Tax Season 2022: What You Need to Know (and Looking Ahead to 2023)

The coronavirus threw several monkey wrenches into 2021 tax season—including giving all of us procrastinators an extra month to file! But 2022 tax season will be back to business as usual . . . well, sort of.

Some new things this year include an increase in charitable giving deductions (if you don’t itemize) and the expanded Child Tax Credit (parents, you noticed some extra cash in your bank account, right?).

We’ll dig into both of those changes, plus a few more, a little later. But first, let’s kick things off with the main details you need to know for 2022 tax season:

  • The big tax deadline for all federal tax returns and payments is April 18, 2022.
  • The standard deduction for 2021 increased to $12,550 for single filers and $25,100 for married couples filing jointly.  
  • Income tax brackets increased in 2021 to account for inflation. 

As for the 2023 tax season, here’s what you’ll want to know when the time comes:

  • The standard deduction for 2022 (which will be useful when you file in 2023) will increase to $12,950 for single filers and $25,900 for married couples filing jointly.
  • The income tax brackets will also increase in 2022.

But that’s just scratching the surface! Let’s break down the details so you can file your taxes with confidence this year.

Income Brackets and Rates for 2022 and 2023 Tax Season

Here’s a refresher on how income brackets and tax rates work: Your tax rate(the percentage of your income that you pay in taxes) is based on what tax bracket (income range) you’re in.

For example, if you’re single and your income is $75,000, then you’re in the 22% tax bracket. But that doesn’t mean your tax rate is a flat 22%. Instead, part of your income is taxed at 10%, another part at 12%, and the last part at 22%. (We break it down in the chart below.)

For the 2021 tax year, the tax rates are the same—but there are some slight changes to the brackets. Basically, the brackets have been adjusted by a few hundred dollars from 2020 to account for inflation.1 2022 tax brackets also look a little different.

2021 Marginal Tax RatesSingle Tax BracketMarried Filing Jointly Tax BracketHead of Household Tax BracketMarried Filing Separately Tax Bracket
10%$0–9,950$0–19,900$0–14,200$0–9,950
12%$9,951–40,525$19,901–81,050$14,201–54,200$9,951–40,525
22%$40,526–86,375$81,051–172,750$54,201–86,350$40,526–86,375
24%$86,376–164,925$172,751–329,850$86,351–164,900$86,376–164,925
32%$164,926–209,425$329,851–418,850$164,901–209,400$164,926–209,425
35%$209,426–523,600$418,851–628,300$209,401–523,600$209,426–314,150
37%Over $523,600Over $628,300Over $523,600Over $314,150

2022 Marginal Income Tax Rates and Brackets

2022 Marginal Tax RatesSingle/Unmarried Tax BracketMarried Filing Jointly Tax BracketHead of Household Tax BracketMarried Filing Separately Tax Bracket
10%$0–10,275$0–20,550$0–14,650$0–10,275
12%$10,276–41,775$20,551–83,550$14,651–55,990$10,276–41,775
22%$41,776–89,075$83,551–178,150$55,991–89,050$41,776–89,075
24%$89,076–170,050$178,151–340,100$89,051–170,050$89,076–170,050
32%$170,051–215,950$340,101–431,900$170,051–215,950$170,051–215,950
35%$215,951–539,900$431,901–647,850$215,951–539,900$215,951–323,925
37%Over $539,901Over $647,850Over $539,900Over $323,926

Higher Standard Deductions in 2021 and 2022

When you pay taxes, you have the option of taking the standard deduction or itemizing your deductions—calculating your deductions one by one. Itemizing is more of a hassle, but it’s worth it if your itemized deductions exceed the amount of the standard deduction.

For tax years 2021 and 2022, the standard deduction went up slightly to adjust for inflation.

Standard Deduction

Filing Status202020212022
Single$12,400$12,550$12,950
Married Filing Jointly$24,800$25,100$25,900
Married Filing Separately$12,400$12,550$12,950
Head of Household$18,650$18,800$19,400

Keep in mind that every situation is different regarding taking the standard deduction or itemizing.

