Unclaimed refund lying with IRS. Here is how to get your unclaimed refund?

Unclaimed refund lying with IRS. Here is how to get your unclaimed refund?

Unclaimed refund lying with IRS. Here is how to get your unclaimed refund?

Since 2016, there is more than $1.5 billion as outstanding refunds with the IRS which remains unclaimed.  This implies there might have been more than around one million taxpayers who may be qualifying to obtain tax refunds but did not file their income tax return.

In case, you are due for a tax refund you must file a federal income tax return to obtain your money.

A three-year window

According to the IRS, you have a window of three years within which you can file your tax return and would be able to claim any tax refund which is due. This window of three years begins on the original date when your return was due or the extended due date in case if you had filed for an extension. For the current year, this due date is 15th July 2020 or it is 15th October 2020 if an extension was filed by you.

In case, you miss out on this three-year window you would not be able to get back the money. The money will then belong to the US Treasury and you would have no right to claim the money anymore.

Why you might be having a refund due?

  • If in 2016, you were filing your federal tax return as a single taxpayer who was below the age of 65 years and had an income less than $6300 then you didn’t need to file the tax returns. You can consider that income tax has been deducted by your employer throughout the year and the IRS owes to return you that. Since you were not needed to file the federal tax return you had not filed which would have been of great interest to you.
  • Your income level in 2016 might be eligible to obtain a tax credit which can only be availed by filing a tax return. Due to your low or moderate-income level for the year 2016, it would be feasible that you might be eligible to obtain the EITC (Earned Income Tax Credit).

Below-mentioned are the income thresholds for 2016 and if your income for 2016 was below these limits, you would be eligible to obtain ETIC and can be done by filing tax returns by the 15th of July 2020. 

  1. For single individuals and having three or more qualifying children-$47955 whereas it is $53,505 for a married couple and filing the tax return jointly.
  2. For single individuals who are having two or more qualifying children-$44648 whereas it is $50,198 for a married couple and filing the tax return jointly. 
  3. For single individuals who are having one or more qualifying children-$39,296 whereas it is $44,846 for a married couple who are filing the tax return jointly.
  4. For single individuals having no qualifying children-$14,880 whereas it is $20,430 for a married couple who are filing the tax return jointly.
  • There are some other tax credits as well which you might be qualifying to claim for 2016 such as Adoption credit, Additional child tax credit, health coverage tax credit, American opportunity credit, etc.
  • You would be able to obtain tax credits and other tax breaks only when you file your federal income tax return. No penalty is charged for failing to file the tax return when you already have a penalty due. 

How will you get back your refund?

To get back your refund, you will need the forms W-2, 1098, 1099 or Form 5498 from the year 2016. In case, you do not have these old forms you can place requests for copies of these forms with your employer, bank, or other payers. You can also the IRS tool i.e. Get Transcript Online tool on the website of the IRS where you would be able to obtain your free wage and income transcript. You might need a copy of the Form 1040, Form 1040A or Form 1040EZ from the year 2016. You can easily obtain these forms and necessary instructions on the IRS.gov Forms and Publications page.

If you have money to be paid back for student loans, any back taxes, or child support then the refund amount would be offset for the tax amount you owe to pay. Moreover, if you have not filed your tax returns for the year 2017 or 2018 then it is quite probable that the IRS would hold back your tax refund.

Conclusion

Hence, this is your chance to claim your refunds back and you should not miss this opportunity failing which the money would belong to the IRS forever.

Top #10 things to keep in mind to avoid falling prey to tax scams

Top #10 things to keep in mind to avoid falling prey to tax scams

Top #10 things to keep in mind to avoid falling prey to tax scams

Tax scams are common happening throughout the year. However, with distressful times caused all around by the novel coronavirus tax scammers are finding this as an ideal time for catching up new prey. Usually, it is seen that young Americans are most likely to fall prey to the tax fraudsters and scammers.

