A tax credit is an amount taxpayers claim on their tax return generally to reduce their income tax. Eligible taxpayers can use them to potentially reduce their tax bill and increase their refund.

Refundable vs. nonrefundable tax credits

Some tax credits are refundable. If a taxpayer's tax bill is less than the amount of a refundable credit, they can get the difference back in their refund. Some taxpayers who aren't required to file may still want to do so to claim refundable tax credits. Not all tax credits are refundable, however. For nonrefundable tax credits, once a taxpayer's liability is zero, the taxpayer won't get any leftover amount back as a refund.

There are a wide range of tax credits, and the amount and types available can vary by tax year. Taxpayers should carefully review current tax credits when preparing their federal tax return.

Earned Income Tax Credit

One refundable tax credit for moderate- and low-income taxpayers is the Earned Income Tax Credit (EITC). The IRS estimates four out of five eligible workers claim the EITC, which means millions of taxpayers are putting EITC dollars to work for them. Unfortunately, there are millions of workers who qualify but don't claim the EITC - missing out on thousands of dollars every year. This includes workers who are:

• Grandparents raising their grandchildren.
• Native Americans.
• Veterans.
• Self-employed.
• Without a qualifying child.
• Recently divorced, unemployed or experienced other changes to their marital, financial or parental status.
• Below the filing requirement with earnings.
• Not proficient in English.
• Living in rural areas.
• Receiving certain disability pensions or have children with disabilities.

Taxpayers can find detailed information in Publication 596, Earned Income Credit, or use the EITC Assistant to learn if they're eligible for the tax credit.

Child Tax Credit and Child and Dependent Care Tax Credit

The Child Tax Credit is nonrefundable and reduces the taxpayer's tax liability. To qualify, the child must:

• Be a U.S. citizen, U.S. national, or U.S. resident under age 17.
• Have a Social Security number.
• Be claimed as a dependent on the taxpayer's tax return.

Qualifying children may include foster children or extended family members if they meet other criteria. Dependents not eligible for the Child Tax Credit may qualify a taxpayer for the credit for other dependents.

Taxpayers who paid someone to care for their child, spouse or dependent so they can work, be a full-time student or look for work may be able to reduce their tax by claiming the Child and Dependent Care Credit.

Publication 503, Child and Dependent Care Expenses, has detailed information.

American Opportunity Tax Credit

The American Opportunity Tax Credit is for qualified education expenses paid by or on behalf of an eligible student for the first four years of higher education. It is partially refundable. If the credit reduces the amount of tax a taxpayer owes to zero, they can get a refund of 40% of any remaining amount of the credit, up to $1,000. Taxpayers can get a maximum annual credit of $2,500 per eligible student. The amount of the credit is 100% of the first $2,000 and 25% of the next $2,000 of qualified education expenses a taxpayer paid for each eligible student.

To claim the full credit, a taxpayer's income must be $80,000 or less ($160,000 or less for married filing jointly). The credit phases out entirely for taxpayers with income over $90,000 ($180,000 for joint filers).

Publication 970, Tax Benefits for Education, has detailed information.

Other tax credits

There are many other tax credits for which a taxpayer may be eligible. Taxpayers can review the credits and deductions page on IRS.gov to see which credits they may be able to claim, including:

• Family and Dependent Credits
• Income and Savings Credits
• Homeowner Credits
• Electric Vehicle Credits
• Health Care Credits

Interactive Tax Assistant can help with tax credit questions

The Interactive Tax Assistant is a tool that provides answers to many common tax law questions based on an individual's specific circumstances. User information is anonymous, and the system discards it when the user exits a topic. The assistant uses information to answer taxpayer questions and won't share or store it, nor can it identify individuals. It can help taxpayers with these tax credit-related questions:

• Am I Eligible to Claim an Education Credit?
• Does My Child/Dependent Qualify for the Child Tax Credit or the Credit for Other Dependents? 
• Am I Eligible to Claim the Premium Tax Credit?
• Am I Eligible to Claim the Child and Dependent Care Credit?
• Do I Qualify for the Credit for the Elderly or Disabled?
• Do I Qualify for the Retirement Savings Contributions Credit?
• Am I Eligible to Claim a Credit for Adopting a Child or to Exclude Employer-Provided Adoption Benefits From My Employer?
• Am I Eligible to Claim the Foreign Tax Credit?
• Do I Need to Repay the First-Time Homebuyer Credit?

