Category Archives: appliance

Charitable Giving Around the Holidays

 Are you feeling extra jolly this holiday season? Before giving to your favorite holiday charities, be sure to get informed.

Holiday donations often pair with the tax-friendly charitable deduction–but be wary of the gifts that won’t qualify for the benefit. Read on to learn how to fine-tune your charitable holiday giving and save cash on your upcoming tax return filing.

 

Holiday Donations 2016-2017

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Why Should I Donate During the Holidays?

The act of donating to your favorite holiday charities sparks a sense of good-deed. Those on the fence may wonder, what is the value of holiday donations on your tax return? In order to claim gifts to holiday charities, the giver must itemize deductions on their tax return.

Contributions made to a qualified charity are only deductible within the year a contribution is made. Keep in mind, if you make a contribution via credit card, the gift is deductible when it’s charged. Not when you pay the bill!

  • For cash donations that are less than $250, it is generally sufficient to keep a bank statement, receipt, or other record that shows the name of the organization, date the contribution was made, and the amount of the contribution.
  • For cash contributions of $250 or more, no deduction is allowed unless you have a receipt or other written confirmation from the charity – a canceled check alone is not enough. If you are in the 25% bracket, that $1,000 donation receipt could be worth up to $250 in tax savings.
  • If you donate property with a combined value more than $250 you will have to have a statement from the charity acknowledging the contribution.
  • For property worth more than $5,000, you will also need to include a qualified appraisal on your return.
  • The IRS only permits deductions for donations of clothing and household items that are in “good condition or better.” Special rules apply to vehicle donations.

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If you have any questions about holiday charities or donations made during the holidays, contact your local H&R Block tax professional for more details.

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Filing for a Deceased Taxpayer

Handling a loved one’s estate is something millions face every year. Here is a short Q&A about some tax aspects to be mindful of when filing taxes for the deceased, including the details of Form 1310.

 

Under what circumstances does a tax return need to be filed for a deceased taxpayer? When is the tax return due?

 

The same filing requirements apply to a deceased taxpayer that apply to any other individual taxpayer. Even if the deceased isn’t subject to filing requirements, file a return to get a tax refund of any taxes that were withheld.

 

The return is due by the filing deadline for the tax year in which the taxpayer died; tax returns for people who died in 2017 are due on or before April 17, 2018.

 

Whose responsibility is it to file?

The person in charge of the estate is responsible for making sure the tax return is filed. This could be the executor, spouse or anyone else in charge of the decedent’s property. If the taxpayer was married at the time of death, the surviving spouse may file the return for the year using the married filing joint status.

 

Can a tax return for a deceased taxpayer be e-filed?

Yes, it can. Whether e-filed or filed on paper, be sure to write “deceased” after the taxpayer’s name. If paper filed, also include the taxpayer’s date of death across the top of the return.

 

Does a death certificate have to be attached to the tax return?

No, a copy of the taxpayer’s death certificate does not have to be sent with the tax return.

 

Is there anything special that must be done if a tax refund is due?

If a tax refund is due, the person claiming the refund must fill out Form 1310 (Statement of Person Claiming Refund Due to Deceased Taxpayer) unless the individual is a surviving spouse filing a joint return or a court appointed personal representative.

 

If money is owed, who is responsible for paying?

If taxes are due, they should be paid by the estate, which has control of the deceased taxpayer’s money. Taxes should be paid before distributing funds to the beneficiaries. If there is not enough money in the estate to cover the tax liability, the debt generally does not get transferred to the person in charge of the decedent’s property.

However, if the money would have been available for the tax debt had it not been distributed to beneficiaries, then the debt will be transferred to the personal representative of the estate.

 

Are all surviving spouses eligible to file as a qualified widow/widower?

 

No, they aren’t. Generally, to file as a qualifying widow/widower, the surviving spouse must also have been entitled to file a joint return with the deceased taxpayer, have a dependent child and not have remarried within in the past two years.

 

What if a child died? Can the child be claimed as a dependent?

If a child was living at any time during the year, the taxpayer can claim the dependent exemption if the dependency tests are met. For this purpose, the child is treated as having lived with the taxpayer all year if the child lived with the taxpayer at all times (with exceptions for temporary absences) prior to the child’s death. If the child is the taxpayer’s qualifying child for the dependency exemption, the taxpayer also is eligible to claim the child for the Child Tax Credit and the Earned Income Tax Credit.

