Tax Tips Class


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Tax Tips Class

  1. 1. Topic 558 - Tax on Early Distributions from Retirement Plans, Other Than IRAsTo discourage the use of retirement funds for purposes other than normal retirement, the law imposes a 10% additional tax on certain earlydistributions of these funds. Early distributions are those you receive from a qualified retirement plan or deferred annuity contract before reachingage 59 1/2. The term "qualified retirement plan" means: • A qualified employee plan under section 401(a), such as a section 401(k) plan • A qualified employee annuity plan under section 403(a) • A tax-sheltered annuity plan under section 403(b) for employees of public schools or tax-exempt organizations, or • An individual retirement account under section 408(a) or an individual retirement annuity under section 408(b)While an eligible State or local government section 457 deferred compensation plan is not a qualified retirement plan, any distribution attributable toamounts the plan received in a direct transfer or rollover from one of the other plans listed here would be subject to the 10% additional tax.Distributions that are not taxable, such as distributions that you roll over to another qualified retirement plan or a distribution of your designated RothIRA contributions are not subject to this 10% additional tax. For more information on rollovers, refer to Topic 413.There are certain exceptions to this additional tax. The following six exceptions apply to distributions from any qualified retirement plan: • Distributions made to your beneficiary or estate on or after your death • Distributions made because you are totally and permanently disabled • Distributions made as part of a series of substantially equal periodic payments over your life expectancy or the life expectancies of you and your designated beneficiary. If these distributions are from a qualified plan other than an IRA, you must separate from service with this employer before the payments begin for this exception to apply • Distributions that are equal to or less than your deductible medical expenses, that is, the amount of your medical expenses that is more than 7.5% of your adjusted gross income. You do not have to itemize to meet this exception. For more information on medical expenses, refer to Topic 502 • Distributions made due to an IRS levy of the plan • Distributions to qualified reservists. Generally, these are distributions made to individuals called to active duty after September 11, 2001 (See section 107 of the Heroes Earnings Assistance and Relief Act of 2008 ("HEART" H. R. 6081), section 72(t)(2)(G) is amended striking this phrase. The amendment made by section 107 shall apply to individuals ordered or called to active duty on or after December 31, 2007.)The following additional exceptions apply only to distributions from a qualified retirement plan other than an IRA: 1. Distributions made to you after you separated from service with your employer if the separation occurred in or after the year you reached age 55, or distributions from qualified governmental defined benefit plans if you were a qualified public safety employee (State or local government) who separated from service on or after you reached age 50, 2. Distributions made to an alternate payee under a qualified domestic relations order, and 3. Distributions of dividends from employee stock ownership plans.Refer to Topic 557 for information on the tax on early distributions from IRAs. For more information, refer to Publication 575, Pension and AnnuityIncome, and Publication 590, Individual Retirement Arrangements (IRAs).The 10% additional tax is reported on the appropriate line of Form 1040 (PDF). You must also file Form 5329 (PDF), Additional Taxes on QualifiedPlans (Including IRAs) and other Tax-Favored Accounts, if: 1. Your distribution is subject to the tax, and distribution code "1" is not shown in the appropriate box of Form 1099-R (PDF), or 2. One of the exceptions applies but the box labeled "Distribution Code(s)" does not show a distribution code of "2", "3", or "4". On the other hand, you do not need to file Form 5329 if your distribution is subject to the tax and a distribution code of "1" shows in the appropriate box. In this case enter the 10% additional tax on the appropriate line of Form 1040 and write "no" on the dotted line next to the appropriate line.Distributions from a qualified retirement plan are subject to federal income tax withholding; however, if your distribution is subject to the 10%additional tax, your withholding may not be enough. You may have to make estimated tax payments. For more information on estimated taxpayments, refer to Publication 505, Tax Withholding and Estimated Tax.
  2. 2. What if I lose my job?The loss of a job may create new tax issues. Severance pay and unemployment compensation are taxable.Payments for any accumulated vacation or sick time also are taxable. You should ensure that enough taxes arewithheld from these payments or make estimated tax payments to avoid a big bill at tax time. Public assistanceand food stamps are not taxable. The IRS has updated a helpful publication which lists a number of job-lossrelated tax issues. For more information, see Publication 4128, Tax Impact of Job Loss and the Tax Center toAssist Unemployed Taxpayers.
  3. 3. Tax Center to Assist Unemployed TaxpayersThe “What Ifs” of an Economic DownturnThe Internal Revenue Service recognizes that many people may be having difficult times financially. There canbe a tax impact to events such as job loss, debt forgiveness or tapping a retirement fund. If your incomedecreased, you may be newly eligible for certain tax credits, such as the Earned Income Tax Credit.Publications to assist unemployed taxpayersPublication 4128 , Tax Impact of Job LossPublication 4128(SP), Tax Impact of Job Loss (Spanish version)Publication 4763, Job Related Questions During an Economic DownturnPublication 4763(SP), Job Related Questions During an Economic Downturn (Spanish version)Assistance with filing and paying taxesIf you have troubles paying your tax bill, contact the IRS immediately. There are steps we can take to help easethe burden. You should file a tax return even if you are unable to pay so you can avoid additional penalties.Free Tax HelpPublication 1546, The Taxpayer Advocate Service at the IRS – How to Get Help with Unresolved Tax ProblemsPayment Plans, Installment AgreementsOffers in CompromiseIRS Help for Financially Distressed TaxpayersStarting your own businessSome taxpayers may see unemployment as an opportunity to start their own businesses.Starting a BusinessSelf-Employed Individuals Tax CenterSmall Business Tax Workshops Learn the basics by taking a free Virtual Small Business Tax guides you through the maze of government rules and regulations and provides accessto services and resources to help you start, grow, and succeed in business.Health insuranceCOBRA Health InsuranceWorkers who lose their jobs may qualify for a 65% reduction in health insurance premiums for up to 15 months.Health Coverage Tax Credit - Trade-affected workers and PBGC payees receive an 80% credit for healthinsurance premiums.Other ResourcesPublication 908, Bankruptcy Tax GuideCanceled Debt – Is it Taxable or Not?Publication 4705, Overview: Mortgage Debt ForgivenessPublication 4705(SP), Overview: Mortgage Debt Forgiveness (Spanish version)Bartering Income Bartering for goods or services? Know the rules.
  4. 4. Payment Plans, Installment AgreementsWhether you call it an installment agreement, payment agreement, payment option or a payment plan, the ideais the same — you make payments on the tax you owe. That sounds like a good deal, but you can save moneyby paying the full amount you owe as quickly as possible to minimize the interest and penalties you’ll becharged. For those who cannot resolve their tax debt immediately, however, an installment agreement can be areasonable payment option. Installment agreements allow for the full payment of the tax debt in smaller, moremanageable amounts.Frequently Asked Questions about Installment Agreements/Payment Plans • How can I save money by paying my taxes? • If I recently filed my income tax return and owe but have NOT yet received a bill from the IRS, can I set up an installment agreement? • How do I set up an installment agreement/payment plan? • Are there fees associated with setting up an agreement? • What is the best way to make timely installment payments? • What happens if I miss a payment? • Will a notice of federal tax lien be filed? • Can I combine other tax balances owed on my new installment agreement? • Will I still get my tax refunds?How to Set Up an Installment AgreementTaxpayers wishing to pay off a tax debt through an installment agreement, and owe: • $25,000 or less in combined tax, penalties, and interest can use the Online Payment Agreement (OPA) or call the number on the bill or notice (have the bill or notice available, along with the social security number). A fill-in Request for Installment Agreement, Form 9465 (PDF), is available online that can be mailed to the address on the bill. Note: If you recently filed your income tax return and owe but have NOT yet received a bill from the IRS, you can use the Online Payment Agreement to establish an installment agreement on current year returns. To determine the information needed to establish a pre- assessed installment agreement, refer to What Information Do I Need to Use OPA? • More than $25,000 in combined tax, penalties, and interest may still qualify for an installment agreement, but a Collection Information Statement, Form 433F (PDF) may need to be completed. Call the number on the bill or mail the Request for Installment Agreement, Form 9465 (PDF) and Form 433F (PDF) to the address on the bill.You will receive a written notification telling you whether your terms for an installment agreement have beenaccepted or if they need to be modified.References/Related Topics • Filing Late and/or Paying Late: Information You Should Know • Havent Filed a Tax Return? Heres What to Do • It’s Important to Pay Taxes in Full • Receiving a Bill From the IRS • Meeting the Terms of an Installment Agreement • Collection Financial Standards and Necessary Expenses • FAQs - Installment Agreement/Payment Plan
  5. 5. What if my income declines?There are many tax credits that are subject to income limitations. If you had a reduction in income this year youmay be eligible for some credits or deductions. For example, the Earned Income Tax Credit is available forworking families and individuals. Eligibility is determined by income and family size. You must file an incometax return in order to claim EITC. See 1040 Central for more information on EITC, other tax credits and tax lawchanges.
