Thursday, February 1, 2018

About IRS Free File

Millions of Americans use IRS Free File to file their federal taxes. It’s safe, secure and free. Taxpayers can use either name-brand software or the Free File Fillable Forms. Combining IRS Free File with direct deposit is the quickest and safest way to get a refund.
Here are five things to remember about IRS Free File:
  1. Access Free File at IRS Free File is available only through Taxpayers can choose a Free File company offer that they qualify for and then click on that link to prepare and e-file the return.
  2. Free File Can Find Tax Breaks. The tax software’s question-and-answer format helps eligible taxpayers find tax breaks. This could include tax credits such as the Earned Income Tax Credit. The software then selects the appropriate tax forms and does the calculations automatically.
  3. It is Free for Everyone. Taxpayers with income of $66,000 or less can use brand-name software. Taxpayers who earned more can use Free File Fillable Forms. This option allows taxpayers to complete IRS forms electronically. It is best for those who are familiar with doing their own taxes.
  4. File from personal devices. Taxpayers may use their smart phones or tablets to electronically prepare and file their tax returns with IRS Free File through the IRS2Go app for Android and iOS devices or by visiting from the device.
  5. Easy Online Extensions. For those who cannot finish their return by the April 17 deadline, it’s easy to use Free File to request a six-month extension. An extension of time to file is not an extension of time to pay. If taxpayers owe federal taxes, they should estimate the amount they owe and pay it with the extension request. This helps avoid penalties and interest.
The IRS partners with the Free File Alliance and its member companies to provide a dozen brand-name tax software options at no cost. Many Free File alliance member companies also provide free state tax preparation software.
All taxpayers should keep a copy of their tax return. Taxpayers using a software product may need their Adjusted Gross Income amount from their prior-year tax return to verify their identity. Taxpayers can learn more about how to verify their identity and electronically sign tax returns at Validating Your Electronically Filed Tax Return.

Questions Preparers Should Ask Themselves About Office Security

Tax professionals can protect taxpayer data by simply looking around their own offices. Preparers can look for places where they store data. They should use a critical eye to assess whether that data is secure. Tax preparers should also remember that unsecured data will not always be on a computer. In fact, securing office space is as important as securing computers. 
In assessing how secure an office is, preparers should consider these six questions. The answers can be very important to help preparers protect both their clients and their businesses.
  • Are all the places where taxpayer information is located protected from unauthorized access and potential danger such as theft, flood and tornado?
  • Are there written procedures that prevent unauthorized access and unauthorized processes?
  • Is taxpayer information left unsecured? This includes data stored electronically. Check desks, photocopiers, mailboxes, vehicles and trashcans. What about in rooms in the office or at home where unauthorized access could occur? 
  • Who authorizes or controls delivery and removal of taxpayer information, including data stored electronically?
  • Are the doors to file rooms and computer rooms locked?
  • Is there a secure disposal of taxpayer information, such as shredders, burn boxes, or secure temporary file areas for information until it can be properly disposed?

Ten Tips for Choosing a Tax Preparer

It’s the time of the year when many taxpayers choose a tax preparer to help file a tax return. These taxpayers should choose their tax return preparer wisely.  This is because taxpayers are responsible for all the information on their income tax return. That’s true no matter who prepares the return. 
Here are ten tips for taxpayers to remember when selecting a preparer:
  1. Check the Preparer’s Qualifications. Use the IRS Directory of Federal Tax Return Preparers with Credentials and Select Qualifications. This tool helps taxpayers find a tax return preparer with specific qualifications. The directory is a searchable and sortable listing of preparers. 
  2. Check the Preparer’s History. Ask the Better Business Bureau about the preparer. Check for disciplinary actions and the license status for credentialed preparers. For CPAs, check with the State Board of Accountancy. For attorneys, check with the State Bar Association. For Enrolled Agents, go to the verify enrolled agent status page on or check the directory.  
  3. Ask about Service Fees. Avoid preparers who base fees on a percentage of the refund or who boast bigger refunds than their competition. When asking about a preparer’s services and fees, don’t give them tax documents, Social Security numbers or other information. 
  4. Ask to E-File. Taxpayers should make sure their preparer offers IRS e-file. The quickest way for taxpayers to get their refund is to electronically file their federal tax return and use direct deposit. 
  5. Make Sure the Preparer is Available. Taxpayers may want to contact their preparer after this year’s April 17 due date. Avoid fly-by-night preparers.
  6. Provide Records and Receipts. Good preparers will ask to see a taxpayer’s records and receipts. They’ll ask questions to figure things like the total income, tax deductions and credits. 
  7. Never Sign a Blank Return. Don’t use a tax preparer who asks a taxpayer to sign a blank tax form.
  8. Review Before Signing. Before signing a tax return, review it. Ask questions if something is not clear. Taxpayers should feel comfortable with the accuracy of their return before they sign it. They should also make sure that their refund goes directly to them – not to the preparer’s bank account. Review the routing and bank account number on the completed return. The preparer should give you a copy of the completed tax return. 
  9. Ensure the Preparer Signs and Includes Their PTIN. All paid tax preparers must have a Preparer Tax Identification Number. By law, paid preparers must sign returns and include their PTIN.
  10. Report Abusive Tax Preparers to the IRS. Most tax return preparers are honest and provide great service to their clients. However, some preparers are dishonest. Report abusive tax preparers and suspected tax fraud to the IRS. Use Form 14157, Complaint: Tax Return Preparer. If a taxpayer suspects a tax preparer filed or changed their return without the taxpayer’s consent, they should file Form 14157-A, Return Preparer Fraud or Misconduct Affidavit. 

