Latest Tax News & Updates

Latest Tax News and Updates

Top Tips Every Taxpayer Should Know about Identity Theft

Identity theft often starts outside of the tax administration system when someone’s personal information is unfortunately stolen or lost. Identity thieves may then use a taxpayer’s identity to fraudulently file a tax return and claim a refund. In other cases, the identity thief uses the taxpayer’s personal information in order to get a job. The legitimate taxpayer may be unaware that anything has happened until they file their return later in the filing season and it is discovered that two returns have been filed using the same Social Security number. Here are the top 13 things the IRS wants you to know about identity theft so you can avoid becoming the victim of an identity thief. 1. The IRS does not initiate contact with taxpayers by email to request personal or financial information. The IRS does not send emails stating you are being electronically audited or that you are getting a refund. 2. If you receive a scam e-mail claiming to be from the IRS, forward it to the IRS at phishing@irs.gov. 3. Identity thieves get your personal information by many different means, including: * Stealing your wallet or purse * Posing as someone who needs information about you through a phone call or e-mail * Looking through your trash for personal information * Accessing information you provide to an unsecured Internet site. 4. If you discover a website that claims to be the IRS but does not begin with ‘www.irs.gov,’ forward that link to the IRS at phishing@irs.gov. 5. To learn how to identify a secure website, visit the Federal Trade Commission at www.onguardonline.gov/tools/recognize-secure-site-using-ssl.aspx. 6. If your Social Security number is stolen, another individual may use it to get a job. That person’s employer may report income earned by them to the IRS using your Social Security number, thus making it appear that you did not report all of your income on your tax return. When this occurs, you should contact the IRS to show that the income is not yours. Your record will be updated to reflect only your information. You will also be asked to submit substantiating documentation to authenticate yourself. That information will be used to minimize this occurrence in future years. 7. Your identity may have been stolen if a letter from the IRS indicates more than one tax return was filed for you or the letter states you received wages from an employer you don’t know. If you receive such a letter from the IRS, leading you to believe your identity has been stolen, respond immediately to the name, address or phone number on the IRS notice. 8. If your tax records are not currently affected by identity theft, but you believe you may be at risk due to a lost wallet, questionable credit card activity, or credit report, you need to provide the IRS with proof of your identity. You should submit a copy of your valid government-issued identification – such as a Social Security card, driver’s license, or passport – along with a copy of a police report and/or a completed IRS Form 14039, Identity Theft Affidavit, which should be faxed to the IRS at 978-684-4542. Please be sure to write clearly. As an option, you can also contact the IRS Identity Protection Specialized Unit, toll-free at 800-908-4490. You should also follow FTC guidance for reporting identity theft at www.ftc.gov/idtheft. 9. Show your Social Security card to your employer when you start a job or to your financial institution for tax reporting purposes. Do not routinely carry your card or other documents that display your Social Security number. 10. For more information about identity theft – including information about how to report identity theft, phishing and related fraudulent activity – visit the IRS Identity Theft and Your Tax Records Page, which you can find by searching “Identity Theft” on the IRS.gov home page. 11. IRS impersonation schemes flourish during tax season and can take the form of e-mail, phone websites, even tweets. Scammers may also use a phone or fax to reach their victims. If you receive a paper letter or notice via mail claiming to be the IRS but you suspect it is a scam, contact the IRS at http://www.irs.gov/contact/index.html to determine if it is a legitimate IRS notice or letter. If it is a legitimate IRS notice or letter, reply if needed. If the caller or party that sent the paper letter is not legitimate, contact the Treasury Inspector General for Tax Administration at 1-800-366-4484. You may also fax the notice/letter you received, plus any related or supporting information, to TIGTA. Note that this is not a toll-free FAX number 1-202-927-7018. 12. While preparing your tax return for electronic filing, make sure to use a strong password to protect the data file. Once your return has been e-filed, burn the file to a CD or flash drive and remove the personal information from your hard drive. Store the CD or flash drive in a safe place, such as a lock box or safe. If working with an accountant, you should ask them what measures they take to protect your information. 13. If you have information about the identity thief that impacted your personal information negatively, file an online complaint with the Internet Crime Complaint Center (IC3) at www.ic3.gov. The IC3 gives victims of cyber crime a convenient and easy-to-use reporting mechanism that alerts authorities of suspected criminal or civil violations. IC3 sends every complaint to one or more law enforcement or regulatory agencies that have jurisdiction over the matter.

