WASHINGTON—Electronically filed tax returns are on track with last year and overall refunds are running nearly 10 percent higher so far in 2010, according to statistics issued today by the Internal Revenue Service.

The statistics issued March 23, covering the period through March 12, show that while the overall number of tax returns filed this year is down slightly, the percentage of returns using e-file remains strong. More than 82 percent of the 69 million returns received this year have come in via e-file. Home usage of e-file is up almost 7 percent compared to this time last year.

Additionally, the average federal refund totaled $3,036, an increase of $266 compared with the same period a year ago.

The refund increase follows a number of federal tax incentives enacted last year as part of the American Recovery and Reinvestment Act, such as the homebuyer credit and the American Opportunity Credit.

“There are several new credits and deductions this year, so we encourage taxpayers to see if they qualify when they fill out their tax return,” said IRS Commissioner Doug Shulman. “To get their refunds quicker, the IRS reminds taxpayers that the fastest, easiest way is to e-file and use direct deposit.”

Taxpayers can check their eligibility for these credits and deductions on the Recovery page of the IRS Web site. This special section also contains instructions on how to claim the available tax incentives and provides answers to frequently asked questions. Detailed information is available on the:

• Homebuyer Credit

• Making Work Pay Credit

• Economic Recovery Payments

• Earned Income Tax Credit

• American Opportunity Tax Credit

• Sales and excise tax deduction for new car purchases

• Energy incentives for homeowners

DETROIT — The Internal Revenue Service issued its 2010 “dirty dozen” list of tax scams, including schemes involving return preparer fraud, hiding income offshore and phishing.

“Taxpayers should be wary of anyone peddling scams that seem too good to be true,” IRS Commissioner Doug Shulman said. “The IRS fights fraud by pursuing taxpayers who hide income abroad and by ensuring taxpayers get competent, ethical service from qualified professionals at home in the U.S.”

Tax schemes are illegal and can lead to imprisonment and fines for both scam artists and taxpayers. Taxpayers pulled into these schemes must repay unpaid taxes plus interest and penalties. The IRS pursues and shuts down promoters of these and numerous other scams.

The IRS urges taxpayers to avoid these common schemes:

Return Preparer Fraud

Dishonest return preparers can cause trouble for taxpayers who fall victim to their ploys.  Such preparers derive financial gain by skimming a portion of their clients’ refunds, charging inflated fees for return preparation services and attracting new clients by promising refunds that are too good to be true. Taxpayers should choose carefully when hiring a tax preparer. Federal courts have issued injunctions ordering hundreds of individuals to cease preparing returns and promoting fraud, and the Department of Justice has filed complaints against dozens of others, which are pending in court.

To increase confidence in the tax system and improve compliance with the tax law, the IRS is implementing a number of steps for future filing seasons. These include a requirement that all paid tax return preparers register with the IRS and obtain a preparer tax identification number (PTIN), as well as both competency tests and ongoing continuing professional education for all paid tax return preparers except attorneys, certified public accountants (CPAs) and enrolled agents.

Setting higher standards for the tax preparer community will significantly enhance protections and services for taxpayers, increase confidence in the tax system and result in greater compliance with tax laws over the long term. Other measures the IRS anticipates taking are highlighted in the IRS Return Preparer Review issued in December 2009.

Hiding Income Offshore

The IRS aggressively pursues taxpayers involved in abusive offshore transactions as well as the promoters, professionals and others who facilitate or enable these schemes. Taxpayers have tried to avoid or evade U.S. income tax by hiding income in offshore banks, brokerage accounts or through the use of nominee entities. Taxpayers also evade taxes by using offshore debit cards, credit cards, wire transfers, foreign trusts, employee-leasing schemes, private annuities or insurance plans.

IRS agents continue to develop their investigations of these offshore tax avoidance transactions using information gained from over 14,700 voluntary disclosures received last year. While special civil-penalty provisions for those with undisclosed offshore accounts expired in 2009, the IRS continues to urge taxpayers with offshore accounts or entities to voluntarily come forward and resolve their tax matters. By making a voluntary disclosure, taxpayers may mitigate their risk of criminal prosecution.