Tax Deductions and Credits to Consider for Tax Season 2022

The closest things to magic words when it comes to taxes are deductions and credits. Both help you keep more money in your pocket instead of Uncle Sam’s, but in slightly different ways.

Tax deductions help lower the amount of your income that can actually be taxed. Some deductions are only available if you itemize your deductions, while others are still available even if you decide to take the standard deduction. 

Tax credits, on the other hand, are dollar amounts actually subtracted from your tax bill, and there are two types: refundable and nonrefundable. If a credit is greater than the amount you owe and it’s a refundable credit, the difference is paid to you as a refund. Score! If it’s a nonrefundable credit, your tax bill will be reduced to zero, but you won’t get a refund. Still a win!

Here are some deductions and credits you might be able to claim on your tax return:

1. Charitable Deductions

The Taxpayer Certainty and Disaster Tax Relief Act of 2020 extended two charitable giving changes enacted by the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The law allows you to deduct up to 100% of your adjusted gross income (AGI), which is your total income minus other deductions you have already taken, in qualified charitable donations if you plan to itemize your deductions.

What if you’re taking the standard deduction? Well, non-itemizers may claim an above-the-line deduction (meaning it is not on Schedule A) of up to $300 ($600 for married filing jointly) for charitable contributions made in cash.  

2. Medical Deductions 

If you found yourself with hefty medical bills last year, you might be able to find at least some tax relief.

You can deduct any medical expenses above 7.5% of your adjusted gross income (AGI), which is your total income minus other deductions you have already taken. For example, if your AGI was $100,000, you can deduct out-of-pocket medical expenses beyond $7,500 in 2021. But you have to itemize your deductions in order to write off those expenses on your tax return. 

3. Business Deductions

If you are self-employed there are a bunch of deductions you can claim on your tax return—including travel expenses and the home office deduction if you use a part of your home to conduct business.

But if you’re one of the millions of workers who were sent home to work remotely, you won’t be able to claim the home office deduction, since it’s reserved for self-employed people only. Sorry!

4. Earned Income Tax Credit

The EITC is a refundable credit designed to help out low- and middle-income households. The maximum adjusted gross income for a single filer with no children is $21,430, while the cap for a married couple with three or more children is $57,414. Depending on your income, your filing status and number of children, the credit could save you anywhere from a few hundred to a few thousand dollars on your taxes. But here’s a crazy stat: About 1 out of 5 eligible taxpayers either don’t claim the benefit on their taxes or don’t file a tax return at all. Don’t let that be you!

5. Child Tax Credit

Got kids? You probably noticed a nice little surprise from the IRS in July: free money! The American Rescue Plan, which was passed in March 2021, bumped the Child Tax Credit from $2,000 to $3,600 for each child under age 6 and to $3,000 for each child 6­­–17. Rather than waiting until tax time for families to claim this credit, the IRS began sending out a portion of the credit through advance monthly payments ($300 per month for each child under 6 and $250 for each child 6 to 17). The Child Tax Credit is gradually phased out for people with incomes over $150,000 if married filing jointly or $112,500 if filing as head of household.

Checks in the mail are nice, but remember that taking advance Child Tax Credit payments now will reduce the amount you get at tax time. Payments are based on your 2020 taxes, so if your income went up enough in 2021 to start closing in on the phase-out limit for the credit, you might consider opting out of advance payments.

There are plenty of other deductions and credits that might be up for grabs depending on your situation! If you don’t want to miss out on any tax savings, you’ll want to work with a tax advisor who can make sure you’re not leaving anything on the table.

6. Education Credits

Bettering yourself or your children through education is a good thing, and it’s even better when you get a tax break.

The American Opportunity Tax Credit (AOTC) is a partially refundable credit for educational expenses for a student for the first four years of college. You can claim up to $2,500 per student, and if the credit brings your tax liability to zero, 40% (up to $1,000) will be refunded to you.

