IRS issues warning about Coronavirus-related scams

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Watch out for schemes tied to economic impact payments

If you have tax related questions, please call Kevin M. Sayed, J.D., LL.M., at 252-321-2020.  The following materials were originally published by the IRS.

The Internal Revenue Service today urged taxpayers to be on the lookout for a surge of calls and email phishing attempts about the Coronavirus, or COVID-19. These contacts can lead to tax-related fraud and identity theft.

“We urge people to take extra care during this period. The IRS isn’t going to call you asking to verify or provide your financial information so you can get an economic impact payment or your refund faster,” said IRS Commissioner Chuck Rettig. “That also applies to surprise emails that appear to be coming from the IRS. Remember, don’t open them or click on attachments or links. Go to IRS.gov for the most up-to-date information.”

Taxpayers should watch not only for emails but text messages, websites and social media attempts that request money or personal information.

“History has shown that criminals take every opportunity to perpetrate a fraud on unsuspecting victims, especially when a group of people is vulnerable or in a state of need,” said IRS Criminal Investigation Chief Don Fort. “While you are waiting to hear about your economic impact payment, criminals are working hard to trick you into getting their hands on it. The IRS Criminal Investigation Division is working hard to find these scammers and shut them down, but in the meantime, we ask people to remain vigilant.”

Don’t fall prey to Coronavirus tricks; retirees among potential targets
The IRS and its Criminal Investigation Division have seen a wave of new and evolving phishing schemes against taxpayers. In most cases, the IRS will deposit economic impact payments into the direct deposit account taxpayers previously provided on tax returns. Those taxpayers who have previously filed but not provided direct deposit information to the IRS will be able to provide their banking information online to a newly designed secure portal on IRS.gov in mid-April. If the IRS does not have a taxpayer’s direct deposit information, a check will be mailed to the address on file. Taxpayers should not provide their direct deposit or other banking information for others to input on their behalf into the secure portal.

The IRS also reminds retirees who don’t normally have a requirement to file a tax return that no action on their part is needed to receive their $1,200 economic impact payment. Seniors should be especially careful during this period. The IRS reminds retirees – including recipients of Forms SSA-1099 and RRB-1099 −  that no one from the agency will be reaching out to them by phone, email, mail or in person asking for any kind of information to complete their economic impact payment, also sometimes referred to as rebates or stimulus payments. The IRS is sending these $1,200 payments automatically to retirees – no additional action or information is needed on their part to receive this.
The IRS reminds taxpayers that scammers may:

  • Emphasize the words “Stimulus Check” or “Stimulus Payment.” The official term is economic impact payment.
  • Ask the taxpayer to sign over their economic impact payment check to them.
  • Ask by phone, email, text or social media for verification of personal and/or banking information saying that the information is needed to receive or speed up their economic impact payment.
  • Suggest that they can get a tax refund or economic impact payment faster by working on the taxpayer’s behalf. This scam could be conducted by social media or even in person.
  • Mail the taxpayer a bogus check, perhaps in an odd amount, then tell the taxpayer to call a number or verify information online in order to cash it.

Reporting Coronavirus-related or other phishing attempts
Those who receive unsolicited emails, text messages or social media attempts to gather information that appear to be from either the IRS or an organization closely linked to the IRS, such as the Electronic Federal Tax Payment System (EFTPS), should forward it to phishing@irs.gov.

Taxpayers are encouraged not to engage potential scammers online or on the phone. Learn more about reporting suspected scams by going to the Report Phishing and Online Scams page on IRS.gov.

Official IRS information about the COVID-19 pandemic and economic impact payments can be found on the Coronavirus Tax Relief page on IRS.gov. The page is updated quickly when new information is available.

Relief from Penalty for Failure to Deposit Employment Taxes

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If you are an employer with tax related questions, please call Kevin M. Sayed, J.D., LL.M., at 252-321-2020.  The following materials were originally published by the IRS.