 

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Three Ways to Reduce or Remove IRS Interest from Your Tax Bill

People who owe the IRS owe more than taxes. On top of the tax bill, the IRS charges penalties and interest. That’s why it’s critical to get into a payment agreement with the IRS: As your balance grows, so does the interest.

So, it’s no surprise that people in this situation often ask the IRS to remove or reduce their interest. The IRS won’t remove interest most of the time – but if you’re proactive, you can minimize interest on your own.

Here are three ways to do it:

1. Reduce the tax

The first thing that you or an experienced tax professional should do is figure out why you owe the tax. There’s always a chance that the tax can be reduced or removed. And if you owe less tax, you owe less interest, too. Here are some common reasons people owe the IRS:

  • CP2000 notice – The IRS sends a CP2000 notice when your tax return doesn’t match income information the IRS has about you. If you don’t respond, or if you respond incorrectly, the IRS will charge you the tax it thinks you owe, plus interest and possibly a penalty. First, you should figure out if the IRS is even correct about the tax it says you owe – then go from there. Here’s exactly how to handle a CP2000 notice.
  • Incorrect or incomplete return – Consider asking a qualified tax professional to review your return to make sure it’s accurate and that you got all the credits and deductions you were entitled to receive. Find out more here.
  • Unfiled returns – If you don’t file a return, the IRS can prepare a return for you (the IRS calls this a substitute for return). But the IRS will prepare your substitute return with only the income information it has on file about you from banks, employers, etc. That means you won’t get any favorable credits or deductions. If you file a return to replace the substitute return, you can reduce or even eliminate the balance you owe – including interest. Here’s how.

2. Reduce the penalties

When you get penalties reduced or removed, you also reduce the interest that goes along with them. There are four types of penalty abatement options:

You should start by identifying which (if any) option you might qualify for. Then, submit your request to the right unit at the IRS. Here’s more about how to address IRS penalties.

3. Set up a monthly payment plan

The best way to stop interest from building up is to pay the full tax bill. But, if that’s not possible, you have options.

If you set up a monthly payment plan with the IRS (called an installment agreement), the IRS will cut your failure to pay penalty in half. Less penalty means less interest.

The IRS offers several types of installment agreements with different terms. A tax professional can help you evaluate which option will work best for you, and work with the IRS to set up the agreement. Learn more about payment options the IRS offers.

When will the IRS eliminate the interest?

The IRS may remove your interest if:

  • The IRS made an arithmetic error.
  • An IRS employee made a mistake or caused a delay.

For example, if an IRS employee lost your case file during an audit, the IRS may remove the interest that built up during the delay in completing your audit.

How to get expert help

An experienced tax professional can evaluate your specific facts and circumstances to determine if you qualify to lower your interest using any of these strategies.

Learn about H&R Block’s Tax Audit & Notice Services. Or make an appointment for a free consultation with a local tax professional by calling 855-536-6504 or finding a local tax pro.

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File for Free – Even If You Itemize Tax Deductions

For anyone with an eye on the bottom line, the details matter. When it comes to taxes, how you file can have a direct effect on the size of your return. That’s why taxpayers should explore what’s right for them when it comes to itemizing tax deductions.

Deductions lower the amount of your taxable income, which can mean getting more back from your tax return. There are two options for how you can take deductions.

You can either:

  • Take the standard deduction. This option reduces your taxable income with a fixed amount based on your filing status — for example, whether you filing as single or married filing jointly.
  • Itemize your tax deductions. This method lets you lower your taxable income by deducting a list of eligible expenses on a 1040 with Schedule A.

Which way leads to a larger return? That depends on which is higher: the total of your itemized deductions or the amount of the standard deduction. If you don’t own a home and you’re not claiming large allowable expenses, a standard deduction usually results in a better tax outcome.

Want to dig deeper? Review when you should claim itemized deductions.

Itemize Your Tax Deductions and File Your Taxes for Free

As a smart consumer, you know the bottom line is not just about what you get back, but also the value you receive. That’s why we offer More Zero from H&R Block. By filing online with us before the end of March, you can complete your free tax filing and at the same time take advantage of claiming itemized deductions.

More Value With More Zero

More Zero lets you file your federal and state 1040EZ, 1040 A or 1040 with Schedule A completely free. When you file with H&R Block Online, you can rest assured that your taxes will be done right. Not only can you rely on more than 60 years of tax expertise, your return is backed by our guarantee for 100% accuracy and you’ll always get your maximum refund.

