Friday, March 30, 2007

E-File Returns Running at Record Pace

E-File Returns Running at Record Pace

IR-2007-74, March 30, 2007

WASHINGTON — The Internal Revenue Service announced today that taxpayers are continuing to electronically file their tax returns at a record pace, up almost 6 percent from the same period last year.

“Taxpayers can rely on e-file as a safe, accurate way to quickly finish their taxes and get a refund,” said IRS Commissioner Mark W. Everson. “We encourage people to consider e-file and Free File as the tax deadline approaches. For those who haven’t filed, they should make sure to request the telephone excise tax refund if they are eligible.”

According to the new filing season statistics for the week ending March 23, 2007, one of the biggest areas of growth is in returns electronically filed from home. Self-prepared e-filed returns have grown more than 8 percent from last year. E-filed returns from tax professionals have climbed almost 5 percent.

So far this tax filing season, almost 72 percent of all returns have been e-filed, compared to 68 percent for the same period last year. As of last Friday, 29 percent of e-filed returns were filed by people using their home computers, up from 28 percent of e-filed returns for the same period last year.

Also, more people than ever before are opting to have their refunds directly deposited. So far this year, the IRS has directly deposited almost 45 million refunds, or 71 percent of all refunds issued this tax filing season, up from almost 69 percent of the total for the same period last year.

People are visiting the IRS Web site at IRS.gov in record numbers. The IRS has recorded more than 97 million unique visits to IRS.gov this year, up from about 89 million for the same period last year, an increase of almost 9 percent.

Meanwhile, this year’s filings still show that about three in 10 tax returns are not requesting the one-time telephone tax refund. Although some of these taxpayers may not be eligible, others may qualify and not know it. The IRS urges taxpayers to check their eligibility for this special refund by visiting the Telephone Excise Tax Refund section on this Web site.

The government stopped collecting the long-distance excise tax last August after several federal court decisions held that the tax does not apply to long-distance service as it is billed today. Federal officials also authorized a one-time refund of the 3 percent federal excise tax collected on service billed during the previous 41 months, stretching from the beginning of March 2003 to the end of July 2006. The tax continues to apply to local-only phone service.

Of those requesting the telephone tax refund, 99 percent are choosing the standard amount, and the rest are basing their request on the actual amount of tax paid. The standard amount ranges from $30 to $60 and is based on the number of exemptions taxpayers are eligible to claim on their return. Alternatively, taxpayers can request a refund based on the tax shown on their phone bills and other records.

Taxpayers can request the telephone excise tax refund, as well as file their entire tax return electronically, for no cost using the IRS's Free File program. Seventy percent of Americans are eligible for the Free File program because they earn an adjusted earned income of $52,000 or less. Free File can only be accessed through IRS.gov. On the home page, click on "2007 Free File" and follow the directions.


2007 FILING SEASON STATISTICS

Cumulative through the weeks ending 3/24/06 and 3/23/07

Individual Income Tax Returns

2006

2007

% Change

Total Receipts

73,438,000

74,150,000

1.0%

Total Processed

69,196,000

70,529,000

1.9%



E-filing Receipts:

TOTAL

50,296,000

53,145,000

5.7%

Tax Professionals

36,268,000

37,942,000

4.6%

Self-prepared

14,028,000

15,203,000

8.4%

Web Usage:

Visits to IRS.gov

89,246,000

97,102,000

8.8%

Total Refunds:

Number

61,660,000

62,951,000

2.1%

Amount

$144.513

Billion

$152.801

Billion

5.7%

Average refund

$2,344

$2,427

3.6%

Direct Deposit Refunds:

Number

42,252,000

44,779,000

6.0%

Amount

$113.414

Billion

$124.101

Billion

9.4%

Average refund

$2,684

$2,771

3.2%

Related Items:

Thursday, March 29, 2007

IRS Issues Regulations on Transactions Designed to Artificially Generate Foreign Tax Credits

IRS Issues Regulations on Transactions Designed to Artificially Generate Foreign Tax Credits

IR-2007-73, March 29, 2007

WASHINGTON — The Internal Revenue Service and Treasury Department today announced the release of proposed regulations that would disallow foreign tax credits for foreign taxes purportedly paid in connection with certain artificially engineered, highly structured transactions.

Foreign tax credits are designed to relieve U.S.taxpayers from double taxation of their foreign source income. Transactions addressed by the regulations, in contrast, are structured so that a U.S.taxpayer voluntarily subjects itself to foreign tax where an ordinary business transaction generally would result in little or no foreign tax paid by the U.S. taxpayer.

“The proposed regulations complement the vigorous enforcement efforts of the IRS to identify and, in appropriate cases, to challenge the tax benefits claimed in these foreign tax credit generator transactions under principles of existing law,” said IRS Chief Counsel Donald L. Korb.

The significant impact of these transactions on the U.S.tax base was brought to the attention of the IRS by members of the Joint International Tax Shelter Information Centre (JITSIC). JITSIC is an information exchange arrangement under which the US, the UK, Canada and Austrailia exchange information bilaterally on tax avoidance schemes.

The IRS is aggressively pursuing cases uncovered through JITSIC or other sources involving inappropriate claims of foreign tax credits. Foreign tax credit abuse is among the IRS’s top compliance concerns for large corporate taxpayers.

IRS Encourages Taxpayers to Take Advantage of Overlooked Tax Benefits

IRS Encourages Taxpayers to Take Advantage of Overlooked Tax Benefits

IR-2007-72, March 29, 2007

WASHINGTON — The Internal Revenue Service today urged taxpayers to take a moment before they file their income tax returns to be sure they do not overlook several important benefits to which they may be entitled.

“Many taxpayers are missing out this year on the special telephone excise tax refund and other benefits such as the Earned Income Tax Credit,” IRS Commissioner Mark W. Everson said. “If you don’t claim it, you don’t get it. That’s money down the drain for millions of Americans.”

In addition to the telephone excise tax refund and the Earned Income Tax Credit, many taxpayers also overlook free services available to them, such as free tax help and the Free File program.

Still others lose out by not filing a return. Even if a taxpayer does not owe tax and is not required by law to file a return, he or she may miss out on a refund or tax credit that is available.

Following are five refunds, credits or services that taxpayers frequently overlook:

Telephone Excise Tax Refund –– This is a one-time refund of long distance excise taxes available on 2006 income tax returns. The refund applies to charges billed from March 2003 through July 2006. The IRS offers a standard refund amount of $30 to $60, or taxpayers can calculate the actual tax paid. Even if the taxpayer does not normally have to file a return, Form 1040EZ-T can be used to request this refund. Businesses and exempt organizations can also request it. Taxpayers can visit IRS.gov for more information on this special payment.

IRS Free File –– Nearly 20 companies are offering free electronic filing to taxpayers whose 2006 adjusted gross income was $52,000 or less. That means 70 percent of all taxpayers, 95 million individuals, can take advantage of the IRS-sponsored Free File program. A link to Free File offerings is located on the IRS.gov homepage.

Earned Income Tax Credit –– Earned income of less than $39,000 in 2006 may qualify a taxpayer to claim the earned income tax credit. This credit could be worth up to $4,536. When the EITC exceeds the amount of taxes owed, it results in a tax refund to those who claim and qualify for the credit. To qualify, taxpayers must meet certain requirements and file a tax return, even if they did not earn enough money to be obligated to file a tax return. An electronic special “EITC Assistant” is available on IRS.gov to help taxpayers determine whether they are eligible. Taxpayers can access more information on this credit by visiting IRS.gov and clicking on “1040 Central.”

Free Tax Help –– Tax help sites in libraries, churches, community centers and other locations are staffed by trained volunteers. Taxpayers who earned less than $39,000 and file a simple tax return can call 1-800-829-1040 to locate the nearest Volunteer Income Tax Assistance Program site. In addition, senior citizens can take advantage of the free IRS Tax Counseling for the Elderly program by calling 1-800-829-1040 or AARP’s Tax-Aide counseling program at 1-888-227-7669.