Notice 2020-22 provides a waiver of additions to tax for failure to make a deposit of taxes for employers required to pay qualified sick leave wages and qualified family leave wages mandated by the Families First Coronavirus Response Act (Families First Act) and qualified health plan expenses allocable to these wages.  This notice also provides a waiver of additions to tax for failure to make a deposit of taxes for certain employers subject to a full or partial closure order due to the coronavirus disease 2019 (COVID-19) or experiencing a statutorily specified decline in business under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).  This notice applies to deposits of Employment Taxes (including withheld income taxes, taxes under the Federal Insurance Contributions Act and taxes under the Railroad Retirement Act) reduced in anticipation of the credits with respect to qualified sick leave wages and qualified family leave wages paid with respect to the period beginning April 1, 2020, and ending December 31, 2020.  This notice applies with respect to deposits of Employment Taxes reduced in anticipation of the credits with respect to qualified wages paid with respect to the period beginning on March 13, 2020, and ending December 31, 2020.  This relief ensures that such employers may pay qualified sick leave wages and qualified family leave wages required by the Families First Act or qualified wages under the CARES Act using Employment Taxes that would otherwise be required to be deposited without incurring a failure to deposit penalty.

IRS increases visits to high-income taxpayers who haven’t filed tax returns

If you are a taxpayer or tax preparer experiencing these issues, please call Kevin M. Sayed, J.D., LL.M., at 252-321-2020. The following materials were originally published by the IRS.

WASHINGTON – As part of a larger effort to ensure compliance and fairness, the Internal Revenue Service today announced that it will step up efforts to visit high-income taxpayers who in prior years have failed to timely file one or more of their tax returns.

Following the recent and ongoing hiring of additional enforcement personnel, IRS revenue officers across the country will increase face-to-face visits with high-income taxpayers who haven’t filed tax returns in 2018 or previous years. These visits are primarily aimed at informing these taxpayers of their tax filing and paying obligations and bringing these taxpayers into compliance.

“The IRS is committed to fairness in the tax system, and we want to remind people across all income categories that they need to file their taxes,” said Paul Mamo, Director of Collection Operations, Small Business/Self Employed Division. “These visits focusing on high-income taxpayers will be taking place across the country.  We want to ensure taxpayers know their options to get right with their taxes and avoid bigger issues later.”

For the current tax season, the IRS reminds taxpayers that everyone should file their 2019 tax return by the April 15 filing deadline regardless of whether they can pay in full. Six-month filing extensions are also available, although that does not extend the April deadline for paying any taxes owed.

“Taxpayers having delinquent filing or payment obligations should consult a competent tax advisor before waiting to be contacted by an IRS revenue officer, Mamo said. “It is always worthwhile to take advantage of various methods of getting back into filing or payment compliance before being personally contacted by the IRS.”

For the new visits taking place, high-income non-filers taxpayers are those who generally received income in excess of $100,000 during a tax year and did not file a tax return with the IRS. Taxpayers who exercise their best efforts in filing their tax returns and paying or entering into agreements to pay their taxes deserve to know that the IRS is aggressively pursuing others who have failed to satisfy their filing and payment obligations.

During the visits, IRS revenue officers will share information and work with the taxpayer to hopefully resolve the tax issue.

How to pay

There are many payment options for people having trouble paying their tax bill. Payment plans can be set up quickly online.

Once returns are filed or an assessment occurs, there are various online payment options available at IRS.gov, including direct pay through a bank account or using a debit or credit card. Other ways to pay include the Electronic Federal Tax Payment System (best option for businesses or large payments; enrollment required), Electronic Funds Withdrawal (using during e-filing), same-day wire (bank fees may apply), check or money order or cash (at a participating retail partner). Those who can’t pay immediately may be able to meet their tax obligation in monthly installments by applying for a payment plan (including installment agreements and those who owe less than $50,000), they can find out if they qualify for an offer in compromise  (a way to settle their tax debt for less than the full amount), or request that the IRS temporarily delay collection until their financial situation improves.

For those who refuse to pay, the IRS has a number of options available under the law, ranging from a series of civil enforcement actions and, when appropriate, pursuing criminal cases against taxpayers. IRS compliance personnel are also now working more closely with IRS criminal investigators on priority compliance issues, including high-income cases.

“These compliance visits underscore the importance of people filing their taxes this April, even if they can’t pay the full amount of tax due,” said Hank Kea, Director of Field Collection Operations, Small Business/Self Employed Division. “Not filing because you don’t believe you can pay at the time of filing makes the problem worse, as interest and penalties mount over time. We have many payment options available on IRS.gov to help taxpayers. It’s better to work on these issues up front rather than ignoring it and ultimately getting to the point of the IRS taking more serious action. Our continued use of ever-changing technologies, coupled with additional enforcement personnel, would suggest that waiting is not a viable option for delinquent taxpayers.”