Taxpayers can find more information about refundable credits and general filing information from:

• IRS Free File
• A trusted tax professional

WASHINGTON – The Internal Revenue Service today encouraged low- to moderate-income individuals and families, especially those who don’t normally file a tax return, to use IRS Free File to prepare their federal tax return and get potentially overlooked refunds and tax credits.

For most taxpayers, the deadline to file their personal federal tax return is Monday, April 15, 2024. Taxpayers living in Maine or Massachusetts have until April 17, 2024. The only way to get a refund is to file a tax return.

IRS Free File allows qualified individuals to file electronically and get a refund by direct deposit – all for free. It's safe, easy and free to file a federal return.

With the April deadline nearing, Free File also provides an easy way to get a tax filing extension. A tax filing extension guarantees the taxpayer six additional months to file – with an extended deadline of Oct. 15, 2024. The IRS Free File program is one of the easiest ways to get an extension.

The program is a public-private partnership between the IRS and several tax preparation software companies who provide their online tax preparation and filing software for free. Through this partnership, tax preparation and filing software providers make their online products available to eligible taxpayers.

Participating partners provide online guided tax software products this year to any taxpayer with an Adjusted Gross Income (AGI) of $79,000 or less in 2023. One partner also offers a product in Spanish.

Those with an AGI over $79,000 can use the IRS's Free File Fillable Forms, the electronic version of IRS paper forms. This product is best for people comfortable using IRS form instructions and publications when preparing their own taxes.

Free File is one of many free options available for taxpayers. The IRS has a special free help page on IRS.gov that provides an easy way of seeing many of the free services and options to help people with their taxes. This includes the Direct File pilot, a free option available to some taxpayers in 12 states who can file directly with the IRS for free.

People who are not required to file should consider filing

Generally, taxpayers with gross income less than $13,850 for single filers, and $27,700 for married filing jointly, are not required to file a federal tax return. However, low-income individuals may mistakenly assume that since they owe no tax, they’re not entitled to a refund. In fact, they may get money back if they file a tax return. For example, if an individual qualifies for the Earned Income Tax Credit (EITC) or if their employer withheld taxes from their paycheck, they may be owed a refund when they file their taxes. 

People should consider taking advantage of IRS Free File to claim potential refunds and credits, especially those who are:

• Low- to moderate-income workers and working families who don’t normally file a return. They may miss out on certain credits for individuals, including the EITC, the Child Tax Credit, the Child & Dependent Credit and the Premium Tax Credit if they don’t file.
• People experiencing homelessness (the address of a friend, relative or trusted service provider, such as a shelter, drop-in day center or transitional housing program, may be used on the tax return).
• Students just entering the workforce or who may have only worked part time.  
• All eligible parents of qualifying children born or welcomed through adoption or foster care in 2023. They may be eligible for the Child Tax Credit.

In order to validate and successfully submit an electronically filed tax return to the IRS, taxpayers will need their AGI from their most recent tax return. If using the same tax preparation software as  last year, this field will auto-populate. However, first-time filers over the age of 16 should enter zero as their AGI.

Don’t have a bank account to direct deposit a refund?

Taxpayers who don't have a bank account can visit the FDIC website for information on banks that let them open an account online and how to choose the right account. Veterans can use the Veterans Benefits Banking Program for access to financial services at participating banks.

Free tax return preparation for qualifying taxpayers

For those not comfortable doing their own tax return, IRS-trained community volunteers offer free tax help through the Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs to qualified individuals at thousands of locations nationwide. The IRS website has a special tool for finding the nearest site. Taxpayers can also call 800-906-9887.

Dear IVES Participants,

On January 2, 2024, the Income Verification Express Services (IVES) program announced a policy update regarding the use of IVES transcripts for mortgage only purposes. In that communication it was stated that all IVES participants must re-apply to the IVES program by May 1, 2024, and declare their sole purpose for using the IVES program is to secure third party tax data needed for a mortgage on residential or commercial real property (real estate). Subsequently, on March 6, 2024, a communication was sent stating this policy decision was being suspended while the impact of these changes are reevaluated.

To support ongoing annual suitability reviews, the requirement for all IVES participants to re-apply to the IVES program remains in effect with the May 1, 2024, deadline.

To remain active, IVES participants must submit an updated Form 13803, Application to Participate in the Income Verification Express Service (IVES) Program, with current business and contact information, and fax the renewal application to 844-251-8254.