The Lifetime Learning Credit (LLC) is not refundable and covers up to $2,000 in qualified educational expenses per return. While you can only take advantage of the AOTC for undergrad expenses, you can reap the benefits of the LLC for expenses related to all kinds of educational opportunities—from degree programs to technical classes to improving job skills.

But beware: You can claim both the AOTC and the LLC on your tax return but not for the same student or the same expenses.

The Coronavirus and Your Taxes

Oh, so you thought you would be done with the coronavirus in 2022? Unfortunately, the coronavirus has created a ripple effect that will be felt when you sit down to file your taxes for last year. Here are some things to keep in mind:

Stimulus Checks

As part of the American Rescue Plan Act of 2021,  the IRS sent a third round of stimulus checks to millions of Americans—up to $1,400 for individuals and an additional $1,400 for dependents.

The good news is your stimulus check will not count as taxable income. Instead, it’s being treated like a refundable tax credit for 2021. Translation: Your stimulus check will not affect your tax situation or cause you to have a higher or lower refund.

Paycheck Protection Program (PPP) Loans

The 2020 Coronavirus Aid, Relief, and Economic Security Act tried to help struggling small business owners stay afloat by offering them Paycheck Protection Program (PPP) loans. As long as these loans were used on certain business expenses—payroll, rent or interest on mortgage payments, and utilities, to name a few—these loans were designed to be “forgiven.”

In December 2020, the IRS announced that any eligible expenses you paid with money from those PPP loans can be deducted from your taxable income. So that’s a little bit of good news! PPP ended in May 2021, but remember, you’ll have to get your loan forgiveness application approved by the Small Business Administration before you’re off the hook for the amount you borrowed.

Unemployment Benefits

After the pandemic stalled a large part of the economy, many Americans found themselves out of work (at least temporarily) and turned to unemployment insurance for help. Though the first $10,200 of unemployment benefits were made tax-free in 2020, that is not the case in 2021. So if you were unemployed in 2021 and did not have taxes withheld from your benefits, plan now to pay taxes on those benefits.

Retirement Plans: 401(k)s, IRAs and More

There were several changes to retirement plans in 2021—and some of those changes could impact your tax bill this year. Let’s tackle each of those changes:

  • If you own a traditional IRA, you have to take money out of your account once you reach a certain age. Those withdrawals are called required minimum distributions (RMDs). The good news is the SECURE Act changed the age for RMDs from 70 1/2 to 72. This extra time could lead to significant tax savings for retirees with those accounts since the money that’s taken out of a traditional IRA counts as taxable income.
  • The SECURE Act also allows owners of traditional IRAs to keep putting money in their accounts past age 70 1/2 as of 2020. Since the money you put into a traditional IRA is tax deductible, you could lower how much of your income is taxed this year. Just remember: You will have to pay taxes on that money whenever you take it out. Total contributions to all of your traditional or Roth IRAs can’t exceed $6,000 ($7,000 if you’re 50 or older) per year.

The difference between a tax deduction and a tax credit

What is the difference between a tax deduction and a tax credit?

Tax deductions and credits are terms often used together when talking about taxes. While you probably know that they can lower your tax liability, you might wonder about the difference between the two.

A tax deduction reduces your taxable income, so when you calculate your tax liability, you’re doing so against a lower amount. Essentially, your tax obligation is reduced by an amount equal to your deductions multiplied by your marginal tax rate. For example, if you’re in the 22% tax bracket and have $1,000 in tax deductions, your tax liability will be reduced by $220 ($1,000 x 0.22 = $220). The reduction would be even greater if you are in a higher tax bracket.

A tax credit, on the other hand, is a dollar-for-dollar reduction of your tax liability. Generally, after you’ve calculated your federal taxable income and determined how much tax you owe, you subtract the amount of any tax credit for which you are eligible from your tax obligation. For example, a $500 tax credit will reduce your tax liability by $500, regardless of your tax bracket.

The Tax Cuts and Jobs Act, signed into law late last year, made significant changes to the individual tax landscape, including changes to several tax deductions and credits.

The legislation roughly doubled existing standard deduction amounts and repealed the deduction for personal exemptions. The higher standard deduction amounts will generally mean that fewer taxpayers will itemize deductions going forward.

