Have not yet filed your 2013 federal tax return? If not, you need to act quickly because your return must be filed by April 18, 2017. Otherwise, you forfeit your refund, and the money becomes the property of the U.S. Treasury.
The IRS estimates that more than 1 million taxpayers have not filed their 2013 tax returns and that more than $1 billion of unclaimed refunds are available for those taxpayers. The IRS estimates that these taxpayers will have an average refund of $763.
By failing to file a return, people stand to lose more than just refunds for taxes withheld or paid during 2013. In addition, many low- and moderate-income workers did not claim the Earned Income Tax Credit (EITC), which helps individuals and families with incomes below certain thresholds. For unmarried individuals in 2013, these thresholds were $46,227 for those with three or more children, $43,038 for those with two children, $37,870 for those with one child, and $14,340 for those with no children. Each amount is $5,340 more for married joint filers. In addition, parents who are eligible to claim the refundable portion of the child tax credit and the American Opportunity Tax Credit (education tax credit) will forfeit those benefits if they don’t file a return.
When filing a 2013 return, the law requires that the return be properly addressed, mailed and postmarked by April 18th. There is no late-filing penalty for those who qualify for a refund.
As a reminder, taxpayers seeking a 2013 refund should know that their checks will be held if they have not also filed tax returns for 2011 and 2012. In addition, their refunds will first be applied to any amounts that they still owe to the IRS and may be used to offset unpaid child support or past-due federal debts caused by student loans, repayment of unemployment compensation and state taxes owed.
Contact Dagley & Co. with any questions, or make your tax appointment today.
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Tax fraud is currently a huge issue which has cost the government billions of tax dollars. New laws are taking effect that clamp down on individuals who have fraudulently claimed the American Opportunity Tax Credit (AOTC), the Child Tax Credit (CTC) or the Earned Income Tax Credit (EITC). Details on these credits are as follows:
- The AOTC is the college tuition credit for low-income families that provides a credit for each eligible student equal to 100% of the first $2,000 and 25% of the next $2,000 spent on college tuition and related expenses; the maximum credit is $2,500, of which 40% is refundable. The credit is phased out depending on income.
- The CTC is a tax credit of $1,000 for each of the taxpayer’s qualifying dependent children. A portion of the credit that is not used to offset the taxpayer’s tax liability can be refundable; the refund is based in part on the number children in the family and in part on the taxpayer’s earned income. This credit may also be phased out for higher-income taxpayers.
- The EITC is a refundable credit awarded to low-income taxpayers who work. The credit is based on the amount of the taxpayer’s income that comes from working as well as on total income and on number of children. In 2016, this credit can be worth as much as $6,269.
We have your rundown of some of the new provisions that the government has put in place to defend against fraud:
Retroactive Claims – Individuals are now prevented from retroactively claiming the AOTC, CTC or EITC if the individual, dependent child or student for whom the credit is claimed does not have a taxpayer identification number (TIN). In other words, the TIN must be issued prior to the due date for filing the original return in the tax year for which the credit is claimed; the IRS will deny the credit if the TIN is not issued on time. In most cases, the TIN is a Social Security number.
Disallowance Periods – When a taxpayer improperly claims the AOTC, CTC or EITC (either fraudulently or recklessly), he or she will be barred from claiming that credit for a period of time. The disallowance periods are 10 years for fraud and 2 years for reckless or intentional disregard of rules and regulations.
Preparer Due Diligence Requirements – In the past, paid tax preparers have always abided by a set of due-diligence guidelines for EITC qualification before including that credit on any return that they prepared. These due-diligence requirements have been expanded to include the CTC and the AOTC. This adds additional work for paid preparers and increases their liability for errors, as each disallowed credit could be subject to a $510 preparer penalty.
1098-T Required to Claim Education Credits – Education credits can no longer be claimed unless the taxpayer includes the employer identification number of the educational institution to which the tuition was paid. This number, as well as the other information needed to determine the credit, can be found on the Form 1098-T (Tuition Statement) issued by the educational institution. The new rules require that the taxpayer (or the dependent who is a student) receive a 1098-T form to claim the credit, although some exceptions are provided.
Refunds that Include the EITC or CTC Will Be Purposely Delayed – Refunds from returns that include an EITC or a refundable CTC will not be issued prior to February 15th, which gives the IRS additional time to verify the validity of the credit claims and to match them against the taxpayers’ income amounts and the informational returns that are filed with the IRS to verify tuition.
If you have questions related to any of the foregoing safeguards, the delayed refunds or the credits themselves, please give Dagley & Co. a call.
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