Disability and Earned Income Tax Credit

Some disability retirement benefits qualify as earned income to claim the Earned Income Tax Credit or EITC. Also, you may claim a relative of any age as a qualifying child if the relative is totally and permanently disabled and fits all other EITC requirements.

What Disability Benefits Qualify as Earned Income for EITC?

IRS considers disability retirement benefits as earned income until you reach minimum retirement age. Minimum retirement age is the earliest age you could have received a pension or annuity if you did not have the disability.

After you reach minimum retirement age, IRS considers the payments your pension and not earned income.

Benefits such as Social Security Disability Insurance, SSI, or military disability pensions are not considered earned income and cannot be used to claim the EITC. You may qualify for the credit only if you,or your spouse, if filing a joint return, have other earned income.

Read more about additional requirements for qualifying for EITC here. Or, use the EITC Assistant to help you determine if you meet the additional requirements for qualifying for EITC. Spanish EITC Assistant.

Read more about Disability Benefits in Publication 596, Earned Income Credit or Publication 596 (SP), Credito por Ingreso del Trabajo

Disability Insurance Payments. Payments you received from a disability insurance policy that you paid the premiums for are not earned income. It does not matter whether you have reached minimum retirement age. If this policy is through your employer, your Form W-2 may show the amount in box 12 with code “J.”Read more about Life Insurance & Disability Insurance Proceeds here.

A Qualifying Child with a Disability

To be your qualifying child for EITC, a child must have a Social Security Number that is valid for employment and is issued before the due date of the return. The child must also pass the age, relationship, residency, and joint return tests. Your child must be your son, daughter, adopted child, stepchild, foster child, brother, sister, stepbrother, stepsister, half brother, half sister or a descendent of any of them.
Age Test for Qualifying Child with a Disability. There is no age limit and the child does not have to be younger than you if the qualifying child is permanently and totally disabled. Your qualifying child is permanently and totally disabled if both of the following apply:
  1. He or she cannot engage in any substantial gainful activity because of a physical or mental condition and
  2. A doctor determines the condition has lasted or can be expected to last continuously for at least a year or can lead to death.

If the qualifying child receives disability benefits, you can still use the child for EITC purposes. Read more about the additional tests for a qualifying child here.
Proof of Permanently and Totally Disabled. To prove your claim of EITC for a child who is permanently and totally disabled, you need a letter from the child’s doctor, other healthcare provider or any social service program or agency verifying the child is permanently and totally disabled.
Sheltered Employment. A child working for minimal pay under a special program for people with disabilities is not engaged in a “substantial gainful activity” under the definition of permanently and totally disabled. Work for minimal pay offered to people with physical or mental disabilities or sheltered employment must be offered by qualified locations. Qualified locations are:
  • Sheltered workshops,
  • Hospitals and similar institutions,
  • Homebound programs, and
  • Department of Veterans Affairs (VA) sponsored homes.

What do I have to do to get EITC?

You must file a tax return to determine your eligibility to claim the EITC. Many miss out because they owe no tax so do not file a tax return.

Free Tax Assistance. Special assistance is available for persons with disabilities. If you are unable to complete your tax return because of a disability, you may be able to obtain assistance from an IRS office or the Volunteer Income Tax Assistance or Tax Counseling for the Elderly Programs sponsored by IRS.
Free File Your Return. Free File is the fast, easy and free way to prepare and e-file your federal taxes online. The Free File program provides free federal income tax preparation and electronic filing for eligible taxpayers through a partnership between the Internal Revenue Service and the Free File Alliance LLC, a group of private sector tax software companies. Or you can use the free fillable tax forms feature. Find out more about Free File here.