What’s a revenue officer’s job?
Revenue officers are trained IRS civil enforcement employees who work to resolve compliance issues, such as missing returns or taxes owed. Revenue officers conduct interviews to gather financial information and provide taxpayers with the necessary steps to become and remain compliant with the law. When necessary, they will take the appropriate enforcement actions to collect the amount owed, following the law while respecting taxpayer rights and following the law.

Don’t be confused: Visits are not a scam
For this new initiative, these high-income taxpayers have typically received numerous letters from the IRS over an extended period of time, so they generally realize they have a tax issue.

Revenue officer visits shouldn’t be confused with scams. Here’s what to look for:

  • While most IRS revenue officer visits to a taxpayer are unannounced, they will always provide two forms of official credentials, both include a serial number and photo of the IRS employee. Taxpayers have the right to see each of these credentials.
  • A legitimate revenue officer helps taxpayers understand and meet their tax obligations. The officer will explain the liability to the taxpayer, along with the consequences of failing to comply with the law. The IRS employee will not make threats nor demand an unusual form of payment for a nonexistent liability.
  • Visits by revenue officers generally occur after numerous contacts by mail about an existing tax issue; taxpayers should be aware they have a tax issue when these visits occur.
  • If someone has an outstanding federal tax debt, the visiting officer will request payment but will provide a range of options, including paying by check written to the U.S. Treasury.
  • More information on identifying legitimate IRS representatives and how to report scams can be found at IRS.gov.

 

Fraud Referral a Priority for IRS Small Business Unit’s New Head

For answers to your questions regarding small business tax returns, please call Kevin M. Sayed, J.D., LL.M., at 252-321-2020. The following materials were originally published by Bloomberg BNA.

September 12, 2019 3:43 PM

Referring more cases for criminal investigation will be a top priority for the IRS’s Small Business/Self-Employed division, the unit’s new leader said.

Strengthening the relationship between SB/SE and the IRS’s Criminal Investigation division “is an important component as to why I’m in this position,” Eric Hylton, the new commissioner of SB/SE, said Sept. 12 on a call with reporters. He worked at CI for 26 years before taking his new position Sept. 1.

  •  Hylton’s appointment aligns with IRS Commissioner Charles Rettig’s previously stated goal of increasing the number of cases that the agency’s civil divisions refer to CI. The referrals now are only 7% of CI’s total caseload, both Rettig and Hylton have said.
  •  “Fraud referrals should represent a much higher percentage of CI’s inventory,” Hylton said on the call. “This definitely will be an area of emphasis.”
  •  SB/SE also will aim to increase outreach to external agencies like the Justice Department, and will ramp up enforcement and make better use of data analytics, he said.
  •  Hylton was joined on the call by Darren Guillot, new deputy commissioner for collection and operations support at SB/SE, and De Lon Harris, the new deputy commissioner for examination. They also began their new roles Sept. 1.

To contact the reporter on this story: Allyson Versprille in Washington at aversprille@bloombergtax.com

To contact the editors responsible for this story: Patrick Ambrosio at pambrosio@bloombergtax.com; Kathy Larsen at klarsen@bloombergtax.com

 

 

 

It’s important for tax pros to know the signs they are a cyberthief’s victim

If you are a taxpayer or tax preparer experiencing these issues, please call Kevin M. Sayed, J.D., LL.M., at 252-321-2020. The following materials were originally published by the IRS.

Tax professionals should learn the tell-tale signs that their office may have experienced a data theft. Such thefts could have resulted in fraudulent tax returns filed in their clients’ names.

Here is a list of warning signs that a tax professional or their office may have experienced a data theft:

  • Their clients’ e-filed returns are rejected by the IRS or state tax agencies. This happens because someone else already filed a tax return with their client’s Social Security number.
  • Clients who haven’t filed tax returns begin to receive taxpayer authentication letters from the IRS. The IRS sends letters such as the 5071C, 4883C and 5747C to confirm a taxpayer’s identity for a submitted tax return.
  • Clients who haven’t filed tax returns receive refunds.
  • Clients receive tax transcripts that they didn’t request.
  • Clients who created an IRS Online Services account receive an IRS notice that their account was accessed.
  • Clients who have an account get an IRS emails saying their account is disabled.
  • Clients unexpectedly receive an IRS notice that an IRS online account was created in their names.
  • The number of returns filed with the tax professional’s Electronic Filing Identification Number is higher than the number of clients they have.
  • Tax professionals or clients responding to emails that the firm did not send.
  • Network computers running slower than normal.
  • Computer cursors moving or changing numbers when the user is not even touching the keyboard.
  • Network computers locking out employees.