  6. 6. Identity Theft and Your Tax RecordsThe IRS does not initiate communication with taxpayers through e-mail. Before identity theft happens,safeguard your information.What do I do if the IRS contacts me because of a tax issue that may have been created by an identitytheft?If you receive a notice or letter in the mail from the IRS that leads you to believe someone may have usedyour Social Security number fraudulently, please respond immediately to the name, address, and/or numberprinted on the IRS notice.Be alert to possible identity theft if the IRS issued notice or letter: • states more than one tax return was filed for you, or • indicates you received wages from an employer unknown to you.An identity thief might also use your Social Security number to file a tax return in order to receive a refund. Ifthe thief files the tax return before you do, the IRS will believe you already filed and received your refund ifeligible.If your Social Security number is stolen, it may be used by another individual to get a job. That person’semployer would report income earned to the IRS using your Social Security number, making it appear that youdid not report all of your income on your tax return.If you have previously been in contact with the IRS and have not achieved a resolution, please contact the IRSIdentity Protection Specialized Unit, toll-free at 1-800-908-4490.What do I do if I have not been contacted by IRS for a tax issue but believe I am a victim of identitytheft?If your tax records are not currently affected by identity theft, but you believe your IRS records may be at riskdue to a lost/stolen purse or wallet, questionable credit card activity, credit report, or other activity, you need toprovide the IRS with proof of your identity.You should submit a copy, not the original documents, of your valid Federal or State issued identification,such as a social security card, drivers license, or passport, etc, along with a copy of a police report and/or acompleted IRS Identity Theft Affidavit - Form 14039. Please send these documents using one of the followingoptions:Mailing address:Internal Revenue ServiceP.O. Box 9039Andover, MA 01810-0939FAX: Note that this is not a toll-free FAX number1-978-247-9965You may also contact the IRS Identity Protection Specialized Unit, toll-free 1-800-908-4490 for resourceinformation and guidance.Hours of Operation: Monday – Friday, 8:00 a.m. – 8:00 p.m. your local time (Alaska & Hawaii follow PacificTime).
  7. 7. What do you do if you receive a paper letter or notice via mail claiming to be the IRS but you suspect it isa scam? 1. Contact the IRS to determine if it is a legitimate IRS notice or letter. 2. If it is a legitimate IRS notice or letter, reply if needed. 3. If caller or party that sent the paper letter is not legitimate, contact the Treasury Inspector General for Tax Administration at 1-800-366-4484. You may also fax the notice/letter you received plus any related or supporting information to TIGTA. Note that this is not a toll-free FAX number 1-202-927-7018.Helpful IRS Publications • Publication 4535, Identity Theft Protection and Victim Assistance • Publication 4524, Security Awareness-Identity Theft Flyer • Publication 4523, Beware of Phishing SchemesAdditional resources • Top 10 Things Every Taxpayer Should Know about Identity Theft • How to report and identify phishing, e-mail scams and bogus IRS Web sites. • If you have tried to resolve a tax problem with the IRS and are still experiencing economic harm, you may be eligible for Taxpayer Advocate Service assistance. • Internal Revenue Manual 10.5.3 (Identity Protection Program) - Procedural guidance on issues related to identity theft • If you do not prepare your own return, be careful in choosing your tax preparer. • Repository of IRS messages related to suspicious e-mails and identity theft. • Having trouble downloading or viewing a PDF?IRS Partner resourcesThe IRS partners with the Federal Trade Commission, SSA and other federal agencies to combat identity theftand educate taxpayers on how to protect themselves. • Urges Taxpayers to Contact the IRS If They Suspect Tax-Related Identity Theft • Social Security Administration: Actions to take in the case of identity theft • Internet Crime Complaint Center (IC3) is a partnership between the Federal Bureau of Investigation, the National White Collar Crime Center, and the Bureau of Justice Assistance.Remember:The IRS does not initiate communication with taxpayers through e-mail.
  8. 8. More Taxpayers Are Filing From Home in 2011, Free File Options AboundIR-2011-24, March 4, 2011WASHINGTON — Almost 19 million tax returns have been filed with the IRS from home computers so farthis year, an increase of almost 6 percent compared to the number of returns from the same time last year.IRS reminds taxpayers that everyone can use Free File to prepare and e-file their tax returns for free, either byusing brand name software or Free File Fillable Forms, which is the electronic version of IRS paper forms.Individuals or families with 2010 adjusted gross incomes of $58,000 or less can use Free File software. UsingFree File Fillable Forms has no income restrictions.Free File software is a product of a public-private partnership between the IRS and the Free File Alliance, LLC.The Alliance is a consortium of approximately 20 tax software providers who make versions of their productsavailable exclusively on line. All Free File members must meet certain security requirements and use the latestin encryption technology to protect taxpayers’ information.The easiest way to locate a software provider is to use the online tool that, with a little of a taxpayer’s personalinformation, can identify matching products. Or, taxpayers can review all providers and their offers. Somesoftware providers also offer state income tax preparation for free or for a fee.This is the third year that the Free File Alliance has provided the Free Fillable Forms program, which is likecompleting a Form 1040 online, except the program performs some math calculations and provides links tosome IRS publications. However, it does not use the familiar question-and-answer format used by taxpreparation software. It also does not support state income tax returns. Taxpayers can e-file the forms for free.Taxpayers must access the tax products through to avoid any charges for preparing or e-filing a federaltax return.The total number of individual income tax returns that have been e-filed this year is 46.9 million, an increase of2 percent from the same time last year. E-file includes both returns filed from home computers and returns e-filed by professional tax return preparers. 2011 FILING SEASON STATISTICS Cumulative through the weeks ending 02/26/10 and 02/25/11Individual Income Tax Returns 2010 2011 % ChangeTotal Receipts 53,556,000 51,927,000 -3.0%Total Processed 49,751,000 49,278,000 -1.0%E-filing Receipts:TOTAL 45,873,000 46,868,000 2.2%Tax Professionals 28,048,000 27,983,000 -0.2%Self-prepared 17,826,000 18,885,000 5.9%
  9. 9. Web Usage:Visits to 98,691,224 107,028,830 8.5Total Refunds:Number 45,544,000 45,077,000 -1.0%Amount $143.417 Billion $141.054 Billion -1.6%Average refund $3,149 $3,129 -0.6%Direct Deposit Refunds:Number 39,569,000 39,821,000 0.6%Amount $130.774 Billion $129.684 Billion -0.8%Average refund $3,305 $3,257 -1.5%
  10. 10. Order a Transcript • Tax Return Transcript • Social Security Number (or • Go to Order a Transcript, or provides most your IRS individual taxpayer line items from your original identification number); • Call 1-800-908-9946 return. • Date of birth; • Tax Account Transcript provides • Street address; and basic info, including marital status, • Zip Code or Postal Code. type of return filed, AGI, taxable income, and later adjustments, if any.Note: We cannot process your request online if you need transcripts mailed to an address other than the onewe have on file for you. To send your transcript to a different address, complete and send Form 4506-T or callus at 1-800-829-1040
  11. 11. Second Special Voluntary Disclosure Initiative Opens; Those Hiding Assets Offshore FaceAug. 31 deadlineUpdate June 10, 2011 — Updated information is available on the main offshore voluntary disclosure andFrequently Asked Questions pages.IR-2011-14, Feb. 8, 2011WASHINGTON — The Internal Revenue Service announced today a special voluntary disclosure initiativedesigned to bring offshore money back into the U.S. tax system and help people with undisclosed income fromhidden offshore accounts get current with their taxes. The new voluntary disclosure initiative will be availablethrough Aug. 31, 2011.“As we continue to amass more information and pursue more people internationally, the risk to individualshiding assets offshore is increasing,” said IRS Commissioner Doug Shulman. “This new effort gives thosehiding money in foreign accounts a tough, fair way to resolve their tax problems once and for all. And it givespeople a chance to come in before we find them.”The IRS decision to open a second special disclosure initiative follows continuing interest from taxpayers withforeign accounts. The first special voluntary disclosure program closed with 15,000 voluntary disclosures onOct. 15, 2009. Since that time, more than 3,000 taxpayers have come forward to the IRS with bank accountsfrom around the world. These taxpayers will also be eligible to take advantage of the special provisions of thenew initiative.“As I’ve said all along, the goal is to get people back into the U.S. tax system,” Shulman said. “Combatinginternational tax evasion is a top priority for the IRS. We have additional cases and banks under review. Thesituation will just get worse in the months ahead for those hiding assets and income offshore. This newdisclosure initiative is the last, best chance for people to get back into the system.”The new initiative announced today – called the 2011 Offshore Voluntary Disclosure Initiative (OVDI) --includes several changes from the 2009 Offshore Voluntary Disclosure Program (OVDP). The overall penaltystructure for 2011 is higher, meaning that people who did not come in through the 2009 voluntary disclosureprogram will not be rewarded for waiting. However, the 2011 initiative does add new features.For the 2011 initiative, there is a new penalty framework that requires individuals to pay a penalty of 25 percentof the amount in the foreign bank accounts in the year with the highest aggregate account balance covering the2003 to 2010 time period. Some taxpayers will be eligible for 5 or 12.5 percent penalties. Participants also mustpay back-taxes and interest for up to eight years as well as paying accuracy-related and/or delinquencypenalties.Taxpayers participating in the new initiative must file all original and amended tax returns and include paymentfor taxes, interest and accuracy-related penalties by the Aug. 31 deadline.
