Thursday, June 12, 2014

Since assuming her position in 2001, National Taxpayer Advocate Nina E. Olson has emphasized the protection of taxpayer rights in tax administration. In her 2007 Annual Report to Congress, and in later reports, she proposed a new Taxpayer Bill of Rights. On June 10, 2014, the IRS formally adopted the Advocate’s proposal, to renew the focus on protecting the rights of taxpayers in all of their dealings with the IRS.
This document groups the dozens of existing rights in the Internal Revenue Code into ten fundamental rights, and makes these rights clear, understandable, and accessible for taxpayers and IRS employees alike.
  1. The Right to Be Informed

    Taxpayers have the right to know what they need to do to comply with the tax laws. They are entitled to clear explanations of the laws and IRS procedures in all tax forms, instructions, publications, notices, and correspondence. They have the right to be informed of IRS decisions about their tax accounts and to receive clear explanations of the outcomes.
  2. The Right to Quality Service

    Taxpayers have the right to receive prompt, courteous, and professional assistance in their dealings with the IRS, to be spoken to in a way they can easily understand, to receive clear and easily understandable communications from the IRS, and to speak to a supervisor about inadequate service.
  3. The Right to Pay No More than the Correct Amount of Tax

    Taxpayers have the right to pay only the amount of tax legally due, including interest and penalties, and to have the IRS apply all tax payments properly.
  4. The Right to Challenge the IRS’s Position and Be Heard

    Taxpayers have the right to raise objections and provide additional documentation in response to formal IRS actions or proposed actions, to expect that the IRS will consider their timely objections and documentation promptly and fairly, and to receive a response if the IRS does not agree with their position.
  5. The Right to Appeal an IRS Decision in an Independent Forum

    Taxpayers are entitled to a fair and impartial administrative appeal of most IRS decisions, including many penalties, and have the right to receive a written response regarding the Office of Appeals’ decision. Taxpayers generally have the right to take their cases to court.
  6. The Right to Finality

    Taxpayers have the right to know the maximum amount of time they have to challenge the IRS’s position as well as the maximum amount of time the IRS has to audit a particular tax year or collect a tax debt. Taxpayers have the right to know when the IRS has finished an audit.
  7. The Right to Privacy

    Taxpayers have the right to expect that any IRS inquiry, examination, or enforcement action will comply with the law and be no more intrusive than necessary, and will respect all due process rights, including search and seizure protections and will provide, where applicable, a collection due process hearing.
  8. The Right to Confidentiality

    Taxpayers have the right to expect that any information they provide to the IRS will not be disclosed unless authorized by the taxpayer or by law. Taxpayers have the right to expect appropriate action will be taken against employees, return preparers, and others who wrongfully use or disclose taxpayer return information.
  9. The Right to Retain Representation

    Taxpayers have the right to retain an authorized representative of their choice to represent them in their dealings with the IRS. Taxpayers have the right to seek assistance from a Low Income Taxpayer Clinic if they cannot afford representation.
  10. The Right to a Fair and Just Tax System, Including Access to the Taxpayer Advocate Service

    Taxpayers have the right to expect the tax system to consider facts and circumstances that might affect their underlying liabilities, ability to pay, or ability to provide information timely. Taxpayers have the right to receive assistance from the Taxpayer Advocate Service if they are experiencing financial difficulty or if the IRS has not resolved their tax issues properly and timely through its normal channels.

Summer Camp 40% Off, Thanks Uncle Sam

Summer Camp 40% Off, Thanks Uncle Sam

Forbes Staff
Are summer camp costs adding up? If you send your kids to camp so you can work, Uncle Sam can help you cut the price by 20% to 40%. 
Summer camp? Really. Day camp counts as “dependent care” (aka child care), and there are actually two ways Uncle Sam helps subsidize it—through the dependent care tax credit and workplace dependent care flexible spending accounts. Depending on your tax situation, one break might be worth more than the other, and in some cases, you might use both.

Too busy getting medical forms to the pediatrician and back to the camp office to worry about taxes? For potentially $1,200 to $2,200 of annual savings, it’s worth figuring out.

The first hurdle is that you (and your spouse if you’re filing jointly) have to have earned income. The point is you’re working so you can’t look after your kids. Your kid campers have to be age 12 or younger when the care was provided. So if your kid turns 13 in the middle of the summer, say Aug. 1, send him to that expensive computer camp in July and take that vacation to the beach in August. Note: Expenses for overnight camps do not count!
Take aim: Parents can turn to two tax breaks to cut summer camp costs. (Photo credit: Wikipedia)

If you’re lucky enough to work for an employer offering a dependent care flexible spending account (it works a lot like a healthcare FSA), you should generally fund that first. You can defer up to $5,000 a year (per family) into a dependent care FSA. It’s pre-tax, so depending on your federal and state tax rate, it’s like getting 40% off. One problem with the workplace FSA is that you usually have to plan in the fall how much money you’ll put in the account for the following summer, so it’s a bit of a guessing game. And if you don’t use all the money you stash away, you lose it, so don’t overstuff it.

You can always fall back on the dependent care tax credit, which is typically a better deal for workers in a low tax bracket from the start. If you earn $43,000 or more, the credit is 20% (it goes up to 35% for the lowest income workers). You can apply up to $3,000 of expenses for one child, and up to $6,000 in total expenses for two or more children, towards the dependent care tax credit. So if you’ve tapped out the $5,000 workplace FSA, you can still apply another $1,000 of expenses towards the credit.

In the meantime, make sure you save receipts for camp and ask for the camp’s taxpayer identification number. You’ll need that number and the camp address to put on your tax return as substantiation of the expenses for the dependent care tax credit. Save the receipts as back up. For the workplace FSA, you need the camp address and a receipt or a signature of the camp director.

Some more caveats: You can’t include the cost of care provided by your spouse or your child who is under age 19 at the end of the year. You also cannot count the cost of care given by a person you can claim as your dependent (say grandma lives with you as a dependent and helps take care of your daughter).

The IRS spells out all the rules with examples and a flow chart in Publication 503, Child Care And Dependent Care Expenses.