Unclaimed Refunds –– Refunds totaling approximately $2.2 billion are waiting for approximately 1.8 million people who failed to file a federal income tax return for 2003. In order to collect the money, a return for 2003 must be filed no later than April 17, 2007. The IRS estimates that half of those who could claim refunds would receive more than $611. In some cases, individuals had taxes withheld from their wages, or made payments against their taxes out of self-employed earnings, but had too little income to require filing a tax return. Current and prior year tax forms and instructions are available on the Forms and Publications page of IRS.gov or by calling 1-800-TAX-FORM (1-800-829-3676). Taxpayers who need help also can call the IRS help line at 1-800-829-1040.

Links:

Jenkens & Gilchrist Admits It Is Subject to $76 Million IRS Penalty

Jenkens & Gilchrist Admits It Is Subject to $76 Million IRS Penalty

IR-2007-71, March 29, 2007

WASHINGTON — The Internal Revenue Service today announced that it has reached a settlement with the law firm of Jenkens & Gilchrist, which agreed that they are subject to a penalty of $76 million. The penalty stems from the firm’s promotion of abusive and fraudulent tax shelters and violation of the tax law concerning tax shelter registration and maintenance and turnover to the IRS of tax shelter investor lists.

“While it is unfortunate that the 56-year-old national firm of Jenkens & Gilchrist is terminating its legal practice, this should be a lesson to all tax professionals that they must not aid or abet tax evasion by clients or promote potentially abusive or illegal tax shelters, or ignore their responsibilities to register or disclose tax shelters,” said IRS Commissioner Mark W. Everson. “Pursuing abusive tax shelters is a top priority for the IRS.”

The firm aggressively marketed potentially abusive tax shelters to high-net-worth individuals. Some of the packages marketed to these individuals included listed transactions such as COBRA (Currency Options Bring Reward Alternatives); BEST (Short Option/Basis Enhancing Securities Transaction); BLISS (Basis Leveraged Investment Swap Spreads); OPS (Option Partnership Strategy); BEDS (Basis Enhancing Derivatives Structure); and BOSS (Bond & Option Sale Strategy).

The firm also marketed two transactions that are not listed transactions — HOMER (Hedge Option Monetization of Economic Remainders) and BART (Basis Adjustment Remainder Trusts).

The agency estimates that 1,400 investors are affected by the firm’s advice and will owe interest and penalties on their underpayment of tax. Jenkens & Gilchrist, which was once a 600-lawyer national firm, is in the process of winding down its legal practice and business affairs.

The national law firm of Jenkens & Gilchrist is composed of a corporation in Dallas, Texas; a corporation in Chicago, Illinois; a partnership in Los Angeles, California; and a partnership in New York City.

Related Items:

Tuesday, March 27, 2007

Many Cell Phone Customers May Be Overlooking Telephone Tax Refund; Before You File, See if You Qualify, IRS Advises

Many Cell Phone Customers May Be Overlooking Telephone Tax Refund; Before You File, See if You Qualify, IRS Advises

IR-2007-70, March 27, 2007

WASHINGTON — Many cell-phone users appear to be overlooking the telephone tax refund in the mistaken belief that this one-time refund only applies to land-line customers.

According to the Internal Revenue Service, most cell-phone users qualify for the federal telephone excise tax refund. In most cases, the refund is also available to land-line, fax and Internet phone customers as well. The method of phone signal transmission does not affect the refund. The telephone-tax refund can add $30 to $60 — or even more — onto a taxpayer’s refund.

“Many taxpayers are overlooking this special refund and the chance to get a bigger refund,” said IRS Commissioner Mark W. Everson. “We encourage taxpayers to spend a few extra minutes reviewing their tax return to make sure they are making an accurate request. A little extra time can mean a bigger refund check.”

The government stopped collecting the long-distance excise tax last August after several federal court decisions held that the tax does not apply to long-distance service as it is billed today. The tax continues to apply to local-only phone service.

Federal officials also authorized a one-time refund of the three-percent tax collected on long-distance or bundled service billed after Feb. 28, 2003, and before Aug. 1, 2006. Bundled service is local and long-distance service provided under a plan that does not separately list the charge for local service. Bundled service includes, for example, phone plans that provide both local and long-distance service for either a flat monthly fee or a charge that varies with the time for which the service is used. It is the type of service provided by many cell-phone companies.

“We want all taxpayers entitled to this refund to get it, whether they are using a tax preparer or doing the return themselves,” Everson said.

So far this year, about three in 10 tax returns received by the IRS are not requesting the telephone-tax refund. If you paid the tax and haven’t filed yet, here are some tips to help you figure the refund correctly and get it quickly:

  • Consider using the standard-refund amount. About 99 percent of returns requesting the telephone-tax refund are choosing the standard amount. Though the standard amount is optional, it is easy to figure and approximates the eligible amount for most telephone customers. You only have to fill out one line on your return, and you don’t need to present proof to the IRS. The standard amount, ranging from $30 to $60, is based on the number of exemptions you can claim on your return. If you can be claimed as a dependent on someone else’s return, you cannot use the standard amount.

  • If you paid more than the standard amount, you may figure your refund using the actual amount of tax shown on your phone bills and other records. Base your refund request on the three-percent federal tax paid, not the total phone bill. Do not count tax paid on local-only service. You must have the phone bills or other records adequate to support the amount you are requesting. These documents should not be sent along with the refund request but should be retained in case the IRS questions the amount requested.

  • If you’re not sure whether you paid the tax, check the portion of your telephone bill that relates to long-distance or bundled service. Service providers use a number of different terms to identify the tax. Phrases to look for include: English-language phone bills: Federal, Federal Excise 3%, Federal Excise @ 3%, Federal Excise Tax, Federal Tax, Fed Excise Tax and FET; Spanish-language phone bills; Impuesto Indirecto Federal and Impuesto federal. Typically, this federal tax amount is not commingled with any other tax or surcharge on a customer's bill. In other words, it is normally shown as a separate line item.

  • Do not file duplicate requests. If you file a regular income-tax return, do not file Form 1040EZ-T. Designed exclusively for requesting the telephone-tax refund, this simple form is for people who don’t need to file a regular income-tax return. If you want to take advantage of the earned income tax credit for low and moderate income workers, the child tax credit or other tax breaks, file a regular return and include your telephone-tax refund request on that return.

  • File electronically. Electronic-filing software flags often overlooked tax breaks, such as the telephone-tax refund, and helps you figure them accurately and report them properly. If you use a professional tax preparer, ask that person to e-file your return.

  • E-file for free. If your income is $52,000 or less, use the Free File link on IRS.gov to connect to a private-sector company offering free e-file services.

  • Choose direct deposit. Whether you file electronically or on paper, you can get your refund at least a week sooner by having it deposited directly into your checking or savings account.

  • If your income is low and you prefer having someone else prepare your refund request, you can get free help by visiting one of more than 12,000 neighborhood tax-assistance sites nationwide. Trained community volunteers fill out telephone-tax refund requests and basic income-tax returns for low-income people and senior citizens. To locate the nearest volunteer tax-help site, call AARP at 1-888-227-7669 or the IRS at 1-800-829-1040.

  • If you already filed your return but failed to request the telephone-tax refund, you can file an amended return using Form 1040X. This form, available on IRS.gov, cannot be e-filed; it must be filed on paper. To avoid delaying a refund request, mail your completed Form 1040X at least three weeks after you filed your original return (if it was e-filed) or at least eight weeks later (if filed on paper).

  • Stay away from tax preparers who falsely claim that many, if not most, phone customers can get hundreds of dollars or more back under this program.

  • Use the Telephone Excise Tax Refund section on the front page of IRS.gov. Here, you can download forms, find answers to frequently-asked questions and link to participating Free File partners.