Stay Connected and Up To Date Daily

IRS not only features and App for your Smart Phone, you may now follow them on Twitter, Facebook, and You Tube. For daily updates and latest tax laws. Visit their website for more details at www.irs.gov

Tax Problem Alerts and Scams

Problem Alerts EFTPS Scam Aug. 20, 2010 The IRS recently became aware of a fraudulent scheme targeting Electronic Federal Tax Payment System users. The scheme uses an e-mail that claims that your tax payment was rejected and directs you to a website for additional information. The website contains malware that will attempt to infect your computer. The IRS does not initiate taxpayer communications through e-mail. If you receive a message claiming to be from the IRS or EFTPS, please: Do not reply to the sender, access links on the site or submit any information to them. Report and identify this or other phishing, e-mail scams and bogus IRS websites by forwarding the e-mail or URL information to the IRS at phishing@irs.gov. EFTPS is a tax payment system provided free by the U.S. Department of Treasury that allows you to pay federal taxes electronically via the Internet or phone 24/7. Visit EFTPS to enroll. Form 1099-OID Fraud Oct. 10, 2008 The IRS cautions taxpayers to avoid getting caught up in a new tax fraud disguised as a debt payment option for credit cards or mortgage debt. The fraud is also marketed as a way to reduce taxes or pay outstanding tax liabilities. It involves the filing of Form 1099-OID, Original Issue Discount, and/or bogus financial instruments such as bonded promissory notes or sight drafts. This fraud has evolved from an earlier frivolous argument that a “strawman” bank account has been created at the Treasury Department for each U.S. citizen, and that individuals could use such “strawman” accounts to pay debts and claim withholding credits. The IRS addresses the “strawman” argument in Revenue Ruling 2005–21 and Revenue Ruling 2004-31, and discredits the use of this position for income tax purposes. Moreover, the courts that have reviewed the “strawman” argument and other similar arguments have found them frivolous. For more information on frivolous schemes, see The Truth About Frivolous Arguments. The IRS Warns of Scam e-Mails or Phone Calls May 16, 2008 The IRS warns taxpayers to be on the alert for e-mails and phone calls they may receive which claim to come from the IRS or other federal agency and which mention their tax refund or economic stimulus payment. These are almost certainly a scam whose purpose is to obtain personal and financial information — such as name, Social Security number, bank account and credit card or even PIN numbers — from taxpayers which can be used by the scammers to commit identity theft. The e-mails and calls usually state that the IRS needs the information to process a refund or stimulus payment or deposit it into the taxpayer's bank account. The e-mails often contain links or attachments to what appears to be the IRS Web site or an IRS "refund application form." However genuine in appearance, these phonies are designed to elicit the information the scammers are looking for. The IRS does not send taxpayers e-mails about their tax accounts. Additionally, the only way to get a tax refund or stimulus payment, or to arrange for a direct deposit, is to file a tax return. For more information on consumer scams, see Suspicious e-Mails and Identity Theft.

IRS Offers Several Reasons to File Your Tax Return Electronically

IRS e-file: It’s safe. It’s easy. It’s time. Most taxpayers—nearly 80 percent-- file electronically. If you haven’t tried it, now is the time! The IRS has processed more than 1 billion individual tax returns safely and securely since the nationwide debut of electronic filing in 1990. In fact, last year, 112 million people – 78 percent of all individual taxpayers – used IRS e-file to electronically transmit their tax returns to the IRS. The number of people who use a paper tax return or who mail a tax return dwindles each year – and for good reason . 1. Safety and security. E-file providers must meet strict guidelines and provide the best in encryption technology. You receive an acknowledgement within 48 hours that the IRS received your return. If the IRS rejects the return, the receipt will explain why so you can quickly correct and resubmit. 2. Faster refunds. An e-filed tax return normally means a fast refund. If you combine e-file and direct deposit the IRS can typically issue your refund in as few as 10 days. About three of four taxpayers receive a refund and last year the average refund was approximately $2,900. 3. More payment options. If you e-file you can file early and set an automatic payment withdrawal date for any date on or before the April due date. You may also pay by paper check or even by credit card. 4. It’s easy. You can e-file through your tax preparer, use commercial tax preparation software or through Free File, the free tax preparation and e-filing service available exclusively at www.irs.gov. Starting in January 2012, any paid preparer or firm that reasonably anticipates preparing and filing 11 or more Form 1040 series returns, Form 1041 returns or a combination of both generally must use IRS e-file. These tax return preparers must be authorized IRS e-file providers so they can transmit tax returns electronically. More information for paid preparers is available at www.irs.gov