The law also made changes to a number of other deductions, such as those for state and local property taxes, home mortgage interest, medical expenses, and charitable contributions.

As for tax credits, the law doubled the child tax credit from $1,000 to $2,000 for each qualifying child under the age of 17. In addition, it created a new $500 nonrefundable credit available for qualifying dependents who are not qualifying children under age 17. The tax law provisions expire after 2025.

For more information on the various tax deductions and credits that are available to you, visit irs.gov.

IRS Issue Number: HCTT-2016-68 Maintaining Eligibility for Advance Payments of the Premium Tax Credit

To Maintain Eligibility for Advance Payments of the Premium Tax Credit, File ASAP

The IRS is sending letters to taxpayers who received advance payments of the premium tax credit in 2016, but who have not yet filed their tax return. You must file a tax return to reconcile any advance credit payments you received in 2016 and to maintain your eligibility for future premium assistance. If you do not file, you will not be eligible for advance payments of the premium tax credit in 2017.

If you receive Letter 5858 or 5862, you are being reminded to file your 2016 federal tax return along with Form 8962, Premium Tax Credit.  The letter encourages you to file within 30 days of the date of the letter to substantially increase your chances of avoiding a gap in receiving assistance with paying Marketplace health insurance coverage in 2017.

Here’s what you need to do if you received a 5858

  • Read your letter carefully.
  • Review the situation to see if you agree with the information in the letter.
  • Use the Form 1095-A that you received from your Marketplace to complete your return. If you need a copy of your Form 1095-A, log in to your HealthCare.gov or state Marketplace account or call your Marketplace call center.
  • File your 2016 tax return with Form 8962 as soon as possible, even if you don’t normally have to file.
  • If you have already filed your 2016 tax return with Form 8962, you can disregard the letter.

Here’s what you need to do if you received a 5862 letter:

  • Read your letter carefully.
  • Review the situation to see if you agree with the information in the letter.
  • Use the Form 1095-A that you received from your Marketplace to complete Form 8962. If you need a copy of your Form 1095-A, log in to your HealthCare.gov or state Marketplace account or call your Marketplace call center.
  • File your 2016 tax return with Form 8962 as soon as possible, even though you have an extension until October 15, 2017, to file.

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Understanding the Net Investment Income Tax

Understanding the Net Investment Income Tax

It’s been around since 2013, but many are still struggling to come to grips with the net investment income tax. The 3.8% tax, which is sometimes referred to as the Medicare surtax on net investment income, affected approximately 3.1 million federal income tax returns for 2013 (the only year for which data is available) to the tune of almost $11.7 billion.1 Here’s what you need to know.

What is it?

The net investment income tax is a 3.8% “extra” tax that applies to certain investment income in addition to any other income tax due. Whether you’re subject to the tax depends on two general factors: the amount of your modified adjusted gross income for the year, and how much net investment income you have.

Note:  Nonresident aliens are not subject to the net investment income tax.

What income thresholds apply?

Modified adjusted gross income (MAGI) is basically adjusted gross income–the amount that shows up on line 37 of your IRS Form 1040–with certain amounts excluded from income added back in.

The net investment income tax applies only   if your modified adjusted gross income exceeds the following thresholds:

Filing Status MAGI
Married filing jointly or qualifying   widow(er) $250,000
Married filing   separately $125,000
Single or head of   household $200,000

What is net investment income?

Investment income generally includes interest, dividends, capital gains, rental and royalty income, income from nonqualified annuities, and income from passive business activities and businesses engaged in the trade of financial instruments or commodities. Investment income does not include wages, unemployment compensation, Social Security benefits, tax-exempt interest, self-employment income, or distributions from most qualified retirement plans and IRAs.

Note:  Even though items like wages and retirement plan distributions aren’t included in net investment income, they are obviously a factor in calculating MAGI. So higher levels of non-investment income can still make a difference in whether the net investment income tax applies.