  12. 12. The IRS is also making other modifications to the 2011 disclosure initiative.Participants face a 25 percent penalty, but taxpayers in limited situations can qualify for a 5 percent penalty.The IRS also created a new penalty category of 12.5 percent for treating smaller offshore accounts. Peoplewhose offshore accounts or assets did not surpass $75,000 in any calendar year covered by the 2011 initiativewill qualify for this lower rate.The 2011 initiative offers clear benefits to encourage taxpayers to come in now rather than risk IRS detection.Taxpayers hiding assets offshore who do not come forward will face far higher penalty scenarios as well as thepossibility of criminal prosecution.“This is a fair offer for people with offshore accounts who want to get right with the nation’s taxpayers,”Shulman said. “This initiative offers them the chance to get certainty about how their case will be handled. Justas importantly, those who truly come in voluntarily can avoid criminal prosecution as well.”The IRS is handling processing of the voluntary disclosures in centralized units to more efficiently process theapplications.The IRS has launched a new section on that includes the full terms and conditions on the 2011Offshore Voluntary Disclosure Initiative, including an extensive set of questions and answers to help taxpayersand tax professionals. The web site also includes details on how people can make a voluntary disclosure.In the first voluntary disclosure program in 2009, taxpayers faced up to a 20 percent penalty covering up to asix-year period. Taxpayers came forward with about 15,000 voluntary disclosures in that effort covering banksin more than 60 countries.Shulman said IRS efforts in the international arena will only increase as time goes on.“Tax secrecy continues to erode,” Shulman said. “We are not letting up on international tax issues, and more isin the works. For those hiding cash or assets offshore, the time to come in is now. The risk of being caught willonly increase.”
  13. 13. Affordable Care Act Tax ProvisionsThe Affordable Care Act was enacted on March 23, 2010. It contains some tax provisions that take effect thisyear and more that will be implemented during the next several years. The following is a list of provisions nowin effect; additional information will be added to this page as it becomes available.Small Business Health Care Tax CreditThis new credit helps small businesses and small tax-exempt organizations afford the cost of covering theiremployees and is specifically targeted for those with low- and moderate-income workers. The credit isdesigned to encourage small employers to offer health insurance coverage for the first time or maintaincoverage they already have. In general, the credit is available to small employers that pay at least half the costof single coverage for their employees. Learn more by browsing our page on the Small Business Health CareTax Credit for Small Employers.Changes to Flexible Spending ArrangementsEffective Jan. 1, 2011, the cost of an over-the-counter medicine or drug cannot be reimbursed from FlexibleSpending Arrangements or health reimbursement arrangements unless a prescription is obtained. The changedoes not affect insulin, even if purchased without a prescription, or other health care expenses such as medicaldevices, eye glasses, contact lenses, co-pays and deductibles. The new standard applies only to purchases madeon or after Jan. 1, 2011, so claims for medicines or drugs purchased without a prescription in 2010 can still bereimbursed in 2011, if allowed by the employer’s plan. A similar rule goes into effect on Jan. 1, 2011 forHealth Savings Accounts (HSAs), and Archer Medical Savings Accounts (Archer MSAs). Employers andemployees should take these changes into account as they make health benefit decisions for 2011.For more information, see news release IR-2010-95, Notice 2010-59, Revenue Ruling 2010-23 and ourquestions and answers.FSA and HRA participants can continue using debit cards to buy prescribed over-the-counter medicines, ifrequirements are met. For more information, see news release IR-2010-128 and Notice 2011-5.IRS partners can spread the word to their clients with the help of a Health Plan Changes flyer and a drop-inarticle, Does your Healthcare Program need a checkup?Health Coverage for Older ChildrenHealth coverage for an employees children under 27 years of age is now generally tax-free to the employee.This expanded health care tax benefit applies to various work place and retiree health plans. These changesimmediately allow employers with cafeteria plans –– plans that allow employees to choose from a menu oftax-free benefit options and cash or taxable benefits –– to permit employees to begin making pre-taxcontributions to pay for this expanded benefit. This also applies to self-employed individuals who qualify forthe self-employed health insurance deduction on their federal income tax return. Learn more by reading ournews release or this notice.
