Five Things You Should Know about the Child Tax Credit  

The Child Tax Credit is an important tax credit that may save you up to $1,000 for each eligible qualifying child. Be sure you qualify before you claim it. Here are five useful facts from the IRS on the Child Tax Credit:

1. Qualifications. For the Child Tax Credit, a qualifying child must pass several tests:

• Age. The child must have been under age 17 at the end of 2015.
• Relationship. The child must be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, half brother, or half sister. The child may be a descendant of any of these individuals. A qualifying child could also include your grandchild, niece or nephew. You would always treat an adopted child as your own child. An adopted child includes a child lawfully placed with you for legal adoption.
• Support. The child must have not provided more than half of their own support for the year.
• Dependent. The child must be a dependent that you claim on your federal tax return.
• Joint return. The child cannot file a joint return for the year, unless the only reason they are filing is to claim a refund.
• Citizenship. The child must be a U.S. citizen, a U.S. national or a U.S. resident alien.
• Residence. In most cases, the child must have lived with you for more than half of 2015.

2. Limitations. The Child Tax Credit is subject to income limitations. The limits may reduce or eliminate your credit depending on your filing status and income.

3. Additional Child Tax Credit. If you qualify and get less than the full Child Tax Credit, you could receive a refund even if you owe no tax with the Additional Child Tax Credit.

4. Schedule 8812. If you qualify to claim the Child Tax Credit, make sure to check if you must complete and attach Schedule 8812, Child Tax Credit, with your tax return. For example, if you claim a credit for a child with an Individual Taxpayer Identification Number, you must complete Part I of Schedule 8812. If you qualify to claim the Additional Child Tax Credit, you must complete and attach Schedule 8812. You can visit IRS.gov to view, download or print IRS tax forms anytime.

5. IRS E-file. The easiest way to claim the Child Tax Credit is with IRS E-file. This system is safe, accurate and easy to use. You can also use IRS Free File to prepare and e-file your taxes for free. Go to IRS.gov/filing to learn more.

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.

Six Reasons to Choose Direct Deposit for Your Tax Refund

When you file your taxes, you have options on how to receive your refund. The best way to get it is by direct deposit. Eight out of 10 taxpayers get their refunds by direct deposit. Here are six good reasons why you should do the same in 2016:

IRS Direct Deposit:

1. Is Fast.  The fastest way to get your refund is to electronically file your federal tax return and use direct deposit. Use IRS Free File to prepare and e-file your federal return for free. You can still use direct deposit even if you file a paper tax return.

2. Is Secure.  Since your refund goes directly into your account, there’s no risk of having your refund check stolen or lost in the mail. This is the same electronic transfer system used to deposit nearly 98 percent of all Social Security and Veterans Affairs benefits into millions of accounts.

3. Is Convenient.  With direct deposit, your refund goes directly into your bank account. There’s no need to wait for your check to come in the mail.

4. Is Easy.  Choosing direct deposit is easy. When you e-file, just follow the instructions in the tax software. If you file a paper return, the tax form instructions will guide you. Make sure that you enter the correct bank account and routing number.

5. Has Options.  You can split your refund into several financial accounts. These include checking, savings, health, education and certain retirement accounts. Beginning this year, there is a new retirement account offered by the U.S. Treasury Department. It’s called a MyRA account and you can designate all or a portion of your refund to a new MyRA account if you mark the “savings” box in the refund section of your return. Use IRS Form 8888, Allocation of Refund (including Savings Bond Purchases), to deposit your refund in up to three accounts. Don’t use Form 8888 to designate part of your refund to pay your tax preparer.

6. Saves Money. Direct deposit also saves you money. It costs the nation’s taxpayers more than $1 for every paper refund check issued but only a dime for each direct deposit made.

You should deposit your refund into accounts in your own name, your spouse’s name or both. Avoid making a deposit into accounts owned by others. Some banks require both spouses’ names on the account to deposit a tax refund from a joint return. Check with your bank for their direct deposit requirements.