The IRS has been continuously creating awareness amongst the Americans against the increased tax scams, frauds, and cons. The IRS has informed the common people about the various in which tax scams can occur may it be in the form of abusive tax schemes, telephone scams, or even in the form of phishing schemes. The IRS urges the Americans to be alert and prevent being a victim to any scams or any such schemes which might be offering instant money or exemption from filing tax returns or paying taxes as the citizen of the United States. Any such schemes or offers can land up common people into big troubles like prosecution and imprisonment as well.

Let us have look at the most important things which need to be kept in mind by the Americans to avoid falling prey to tax scams.

a.Abusive or fraudulent tax preparers

The majority of the tax preparers are quite honest and do the tax preparation legitimately, but some can be fraudulent. Fraudulent tax preparers can file returns by the use of false information to boost the refund. Some taxpayers might even attempt to steal personal information that is present in your tax documents. Taxpayers must be very careful while selecting their tax preparers and must remember that the ultimate responsibility for information used in a tax return is theirs.

b.Telephone scams

This can happen when criminals pose to be IRS agents and call the taxpayers to threaten for paying overdue tax bills. These imposters use fake names and phony IRS identification badge numbers. Taxpayers should always remember that the IRS would never adopt threatening as a strategy to deal with common people. Moreover, the IRS would also never call up taxpayers for immediate payment using a debit card or any other medium. It would usually send you mail in case of any payment due or any other issues. 

c.Tax identity thefts

Tax identity thefts occur when a tax fraudster tend to use taxpayer’s information and obtain income tax returns from the IRS. This might occur even before income tax returns have been filed by the taxpayers. Fraudsters can steal taxpayer’s Social Security number and file returns early in the season. Usually, fraudsters try to use this strategy for deceased persons to obtain the benefits.

 

d.Phishing 

Phishing occurs by unsolicited emails or websites posing as legitimate sites that can lure the victims to share their personal and financial information. The intent of the fraudsters here is not to use the taxpayer’s information only for tax-related scams but also to store the information for use in other frauds in the future. 

 

e.Security of Social Security Number

A taxpayer can lose his Social Security number easily and the entire fraud procedure begins when the Social Security Number is available. Taxpayers should avoid carrying Social Security Number outside and must also ensure that their smartphones are locked to avoid Social Security Number theft.

f.Early filing of tax returns

The taxpayers should file their tax returns at the earliest so that they can beat the criminals. Usually, fraudsters aim at filing the tax returns by using the stolen information at the earliest and even obtain the returns before the IRS is aware of it. However, taxpayers can rule out this possibility by filing their tax returns as soon as possible.

g.Choose bona fide tax preparers

Taxpayers must always opt to work with a reputed company and trustworthy tax preparers. Qualified tax preparers would have Tax Preparer Identification Number and taxpayers can check on this from the IRS website. Moreover, taxpayers can check the reviews of the tax preparation companies before deciding to work with them.

 h.Alert about data breaches

Data breaches help the fraudsters in obtaining the information which is needed to execute the tax identity thefts.  Sometimes, tax scammers might be having very little information and they can use phishing emails to gain further information. It is very necessary for taxpayers to be aware of data breaches and secure their information in case of any breach.

i.Secure tax return filing

If taxpayers are filing tax returns using Wi-Fi, they must do it by the use of the secure connection. The filing of tax returns by using public Wi-Fi should be avoided by taxpayers. Moreover, if taxpayers are filing their tax returns by using mail they must do it directly from the post office. 

j.Report about frauds and scams

Taxpayers are encouraged to report any fraudulent practice, impersonation scam, phishing scam, etc. to the IRS by using the various tools of the IRS such as IRS Impersonation Scam Reporting, FTC complaint assistant or by sending mail to phishing@irs.gov.

Conclusion

Hence, taxpayers must be very alert about the different types of tax scams that are happening very frequently and must report to the IRS about such scams.