Related Item:

Monday, March 26, 2007

Williams Will Head IRS’ ETA Office; Holland to Direct EITC Program

Williams Will Head IRS’ ETA Office; Holland to Direct EITC Program

IR-2007-69, March 26, 2007

WASHINGTON — The Internal Revenue Service today announced the appointment of David R. Williams as Director, Electronic Tax Administration and Refundable Credits. Reporting to Williams and focusing entirely on administration of the Earned Income Tax Credit program will be Debra Holland, Director, EITC.

Williams most recently served as the IRS Director in charge of the Earned Income Tax Credit, Health Coverage Tax Credit and Telephone Excise Tax Refund programs. He will maintain responsibility for those programs in his new capacity as he assumes the responsibility for Electronic Tax Administration including its e-file, e-services and internet programs.

“We’re very fortunate to have someone with David’s expertise and background to take over this very important program,” said IRS Commissioner Mark W. Everson. “He has the knowledge and experience to bring together the private sector to work with the IRS to achieve significant advances in our shared goal of effective electronic tax administration. We see this move as a step forward for both the program and the IRS as a whole.”

The Electronic Tax Administration Office (ETA) is responsible for all aspects of the growing exchange of electronic information between the IRS and individual taxpayers, businesses and practitioners. This includes the IRS e-file program now used by most taxpayers, the IRS.gov web site, and the development of additional electronic interactions with taxpayers and tax practitioners.

Prior to joining the IRS in 1998 as Chief of Communications and Liaison under IRS Commissioner Charles O. Rossotti, Williams was a Deputy Assistant Secretary with the Department of the Treasury and had worked on Capitol Hill. He holds a Master of Public Policy from the John F. Kennedy School of Government at Harvard University, and a Bachelor of Science in Business Administration from Colorado State University.

Holland most recently served as the Director, Pre-Refund Program Office, and she previously served as the Director of Business Systems Planning within the Wage and Investment Operating Division. Holland has held top-level positions in the IRS Joint Operations Center and Accounts Managements organizations.

“Debra brings a unique blend of business management and technology expertise to the position that will serve her well as she oversees the important EITC program,” said Richard Morgante, Commissioner of the IRS Wage and Investment Division.

As Director of EITC, Holland will balance the IRS’s nationwide outreach aimed at ensuring that every eligible taxpayer receives the credit with the equal responsibility to ensure that only those eligible for the credit receive it.

Williams and Holland are working to ensure a smooth transition. The moves will be effective later this year.

Related Items:

Telephone Excise Tax Refund
Earned Income Tax Credit
Health Coverage Tax Credit
Electronic Tax Administration/e-file

Friday, March 23, 2007

IRS Announces Enhancements to Online Payment Agreement Application

IRS Announces Enhancements to Online Payment Agreement Application

IR-2007-68, March 23, 2007

WASHINGTON — With the filing deadline approaching, the Internal Revenue Service today announced enhancements to the interactive Online Payment Agreement application on IRS.gov.

The Web-based application allows eligible taxpayers or their authorized representatives to self-qualify, apply and receive immediate notification of approval for installment agreements – including paperless direct debit agreements.

Two recent enhancements provide added functionality. The first permits individuals who have not yet received a bill to establish pre-assessed agreements on current tax year Form 1040 liabilities. The second allows practitioners with valid authorizations to remain in the application to request agreements for multiple clients.

The IRS estimates that over 75% of those eligible for an installment agreement can establish one using this application. Since launching in October, about 3,000 taxpayers have successfully used it to set up a payment agreement with the IRS.

Paying taxes on time and in full avoids unnecessary penalties and interest. However, taxpayers who cannot pay in full may request a payment agreement. To be eligible, a taxpayer must first file all required tax returns and be current with estimated tax payments if applicable.

Individuals with a balance due notice can access the application using the following information:

  • Taxpayer identification number (generally a Social Security Number) and
  • Personal identification number, which can be established online using the caller identification number from the balance due notice.

Individuals who have not yet received a bill must provide the following information to establish pre-assessed agreements on current year returns:

  • The balance due shown on the return
  • Taxpayer identification number
  • Spouse’s taxpayer identification number (if applicable)
  • Date of birth
  • Adjusted Gross Income from last year’s income tax return
  • Total tax from last year’s income tax return.

Three payment options are available when applying online:

  • Pay in full — Taxpayers who pay within 10 days save interest and penalties.
  • Short-term extension — Receive a short-term extension of up to 120 days. No fee is charged, but additional penalties and interest will accrue.
  • Monthly payment plan — A user fee will be added to the amount owed, and interest and penalty will continue to accrue on the unpaid balance.User fees are $105 for non-direct debit agreements and $52 for direct debit agreements. A reduced fee of $43 is available for individuals with income at or below certain levels.

To access the application, use the pull-down menu under “I need to...” on the front page of IRS.gov and select “Set Up a Payment Plan.” The application is available Monday through Friday from 6 a.m. to 12:30 a.m., Saturday from 6 a.m. to 10 p.m. and Sunday from 4 p.m. to midnight (all are Eastern Time).

Related Item: Set Up Payment Plan

Thursday, March 22, 2007

IRS Further Extends Deadline for Settlement Offered To Certain Foreign Embassy Staff

IRS Further Extends Deadline for Settlement Offered To Certain Foreign Embassy Staff

IR-2007-67, March 22, 2007

WASHINGTON — The Internal Revenue Service is providing a further extension, until June 30, 2007, of the deadline for current and former U.S.-based employees of foreign embassies, consular offices and missions and international organizations to participate in a one-time settlement initiative to resolve outstanding tax matters related to their employment.

Following requests from several embassies, the date is again being extended to make certain those wishing to participate in the initiative have the opportunity to do so.

The offer is open to employees of those organizations who are U.S. citizens, green-card holders and foreign employees who have tax obligations. Accredited diplomatic personnel are generally exempt from income taxes on their wages under the Internal Revenue Code and international treaties or agreements.

The IRS estimates that as many as half of these employees subject to U.S. tax fail to report their wages, claim deductions they are not entitled to, incorrectly establish SEP/IRA retirement plans, fail to pay self-employment tax or fail to file tax returns.

To participate, employees must submit amended or original tax returns for tax years 2004 and 2005 that properly reflect their income and expenses. Participants in the settlement will not be required to provide tax year 2003 returns, which was previously part of the settlement eligibility requirement. In addition, participants with erroneously established SEP/IRA plans will not be required to distribute amounts contributed to these SEP/IRAs for tax years prior to the 2004 tax year. This change follows discussions with embassies and provides consistency with the income tax portion of the settlement initiative.

IRS will remove the 2003 tax year issues from the settlement elections previously received from taxpayers.

IRS encourages those affected taxpayers to act quickly so to avoid a future audit process that could prove costly. Foreign embassy, consular office or international organization employees who fail to come forward may be subject to IRS audits and penalties which could cover more than just three years.

IRS Invites Taxpayers to Apply for Taxpayer Advocacy Panel

IRS Invites Taxpayers to Apply for Taxpayer Advocacy Panel

IR-2007-66, March 22, 2007

WASHINGTON — The Internal Revenue Service is inviting civic-minded individuals to help improve the nation’s tax agency by applying to be members of the Taxpayer Advocacy Panel. The Panel provides a forum for citizens from each state to make suggestions regarding IRS decision making.

The mission of the Panel is to listen to taxpayers, identify taxpayers’ issues, and make recommendations for improving IRS service and customer satisfaction. Taxpayer Advocacy Panel (TAP) members:

  • Provide opportunities for citizen input and make recommendations to the IRS on customer-service issues.
  • Identify and prioritize taxpayer issues.
  • Report annually to Treasury, the IRS and the National Taxpayer Advocate.
  • Participate in meetings where taxpayers are invited to raise issues about their experiences with the IRS.
  • Participate in taxpayer outreach opportunities by speaking to individuals and groups about the Panel.