  14. 14. Excise Tax on Indoor Tanning Services — First Quarterly Payment Was Due Nov. 1, 2010A 10-percent excise tax on indoor UV tanning services went into effect on July 1, 2010. The firstpayment of the tax was due Monday, Nov. 1. Payments are made along with Form 720, QuarterlyFederal Excise Tax Return. The tax doesnt apply to phototherapy services performed by a licensedmedical professional on his or her premises. Theres also an exception for certain physical fitnessfacilities that offer tanning as an incidental service to members without a separately identifiable fee.For more information on the tax and how it will be administered, see our news release, video,webinar, questions and answers and legal guidance.Employer-Provided Health Coverage — Not Taxable; Reporting is Voluntary for All Employers for2011 and Small Employers for 2012Starting in tax year 2011, the Affordable Care Act requires employers to report the cost of coverage under anemployer-sponsored group health plan. To give employers more time to update their payroll systems, Notice2010-69, issued last fall, made this requirement optional for all employers in 2011. IRS Notice 2011-28provided further relief for smaller employers filing fewer than 250 W-2 forms by making the reportingrequirement optional for them at least for 2012 and continuing this optional treatment for smaller employersuntil further guidance is issued. Notice 2011-28 also includes information on how to report, what coverage toinclude and how to determine the cost of the coverage.The 2011 Form W-2 is available for viewing on This is the W-2 that most employees will receive inearly 2012. The form includes the codes that employers may use to report the cost of coverage under anemployer-sponsored group health plan.This reporting is for informational purposes only, to show employees the value of their health care benefits sothey can be more informed consumers. The amount reported does not affect tax liability, as the value of theemployer contribution to health coverage continues to be excludible from an employees income, and it is nottaxable.For more information, see the 2011 Form W-2, IR-2011-31, Notice 2010-69, Notice 2011-28 and our IRSYouTube video and frequently asked questions.Adoption CreditThe Affordable Care Act raises the maximum adoption credit to $13,170 per child, up from $12,150in 2009. It also makes the credit refundable, meaning that eligible taxpayers can get it even if theyowe no tax for that year. In general, the credit is based on the reasonable and necessary expensesrelated to a legal adoption, including adoption fees, court costs, attorney’s fees and travel expenses.Income limits and other special rules apply. In addition to filling out Form 8839, Qualified AdoptionExpenses (see instructions), eligible taxpayers must include with their 2010 tax returns one or moreadoption-related documents to avoid slowing down a refund.For other information, see our news release, tax tip, questions and answers, flyer, Notice 2010-66,Revenue Procedure 2010-31 and Revenue Procedure 2010-35.Medicare Shared Savings ProgramThe Affordable Care Act establishes a Medicare shared savings program (MSSP) which encouragesAccountable Care Organizations (ACOs) to facilitate cooperation among providers to improve the quality ofcare provided to Medicare beneficiaries and reduce unnecessary costs. More information can be found in
  15. 15. Notice 2011-20, which solicits written comments regarding what additional guidance, if any, is needed for tax-exempt organizations participating in the MSSP through an ACO. This guidance also addresses theparticipation of tax-exempt organizations in non-MSSP activities through ACOs. Comments must besubmitted by May 31, 2011. Additional information on the MSSP is available on the Department of Health andHuman Services website.Qualified Therapeutic Discovery Project ProgramThis program was designed to provide tax credits and grants to small firms that show significant potential toproduce new and cost-saving therapies, support U.S. jobs and increase U.S. competitiveness. Applicants wererequired to have their research projects certified as eligible for the credit or grant. IRS guidance describes theapplication process.Submission of certification applications began June 21, 2010, and applications had to be postmarked no laterthan July 21, 2010, to be considered for the program. Applications that were postmarked by July 21, 2010,were reviewed by both the Department of Health and Human Services (HHS) and the IRS. All applicants werenotified by letter dated October 29, 2010, advising whether or not the application for certification wasapproved. For those applications that were approved, the letter also provided the amount of the grant to beawarded or the tax credit the applicant was eligible to take.The IRS published the names of the applicants whose projects were approved as required by law. Listings ofresults are available by state.Learn more by reading the IRS news release, the news release issued by the U.S. Department of the Treasury,the page on the HHS website and our questions and answers.Group Health Plan RequirementsThe Affordable Care Act establishes a number of new requirements for group health plans. Interim guidanceon changes to the nondiscrimination requirements for group health plans can be found in Notice 2011-1, whichprovides that employers will not be subject to penalties until after additional guidance is issued. Otherinformation on requirements is available on the websites of the Departments of Health and HumanServices and Labor and in additional guidance.Tax-Exempt 501(c)(29) Qualified Nonprofit Health Insurance IssuersThe Affordable Care Act requires the Department of Health and Human Services (HHS) to establish theConsumer Operated and Oriented Plan program (CO-OP program). It also provides for tax exemption undersection 501(c)(29) for recipients of CO-OP grants and loans that meet additional requirements. IRS Notice2011-23 outlines the requirements for tax exemption under under section 501(c)(29) and solicits writtencomments regarding these requirements as well as the application process. Comments must be submitted byMay 27, 2011.An overview of the CO-OP program is available on the Department of Health and Human Services website.Medicare Part D Coverage Gap “donut hole” RebateThe Affordable Care Act provides a one-time $250 rebate in 2010 to assist Medicare Part D recipients whohave reached their Medicare drug plan’s coverage gap. This payment is not taxable. This payment is not madeby the IRS. More information can be found at
  16. 16. Additional Requirements for Tax-Exempt HospitalsThe Affordable Care Act adds requirements in the Internal Revenue Code that tax-exempt hospitals must meetto maintain their tax-exempt status. IRS Notice 2010-39 described the new requirements and solicited publiccomments. Due to changes to IRS forms and systems to reflect the additional requirements for charitablehospitals, the start of the 2010 filing season for hospital organizations is delayed. Tax-exempt organizationsthat are required to file Form 990, Schedule H (Hospitals), may not file their 2010 Forms 990 before July 1,2011. Furthermore, IRS Announcement 2011-37 advises hospital organizations that Part V, Section B ofSchedule H is optional for the 2010 tax year. The 2010 Form 990 and Schedule H include new questionsrelating to the new requirements that are in effect for tax years beginning after March 23, 2010, addressing thefinancial assistance, emergency medical care, billing and collection policies and charges for medical care.Annual Fee on Branded Prescription Pharmaceutical Manufacturers and ImportersThe Affordable Care Act created an annual fee payable beginning in 2011 by certain manufacturers andimporters of brand name pharmaceuticals. More information can be found in Notice 2010-71 and Notice 2011-9, which provide proposed guidance and solicit comments on the new fee, and on Form 8947, Report ofBranded Prescription Drug Information.Revenue Procedure 2011-24, establishes a dispute resolution process for the preliminary fee calculation for the2011 annual fee. The revenue procedure provides guidance on what information needs to be submittedregarding an asserted error, in what format the information must be submitted, who may submit theinformation and the deadline for submitting the information. Notice 2011-46 extends the deadline forsubmitting error reports as part of the dispute resolution process.Modification of Section 833 Treatment of Certain Health OrganizationsThe Affordable Care Act amended section 833 of the Code, which provides special rules for the taxation ofBlue Cross and Blue Shield organizations and certain other organizations that provide healthinsurance. Guidance can be found in Notice 2011-04, which provides procedures for a taxpayer to obtainautomatic consent to change its method of accounting for unearned premiums, and Notice 2011-51, whichextends interim guidance on modification of Section 833 treatment of certain health organizations.Limitation on Deduction for Compensation Paid by Certain Health Insurance ProvidersThe Affordable Care Act amended section 162(m) of the Code to limit the compensation deduction availableto certain health insurance providers. The amendment goes into effect for taxable years beginning after Dec.31, 2012, but may affect deferred compensation attributable to services performed in a taxable year beginningafter Dec. 31, 2009. Initial guidance on the application of this provision can be found in Notice 2011-2, whichalso solicits comments on the application of the amended provision.Employer Shared Responsibility PaymentStarting in 2014, certain employers must offer health coverage to their full-time employees or a sharedresponsibility payment may apply. More information and a request for comments on approaches todetermining who is a full-time employee for purposes of this new provision are in Notice 2011-36. Learn moreby reading our news release.
  17. 17. Patient-Centered Outcomes Research InstituteThe Affordable Care Act establishes the Patient-Centered Outcomes Research Institute and that the institute befunded by the Patient-Centered Outcomes Research Trust Fund. The institute will assist patients, clinicians,purchasers, and policy-makers in making informed health decisions by advancing clinical effectivenessresearch. The Trust Fund is to be funded in part by fees to be paid by issuers of health insurance policies andsponsors of self-insured health plans. IRS Notice 2011-35 requests comments regarding how the fees to fundthe institute should be calculated and paid, including several possible rules and safe harbors.For More InformationFor tips, fact sheets, questions and answers, videos and more, see our Affordable Care Act of 2010: NewsReleases, Multimedia and Legal Guidance page.