When a policy decision is finalized and implemented, the updated Form 13803 and the stated reason(s) for using the IVES program selected on the form will help the IRS determine an IVES participant’s continued eligibility. Failure to provide an updated Form 13803 by May 1, 2024, may result in removal from the IVES program.

 

Thank you,

IRS IVES Team

A deduction reduces the amount of a taxpayer's income that's subject to tax, generally reducing the amount of tax the individual may have to pay. Most taxpayers now qualify for the standard deduction, but there are some important details involving itemized deductions that people should keep in mind.

Standard deduction

The standard deduction is a specific dollar amount that reduces the amount of taxable income. The standard deduction consists of the sum of the basic standard deduction and any additional standard deduction amounts for age and/or blindness.

In general, the IRS adjusts the standard deduction each year for inflation. It varies by filing status, whether the taxpayer is 65 or older and/or blind and whether another taxpayer can claim them as a dependent.

Taxpayers cannot take the standard deduction if they itemize their deductions. Taxpayers can refer to Topic No. 501, Should I Itemize?, for more information.

Itemized deductions

Some taxpayers choose to itemize their deductions if their allowable itemized deductions total is greater than their standard deduction. Other taxpayers must itemize deductions because they aren't entitled to use the standard deduction.

Taxpayers who must itemize deductions include:

• A married individual filing as married filing separately whose spouse itemizes deductions.
• An individual who was a nonresident alien or dual status alien during the year (some exceptions apply).
• An individual who files a return for a period of less than 12 months due to a change in his or her annual accounting period.
• An estate or trust, common trust fund or partnership.

Schedule A (Form 1040) for itemized deductions

Taxpayers use Schedule A (Form 1040, Itemized Deductions or 1040-SR, U.S. Tax Return for Seniors) to figure their itemized deductions. In most cases, their federal income tax owed will be less if they take the larger of their itemized deductions or standard deduction.

Taxpayers can review the instructions for Schedule A (Form 1040), Itemized Deductions, to calculate their itemized deductions, such as certain medical and dental expenses, and amounts paid for certain taxes, interest, contributions and other expenses. Taxpayers may also deduct certain casualty and theft losses on Schedule A.

Interactive Tax Assistant can help with deduction questions

The Interactive Tax Assistant (ITA) provides answers to tax law questions based on a taxpayer's individual circumstances. It can help a taxpayer determine the answer to common questions, such as if they:

• Must file a tax return.
• Have the correct filing status.
• Can claim a dependent.
• Have taxable income.
• Are eligible to claim a credit.
• Can deduct expenses.

The ITA can help taxpayers with these deduction-related questions:

• How Much Is My Standard Deduction?
• Can I Claim a Deduction for Student Loan Interest?
• Can I Deduct My Moving Expenses?
• How Do I Claim My Gambling Winnings and/or Losses?
• Can I Deduct My Medical and Dental Expenses?
• Can I Deduct My Mortgage-Related Expenses?
• Can I Deduct My Charitable Contributions?
• Can I Claim My Expenses as Miscellaneous Itemized Deductions on Schedule A?
• Can I Deduct Personal Taxes That I Pay as an Itemized Deduction on Schedule A?
• Are My Work-Related Education Expenses Deductible?

WASHINGTON – As part of the Dirty Dozen campaign, the Internal Revenue Service warned wealthy individuals about three tax traps designed for them by dishonest promoters and shady tax practitioners.

For those with high incomes, they can be tempting targets for a variety of schemes and aggressive tax strategies designed to reduce taxes. These can take many different forms, ranging from inflated art donation deductions to aggressive Charitable Remainder Annuity Trusts and detailed shelters that maneuver to delay paying gains on property.

"High-income taxpayers can be vulnerable to being pulled into these aggressive schemes and scams,” said IRS Commissioner Danny Werfel. "Taxpayers should be extra careful on tax maneuvers that seem too good to be true. Beware of advertisements for seemingly ideal tax structures that distort tax laws and leave victims with civil or criminal tax penalties.”

“There’s growing risk for taxpayers pulled into aggressive schemes as the IRS continues to accelerate and expand our compliance work involving high-income individuals,” Werfel added. “The IRS reminds taxpayers that relying on an independent tax or legal professional can help avoid problems with aggressive promoters.”

This marks the tenth day of the special Dirty Dozen series. The annual Dirty Dozen list comprises a list of scams and schemes that can put taxpayers and tax professionals at risk. The list is not a legal document nor a formal enforcement priority. The education effort is designed to raise awareness and protect taxpayers and tax pros from common tax scams and schemes.