Getting started with More Zero is simple even if you used a different tax filing provider in the past.  You can upload a PDF of last year’s return with an easy-to-use drag and drop feature. You can also import a picture of your W-2 using your smart device. We’ll walk you through the rest.  

Free Filing for a Limited Time

To take advantage of free tax filing with More Zero, remember to file your taxes with H&R Block Online before March 31, 2018.

GET STARTED TODAY

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Switch to H&R Block for Free Tax Filing

While other tax preparation providers may let you file your 1040EZ or 1040A for free, only More Zero from H&R Block lets you file your 1040 with Schedule A for free. That means if you claim itemized deductions, such as home mortgage interest or charitable donations, you could file for free with H&R Block Online. 

What’s more, you can file your return knowing it’s backed by all of the security of filing with Block. You’ll always get your maximum refund and 100% accuracy guaranteed. We’ll use our 60 years of tax expertise to help you get your taxes won.

File Taxes for Free with Unmatched Value

You may be asking, “Should I go to H&R Block for my taxes?” If you compare More Zero from H&R Block with the other guys and the benefits are clear: At Block, you can file your taxes for free, maximize the amount of your refund and get industry-leading tax expertise. Sounds great, but you may think that making the switch to H&R Block Online will take too long or be complicated. Luckily, this is not the case – switching is now easier than ever.

No matter how you completed your tax return last year, in just a few steps, you can start using More Zero and take advantage of free tax filing. In minutes, you’ll be able to import and upload your documents electronically and start completing your return.

Small Steps to Big Value and Free Filing

Here’s what you’ll need to make the switch and start your filing. Simply gather the documents below and upload them to H&R Block. We’ll prompt you to import:

  • Last year’s return – Drag and drop a PDF copy of your 2016 tax return, such as a 1040EZ, 1040A or 1040 with Schedule A, from your computer. If you need to scan a paper copy, be sure to include the front and back of each page.
  • This year’s W-2 – Use your smart device to snap a picture of your 2017 W-2 you receive from your employer and upload it.

And just that quickly, you’ve said Goodbye to the other guys and Hello to exceptional value with H&R Block More Zero. By making the switch, you’ll join 81 million tax payers who can enjoy free tax filing with H&R Block Online.

Switch to More Zero

It’s never been easier to switch to H&R Block Online. In a snap, you’ll be on your way to filing for free. But don’t delay! Filing your federal and state 1040EZ, 1040A or 1040 with Schedule A is only available for a limited time until March 31, 2018. 

GET STARTED

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First Time International Taxpayer | H&R Block

Ed note: If you are new to the U.S., the process of filing a tax return may seem daunting at best and impossible at worst. We help sort through what it means to be a nonresident filing for the first time – what status to use and what documentation you’ll need to work on ahead of time. 

 

 

If you are a non-citizen filing a U.S. tax return for the first time or a U.S. citizen who has moved abroad, you’re probably wondering what the filing process looks like for you. Here, we’ll explain some of the preliminary issues that you may encounter, such as how to figure out your filing requirements and how to obtain an identifying number.

 

Filing Requirements for Expats

Expats are U.S. citizens or green card holders who have moved abroad and/or are working abroad. As an expat, you must file a U.S. return (Form 1040), and report your worldwide income every year you meet the filing threshold applicable to you. Additionally, foreign informational returns such as FBAR and Form 8938 may also be required. 

 

A Definition of Terms for Inpats

If you are not a U.S. citizen, you’ll likely fall into one of these three groups for tax purposes: resident aliennonresident alien or dual status taxpayer. Generally, if you are a visa holder in the U.S., you are termed an Inpat. Importantly, your tax filing status doesn’t change or impact your immigration status.

 

Determine which group you fall into as an Inpat

If you have a green card, then the answer is simple – you’re a resident alien. If you don’t have a green card, you’ll need to use the substantial presence test to determine your tax filing status.

You will need to know:

  • The number of days you have been in the U.S. in the current year.
  • The number of days you have been in the U.S. during each of the previous two years.
  • The date you first arrived in the U.S.
  • The type of visa status you have.
  • What type of visas your spouse and dependents have.

Your visa status can help determine your filing status because certain visa categories must be treated as nonresident aliens for a specific period of time. Presence in the U.S. under specific exempt categories will not count as days of presence for tax residency purposes. For example, a teacher or trainee with a “J” visa will not count days present in the U.S. for the first two years they are on that visa. This means that they will be considered a nonresident alien and file a 1040NR for those first two years.