  18. 18. The “What Ifs” of an Economic Downturn The Internal Revenue Service recognizes that many people may be having difficult times financially. There can be a tax impact to events such as job loss, debt forgiveness or tapping a retirement fund. If your income decreased, you may be newly eligible for certain tax credits, such as the Earned Income Tax Credit.Most importantly, if you believe you may have trouble paying your tax bill contact the IRS immediately. There are steps we can take to help ease the burden. You also should file a tax return even if you are unable to pay so you can avoid additional penalties. Here are some “What if” scenarios and the possible tax impact: Job Related What if I lose my job? What if I receive unemployment compensation? What if my income declines? What if I am searching for a job? What if my employer goes out of business? What if I close my own business? What if I withdraw money from my IRA? What if my 401(k) drops in value? Debt Related What if I lose my home through foreclosure? What if I sell my home for a loss? What if my debt is forgiven? What if I am insolvent? What if I file for bankruptcy protection? Tax Related What if I can’t pay my taxes? What if I can’t pay my installment agreement? What if there is a federal tax lien on my home? What if a levy on my wages is creating hardship? What if I can’t resolve my tax problem with the IRS? What if I need legal representation to help with my tax problem but can’t afford it? Related Items: Tax Tip 2011-68, Three Ways to Pay Your Federal Income Tax • Special Edition Tax Tip, IRS Help for Financially Distressed Taxpayers • IR-2011-42, April 18 Deadline Approaching; Check IRS Payment Options • IR-2011-20, IRS Announces New Effort to Help Struggling Taxpayers Get a Fresh Start; Major Changes Made to Lien Process • IR-2010-29, IRS Outlines Additional Steps to Assist Unemployed Taxpayers and Others • Payment Plans, Installment Agreements • Offers in Compromise • Tax Center to Assist Unemployed Taxpayers • Publication 4763, Job Related Questions During an Economic Downturn GO TO WWW.IRS.GOV AND TYPE IN THE SEARCH ENGINE: THE WHAT IFS OF AN ECONOMIC DOWNTURN
  19. 19. Tax ImpactofJob Loss Publication 4128 (Rev. 5-2011) Catalog Number 35359QDepartment of the Treasury Internal Revenue Service
  20. 20. Facts JOB LOSS CREATES TAX ISSUESThe Internal Revenue Service recognizes that the loss of a job may create new taxissues. The IRS provides the following information to assist displaced workers. Severance pay and unemployment compensation are taxable. Payments for any accumulated vacation or sick time are also taxable. You should ensure that enough taxes are withheld from these payments or make estimated payments. See IRS Publication 17, Your Federal Income Tax, for more information. Generally, withdrawals from your pension plan are taxable unless they are transferred to a qualified plan (such as an IRA). If you are under age 59 1⁄2, an additional tax may apply to the taxable portion of your pension. See IRS Publication 575, Pension and Annuity Income, for more information. Certain expenses incurred while looking for a new job may be deductible. Examples of deductible expenses include employment and outplacement agency fees, resume preparation, and travel expenses for job search and interviews. See IRS Publication 17, Your Federal Income Tax, for more information. Moving costs you incur because of a change in your job location may be deductible. You must meet certain criteria relating to distance moved and timing of the move. See IRS Publication 521, Moving Expenses, for more information. Some displaced workers may decide to start their own business. The IRS provides information and classes for new business owners. Please visit or see IRS Publication 334, Tax Guide for Small Businesses, for more information.Copies of all publications are available at You may also request a copy bycalling 1-800-829-3676. 1
  21. 21. Q&A JOB LOSS: What Income is Taxable?The following Questions and Answers are provided by the Internal Revenue Service to clarify the taximplications of financial issues faced by workers who have lost their jobs. References are provided foradditional information.Is Severance Pay taxable?Yes, severance pay is taxable in the year that you receive it. Your employer will include this amount onyour Form W-2 and will withhold appropriate federal and state taxes. See Publication 525 for additionalinformation.What about Accumulated Leave or Vacation Pay and Sick Pay?Yes, annual, or vacation pay, and sick pay are calculated as wages by your employer and will be includedin your Form W-2.Is Unemployment Compensation taxable?Yes, your state unemployment insurance benefits (up to 26 weeks) and your extended benefits (up to anadditional 13 weeks) are taxable. You may choose to have 10% withheld for federal taxes by completingForm W-4V. The State will provide you with a Form 1099-G prior to January 31st of each year, showingthe amount of taxable benefits paid in the prior year. See Publication 525 for additional information.What about Gifts of Cash and Property from Family or Friends?Generally, the person who receives the gift is not liable for any taxes on the gift. If the gift producesincome like interest, dividends or rent payments, the receiver would be responsible for taxes on thatproduced income. Each year there is a specific maximum amount that may be given that will not createa taxable event to either the giver or the receiver. Gifts in excess of this maximum may be subject to gifttaxes by the gift giver. See Publications 17 or Instructions to Form 709, United States Gift Tax Return, foradditional information.If I am eligible for Public Assistance or Food Stamps, is it taxable? No.When will I get my final Form W-2 from my employer?Your employer must provide your Form W-2 by January 31st after the close of the calendar year. As anexample, 2011 Forms W-2 are due to employees by January 31, 2012.What if my employer filed bankruptcy or went out of business, how do I get my Form W-2?In either case the employer must file and report your wages and withholding on a Form W-2 at year’send. If you do not receive your Form W-2, try to contact your employer or their representative. If you areunsuccessful, the IRS can assist you in filing a substitute Form W-2 using your records. A good precautionis to keep year-to-date records or pay stubs until you receive your Form W-2.Can I file an early tax return and receive any refund due?No. Individual income tax returns are based on a calendar year and cannot be filed and processed earlierthan January 1st of the next calendar year.If I sell other assets like stocks, bonds, and investment property, are they immediately taxable?Not necessarily, however the sale of such assets should be reported. If you have a gain on the sale, it maygenerate an income tax liability. You should review your overall tax situation and make sure you have paidyour taxes as required to avoid any estimated tax penalty. Information on estimated tax is in Publication505. 2
  22. 22. Q&A JOB LOSS: What Income is Taxable? (continued)What can I do if I owe taxes and cannot pay them?Contact the Internal Revenue Service as soon as possible to request a payment plan. Communication isthe key to minimizing problems.Go to for more information on payment methods and balance due payment options or youcan call the IRS at 1-800-829-1040.Is special assistance available on unresolved tax matters that create hardships?Yes, if you are experiencing economic harm, a systemic problem or are seeking help in resolving taxproblems that have not been resolved through normal channels, you may be eligible for TaxpayerAdvocate Services (TAS) assistance. You can reach TAS by calling toll-free 1-877-777-4778 or TTY/TTD1-800-829-4059.Copies of the referenced publications can be found at, or you may call 1-800-829-3676. 3
  23. 23. Q&A JOB LOSS: Pensions/IRAs – What’s Next?The following Questions and Answers are provided by the Internal Revenue Service to help you handlefinancial issues with a tax impact which may arise if you lose your job.What if I withdraw money from my qualified retirement plan or IRA?Generally speaking, if you withdraw the funds before you reach eligible age, and do not roll it over intoanother qualified retirement plan or Individual Retirement Account (IRA) within 60 days, that amount willbe taxable income in the year in which it is withdrawn. You may also have to pay an additional 10% taxon those early distributions. There are special rules for computing tax on lump-sum distributions. See IRSPublication 17 or Publication 575 for detailed information.Can I move money from my qualified retirement plan into another qualified retirement plan or IRA?Yes, this is called a “rollover” and the amount will not be taxed if you redeposit the amount withdrawninto another qualified retirement plan or traditional IRA within 60 days. See Publication 575 for additionalinformation.Are there any “hardship” exceptions to the early distribution penalties?Yes. If you are totally and permanently disabled or if you withdraw the money to pay medical expenses(these expenses must be more than 7.5% of your adjusted gross income) or to pay an alternate payeeunder a qualified domestic relations order. Other specific exceptions are detailed in Publication 575.If I made an IRA contribution during the current tax year, can I withdraw it before the close of theyear?Yes. Contributions returned before the due date of the return can be withdrawn without penalty. You musttake not only the contribution but any interest or dividend it may have earned. This is a tax-free eventif (1) you do not take a deduction for the contribution and (2) you withdraw any income or interest theinvestment made while in the IRA and include that amount in your income. See Publication 590, IndividualRetirement Arrangements for more information.I’ve had my IRAs for several years, in some of those years I didn’t benefit from any deduction dueto my income. How do I figure what part of the distribution is taxable?If you had non-deductible IRA contributions, you would have completed Form 8606 to establish yourbasis (cost) in your combined IRAs. Use the worksheet in Publication 590 to calculate what part of thedistribution is taxable and complete Part I on Form 8606 and attach it to your return.If I take my pension and want to transfer it to an IRA, are there any special rules or restrictions?Rolling over your pension distribution to a financial institution: (i.e., bank, credit union, brokerage house,etc.) is straightforward. There are some prohibited transactions including borrowing the distribution evenwith a signed contract with interest due, receiving unreasonable compensation for managing these funds,buying property for personal use (present or future), or using the distribution as security for a loan. Reviewthe information in Publications 575 and 590 for additional information.In addition to the Publications 17, 575 and 590, take advantage of every resource including your financialand/or tax advisor before deciding how to proceed in transitioning your retirement funds. Copies of thereferenced publications can be found at or you may call 1-800-829-3676. 4