“As the IRS continues to examine taxpayers’ needs in the area of service, the Taxpayer Advocacy Panel has emerged as a vital source for gathering and providing information from the perspective of taxpayers,” said Nina E. Olson, National Taxpayer Advocate. “TAP’s role will ultimately aid taxpayers by helping the IRS to provide them with the top quality service they deserve."

To qualify as a TAP member, applicants must be U.S. citizens and be able to commit 300 to 500 hours during the year to the Panel. In addition, they must be current with their tax obligations and pass a criminal background check.

This year TAP is accepting applications from U.S. citizens who reside in the following locations: Alabama, Arkansas, California, Colorado, Delaware, Georgia, Hawaii, Idaho, Illinois, Indiana, Louisiana, Maine, Massachusetts, Michigan, Mississippi, Montana, Nebraska, New Hampshire, North Carolina, North Dakota, New Mexico, Nevada, Ohio, Oklahoma, Pennsylvania, Puerto Rico, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Vermont, Virginia, West Virginia, Wisconsin, Utah, Washington, Wyoming.

The application form will be available, and may be submitted electronically online, at www.improveirs.org (see link below) from March 19 through April 30, 2007.

If you do not have access to a computer, call 1-888-912-1227 to request a paper application form.

All applications, both electronic and paper, must be received no later than April 30, 2007.

Links:

Electronically Filed Returns Up More Than 5 Percent

Electronically Filed Returns Up More Than 5 Percent


IR-2007-65, March 22, 2007

WASHINGTON — The Internal Revenue Service announced today that taxpayers are continuing to electronically file their tax returns at a record pace, up more than 5 percent from the same period last year.

“Taxpayers are filing electronically at a record pace this year,” said IRS Commissioner Mark W. Everson. “We encourage people to consider e-file and Free File as the tax deadline approaches. E-file reduces taxpayer errors and gets refunds back quickly.”

According to the new filing season statistics for the week ending March 16, 2007, one of the biggest areas of growth is in returns filed electronically from home. Self-prepared e-filed returns have grown more than 8 percent from last year. E-filed returns from tax professionals have climbed more than 4 percent.

So far this tax filing season, 73 percent of all returns have been e-filed, compared to 70 percent for the same period last year. As of last Friday, 29 percent of e-filed returns were filed by people using their home computers, up from 28 percent of e-filed returns for the same period last year.

Also, more people than ever before are opting to have their refunds directly deposited. So far this year, the IRS has directly deposited more than 42 million refunds, or 76 percent of all refunds issued this tax filing season, up from 71 percent of the total for the same period last year.

People are visiting the IRS Web site at IRS.gov in record numbers. The IRS has recorded more than 90 million unique visits to IRS.gov this year, up from about 83 million for the same period last year, an increase of 9.0 percent.

One of the most popular features of IRS.gov is "Where's My Refund?" As the name implies, taxpayers can check on the status of their tax refunds using this tool. Already this year, almost 24 million people have accessed this popular system, an increase of 23 percent over the same period last year.

Meanwhile, this year’s filings still show that about three in 10 tax returns are not requesting the one-time telephone tax refund. Although some of these taxpayers may not be eligible, others may qualify and not know it. The IRS urges taxpayers to check their eligibility for this special refund by visiting the Telephone Excise Tax Refund section on IRS.gov.

The government stopped collecting the long-distance excise tax last August after several federal court decisions held that the tax does not apply to long-distance service as it is billed today. Federal officials also authorized a one-time refund of the 3 percent federal excise tax collected on service billed during the previous 41 months, stretching from the beginning of March 2003 to the end of July 2006. The tax continues to apply to local-only phone service.

Of those requesting the telephone tax refund, 99 percent are choosing the standard amount, and the rest are basing their request on the actual amount of tax paid. The standard amount ranges from $30 to $60 and is based on the number of exemptions taxpayers are eligible to claim on their return. Alternatively, taxpayers can request a refund based on the tax shown on their phone bills and other records.

Taxpayers can request the telephone tax refund, as well as file their entire tax return electronically, for no cost using the IRS's Free File program. Seventy percent of Americans are eligible for the Free File program because they earn an adjusted gross income of $52,000 or less. Free File can only be accessed through IRS.gov. Once on the home page, click on "2007 Free File" and follow the directions.

2007 FILING SEASON STATISTICS

Cumulative through the weeks ending 3/17/06 and 3/16/07

Individual Income Tax Returns

2006

2007

% Change

Total Receipts

67,077,000

67,703,000

0.9%

Total Processed

62,726,000

63,798,000

1.7%





E-filing Receipts:




TOTAL

46,874,000

49,401,000

5.4%

Tax Professionals

33,664,000

35,105,000

4.3%

Self-prepared

13,210,000

14,296,000

8.2%





Web Usage:




Visits to IRS.gov

82,974,000

90,424,000

9.0%





Total Refunds:




Number

56,320,000

55,186,000

-2.0%

Amount

$133.993

Billion

$139.297

Billion

4.0%

Average refund

$2,379

$2,524

6.1%





Direct Deposit Refunds:




Number

39,765,000

42,057,000

5.8%

Amount

$107.529

Billion

$117.429

Billion

9.2%

Average refund

$2,704

$2,792

3.3%

Related Items:

E-File

Where's My Refund?

Telephone Excise Tax Refund

Free File

Monday, March 19, 2007

2007 Saturn Aura Certified As Qualified Hybrid Vehicle

2007 Saturn Aura Certified As Qualified Hybrid Vehicle

IR-2007-64, March 19, 2007

WASHINGTON — The Internal Revenue Service has acknowledged the certification by General Motors Corp. that its 2007 Saturn Aura Hybrid vehicle meets the requirements of the Alternative Motor Vehicle Credit as a qualified hybrid motor vehicle.

The credit amount for the hybrid vehicle certification of the 2007 Saturn Aura Hybrid is $1,300.

Consumers seeking the credit may want to buy early since the full credit is only available for a limited time. Taxpayers may claim the full amount of the allowable credit up to the end of the first calendar quarter after the quarter in which the manufacturer records its sale of the 60,000th vehicle. For the second and third calendar quarters after the quarter in which the 60,000th vehicle is sold, taxpayers may claim 50 percent of the credit. For the fourth and fifth calendar quarters, taxpayers may claim 25 percent of the credit. No credit is allowed after the fifth quarter.

Friday, March 16, 2007

IRS Releases 2006 Data Book

IRS Releases 2006 Data Book

IR-2007-63, March 16, 2007

WASHINGTON — The Internal Revenue Service announced today that its 2006 Data Book is available on the IRS Web site. The report describes activities conducted by the IRS from October 1, 2005, through September 30, 2006, and includes information about returns filed and taxes collected, enforcement, taxpayer assistance and the IRS budget and workforce.

During Fiscal Year (FY) 2006, the IRS collected more than $2.2 trillion in tax and processed over 228 million returns. Over 80 million returns, including 54.3 percent of individual income tax returns, were filed electronically in FY 2006. Over 108 million individual income tax return filers received tax refunds totaling $243 billion. In FY 2006, IRS spent an average of 42 cents to collect each $100 of tax revenue.

IRS examined nearly 1.3 million individual income tax returns in FY 2006, more than double the number examined in FY 2000. Examinations of business tax returns grew for the second year in a row, reaching over 52,000 in 2006. IRS personnel answered over 32.6 million toll-free calls from taxpayers, and the IRS Web site received about 194 million visits.

Printed copies of the Fiscal Year 2006 IRS Data Book, Publication 55B, will be available by mid-April 2007 from the U.S. Government Printing Office. To obtain a copy, write to the Superintendent of Documents, P.O. Box 371954, Pittsburgh, PA 15250-7954, call (202) 512 1800 for voice mail or fax a request to (202) 512-2250.