Improper art donation deductions

There are ways for taxpayers to properly claim donations of art. But some unscrupulous promoters use direct solicitation to promise values of art that are too good to be true.

These promoters encourage taxpayers to buy various types of art, often at a "discounted" price. This price may also include additional services from the promoter, such as storage, shipping and arranging the appraisal and donation of the art. The promotor promises the art is worth significantly more than the purchase price.

These schemes are designed to encourage purchasers to donate the art after waiting at least one year and to claim a tax deduction for an inflated fair market value, which is substantially more than they paid for the artwork. Promoters may suggest taxpayers donate art annually and allow them to buy a quantity of art that guarantees a specific deductible amount. Promoters may even arrange for certain charities to take the donations.

The IRS has a team of professionally trained Appraisers in Art Appraisal Services who provide assistance and advice to the IRS and taxpayers on valuation questions in connection with personal property and works of art.

"Creativity in art is a beautiful thing, but aggressive creativity in art donation deductions can paint a bad picture for people pulled into these schemes," Werfel said. "This is another example where people should be careful when it comes to aggressive marketing and promotions. There are legitimate ways to claim an art donation, but taxpayers should be careful to understand the rules and watch out for inflated values or questionable appraisals. Beauty is not always in the eye of the beholder when it comes to tax deductions of art."

Charitable Remainder Annuity Trust (CRAT)

Charitable remainder trusts are irrevocable trusts that let persons donate assets to charity and draw annual income for life or for a specific time period. The IRS examines charitable remainder trusts to ensure they correctly report trust income and distributions to beneficiaries, file required tax documents and follow applicable laws and rules. A charitable remainder annuity trust (CRAT) pays a specific dollar amount each year.

Unfortunately, these trusts are sometimes misused to eliminate capital gain.

Here’s how it works. The appreciated property is transferred to a CRAT. Taxpayers wrongly claim the transfer of the appreciated assets to the CRAT, which gives those assets a step-up in basis to fair market value as if they had been sold to the trust. The CRAT then sells the property but does not recognize gain due to the claimed step-up in basis. The CRAT then uses the proceeds to purchase a single premium immediate annuity (SPIA). The beneficiary then reports, as income, only a small portion of the annuity received from the SPIA. Through a misapplication of the law relating to CRATs, the beneficiary treats the remaining payment as an excluded portion representing a return of investment for which no tax is due. Taxpayers who seek to achieve this inaccurate result do so by misapplying the rules.

Monetized installment sales

In these frequently shady deals, promoters look for taxpayers seeking to defer the recognition of gain upon the sale of appreciated property and then organize an abusive shelter through selling them monetized installment sales. These transactions occur when an intermediary purchases appreciated property from a seller in exchange for an installment note, which typically provides for payments of interest only, with principal being paid at the end of the term.

In these arrangements, the seller gets the lion's share of the proceeds but improperly delays the gain recognition on the appreciated property until the final payment on the installment note, often slated for many years later.

Report tax fraud

As part of the Dirty Dozen awareness effort, the IRS encourages people to report individuals who promote improper and abusive tax schemes as well as tax return preparers who deliberately prepare improper returns.

To report an abusive tax scheme or a tax return preparer, people should use the online Form 14242, Report Suspected Abusive Tax Promotions or Preparers, or mail or fax a completed paper Form 14242, Report Suspected Abusive Tax Promotions or Preparers, and any supporting material to the IRS Lead Development Center in the Office of Promoter Investigations.

Mail:

Internal Revenue Service Lead Development Center
Stop MS5040
24000 Avila Road
Laguna Niguel, California 92677-3405

Fax: 877-477-9135

Alternatively, taxpayers and tax practitioners may send the information to the IRS Whistleblower Office for possible monetary award. For more information, see Abusive Tax Schemes and Abusive Tax Return Preparers.

Announcement 2024-19 addresses the Federal income tax treatment of amounts paid for the purchase of energy efficient property and improvements as part of the Department of Energy’s “Home Energy Rebate Programs” under §§ 50121 and 50122 of the Inflation Reduction Act. The announcement also provides coordination rules for taxpayers who receive such amounts and wish to claim a Federal tax credit under § 25C of the Internal Revenue Code.

Announcement 2024-19 will be in IRB: 2024-17, dated 4/22/24.

