procedure for 2014.

“We are pleased to be able to offer this relief to small business owners and their tax preparers in time for them to take advantage of it on their 2014 return,” said IRS Commissioner John Koskinen. “We carefully reviewed the comments we received and especially appreciate the valuable feedback provided by the professional tax community on this issue.”

The new simplified procedure is generally available to small businesses, including sole proprietors, with assets totaling less than $10 million or average annual gross receipts totaling $10 million or less. Details are in Revenue Procedure 2015-20, posted today on IRS.gov.

The revenue procedure also requests comment on whether the $500 safe-harbor threshold should be raised for businesses that choose to deduct, rather than capitalize, certain capital expenses.

The January 2015 revision of Offer in Compromise Form 656 Booklet is now available for download on IRS.gov. The booklet contains necessary forms and instructions for submitting an Offer in Compromise. Use of earlier versions will result in delayed processing of Offer applications.