EITC Impact on Other Government Benefits

Refunds received from the Earned Income Tax Credit (EITC or EIC), the Child Tax Credit (CTC) or other refundable credits are not considered income and is not counted as a resource for at least 12 months from when your receive it for benefits or assistance under any Federal program or under any State or local program financed in whole or in part with Federal funds. 
But, it is always best to check with your local benefit coordinator to find out if your benefits fall under this provision.

Have Your Tax Prepared for Free

Millions of families get their taxes done every year for free through two programs sponsored by the IRS. These help people with lower and moderate incomes:
  • The Volunteer Income Tax Assistance: This program is also known as VITA. It offers free tax return preparation to eligible taxpayers who generally earn $54,000 or less.
  • Tax Counseling for the Elderly: TCE is mainly for people age 60 or older, but offers service to all taxpayers. The program focuses on tax issues unique to seniors. AARP participates in the TCE program through AARP Tax-Aide.
The IRS works with local community groups to train and certify thousands of volunteers. Eligible taxpayers should consider taking advantage of these free programs. This includes people with disabilities and people who speak limited English.
Here are some additional details about these two volunteer programs:
  • Free Tax Prep Around the Country. The IRS works with community organizations to offer free tax help at thousands of sites nationwide. These sites usually begin opening in late January and early February.
  • Free Electronic Filing. VITA and TCE provide free electronic filing. E-file is the safest, most accurate way to file a tax return. Taxpayers can combine e-file with direct deposit for quicker refunds.
  • Volunteer Preparers Trained to Help Find Tax Benefits. The IRS certifies the VITA and TCE volunteers. They help people get all the tax benefits for which they are eligible. These include the Earned Income Tax CreditAmerican Opportunity Tax Credit, the Child Tax Credit or the Credit for the Elderly.
  • Bilingual Help. Some VITA and TCE sites provide bilingual assistance.
  • Help for Military. Many military bases have VITA sites. These sites offer free tax assistance to members of the military and their families. Volunteers can help with military tax topics. Some of these include special rules and tax benefits that apply to those serving in combat zones.
  • Self-Preparation Option. At many VITA sites, people who earn $64,000 or less may be able to prepare their own tax returns. They can do this using free web-based software. This option is for those who do not have a home computer or do not need much help.
  • Site Information Available on Taxpayers can find the nearest VITA site by using the VITA Locator Tool at They can also do so by downloading the IRS2Go app. Site information is also available by calling the IRS at 800-906-9887. Find more on AARP Tax-Aide locations by using the AARP Locator.

Four Tax Credits Can Mean a Refund for Individual Taxpayers

Taxpayers who are not required to file a tax return may want to do so. They might be eligible for a tax refund and don’t even know it. Some taxpayers might qualify for a tax credit that can result in money in their pocket. Taxpayers need to file a 2017 tax return to claim these credits.
Here is information about four tax credits that can mean a refund for eligible taxpayers:
  • Earned Income Tax Credit. A taxpayer who worked and earned less than $53,930 last year could receive the EITC as a tax refund. They must qualify for the credit, and may do so with or without a qualifying child. They may be eligible for up to $6,318. Taxpayers can use the 2017 EITC Assistant tool to find out if they qualify.
  • Premium Tax Credit.Taxpayers who chose to have advance payments of the premium tax credit sent directly to their insurer during 2017 must file a federal tax return to reconcile any advance payments with the allowable premium tax credit. In addition, taxpayers who enrolled in health insurance through the Health Insurance Marketplace in 2017 and did not receive the benefit of advance credit payments may be eligible to claim the premium tax credit when they file. They can use the Interactive Tax Assistant to see if they qualify for this credit.
  • Additional Child Tax Credit. If a taxpayer has at least one child that qualifies for the Child Tax Credit, they might be eligible for the ACTC. This credit is for certain individuals who get less than the full amount of the child tax credit.
  • American Opportunity Tax Credit. To claim the AOTC, the taxpayer, their spouse or their dependent must have been a student who was enrolled at least half time for one academic period. The credit is available for four years of post-secondary education. It can be worth up to $2,500 per eligible student. Even if the taxpayer doesn’t owe any taxes, they may still qualify. They are required to have Form 1098-T, Tuition Statement, to be eligible for an education benefit. Students receive this form from the school they attended. There are exceptions for some students. Taxpayers should complete Form 8863, Education Credits, and file it with their tax return.
By law, the IRS is required to hold EITC and Additional Child Tax Credit refunds until mid-February — even the portion not associated with the EITC or ACTC.  The IRS expects the earliest of these refunds to be available in taxpayer bank accounts or debit cards starting February 27, 2018, if these taxpayers choose direct deposit and there are no other issues with their tax return.
Instructions for Forms 10401040A or 1040EZ list income tax filing requirements. Taxpayers can also use the Interactive Tax Assistant tool on to answer many tax questions. They should look for “Do I need to file a return?” under general topics.
This tax tip covers information for tax year 2017 and is not affected by the Tax Cuts and Jobs Act of 2017. Most of the changes in this legislation take effect in 2018 and will affect the tax returns filed in 2019.