More information:

Share this tip on social media — #IRSTaxTip: It’s important for tax pros to know the signs they are a cyberthief’s victim https://go.usa.gov/xV85p

 

Tips for taxpayers who make money from a hobby

For answers to your questions regarding tax returns, please call Kevin M. Sayed, J.D., LL.M., at 252-321-2020. The following materials were originally published by the IRS.

Many people enjoy hobbies that are also a source of income. From painting and pottery to scrapbooking and soap making, these activities can be sources of both fun and finances. Taxpayers who make money from a hobby must report that income on their tax return.

However, the rules for how to report the income and expenses depend on whether the activity is a hobby or a business.

There are special rules and limits for deductions taxpayers can claim for hobbies. Here are five things to consider:

If the activity is a business or a hobby.
If someone has a business, they operate the business to make a profit. In contrast, people engage in a hobby for sport or recreation, not to make a profit. Taxpayers should consider nine factors when determining whether their activity is a business or a hobby. They should base their determination on all the facts and circumstances of their activity.

Allowable hobby deductions.
Taxpayers can only deduct ordinary and necessary hobby expenses:

  • Ordinary expense is common and accepted for the activity.
  • Necessary expense is appropriate for the activity.

Limits on hobby expenses.
Taxpayers can generally only deduct hobby expenses up to the amount of hobby income. If hobby expenses are more than its income, taxpayers have a loss from the activity. However, a hobby loss can’t be deducted from other income.

How to deduct hobby expenses.
Taxpayers must itemize deductions on their tax return to deduct hobby expenses. Taxpayers can look into this now to determine if they will itemize their deductions when they file their 2019 tax return next year. Expenses may fall into three types of deductions, and special rules apply to each type.

Use IRS Free File.
Hobby rules can be complex. IRS Free File can make filing a tax return easier.

More Information:
Publication 334, Tax Guide for Small Business
Publication 525, Taxable and Nontaxable Income
Publication 529, Miscellaneous Deductions
Publication 535, Business Expenses
Publication 17, Your Federal Income Tax
About Schedule C, Profit or Loss from Business
Estimated Taxes

Share this tip on social media — #IRSTaxTip: Tips for taxpayers who make money from a hobby. https://go.usa.gov/xyYHj

IRS releases Data Book for 2018 showing range of tax data including audits, collection actions and taxpayer service

For answers to your questions regarding tax returns, please call Kevin M. Sayed, J.D., LL.M., at 252-321-2020. The following materials were originally published by the IRS.

The Internal Revenue Service today released the 2018 IRS Data Book, a snapshot of agency activities for the fiscal year.

The 2018 IRS Data Book describes activities conducted by the IRS from Oct. 1, 2017, to Sept. 30, 2018, and includes information about tax returns, refunds, examinations and appeals. The annual publication is illustrated with charts showing changes in IRS enforcement activities, taxpayer assistance levels, tax-exempt activities, legal support workload and IRS budget and workforce levels when compared to fiscal year 2017 and prior years. Included this year is a section on taxpayer attitudes from a long-running opinion survey.

“Underlying the numbers in this year’s edition of the Data Book is the hard work of IRS employees,” said IRS Commissioner Chuck Rettig. “Our employees are the backbone of this agency, delivering our mission efficiently and effectively. They work hard to help taxpayers, and the numbers outlined in the Data Book reflect their commitment.”

Revenue Collection, Returns Processing, Taxpayer Service and Enforcement Actions

During fiscal year 2018, the IRS collected nearly $3.5 trillion, processed more than 250 million tax returns and other forms, and issued over 120 million individual income tax refunds totaling almost $395 billion.

The IRS received and processed more of every major type of form during FY 2018 than during the prior year, with the exception of estate tax returns; those filings were down slightly less than 1 percent compared to the prior year. However, filings by pass-through entities were up in FY 2018; partnerships filed almost 5 percent more forms with the IRS in FY 2018 than in the prior year, S-corporation filings were up almost 6 percent in the same time frame.

The IRS provided taxpayer assistance through more than a half-billion visits to IRS.gov and helped more than 64.8 million taxpayers through different service channels, such as correspondence, toll-free telephone helplines or at Taxpayer Assistance Centers. There were also more than 309 million inquiries to the “Where’s My Refund?” application, up 11 percent compared to the prior year.

