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Friday, March 16, 2018

IRS Press Release: Taxpayers can now e-file returns including four tax benefits related to incentives for energy production and conservation

IRS Press Release

IR-2018-59, March 16, 2018
WASHINGTON --The Internal Revenue Service today said that it is ready to process tax year 2017 returns claiming four additional tax benefits recently renewed retroactively into law.
The Bipartisan Budget Act, enacted on Feb. 9, renewed for tax year 2017 a wide range of individual and business tax benefits that had expired at the end of 2016. The IRS has now reprogrammed its processing systems to handle returns claiming four energy-related tax incentives. As a result, taxpayers can now file 2017 returns claiming:
  • Credit for nonbusiness energy property claimed on Form 5695
  • Alternative motor vehicle credit claimed on Form 8910
  • Credit for qualified plug-in electric drive motor vehicles claimed on Form 8936
  • Credit for certain two-wheeled vehicles claimed on Form 8936
The IRS had already reprogrammed its processing systems to handle the three benefits most likely to be claimed on returns filed early in the tax season.
Thus, starting last month, taxpayers could also file returns claiming:
  • Exclusion from gross income of discharge of qualified principal residence indebtedness (often, foreclosure-related debt forgiveness), claimed on Form 982,
  • Mortgage insurance premiums treated as qualified residence interest, claimed on Schedule A, and
  • Deduction for qualified tuition and related expenses claimed on Form 8917.
The IRS continues to work closely with tax professionals and the tax-preparation industry to ensure that their software can now accommodate these new provisions. As always, filing electronically and choosing direct deposit is the fastest, most accurate and most convenient way to receive a tax refund. Last year, nearly 87 percent of individual returns were filed electronically and nearly 80 percent of refunds were direct deposited.
The IRS is continuing to update its systems to handle returns claiming the other tax benefits extended by the new law, enacted on Feb. 9. In general, these benefits affect a smaller number of taxpayers. Taxpayers eligible for these benefits can avoid delays or possibly needing to file an amended return later, by filing after IRS systems have been updated to reflect these changes. Check Extenders and Form Updates for future updates. Other impacted forms, instructions and publications that the IRS had already released, are being revised and reposted to Download Forms.
As a reminder, taxpayers who have already filed their 2017 federal tax return and now wish to claim one of these renewed tax benefits can do so by filing an amended return on Form 1040X. Amended returns cannot be filed electronically and can take up to 16 weeks to process. Visit for details.

IRS and Security Summit Urges Tax Preparers to Protect Their PTINs, EFINs and CAF numbers

The IRS, state tax agencies and the tax industry is urging tax practitioners to maintain and monitor their EFINs and CAF numbers to help safeguard taxpayer data.

Cyber-criminals sometimes post stolen EFINs, PTINs and CAF numbers on the Dark Web as a crime kit for identity thieves who can then file fraudulent tax returns. To protect EFINs, PTINs and CAF numbers a tax preparer should avoid phishing emails which cyber-criminals commonly use to trick practitioners into disclosing their sensitive information. Tax preparers can review the Don’t Take the Bait campaign to learn more about the various tactics are used by identity thieves.

To assist tax professionals the IRS has created a How to Maintain, Monitor and Protect Your EFIN video and web page that offer tips to preparers.

Tax preparers should make a weekly check of their EFINs to determine how many returns were filed under their number. They should also update their EFIN application within 30 days of any change, including if there are any new personnel, telephone numbers, addresses or email addresses.

Additionally, tax professionals who are attorneys, CPAs, enrolled agents or participants in the Annual Filing Season Program and file more than 50 returns can also check the number of returns that the IRS processed with their PTIN in the current year. This information is updated weekly and can be located by going to their online PTIN account and selecting “View Returns Filed per PTIN”.

For more details see IRS news release IR-2018-61 (Security Summit urges tax pros to protect their identification numbers).

IRS Press Release: IRS warns against frivolous tax arguments; Part of ‘Dirty Dozen’ scams list

IRS Press Release

IR-2018-58, March 16, 2018
WASHINGTON — The Internal Revenue Service today continued releasing the 2018 list of “Dirty Dozen” tax scams with a warning to taxpayers about using frivolous tax arguments to avoid paying taxes.
Promoters of frivolous schemes encourage taxpayers to make unreasonable and outlandish legal claims to avoid paying their taxes. Time and again, these arguments have been thrown out of court.
The “Dirty Dozen” is an annual list compiled by the IRS. It describes a variety of common scams that taxpayers may encounter. Many of these schemes peak during filing season as people prepare their returns or hire others to help with their taxes.
A recurring Dirty Dozen theme through the years involves claims about "secret" schemes to avoid people paying taxes.
In “The Truth about Frivolous Tax Arguments,” the IRS outlines some of the more common frivolous arguments, explains why they’re wrong and cites relevant court decisions. Examples include:
  • The First Amendment allows taxpayers to refuse to pay taxes on religious or moral grounds;
  • The only “employees” subject to federal income tax are those who work for the federal government;
  • Only foreign-source income is taxable.
Perpetrators of illegal scams, as well as those who make use of them, may face possible criminal prosecution. IRS Criminal Investigation works closely with the Department of Justice to shut down scams and prosecute the criminals behind them.