There is a limit of three electronic direct deposit refunds made into a single financial account or pre-paid debit card. Taxpayers who exceed the limit will receive an IRS notice and a check refund in the mail. Helpful tips about direct deposit and the split refund option are available in Publication 17, Your Federal Income Tax. You can view, download and print tax products on IRS.gov/forms anytime.  

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.

Ways to Pay Your Tax Bill

If you owe federal tax, the IRS offers many easy ways to pay. Make sure you pay by the April 18 deadline, even if you get an extension of time to file your 2015 tax return. You can get an automatic extension of time to file when you make an electronic payment by April 18. Here are some of the ways to pay your tax:

• Use Direct Pay.  IRS Direct Pay offers taxpayers a free, secure and easy way to pay. You can schedule a payment in advance to pay your tax directly from your checking or savings account. You don’t need to register, write a check or find a mailbox. Direct Pay gives you instant confirmation after you make a payment.
• Pay by Debit or Credit Card.  Choose a payment processor  to make a tax payment online, by phone or by mobile device. It’s safe and secure. The payment processor will charge a processing fee. The fees vary by service provider and may be tax deductible. No part of the fee goes to the IRS. 
• Use IRS2Go. IRS2Go is a free app that you can use to make a payment with Direct Pay and by debit or credit card. Simply download IRS2Go from Google Play, the Apple App Store or Amazon.
• Pay When You E-file. If you file your federal tax return electronically, you can schedule a payment at the time that you file. You can pay directly from your bank account using Electronic Funds Withdrawal.  You choose the date and amount of the payment, and as long as it is on or before April 18, it will be on time. Some software that you use to e-file also allows you to pay by debit or credit card with a processing fee.
• Choose Other Options to Pay. The IRS offers other ways to pay:
• Use the Electronic Federal Tax Payment Systemto pay your taxes online or by phone. This free system provides security, ease and accuracy. To enroll or for more information, call 888-555-4477or visit EFTPS.gov.
• Pay by Check or Money Order. Make the check, money order or cashier’s check payable to the U.S. Treasury. Do not staple, clip or attach your payment to the tax form. Include your name, address, daytime phone number and Social Security number or Employer Identification Number on the front of the payment. Use the SSN shown first if it’s a joint return. Also include the tax year and related tax form or notice number. Do not send cash through the mail.
• Can’t Pay Now?  If you are unable to pay in full, you have options:
• Apply for an online payment agreement to pay your tax liability over time. Use the IRS.gov tool to set up a direct debit installment agreement. With a direct debit plan there is no need to write a check and mail it each month.
• Owe more than you can afford? An offer in compromise may allow you to settle for less than the full amount you owe. It may be an option for you if you can’t pay your full tax liability. It may also be an option if paying in full creates a financial hardship. Not everyone qualifies. Use the Offer in Compromise Pre-Qualifier tool to see if you are eligible for an OIC.

In short, remember to pay your tax bill on time. If you are suffering a financial hardship, the IRS is willing to work with you.

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.

Get to Know Your Taxpayer Bill of Rights

Every taxpayer has a set of fundamental rights. The “Taxpayer Bill of Rights” takes the many existing rights in the tax code and groups them into 10 categories. You should be aware of these rights when you interact with the IRS. 

Publication 1, Your Rights as a Taxpayer, highlights a list of your rights and the agency’s obligations to protect them. Here is a summary of the Taxpayer Bill of Rights:

1. The Right to Be Informed. Taxpayers have the right to know what is required 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 know about IRS decisions affecting their accounts and 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 and the freedom to speak to a supervisor about inadequate service. Communications from the IRS should be clear and easy to understand.
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. They should also expect the IRS to apply all tax payments properly.
4. The Right to Challenge the IRS’s Position and Be Heard. Taxpayers have the right to object to formal IRS actions or proposed actions and provide justification with additional documentation. They should expect that the IRS will consider their timely objections and documentation promptly and fairly. If the IRS does not agree with their position, they should expect a response.
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 certain penalties. Taxpayers have the right to receive a written response regarding a decision from the Office of Appeals. 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 an IRS position and 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 concludes 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 as unobtrusive as possible. They should expect such proceedings to respect all due process rights, including search and seizure protections. The IRS will provide, where applicable, a collection due process hearing.
8. The Right to Confidentiality. Taxpayers have the right to expect that their tax information will remain confidential. The IRS will not disclose information unless authorized by the taxpayer or by law. Taxpayers should expect the IRS to take appropriate action against employees, return preparers and others who wrongfully use or disclose their 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. Taxpayers have the right to expect fairness from the tax system. This includes considering all 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.