Dear IVES Participants,

We are happy to announce the 2024 Income Verification Express Service (IVES) Working Group is now up and running.

The Working Group is committed to promoting transparency and communication among all stakeholders involved in the IVES process.

This shared effort between the IVES participant community and IRS aims to explore important IVES topics and obtain valuable feedback on current and proposed IVES policies. This process also gives all IVES participants the opportunity to share their ideas and/or concerns. Please do so by sending them to: ives.working.group.comms@aven.com. 

Thank you,

IRS IVES Team

WASHINGTON – In the sixth part of the “Dirty Dozen” tax scams for 2024, the Internal Revenue Service warned taxpayers about groups masquerading as charitable organizations to attract donations from unsuspecting contributors.

In natural disasters and other tragic events, it’s common for compassionate individuals to donate money to help the victims. Unfortunately, scammers often use fake charities as a cover to not only obtain money but also gather sensitive personal and financial information that can be exploited for tax-related identity fraud.

“We see repeated instances of scammers using major disasters as a way to prey on well-meaning taxpayers,” said IRS Commissioner Danny Werfel. “In these tragic situations, many people want to help, but con artists too frequently come in posing as charitable groups to take advantage of the situation, stealing money and personal information. People should remember it’s important to never feel pressured to give donations immediately. They should do some research and only donate to clearly established charities that help victims.”

Fake charities mark day six of the Dirty Dozen. Started in 2002, the IRS' annual Dirty Dozen campaign lists 12 scams and schemes that put taxpayers, businesses and the tax professional community at risk of losing money, personal information, data and more. While the Dirty Dozen is not a legal document or a formal listing of agency enforcement priorities, the education effort is designed to raise awareness and protect taxpayers and tax pros from common tax scams and schemes, including fake charities.

As a member of the Security Summit, the IRS has worked with state tax agencies and the nation’s tax industry for nine years to cooperatively implement a variety of internal security measures to protect taxpayers. The collaborative effort by the Summit partners also has focused on educating taxpayers about scams and fraudulent schemes throughout the year, which can lead to tax-related identity theft. Through initiatives like the Dirty Dozen and the Security Summit program, the IRS strives to protect taxpayers, businesses and the tax system from cyber criminals and deceptive activities that seek to extract information and money, including fake charities.

Real tragedies; fake charities

During times of disasters, fake charities become a concern. These deceitful organizations are created by scammers who take advantage of people’s generosity. They solicit money and personal information to victimize individuals through identity theft.

When taxpayers decide to contribute funds or goods to an organization, they may qualify for a deduction on their tax return, but only if they itemize their deductions. It is important to remember that charitable donations are valid when directed toward IRS-recognized tax-exempt organizations. Individuals intending to donate can utilize the Tax-Exempt Organization Search (TEOS) tool on IRS.gov to ensure legitimacy.

Beware of scammers who might use email communications or manipulate caller IDs to deceive people into donating funds to charities. These fraudsters often target groups such as seniors and those with limited English proficiency.

Here are some helpful tips to avoid getting scammed:

• Don’t give in to pressure. Scammers often create situations to get people to make payments. Genuine charities are always grateful for donations. Donors should take their time and research before making a charitable contribution.
• Exercise caution when making donation payments. Avoid any charity that requests gift card numbers or wire transfers. It’s better to pay by credit card or check after ensuring the charity’s authenticity.
• Verify the legitimacy of the charity. Scammers often use similar-sounding names for charities to confuse people. Before donating, potential donors need to ask the fundraiser for the charity's name, website and mailing address so they can independently verify its authenticity. Use the special IRS TEOS tool to verify if an organization is a legitimate tax-exempt charity.
• Avoid sharing too much information. Scammers are always on the lookout for both money and personal data. Never disclose Social Security numbers, credit card numbers or Personal Identification Numbers. Only provide bank or credit card details after confirming the charity's legitimacy.

Report fraud

As part of the Dirty Dozen awareness effort regarding tax schemes and unscrupulous tax return preparers, the IRS encourages individuals to report those who promote abusive tax practices and tax preparers who intentionally file incorrect returns.

To report an abusive tax scheme or a tax return preparer, people should use the online Form 14242, Report Suspected Abusive Tax Promotions or Preparers, or mail or fax a completed paper Form 14242, Report Suspected Abusive Tax Promotions or Preparers, and any supporting material to the IRS Lead Development Center in the Office of Promoter Investigations.