There is also a final category: dual-status aliens. You usually file as a dual-status taxpayer during the years you either move into, or move out of the U.S.

 

The implications of your filing status

U.S. citizens and resident aliens must report their worldwide income and file a U.S. tax return each year they meet the applicable filing threshold. This is true regardless of where they live in the world.

But, a nonresident alien is only taxed on U.S.-source income including wages earned for work performed in the U.S. or proceeds from the sale of real property located in the U.S. Whether you are required to file a return (FORM 1040NR) as a nonresident is dependent on a number of factors. However, if you are earning wages as an employee you will typically need to file a return.

 

How to File a U.S. Return for the First Time

You’ll need a taxpayer identification number (TIN) in order to file a U.S. return. U.S. citizens and green card holders usually have Social Security Numbers (SSNs). If you already have a SSN, even if it doesn’t allow you to work in the U.S., use that as your TIN. If you have applied for a SSN, you shouldn’t apply for a taxpayer identification number (TIN).

However, if you don’t have a SSN and aren’t eligible for one, you will need to apply for an individual taxpayer identification number (ITIN). If you are able to claim a spousal exemption and/or claim dependents, then your spouse and children will also need ITINs. The ITIN will not entitle you to social security benefits, nor does it change your immigration status or right to work in the U.S. In addition, individuals filing tax returns using an ITIN are not eligible for the earned income tax credit (EITC).

 


Applying for an ITIN

There are two methods to apply for an ITIN. First, you can apply for an ITIN by completing Form W-7 and attaching the form to the tax return for which the ITIN is needed. The other method is to have the required original documents certified by a certified acceptance agent (CAA) and to attach the certified identification documents to the W-7 application.

Working through the substantial presence test and the ITIN application process can be daunting. Both Inpats and Expats who are ready to get started on their tax returns and FBARs can get help from H&R Block Expat Services. Expat Tax Services also has CAA’s that can assist with the ITIN application process.

  

 

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States Have Changed Their Tax Rates This Year

While there has been plenty of coverage in the recent months about possible changes to the Federal tax laws and rates, many states have enacted changes to their own tax laws and rates. Because these changes normally miss the national news, you likely have missed out on the updates unless they happened in your state.

If you earn wages in other states or run a business in a state other than your place of residence, you could be affected.

This blog will focus mainly on state tax rates for the 2017 tax year, but will also mention a handful that will come into effect in the next few years as well.

 

Illinois

Effective as of July 1, 2017, there are new individual and business rates in effect for Illinois state tax:

  • The income tax rate for all individuals  , estates, and trusts has increased from 3.75% to 4.95%
  •  The income tax rate for corporations (including S corps) has increased from 5.25% to 7%

Since these changes took effect mid-year, there could be some associated complications. If you are a calendar year filer with no estimated payments, all the changes should be handled on your 2017 return. The changes will be accounted for in the instructions when completing your return. If you are a fiscal year filer, you should consult this info sheet from IL, which will help with your filing for this year. Lastly, if you are required to make estimated payments, any estimates made after July 1, 2017 should account for the increase in rates.

 

Indiana

Effective January 1, 2017, the Indiana individual income tax rate is reduced from 3.3% to 3.23%.

 

Kansas

The Sunflower State enacted a new law on June 27, 2017, but will be retroactive to January 1, 2017. The new law creates new brackets and rates for individuals and eliminates tax breaks for individuals with income from pass-through entities. Your employer should have implemented changes in your withholding, beginning in July, to account for the retroactive change.

The new brackets and rates are as follows:

Rate Single Filers MFJ Filers
2.9% Income up to $15,000 Income up to $30,000
4.9% $15,001 to $30,000 $30,001 to $60,000
5.2% Income over $30,000 Income over $60,000

 

In 2012, Kansas passed a law that would eliminate any tax on income from a pass-through entity, such as a partnership, LLC, or S-Corporation to an individual. Thus, taxpayers were not paying any tax on income earned by their pass-through entities.

In 2017, this exemption has been eliminated. Going forward, taxpayers will pay tax on their income from pass-through entities using the applicable rates described above.

 

Tennessee

Beginning January 1, 2017, the Tennessee income tax rate will be reduced by 1% annually.  The rate for 2017 subsequently reduced from 5% to 4%.