Phishing

Phishing is a tactic used by scam artists to trick unsuspecting victims into revealing personal or financial information online. IRS impersonation schemes flourish during the filing season and can take the form of e-mails, tweets or phony Web sites. Scammers may also use phones and faxes to reach their victims.

Scam artists will try to mislead consumers by telling them they are entitled to a tax refund from the IRS and that they must reveal personal information to claim it. Criminals use the information they get to steal the victim’s identity, access bank accounts, run up credit card charges or apply for loans in the victim’s name.

Taxpayers who receive suspicious e-mails claiming to come from the IRS should not open any attachments or click on any of the links in the e-mail. Suspicious e-mails claiming to be from the IRS or Web addresses that do not begin with http://www.irs.gov should be forwarded to the IRS mailbox: phishing@irs.gov.

Filing False or Misleading Forms

The IRS is seeing various instances where scam artists file false or misleading returns to claim refunds that they are not entitled to. Under the scheme, taxpayers fabricate an information return and falsely claim the corresponding amount as withholding as a way to seek a tax refund. Phony information returns, such as a Form 1099-Original Issue Discount (OID), claiming false withholding credits usually are used to legitimize erroneous refund claims. One version of the scheme is based on a false theory that the federal government maintains secret accounts for its citizens, and that taxpayers can gain access to funds in those accounts by issuing 1099-OID forms to their creditors, including the IRS.

Nontaxable Social Security Benefits with Exaggerated Withholding Credit

The IRS has identified returns where taxpayers report nontaxable Social Security Benefits with excessive withholding. This tactic results in no income reported to the IRS on the tax return. Often both the withholding amount and the reported income are incorrect. Taxpayers should avoid making these mistakes. Filings of this type of return may result in a $5,000 penalty.

Abuse of Charitable Organizations and Deductions

The IRS continues to observe the misuse of tax-exempt organizations. Abuse includes arrangements to improperly shield income or assets from taxation and attempts by donors to maintain control over donated assets or income from donated property. The IRS also continues to investigate various schemes involving the donation of non-cash assets including situations where several organizations claim the full value for both the receipt and distribution of the same non-cash contribution. Often these donations are highly overvalued or the organization receiving the donation promises that the donor can repurchase the items later at a price set by the donor. The Pension Protection Act of 2006 imposed increased penalties for inaccurate appraisals and set new definitions of qualified appraisals and qualified appraisers for taxpayers claiming charitable contributions.

Frivolous Arguments

Promoters of frivolous schemes encourage people to make unreasonable and outlandish claims to avoid paying the taxes they owe. If a scheme seems too good to be true, it probably is. The IRS has a list of frivolous legal positions that taxpayers should avoid. These arguments are false and have been thrown out of court. While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law or IRS guidance.

Abusive Retirement Plans

The IRS continues to find abuses in retirement plan arrangements, including Roth Individual Retirement Arrangements (IRAs). The IRS is looking for transactions that taxpayers use to avoid the limits on contributions to IRAs, as well as transactions that are not properly reported as early distributions. Taxpayers should be wary of advisers who encourage them to shift appreciated assets at less than fair market value into IRAs or companies owned by their IRAs to circumvent annual contribution limits. Other variations have included the use of limited liability companies to engage in activity that is considered prohibited.

Disguised Corporate Ownership

Corporations and other entities are formed and operated in certain states for the purpose of disguising the ownership of the business or financial activity by means such as improperly using a third party to request an employer identification number.

Such entities can be used to facilitate underreporting of income, fictitious deductions, non-filing of tax returns, participating in listed transactions, money laundering, financial crimes and even terrorist financing. The IRS is working with state authorities to identify these entities and to bring the owners of these entities into compliance with the law.

Zero Wages

Filing a phony wage- or income-related information return to replace a legitimate information return has been used as an illegal method to lower the amount of taxes owed. Typically, a Form 4852 (Substitute Form W-2) or a “corrected” Form 1099 is used as a way to improperly reduce taxable income to zero. The taxpayer also may submit a statement rebutting wages and taxes reported by a payer to the IRS. Sometimes fraudsters even include an explanation on their Form 4852 that cites statutory language on the definition of wages or may include some reference to a paying company that refuses to issue a corrected Form W-2 for fear of IRS retaliation. Taxpayers should resist any temptation to participate in any of the variations of this scheme. Filings of this type of return may result in a $5,000 penalty.