The changes in the NRI norms in India 2020, resulting in higher tax liability

The changes in the NRI norms in India 2020, resulting in higher tax liability

The changes in the NRI norms in India 2020, resulting in higher tax liability

The novel coronavirus has been spreading across the world very rapidly making millions and millions of people sick. To put a brake on the speedily spreading coronavirus, domestic and international flights had been stopped on an interim basis by the Indian Government. As a result, many NRIs who had visited India had to extend their stay in India till the restrictions on flights are lifted.

This extension in the stay of the NRIs and the foreigners in India due to the pandemic COVID-19 might lead to an increase in their tax liabilities. Non-resident Indians may be stuck in the country due to the restrictions imposed on travel, illnesses, or restrictions being imposed by the other countries. This extended stay can cause higher tax incidence if the stay exceeds the prescribed thresholds unless specific exemptions are provided by the Government to reduce the extra tax liabilities. In simple terms, the extended-stay by an NRI in India can bring him into the Indian income tax fold. 

The taxation regime

According to the Income Tax Law, a person can be classified as a resident or a non-resident of India based upon his duration of stay in the country during a financial year. 

  1. An NRI who is visiting India becomes a resident of India if he stays in India for 182 days or more in a financial year along with a stay of 365 days or more in four preceding years. This criterion applies to an NRI who is either a citizen of India or a person of Indian origin.
  2. However, according to the latest Finance Act, 2020 there have been certain amendments made to the tax residence criteria. From the Financial year 2020-21, the threshold for the period of stay for an NRI staying in India has been reduced to 120 days from 182 days. 
  3. So, an NRI can become a tax resident with a minimum of 120 days stay only if the NRI is earning above Rs. 15 lakhs in a particular financial year. In this case, the NRI would be taxed on his global income
  4. However, the threshold of 120 days does not apply for those NRIs who have an Indian income of less than Rs. 15 lakhs and would become a resident only on a stay of 182 days in India.
  5. The Indian Income Tax Law does not differentiate between the voluntary or involuntary stay of an NRI in India for the determination of his residence for taxation. NRIs staying in India beyond their prescribed thresholds would attract tax liability even if they wanted to leave India.

Extension of lockdown and implications of being a tax resident

Due to the ongoing lockdown and non-resumption of International flights, an NRI would be taxable on his Indian income. NRIs would also face problems related to dual tax residency or citizenship. However, an NRI who became a tax resident of India is not liable to file his tax returns in India immediately. The process of taxation would need an evaluation on a case-to-case basis.

An NRI who has a taxable income in India above the basic limit of exemption i.e. Rs. 2.5 lakhs should file an income tax return in India. NRIs becoming tax residents of India might also face other problems such as taxability of the interest on their NRE accounts. Moreover, there might be changes in the TDS rates on their Indian income. 

However, the Government of India might give some clarification on the matter related to the tax residency of the NRIs who have been bound to stay longer in India due to the current COVID-19 situations.  The OECD (Organization for Economic Co-operation and Development) has recommended for some exemptions in the threshold limits related to the tax residency of NRIs. However, there has been notification on this but the Government might issue relaxation on this.

If there are no relaxations from the Indian Government, then the NRIs will have to file income tax returns in India. But, the NRIs need not pay any tax in case of the absence of an income in India. Also, they do not need to pay any tax on their foreign income in India.

Conclusion

Hence, it is important for the NRIs who have been held up in India due to the lockdown to consult about the impact of the new regulations related to tax residency rules in India. They must understand the rules and fulfill the compliances if applicable in their case.

  

Tax-exempt organizations to start e-filing

Tax-exempt organizations to start e-filing

Tax-exempt organizations to start e-filing

Non-profit organizations that do not distribute profits can be said to be exempted from federal income tax if they are organized for public purposes. There are several categories of organizations which can be considered in the group of “tax-exempted” such as Educational organizations, organizations associated with public society benefits, human services, organizations associated with arts, culture, humanities, health, public society benefits, trade associations, Veteran’s organization, etc. Even there are different kinds of mutual benefit organizations in the United States which are considered as a tax exempted. 