Mail:

Internal Revenue Service Lead Development Center
Stop MS5040
24000 Avila Road
Laguna Niguel, California 92677 3405
Fax: 877 477 9135

Taxpayers and tax professionals can also submit this information to the IRS Whistleblower Office, where they may be eligible for a monetary award. For details, refer to the sections on Abusive Tax Schemes and Abusive Tax Return Preparers.

Inside This Issue

 

1. Deadline approaches to file 2023 tax returns, make payment or request extension
2. IRS reminder: 2024 first quarter estimated tax payment deadline is April 15
3. TDS Authorization Change
4. Treasury, IRS issue guidance on the tax treatment of amounts paid as rebates for energy efficient property and improvements
5. Dirty Dozen: Beware of evolving scams
6. Dirty Dozen: IRS urges taxpayers to not fall prey to untrustworthy tax preparers; ‘ghost preparers’ can disappear with taxpayer cash, information
7. Reminder to U.S. taxpayers impacted by Israel attacks have until Oct. 7; more relief available
8. Tax relief available for Maine, Rhode Island disaster victims
9. See what’s new at the IRS Nationwide Tax Forum
10. Upcoming Webinars for tax practitioners
11. Report digital asset income, including cryptocurrency on tax return
12. News from the Justice Department’s Tax Division

1.  Deadline approaches to file 2023 tax returns, make payment or request extension

The IRS reminds taxpayers of the April 15 deadline to electronically file their federal income tax return and request direct deposit.

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2.  IRS reminder: 2024 first quarter estimated tax payment deadline is April 15

The Internal Revenue Service advised taxpayers, including self-employed individuals, retirees, investors, businesses and corporations about the April 15 deadline for first quarter estimated tax payments for tax year 2024.

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3.  TDS Authorization Change

As part of the IRS’ effort to continue combatting identity theft and protecting taxpayers’ personal information, we’re making changes that will impact how tax professionals receive transcripts.

Beginning April 8, 2024, tax professionals must call the Practitioner Priority Service (PPS) to request transcripts to be deposited into their Secure Object Repository (SOR). While PPS has been the primary avenue for these requests, other IRS toll-free lines will no longer offer the SOR as a delivery method.

Additionally, tax professionals need to pass the current required authentication and also verify their Short Identification (ID). The Short ID is a unique 8-10 alphanumeric code that is systemically assigned when an IRS account is established. This Short ID is visible when the tax professional logs in to their e-Services SOR. If the identity can’t be verified, transcripts will only be mailed to the address of record. PPS assistors cannot resolve issues with ID.Me identity proofing or the status of an ID.Me account.

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4.  Treasury, IRS issue guidance on the tax treatment of amounts paid as rebates for energy efficient property and improvements

The Department of Treasury and the Internal Revenue Service issued Announcement 2024-19 that addresses the federal income tax treatment of amounts paid for the purchase of energy efficient property and improvements. Generally, taxpayers who receive rebates for the purchase of energy efficient homes will not include the value of those rebates as income o their tax returns, however they will need to reduce the basis of the property when they sell it by the amount of the rebate.

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5.  Dirty Dozen: Beware of evolving scams

The Internal Revenue Service continues to share its Dirty Dozen list of tax scams reminding taxpayers and tax professionals to be wary of evolving phishing and smishing scams designed to steal sensitive taxpayer information.

Taxpayers are advised by the IRS to be cautious of the following scenarios:

• Helpful scammers offering to set up an Online Account
• False Fuel Tax Credit claims
• False Offer in Compromise (OIC) "mills" claiming services to resolve IRS debt
• False Charities exploitation

The IRS urges individuals to report unscrupulous promoters and tax preparers. To report an abusive tax scheme or a tax return preparer, people should use the online Form 14242, Report Suspected Abusive Tax Promotions or Preparers, or mail or fax a completed paper Form 14242, Report Suspected Abusive Tax Promotions or Preparers and any supporting material to the IRS Lead Development Center in the Office of Promoter Investigations.

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6.  Dirty Dozen: IRS urges taxpayers to not fall prey to untrustworthy tax preparers; ‘ghost preparers’ can disappear with taxpayer cash, information

The Internal Revenue Service and Security Summit partners alerted taxpayers to be on the lookout for unscrupulous tax preparers who could encourage people to file false tax returns and steal valuable personal information.