Gain from the sale of a personal residence would generally be included in determining investment income. However, investment income does not include any amount of gain that is excluded from gross income for regular income tax purposes. Qualifying individuals are generally able to exclude the first $250,000–or $500,000 for married couples filing jointly–of gain on the sale of a principal residence; any of the gain that’s excluded for regular income tax purposes would not be included in determining investment income.

To calculate net investment income, you reduce your gross investment income by any deductible expenses that can be allocated to the income.  So, for example, associated investment interest expense, investment and brokerage fees, expenses associated with rental and royalty income, and state and local income taxes can all be factored in.

How is the tax calculated?

You know your modified adjusted gross income. You know your net investment income. To calculate the net investment income tax, first subtract the threshold figure (shown above) for your filing status from your MAGI. Then compare the result with your net investment income. Multiply the lower of the two figures by 3.8%.

For example, assume you and your spouse file a joint federal income tax return and have $270,000 in MAGI and $50,000 in net investment income. Your MAGI is $20,000 over the $250,000 threshold for married couples filing jointly. You would owe $760 (3.8% multiplied by $20,000), because the tax is based on the lesser of net investment income or MAGI exceeding the threshold.

How is it reported?

If you’re subject to the net investment income tax, you must complete IRS Form 8960, Net Investment Income Tax–Individuals, Estates, and Trusts, and attach it to your federal income tax return (you must file IRS Form 1040). The instructions for IRS Form 8960 provide an overview of the rules that apply and can be a good source of additional information. If you think you may be affected by the net investment income tax, though, it’s a good idea to consider  discussing your individual situation with a tax professional.

1IRS Statistics of Income Bulletin, Spring 2015

Health Insurance Documents – Forms 1095-A, 1095-B & 1095-C

irs.gov Issue Number:    HCTT 2016-36

Keep your Health Insurance Documents with Your Tax Records

Gathering documents and keeping well-organized records make it easier to prepare a tax return. They can also help provide answers if the IRS needs to follow-up with you for more information.

This year marks the first time that you may receive information forms about health insurance coverage.

The information forms are:

You do not need to send these forms to IRS as proof of your health coverage. However, you should keep any documentation with your other tax records. This includes records of your family’s employer-provided coverage, premiums paid, and type of coverage. You should keep these – as you do other tax records – generally for three years after you file your tax return.

When preparing 2015 tax returns, most people will simply have to check a box to indicate they and everyone on their tax return had health care coverage for the entire year. You will not need to file any additional forms, unless you are claiming the premium tax credit or a coverage exemption. In which case, you will use Form 8962, Premium Tax Credit, or Form 8965, Health Coverage Exemptions.

For more information about the information forms, see our Questions and Answers on IRS.gov/aca.

WHO CAN BE CLAIMED AS A DEPENDENT?

WHAT IS A DEPENDENT:

This is a question I get asked all the time…Who and what qualifies as a dependent on my tax return?? To help taxpayers navigate this gray area, here are the tests necessary to claim someone as your dependent

First and foremost, whether they are your child or your girlfriend/boyfriend, a dependent is a person other than the taxpayer or spouse who entitles the taxpayer to claim a dependency exemption.

  1. You cannot claim them if you can be claimed as a dependent by another person.
  2. They cannot file a joint tax return (in most cases).
  3. They must be a U.S. citizen, resident alien, national, or a resident of Canada or Mexico.

In order to claim a child as a dependent, these five additional tests must be met:

  • Relationship test: Must be your child, adopted child, foster-child, brother or sister, or a descendant of one of these (grandchild or nephew).
  • Residency test: Must have the same residence for more than half the year.
  • Age test: Must be under age 19 or under 24 and a full-time student for at least 5 months. Can be any age if they are totally and permanently disabled.
  • Support test: Must not have provided more than half of their own support during the year.
  • Joint support test: The child cannot file a joint return for the year.

The next four tests determine where a relative or sweetheart qualifies as a dependent:

  • They are not the “qualifying child” of another taxpayer or your “qualifying child.”
  • Gross income: Dependent earns less than $3950 taxable income in 2014
  • Total support: You provide more than half of the total support for the year.
  • Member of household or relationship: The person must live with you all year as a member of your household or be one of the relatives who doesn’t have to live with you (see IRS Publication 501 for a list of qualifying relatives.)