Related Item: 2006 Data Book

IRS Web Site, Where’s My Refund? See Increased Use

IRS Web Site, Where’s My Refund? See Increased Use

IR-2007-62, March 16, 2007

WASHINGTON — The Internal Revenue Service released statistics today showing that taxpayers’ use of IRS.gov, which includes features such as Where’s My Refund? is increasing. Use of the IRS Web site has increased 9 percent over this time last year to 83.3 million visits.

Where’s My Refund? is the IRS Internet-based service taxpayers can use to check on the status of their federal income tax refunds. Nearly 21 million requests have been received on Where’s My Refund? this year, representing a growth of more than 3.9 million users compared to the same period last year.

Where’s My Refund? is easy to use,” said IRS Commissioner Mark W. Everson. “It is the fastest way to check on a refund. Taxpayers who file Form 1040EZ-T can also take advantage of Where’s My Refund? to find out about the telephone excise tax refund.”

Taxpayers can check their refund status online anytime from anywhere. It is available 24 hours a day, 7 days a week, worldwide, only by visiting IRS.gov. Taxpayers can securely access their personal refund information by entering their Social Security number, filing status and the exact amount of their refund. These shared secrets, known only to the taxpayer and IRS, verify the person is authorized to access the account.

Taxpayers can check on the status of their federal income tax refunds seven days after they e-filed their return. If they file a paper return, they can check four to six weeks after mailing their return.

For the first time this year, taxpayers who chose direct deposit can split their refunds among as many as three accounts held by up to three different U.S. financial institutions.

Split refunds offer taxpayers the opportunity to manage their money by sending part of their refund to one account for immediate needs and another part to a savings or investment account. The average refund at this point, which typically declines between now and the end of the filing season, is more than $2,800.

Where’s My Refund? will include a message confirming the refund was split and the expected deposit date. It will not specify the amount of individual deposits or the accounts to which the deposits were made.

Taxpayers can use Where’s My Refund? to verify when their refunds are scheduled for direct deposits or mailing, initiate a trace on lost or missing refund checks, and/or notify IRS of address changes in case of undeliverable refund checks.

The IRS reminds taxpayers they can avoid undelivered refund checks by having their refund checks deposited into a personal checking or savings account. Direct deposit also guards against theft and lost refund checks. Direct deposit is available for both paper and electronically filed returns.

Compared to this time last year, there is a 5.6 percent increase in the number of taxpayers who have chosen direct deposit for their refund. So far, refunds total about $110 billion, a 9 percent increase over last year.

The IRS also reports a substantial increase in the number of taxpayers who are preparing their returns and filing online.

The table below shows an 8 percent increase in self-prepared online filing over the same period last year. Tax professional e-file also has increased by close to 4 percent over last year. Overall, e-filed returns are up nearly 5 percent, with about 45.5 million taxpayers e-filing their return.

In addition, this year’s filings show about three in 10 tax returns are not requesting the one-time telephone tax refund. The standard amount ranges from $30 to $60 and is based on the number of exemptions a taxpayer is eligible to claim on their return. Although some of these taxpayers may not be eligible, others may qualify and not know it. The IRS urges taxpayers to check their eligibility for this special refund by visiting the telephone excise tax refund section on this Web site. Taxpayers who are not required to file a return can request the telephone excise tax refund by filing the 1040-EZT.

2007 FILING SEASON STATISTICS

Cumulative through the weeks ending 3/10/06 and 3/9/07

Individual Income Tax Returns

2006

2007

% Change

Total Receipts

60,657,000

61,123,000

0.8%

Total Processed

56,028,000

56,974,000

1.7%





E-filing Receipts:




TOTAL

43,356,000

45,498,000

4.9%

Tax Professionals

31,010,000

32,156,000

3.7%

Self-prepared

12,346,000

13,342,000

8.1%





Web Usage:




Visits to IRS.gov

76,449,000

83,365,000

9.0%





Total Refunds:




Number

50,656,000

50,515,000

-0.3%

Amount

$122.752

Billion

$128.736

Billion

4.9%

Average refund

$2,423

$2,548

5.2%





Direct Deposit Refunds:




Number

37,031,000

39,088,000

5.6%

Amount

$101.009

Billion

$110.090

Billion

9.0%

Average refund

$2,728

$2,816

3.3%

Related Items: Where's My Refund?

Thursday, March 15, 2007

IRS Identifies 40 Frivolous Positions for Taxpayers to Avoid

IRS Identifies 40 Frivolous Positions for Taxpayers to Avoid

IR-2007-61, Mar. 15, 2007

WASHINGTON — The Internal Revenue Service today issued guidance identifying dozens of frivolous positions that taxpayers should avoid when filing their tax returns. The guidance lists 40 positions which have no basis for validity in existing law or which have been deemed frivolous by the United States Tax Court or other federal court.

If these or other frivolous positions are contained in a tax return, taxpayers could face a $5,000 penalty – 10 times the previous maximum.

“People should remember they are ultimately responsible for what is on their tax return even if some unscrupulous preparers have steered them in the wrong direction,” said IRS Commissioner Mark W. Everson. “The truth about these frivolous arguments is simple: They don’t work.”

In 2006, Congress increased the amount of the penalty for frivolous tax returns from $500 to $5,000. The increased penalty amount applies when a person submits a tax return, or other specified submission, and any portion of the submission is based on a position the IRS identifies as frivolous.

IRS Notice 2007-30 contains a list of frivolous positions that will trigger the increased penalty amount.

Four revenue rulings issued in conjunction with the notice address specific frivolous claims often made to the IRS. The revenue rulings center on:

  • False arguments that wages are not taxable income.
  • Filing returns and paying taxes are voluntary.
  • The IRS must provide taxpayers with a summary record of assessment made on a Form 23C, “Assessment Certificate-Summary Record of Assessments”, before overdue taxes may be collected.
  • Income is not subject to taxation when the taxpayer declares that he is not a United States citizen because he is a citizen of an individual State or claims he is not a person as defined by the Internal Revenue Code.

The revenue rulings emphasize the adverse consequences to taxpayers who fail to file returns or fail to pay taxes based on an erroneous belief in any of these frivolous arguments.

Additional information about frivolous positions is available on the IRS website at IRS.gov. “The Truth About Frivolous Arguments” is a 64-page document updated in December 2006 that addresses false arguments about the legality of not paying taxes or filing returns. The document includes citations from numerous cases decided by the courts and responds to 40 frivolous contentions.
The courts have not only rebuked these arguments numerous times, but also have imposed thousands of dollars in fines on taxpayers or their representatives for pursuing frivolous cases.

"Our rulings on frivolous arguments emphasize that the IRS and the courts reject these arguments about the validity of the income tax and ‘too good to be true’ schemes to eliminate tax liability," said IRS Chief Counsel Donald L. Korb.

The IRS continues to investigate promoters of frivolous arguments and to refer cases to the Department of Justice for criminal prosecution. In addition to tax and interest, taxpayers who file frivolous income tax returns face a $5,000 penalty, and may be subject to civil penalties of 20 or 75 percent of the underpaid tax. Those who pursue frivolous tax cases in court may face an additional penalty of up to $25,000.

Related Items:

Phone Card Retailers Usually Qualify for Telephone Tax Refund

Phone Card Retailers Usually Qualify for Telephone Tax Refund


IR-2007-60, March 15, 2007 —

WASHINGTON — Under the law, retailers and other businesses that sell prepaid phone cards usually qualify for the telephone tax refund.

The Internal Revenue Service today reminded these businesses to check their eligibility for this special refund before filing their 2006 federal income tax return. Normally, the phone card retailer, not the phone company that issues the card or the customer who uses the card, is responsible for paying the three-percent federal excise tax. As long as the phone card was not restricted to local-only service, the retailer is eligible to request the telephone tax refund.