 

Ohio

Effective as of January 1, 2017, Ohio has eliminated their two lowest tax brackets of .5% and .99% for income under $10,500. The new rates and brackets are as follows:

Rate Income Bracket
1.980% $10,500 – $15,800
2.476% $15,801 – $21,100
2.969% $21,101 – $42,100
3.465% $42,101 – $84,200
3.960% $84,201 – $105,300
4.597% $105,301 – $210,600
4.997% $210,601 and over

 

2018 And Beyond: Taxes By State

Delaware: the estate tax will be eliminated beginning in 2018

Hawaii: three top marginal tax rates will be added beginning in 2018:

  • for individuals and MFS taxpayers (not surviving spouses or HoH) 9% for income over $150k, 10% for income over $175k, and 11% for income over $200,000;
  • for MFJ and surviving spouse 9% for income over $300,000, 10% for income over $350,000 and 11% for income over $400,000;
  • and HoH 9% for income over $225,000, 10% for income over 262,500, and 11% for income over $300,000.

Kansas: the rates outlined above will increase to 3.1%, 5.25%, and 5.7% respectively.

New York: in 2018 the rate for taxpayers is reduced from 6.45% to 6.33% for the $21,400 to $80,650 tax bracket (MFS and Single rates are used for illustration) and from 6.65% to 6.57% for the $80,650 to $215,400 tax bracket.

  • In 2019, for the same tax brackets, the rate is reduced to 6.21% and 6.49%.
  • In 2020, for the same tax brackets, the rate is reduced to 6.09% and 6.41%.
  • In 2021, for the same tax brackets, the rate is reduced to 5.97% and 6.33%.
  • In 2022, for the same tax brackets, the rate is reduced to 5.85% and 6.25%.
  • In 2023, for the same tax brackets, the rate is reduced to 5.73% and 6.17%.
  • In 2024, for the same tax brackets, the rate is reduced to to 5.61% and 6.09%.

For 2025 and beyond, these tax brackets will have a tax rate of 5.50% and 6.00% respectively.

New Hampshire: Business tax rates will be reduced for the BPT and BET beginning in 2019. The rates will reduce to 7.9% for the BPT and .675% for the BET for 2019. In 2020, they will reduce farther to 7.7% and .6%, respectively. They are scheduled to dip again in 2022 to 7.5% and .5%.

North Carolina: Effective January 1, 2019, the individual income tax rate will reduce from 5.499% to 5.25%.

Tennessee: Effective January 1, 2018 the individual income tax rate will be reduced from 4% to 3%.  Effective January 1, 2019 the individual income tax rate will be reduced from 3% to 2%.  Effective January 1, 2020 the individual income tax rate will be reduced from 2% to 1%.

Full repeal of the Tennessee individual income tax will happen starting January 1, 2021.

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Taxes in the Gig Economy

Gig workers are nothing new – contractors, laborers, musicians, etc. – have been working their crafts for centuries, going from job-to-job or client-to-client to make a living. Individual craftsmen and small shops gave rise to industrialization and the corporate employer in the 19th and 20th centuries.

Changes in terms of how we approach daily work are not over. Driver-less cars, artificial intelligence, and other new forms of technology will continue to change the labor market, and our society as well. However, during the last 35 years or so, technology has been the big boom in the labor universe.

The first wave of the big boom was a shift in labor from manufacturing to the service sector. Then, within the last 10 years, there has been another boom – a shift from the corporation to the individual as a service provider. This shift marked the introduction of gig economy jobs.

 

Filing Taxes as an Independent Contractor

Despite all these astronomical changes, one thing that hasn’t changed is how workers’ income is taxed. All  workers – employees and gig workers alike – must pay tax throughout the year using our “pay as you go” system of taxation. Employees have the convenience of an employer who withholds and remits taxes to the IRS, state, and local taxing authorities.

Gig workers must pay their own taxes more or less evenly in four installments using Form 1040-ES (Estimated Taxes for Individuals). The first payment for the year is due on April 15, the second on June 15, the third on September 15, and the final payment on January 15 of the following year.