Net revenue from delinquent collection activities rose to just over $40 billion, an increase of 1.6 percent compared to the prior year. IRS levies were up 8.3 percent compared to the prior year, but the agency filed about 8 percent fewer liens than in fiscal year 2017.

Compared to the prior year, there were fewer audits during fiscal year 2018. The IRS audited more than 892,000 individual income tax returns during the fiscal year, down slightly from the prior year.

Comprehensive Taxpayer Attitude Survey

The IRS Data Book contains the results of the 2018 Comprehensive Taxpayer Attitude Survey (CTAS) which drew from feedback from 2,000 taxpayers through cell phone, landline phone or online surveys. Their opinions continue to inform IRS’ efforts to improve taxpayer service. Some of the results of the survey for 2018 show the following results:

  • Most taxpayers continued to agree that it is not at all acceptable to cheat on their income taxes. This attitude has remained within a four-point range since 2009.
  • Most taxpayers are still satisfied with their personal interactions with the IRS.
  • Almost half of the taxpayers who responded in 2018 agreed that service and enforcement are properly balanced.

The IRS Data Book’s online format makes navigating data on taxpayer assistance, enforcement, and IRS operations easier. The publication contains depictions of key areas and quick links to the underlying data.

An electronic version of the 2018 IRS Data Book can be found on the Tax Stats page of IRS.gov. Printed copies of the 2018 IRS Data Book, Publication 55B, will be available June 2019 from the U.S. Government Printing Office. To obtain a copy, write to the Superintendent of Documents, P.O. Box 371954, Pittsburgh, PA 15250-7954, or call (202) 512-1800 for voicemail or fax a request to (202) 512-2250.

Proposed Changes to Form W-4 Could Complicate Tax Filing

For answers to your questions regarding tax withholding options, please call Kevin M. Sayed, J.D., LL.M., at 252-321-2020. The following materials were originally published by Rachel Fausnaught of PrimePay.com.

…And you thought tax filing season was over.

Just when you thought you understood the IRS’ changes to withholding from last year, there are more changes coming.

The IRS plans to release a new Form W-4 that will incorporate changes brought on by the new tax law. This is to help ensure that the amount held back for taxes in each paycheck is more accurate.

The overall goal of this change is so that taxpayers shouldn’t owe anything or be owed anything once tax time rolls around.

Here are the proposed changes.

Last summer, the IRS released a draft version of the new Form W-4, seeking feedback on it. Here are some of the changes.

As for marital status, employees would now have three marital status options:

  • Single or married, filing separately.
  • Married, filing jointly.
  • Head of household.

Instead of claiming withholding allowances, the new Form W-4 gives taxpayers the option of providing annual dollar amounts for the following:

  • Non-wage income (ex. interest).
  • Deductions from income for the household (ex. itemized of other deductions).
  • Income tax credits expected for the tax year.
  • For employees who have multiple jobs, the total annual taxable wages for all lower paying jobs.

According to Ernst & Young, here are a few more things employers need to know.

Before implementing the income tax withholding calculation in Publication 15 or Publication 15-A, employers would need to adjust the employee’s pay period taxable wages according to the annual dollar amounts entered on lines 5 through 8 on the Form W-4 draft.

If an employee leaves those lines blank, federal income tax would be withheld according to the normal federal income tax withholding calculation. This means it will default two withholding allowances for single or married, filing separately and three withholding allowances for married, filing jointly or head of household.

The revised Form W-4 and the updated method of calculating federal income tax and withholding would apply to employees hired on and after Jan. 1, 2019. It would also apply to existing employees who change their Form W-4 at any time in 2019.

What’s next.

According to the IRS, another draft version of the new Form W-4 is expected by May 31. This will also seek public comment. Once the comments are reviewed, the plan is to post a second draft later in the summer, with the final Form W-4 version to be released by the end of the year.

 

IRS issues guidance relating to deferral of gains for investments in a qualified opportunity fund

For answers to your questions regarding tax returns, please call Kevin M. Sayed, J.D., LL.M., at 252-321-2020. The following materials were originally published by the IRS.

The Internal Revenue Service today issued guidance (PDF) providing additional details about investment in qualified opportunity zones.

The proposed regulations allow the deferral of all or part of a gain that is invested into a Qualified Opportunity Fund (QO Fund) that would otherwise be includible in income. The gain is deferred until the investment is sold or exchanged or Dec. 31, 2026, whichever is earlier. If the investment is held for at least 10 years, investors may be able to permanently exclude gain from the sale or exchange of an investment in a QO Fund.

