Taxpayers Must Validate Their Identity When Calling the IRS

Taxpayers must be prepared to validate their identity when speaking with an IRS assistor; preparation will help to avoid a repeat call at one of the IRS’s busiest times of year. To better serve taxpayers around the President’s Day holiday, the peak time of the year for telephone calls to the IRS, the IRS toll-free lines will be open Saturday, February 18, from 9:00 a.m. to 5:00 p.m. (callers’ local time) and Monday, February 20, from 7:00 a.m. to 7:00 p.m. (callers’ local time).

Before calling about a personal tax account, taxpayers must have the following information handy:

  • Social Security numbers and birth dates for those listed on the tax return;

  • An Individual Taxpayer Identification Number (ITIN) for those without a Social Security number (SSN);

  • Filing status (Single, Head of Household, Married Filing Joint or Married Filing Separate);

  • A copy of the tax return in question; and

  • Any letters or notices received from the IRS.

Letter 4883C

When the IRS identifies a suspicious return it will 4883C letters to the taxpayer to determine whether the taxpayer actually filed the return. Taxpayers have 30 days to call, which allows time to avoid the rush around Presidents’ Day. To expedite the process when calling, taxpayers must have:

  • The IRS letter;

  • Copy of prior year tax return (if filed);

  • Current year tax return (if filed); and

  • Any supporting documents for each year’s return (such as W-2s, 1099s, Schedule C, Schedule F, etc.).

Someone Else’s Account

IRS call center assistors will only speak with the taxpayer or their legally designated representative. Before inquiring about someone else’s account, taxpayers must have the following information handy:

  • Verbal or written authorization to discuss the account;

  • The ability to verify the taxpayer’s name, SSN/ITIN, tax period, form(s);

  • If the caller is a third party designee, a PTIN or PIN must be provided; and

  • A current, completed, and signed Form 8821, Tax Information Authorization or a completed and signed Form 2848, Power of Attorney and Declaration of Representative.

Deceased Taxpayer

For inquiries about deceased taxpayers, individuals must be prepared to fax the deceased taxpayer’s death certificate, and either copies of the Letter of Representation approved by the court or IRS Form 56, Notice Concerning Fiduciary Relationship (for estate executors).

Finally, taxpayers should use the Where’s My Refund? tool to track the status of their refund. The IRS phone assistors do not have additional information on refund dates beyond what is available on “Where’s My Refund?” Given high call volumes, taxpayers should not call unless directed to do so by the refund tool. In addition, a common myth is that people can get their refund date earlier by ordering a tax transcript. There is no such “secret” option to find a refund date by calling the IRS or ordering a transcript.

Form 1099-MISC for Rental Payments

1099-MISC rent

If you rent business property such as office space or storage space, you must issue a Form 1099-MISC to your non-corporation landlord for the rental you paid. Without this, your business deduction for rent payments will be denied under audit. This means if your landlord is an individual, LLC, partnership or trust you must issue the 1099-MISC.

You will need to give your landlord Form W-9 to obtain their tax ID number, name and address. Form W-9 will also show the business entity type for the landlord. Form W-9 can be found here.

The deadline for filing Form 1099-MISC is January 31, 2017 for both the payee and the IRS. If you need assistance with filing Form 1099-MISC, just contact us.

Charitable Deduction Requires Acknowledgement Letter

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The tax code says that no deduction is allowed for any charitable contribution of $250 or more unless the taxpayer substantiates the gift with a contemporaneous written acknowledgement (CWA) from the donee organization. Furthermore, the CWA must state whether the donee supplied the donor with any goods or services in consideration for the gift.

There are innumerable tax court cases of people being denied their charitable contribution because of this requirement:

  1. Contemporaneous means that the receipt from the charitable organization be dated no later than the due date of the tax return – April 15 or October 15 if extended. If it is dated one day after that deadline the contribution will be disallowed by the IRS and by the courts.
  2. The statement of no goods or service being given in consideration is often left off by the charitable organization, probably because they do not know the rules. If you get audited and this statement is not on the receipt, the deduction will be denied. If you then go back to the charitable organization and they send you a new notice with the statement, it will fail requirement #1 – contemporaneous.

In the most recent tax court case the donor lost a $64 million deduction because these rules were not followed. There is no appeal to this. After the fact receipts are disregarded as are receipts without the “goods and services” statement.

Unfortunately, it is up to you the taxpayer to verify that you have the correct receipt.

Charitable contributions can become very complex so you should consider checking with your tax professional when you make a large donation to make sure the receipt meets the requirements. Here are a few items you should know:

  1. Clothing or household items are not deductible if the items has minimal values such as used socks or undergarments or the item is not in good or better condition. An exception to this is antique items worth more than $500 for which you have an appraisal.
  2. Items or groups of similar items for which a deduction of more than $5,000 is claimed must have an appraisal from a third party – not the charitable organization.
  3. Special rules apply to volunteer expenses and mileage but your drive to and from your religious organization for normal services are not a charitable deduction.
  4. Special rules apply for the contribution of vehicles, boats and airplanes.

Please feel free to contact us if you have any questions.