College-bound students and their parents sometimes face last minute requests to complete or provide additional information for financial aid applications. 

The Internal Revenue wants to help by minimizing time spent on the completion of the Department of Education’s Free Application for Federal Student Aid (FAFSA). By using the IRS Data Retrieval Tool, applicants can automatically transfer required tax data from their federal tax returns directly to their FAFSA form.

This IRS tool is a free, easy and secure way to access and transfer tax return information onto the FAFSA form. Using the tool saves time, improves accuracy and may reduce the likelihood of the school’s financial aid office requesting that you verify the information.

Here are some tips on using the IRS DRT:

• Eligibility Criteria  To use the IRS DRT to complete their 2012-2013 FAFSA form, taxpayers must:  

1. have filed a federal 2011 tax return,
   
2. possess a valid Social Security Number,
3. have a Federal Student Aid PIN (individuals who don’t have a PIN will be given the option to apply for one through the FAFSA application process), and
4. have not changed marital status since Dec. 31, 2011.

• Exceptions  If any of the following conditions apply to the student or parents, the IRS Data Retrieval Tool cannot be used for the 2012 FAFSA application:

1. an amended tax return was filed for 2011,
2. no federal tax return was filed for 2011,
3. the federal tax filing status on the 2011 return is married filing separately or
4. a Puerto Rican or other foreign tax return has been filed.

Applicants who cannot use the IRS DRT to meet college requests for verification, may need to obtain an official transcript from the IRS. Transcripts are not available until the IRS has processed the related tax return. To order tax return or tax account transcripts, visit IRS.gov and select "Order a Transcript" or call the toll-free Transcript line at 1-800-908-9946.

In addition, the IRS offers money-saving information for college students and their parents about tax credits and deductions for qualifying tuition, materials and fees.

Links:

• Student's Page - College Bound
• Order a Transcript
• IRS Tax Benefits for Education: Information Center 
• IRS Publication 970, Tax Benefits for Education

The IRS is sending out warning letters to those paid preparers who did not submit Form 8867 with EITC returns.  Penalties will be assessed for 2012 returns. The online EITC Due Diligence training module can help avoid penalties.

June 2012

Taxpayers should be on the lookout for a new, email-based phishing scam now circulating that targets Department of Defense military members, retirees and civilian employees. The email appears to come from Defense Finance and Accounting Services and displays a .mil email address. The email states that those receiving disability compensation from the Department of Veterans Affairs (VA) may be able to obtain additional funds from the IRS. Email recipients are then asked to send various VA and IRS documents containing their personal and financial information, such as copies of VA award letters or their income tax returns, to an address in Florida.

The information on these documents is then used by the scammers to commit identity theft. Typically, identity thieves use someone’s personal data to empty the victim’s financial accounts, run up charges on the victim’s existing credit cards or apply for new loans, credit cards, services or benefits in the victim’s name.

For more information on phishing scams, please see Suspicious e-Mails and Identity Theft.

Did you know that you can take the Registered Tax Return Preparer Test at the Las Vegas IRS Nationwide Tax Forum?  We also have test centers within 20 miles of all Tax Forum locations. Register for a Forum and then reserve your test slot. Stand out among your peers by becoming a Registered Tax Return Preparer this summer.

Special Edition Tax Tip 2012-11, June 12, 2012

Employers that hired unemployed veterans during late 2011 and early 2012 had an expanded period to request the required certification for claiming the expanded Work Opportunity Tax Credit (WOTC). That expanded period ends on Tuesday, June 19.

The IRS is reminding employers that for eligible veterans hired on or after Nov. 22, 2011 and before May 22, 2012, they have until June 19 to file certification forms with state workforce agencies.

Here are some important points to know about the credit and upcoming deadline:

• New rules provide for an expanded WOTC to employers that hire eligible unemployed veterans.
  
  
• The credit can be as high as $9,600 per veteran for for-profit employers or up to $6,240 per veteran for tax-exempt organizations.
  
  
• The amount of the credit depends on a number of factors, including the length of the veteran’s unemployment before hiring, the hours the veteran works and the amount of first-year wages paid.
  
  
• Employers hiring veterans with service-related disabilities may be eligible for the maximum credit.
  