Misuse of Trusts

For years, unscrupulous promoters have urged taxpayers to transfer assets into trusts.  While there are many legitimate, valid uses of trusts in tax and estate planning, some promoted transactions promise reduction of income subject to tax, deductions for personal expenses and reduced estate or gift taxes. Such trusts rarely deliver the tax benefits promised and are used primarily as a means to avoid income tax liability and to hide assets from creditors, including the IRS.

The IRS has recently seen an increase in the improper use of private annuity trusts and foreign trusts to shift income and deduct personal expenses. As with other arrangements, taxpayers should seek the advice of a trusted professional before entering into a trust arrangement.

Fuel Tax Credit Scams

The IRS receives claims for the fuel tax credit that are excessive. Some taxpayers, such as farmers who use fuel for off-highway business purposes, may be eligible for the fuel tax credit. But other individuals are claiming the tax credit for nontaxable uses of fuel when their occupation or income level makes the claim unreasonable. Fraud involving the fuel tax credit is considered a frivolous tax claim and potentially subjects those who improperly claim the credit to a $5,000 penalty.

How to Report Suspected Tax Fraud Activity

Suspected tax fraud can be reported to the IRS using Form 3949-A, Information Referral. Form 3949-A is available for download from the IRS Web site at IRS.gov. The completed form or a letter detailing the alleged fraudulent activity should be addressed to the Internal Revenue Service, Fresno, CA 93888. The mailing should include specific information about who is being reported, the activity being reported, how the activity became known, when the alleged violation took place, the amount of money involved and any other information that might be helpful in an investigation. The person filing the report is not required to self-identify, although it is helpful to do so. The identity of the person filing the report can be kept confidential.

Whistleblowers also may provide allegations of fraud to the IRS and may be eligible for a reward by filing Form 211, Application for Award for Original Information, and following the procedures outlined in Notice 2008-4, Claims Submitted to the IRS Whistleblower Office under Section 7623.

(NAPSA)—It could pay to know if you qualify for a tax credit that the IRS says could put more than $5,650 into your pocket.

Called the Earned Income Tax Credit (EITC), it’s available to many low- to moderate-income individuals and families that earn less than $49,000 annually.

Nationally, the IRS estimates that 25 percent of eligible taxpayers are unaware they qualify for the credit. And as income changes qualify even more people for the EITC, that percentage is expected to rise. In addition, working families with three or more children may qualify to get more money due to recent tax law changes.

Free Tax Preparation

Hundreds of local United Ways work with community partners to provide free tax preparation and other services at Volunteer Income Tax Assistance sites nationwide. Since 2006, Bank of America has invested $4.5 million to support the United Way Earned Income Tax program and launch the United Way Financial Stability Partnership. The bank has expanded support for free tax preparation services to 61 cities, contributing to the completion of more than 1.1 million free tax returns and more than $1.2 billion in total tax refunds to lower-income families. In addition, bank associates volunteer their time to help working individuals and families claim valuable tax refunds.

United Way also partners with the Walmart Foundation, One Economy and National Disability Institute to make free tax preparation more accessible to lower-income working families. By providing a free self-preparation option for federal and state taxes for families that earn less than $58,000, United Way is increasing the number of working families that access the EITC and avoid costly filing fees. As part of this partnership, Walmart sponsored the creation of the MyFreeTaxes.com tour that will visit 30 cities nationwide to promote the service and train people to complete and file their taxes online. The Walmart Foundation is also supporting 91 volunteer-assisted tax preparation campaigns across the country. Combined, this effort will help return $1 billion in total tax refunds to qualifying, low-income families throughout the U.S. Last year, this partnership contributed to the completion of more than 650,000 tax returns, for a total of $950 million in tax refunds and a savings of $45 million in tax preparation fees.

Where to Find  Free Tax Preparation

You can dial 2-1-1 to find out where to get free tax prep help or to learn more about tax preparation programs. You can also visit www.myfreetaxes.com.