You can even claim a boyfriend, girlfriend, domestic partner, or friend as a qualifying relative if:

  • They are a member of your household the entire year.
  • The relationship between you and the dependent does not violate the law, meaning you can’t still be married to someone else. Also check your individual state law, since some states do not allow you to claim a boyfriend or girlfriend as a dependent even if your relationship doesn’t violate the law.
  • You meet the other criteria for “qualifying relatives” (gross income and support).

Once you’ve determined who in your life can be claimed as a dependent, be sure to take advantage of the following tax deductions and credits:

Dependent exemption: Have you been supporting your boyfriend or girlfriend? If he or she meets the above tests, this may entitle you to a deduction of $4,000

Child tax credit: Depending on your income, you can claim up to $1,000 per qualifying child (>16 years)

• The Child and Dependent Care Tax Credit (CDCTC): This is a tax credit that helps working families pay expenses for the care of children, adult dependents or an incapacitated spouse. Families can claim up to $3,000 in dependent care expenses for one child/dependent and $6,000 for two children/dependents per year. The credit is worth between 20 percent and 35 percent of these expenses, depending on a family’s income. Eligible families with adjusted gross income (AGI) of $15,000 or less can claim 35 percent of these expenses for a maximum potential credit of $2,100. The percentage of expenses a family can claim steadily decreases as income rises, until families with AGI of $43,000 or more reach the minimum claim rate of 20 percent, qualifying for a maximum potential credit of $1,200.

IRS: “Phone Scams Continue to be a Serious Threat!!”

Phone Scams Continue to be a Serious Threat, Remain on IRS “Dirty Dozen” List of Tax Scams for the 2016 Filing Season

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WASHINGTON — Aggressive and threatening phone calls by criminals impersonating IRS agents remain a major threat to taxpayers, headlining the annual “Dirty Dozen” list of tax scams for the 2016 filing season, the Internal Revenue Service announced today.

The IRS has seen a surge of these phone scams as scam artists threaten police arrest, deportation, license revocation and other things. The IRS reminds taxpayers to guard against all sorts of con games that arise during any filing season.

“Taxpayers across the nation face a deluge of these aggressive phone scams. Don’t be fooled by callers pretending to be from the IRS in an attempt to steal your money,” said IRS Commissioner John Koskinen. “We continue to say if you are surprised to be hearing from us, then you’re not hearing from us.”

“There are many variations. The caller may threaten you with arrest or court action to trick you into making a payment,” Koskinen added. “Some schemes may say you’re entitled to a huge refund. These all add up to trouble. Some simple tips can help protect you.”

The Dirty Dozen is compiled annually by the IRS and lists a variety of common scams taxpayers may encounter any time during the year. Many of these con games peak during filing season as people prepare their tax returns or hire someone to do so.

This January, the Treasury Inspector General for Tax Administration (TIGTA) announced they have received reports of roughly 896,000 contacts since October 2013 and have become aware of over 5,000 victims who have collectively paid over $26.5 million as a result of the scam.

“The IRS continues working to warn taxpayers about phone scams and other schemes,” Koskinen said. “We especially want to thank the law-enforcement community, tax professionals, consumer advocates, the states, other government agencies and particularly the Treasury Inspector General for Tax Administration for helping us in this battle against these persistent phone scams.”

Protect Yourself

Scammers make unsolicited calls claiming to be IRS officials. They demand that the victim pay a bogus tax bill. They con the victim into sending cash, usually through a prepaid debit card or wire transfer. They may also leave “urgent” callback requests through phone “robo-calls,” or via a phishing email.

Many phone scams use threats to intimidate and bully a victim into paying. They may even threaten to arrest, deport or revoke the license of their victim if they don’t get the money.

Scammers often alter caller ID numbers to make it look like the IRS or another agency is calling. The callers use IRS titles and fake badge numbers to appear legitimate. They may use the victim’s name, address and other personal information to make the call sound official.