The government stopped collecting the long-distance excise tax last August after several federal court decisions held that the tax does not apply to long-distance service as it is billed today. Federal officials also authorized a one-time refund of the 3 percent federal excise tax collected on service billed during the previous 41 months, stretching from the beginning of March 2003 to the end of July 2006.

In most instances, the law places the responsibility for the collection of the excise tax on the carrier. The carrier, usually a phone company, has transferred the phone card to a retailer or other business. This retailer or other business is referred to as a transferee. The transferee most often is the first person that is not a carrier to whom a phone card is transferred. The transferee is generally liable for the payment of the excise tax, not the carrier.

Because the carrier is not usually liable for the tax, the carrier is not usually eligible for the refund. Also under the law the holder or end-user, that is the customer who purchases a phone card to use and not to resell, is ordinarily not liable for the tax and not entitled to the refund.

Businesses request the refund by filling out Form 8913, Credit for Federal Telephone Excise Tax Paid, and attaching it to their regular income-tax return. More information on the refund is available in the “Telephone Excise Tax Refund” section on the front page of IRS.gov.

The three-percent federal excise tax continues to apply to local-only phone service.

Wednesday, March 14, 2007

Free File Usage Tops 2 Million

Free File Usage Tops 2 Million

IR-2007-59, March 14, 2007

WASHINGTON — The Internal Revenue Service reminds taxpayers to take advantage of Free File, which allows most taxpayers to electronically file their tax returns at no cost through this Web site. Through March 13, almost 2.6 million taxpayers have electronically filed their returns using Free File.

Seventy percent of U.S. taxpayers are eligible for Free File since they have an adjusted gross income of $52,000 or less. Free File can only be accessed through this Web site. The program is a partnership between the IRS and the Free File Alliance, a group of private sector tax preparation companies.

Free File is part of the IRS e-file program. Through early March, the number of overall e-filed returns increased by about 5 percent. And returns prepared on home computers — which include free file returns — jumped by 8 percent. For the Free File program alone, nearly 2.6 million taxpayers used the program, about a 4 percent drop from the nearly 2.7 million who used it during the same period last year. While Free File started out slowly this year, returns in recent weeks are now topping comparable weeks from last year, and the IRS expects the program to equal or surpass last year’s numbers by the end of the filing season.

"Several factors are behind Free File usage this year. It started out slowly, but the numbers are increasing each week. We believe some Free File users are switching over to other parts of our e-file program, which continues to grow this year," said IRS Commissioner Mark W. Everson." Taxpayers shouldn't overlook Free File, because we've made major improvements to the program this year."

The IRS reminds taxpayers that this year's Free File has major changes from the year before. Gone are sales pitches for refund anticipation loans and other products. Not only that, it's easier to find which Free File tax software company best suits the taxpayer by using the enhanced "Guide Me to a Company" wizard available on IRS.gov.

Several indicators show customer satisfaction for Free File continues to be high. One such indicator, the number of customer service inquiries, occurs on less than 1/10th of 1 percent of total Free File returns.

Taxpayers have consistently given high marks to Free File in satisfaction surveys. According to Russell Research, a market research firm contracted by the IRS, 96 percent said they found Free File very easy or somewhat easy to use, and 97 percent said they would recommend Free File to others. Convenience, not the free cost, was the most appealing factor of Free File.

Accessing Free File is easy. Just go to our home page, click "2007 Free File" and click "Start Now" on the Free File landing page. Taxpayers will see the "Guide Me to a Company" button. When they click it, the wizard will ask a few questions to determine which of the 20 participating tax software companies best fulfill the taxpayer's needs, such as the ability to file state returns in the taxpayer's state.

Taxpayers can use Free File to take advantage of recent tax changes. For example, users can request their telephone excise tax refund through Free File. This refund is only available this year. Taxpayers can also try one of the IRS's newest features: split refunds. It allows taxpayers to directly deposit their refunds in up to three financial accounts.

Related Item:

Free File

Tuesday, March 13, 2007

IRS Urges Caution about Internet Sites that Resemble the Official IRS Site

IRS Urges Caution about Internet Sites that Resemble the Official IRS Site

IR-2007-58, March 13, 2007

WASHINGTON — The Internal Revenue Service today reminded taxpayers that the address of the official IRS government Web site is www.irs.gov.

Taxpayers may be confused by the proliferation of Internet sites that contain some form of the Internal Revenue Service name or IRS acronym with a .com, .net, .org or other designation in the address instead of .gov. Since many of these sites also bear a striking resemblance to the real IRS site, taxpayers may be misled into thinking that the site they have accessed is indeed the official IRS government site. These sites are not the official IRS Web site and have no connection to the official IRS site or to the IRS.

“There is one legitimate IRS site: IRS.gov,” said IRS Commissioner Mark W. Everson. “Always check carefully and make sure you know what Web site you are using.”

Because .com, .net and .org are such common parts of Internet addresses, taxpayers may automatically or inadvertently type these extensions, instead of .gov, into the address line of their Web browser when trying to find the genuine IRS Web site.

Following recent concerns that Internet sites may be causing confusion among taxpayers, the IRS is working with the Treasury Inspector General for Tax Administration on this matter. TIGTA has authority to review issues protecting the integrity of tax administration, including impersonation of the IRS. The IRS and TIGTA are committed to ensuring that taxpayers are not misled.

Although the IRS Web site offers interactive features, the tax or private financial information that these features ask the taxpayer for is extremely limited. The IRS reminds consumers who access unfamiliar sites, or sites they have never dealt with before, that they should never reveal any personal or financial information, such as credit, bank account or PIN numbers, without verifying the validity of the site.

The IRS also reminds consumers to be alert to an on-going Internet scam in which consumers receive an e-mail informing them of a federal tax refund. The e-mail, which
claims to be from the IRS, directs the consumer to a link — often a Web site resembling the IRS Web site — that requests personal and financial information, such as Social Security number and credit card information.

This scheme is an attempt to trick the e-mail recipients into disclosing their personal and financial data. The practice is called “phishing” for information.

The information fraudulently obtained is then used to steal the taxpayer’s identity and financial assets. Generally, identity thieves use someone’s personal data to steal his or her financial accounts, run up charges on the victim’s existing credit cards, apply for new loans, credit cards, services or benefits in the victim’s name and even file fraudulent tax returns.

Taxpayers who receive an unsolicited e-mail purporting to be from the IRS should never click on any links in the message, open any attachments or provide any personal or financial information to the sender.

Related Items:

  • IR-2007-37, Fraudulent Telephone Tax Refunds, Abusive Roth IRAs Top Off 2007 “Dirty Dozen” Tax Scams

Monday, March 12, 2007

IRS Reminds Corporations to E-File or File for an Extension by March 15

IRS Reminds Corporations to E-File or File for an Extension by March 15

IR-2007-57, March 12, 2007

WASHINGTON — Today the Internal Revenue Service reminds certain corporations with assets of $10 million or more and whose tax year is the calendar year to e-file their returns or file for an extension by the March 15 filing deadline. Corporate taxpayers who chose to request extensions are encouraged to submit their requests through e-file.

"We are seeing significant increases in the number of electronically filed corporate tax returns due to the e-filing requirement for certain corporate taxpayers, the availability of enhanced electronic filing software, and the benefits realized by corporate taxpayers," said LMSB Commissioner Deborah M. Nolan. "E-filing brings increased efficiencies to the IRS which will ultimately benefit all taxpayers."

More than 22,000 large and mid-sized corporations with assets of $10 million or more that file at least 250 federal returns each year, such as Form W-2 and Form 1099, are now required to file electronic returns. Treasury temporary regulations requiring certain corporations to e-file became effective in January 2005, and have been phased in over a two year period.

Businesses which operate on a calendar year rather than a fiscal year basis must file their returns for the previous year or file an application for an extension by March 15, 2007. A corporate taxpayer who e-files an application for an extension using Form 7004 will receive immediate acknowledgement of that request and whether it has been accepted or rejected.