DETROIT — The Internal Revenue Service announced last week several additional steps it is taking this tax season to help people having difficulties meeting their tax obligations because of unemployment or other financial problems.

“Times are tough for many people, and the IRS wants to do everything it can to help people who have lost their job or face financial strain,” IRS Commissioner Doug Shulman said. “We continue to make adjustments to key programs and expand ways for people to get help. We’re doing everything we can to help ease the burden on struggling taxpayers.”

“The steps we are taking—an expansion of efforts that began more than a year ago—include additional flexibility on offers in compromise for struggling taxpayers, a series of Saturday ‘open houses’ offering taxpayers extra opportunities to work out tax problems face to face with the IRS, special outreach with partner groups to unemployed taxpayers and the availability of more information on a special section of the IRS Web site,” said Luis D. Garcia, Michigan’s IRS Spokesman.

New Flexibility for Offers in Compromise

For some taxpayers, an offer in compromise—an agreement between a taxpayer and the IRS that settles the taxpayer’s debt for less than the full amount owed—continues to be a viable option. IRS employees will now have additional flexibility when considering offers in compromise from taxpayers facing economic troubles, including the recently unemployed. Specifically, IRS employees will be permitted to consider a taxpayer’s current income and potential for future income when negotiating an offer in compromise. Normally, the standard practice is to judge an offer amount on a taxpayer’s earnings in prior years. This new step provides greater flexibility when considering offers in compromise from the unemployed. The IRS may also require that a taxpayer entering into such an offer in compromise agree to pay more if the taxpayer’s financial situation improves significantly. These immediate steps are part of an on-going effort by the IRS to ensure the availability of the Offer in Compromise program for taxpayers.

Hundreds of Saturday Open Houses to Resolve Taxpayer Issues

In addition, IRS will hold hundreds of special Saturday open houses to give struggling taxpayers more opportunity to work directly with IRS employees to resolve issues. The offices will be open on March 27 and three additional Saturdays in the spring and early summer. Dates, times and locations will be announced shortly. During the expanded Saturday hours, taxpayers will be able to address economic hardship issues they may be facing or get help claiming any of the special tax breaks in last year’s American Recovery and Reinvestment Act, including the:

• Homebuyer tax credit

• American Opportunity Credit

• Making Work Pay credit

• Expanded Earned Income Tax Credit

In addition to these special Saturdays, taxpayers can take advantage of regularly scheduled hours at local Taxpayer Assistance Centers. Taxpayers can find the location, telephone number and business hours of the nearest assistance center by visiting the Contact My Local Office page on IRS.gov.

Special outreach efforts to unemployed

The IRS is working and coordinating with state departments of revenue and state workforce agencies to help taxpayers who are having problems meeting their tax liabilities because of unemployment or other financial problems. These coordinated efforts may include opportunities for taxpayers to make payment arrangements and resolve both federal and state tax issues in one place.

Special section of irs.gov created

Taxpayers who are unemployed or struggling financially can find information in a new electronic tax center on the IRS Web site, IRS.gov. This online tax center has numerous resources including links to information on tax assistance and relief to help struggling taxpayers.

Other options available for taxpayers

The IRS will continue to offer other help to taxpayers, including:

• Postponement of collection actions in certain hardship cases.
• Added flexibility for missed payments on installment agreements and offers in compromise for previously compliant individuals having difficulty paying.
• Additional review of home values for offers in compromise in cases where real-estate valuations may not be accurate.
• Accelerated levy releases for taxpayers facing economic hardship.

In addition, the IRS will accelerate lien relief for homeowners if a taxpayer cannot refinance or sell a home because of a tax lien. As previously announced, a taxpayer seeking to refinance or sell a home may request the IRS make a tax lien secondary to the lien by the lending institution that is refinancing or restructuring a loan. The taxpayer may also request the IRS discharge its claim if the home is being sold for less than the amount of the mortgage lien under certain circumstances.

“We understand how difficult things are for a lot of people right now,” Garcia added. “We at the IRS are focused on helping folks trying their best to meet their tax obligations by making their load a little lighter right now.”

Reduce the damage done by a data breach

While the volume of data breaches declined in 2009, data breaches at businesses – as opposed to the government or non-profit sector – are on the rise. The Better Business Bureau recommends that small business owners take steps to protect their data and also develop a plan of action in order to react quickly and reduce the damage if a data breach does occur.