A common problem seen annually during tax season, “ghost preparers” pop up to encourage taxpayers to take advantage of tax credits and benefits for which they don’t qualify. These preparers can charge a large percentage fee of the refund or even steal the entire tax refund. After the tax return is prepared, these “ghost preparers” can simply disappear, leaving well-meaning taxpayers to deal with the consequences.

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7.  Reminder to U.S. taxpayers impacted by Israel attacks have until Oct. 7; more relief available

The IRS reminds U.S. taxpayers who live or have a business in Israel, Gaza or the West Bank, and certain other taxpayers affected by the terrorist attacks in the State of Israel, have until Oct. 7, 2024, to both file and pay most taxes due.

Other tax-related deadlines are postponed as well. Among other things, this includes individuals, corporations and tax-exempt organizations that had valid extensions to file their 2022 federal income tax returns, though payments for these returns do not get the extra time because they were due before the attacks occurred. See Notice 2023-71 and Rev. Proc. 2018-58 for details. For additional information, affected taxpayers may call the IRS disaster hotline at 866-562-5227. Alternatively, international callers may call 267-941-1000.

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8.  Tax relief available for Maine, Rhode Island disaster victims

The IRS is providing tax relief to the following individuals and businesses who have recently been affected by storms and flooding:

• Disaster-area taxpayers in parts of Maine affected by severe storms and flooding that began on Jan. 9 have until July 15 to file various federal individual and business tax returns and make tax payments. The IRS is offering relief to areas designated by the Federal Emergency Management Agency (FEMA). Currently, this includes individuals and households that reside or have a business in Cumberland, Hancock, Knox, Lincoln, Sagadahoc, Waldo, Washington and York counties qualify for tax relief. The same relief will be available to any other Maine localities added later to the disaster area.
• Individuals and businesses in parts of Rhode Island that were affected by severe storms and flooding that began on Dec. 17 and Jan. 9, now have until July 15, 2024, to file various federal individual and business tax returns and make tax payments. Currently, this includes Kent, Providence and Washington counties. The same relief will be available to any counties added later to the disaster areas.

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9.  See what’s new at the IRS Nationwide Tax Forum

Tax professionals can attend the upcoming IRS Nationwide Tax Forum, where they will have access to the latest insights and expertise straight from the IRS. Each of the five forums is a three-day event with seminars, workshops, networking opportunities, and much more. Attendees can maximize their time by participating in additional events as early as the Monday before the forums officially begin, from the annual filing season refresher course to the practice management session for tips to running their businesses.

In addition to learning about the latest developments in tax law and other issues affecting the tax community, attendees will also have a chance to meet in-person with IRS hiring experts. The IRS looks to hire talented people in the tax community and other industries as the agency continues the historic transformation work under the Inflation Reduction Act.

Register now to take advantage of the Early Bird rate available until June 17. Visit 2024 IRS Nationwide Tax Forum for information on the program, accommodations and registration.

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10.  Upcoming Webinars for tax practitioners

The IRS is presenting the webinar “Impacts of Gaming on Tax Exempt Organizations” on April 18 at 2 p.m. ET. Tax professionals can earn up to one continuing education credit.

For more information or to register for the webinar, visit the Webinars for Tax Practitioners webpage. 

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11.  Report digital asset income, including cryptocurrency on tax return

Any income earned from digital asset transactions must be reported on your federal tax return.

Detailed reporting requirements are available in the Instructions for Form 1040 and Form 1040-SR and on the Digital Assets page on IRS.gov.

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12.  News from the Justice Department’s Tax Division

The United States filed a civil complaint in the U.S. District Court for the Eastern District of Washington to bar Donald J. Taylor, a former IRS revenue agent and registered enrolled agent, who left the IRS in 2008 to work as a paid tax return preparer in Kennewick, Washington. By repeatedly understating his customers’ tax liabilities, the complaint alleges that the United States has been harmed by Taylor’s conduct resulting in the loss in federal tax revenue, estimated to be over $42 million for tax years 2017 and 2020.

The Justice Department filed a civil injunction suit against a group of Texas tax return preparers seeking to bar them from owning or operating a tax preparation business and preparing tax returns. The complaint also requests that the court require the defendants to disgorge the return preparation fees they obtained by preparing allegedly false or fraudulent tax returns. The IRS estimates the harm to the United States in the form of underreported income and unpaid taxes from the defendants’ misconduct could exceed $10 million.