Here are five things the scammers often do but the IRS will not do. Any one of these five things is a tell-tale sign of a scam.

The IRS will never:

  • Call to demand immediate payment, nor will the agency call about taxes owed without first having mailed you a bill.
  • Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
  • Require you to use a specific payment method for your taxes, such as a prepaid debit card.
  • Ask for credit or debit card numbers over the phone.
  • Threaten to bring in local police or other law-enforcement groups to have you arrested for not paying.

If you get a phone call from someone claiming to be from the IRS and asking for money, here’s what you should do:

If you don’t owe taxes, or have no reason to think that you do:

  • Do not give out any information. Hang up immediately.
  • Contact TIGTA to report the call. Use their “IRS Impersonation Scam Reporting” web page. You can also 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.

If you know you owe, or think you may owe tax:

  • Call the IRS at 800-829-1040. IRS workers can help you.

Stay alert to scams that use the IRS as a lure. Tax scams can happen any time of year, not just at tax time. For more, visit “Tax Scams and Consumer Alerts” on IRS.gov.

Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on IRS.gov.

Answers to Five of Your Questions about the Premium Tax Credit

Answers to Five of Your Questions about the Premium Tax Credit

The premium tax credit is a refundable credit that helps eligible individuals and families with low or moderate income afford health insurance purchased through a Health Insurance Marketplace. To get this credit, you must meet certain eligibility requirements and file a tax return.

Here are five questions the IRS is hearing from taxpayers, along with answers and where to go for more information.

1. What is included in household income?

For purposes of the PTC, household income is the modified adjusted gross income of you and your spouse if filing a joint return, plus the modified AGI of each individual in your tax family whom you claim as a dependent and who is required to file a tax return because their income meets the income tax return filing threshold. Household income does not include the modified AGI of those individuals you claim as dependents and who are filing a return only to claim a refund of withheld income tax or estimated tax. For this and other detailed premium tax credit questions and answers visit IRS.gov/aca.

2. The IRS is asking to see my 1095-A. What should I do?

You should follow the instructions on the correspondence that you received from the IRS.  You may be asked for a copy of Form 1095-A in order to verify information that has been entered on your tax return.  Visit our Health Insurance Marketplace Statements webpage for more information about Form 1095-A and how to obtain a copy,

3. If I got advance payments of the PTC, do I have to file even if I never had a filing requirement before?

Yes. If you received the benefit of advance payments of the premium tax credit, you must file a tax return to reconcile the amount of advance credit payments made on your behalf with the amount of your actual premium tax credit.  You must file a return and submit a Form 8962 for this purpose even if you are otherwise not required to file a return.

4. Marketplace says I did not file, but I did file before the extended due date.  What should I do?

In advance of the open enrollment period that runs through January 31, 2016, the Marketplace sent Marketplace Open Enrollment and Annual Redetermination letters to individuals who might not have filed a tax return. Follow the instructions in the letter you received.

  • Log in to your Marketplace account to update your 2016 Marketplace application.
  • Check the box telling the Marketplace you reconciled your premium tax credits by filing a 2014 tax return and Form 8962.
  • Update your Marketplace application by December 15, 2015.
  • If you don’t update your Marketplace application, any help with costs you currently get will stop on December 31, 2015 and you’ll be responsible for the full upfront costs of your Marketplace plan and covered services.
  • For more help visit HealthCare.gov or call your Marketplace.

5. What are my options to receive help with filing a return and reconciling?

Filing electronically is the easiest way to file a complete and accurate tax return as the software guides you through the filing process. Electronic filing options include free Volunteer Assistance, IRS Free File, commercial software, and professional assistance. For information about filing a return and reconciling advance credit payments, visit IRS.gov/aca.