In an effort to expand awareness, the IRS has made Publication 1 available in  English, Chinese, Korean, Russian, Spanish and Vietnamese.

The IRS will include Publication 1 when sending a notice to taxpayers on a range of issues, such as an audit or collection matter. All IRS facilities will publicly display the rights for taxpayers and employees to see.

Additional IRS Resources:

• What the Taxpayer Bill of Rights Means for You
•  IR-2014-72, IRS Adopts “Taxpayer Bill of Rights;” 10 Provisions to be Highlighted on IRS.gov, in Publication 1
•  IR-2014-80, IRS “Taxpayer Bill of Rights” Now Available in 6 Languages; 10 Key Rights Outlined in Updated Publication 1

IRS YouTube Videos:

• Taxpayer Bill of Rights – English | Spanish | ASL

IRS Podcasts:

• Taxpayer Bill of Rights – English | Spanish

There are several ways taxpayers can reduce their 2015 personal income tax bill as the year comes to a close. More opportunities for tax savings are available for taxpayers that start planning now, rather than those who wait until December 31st, so take this time to assess your individual situation and enjoy substantial savings.

1. 4 tips for individuals

1. Pay college tuition bills early. 
2. Think about pre-paying tuition bills that are due in early 2016 if you qualify for the Lifetime Learning or American Opportunity credit but haven’t incurred enough expenses to max out the credit for 2015. You are able to claim a 2015 credit for prepaying tuition for academic sessions that begin in January through March of 2016.
   • For Lifetime Learning credit qualifiers, the maximum amount you can claim is $2,000 per tax return, but the credit is phased out if your 2015 modified adjusted gross income (MAGI) is $55,000 to $65,000 for unmarried individuals, and $110,000-$130,000 for married joint filers.
   • For American Opportunity credit qualifiers, the maximum amount you can claim is $2,500 per student, but it is also phased out if your 2015 MAGI ranges from $80,000 to $90,000 for unmarried taxpayers, and $160,000-$180,000 for married joint filers.
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3. 2. Consider paying deductible expenses earlier than usual. Do you itemize deductions? If so, you can generate higher 2015 write-offs if you pay some deductible expenses before year-end. If you expect to be in the same tax bracket as last year, part of your income tax liability will be deferred until next year, and if you end up in a lower bracket for 2016, you will reduce your liability for the long run. Some easy deductible expenses that you can pay ahead of time include:
   • Your mortgage bill on your main residence or vacation home due on January 1st of next year is an easy deductible expense to pay ahead of time, and will give you 13 months’ worth of deductible interest in 2015 if you did not pay ahead of time last year.
   • Expenses subject to deduction floors- You can deduct expenses subject to deduction floors based on a portion of your adjusted gross income (AGI) if they are above the “floor” in question. If you’ve exceeded the floor year-to-date, for medical costs (10% floor for most) or miscellaneous deductions (2% floor), for example, think about accelerating additional costs into the last couple months of 2015 to be able to deduct the expenses.
   • State and local income and property taxes.
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4. 3. Defer some taxable income into next year. If you think you’ll be in the same or lower tax bracket for 2016, it might be a good idea to defer some of your taxable income into next year if possible. This will allow you to, in some cases, postpone tax liability until next year, and take more advantage of tax breaks (like the higher education tax credit, for example) in alternating years.
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6. 4. Gift assets to relatives. For taxpayers in the 10% or 15% rate brackets, the federal income tax rate on long-term capital gains and qualified dividends is 0% for 2015. If you have relatives in lower tax brackets, consider giving them appreciated stock or mutual fund shares if your personal tax bracket is too high to claim the 0% rate. By doing so, you can allow them to sell the shares and pay the 0% rate on the long-term gains that result. Remember that the annual gift tax exclusion is $14,000 in 2015 ($28,000 for married couples).