Six Important Facts about Dependents and Exemptions

Even though each individual tax return is different, some tax rules affect every person who may have to file a federal income tax return. These rules include dependents and exemptions. The IRS has six important facts about dependents and exemptions that will help you file your 2011 tax return. 1. Exemptions reduce your taxable income. There are two types of exemptions: personal exemptions and exemptions for dependents. For each exemption you can deduct $3,700 on your 2011 tax return. 2. Your spouse is never considered your dependent. On a joint return, you may claim one exemption for yourself and one for your spouse. If you’re filing a separate return, you may claim the exemption for your spouse only if they had no gross income, are not filing a joint return, and were not the dependent of another taxpayer. 3. Exemptions for dependents. You generally can take an exemption for each of your dependents. A dependent is your qualifying child or qualifying relative. You must list the Social Security number of any dependent for whom you claim an exemption. 4. If someone else claims you as a dependent, you may still be required to file your own tax return. Whether you must file a return depends on several factors including the amount of your unearned, earned or gross income, your marital status and any special taxes you owe. 5. If you are a dependent, you may not claim an exemption. If someone else – such as your parent – claims you as a dependent, you may not claim your personal exemption on your own tax return. 6. Some people cannot be claimed as your dependent. Generally, you may not claim a married person as a dependent if they file a joint return with their spouse. Also, to claim someone as a dependent, that person must be a U.S. citizen, U.S. resident alien, U.S. national or resident of Canada or Mexico for some part of the year. There is an exception to this rule for certain adopted children. See IRS Publication 501, Exemptions, Standard Deduction, and Filing Information for additional tests to determine who can be claimed as a dependent. For more information on exemptions, dependents and whether you or your dependent needs to file a tax return, see IRS Publication 501. The publication is available at www.irs.gov or can be ordered by calling 800-TAX-FORM (800-829-3676). You can also use the Interactive Tax Assistant at www.irs.gov to determine who you can claim as a dependent and how much you can deduct for each exemption you claim. The ITA tool is a tax law resource on the IRS website that takes you through a series of questions and provides you with responses to tax law questions. Links: IRS Publication 501, Exemptions, Standard Deduction, and Filing Information