Don’t Fall for New Tax Scam Tricks by IRS Posers

copied and posted directly from the IRS Summertime Tax Tip 2015


Don’t Fall for New Tax Scam Tricks by IRS Posers

Though the tax season is over, tax scammers work year-round. The IRS advises you to stay alert to protect yourself against new ways criminals pose as the IRS to trick you out of your money or personal information. These scams first tried to sting older Americans, newly arrived immigrants and those who speak English as a second language. The crooks have expanded their net, and now try to swindle virtually anyone. Here are several tips from the IRS to help you avoid being a victim of these scams:

  • Scams use scare tactics.  These aggressive and sophisticated scams try to scare people into making a false tax payment that ends up with the criminal. Many phone scams use threats to try to intimidate you so you will pay them your money. They often threaten arrest or deportation, or that they will revoke your license if you don’t pay. They may also leave “urgent” callback requests, sometimes through “robo-calls,” via phone or email. The emails will often contain a fake IRS document with a phone number or an email address for you to reply.
  • Scams use caller ID spoofing.  Scammers often alter caller ID to make it look like the IRS or another agency is calling. The callers use IRS titles and fake badge numbers to appear legit. They may use online resources to get your name, address and other details about your life to make the call sound official.
  • Scams use phishing email and regular mail.  Scammers copy official IRS letterhead to use in email or regular mail they send to victims. In another new variation, schemers provide an actual IRS address where they tell the victim to mail a receipt for the payment they make. All in an attempt to make the scheme look official.
  • Scams cost victims over $20 million.  The Treasury Inspector General for Tax Administration, or TIGTA, has received reports of about 600,000 contacts since October 2013. TIGTA is also aware of nearly 4,000 victims who have collectively reported over $20 million in financial losses as a result of tax scams.

The real IRS will not:

  • Call you to demand immediate payment. The IRS will not call you if you owe taxes without first sending you a bill in the mail.
  • Demand that you pay taxes and not allow you to question or appeal the amount that you owe.
  • Require that you pay your taxes a certain way. For instance, require that you pay with a prepaid debit card.
  • Ask for credit or debit card numbers over the phone.
  • Threaten to bring in police or other agencies to arrest you for not paying.

If you don’t owe taxes or have no reason to think that you do:

  • Do not provide any information to the caller. Hang up immediately.
  • Contact the Treasury Inspector General for Tax Administration. Use TIGTA’s “IRS Impersonation Scam Reporting” web page to report the incident.
  • You should also report it to the Federal Trade Commission. Use the “FTC      Complaint Assistant” on FTC.gov. Please add “IRS Telephone Scam” in the notes.

If you know you owe, or think you may owe taxes:

  • Call the IRS at 800-829-1040. IRS workers can help you if you do owe taxes.

Stay alert to scams that use the IRS as a lure. For more, visit “Tax Scams and Consumer Alerts” on IRS.gov.

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Notify the Marketplace If You Have Changes in Circumstances

Report Changes in Circumstances that could Affect Your 2015 Premium Tax Credit

If you have enrolled for health coverage through the Health Insurance Marketplace and receive advance payments of the premium tax credit in 2015, it is important that you report changes in circumstances, such as changes in your income or family size, to your Marketplace.

For the full list of changes you should report, visit HealthCare.gov/how-do-i-report-life-changes-to-the-marketplace.

Advance payments of the premium tax credit provide financial assistance to help you pay for the insurance you buy through the Marketplace. Having at least some of your credit paid in advance directly to your insurance company will reduce the out-of-pocket cost of the health insurance premiums you’ll pay each month.

However, it is important to notify the Marketplace about changes in circumstances to allow the Marketplace to adjust your advance payment amount. This adjustment will decrease the likelihood of a significant difference between your advance credit payments and your actual premium tax credit. Changes in circumstances that you should report to the Marketplace include, but are not limited to:

  • An increase or decrease in your income
  • Marriage or divorce
  • The birth or adoption of a child
  • Starting a job with health insurance
  • Gaining or losing your eligibility for other health      care coverage
  • Changing your residence

If you report changes in your income or family size to the Marketplace when they happen in 2015, the advance payments will more closely match the credit amount on your 2015 federal tax return.  This will help you avoid getting a smaller refund than you expected, or even owing money that you did not expect to owe.