  
• Normally, an eligible employer must file Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit, with their state workforce agency within 28 days after an eligible worker starts work. But under a special rule employers have until June 19, 2012, to file this form for veterans hired on or after Nov. 22, 2011, and before May 22, 2012.
  
  
• The 28-day rule for timely filing applies for eligible veterans hired on or after May 22, 2012, and before Jan. 1, 2013.
  
  
• Form 8850 can be faxed or electronically transmitted to the state workforce agency, as long as the agency is able to receive the certification forms that way.
  
  
• For-profit employers claim the credit on their income tax return using Form 5884, Work Opportunity Credit, and Form 3800, General Business Credit.
  
  
• Tax-exempt organizations follow a separate claim procedure using Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans.

More details about the expanded WOTC and the forms are available on IRS.gov.

IRS YouTube Video: New Tax Preparer Test Explained

WASHINGTON - The Internal Revenue Service today marked the third anniversary of its groundbreaking return preparer initiative and urged those paid tax return preparers required to pass a new competency test to take the test as soon as possible.

Three years ago the IRS took its first step toward ensuring standards for competency, continuing education and ethics would apply to all paid tax return preparers. Major facets of the initiative are now in place.

On June 4, 2009, IRS Commissioner Doug Shulman launched a six-month review focusing on the competency and conduct of paid tax return preparers. The review resulted from a recognition that paid tax return preparers were an important element in the integrity of the nation’s tax system.  The review included a series of public hearings with the tax preparation community, consumer advocates, oversight groups and taxpayers.

Six months later, the Return Preparer Review laid out a series of recommendations to extend oversight to certain areas of the preparer industry to enhance tax compliance and service to taxpayers.

Among the initiative highlights:

Mandatory registration and use of a Preparer Tax Identification Number (PTIN): Anyone who is paid to prepare, or help prepare, all or substantially all of a federal tax return now has to register with the IRS and obtain a PTIN, as do all enrolled agents. The PTIN is valid for a calendar year and must be renewed annually. Almost 850,000 preparers have registered since the requirement began.

Competency Test: In November 2011, a 120-question basic competency test was launched. Certain preparers are required to take the test by Dec. 31, 2013, to stay in business. The IRS urges an estimated 340,000 preparers required to take the test to do so as soon as possible to give them selves more time if they have to retake the test and to avoid a potential flood of last-minute test takers. Certified Public Accountants, Enrolled Agents and attorneys are exempt from the test because they already have other testing requirements as part of their credentials. Certain non-signing preparers supervised by CPAs, EAs or attorneys are exempt, as are non-1040 preparers.

Continuing Education (CE): The roughly 340,000 preparers who have a testing requirement also have a new requirement to complete 15 hours of continuing education courses each year. The CE credits must include 10 hours in federal tax law, three hours in federal tax law changes and two hours in ethics. This requirement became effective January 2012 and it applies even if the preparer has not yet taken the test. There are now hundreds of outlets offering IRS-approved CE courses. More details are available at www.irs.gov/taxpros/ce.

Ethics and Tax Compliance: Ethical requirements that previously applied only to CPAs, EAs and attorneys now apply to all paid return preparers. All paid preparers also will undergo a tax compliance check and are subject to the standards for practice outlined in Treasury Department Circular 230.

Registered Tax Return Preparer: Preparers who pass the competency test and tax compliance check are given a new credential: Registered Tax Return Preparer. To date, over 4,800 people have become Registered Tax Return Preparers.  Beginning in 2014, only Registered Tax Return Preparers, Enrolled Agents, Certified Public Accountants, and attorneys will be authorized to prepare individual income tax returns for compensation.

Public Database: The IRS also will create a publicly searchable database that will allow taxpayers to see if their tax preparers have met IRS standards or to find a tax preparer in their zip code area. The IRS will have a public education campaign to inform taxpayers to use only CPAs, EAs, attorneys or Registered Tax Return Preparers if they pay to have their taxes prepared.

The database will also show any credentials held by the preparer, including the new RTRP credential, as well as those who are EAs, CPAs and attorneys.

The RTRP competency test is available at more than 260 vendor testing centers nationwide. Preparers can determine if they have a test requirement by going to their online PTIN Account at www.irs.gov/ptin. Preparers also can set a test date, time and location through their online PTIN Account.