There were more than 498 reported data breaches in 2009, according to the Identity Theft Resource Center. While this is an improvement from the 657 breaches in 2008, unfortunately, the share of data breaches occurring in the business sector, specifically, increased to 41 percent.

“Even when a company takes all necessary precautions, a data breach can occur as the result of a malicious attack or employee error,” said Ken Vander Meeden, BBB of Western Michigan CEO. “The key to limiting the damage – and retaining customer trust – is to develop an action plan in case a data breach does strike your business.”

Resolving a data breach can be costly to a business, not only because of the time and energy spent resolving the issue, but also due to the number of customers whose trust in the business was lost in the wake of the breach. According to U.S. Cost of a Data Breach Study released by PGP Corporation and the Ponemon Institute, data breach incidents cost U.S. companies $204 per compromised customer record.

The BBB recommends that small business owners take the following steps to prepare the business and reduce the damage in the event of a data breach:

1. Create a Data Breach Notification Policy.
A data breach notification policy tells consumers how your business will notify customers if a data breach occurs. Consider informing consumers that you will notify them through a quicker and relatively inexpensive method (e.g., e-mail or publication) instead of a more expensive method (e.g., US mail). However, there are state-specific laws on the notification delivery method, so consult with an attorney before sending out any notices.

2. Train Your Employees to Identify Breaches.
Employees need to know how to spot a potential breach and how to report this type of event. More information on the red flags of a data breach is available in Chapter 7 of the BBB’s new publication for small business owners, Data Security-Made Simpler.

3. Immediately Gather the Facts of an Alleged Breach.
How and when did this occur? Was it an internal error or the result of a malicious attack? Determining the source of the breach quickly enables you to take immediate steps to reduce any further damage.

4. Notify Financial Institutions.
If financial information, such as payment card numbers, was compromised, contact the bank or company that manages your payment card processing.

5. Seek Outside Counsel.
Seek attorney assistance or guidance from a risk consulting company as soon as you become aware of an incident that might constitute a data security breach. Your attorney can help you identify which laws might be involved and whether you need to alert consumers or the government of the incident.

6. Notify Affected Customers.
Notify them in the manner you said you would in your Data Security Policy. Explain what occurred, when it occurred and the specific steps you are taking to address the event.

The BBB and partners Symantec Corporation, Visa Inc., Kroll’s Fraud Solutions and NACHA – The Electronic Payments Association created Data Security-Made Simpler, an online resource to help small businesses implement key data security policies and practices.

Data Security-Made Simpler was created by the BBB in collaboration with two nationally recognized data security experts, Dana Rosenfeld and David Zetoony.

Small business owners can get additional free advice and tips on improving data security from the BBB at www.bbb.org/data-security/.

IRS tax tip 2010-44

If your mortgage debt is partly or entirely forgiven during tax years 2007 through 2012, you may be able to claim special tax relief and exclude the debt forgiven from your income. Here are 10 facts the IRS wants you to know about Mortgage Debt Forgiveness.

1. Normally, debt forgiveness results in taxable income. However, under the Mortgage Forgiveness Debt Relief Act of 2007, you may be able to exclude up to $2 million of debt forgiven on your principal residence.
2. The limit is $1 million for a married person filing a separate return.
3. You may exclude debt reduced through mortgage restructuring, as well as mortgage debt forgiven in a foreclosure.
4. To qualify, the debt must have been used to buy, build or substantially improve your principal residence and be secured by that residence.
5. Refinanced debt proceeds used for the purpose of substantially improving your principal residence also qualify for the exclusion.
6. Proceeds of refinanced debt used for other purposes—for example, to pay off credit card debt—do not qualify for the exclusion.
7. If you qualify, claim the special exclusion by filling out Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness, and attach it to your federal income tax return for the tax year in which the qualified debt was forgiven.
8. Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the tax relief provision. In some cases, however, other tax relief provisions—such as insolvency—may be applicable. IRS Form 982 provides more details about these provisions.
9. If your debt is reduced or eliminated you normally will receive a year-end statement, Form 1099-C, Cancellation of Debt, from your lender. By law, this form must show the amount of debt forgiven and the fair market value of any property foreclosed.
10. Examine the Form 1099-C carefully. Notify the lender immediately if any of the information shown is incorrect. You should pay particular attention to the amount of debt forgiven in Box 2 as well as the value listed for your home in Box 7.