Affordable Care Act Tax Provisions

The Affordable Care Act was enacted on March 23, 2010. It contains some tax provisions that became effective in 2010 or 2011, and more that will be implemented during the next several years. The following is a list of provisions now in effect; additional information will be added to this page as it becomes available. Health Insurance Premium Tax Credit Starting in 2014, individuals and families can take a new premium tax credit to help them afford health insurance coverage purchased through an Affordable Insurance Exchange. Exchanges will operate in every state and the District of Columbia. The premium tax credit is refundable so taxpayers who have little or no income tax liability can still benefit. The credit also can be paid in advance to a taxpayer’s insurance company to help cover the cost of premiums. On Aug.12, 2011, the IRS issued proposed regulations that describe who will be eligible to receive the premium tax credit and how to compute the credit. The proposed regulations also describe how to reconcile any advance credit payments for health benefits purchased through an Exchange with the final credit amount. The proposed regulations provide numerous examples, solicit written comments and provide a notice of public hearing. Comments must be submitted by Oct. 31, 2011. The portion of the law that will allow eligible individuals to use tax credits to purchase health coverage through an Exchange is not effective until 2014. Exchanges will offer individuals a choice of health plans that meet certain benefit and cost standards. The Department of Health and Human Services (HHS) administers the requirements for the Exchanges and the health plans they offer. Additional information about the Exchange can be found at www.healthcare.gov. Small Business Health Care Tax Credit This new credit helps small businesses and small tax-exempt organizations afford the cost of covering their employees and is specifically targeted for those with low- and moderate-income workers. The credit is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have. In general, the credit is available to small employers that pay at least half the cost of single coverage for their employees. Learn more by browsing our page on the Small Business Health Care Tax Credit for Small Employers and our news release. Changes to Flexible Spending Arrangements Effective Jan. 1, 2011, the cost of an over-the-counter medicine or drug cannot be reimbursed from Flexible Spending Arrangements or health reimbursement arrangements unless a prescription is obtained. The change does not affect insulin, even if purchased without a prescription, or other health care expenses such as medical devices, eye glasses, contact lenses, co-pays and deductibles. The new standard applies only to purchases made on or after Jan. 1, 2011, so claims for medicines or drugs purchased without a prescription in 2010 can still be reimbursed in 2011, if allowed by the employer’s plan. A similar rule goes into effect on Jan. 1, 2011 for Health Savings Accounts (HSAs), and Archer Medical Savings Accounts (Archer MSAs). Employers and employees should take these changes into account as they make health benefit decisions for 2011. For more information, see news release IR-2010-95, Notice 2010-59, Revenue Ruling 2010-23 and our questions and answers. FSA and HRA participants can continue using debit cards to buy prescribed over-the-counter medicines, if requirements are met. For more information, see news release IR-2010-128 and Notice 2011-5. IRS partners can spread the word to their clients with the help of a Health Plan Changes flyer and a drop-in article, Does your Healthcare Program need a checkup? Health Coverage for Older Children Health coverage for an employee's children under 27 years of age is now generally tax-free to the employee. This expanded health care tax benefit applies to various work place and retiree health plans. These changes immediately allow employers with cafeteria plans –– plans that allow employees to choose from a menu of tax-free benefit options and cash or taxable benefits –– to permit employees to begin making pre-tax contributions to pay for this expanded benefit. This also applies to self-employed individuals who qualify for the self-employed health insurance deduction on their federal income tax return. Learn more by reading our news release or this notice. Excise Tax on Indoor Tanning Services — First Quarterly Payment Was Due Nov. 1, 2010 A 10-percent excise tax on indoor UV tanning services went into effect on July 1, 2010. The first payment of the tax was due Monday, Nov. 1. Payments are made along with Form 720, Quarterly Federal Excise Tax Return. The tax doesn't apply to phototherapy services performed by a licensed medical professional on his or her premises. There's also an exception for certain physical fitness facilities that offer tanning as an incidental service to members without a separately identifiable fee. For more information on the tax and how it will be administered, see the Indoor Tanning Services Tax Center. Employer-Provided Health Coverage — Not Taxable; Reporting is Voluntary for All Employers for 2011 and Small Employers for 2012 Starting in tax year 2011, the Affordable Care Act requires employers to report the cost of coverage under an employer-sponsored group health plan. To give employers more time to update their payroll systems, Notice 2010-69, issued fall 2010, made this requirement optional for all employers in 2011. IRS Notice 2011-28 provided further relief for smaller employers filing fewer than 250 W-2 forms by making the reporting requirement optional for them at least for 2012 and continuing this optional treatment for smaller employers until further guidance is issued. Notice 2012-9, issued Jan. 3, 2012, restates and clarifies the guidance provided in Notice 2011-28, including the information on how to report, what coverage to include and how to determine the cost of the coverage. The 2011 Form W-2 is available for viewing on IRS.gov. This is the W-2 that most employees will receive in early 2012. The form includes the codes that employers may use to report the cost of coverage under an employer-sponsored group health plan. This reporting is for informational purposes only, to show employees the value of their health care benefits so they can be more informed consumers. The amount reported does not affect tax liability, as the value of the employer contribution to health coverage continues to be excludible from an employee's income, and it is not taxable. For more information, see the 2011 Form W-2, IR-2011-31, Notice 2012-9 (restating and clarifying Notice 2011-28), Notice 2010-69, Notice 2011-28, frequently asked questions and our multimedia products — an IRS YouTube video and a webinar, Reporting of Employer Healthcare Coverage on Form W-2. Adoption Credit The Affordable Care Act raises the maximum adoption credit to $13,360 per child, up from $13,170 in 2010 and $12,150 in 2009. The adoption tax credit is refundable for tax year 2011, meaning that eligible taxpayers can get it even if they owe no tax for that year. In general, the credit is based on the reasonable and necessary expenses related to a legal adoption, including adoption fees, court costs, attorney’s fees and travel expenses. Income limits and other special rules apply. In addition to attaching Form 8839, Qualified Adoption Expenses (see instructions), eligible taxpayers must include with their 2011 paper tax return one or more adoption-related documents to avoid delaying their refund. Taxpayers may also be asked, after filing their returns, to substantiate any qualified adoption expenses they paid. For other information, see our news release, tax tip, questions and answers, flyer, Notice 2010-66, Revenue Procedure 2010-31, Revenue Procedure 2010-35 and Revenue Procedure 2011-52. Medicare Shared Savings Program The Affordable Care Act establishes a Medicare shared savings program (MSSP) which encourages Accountable Care Organizations (ACOs) to facilitate cooperation among providers to improve the quality of care provided to Medicare beneficiaries and reduce unnecessary costs. More information can be found in Notice 2011-20, which solicits written