Don’t Get Talked into Using a Frivolous Argument

Taxpayers have the right to contest their tax liabilities using IRS administrative appeals procedures or in court, but they are still obligated to follow the law.
Besides risking criminal prosecution, taxpayers can also face a variety of civil penalties. Key among them is the $5,000 penalty for filing a frivolous tax return. The penalty applies to anyone who submits a frivolous tax return or other specified submissions, such as a request for a collection due process hearing, installment agreement, offer-in-compromise or taxpayer assistance order if any part of these submissions are based on a frivolous position. A list of more than 40 such positions can be found in Notice 2010-33, 2010-17 I.R.B.609. The list is not all inclusive, and the IRS and the courts may add to it at any time.
The IRS reminds taxpayers these schemes also can bring other civil penalties including:
  • Accuracy-related penalty—20 percent of the underpaid tax;
  • Civil fraud penalty—75 percent of the underpayment attributable to fraud;
  • Erroneous refund claim penalty—20 percent of the excessive amount.
Late-filing and late-payment penalties may also apply. The Tax Court may also impose a penalty against taxpayers who make frivolous arguments in court.
Further details, including a list of the Dirty Dozen and information about other tax scams, can be found on

View the original IRS press release here.

Tuesday, March 13, 2018

IRS Press Release: IRS ‘Dirty Dozen’ list of tax scams for 2018 contains warning to avoid improper claims for business credits

IRS Press Release

IR-2018-49, March 13, 2018
WASHINGTON — The Internal Revenue Service today warned that taxpayers should avoid making improper claims for business credits, a common scam used by unscrupulous tax preparers.
Two common credits targeted for abuse by shady return preparers include the research credit and the fuel tax credit. Both credits have legitimate uses, but there are specific criteria that taxpayers need to qualify for these.
As part of the 2018 “Dirty Dozen” tax scams, the IRS reminds taxpayers to watch out for these red flags involving business credits when dealing with return preparers. Remember, the taxpayer is responsible for the information on the tax return long after the scammer is gone.
Each year, the IRS publishes its “Dirty Dozen” list of a variety of common scams that taxpayers may encounter any time. These can especially peak during the tax filing season as people prepare their returns or hire people to help with their taxes.

Research Credit Scams

Section 41 of the Internal Revenue Code provides a credit for increasing research activities, commonly known as the "research credit." Congress enacted the research credit in 1981 to provide an incentive for American private industry to invest in research and experimentation.
The IRS continues to see significant misuse of the research credit. Improper claims for this credit generally involve a failure to participate in or substantiate qualified research activities and/or a failure to satisfy the requirements related to qualified research expenses.
To qualify for the credit, a taxpayer’s research activities must, among other things, involve a process of experimentation using science with a goal of improving a product or process the taxpayer uses in its business or holds for sale or lease. However, there are certain activities specifically excluded from the credit., including research after commercial production, adaptation of an existing business product or process, foreign research and research funded by the customer. Qualified activities also do not include activities where there is no uncertainty about the taxpayer’s method or capability to achieve a desired result.
The IRS often sees expenses from non-qualified activities included in claims for the research credit. In addition, qualified research expenses include only in-house wages and supply expenses and 65 percent (typically) of payments to contractors. Qualified research expenses do not include expenses without a proven nexus between the claimed expenses and the qualified research activity.

Steps to Properly Claim the Credit

Taxpayers who qualify for the credit may claim up to 20 percent of qualified expenses above a base amount by completing and attaching Form 6765, Credit for Increasing Research Activities, to their tax return. For tax years beginning in 2016, eligible small businesses may use the research credit to offset the alternative minimum tax. Also for tax years beginning in 2016, qualified small businesses may elect to use a portion of the research credit as a payroll tax credit against the employer’s portion of the Social Security tax. Qualified small businesses make this election on Form 6765 and must complete and attach Form 8974, Qualified Small Business Payroll Tax Credit for Increasing Research Activities, to their Form 941, Employer’s Quarterly Federal Tax Return.
To claim a research credit, taxpayers must evaluate and document their research activities contemporaneously (i.e. over the period of time in which the research occurs) to establish the amount of qualified research expenses paid for each qualified research activity. While taxpayers may estimate some research expenses, taxpayers must have a factual basis for the assumptions used to create the estimates.
Unsupported claims for the research credit may subject taxpayers to penalties. Taxpayers should carefully review reports or studies prepared by third parties to ensure they accurately reflect the taxpayer’s activities. Third parties who are involved in the preparation of improper claims or research credit studies also may be subject to penalties

