New Process Lets Expats get Square with IRS

New Process Lets Expats get Square with IRS

The Internal Revenue Service says it has new procedures in place that can help certain expatriated American taxpayers come into compliance with their U.S. tax obligations and get relief for back taxes.

Relief Procedures for Certain Former Citizens apply only to those individuals who have not filed U.S. tax returns as American citizens or residents, owe a limited amount of back taxes to the U.S. and have net assets of less than $2 million.

Lack of compliance by eligible taxpayers must not have been willful in order to take part in this program. The IRS acknowledges that many of the taxpayers in this group have lived outside the U.S. for most of their lives and my not even been aware they had American tax obligations.

To qualify for the program, the IRS says taxpayers have to file their missing tax returns as a first step:

“Eligible individuals wishing to use these relief procedures are required to file outstanding U.S. tax returns, including all required schedules and information returns, for the five years preceding and their year of expatriation. Provided that the taxpayer’s tax liability does not exceed a total of $25,000 for the six years in question, the taxpayer is relieved from paying U.S. taxes,” the IRS press release states.

Individuals who qualify for the procedure will not be assessed penalties and interest. These procedures are only available to individuals. Estates, trusts, corporations, partnerships and other entities are not eligible.

No specific termination date was issued for this new program, although the IRS says it will issue a closing date before it decides to shut the program down.

Taxpayers who relinquished their U.S. citizenship any time after March 18, 2010, are eligible – as long as they satisfy the other criteria of the new procedure.

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Tax preparers can follow these simple steps to protect client data

Tax Tip 2019-122, September 5, 2019

Tax professionals and their employees can take steps to help prevent thieves from stealing sensitive data. Cybercriminals use phishing emails and malware to gain control of computer systems or to steal usernames and passwords.

Here are some simple steps that tax pros and their employees can take to protect their clients’ data. They should:

  • Use separate personal and business email accounts.
  • Protect email accounts with strong passwords and two-factor authentication if available.
  • Install an anti-phishing tool bar to help identify known phishing sites.
  • Use anti-phishing tools that are included in security software products.
  • Use security software to help protect systems from malware and scan emails for viruses.
  • Never open or download attachments from unknown senders, including potential clients. They should instead make contact first by phone.
  • Send only password-protected and encrypted documents when files must be shared with clients over email.
  • Not respond to suspicious or unknown emails.
  • Forward scams that are related to the IRS to phishing@irs.gov.

All tax professionals should remember they must have a written data security plan. This is required by the Federal Trade Commission and its Safeguards Rule.

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Taxpayers can use 2018 tax return to estimate 2019 withholding amount

IRS Tax Reform Tax Tip 2019-121, September 4, 2019

Millions of people have filed their 2018 tax return, making this a prime time to consider whether their tax situation came out as expected. If not, taxpayers can use their finished 2018 return and the Tax Withholding Estimator to do a Paycheck Checkup ASAP and, if needed, adjust their withholding. Having their 2018 return handy can make it easier for taxpayers to estimate deductions, credits and other amounts for 2019. Performing a Paycheck Checkup is a good idea for anyone who:

  • Adjusted their withholding in 2018, especially those who did so later in the year.
  • Owed additional tax when they filed their tax return this year.
  • Had a refund that was larger or smaller than expected.
  • Had life changes such as marriage, childbirth, adoption, buying a home or income changes.

Since most people are affected by the Tax Cuts and Jobs Act all taxpayers should check their withholding. They should do a checkup even if they did one in 2018. This especially includes taxpayers who:

  • Have children and claim credits such as the Child Tax Credit.
  • Have older dependents, including children age 17 or older.
  • Experienced changes to itemized deductions this year.
  • Itemized deductions in the past.
  • Are a two-income family.
  • Have two or more jobs at the same time.
  • Only work part of the year.
  • Have high income or a complex tax return.

This Tax Withholding Estimator works for most taxpayers. Those with more complex situations may need to use Publication 505, Tax Withholding and Estimated Tax, instead of the Tax Withholding Estimator. This includes taxpayers who owe alternative minimum tax or certain other taxes, and people with long-term capital gains or qualified dividends.