comments regarding what additional guidance, if any, is needed for tax-exempt organizations participating in the MSSP through an ACO. This guidance also addresses the participation of tax-exempt organizations in non-MSSP activities through ACOs. Additional information on the MSSP is available on the Department of Health and Human Services website. The Centers for Medicare and Medicaid Services has released final regulations describing the rules for the Shared Savings Program and accountable care organizations. Fact Sheet 2011-11 confirms that Notice 2011-20 continues to reflect IRS expectations regarding the Shared Savings Program and ACOs, and provides additional information for charitable organizations that may wish to participate. Qualified Therapeutic Discovery Project Program This program was designed to provide tax credits and grants to small firms that show significant potential to produce new and cost-saving therapies, support U.S. jobs and increase U.S. competitiveness. Applicants were required to have their research projects certified as eligible for the credit or grant. IRS guidance describes the application process. Submission of certification applications began June 21, 2010, and applications had to be postmarked no later than July 21, 2010, to be considered for the program. Applications that were postmarked by July 21, 2010, were reviewed by both the Department of Health and Human Services (HHS) and the IRS. All applicants were notified by letter dated October 29, 2010, advising whether or not the application for certification was approved. For those applications that were approved, the letter also provided the amount of the grant to be awarded or the tax credit the applicant was eligible to take. The IRS published the names of the applicants whose projects were approved as required by law. Listings of results are available by state. Learn more by reading the IRS news release, the news release issued by the U.S. Department of the Treasury, the page on the HHS website and our questions and answers. Group Health Plan Requirements The Affordable Care Act establishes a number of new requirements for group health plans. Interim guidance on changes to the nondiscrimination requirements for group health plans can be found in Notice 2011-1, which provides that employers will not be subject to penalties until after additional guidance is issued. Other information on requirements is available on the websites of the Departments of Health and Human Services and Labor and in additional guidance. Tax-Exempt 501(c)(29) Qualified Nonprofit Health Insurance Issuers The Affordable Care Act requires the Department of Health and Human Services (HHS) to establish the Consumer Operated and Oriented Plan program (CO-OP program). It also provides for tax exemption under section 501(c)(29) for recipients of CO-OP grants and loans that meet additional requirements. IRS Notice 2011-23 outlines the requirements for tax exemption under under section 501(c)(29) and solicits written comments regarding these requirements as well as the application process. Comments must be submitted by May 27, 2011. An overview of the CO-OP program is available on the Department of Health and Human Services website. Medicare Part D Coverage Gap “donut hole” Rebate The Affordable Care Act provides a one-time $250 rebate in 2010 to assist Medicare Part D recipients who have reached their Medicare drug plan’s coverage gap. This payment is not taxable. This payment is not made by the IRS. More information can be found at www.medicare.gov. Additional Requirements for Tax-Exempt Hospitals The Affordable Care Act added new requirements that tax-exempt hospitals must meet to maintain their tax-exempt status. (See Notice 2010-39 and Notice 2011-52.) Form 990, Schedule H, for tax year 2010 was revised to include a new Part V, Section B, to gather information on hospitals' compliance with the new requirements and on related policies and practices. To give the hospital community time to familiarize itself with the types of information the IRS is requesting, Part V, Section B of Schedule H was made optional for the 2010 tax year (see Announcement 2011-37). The IRS considered public input and made revisions to Part V, Section B for tax year 2011 (see the draft Form 990, Schedule H and instructions). Hospitals are required to complete all parts and sections of Schedule H for tax year 2011, with the exception of lines 1-7 of Part V, Section B, which relate to community health needs assessments (see Notice 2012-4). These lines will be optional for 2011. The IRS continues to welcome public input on the new tax-exempt hospital requirements of the Affordable Care Act. Annual Fee on Branded Prescription Pharmaceutical Manufacturers and Importers The Affordable Care Act created an annual fee payable beginning in 2011 by certain manufacturers and importers of brand name pharmaceuticals. On Aug. 15, 2011, the IRS issued temporary regulations and a notice of proposed rulemaking on the branded prescription drug fee. The temporary regulations describe the rules related to the fee, including how it is computed and how it is paid. The notice of proposed rulemaking solicits comments regarding these rules. On Nov. 4, 2011, the IRS issued Notice 2011-92, providing guidance on the branded prescription drug fee for the 2012 fee year. A covered entity may choose to submit Form 8947, Report of Branded Prescription Drug Information, by Dec. 15, 2011, in accordance with the form instructions. For additional information and guidance previously issued, see Notice 2010-71, Notice 2011-9, Revenue Procedure 2011-24 and Notice 2011-46. Modification of Section 833 Treatment of Certain Health Organizations The Affordable Care Act amended section 833 of the Code, which provides special rules for the taxation of Blue Cross and Blue Shield organizations and certain other organizations that provide health insurance. IRS Notice 2010-79 provides transitional relief and interim guidance on the computation of an organization’s taxpayer’s Medical Loss Ratio for purposes of section 833, the consequences of nonapplication and changes in accounting method. Notice 2011-04 provides additional information and the procedures for qualifying organizations to obtain automatic consent to change its method of accounting for unearned premiums. Notice 2011-51 extends the transitional relief and interim guidance provided in Notice 2010-79 for another year to any taxable year beginning in 2010 and the first taxable year beginning after Dec. 31, 2010. Limitation on Deduction for Compensation Paid by Certain Health Insurance Providers The Affordable Care Act amended section 162(m) of the Code to limit the compensation deduction available to certain health insurance providers. The amendment goes into effect for taxable years beginning after Dec. 31, 2012, but may affect deferred compensation attributable to services performed in a taxable year beginning after Dec. 31, 2009. Initial guidance on the application of this provision can be found in Notice 2011-2, which also solicits comments on the application of the amended provision. Employer Shared Responsibility Payment Starting in 2014, certain employers must offer health coverage to their full-time employees or a shared responsibility payment may apply. More information may be found in news releases IR-2011-92 and IR-2011-50 and Notices 2011-73 and 2011-36. Patient-Centered Outcomes Research Institute The Affordable Care Act establishes the Patient-Centered Outcomes Research Institute and that the institute be funded by the Patient-Centered Outcomes Research Trust Fund. The institute will assist patients, clinicians, purchasers, and policy-makers in making informed health decisions by advancing clinical effectiveness research. The Trust Fund is to be funded in part by fees to be paid by issuers of health insurance policies and sponsors of self-insured health plans. IRS Notice 2011-35 requests comments regarding how the fees to fund the institute should be calculated and paid, including several possible rules and safe harbors. For More Information For tips, fact sheets, questions and answers, videos and more, see our Affordable Care Act of 2010: News Releases, Multimedia and Legal Guidance page.

