IRS reminds Veterans who are owed refunds for overpayments attributable to disability severance payments that they should file amended returns to claim tax refunds!

USA flag and US Army patch on solder's uniformMost veterans who received a one-time lump-sum disability severance payment when they separated from their military service will receive a letter from the Department of Defense with information explaining how to claim tax refunds they are entitled to. The letters include an explanation of a simplified method for making the claim.

Statute of Limitations

The amount of time for claiming these tax refunds is limited. However, the law grants veterans an alternative timeframe – one year from the date of the letter from DoD. Veterans making these claims have the normal limitations period for claiming a refund or one year from the date of their letter from the DoD, whichever expires later. As taxpayers can usually only claim tax refunds within 3 years from the due date of the return, this alternative time frame is especially important since some of the claims may be for refunds of taxes paid as far back as 1991.

Amount to Claim

Veterans can submit a claim based on the actual amount of their disability severance payment by completing Form 1040X, carefully following the instructions. However, there is a simplified method. Veterans can choose instead to claim a standard refund amount based on the calendar year (an individual’s tax year) in which they received the severance payment. Write “Disability Severance Payment” on line 15 of Form 1040X and enter on lines 15 and 22 the standard refund amount listed below that applies:

  • $1,750 for tax years 1991 – 2005
  • $2,400 for tax years 2006 – 2010
  • $3,200 for tax years 2011 – 2016

Claiming the standard refund amount is the easiest way for veterans to claim a refund, because they do not need to access the original tax return from the year of their lump-sum disability severance payment.

Special Instructions

All veterans claiming refunds for overpayments attributable to their lump-sum disability severance payments should write either “Veteran Disability Severance” or “St. Clair Claim” across the top of the front page of the Form 1040X that they file. Because all amended returns are filed on paper, veterans should mail their completed Form 1040X, with a copy of the DoD letter, to:

Internal Revenue Service
333 W. Pershing Street, Stop 6503, P5
Kansas City, MO  64108

Veterans eligible for a refund who did not receive a letter from DoD may still file Form 1040X to claim a refund but must include both of the following to verify the disability severance payment:

  • A copy of documentation showing the exact amount of and reason for the disability severance payment, such as a letter from the Defense Finance and Accounting Services (DFAS) explaining the severance payment at the time of the payment or a Form DD-214, and
  • A copy of either the VA determination letter confirming the veteran’s disability or a determination that the veteran’s injury or sickness was either incurred as a direct result of armed conflict, while in extra-hazardous service, or in simulated war exercises, or was caused by an instrumentality of war.

Veterans who did not receive the DoD letter and who do not have the required documentation showing the exact amount of and reason for their disability severance payment will need to obtain the necessary proof by contacting the Defense Finance and Accounting Services (DFAS).

By C Fitts Tax Solutions, LLC Posted in Tax Talk

Six (6) Tax Law Changes that could affect your payroll withholdings

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Those who claimed allowances for itemized deductions under prior law should claim fewer allowances in 2018 for itemized deductions—even if they no longer itemize.

  • Tax rates have decreased in general
  • Standard deductions have almost doubled:
    • Single: $6,350 → $12,000
    • Head of Household: $9,350 → $18,000
    • Married-Joint: $12,700 → $24,000
  • Exemptions are eliminated
  • Child Tax Credit increased from $1,000 to $2,000/child and eligibility expanded
  • New credit for other dependents of $500/dependent is added
  • Changes are made to allowable itemized deductions

Use the Withholding Calculator and determine if you need to fill out a new Form W-4 with your employer(s). Some of its features are:

  • It allows for other types of income and offsets to income.
  • It accounts for withholding-to-date (e.g., mid-year).
  • It accounts for part-year jobs.
  • It prevents users from entering unallowableor inconsistent amounts.
By C Fitts Tax Solutions, LLC Posted in Tax Talk

What Should You Do If You Need More Time to Pay Taxes?

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If you haven’t filed your tax return because you couldn’t pay in-full by the April 17 deadline, here are a few tips that could save you from a potential failure to file penalty and interest:

  • File now and Pay as Much as Possible.
  • Get a Loan or Use a Credit Card to Pay the Tax.
  • Don’t wait for IRS to send a bill. Use the Online Payment Agreement tool.
  • The IRS may take collection action against taxpayers who don’t respond to notices, so don’t ignore a tax bill.
By C Fitts Tax Solutions, LLC Posted in Tax Talk
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Tax Filing Extension Expires Oct. 16 for Many Taxpayers!

 Although Oct. 16 is the last day for most people to file, some individuals — such as members of the military serving in a combat zone — are allowed more time to file. Typically, they have until 180 days after they leave the combat zone to both file their return and pay any taxes due.