Fuel Tax Credit Scams

Fraud involving the fuel tax credit is considered a frivolous tax claim and can result in a penalty of $5,000. Furthermore, illegal scams can lead to significant penalties and interest and possible criminal prosecution. IRS Criminal Investigation works closely with the Department of Justice to shutdown scams and prosecute the criminals behind them.
The fuel tax credit is generally limited to off-highway business use or use in farming.  Consequently, the credit is not available to most taxpayers. Still, the IRS routinely finds unscrupulous tax return preparers who have enticed sizable groups of taxpayers to erroneously claim the credit to inflate their refunds.
The federal government taxes gasoline, diesel fuel, kerosene, alternative fuels and certain other types of fuel. Certain commercial uses of these fuels are nontaxable. Individuals and businesses that purchase fuel for one of those purposes can claim a tax credit by filing Form 4136, Credit for Federal Tax Paid on Fuels.
The tax is on fuels used to power vehicles and equipment on roads and highways. Taxes paid for fuel to power vehicles and equipment used off-road may qualify for the tax credit and may include farm equipment, certain boats, trains and airplanes.
Improper claims for the fuel tax credit generally come in two forms. An individual or business may make an erroneous claim on their otherwise legitimate tax return. It is also possible for an identity thief to claim the credit as part of a broader fraudulent scheme.
The IRS has taken a number of steps to improve compliance processes involving fuel tax credits. IRS compliance systems are preventing a significant number of questionable fuel tax credit claims from being processed. For example, new identity theft screening filters have also improved the IRS’s ability to identify questionable fuel tax credit claims during return processing.

View original IRS Press Release here.

Friday, March 9, 2018

IRS PRESS RELEASE: Fake charities make 2018 ‘Dirty Dozen’ list; taxpayers should be alert to scams involving disasters, worthwhile causes


IR-2018-47, March 9, 2018
WASHINGTON — The Internal Revenue Service today warned taxpayers against scam groups masquerading as charitable organizations, luring people to make donations to groups or causes that don't actually qualify for a tax deduction.
These ‘fake’ charities attempt to attract donations from unsuspecting contributors, using a charitable reason and a tax deduction as bait for taxpayers. Fake charities are one of the “Dirty Dozen” tax scams for the 2018 filing season.
Compiled annually, the “Dirty Dozen” lists a variety of common scams that taxpayers may encounter anytime, but many of these schemes peak during filing season as people prepare their tax returns or hire someone to prepare their taxes.
Perpetrators of illegal scams can face significant penalties and interest and possible criminal prosecution. To help protect taxpayers, IRS Criminal Investigation works closely with the Department of Justice to shut down scams and prosecute the criminals behind them.

The IRS offers these basic tips to taxpayers making charitable donations:

  • Be wary of charities with names that are similar to familiar or nationally known organizations. Some phony charities use names or websites that sound or look like those of respected, legitimate organizations. has a search feature, Exempt Organizations Select Check, that allows people to find legitimate, qualified charities to which donations may be tax-deductible. Legitimate charities will provide their Employer Identification Number (EIN), if requested, which can be used to verify their legitimacy through the IRS Select Check.
  • Don’t give out personal financial information, such as Social Security numbers or passwords, to anyone who solicits a contribution. Scam artists may use this information to steal identities and money from victims. Donors often use credit cards to make donations. Be cautious when disclosing credit card numbers to those seeking a donation. Confirm that those soliciting a donation are calling from a legitimate charity.
  • Don’t give or send cash. For security and tax record purposes, contribute by check or credit card or another way that provides documentation of the donation.
  • Consult IRS Publication 526, Charitable Contributions, available on This free booklet describes the tax rules that apply to making tax-deductible donations. Among other things, it provides complete details on what records to keep to help taxpayers at tax time.

Impersonation of charitable organizations

Another long-standing type of abuse or fraud involves scams that occur in the wake of significant natural disasters.
The IRS encourages taxpayers to donate to recognized charities established to help disaster victims. Following major disasters, it’s common for scam artists to impersonate charities to get money or private information from well-intentioned taxpayers.
Scam artists can use a variety of tactics following a disaster. Some scammers operating bogus charities may contact people by telephone or email to solicit money or financial information. They may even directly contact disaster victims and claim to be working for or on behalf of the IRS to help the victims file casualty loss claims and get tax refunds.
Remember, fraudsters may attempt to get personal financial information or Social Security numbers that can be used to steal the victims’ identities or financial resources. Bogus websites may solicit funds for disaster victims.
Taxpayers can find legitimate and qualified charities with the Select Check search tool on

Access the original IRS Press Release here.
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