The requirement that businesses e-file their returns is determined by type of tax return to be filed, amount of the filer's assets, and the total number of federal returns filed by the business. By the end of the first week in March, more than 1,800 large and mid-sized corporations submitted their tax returns electronically. This represents a 250% increase over the number of large and midsized electronic returns filed during in same period last year.

Since introducing corporate e-file in 2004, IRS has continued to streamline its processes and improve e-filing technology. The IRS continues to work closely with e-file software developers and e-file service providers to ensure corporate taxpayers a smooth transition to electronic filing. According to Don McPartland, an IRS senior executive, the agency's goal is to continue to streamline e-file processes, integrate e-file software into existing tax preparation systems, and provide quality service to IRS's many stakeholders.

Detailed e-filing guidance and instructions are available at this Web site.

Related Item:

Form 7004, Application for Automatic 6-Month Extension of Time to File Certain Business Income Tax, Information, and Other Returns

Interest Factors for Corporations Requesting Telephone Tax Refund Posted On IRS.gov

Interest Factors for Corporations Requesting Telephone Tax Refund Posted On IRS.gov

IR-2007-56, March 12, 2007

WASHINGTON — The Internal Revenue Service today reminded corporations, facing a March 15 tax-filing deadline, that they can use interest factors posted on IRS.gov to help them figure the one-time telephone excise tax refund.

Corporations, including S corporations, preparing calendar-year 2006 income-tax returns with a March 15 due date, should use the interest factors posted at http://www.irs.gov/pub/irs-dft/corp3-15.pdf, rather than those in the instructions for Form 8913, Credit for Telephone Excise Tax Paid. By law, the interest rates that apply to corporate tax overpayments are lower than those that apply to other taxpayers.

The interest factors in the Form 8913 instructions apply to non-corporate taxpayers with an April 17 filing deadline, including individuals, estates, trusts and partnerships that are basing their refund request on the actual amount of tax paid. Except for individuals choosing the standard amount, all taxpayers must use Form 8913 to request the telephone tax refund and related interest. This form is then attached to the taxpayer’s regular income-tax return.

The government stopped collecting the long-distance excise tax last August after several federal court decisions held that the tax does not apply to long-distance service as it is billed today. Federal officials also authorized a one-time refund of the 3-percent federal excise tax collected on service billed during the previous 41 months, stretching from the beginning of March 2003 to the end of July 2006.

The tax continues to apply to local-only phone service.

Releated Item: Telephone Excise Tax Refund

IRS Issues Winter 2006-2007 Statistics of Income Bulletin

IRS Issues Winter 2006-2007 Statistics of Income Bulletin

IR-2007-55, March 12, 2007

WASHINGTON — The Internal Revenue Service today announced the release of the Winter 2006-2007 issue of the Statistics of Income Bulletin. Highlights include articles on individual income taxes, split-interest trusts and tax-exempt organizations.

Preliminary data for tax year 2005 indicate that taxpayers filed 134.5 million U.S. individual income tax returns, an increase of 1.6 percent from the preliminary estimate of 132.4 million returns filed for tax year 2004. Adjusted gross income (AGI) increased by 8.9 percent from the previous year to $7.4 trillion for 2005 and taxable income increased 9.5 percent to $5.1 trillion. The alternative minimum tax rose 31.6 percent to $15.9 billion, while total income tax increased 11.8 percent to $928.3 billion. Other notable changes were: net capital gains, the second largest component of adjusted gross income, rose by 36.7 percent to $604.4 billion; statutory adjustments to total income increased 10.2 percent, from $94.5 billion to $104.2 billion; total deductions increased 8.4 percent to $1,665.6 billion; and total tax credits used to offset income tax liabilities increased 5.7 percent to $54.3 billion. The total earned income credit, including the refundable portion, increased 6.1 percent to $43.1 billion for tax year 2005.

In addition, the Bulletin contains articles with the following information:

  • For tax year 2004, taxpayers filed 132.2 million returns, of which 89.1 million (or 67.4 percent) were classified as taxable returns. This represents an increase of 0.2 percent in the number of taxable returns from tax year 2003. Adjusted gross income (AGI) on these taxable returns rose 9.0 percent to $6,266 billion, while total income tax showed the first increase in 4 years, rising 11.2 percent. Also for the first time in 4 years, the average tax rate for taxable returns rose, increasing 0.3 percentage points to 13.3 percent for 2004. Taxpayers with an AGI of at least $328,049, the top 1 percent of taxpayers, accounted for 19 percent of total AGI, representing an increase in income share of 2.2 percentage points from the previous year. These taxpayers accounted for 36.9 percent of the total income tax reported, an increase from 34.3 percent in 2003.

  • In filing year 2005, some 124,292 Split-Interest Trust Information Returns (Form 5227) were filed, an increase of 0.8 percent from filing year 2004. Charitable remainder unitrusts continued to be the most common trust type, increasing by 1.6 percent, or 1,450 returns, between 2004 and 2005. Charitable lead trust filings increased the most, 9 percent, to 6,168 in 2005. The number of returns filed for charitable remainder annuity trusts decreased by 4.2 percent between 2004 and 2005. Total net income reported for charitable remainder trusts (CRTs) increased by 67.4 percent from 2004 to 2005, primarily due to an exceptionally large increase in the value of capital gains reported in 2005. Total net capital gains reported for CRTs increased by 119.2 percent from filing year 2004 to filing year 2005.

  • During calendar years 2004 and 2005, tax-exempt organizations filed an estimated 36,064 Forms 990-T, Exempt Organization Business Income Tax Return, for tax year 2003, ending a 4-year decline in annual Form 990‑T filings. After offsetting $8.4 billion of total gross unrelated business income (UBI) with a nearly equal amount of total deductions, the resulting unrelated business taxable income (less deficit) for 2003 was $23.2 million. Positive unrelated business taxable income reported on Form 990‑T increased by 20.5 percent between tax years 2002 and 2003, totaling $780.1 million, and the associated unrelated business income tax (UBIT) rose 13.3 percent, to $219.9 million. After adjusting UBIT with certain credits and other taxes, the resulting total tax reported on Form 990‑T was $220.9 million.

About 3.8 percent of the 263,353 Internal Revenue Code section 501(c)(3) nonprofit charitable organizations that filed Forms 990/990‑EZ, Return of Organization Exempt From Income Tax/Short Form Return of Organization Exempt From Income Tax, also filed Forms 990-T to report UBI. Overall, nonprofit charitable organizations that filed Forms 990/990-EZ reported an aggregate $1,072.2 billion of total revenue for tax year 2003, of which under one-half of 1 percent, or $4.2 billion, was attributable to UBI.

The Bulletin includes historical data on income, deductions, and tax reported on returns filed by individuals, corporations, and unincorporated businesses, with selected data presented for estates. Statistics are also presented on tax collections, including excise taxes by type, and refunds for recent years.

The Statistics of Income Bulletin is available from the Superintendent of Documents, U.S. Government Printing Office, P.O. Box 371954, Pittsburgh, PA 15250-7954. The annual subscription rate is $53 ($74.20 foreign). Single issues cost $39 ($48.75 foreign). For more information about these data, write the Director, Statistics of Income (SOI) Division, RAS:S, Internal Revenue Service, P.O. Box 2608, Washington, DC 20013-2608; call the SOI Statistical Information Services office at (202) 874-0410; or fax to (202) 874-0964. To access the Winter 2006-2007 Statistics of Income Bulletin, on the front page of this Web site, click on “Tax Stats” under “Information About.” From the Tax Stats page, select “SOI Bulletins” under “Products, Publications, and Papers.” Or click on the link below.