Also see the disaster relief page on IRS.gov to get details about hurricane relief.

By C Fitts Tax Solutions, LLC Posted in Tax Talk

Data Breach: Five Things to Do After Your Information Has Been Stolen

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What You Can Do Now

  1. Stay alert: If you have been part of a data breach, the breached company may send you a notice. Retain all documents and consider any suggestions they may have. Also, pay attention to and retain any mail you receive that is unfamiliar to you, such as notices from the IRS regarding your taxes or any bills from unknown lenders.
  2. Initiate a fraud alert: You can set a fraud alert with Experian. When you request a fraud alert be added with any of the three major credit bureaus, the bureau you contacted will notify the other two and alerts will be added with those bureaus as well. A fraud alert (also known as an initial security alert) will warn lenders that you may have been a fraud victim. This extra precaution will notify the potential lender that they should contact you before granting any new line of credit in your name. This fraud alert will stay on your credit report for 90 days. You can renew the fraud alert when it expires.
  3. Monitor your financial accounts: Visit your online bank and financial accounts, and set up any alert features they may have, if you have not already done so. This could help save some time and keep you notified of any unusual events when they occur.
  4. Monitor your credit reports: You can check your credit report for free once every twelve months by visiting AnnualCreditReport.com. Checking your credit report can help you identify any unusual activity, such as new accounts, new personal information or inquiries. Experian free credit report members can check their Experian credit report for free every 30 days on sign in.
  5. Freeze or lock your credit file: You may consider adding a security freeze. You can also freeze your credit reports with Equifax and TransUnion®. A security freeze will prevent potential lenders from accessing your credit report. Your credit report will only be accessible by unfreezing the account. If you are planning on applying for new credit in the near future, you could consider postponing the security freeze. Fees and requirements for adding and removing a freeze vary by state. Also, if you are already a member of Experian IdentityWorks, you can lock and unlock your Experian credit report at any time.

How We Can Help

By C Fitts Tax Solutions, LLC Posted in Tax Talk

IRS Provides Help for Hurricane Harvey Victims

IRS logoThe IRS is providing a variety of tax relief for those affected by Hurricane Harvey. 

IRS Gives Tax Relief to Victims of Hurricane Harvey; Parts of Texas Now Eligible; Extension Filers Have Until Jan. 31 to File

Hurricane Harvey victims in parts of Texas have until Jan. 31, 2018, to file certain individual and business tax returns and make certain tax payments.

 Beware of Fake Charity Scams Relating to Hurricane Harvey

Fake charity scams proliferate after disasters. Donees are encouraged to seek out recognized charitable groups when making donations.

 Retirement Plans Can Make Loans, Hardship Distributions to Victims of Hurricane Harvey

401(k)s and similar employer-sponsored retirement plans can make loans and hardship distributions to victims of Hurricane Harvey and members of their families.

 IRS Waives Diesel Fuel Penalty Due to Hurricane Harvey

In response to shortages of undyed diesel fuel caused by Hurricane Harvey, IRS will not impose a penalty when dyed diesel fuel is sold for use or used on the highway.

By C Fitts Tax Solutions, LLC Posted in Tax Talk

Important Social Security Information for People Affected by Hurricane Harvey

Many Social Security and Supplemental Security Income (SSI) benefit payments are scheduled for Friday, September 1.

Payments by Paper Check Delivered by the US Postal Service

Hurricane Harvey’s impact on the Gulf Coast resulted in the temporary suspension of mail delivery service, as well as the closure of some postal facilities in the Houston area. The U.S. Postal Service is providing additional information on how customers displaced by Hurricane Harvey can retrieve checks they receive via the mail.

Provided here about.usps.com/news/state-releases/tx/tx.htm is a list of Post Office locations, by ZIP Code, where checks will be made available for pick-up beginning Friday, September 1. People must have proper identification to receive their check.

Payments by Direct Deposit

Nearly all payments issued by direct deposit will arrive as scheduled. If a person’s payment is delayed, they should contact their financial institution. If the financial institution is not operating, please see the “emergency payment” information below.

Payments by Direct Express Debit Card (a Treasury Department program)

For recipients in the affected areas who receive their payment through a Direct Express card, fees will be waived, even if they have evacuated out of the area. Payments will be posted to Direct Express cards on September 1.

People may contact Direct Express at 1-888-741-1115 .