  24. 24. Q&A JOB LOSS: Starting Your Own BusinessEvery new phase of life brings many challenges. The Internal Revenue Service recognizes that the lossof a job can create new tax situations for you. The following information is provided to clarify possible taximplications.Can I be an Employee and a Business Owner in the same tax year?Yes. Under the tax law, you can be both an Employee and a Business Owner at the same time if youchoose. The primary issue is to report all income on your return.Where can I get information about starting my own business?Publication 334, Tax Guide for Small Business, Publication 583, Starting a Business and Keeping Recordsare free publications that have helpful information for small business owners. In addition, Publication4591, Small Business Tax Responsibilities, provides a summary of the reference material for the businessowner. These products contain information on starting your own business, record keeping, and deductibleexpenses.What options do I have for organizing my business?Under the federal tax code, there are three options: Sole Proprietorship, Partnership or Corporation. Anumber of factors may influence your decision about which structure is best for you including cost of start-up, exposure to risk or liability, financing and the tax implications.What record keeping requirements do I have as a Sole Proprietor?Generally, you should keep detailed records of your income and expenses for your business to preparenot only required tax returns but also financial statements to help in maintaining and growing yourbusiness. The same general rules apply for Partnerships and Corporations with some additional detail.How do I report my business income?As a Sole Proprietor, you will need to file a Form 1040, Schedule C or C-EZ and Schedule SE. For moreinformation, please see Publication 334, Tax Guide for Small Business.What kinds of taxes do I pay as a Sole Proprietor?Taxes due on net self-employment income (total business income minus expenses) include incometax and self-employment (Social Security and Medicare) taxes. Additional information is available inPublication 334, Tax Guide for Small Businesses. You may be responsible for Employment Taxes if youhave employees working in your business, see Publication 15, Circular E, Employer’s Tax Guide fordetails.How do I pay my taxes as a Sole Proprietor?Generally, you would pay using the 1040ES Estimated Tax process on a quarterly basis. Federal incometaxes including Self-Employment tax use a pay-as-you-go system. You generally must make estimated taxpayments if you expect to owe taxes of $1,000 or more when you file your return. For more information onEstimated Tax see Publication 505. Employment taxes are paid using Forms 941, Employer’s QuarterlyFederal Tax Return, and Form 940, Employer’s Annual Federal Unemployment Tax Return. The filingrequirements for each of these forms and instructions about how to pay taxes due are included in thePublication 15, Circular E, Employer’s Tax Guide.Can I claim the Earned Income Credit on my net self-employment income?Yes, net income from a Sole Proprietorship is earned income and is one of the qualifications for earnedincome credit. The Earned Income Credit is available to taxpayers that meet certain income guidelines.See Publication 596, Earned Income Credit.Are classes or seminars available to get additional information?Yes. The Small Business/Self-Employed Division of the Internal Revenue Service has a number of SmallBusiness seminars through out the nation. You can also order Publication 1066C, A Virtual Small BusinessWorkshop DVD on the Small Business Web Site at Other products are available to order atthe Small Business Web Site as well. 5
  25. 25. Q&A JOB LOSS: Miscellaneous Tax InformationEvery new phase of life brings many challenges. The Internal Revenue Service recognizes that the lossof a job can create new tax situations for you. The following information is provided to clarify the taximplications.Can I deduct any of the expenses that I have from looking for a new job?Yes, you can deduct certain expenses for looking for a new job in your present occupation, even if you donot get a new job. For additional information, see Publication 529, Miscellaneous Deductions.What types of expenses can I include?Generally, you can deduct employment and outplacement agency fees and amounts for typing, printing,and mailing copies of your resume to prospective employers for work in your current occupation. Morespecific information is available in Publication 529, Miscellaneous Deductions.What about travel costs for interviews or job hunting?If you travel to an area to look for work in your current occupation or attend an interview you can generallydeduct the ordinary and necessary travel costs. The purpose of the trip must be considered. Trips that areprimarily personal are not deductible. For more information on how to compute your travel expenses, seePublication 463, Travel, Entertainment, Gifts and Car Expense.Do I need to file the “long-form” to deduct my job hunting costs?Yes, you will need to file a Form 1040 and Schedule A. Job hunting costs are a miscellaneous itemizeddeduction, subject to a 2% Adjusted Gross Income limitation. For more information, please seePublication 17, Your Federal Income Tax.Can I deduct the moving costs I paid to move to my new job?Certain moving costs are deductible if you meet the time and distance requirements. Generally, yourmove has to be closely related in time to the start of your new job and you must have moved at least 50miles. Deductible moving costs are calculated on Form 3903. Publication 521, Moving Expenses, providesadditional information.If I sell my home, do I have to pay taxes on the money I make?Usually you do not have to pay tax on the first $250,000 ($500,000 on a joint return in most cases) of gainfrom the sale of your main home. Generally, you must have lived in and owned the home for at least twoyears of the five years prior to the sale and not excluded a gain on another home in the past two years.For more information, see Publication 523, Selling Your Home.Now I have to pay the full cost for my health insurance. Is this deductible?Health insurance premiums are includible in your medical and dental bills. They are deductible onSchedule A, if you itemize. Some limitations apply. See Publication 502, Medical and Dental Expenses, formore information.Can I deduct contributions I made to a Health Savings Account (HSA)?If you are an eligible individual, you can claim a tax deduction for contributions you, or someone otherthan your employer, make to your HSA even if you do not itemize your deductions on Form 1040. Formore information see Pub 969, Health Savings Accounts and Other Tax-Favored Health Plans.Can I claim the Earned Income Credit this year?Even though your income may have exceeded the thresholds for this credit in past years, you may beeligible for the credit this year. The credit is available to taxpayers who meet certain income guidelines. Formore information, see Publication 596, Earned Income Credit.My chances of finding a new job will be better if I take a few college courses. Can I deduct any ofmy tuition?There are a number of tax benefits available for going to college or taking college courses. Some of thebenefits are credits and others are deductions from your income. Refer to Publication 970, Tax Benefitsfor Education for more information.Copies of the referenced publications can be found at or you may call 1-800-829-3676. 6
  26. 26. How can you minimize becoming a victim? How can you protect your tax records? Identity Theft Prevention • Don’t carry your Social Security card or any document(s) with If your tax records are not currently affected by identity theft, but your SSN on it. you believe you may be at risk due to a lost/stolen purse or wallet, And Victim Assistance • Don’t give a business your SSN just because they ask - only when questionable credit card activity or credit report, etc., contact the absolutely necessary. IRS Identity Protection Specialized Unit at 1-800-908-4490. • Protect your financial information. What should you do if your tax records are affected • Check your credit report every 12 months. by identity theft? • Secure personal information in your home. If you receive a notice from IRS, respond immediately. If you • Protect your personal computers by using firewalls, anti- believe someone may have used your SSN fraudulently, please spam/virus software, update security patches, and change passwords notify IRS immediately by responding to the name and number for Internet accounts. printed on the notice or letter. • Don’t give personal information over the phone, through the mail What if you receive an e-mail claiming to be from or on the Internet unless you have initiated the contact or you are the IRS? sure you know who you are dealing with. • Remember, the IRS does not initiate contact with taxpayers via e- Remember, the IRS does not initiate contact with mail, and the IRS does not request detailed personal information taxpayers via e-mails, and the IRS does not through e-mail. request detailed personal information • Confirm the contact you have received is from the IRS by calling through e-mail. 1-800-829-1040. What if you are a victim of identity theft? • Please forward the bogus e-mail claiming to be from the IRS to • Report incidents of identity theft to the FTC Go to (keyword phishing) to get Information from or the FTC Identity Theft hotline at instructions on how to forward thee-mail message. the Internal Revenue Service 1-877-438-4338 or TTY 1-866-653-4261. • Do not open attachments or click on the links found within the • File a report with the local police. bogus e-mail. • Contact the fraud departments of the three major credit bureaus: For additional information, visit: Equifax – 1-800-525-6285 • (keyword identity theft) Experian – 1-888-397-3742While the Federal Trade Commission, the lead agency • (keyword phishing) TransUnion – 1-800-680-7289on identity theft, reported that the IRS has a low number • Close any accounts that have been tampered with or opened Federal Trade Commission, FTCof identity theft crimes, we take this issue very seriously. fraudulently.What is identity theft? How could identity theft impact your tax records?Identity theft occurs when someone uses your personal • Individuals may use your SSN to get a job. That person’s employerinformation such as your name, Social Security number would report the W-2 wages earned using your SSN to IRS. Thisor other identifying information, without your permission, to may give the appearance that you did not report all of your incomecommit fraud or other crimes. on your return.Identity theft is a serious crime. People whose identities • When you subsequently file your tax return the IRS will believehave been stolen can spend months or years, and their you already filed and received a refund, and the return you actuallyhard earned money, cleaning up the mess thieves have submitted is a second copy or duplicate.made of their good name and credit record. In the • Be alert to possible identity theft if you receive an IRS notice ormeantime, victims may lose job opportunities, be letter that states that:refused loans, education, housing or cars, or even get • More than one tax return for you was filed, orarrested for crimes they didn’t commit. • IRS records indicate you received wages from an employer unknown to you.