For more information about the Mortgage Forgiveness Debt Relief Act of 2007, visit IRS.gov. A good resource is IRS Publication 4681, Canceled Debts, Foreclosures, Repossessions and Abandonments. Taxpayers may obtain a copy of this publication and Form 982 either by downloading them from IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Washington — Unclaimed refunds totaling more than $1.3 billion are awaiting nearly 1.4 million people who did not file a federal income tax return for 2006, the Internal Revenue Service announced today. However, to collect the money, a return for 2006 must be filed with the IRS no later than Thursday, April 15, 2010.

The IRS estimates that the median unclaimed refund for tax-year 2006 is $604.

Some people may not have filed because they had too little income to require filing a tax return even though they had taxes withheld from their wages or made quarterly estimated payments. In cases where a return was not filed, the law provides most taxpayers with a three-year window of opportunity for claiming a refund. If no return is filed to claim the refund within three years, the money becomes property of the U.S. Treasury.

For 2006 returns, the window closes on April 15, 2010. The law requires that the return be properly addressed, mailed and postmarked by that date. There is no penalty for filing a late return qualifying for a refund. Though back-year tax returns cannot be filed electronically, taxpayers can still speed up their refunds by choosing to have them deposited directly into a checking or savings account.

The IRS reminds taxpayers seeking a 2006 refund that their checks will be held if they have not filed tax returns for 2007 or 2008. In addition, the refund will be applied to any amounts still owed to the IRS and may be used to satisfy unpaid child support or past due federal debts such as student loans.

By failing to file a return, people stand to lose more than refunds of taxes withheld or paid during 2006. For example, most telephone customers, including most cell-phone users, qualify for the one-time telephone excise tax refund. Available only on the 2006 return, this special payment applies to long-distance excise taxes paid on phone service billed from March 2003 through July 2006. The government offers a standard refund amount of $30 to $60, or taxpayers can base their refund request on the actual amount of tax paid. For details, see the Telephone Excise Tax Refund page on IRS.gov.

In addition, many low-and-moderate income workers may not have claimed the Earned Income Tax Credit (EITC). The EITC helps individuals and families whose incomes are below certain thresholds, which in 2006 were $38,348 for those with two or more children, $34,001 for people with one child and $14,120 for those with no children. For more information, visit the EITC Home Page.

WASHINGTON — Taxpayers wishing to claim their Haiti relief donations on the tax return they are filling out this season must make those donations by the end of this month, according to the Internal Revenue Service.
Individuals and corporations have until midnight on Sunday, Feb. 28, to make cash contributions to charities providing earthquake relief in Haiti. These contributions can be claimed on either a 2009 or 2010 return, but not both. Contributions made after that date but before the end of the year can only be claimed on a 2010 return.
Contributions made by text message, check, credit card or debit card qualify for this special option. Donations charged to a credit card before the end of February count for 2009. This is true even if the credit card bill isn’t paid until after Feb. 28. Also, checks count for 2009 as long as they are mailed by the end of this month and clear your financial institution shortly thereafter.
Taxpayers can benefit from their donations most quickly by filing their 2009 returns early, filing electronically and choosing direct deposit. Refunds take as few as ten days and can be directly deposited into a savings, checking or brokerage account, or used to purchase Series I U.S. savings bonds.
This special provision, enacted Jan. 22, does not apply to contributions of property. Eligible contributions must be made specifically for the relief of victims in areas affected by the Jan. 12 earthquake in Haiti. Gifts made directly to individual victims are not deductible. Notice 1396 a one-page notice describing this provision, is available on IRS.gov and is printed in English, Spanish, French and Haitian Creole.
To get a tax benefit, individuals must itemize their deductions on Schedule A. Those who claim the standard deduction, including all short-form filers, are not eligible.
Taxpayers should be sure their contributions go to qualified charities. Most organizations eligible to receive tax-deductible donations are listed in a searchable online database available on this Web site under Search for Charities. Some organizations, such as churches or governments, may be qualified even though they are not listed on IRS.gov. Donors can find out more about organizations helping Haitian earthquake victims from agencies such as USAID.
The IRS reminds donors that contributions to foreign organizations generally are not deductible. IRS Publication 526, Charitable Contributions, provides information on making contributions to charities.
Federal law requires that taxpayers keep a record of any deductible donations they make. For donations by text message, a telephone bill will meet the recordkeeping requirement if it shows the name of the donee organization, the date of the contribution and the amount of the contribution. In addition, for text message donations of $250 or more, taxpayers must obtain a written acknowledgement from the charity. For cash contributions made by other means, be sure to keep a bank record, such as a cancelled check, or a receipt from the charity showing the name of the charity and the date and amount of the contribution. Publication 526 has further details on the recordkeeping rules for cash contributions.