The status of “Tax-exempt” confers an exemption from the Federal taxes on the earnings obtained from assets that produce income. In the year 2020, there are approximately 1.74 million organizations registered with the IRS which are tax-exempted. Even though many non-profit organizations qualify for tax-exemption, only two-thirds of these qualify for charities which can receive contributions that can be used as tax deductions. 

E-filing by tax-exempt organizations

Out of the non-profit organizations which are registered with the IRS, there are around 35% organizations that need to file their annual federal income tax returns. The tax-exempt organizations ought to file certain forms with the IRS for which the due date is on 15th July 2020.

Tax-exempt organizations can file their necessary forms by IRS’s MeF (Modernized e-file). When e-filing is done by a tax-exempt organization; the organization would send the information return data directly to the IRS rather than using paper forms. The MeF can be defined as a web-based system that allows e-filing through the use of the internet. The XML (Extensible Mark-up Language) format is used by the MeF for storing and transmitting data. The e-file system of the IRS is available for all the tax-exempt organizations that prepare their tax returns themselves or for those who rely on tax professionals for their tax return preparation. Non-profit organizations and charitable trusts or organizations can file their respective forms by the use of the IRS Authorized e-file provider.

By the e-filing method, fast acknowledgment can be obtained from the IRS about the receipt of the return filing. Moreover, by the e-filing method, the processing time would be reduced thus, making compliance with reporting much easier. 

Forms to be filed by tax-exempt organizations

Some of the major forms which need to be signed by the IRS can be listed below.

a.Form 990 which is a series of annual information returns which includes Forms 990, 990-EZ, 990-PF, and 990-BL. Tax-exempt organizations that have total assets worth $10 million or more need to file around 250 tax returns in a calendar year. These returns can be related to income, excise, information returns, employment tax, and many more.

 The Form 990-PF needs to be filed by the private organizations and non-exempt charitable trusts by the e-filing method irrespective of their asset size.

b.Form 990-N which is an annual electronic Notice e-postcard meant for tax-exempt organizations. This form has to be filed by tax-exempt organizations that are small and have gross receipts of up to $50,000 in a year. Organizations that file this form do not need to file Forms 990or Form 990-EZ.  

c.Form 990-T is used by tax-exempt organizations to report unrelated business income. Also, it is used by tax-exempt organizations to report unrelated business income tax liability and report proxy tax liability. Moreover, it can be used to report unrelated business income tax on reinsurance entities.

d.Form 8871 is used by the political organization for notifying the IRS about the organization being a tax-exempt organization of Section 527 Status. If an organization has annual gross receipts of $25,000 or more in a particular taxable year then it must file this form. 

e.Form 8872 is filed by a political organization in the form of a report of its contributions and expenditures

f. Form 1120-POL represents the annual income tax returns for political organizations. This form is signed to report about the organization’s taxable income and income tax liability Section 527.

g.Form 4720 is meant for reporting of Private Foundation Excise Tax return and is mostly used along with Form 990-PF. 

 

E-filing timeline extension for tax-exempt organizations

If tax exempt organizations feel that they would not be able to file their respective forms by 15th July 2020, they can request for an extension in the timeline. This extension request can be done by filing Form 8868. An extension of six months beyond the original due date to file the returns is provided to the tax-exempt organizations filing Form 8868. However, extension in the timeline for filing tax returns does not provide an extension in the timeline for making the Income-tax payments if due for a tax-exempted organization. 

Conclusion

Hence, almost all forms used by the tax exempted organizations can be filed by e-filing method except the Form 990-T. The IRS has been constantly motivating the tax-exempt organizations to make use of e-filing for filing their tax returns.

Top 10 things to keep in mind for your tax filing

Top 10 things to keep in mind for your tax filing

Top 10 things to keep in mind for your tax filing

Filing tax returns can be tricky, confusing and you ought to be cautious while filing your tax returns.