  27. 27. Form 4506-T Request for Transcript of Tax Return(Rev. January 2011) OMB No. 1545-1872Department of the Treasury Request may be rejected if the form is incomplete or illegible.Internal Revenue ServiceTip. Use Form 4506-T to order a transcript or other return information free of charge. See the product list below. You can quickly request transcripts by usingour automated self-help service tools. Please visit us at and click on "Order a Transcript" or call 1-800-908-9946. If you need a copy of your return, useForm 4506, Request for Copy of Tax Return. There is a fee to get a copy of your return. 1a Name shown on tax return. If a joint return, enter the name shown 1b First social security number on tax return, individual taxpayer identification first. number, or employer identification number (see instructions) 2a If a joint return, enter spouse’s name shown on tax return. 2b Second social security number or individual taxpayer identification number if joint tax return 3 Current name, address (including apt., room, or suite no.), city, state, and ZIP code (See instructions) 4 Previous address shown on the last return filed if different from line 3 (See instructions) 5 If the transcript or tax information is to be mailed to a third party (such as a mortgage company), enter the third party’s name, address, and telephone number. The IRS has no control over what the third party does with the tax information.Caution. If the transcript is being mailed to a third party, ensure that you have filled in line 6 and line 9 before signing. Sign and date the form once youhave filled in these lines. Completing these steps helps to protect your privacy. 6 Transcript requested. Enter the tax form number here (1040, 1065, 1120, etc.) and check the appropriate box below. Enter only one tax form number per request. a Return Transcript, which includes most of the line items of a tax return as filed with the IRS. A tax return transcript does not reflect changes made to the account after the return is processed. Transcripts are only available for the following returns: Form 1040 series, Form 1065, Form 1120, Form 1120A, Form 1120H, Form 1120L, and Form 1120S. Return transcripts are available for the current year and returns processed during the prior 3 processing years. Most requests will be processed within 10 business days . . . . . . b Account Transcript, which contains information on the financial status of the account, such as payments made on the account, penalty assessments, and adjustments made by you or the IRS after the return was filed. Return information is limited to items such as tax liability and estimated tax payments. Account transcripts are available for most returns. Most requests will be processed within 30 calendar days. . c Record of Account, which is a combination of line item information and later adjustments to the account. Available for current year and 3 prior tax years. Most requests will be processed within 30 calendar days . . . . . . . . . . . . . . . . . . . 7 Verification of Nonfiling, which is proof from the IRS that you did not file a return for the year. Current year requests are only available after June 15th. There are no availability restrictions on prior year requests. Most requests will be processed within 10 business days . . 8 Form W-2, Form 1099 series, Form 1098 series, or Form 5498 series transcript. The IRS can provide a transcript that includes data from these information returns. State or local information is not included with the Form W-2 information. The IRS may be able to provide this transcript information for up to 10 years. Information for the current year is generally not available until the year after it is filed with the IRS. For example, W-2 information for 2007, filed in 2008, will not be available from the IRS until 2009. If you need W-2 information for retirement purposes, you should contact the Social Security Administration at 1-800-772-1213. Most requests will be processed within 45 days . . .Caution. If you need a copy of Form W-2 or Form 1099, you should first contact the payer. To get a copy of the Form W-2 or Form 1099 filedwith your return, you must use Form 4506 and request a copy of your return, which includes all attachments. 9 Year or period requested. Enter the ending date of the year or period, using the mm/dd/yyyy format. If you are requesting more than four years or periods, you must attach another Form 4506-T. For requests relating to quarterly tax returns, such as Form 941, you must enter each quarter or tax period separately.Signature of taxpayer(s). I declare that I am either the taxpayer whose name is shown on line 1a or 2a, or a person authorized to obtain the taxinformation requested. If the request applies to a joint return, either husband or wife must sign. If signed by a corporate officer, partner, guardian, taxmatters partner, executor, receiver, administrator, trustee, or party other than the taxpayer, I certify that I have the authority to executeForm 4506-T on behalf of the taxpayer. Note. For transcripts being sent to a third party, this form must be received within 120 days of signature date. Telephone number of taxpayer on line 1a or 2a Signature (see instructions) DateSignHere Title (if line 1a above is a corporation, partnership, estate, or trust) Spouse’s signature DateFor Privacy Act and Paperwork Reduction Act Notice, see page 2. Cat. No. 37667N Form 4506-T (Rev. 1-2011)
  28. 28. Form 4506-T (Rev. 1-2011) Page 2General Instructions Chart for all other transcripts Corporations. Generally, Form 4506-T can be signed by: (1) an officer having legal authority toPurpose of form. Use Form 4506-T to request If you lived in Mail or fax to the bind the corporation, (2) any person designatedtax return information. You can also designate a or your business “Internal Revenue by the board of directors or other governingthird party to receive the information. See line 5. was in: Service” at: body, or (3) any officer or employee on writtenTip. Use Form 4506, Request for Copy of request by any principal officer and attested toTax Return, to request copies of tax returns. Alabama, Alaska, by the secretary or other officer. Arizona, Arkansas,Where to file. Mail or fax Form 4506-T to Partnerships. Generally, Form 4506-T can be California, Colorado,the address below for the state you lived in, signed by any person who was a member of the Florida, Hawaii, Idaho,or the state your business was in, when that partnership during any part of the tax period Iowa, Kansas,return was filed. There are two address charts: requested on line 9. Louisiana, Minnesota,one for individual transcripts (Form 1040 series Mississippi, All others. See Internal Revenue Code sectionand Form W-2) and one for all other transcripts. Missouri, Montana, 6103(e) if the taxpayer has died, is insolvent, is a If you are requesting more than one transcript Nebraska, Nevada, RAIVS Team dissolved corporation, or if a trustee, guardian,or other product and the chart below shows two New Mexico, P.O. Box 9941 executor, receiver, or administrator is acting fordifferent RAIVS teams, send your request to the North Dakota, Mail Stop 6734 the based on the address of your most recent Oklahoma, Oregon, Ogden, UT 84409 Documentation. For entities other thanreturn. South Dakota, Texas, individuals, you must attach the authorization Utah, Washington, document. For example, this could be the letterAutomated transcript request. You can quickly Wyoming, a foreign from the principal officer authorizing anrequest transcripts by using our automated self country, or A.P.O. or employee of the corporation or the Lettershelp-service tools. Please visit us at and F.P.O. address 801-620-6922 Testamentary authorizing an individual to act forclick on “Order a Transcript” or call1-800-908-9946. an estate. Connecticut,Chart for individual Delaware, District of Privacy Act and Paperwork Reduction Act Columbia, Georgia, Notice. We ask for the information on this formtranscripts (Form 1040 series and Illinois, Indiana, to establish your right to gain access to theForm W-2) Kentucky, Maine, requested tax information under the Internal Maryland, Revenue Code. We need this information toIf you filed an Mail or fax to the Massachusetts, properly identify the tax information and respond Michigan, New RAIVS Teamindividual return “Internal Revenue P.O. Box 145500 to your request. You are not required