Check Eligibility for Earned Income Tax Credit

The IRS urges Native American taxpayers to check if they qualify for the earned income tax credit since many workers in Tribal communities often overlook this credit.
EITC benefits Native Americans who meet basic rules. Taxpayers must have income from a job, be self-employed, or run their own business. This includes home-based businesses and work in the service industry, construction and farming.

Income Limits and Maximum Credit Amounts

For tax year 2017, the income limits for all taxpayers’ earned income and adjusted gross income must each be less than:
Filing StatusQualifying Children Claimed
ZeroOneTwoThree or More
Head of Household$15,010$39,617$45,007$48,340
Qualifying Widow(er) with Dependent Child$15,010$39,617$45,007$48,340
Married Filing Jointly$20,600$45,207$50,957$53,930

The maximum credit for Tax Year 2017 is:
  • $6,318 with three or more qualifying children
  • $5,616 with two qualifying children
  • $3,400 with one qualifying child
  • $510 with no qualifying children
By law, the IRS cannot issue refunds before mid-February for tax returns that claim the EITC or the additional child tax credit. The law requires the IRS to hold the entire refund — even the portion not associated with the EITC or ACTC. The IRS expects the earliest EITC/ACTC related refunds to be available in taxpayer bank accounts or on debit cards starting Feb. 27, 2018, if these taxpayers choose direct deposit and there are no other issues with their tax return.

Members of Military? Learn about the Earned Income Tax Credit

The IRS reminds members of the military and veterans that they may qualify for the earned income tax credit. This credit benefits certain people who work and have earned income that’s less than $53,930.
A tax credit usually means more money in the taxpayer’s pocket. The EITC can reduce the amount of tax someone owes, but it might also result in a refund. Here are some things members of the armed forces should know about this credit. These are all specific to the military:
  • Generally, nontaxable pay for members of the armed forces isn’t earned income for the EITC. Examples of nontaxable military pay are
    • Combat pay
    • Basic allowance for housing
    • Basic allowance for subsistence
  • A member of the armed forces can elect to have their nontaxable combat pay included in earned income for purposes of the EITC. Doing so may increase or decrease their EITC. The taxpayer can find the amount of their nontaxable combat pay on their Form W-2, in box 12, with code Q. The IRS encourages these taxpayers to calculate their taxes both ways to find out what's best for them.
  • Taxpayers who elect to include their combat pay in income must include all nontaxable combat pay they received. They can't choose to include only a part of the nontaxable combat pay in earned income. Couples with two members of the military filing a joint return have a few options when deciding whether to include combat pay in their income:
    • Spouse 1 can choose to include all their nontaxable combat pay and spouse 2 can choose zero
    • Spouse 1 can choose to include zero amount of your nontaxable combat pay and spouse 2 can choose to include all of it
    • They can both choose to include all their nontaxable combat pay
    • They can both choose not to include their nontaxable combat pay
  • Members of the military on extended active duty outside the U.S. are considered to live in the country during that duty period for purposes of figuring their EITC. Extended active duty means the taxpayer is called to duty for an indefinite period or for a period of more than 90 days. Once they begin serving extended active duty, they’re still considered to have been on extended active duty even if they don't serve more than 90 days.
By law, the IRS cannot issue refunds before mid-February for tax returns that claim the EITC or the additional child tax credit. The law requires the IRS to hold the entire refund — even the portion not associated with the EITC or ACTC.  The IRS expects the earliest EITC/ACTC related refunds to be available in taxpayer bank accounts or on debit cards starting Feb. 27, 2018, if these taxpayers choose direct deposit and there are no other issues with their tax return.