Most Americans will get assistance from a professional tax preparer or tax software when filing their taxes this year. The Better Business Bureau encourages taxpayers to use caution when selecting tax preparation help or they may get hit with headaches and mounting fines and fees if the return isn’t correct or filed late.

According to the IRS, 80 percent of Americans enlist the help of a tax preparer or tax software when filing their taxes. Unfortunately, every year the BBB receives thousands of complaints from consumers against tax preparers. Commonly, complainants state that the tax preparer made errors in their return which resulted in fines and fees.

“Even though the tax preparer completes the return, it’s the taxpayer who is ultimately responsible for the return’s accuracy and whether or not it’s filed on time,” said Ken Vander Meeden, BBB of Western Michigan President. “The fines, fees and hassles can mount if you choose an unreliable tax preparer and that’s why it’s important to do your research.”

The BBB offers the following advice to find a trustworthy tax preparer:

• Ask around. Get referrals from friends and family on who they use and check the BBB Reliability Report on tax preparation services at www.bbb.org.
• Look for credentials. Ideally, your tax preparer should either be a certified public accountant, a tax attorney or an enrolled agent. All three can represent you before the IRS in all matters, including an audit. Also, find out if the preparer is affiliated with a professional organization that holds its members to a code of ethics.
• Don’t fall for the promise of a big refund. Be wary of any tax preparation service that promises larger refunds than the competition, and avoid any tax preparers who base their fee on a percentage of the refund.
• Think about accessibility. Many tax preparation services only set up shop for the months leading up to April 15. In case the IRS find errors, or in case of an audit, you might need to be able to contact your tax preparer throughout the year.
• Read the contract carefully. Read tax preparation service contracts closely to ensure you understand issues such as how much it is going to cost for the service, how the cost will be affected if preparation is more complicated and time consuming than expected and whether the tax preparer will represent you in case of an audit.

For more advice on finding professionals you can trust, visit www.bbb.org.

The Internal Revenue Service is sponsoring a public outreach event from 9 a.m. to 3 p.m. on Feb. 19 at the Radisson Hotel Grand Rapids Riverfront to assist taxpayers who may be eligible for the Health Coverage Tax Credit.

This credit makes health coverage more affordable by allowing eligible individuals to pay only 20 percent of their health insurance premiums each month.

Nationwide, thousands of people are potentially eligible to receive the HCTC. Some of them are displaced workers who are certified by the Department of Labor as eligible to receive Trade Readjustment Allowances under the Trade Adjustment Assistance Act (TAA). Others qualify because they receive benefits from the Pension Benefit Guaranty Corporation (PBGC) and are between 55 and 65 years of age.

The HCTC Program partners with various federal and state agencies and Health Plan Administrators (HPAs) to deliver the tax credit to eligible individuals.

The HCTC is available on a monthly basis to help individuals pay their health insurance costs as they become due or on a yearly basis when they file their federal tax return. It is a refundable tax credit and is paid in full no matter how much federal income tax an eligible individual owes.

The HCTC began as a ground-breaking tax credit program in 2002 and was expanded in 2009 as a result of the American Recovery and Reinvestment Act.

For more information, call 1-866-628-HCTC or visit http://www.irs.gov/individuals/article/0,,id=109915,00.html