TIGTA, the Treasury Inspector General for Tax Administration, has reported a 33% increase, between 2007 and 2016, in the number of penalties assessed for tax underpayments. The jury is out as to the reasons for such a large increase, but these are among the most likely:

  • the growth in newly retired employees who may not realize that their pension, investment, and/or social security income have no taxes withheld,
  • economic growth and higher returns on investments (especially after the Great Recession of 2008-2009) that generated higher dividend and capital gain distributions, with no associated tax withholding,
  • the growing gig, or sharing, economy, where an increasing number of taxpayers work fully, or part-time, with no taxes being withheld from their earnings.

 

Penalties and Payments

The penalty for not paying your quarterly income taxes when due can be annoying or downright painful, depending on how much you owe and how late you are in making the payment. And even if you have a refund coming when you file, you may still have an underpayment penalty if you’re late with your estimated payments!

The best course of action is to simply pay on time and avoid the penalty altogether. Here’s how you do that: every quarter, estimate your tax liability.

This is easier said than done, and the calculations are well beyond the scope of this article. However, this is not your expected refund or balance due, but how much you expect your full-year tax liability to be. This value will appear on your Form 1040, line 63 (you can’t use Form 1040A or 1040EZ if you have self-employment income).

 

Safe Harbors

There are two “safe harbors” from underpayment tax penalty. That is, if you pay a certain amount, you will not be assessed the penalty. The first safe harbor is to pay 90% of your current year tax liability. Of course, calculating the 90% part is easy; as mentioned above, estimating the full year tax liability can be challenging, depending on how complicated your taxes are, so you may want to visit a tax professional for help with that.

The second safe harbor to avoid the underpayment penalty is to pay 100% of last year’s tax. Nothing complicated about that – no calculations or estimates required! This can be appealing to gig workers and others whose income fluctuates. However, if last year’s tax was a lot higher than this year’s will be, you’ll have overpaid your estimated taxes. Of course, you’ll get the excess back when you file your tax return, but in the meantime, your budget may already be pinched.

If you find yourself pulling hair as you navigate the world of gig economy taxes, feel free to chat with your neighborhood H&R Block tax professional.

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The Top Seven Questions About IRS Transcripts – and How They Can Help You

There’s one simple answer for getting all your records of tax filings, income, and account activity from the IRS: tax transcripts. But it’s not that simple at all.

Many people have never heard of a tax transcript – much less understand why they may want to access theirs. And because IRS transcripts aren’t exactly easy reading material, people get confused after they have their transcripts in hand.

Here are the most common questions and answers to help you understand IRS transcripts.

1. Why would I want to get my tax transcript?

Most of the time, people use tax transcripts to:

  • Understand their status with the IRS
  • Get their income history
  • Verify their tax return information for a third party, such as a lender or for a legal issue
  • Prepare accurate and complete tax returns that show all their income reported to the IRS
  • Help resolve many tax notices, discrepancies, and other issues
  • Research their account if they’re under IRS audit

2. Who can get transcripts online?

Several years ago, the IRS gave individual taxpayers online access to their IRS transcripts. If you set up an account on the  IRS Get Transcript tool, you can view the five types of transcripts right away. Business taxpayers can call the IRS at (800) 829-4933.

Learn more about researching your IRS account.

3. What are the five types of transcripts?

1. An account transcript provides an overview of your account. 

It shows filings, extensions, withholding, credits and any follow-up transactions on your account, including penalties, assessments, IRS inquiries and other account activity. 

Basically, most IRS actions on your account will appear on this transcript.   

2. A return transcript shows most lines from the original tax return as it was processed. 

Changes made to the return after it was processed are not reflected, including any amended returns you may have filed. If you need a copy of your tax return for any reason, such as a loan or financial aid application, this is the transcript to use.  

3. A record of account transcript is simply a combination of the account and return transcripts. 

The IRS makes this available because it shows the big picture, from your original return filed to any changes made to the return after processing. This transcript is especially helpful if you want to file an amended return because it will show the original return information plus any indicators of changes made to the return (such as prior amended returns or audit adjustments), which are required to complete an accurate amended return.

4. A wage and income transcript provides a listing of information statements (Forms W-2, 1099) that show income reported to the IRS under your Taxpayer Identification Number. 

You can use this transcript to help with your research to accurately file a late or extended tax return, verify employment, or keep a personal record of income.

5. A verification of nonfiling letter is a transcript that is automatically produced when the IRS doesn’t have your return on file or hasn’t yet processed your filed return. 

Many taxpayers use this transcript to apply for public benefits, such as low-income housing, which requires proof of nonfiling.