Qualified opportunity zone business property is tangible property used in a trade or business of the QO Fund if the property was purchased after Dec. 31, 2017. The guidance permits tangible property acquired after Dec. 31, 2017, under a market rate lease to qualify as “qualified opportunity zone business property” if during substantially all of the holding period of the property, substantially all of the use of the property was in a qualified opportunity zone.

A key part of the newly released guidance clarifies the “substantially all” requirements for the holding period and use of the tangible business property:

  • For use of the property, at least 70 percent of the property must be used in a qualified opportunity zone.
  • For the holding period of the property, tangible property must be qualified opportunity zone business property for at least 90 percent of the QO Fund’s or qualified opportunity zone business’s holding period.
  • The partnership or corporation must be a qualified opportunity zone business for at least 90 percent of the QO Fund’s holding period.

The guidance notes there are situations where deferred gains may become taxable if an investor transfers their interest in a QO Fund. For example, if the transfer is done by gift the deferred gain may become taxable. However, inheritance by a surviving spouse is not a taxable transfer, nor is a transfer, upon death, of an ownership interest in a QO Fund to an estate or a revocable trust that becomes irrevocable upon death.

The guidance (PDF) is posted on IRS.gov. These regulations relate to the Tax Cuts and Jobs Act (TCJA), the tax reform legislation enacted in December 2017.

For information about other TCJA provisions, visit IRS.gov/taxreform

With new SALT limit, IRS explains tax treatment of state and local tax refunds

For ways to save on taxes on business and investment transactions, please call Kevin M. Sayed, J.D., LL.M., at 252-321-2020. The following materials were originally published by the IRS.

WASHINGTON — The Internal Revenue Service today clarified the tax treatment of state and local tax refunds arising from any year in which the new limit on the state and local tax (SALT) deduction is in effect.

In Revenue Ruling 2019-11, posted today on IRS.gov, the IRS provided four examples illustrating how the long-standing tax benefit rule interacts with the new SALT limit to determine the portion of any state or local tax refund that must be included on the taxpayer’s federal income tax return. Today’s announcement does not affect state tax refunds received in 2018 for tax returns currently being filed.

The Tax Cuts and Jobs Act (TCJA), enacted in December 2017, limited the itemized deduction for state and local taxes to $5,000 for a married person filing a separate return and $10,000 for all other tax filers. The limit applies to tax years 2018 to 2025.

As in the past, state and local tax refunds are not subject to tax if a taxpayer chose the standard deduction for the year in which the tax was paid. But if a taxpayer itemized deductions for that year on Schedule A, Itemized Deductions, part or all of the refund may be subject to tax, to the extent the taxpayer received a tax benefit from the deduction.

Taxpayers who are impacted by the SALT limit—those taxpayers who itemize deductions and who paid state and local taxes in excess of the SALT limit—may not be required to include the entire state or local tax refund in income in the following year. A key part of that calculation is determining the amount the taxpayer would have deducted had the taxpayer only paid the actual state and local tax liability—that is, no refund and no balance due.

In one example described in the ruling, a single taxpayer itemizes and claims deductions totaling $15,000 on the taxpayer’s 2018 federal income tax return. A total of $12,000 in state and local taxes is listed on the return, including state and local income taxes of $7,000. Because of the limit, however, the taxpayer’s SALT deduction is only $10,000. In 2019, the taxpayer receives a $750 refund of state income taxes paid in 2018, meaning the taxpayer’s actual 2018 state income tax liability was $6,250 ($7,000 paid minus $750 refund). Accordingly, the taxpayer’s 2018 SALT deduction would still have been $10,000, even if it had been figured based on the actual $6,250 state and local income tax liability for 2018. The taxpayer did not receive a tax benefit on the taxpayer’s 2018 federal income tax return from the taxpayer’s overpayment of state income tax in 2018. Thus, the taxpayer is not required to include the taxpayer’s 2019 state income tax refund on the taxpayer’s 2019 return.

See the ruling for details on all four examples.

Today’s ruling has no impact on state or local tax refunds received in 2018 and reportable on 2018 returns taxpayers are filing this season. For information, including worksheets for reporting these refunds, see the 2018 instructions for Form 1040, U.S. Individual Income Tax Return, and Publication 525, Taxable and Nontaxable Income.

For information about other TCJA provisions, visit IRS.gov/taxreform.