Eight Facts to Help Determine Your Correct Filing Status

Determining your filing status is one of the first steps to filing your federal income tax return. There are five filing statuses: Single, Married Filing Jointly, Married Filing Separately, Head of Household and Qualifying Widow(er) with Dependent Child. Your filing status is used to determine your filing requirements, standard deduction, eligibility for certain credits and deductions, and your correct tax. Some people may qualify for more than one filing status. Here are eight facts about filing status that the IRS wants you to know so you can choose the best option for your situation. Your marital status on the last day of the year determines your marital status for the entire year. If more than one filing status applies to you, choose the one that gives you the lowest tax obligation. Single filing status generally applies to anyone who is unmarried, divorced or legally separated according to state law. A married couple may file a joint return together. The couple’s filing status would be Married Filing Jointly. If your spouse died during the year and you did not remarry during 2011, usually you may still file a joint return with that spouse for the year of death. A married couple may elect to file their returns separately. Each person’s filing status would generally be Married Filing Separately. Head of Household generally applies to taxpayers who are unmarried. You must also have paid more than half the cost of maintaining a home for you and a qualifying person to qualify for this filing status. You may be able to choose Qualifying Widow(er) with Dependent Child as your filing status if your spouse died during 2009 or 2010, you have a dependent child, have not remarried and you meet certain other conditions. There’s much more information about determining your filing status in IRS Publication 501, Exemptions, Standard Deduction, and Filing Information. Publication 501 is available at www.irs.gov or by calling 800-TAX-FORM (800-829-3676). You can also use the Interactive Tax Assistant on the IRS website to determine your filing status. The ITA tool is a tax law resource on the IRS website that takes you through a series of questions and provides you with responses to tax law questions. Link: IRS Publication 501, Exemptions, Standard Deduction, and Filing Information

Do I Need to File a Tax Return This Year?

You are required to file a federal income tax return if your income is above a certain level, which varies depending on your filing status, age and the type of income you receive. However, the Internal Revenue Service reminds taxpayers that some people should file even if they aren't required to because they may get a refund if they had taxes withheld or they may qualify for refundable credits. To find out if you need to file, check the Individuals section of the IRS website at www.irs.gov or consult the instructions for Form 1040, 1040A or 1040EZ for specific details that may help you determine if you need to file a tax return with the IRS this year. You can also use the Interactive Tax Assistant available on the IRS website. The ITA tool is a tax law resource that takes you through a series of questions and provides you with responses to tax law questions. Even if you don’t have to file for 2011, here are six reasons why you may want to: Federal Income Tax Withheld You should file to get money back if your employer withheld federal income tax from your pay, you made estimated tax payments, or had a prior year overpayment applied to this year’s tax. Earned Income Tax Credit You may qualify for EITC if you worked, but did not earn a lot of money. EITC is a refundable tax credit; which means you could qualify for a tax refund. To get the credit you must file a return and claim it. Additional Child Tax Credit This refundable credit may be available if you have at least one qualifying child and you did not get the full amount of the Child Tax Credit. American Opportunity Credit Students in their first four years of postsecondary education may qualify for as much as $2,500 through this credit. Forty percent of the credit is refundable so even those who owe no tax can get up to $1,000 of the credit as cash back for each eligible student. Adoption Credit You may be able to claim a refundable tax credit for qualified expenses you paid to adopt an eligible child. Health Coverage Tax Credit Certain individuals who are receiving Trade Adjustment Assistance, Reemployment Trade Adjustment Assistance, Alternative Trade Adjustment Assistance or pension benefit payments from the Pension Benefit Guaranty Corporation, may be eligible for a 2011 Health Coverage Tax Credit. Eligible individuals can claim a significant portion of their payments made for qualified health insurance premiums. For more information about filing requirements and your eligibility to receive tax credits, visit www.irs.gov.

IRS Offers Top 10 Tax-Time Tips

The income tax filing season has begun and important tax documents should be arriving in your mailbox. Even though your return is not due until April, you can make tax time easier on yourself with an early start. Here are the Internal Revenue Service’s top 10 tips to ensure a smooth tax-filing process. 1. Gather your records Round up any documents you’ll need when filing your taxes: receipts, canceled checks and other documents that support income or deductions you’re claiming on your return. 2. Be on the lookout W-2s and 1099s will be coming soon; you’ll need these to file your tax return. 3. Have a question? Use the Interactive Tax Assistant available on the IRS website to find answers to your tax questions about credits, deductions, general filing questions and more. 4. Use Free File Let Free File do the hard work for you with brand-name tax software or online fillable forms. It's available exclusively at www.irs.gov. Everyone can find an option to prepare their tax return and e-file it for free. If you made $57,000 or less, you qualify to use free tax software offered through a private-public partnership with manufacturers.　If you made more or are comfortable preparing your own tax return, there's Free File Fillable Forms, the electronic versions of IRS paper forms. Visit www.irs.gov/freefile to review your options. 5. Try IRS e-file IRS e-file is the　safe, easy and most common way to file a tax return.　Last year, 79 percent of taxpayers - 106 million people - used IRS e-file. Many tax preparers are now required to use e-file. If you owe taxes, you have payment options to file immediately and pay by the tax deadline. Best of all, the IRS issues refunds to 98 percent of electronic filers by direct deposit within 14 days, if there are no problems, and some may be issued in as few as 10 days. 6. Consider other filing options There are many options for filing your tax return. You can prepare it yourself or go to a tax preparer. You may be eligible for free face-to-face help at a volunteer site. Give yourself time to weigh all the options and find the one that best suits your needs. 7. Consider direct deposit If you elect to have your refund directly deposited into your bank account, you’ll receive it faster than a paper check in the mail. 8. Visit the official IRS website often The IRS website at www.irs.gov is a great place to find everything you need to file your tax return: forms, publications, tips, answers to frequently asked questions and updates on tax law changes. 9. Remember this number: 17 Check out IRS Publication 17, Your Federal Income Tax, on the IRS website. It’s a comprehensive resource for taxpayers, highlighting everything you’ll need to know when filing your return. 10. Review! Review! Review! Don’t rush. We all make mistakes when we rush. Mistakes slow down the processing of your return. Be sure to double check all the Social Security numbers and math calculations on your return as these are the most common errors. Don’t panic! If you run into a problem, remember the IRS is here to help. Start with www.irs.gov.