to requestand lived in: Service” at: Hampshire, New any transcript; if you do request a transcript, Jersey, New York, Stop 2800 F Cincinnati, OH 45250 sections 6103 and 6109 and their regulationsFlorida, Georgia (After RAIVS Team North Carolina, require you to provide this information, includingJune 30, 2011, send P.O. Box 47-421 Ohio, Pennsylvania, your SSN or EIN. If you do not provide thisyour transcript Stop 91 Rhode Island, South information, we may not be able to process yourrequests to Kansas Doraville, GA 30362 Carolina, Tennessee, request. Providing false or fraudulent informationCity, MO) 770-455-2335 Vermont, Virginia, may subject you to penalties. West Virginia, Wisconsin 859-669-3592 Routine uses of this information include givingAlabama, Kentucky, RAIVS Team it to the Department of Justice for civil andLouisiana, Mississippi, Stop 6716 AUSC criminal litigation, and cities, states, the District Line 1b. Enter your employer identificationTennessee, Texas, a Austin, TX 73301 of Columbia, and U.S. commonwealths and number (EIN) if your request relates to aforeign country, possessions for use in administering their tax business return. Otherwise, enter the firstAmerican Samoa, laws. We may also disclose this information to social security number (SSN) or your individualPuerto Rico, Guam, the other countries under a tax treaty, to federal and taxpayer identification number (ITIN) shown onCommonwealth of the state agencies to enforce federal nontax criminal the return. For example, if you are requestingNorthern Mariana laws, or to federal law enforcement and Form 1040 that includes Schedule C (FormIslands, the U.S. Virgin 512-460-2272 intelligence agencies to combat terrorism. 1040), enter your SSN.Islands, or A.P.O. orF.P.O. address Line 3. Enter your current address. If you use a You are not required to provide the P. O. box, include it on this line. information requested on a form that is subject to the Paperwork Reduction Act unless the formAlaska, Arizona, RAIVS Team Line 4. Enter the address shown on the last displays a valid OMB control number. Books orArkansas, California, Stop 37106 return filed if different from the address entered records relating to a form or its instructions mustColorado, Hawaii, Fresno, CA 93888 on line 3. be retained as long as their contents mayIdaho, Illinois, Indiana, become material in the administration of anyIowa, Kansas, Note. If the address on Lines 3 and 4 are Internal Revenue law. Generally, tax returns andMichigan, Minnesota, different and you have not changed your address return information are confidential, as required byMontana, Nebraska, with the IRS, file Form 8822, Change of Address. section 6103.Nevada, New Mexico, Line 6. Enter only one tax form number perNorth Dakota, The time needed to complete and file Form request.Oklahoma, Oregon, 559-456-5876 4506-T will vary depending on individual Signature and date. Form 4506-T must be circumstances. The estimated average time is:South Dakota, Utah, signed and dated by the taxpayer listed on lineWashington, Learning about the law or the form, 10 min.; 1a or 2a. If you completed line 5 requesting the Preparing the form, 12 min.; and Copying,Wisconsin, Wyoming information be sent to a third party, the IRS must assembling, and sending the form to the IRS, receive Form 4506-T within 120 days of the date 20 min.Connecticut, Delaware, RAIVS Team signed by the taxpayer or it will be rejected. If you have comments concerning theDistrict of Columbia, Stop 6705 P-6 Individuals. Transcripts of jointly filed tax accuracy of these time estimates or suggestionsMaine, Maryland, Kansas City, MO returns may be furnished to either spouse. Only for making Form 4506-T simpler, we would beMassachusetts, 64999 one signature is required. Sign Form 4506-T happy to hear from you. You can write to theMissouri, New exactly as your name appeared on the original Internal Revenue Service, Tax ProductsHampshire, New return. If you changed your name, also sign your Coordinating Committee, SE:W:CAR:MP:T:T:SP,Jersey, New York, current name. 1111 Constitution Ave. NW, IR-6526,North Carolina, Ohio, Washington, DC 20224. Do not send the form toPennsylvania, Rhode this address. Instead, see Where to file on thisIsland, South Carolina, page.Vermont, Virginia, West 816-292-6102Virginia
  29. 29. Volunteer Income Tax Assistance Grant ProgramIRS VITA Grant ProgramThe Volunteer Income Tax Assistance Grant Program is an IRS initiative designed to promote and support free tax preparation service for theunderserved, low income populations. These include the elderly, disabled, non-urban, native American and those taxpayers having limited Englishproficiency.In 2011, IRS awarded matching grants to 179 organizations that offered free tax preparation services during the 2011 tax filing season at locationsin all 50 states and the District of Columbia. Congress appropriated $12 million in funding to support the VITA Program.This year the IRS will be accepting applications for the VITA Grant Program that will allow some organizations to apply for annual funding for upto three years. The application period opens May 23, 2011 and closes June 30, 2011.This Grant Program is intended to provide direct funds to organizations to: • Enable VITA Programs to extend services to underserved populations in hardest-to-reach areas, both urban and non-urban; • Increase the capacity to file returns electronically; • Heighten quality control; • Enhance volunteer training; and • Significantly improve the accuracy rate of returns prepared at volunteer sites.Please refer to IRS Publication 4671, VITA Grant 2012 Program Overview and Application Package for more information. Contact the VITA GrantProgram at Whats Happening Forms Reporting Requirements • 2012 VITA/TCE Grant Overview • Standard Form 424, Application for Federal • At-A-Glance VITA Grant • VITA Grant 2012 Workbook Assistance Reporting Requirements • VITA Grant FAQs by Category • Standard Form 424A, Budget Information–Non- • Guidelines for VITA Grant • GPO News - May 2011 Construction Programs Reports • Standard Form 424B, Assurances—Non- • SF 425, Federal Financial Report Construction Programs • SF PPR, Performance Progress Report • Standard Form LLL, Disclosure Form to Report • SF PPR-A, Performance Measures Lobbying When Applicable • SF PPR-B, Program • Form 13981, VITA Grant Agreement
  30. 30. Publications Important Links Additional Resources• Publication 561, Determining the • - Online federal grant announcement • 2011 Grant Award Notification Value of Donated Property and application system. Enclosure• Publication 1084, IRS Volunteer • Office of Management and Budget- Circulars • 2011 VITA/TCE Grant Recipient Site Coordinators Handbook governing the administrative requirements, cost Orientation• Publication 4299, Privacy and principles, and audit requirements of a grant • Form 13614-C, Intake/Interview Confidentiality - A Public Trust award. and Quality Review Sheet• Publication 4671, VITA Grant • Central Contractor Registry - The primary • SF1199-A, Direct Deposit Form 2012 Program Overview and registrant database of contracts and assistance • VITA Grant Program Office Application Package (Rev. 5- awards for the federal government. Primary Contact Form 2011) • State Review Required under Executive Order • Division of Payment Management• Publication 4680, VITA Grant 12372 - Allows each state to designate an entity Primary Contact Form Program brochure (Rev. 3-2011) to review proposed federal financial assistance • Previous GPO News• Publication 4883, Grant Programs and direct federal development. Visit the Web o March 2011 Resource Guide (Rev. 3-2011) site to determine whether your state participates. o February 2010 • Division of Payment Management - Provides an on-line payment system that is used to request federal funds awarded under the VITA Grant Program. • Dun & Bradstreet Universal Number - The DUNS number is a means to identify entities receiving federal grants and cooperative agreements. Call 1–866–705–5711 to learn more. • Sub-award Reporting - Reporting of first tier sub-awards. Please refer to the Terms and Conditions Addendum, Form 13981. Page Last Reviewed or Updated: May 31, 2011 If you would like to be a Volunteer to assist the elderly and disabled file tax returns, please review the information on the website at - search for VITA Volunteer Income Tax Assistance Grant Program.