Related Item: SOI Bulletins

No Change In Interest Rates For The Second Quarter Of 2007

No Change In Interest Rates For The Second Quarter Of 2007

IR-2007-54, March 12, 2007

WASHINGTON — The Internal Revenue Service today announced there will be no change in the interest rates for the calendar quarter beginning April 1, 2007. The interest rates are as follows:
  • eight (8) percent for overpayments [seven (7) percent in the case of a corporation];
  • eight (8) percent for underpayments;
  • ten (10) percent for large corporate underpayments; and
  • five and one-half (5.5) percent for the portion of a corporate overpayment exceeding $10,000.

Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points. Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.

The interest rates announced today are computed from the federal short-term rate based on daily compounding determined during January 2007.

Releated Item: Rev. Rul 2007-16

Thursday, March 8, 2007

Free File Available for Requesting Telephone Tax Refund

Free File Available for Requesting Telephone Tax Refund

IR-2007-52, March 8, 2007

WASHINGTON — The Internal Revenue Service reminds telephone customers who do not normally file tax returns that they can use Free File to request the telephone excise tax refund. This group includes low-income people, many of them senior citizens. IRS's Free File is the easiest and quickest way to request the refund, which, if directly deposited, could arrive in the taxpayer's bank account in two weeks or less.

“This program provides the option for most people to do their taxes electronically and for free," said IRS Commissioner Mark W. Everson. "Free File is a great choice for people who don’t normally need to file a tax return but who are entitled to this special telephone excise tax refund.”

The refund covers the 3-percent tax paid on long-distance and bundled service billed after Feb. 28, 2003, and before Aug. 1, 2006.

Federal long-distance excise taxes paid on land line, cell phone, fax and Internet phone service qualify for the refund. This includes bundled service — local and long-distance service provided under a plan that does not separately list the charge for local service. Bundled service includes, for example, phone plans that provide both local and long-distance service for either a flat monthly fee or a charge that varies with the time for which the service is used.

The tax no longer applies to these kinds of service, though it continues to apply to local-only phone service.

Telephone customers have two choices for requesting the refund. They may:

  • Use the actual amount of tax paid, as shown on phone bills and other records; or
  • Use a standard amount. This amount ranges from $30 to $60, based on the number of personal exemptions the customer is eligible to claim.

Both choices are available through IRS Free File. Just go to the home page of this Web site, click "2007 Free File" and follow the directions. Three Free File Alliance members are providing free access to Form 1040EZ-T to request the standard amount. Some Alliance members are also offering free access to Form 8913 to request the actual amount.

Free File is a program run by the IRS and the Free File Alliance, a consortium of tax preparation software companies. Seventy percent of the nation’s taxpayers — those with an adjusted gross income of $52,000 or less — are eligible for Free File. Each company sets its own criteria for who can use the service. The program is available only through this Web site.

Alternatively, low-income telephone customers who prefer having someone else prepare their refund request can get free help by visiting one of more than 12,000 neighborhood tax-assistance sites nationwide. Trained community volunteers fill out telephone tax refund requests and basic income-tax returns for low-income people and senior citizens. To locate the nearest volunteer tax-help site, call AARP at 1-888-227-7669 or the IRS at 1-800-829-1040.

Free File users who forgot to request the telephone excise tax refund can file an amended return using Form 1040X. To avoid delaying a refund request, the IRS recommends that Free File users wait until three weeks after they filed their original return before sending in Form 1040X. This form cannot be e-filed; it must be filed by paper. Form 1040X can be downloaded from this Web site.

Direct Deposit Refunds Top $100 Billion; Now They Can Be Deposited In Up To Three Accounts

Direct Deposit Refunds Top $100 Billion; Now They Can Be Deposited In Up To Three Accounts

IR-2007-53, March 8, 2007

WASHINGTON— For millions of Americans, the refund check is no longer in the mail; it’s in the bank.

According to the Internal Revenue Service, direct-deposit refunds soared over the $100 billion mark last week as a growing number of taxpayers are choosing the speed and convenience of direct deposit, rather than receiving a paper check.

“At the halfway point, the filing season is proceeding smoothly,” said IRS Commissioner Mark W. Everson. “There are a couple of noteworthy items so far. Taxpayers are choosing direct deposit of refunds at a record pace. Electronic filing has increased over last year. In addition, I want to encourage people to take advantage of the telephone excise tax refund if they are eligible. Far too many people who qualify for this special refund are not claiming it.”

As of March 2, 35.6 million taxpayers had chosen to have their refunds deposited directly into a savings or checking account this year, up 5.2 percent over last year at the same time. These direct-deposit refunds totaled $101.5 billion, an 8.7 percent increase over last year at this time.

In the past, taxpayers were only allowed to designate one bank account for their direct-deposit refund. But this year for the first time, taxpayers can split their refunds among up to three accounts held by as many as three different

U.S. financial institutions. Though most people are still opting to use just one account, about 37,000 taxpayers have, thus far, taken advantage of the new split refund option.

Because split refunds give taxpayers more choices for managing their money, the IRS urges taxpayers who have not yet filed their return to consider this new option.

Split refunds offer taxpayers the opportunity to build assets by, for example, sending part of their refund to one account for immediate needs and another part to a savings or investment account for future needs.

Banks, mutual funds, brokerage firms or credit unions are all eligible to receive direct deposits. Before making this choice, however, check to see whether the financial institution accepts direct deposits for the type of account chosen.

To split a refund among two or three different accounts or financial institutions, fill out new Form 8888, Direct Deposit of Refund to More Than One Account. Alternatively, taxpayers who want to continue electronically sending their refund to just one account can do so by filling out the direct-deposit line on their regular income-tax return.

Direct deposit is available to taxpayers who file electronically, as well as those who submit paper returns. Those who choose direct deposit get their refunds at least a week sooner, and direct deposit eliminates the chance of a lost, stolen or undeliverable refund.

Also overall electronic filing has increased by more than 4 percent since last year. In fact, 76 percent of all returns have been electronically filed so far this tax filing season, compared to 73 percent for the same period last year.

People are also visiting the IRS Web site — IRS.gov — in record numbers. The IRS has recorded almost 76 million unique visits to IRS.gov this year, up from almost 70 million for the same period last year, an increase of 9 percent.

In addition, this year’s filings show about three in 10 tax returns are not requesting the one-time telephone tax refund. Although some of these taxpayers may not be eligible, others may qualify and not know it. The IRS urges taxpayers to check their eligibility for this special refund by visiting the Telephone Excise Tax Refund section on IRS.gov.

The government stopped collecting the long-distance excise tax last August after several federal court decisions held that the tax does not apply to long-distance service as it is billed today. Federal officials also authorized a one-time refund of the 3 percent federal excise tax collected on service billed during the previous 41 months, stretching from the beginning of March 2003 to the end of July 2006. The tax continues to apply to local-only phone service.

Of those requesting the telephone tax refund, 99 percent are choosing the standard amount, and the rest are basing their request on the actual amount of tax paid. The standard amount ranges from $30 to $60 and is based on the number of exemptions a taxpayer is eligible to claim on their return. Alternatively, taxpayers can request a refund, based on the tax shown on their phone bills and other records.

2007 FILING SEASON STATISTICS

Cumulative through the weeks ending 3/3/06 and 3/2/07

Individual Income Tax Returns

2006

2007

% Change

Total Receipts

53,947,000

54,172,000

0.4%

Total Processed

48,957,000

49,690,000

1.5%

E-filing Receipts:

TOTAL

39,503,000

41,221,000

4.4%

Tax Professionals

28,136,000

29,002,000

3.1%

Self-prepared

11,366,000

12,220,000

7.5%

Web Usage:

Visits to IRS.gov

69,766,000

75,991,000

8.9%

Total Refunds:

Number

44,544,000

45,420,000

2.0%

Amount

$110.465

Billion

$117.078

Billion

6.0%

Average refund

$2,480

$2,578

3.9%

Direct Deposit Refunds:

Number

33,887,000

35,645,000

5.2%

Amount

$93.440

Billion

$101.540

Billion

8.7%

Average refund

$2,757

$2,849

3.3%