Taxpayers can use the results from the Tax Withholding Estimator to see if they need to complete a new Form W-4, Employee’s Withholding Allowance Certificate, and submit it to their employer. In some instances, the calculator may recommend they have an additional flat-dollar amount withheld each pay period. Taxpayers give this form to their employer and do not send this form to the IRS.

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It’s important for tax pros to know the signs they are a cyberthief’s victim

IRS Tax Tip 2019-124, September 10, 2019

Tax professionals should learn the tell-tale signs that their office may have experienced a data theft. Such thefts could have resulted in fraudulent tax returns filed in their clients’ names.

Here is a list of warning signs that a tax professional or their office may have experienced a data theft:

  • Their clients’ e-filed returns are rejected by the IRS or state tax agencies. This happens because someone else already filed a tax return with their client’s Social Security number.
  • Clients who haven’t filed tax returns begin to receive taxpayer authentication letters from the IRS. The IRS sends letters such as the 5071C, 4883C and 5747C to confirm a taxpayer’s identity for a submitted tax return.
  • Clients who haven’t filed tax returns receive refunds.
  • Clients receive tax transcripts that they didn’t request.
  • Clients who created an IRS Online Services account receive an IRS notice that their account was accessed.
  • Clients who have an account get an IRS emails saying their account is disabled.
  • Clients unexpectedly receive an IRS notice that an IRS online account was created in their names.
  • The number of returns filed with the tax professional’s Electronic Filing Identification Number is higher than the number of clients they have.
  • Tax professionals or clients responding to emails that the firm did not send.
  • Network computers running slower than normal.
  • Computer cursors moving or changing numbers when the user is not even touching the keyboard.
  • Network computers locking out employees.

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Taxpayers can go to IRS.gov for answers to questions about payments and penalties

IRS Tax Tip 2019-123, September 9, 2019

Questions about tax payments and penalties come up all year long. Taxpayers can find most answers to these questions on IRS.gov. They can head over to the Let Us Help You page, which features links that take users to information and resources on a wide range of topics related to penalties and payments.

Payments

Payment options

  • This page lays out the different way taxpayers can pay what they owe, from having the payment taken directly from their bank account to using a credit card.

Payment plan

  • Taxpayers who cannot pay what they owe in full have options, which are explained on this page.

View your balance and payment history

  • Individual taxpayers can use this tool to check their account and see things like their payoff amount.

Liens and levies

These links explain what a lien and a levy are, and how taxpayers comply with them.

Resolve a dispute

The Office of Appeals is an independent organization within the IRS that helps taxpayers resolve their tax disputes. This page has links to information that will help taxpayers who received a notice saying their case qualifies to be reviewed by Appeals.

Prevent future tax bill

Taxpayers who owed more than expected when they filed this year have a couple options to help them avoid that when they file next year. These pages have more info about the options.

Penalties

These links take the user to information where they can find out more about topics related to penalties and penalty relief.

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Two education credits help taxpayers with college costs

IRS Tax Tip 2019-125, September 11, 2019

With school back in session, parents and students should look into tax credits that can help with the cost of higher education. They do this by reducing the amount of tax someone owes on their tax return. If the credit reduces tax to less than zero, the taxpayer may get a refund.

Taxpayers who pay for higher education in 2019 can see these tax savings when they file their tax returns next year. If taxpayers, their spouses or their dependents take post-high school coursework, they may be eligible for a tax benefit.

There are two credits available to help taxpayers offset the costs of higher education. The American opportunity tax credit and the lifetime learning credit may reduce the amount of income tax owed. Taxpayers use Form 8863, Education Credits, to claim the credits.

To be eligible to claim the American opportunity tax credit, or the lifetime learning credit, a taxpayer or a dependent must have received a Form 1098-T from an eligible educational institution.

The American opportunity tax credit is:

  • Worth a maximum benefit up to $2,500 per eligible student.
  • Only for the first four years at an eligible college or vocational school.
  • For students pursuing a degree or other recognized education credential.
  • Partially refundable. This means if the credit brings the amount of tax owed to zero, 40 percent of any remaining amount of the credit, up to $1,000, is refundable.

The lifetime learning credit is:

  • Worth a maximum benefit up to $2,000 per tax return, per year, no matter how many students qualify.
  • Available for all years of postsecondary education and for courses to acquire or improve job skills.
  • Available for an unlimited number of tax years.

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