Emergency Payment Locations

Social Security has established three emergency payment locations in Texas where Social Security and SSI beneficiaries may request an immediate payment in person if they cannot receive their regular payment. The locations and hours are:

Friday, September 1, and Saturday, September 2:

    • Houston: NRG Center
      2 NRG Park, Houston, TX 77054
      From 9:00 AM – 4:00 PM
    • Dallas: Kay Bailey Hutchison Dallas Convention Center
      650 S. Griffin Street, Dallas, TX 75202
      From 9:00 AM – 4:30 PM
    • Austin: Tony Burger Center
      3200 Jones Rd Austin, TX 78745
      From 9:30 AM – 3:00 PM

For people who cannot receive their regularly scheduled Social Security payment as a result of Hurricane Harvey, in most cases they can go to any open Social Security office and request an immediate payment. A list of offices that are currently closed, as well as additional information for the public, is available at www.socialsecurity.gov/emergency.

To find the nearest open Social Security office outside of the affected areas, call 1-800-772-1213 (TTY 1-800-325-0778 ) or go to www.socialsecurity.gov/locator.

To get more Social Security news, follow the Press Office on Twitter @SSAPress.

By C Fitts Tax Solutions, LLC Posted in Tax Talk

Your Tax Responsibility in the Sharing “Cloud Based” Economy

Tablet Computer With Mobile Phones Stock Photo

Do you make extra money through the use of social media? or your car to pick up passengers? Even rent-out a spare bedroom to make extra money? If so, you’re participating in the Sharing Economy (aka, the gig, on-demand or access economy). Income from these emerging areas is generally taxable, and related expenses may be deductible. Use this link for basic tax tips to keep in mind.

By C Fitts Tax Solutions, LLC Posted in Tax Talk

New Tax Scams to be Aware of!

Credit Card ThiefTaxpayers can avoid scams by taking a few minutes to review the tell-tale signs of these schemes. This is just a few:

EFTPS Scam

A new scam linked to the Electronic Federal Tax Payment System (EFTPS) has been reported nationwide. In this ruse, con artists call to demand immediate tax payment. The caller claims to be from the IRS and says that two certified letters mailed to the taxpayer were returned as undeliverable. The scammer then threatens arrest if a payment is not made immediately by a specific prepaid debit card. Victims are told that the debit card is linked to the EFTPS when, in reality, it is controlled entirely by the scammer. Victims are warned not to talk to their tax preparer, attorney or the local IRS office until after the payment is made.

 “Robo-call” Messages

 The IRS does not call and leave prerecorded, urgent messages asking for a call back. In this tactic, scammers tell victims that if they do not call back, a warrant will be issued for their arrest. Those who do respond are told they must make immediate payment either by a specific prepaid debit card or by wire transfer.

 Private Debt Collection Scams

The IRS recently began sending letters to a relatively small group of taxpayers whose overdue federal tax accounts are being assigned to one of four private-sector collection agencies. Taxpayers should be on the lookout for scammers posing as private collection firms. The IRS-authorized firms will only be calling about a tax debt the person has had – and has been aware of – for years. The IRS would have previously contacted taxpayers about their tax debt.

Scams Targeting People with Limited English Proficiency

Taxpayers with limited English proficiency have been recent targets of phone scams and email phishing schemes that continue to occur across the country. Con artists often approach victims in their native language, threaten them with deportation, police arrest and license revocation among other things. They tell their victims they owe the IRS money and must pay it promptly through a preloaded debit card, gift card or wire transfer. They may also leave “urgent” callback requests through phone “robo-calls” or via a phishing email.

Tell Tale Signs of a Scam:

The IRS (and its authorized private collection agencies) will never:

  • Call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer. The IRS does not use these methods for tax payments. The IRS will usually first mail a bill to any taxpayer who owes taxes. All tax payments should only be made payable to the U.S. Treasury and checks should never be made payable to third parties.
  • Threaten to immediately bring in local police or other law-enforcement groups to have the taxpayer arrested for not paying.
  • Demand that taxes be paid without giving the taxpayer the opportunity to question or appeal the amount owed.
  • Ask for credit or debit card numbers over the phone.

For anyone who doesn’t owe taxes and has no reason to think they do:

  • Do not give out any information. Hang up immediately.
  • Contact the Treasury Inspector General for Tax Administration to report the call. Use their IRS Impersonation Scam Reporting web page. Alternatively, call 800-366-4484 .
  • Report it to the Federal Trade Commission. Use the FTC Complaint Assistant on FTC.gov. Please add “IRS Telephone Scam” in the notes.

For anyone who owes tax or thinks they do:

How to Know It’s Really the IRS Calling or Knocking

The IRS initiates most contacts through regular mail delivered by the United States Postal Service. However, there are special circumstances in which the IRS will call or come to a home or business, such as:

  • when a taxpayer has an overdue tax bill,
  • to secure a delinquent tax return or a delinquent employment tax payment, or,
  • to tour a business as part of an audit or during criminal investigations.

Even then, taxpayers will generally first receive several letters (called “notices”) from the IRS in the mail. For more information, visit “How to know it’s really the IRS calling or knocking on your door” on IRS.gov.