New Jersey tax return preparer Leon Haynes, of Teaneck, New Jersey, was charged with 55 counts of aiding and assisting in the preparation of false tax returns, five counts of mail fraud, one count of aggravated identity theft and two counts of tax evasion. Haynes filed hundreds of false returns and caused a tax loss to the IRS of $1,428,592 based on false claims he submitted relating to his businesses. Haynes faces a maximum penalty of 20 years in prison for mail fraud charges, a maximum penalty of five years in prison for each tax evasion charge, three years in prison for aiding and assisting in the preparation of false return charge and two years in prison for the aggravated identity 

WASHINGTON – As part of the annual Dirty Dozen list of tax scams, the Internal Revenue Service today renewed its warning to taxpayers concerning pricey Offer in Compromise (OIC) "mills” that aggressively mislead taxpayers into thinking their tax debts can disappear.

As in past years, companies running OIC mills continue heavily advertising their promises to settle taxpayer debt at steep discounts for pennies on the dollar. While OIC is a legitimate IRS program, many taxpayers do not meet the technical requirements for the tax resolution program, often leaving them facing excessive fees from the promoters for information they could have easily obtained for free by using the IRS's Offer in Compromise Pre-Qualifier tool.

The OIC is a valuable IRS program to help taxpayers who cannot pay their federal tax debts, and some companies offer legitimate services. But the IRS encourages individuals to take a few minutes to assess the information available on IRS.gov to determine if they meet the eligibility criteria for the OIC program and to avoid hiring expensive promoters.

"Taxpayers need to be cautious with aggressive marketing around the Offer in Compromise program that can mislead taxpayers,” said IRS Commissioner Danny Werfel. “These mills try to pull in steep fees while raising false expectations and exploiting vulnerable individuals with promises that tax debt can magically disappear.”

“The program is legitimate, but it’s not for everyone,” Werfel added. “The IRS wants to help taxpayers who qualify for this program, but there are very specific requirements for people to qualify. A good first step is for taxpayers to take a few minutes and explore our free resources on IRS.gov. They can find out if they might qualify for this program – and at the same time avoid paying someone a hefty fee.”

OIC mills are the focus of the fifth news release in the Dirty Dozen series. Started in 2002, the IRS' annual Dirty Dozen campaign lists 12 scams and schemes that put taxpayers and the tax professional community at risk of losing money, personal information, data and more. While the Dirty Dozen is not a legal document or a formal listing of agency enforcement priorities, the education effort is designed to raise awareness and protect taxpayers and tax pros from common tax scams and schemes.

Beware of Offer in Compromise mills

An OIC is a legitimate IRS program that allows qualifying taxpayers to work with the IRS to settle a tax debt for less than the full amount owed. It is an option for those who may be unable to pay their full tax liability, or if doing so creates a financial hardship. In determining eligibility, the IRS considers the taxpayer’s unique situation. The OIC agreement occurs directly between the taxpayer and the IRS without a third party.

Taxpayers, however, should be cautious of OIC mills, which make exaggerated claims through radio and TV ads about settling tax debts inexpensively. In reality, these mills often charge excessive fees, and taxpayers end up paying for a service they could have obtained for free directly from the IRS.

The IRS urges individuals to spend a few minutes reviewing information on IRS.gov to determine if they may be eligible for the OIC program by using the IRS's Offer in Compromise Pre-Qualifier tool for free.

The IRS also reminds taxpayers about the First Time Penalty Abatement policy, where taxpayers can go directly to the IRS for administrative relief from a penalty that would otherwise be added to their tax debt.

Help others: Report fraud, scams and schemes

The IRS encourages taxpayers to report any individuals promoting improper, abusive or fraudulent tax schemes, as well as tax return preparers who deliberately prepare improper or fraudulent returns.

To report an abusive tax scheme or a tax return preparer, people should use the online Form 14242, Report Suspected Abusive Tax Promotions or Preparers, or mail or fax a completed paper Form 14242, Report Suspected Abusive Tax Promotions or Preparers, and any supporting material to the IRS Lead Development Center in the Office of Promoter Investigations.

Mail:
Internal Revenue Service Lead Development Center
Stop MS5040
24000 Avila Road
Laguna Niguel, California 92677-3405
Fax: 877-477-9135

Additionally, taxpayers and tax practitioners may submit their report of improper or fraudulent practices to the IRS Whistleblower Office, which may offer a possible monetary award.

To learn more about avoiding becoming a victim of tax preparation schemes and fraud, please see Abusive Tax Schemes and Abusive Tax Return Preparers on IRS.gov.