So, let us give you some basic tips to follow while filing your tax returns. These tips will help in avoiding common mistakes to ensure that your taxes are filed properly and you obtain the maximum refunds.

1.Filing for an extension

You can easily file for an extension in the timeline of your tax return filing but, an extension in the due date for tax payment cannot be done. You might have the thought that you may end up having taxes to pay once your return filing is completed. So, you should pay whatever amount you owe to the IRS by the July deadline so that you could do reconciliation after the returns have been filed successfully. If you do not pay your taxes by the deadline, you might have to pay a penalty which you should try to avoid.

2.Document your charitable contributions meticulously

Nowadays, charitable contributions are getting a lot of scrutiny from the IRS. So, if you are planning to claim charitable contributions as itemized deductions in your tax returns then you must have written acknowledgment from charitable organizations for contributions made of $250 or more. The contribution made can only be claimed if they are made to a qualified organization. In case of your contribution being less than $250, you must keep a list or record of what you contributed and to whom.

3.Know about new due dates for some tax returns

There might be some information forms that would be needed by you for filing your tax returns might be having different due dates than that of your tax returns. So, you need to be alert and visit the IRS’s website for the information on these new due dates.

4.Need for amendment

Many taxpayers have to file amended tax returns due to reasons like receipt of updated Forms 1099, Schedules K-1, and other information forms later than filing your actual tax returns. You need to be aware of the factor that if you are receiving any rectified information returns ad you have already filed your tax returns then you would not have to amend your returns if the difference is not more than $100 in your income or not more than $25 in your withholding. In these cases, your information and filing both would be considered as correct and no penalty would be charged.

5.Expiry of your ITIN

If you are using your ITIN for tax returns filing, then you must be careful about your ITIN being expired. If your ITIN has not being used for filing federal tax returns once within three years then your ITIN must have been expired and it needs to be renewed. You can renew your ITIN by submission of Form W-7 and the necessary documents as well. If you are filing your tax returns without a valid ITIN or without submitting a renewal application for your ITIN then there might be adjustments made into your tax returns. Your income tax return would be processed but you would not receive the refunds and any exemptions claimed on the income tax return would be denied to you.

6.Disaster losses

In case of any loss incurred in an area that has been federally declared disaster area, the losses can be claimed as an itemized deduction on your federal income tax returns. This loss must be related to your home, your vehicles, or any household items and the amount which you can deduct are reduced by any insurance payment which you have received or reduced by any salvage value of your property. These losses can be deducted on Schedule A of Form 1040 for the year in which the losses have occurred.

7.ID Theft

The tax season is the best season for identity thieves. You must be very vigilant and should try to keep your financial information secure. You should not send your financial information to a tax preparer by electronic medium if the medium is not encrypted. Moreover, you should be careful about phishing scams which can be in the form of fake email, text, or anonymous phone call.

8.Private debt collectors on the job

There has been a relative change in the IRS procedure i.e. the use of private debt collectors for certain federal bills that are overdue. If your tax debt is to be collected by debt collection agencies then you would be notified by a letter that confirms this. The collection agencies would send collectors who can be said as IRS contractors and any check you pay would be addressed to the IRS.

9.Query resolution with the IRS

Your queries on tax returns can be addressed by the Interactive Tax Assistant present on the IRS. This can be helpful for you in resolving your queries and thus, assisting you in filing your tax returns correctly.

10.Selection of your tax preparer

If you are planning to hire a tax preparer for preparation of your tax returns then you must obtain referrals, check the credentials of the tax preparers, interview them, and understand the method they use to bill, etc. These are the vital information that you must collect and you must check if they have a PTIN (IRS Preparer Tax Identification Number) or not which is mandated by the law. 

Conclusion

Hence, you can follow these tips and file your tax returns successfully on time without facing any inconvenience or difficulties.