4. How many years are available for each type of transcript?

The IRS generates separate transcripts for each tax year. In the IRS Get Transcript tool, each transcript is available as a separate link, listed by tax year. Here are the number of years available for each type of IRS transcript:

  • Account transcripts: Current tax year and three prior tax years. Older account transcripts can appear if there has been activity within the past three years on the account.
  • Return transcripts: Current tax year and three prior tax years. If you don’t see a return transcript available for download, it likely means that you didn’t file a return for that year, or that the IRS hasn’t processed the return.
  • Record of account transcripts: Current tax year, five prior years, and any years with recent activity, such as a payment or notice.
  • Wage and income transcripts: Current tax year and nine prior tax years. In mid-May, wage and income transcripts become available for the previous tax year. For example, 2013 wage and income transcripts became available in May 2014. The May transcript will have most of the items registered for the last tax year.
  • Verification of nonfiling letter: Current tax year and three prior tax years.

5. Why don’t my tax return transcript and account transcript show the return I filed?

Your filed return will be reflected on your transcripts only after the IRS is finished processing the return. Returns usually post to account transcripts in about one to two weeks. Return transcripts take longer, especially if you owe taxes with the return.

6. What do the transaction codes mean on my account transcript?

Transcript transaction codes represent actions on your IRS account and provide a literal description of the action. For routine filers with no post-filing compliance activity, account transcripts are typically easy to interpret. But, if you have any post-filing compliance activity, such as tax notices and back-and-forth correspondence with the IRS, transcripts can be confusing.

The IRS Transaction Codes Pocket Guide offers explanations, but people who use the guide can misinterpret codes and draw the wrong conclusions. It’s a good idea to seek the help of a tax expert to translate the codes.

7. Can my account transcript tell me if the IRS selected my return for audit?

Every year, the IRS selects millions of returns for examination, but audits only a fraction of those selected. If you see TC 420, “Examination of tax return,” on your account transcript, it doesn’t necessarily mean you’ll be audited. If you’re actually being audited, you’ll receive a separate notice from the IRS. Generally, the IRS will start an audit within a year after you file the return. Learn how to handle an IRS audit.

 

Learn more about researching your IRS account.

Your tax pro can also contact the IRS for you to research your account, ask questions, and resolve any IRS or state issues you may have. Learn more about H&R Block Tax Audit & Notice Services.

The post The Top Seven Questions About IRS Transcripts – and How They Can Help You appeared first on Tax Information Center.

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Shopping Online? Double Check If You’ll Owe the IRS

Within the last decade, online shopping has become as much of an everyday activity as visiting a physical brick and mortar store. Online shopping is estimated to account for 10.1% of all retail sales in 2017. That’s up nearly one-and-a-half percent since 2016.

Despite the rising figures, online retail is still relatively new. Both retailers and state governments struggle to address when a sale should be subject to sales tax. Let’s explore some of the reasons why.

 

Supreme Court Influence

The story behind this ongoing struggle dates back to the 1992 US Supreme Court decision in Quill Corp. v. North Dakota, where it was held that an out-of-state company had to have a nexus or physical presence in a state before requiring the collection of sales tax by the state it exists within.

The Quill case centered around a mail-order company who experienced a parallel issue prior to the boom of online shopping. Various Courts have since ruled the case’s physical presence requirement applies equally to sales the take place via the internet.

 

Tax-Free Online Shopping Myth

Many argue that the state-presence requirement creates a potential loophole. Specifically, one could theoretically only shop online at retailers who have no connection to their home state, and avoid paying sales tax altogether.

Not so fast! Forty-five states, plus the District of Columbia, impose what is called a use tax to make up for lost sales tax revenues on out-of-state purchasers. The states of Alaska, Delaware, Montana, New Hampshire, and Oregon do not have a use tax. These taxes are generally assessed at the same rate as a sales tax and are imposed on out-of-state purchases that will be used, or consumed, within the state.

Most states make the presumption the state where an item will be used is the state where it is shipped to by the retailer.

 

Tracking Customer Spending

Use taxes are not paid at the time of sale and are typically added in addition to the individual’s annual income tax. Keeping track of every dollar spent online is incredibly difficult, so many states allow the use of an amount calculated based on your income to determine the applicable amount to pay if actual expenditures are not known.

If you are unsure of the use tax or annual income tax guidelines of your state, contact your neighborhood H&R Block office for more details.

The post Shopping Online? Double Check If You’ll Owe the IRS appeared first on Tax Information Center.

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