When Can I Expect My Refund?

The Internal Revenue Service reminds taxpayers to keep in mind that many variables can affect the speed of a tax refund. Using e-file with direct deposit remains the fastest option for taxpayers. Following technology improvements, the IRS will issue refunds to more taxpayers in as few as 10 days this year for those who e-file and select direct deposit. Overall, the IRS issues the vast majority (more than 9 out of 10) of all refunds — whether filed electronically or on paper — in 21 days or less. Although refund speed will generally increase overall, the IRS emphasizes these are “best-case scenarios,” where tax returns are filed accurately and no corrections or review are required. In addition, the IRS also cautions taxpayers it is increasing scrutiny of tax returns for signs of fraud. This means some tax refunds will face additional screening and review before being released, which will add time before the refund is delivered. There are some simple ways for people to help ensure they receive their refund quickly. E-file remains the best way to ensure an error-free return. Taxpayers can help ensure their refund arrives as expected by submitting an error free return. Use the correct Social Security number or taxpayer identification number, the correct address, and the correct bank and routing number if electing direct deposit. You don’t need to wait on the phone to check on the status of your refund. The fastest and best way to get information on your refund is through the “Where's My Refund?” tool on IRS.gov and the IRS2Go phone app. Information about refund status is available about three days after the IRS acknowledges receipt of your e-filed return, or four weeks after mailing a paper return. The free IRS2Go application is available at the Apple App Store and the Android Marketplace. When checking the status of your refund through these IRS online tools, you will need to have your federal tax return handy. To get your personalized refund information you must enter the following information on the safe and secure IRS.gov website or phone app: Your Social Security Number or Individual Taxpayer Identification Number; Your filing status, which will be Single, Married Filing Joint Return, Married Filing Separate Return, Head of Household or Qualifying Widow(er); and Exact whole dollar refund amount shown on your tax return. Once you’ve entered your personal information, and depending on the status of your refund, our online tool may provide several pieces of information, including acknowledgement that your return was received and is being processed, the mailing or payment issuance date of your refund, and possibly a notification that the IRS could not deliver your refund due to an incorrect address. The IRS must review tax returns to prevent fraudulent and erroneous refunds, while balancing customer service, fast refunds and protecting against fraud. If the IRS needs additional information to process your return, we will contact you by mail. You don’t need to call and wait on the phone. Taxpayers are encouraged not to tie major financial decisions to the receipt of their tax refund by a specific day, but please know that the IRS works hard to issue proper refunds as quickly as possible.

IRS Creates an App for your Smartphones

IRS has created an App for your Smart Phone, this new App is safe and secure. You can check the status of your refund on your mobile device.

Get Ready for the Tax Filing Season with IRS Social Media

The Internal Revenue Service uses social media tools and platforms to share the latest information on tax changes, initiatives, products and services. These social media platforms include the IRS2Go phone application, YouTube, Twitter, Facebook and iTunes. A listing is available on IRS.gov. IRS2Go The IRS plans to offer even more features for its IRS2Go phone app for the 2012 filing season. The app is available for the iPhone and Android, and it’s free. Stay tuned for future updates. YouTube The IRS has short and informative YouTube videos on tax related topics in English, Spanish and American Sign Language (ASL). The channels have received nearly 2.2 million views. The main English channel is the fourth most-viewed federal government YouTube channel. IRS Videos — http://www.youtube.com/irsvideos ASL Videos — http://www.youtube.com/IRSvideosASL Multilingual Videos — http://www.youtube.com/IRSvideosMultilingua Twitter IRS tweets include various tax-related announcements, news for tax professionals and hiring initiatives: @IRSnews — http://twitter.com/irsnews IRS news and helpful information for the public, the press and practitioners @IRStaxpros — http://twitter.com/irstaxpros IRS news and guidance for tax professionals @IRSenEspanol — http://twitter.com/irsenespanol Información, Comunicados de Prensa y Noticias en Español del IRS (News and information in Spanish from IRS) @RecruitmentIRS — http://twitter.com/recruitmentirs IRS Human Capital Office @YourVoiceatIRS — http://twitter.com/yourvoiceatirs Taxpayer Advocate Service Facebook The IRS has four Facebook pages that focus on general taxpayers, return preparers, recruitment and taxpayer advocate issues: IRS IRS Return Preparer Office IRS Recruitment Taxpayer Advocate iTunes The IRS creates audio files for use as podcasts in English and Spanish. Each short audio recording provides information on one tax related topic. The audio files and their transcripts can be found in the Multimedia Center on IRS.gov. These files are also available as podcasts on iTunes. Widgets Widgets are tools that can be placed on websites, blogs or social media networks to direct others to IRS.gov for information. The IRS has developed a variety of widgets that feature the latest tax initiatives and programs. These widgets can be found on Marketing Express, the marketing site that allows IRS partners and tax preparers to customize their IRS communications products.

Free Tax Help Available From the IRS

The Internal Revenue Service offers taxpayers a wide range of free tax help services, many of them available online or by smartphone, designed to help people easily and quickly meet their tax-filing and tax-payment responsibilities. IRS.gov Better Than Ever The IRS website, www.IRS.gov, provides answers to many tax questions in a user-friendly format. Visitors now have greater ease navigating through the site with a new front page and other newly redesigned pages. The IRS plans to continue making improvements in the months ahead. Taxpayers can start by visiting 1040 Central, which has links to forms and instructions and is also the place to find important updates and information regarding tax return preparation and filing. After 1040 Central, take a look at the Online Services section, which provides access to the following useful applications: Free File –– Everyone can find an option to prepare and e-file their tax returns for free through Free File. Taxpayers who earned $57,000 or less in 2011 qualify for brand name tax software free of charge through a private-public partnership with manufacturers. Free File Fillable Forms, the electronic version of IRS paper forms, are also available to all taxpayers comfortable preparing their own returns. Free File is available only through IRS.gov. Interactive Tax Assistant –– Taxpayers learn about credits, deductions and general filing questions. EITC Assistant –– Individuals can find out if they qualify for the Earned Income Tax Credit, a popular tax benefit that aids millions of low-and moderate-income workers and working families. Electronic Federal Tax Payment System –– This site offers individuals and businesses a secure way to pay their federal taxes online, free of charge. Online Payment Agreement –– For those who cannot pay their tax liabilities by April 17, 2012, this site offers eligible taxpayers a quick and easy way to set up an installment agreement with the IRS in a matter of minutes. IRS Withholding Calculator –– Helps taxpayers determine the right amount of tax to take out of their paychecks. After they file, taxpayers can check their 2011 refund status online using “ Where's My Refund?” E-filers can check their refund status 72 hours after receiving an IRS acknowledgement of the acceptance of a tax return. Paper filers should wait three or four weeks after mailing their tax returns before having a refund status update. To use the “Where’s My Refund?” tool, taxpayers will need information that appears on their tax returns. Some taxpayers may receive directions to resolve refund-related problems. “Where's My Refund?” is also available by calling 800-829-1954. The IRS advises taxpayers to ensure they visit the authentic IRS website by typing www.IRS.gov into their browsers. The official site does not end in .com, .net, .org or any designation other than .gov. Volunteer Tax Preparers Free tax preparation is available through more than 12,000 Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) sites in communities across the nation. Taxpayers should check for the VITA site location closest to them by calling 800-906-9887. Taxpayers may also call the AARP Tax-Aide Program — the IRS’s largest TCE partner — at 888-227-7669 to find a convenient location. Face-to-Face and Virtual Services at IRS Offices IRS Taxpayer Assistance Centers are available to people who believe their tax issues cannot be resolved online or over the telephone. In 37 centers, kiosks are available for individuals to access IRS.gov with the help of an IRS facilitator. New this year, the IRS provides assistance virtually through video conferencing technology in 12 locations. This is a quick and effective, self-service option to access services such as: Help with letters, notices and levies on wages or bank accounts Adjustments to tax account information or payments Payment Arrangements Application for Taxpayer Assistance Order (ATAO) Tax Forms Taxpayer Assistance Centers and virtual service locations can be found by clicking on Contact My Local Office under the ‘Individuals’ tab on IRS.gov. Check the “Services Provided” link prior to visiting the IRS. A message detailing operating hours and addresses is also available by calling the number in local phone directories. Tax Forms and Publications IRS tax forms and publications are available for free download 24 hours a day at IRS.gov. IRS Taxpayer Assistance Centers also have tax publications, forms and instructions. Alternatively, taxpayers may place orders by calling the IRS at 800-829-3676. Taxpayers can also pick up some of the most-requested forms, instructions and publications at many IRS offices, public buildings and local businesses. Low Income Taxpayer Clinics Low Income Taxpayer Clinics (LITCs) are independent from the IRS. Some clinics serve individuals whose income is below a certain level and who need to resolve a tax problem. These clinics provide professional representation before the IRS or in court on audits, appeals, tax collection disputes, and other issues for free or for a small fee. Some clinics can provide information about taxpayer rights and responsibilities in many different languages for individuals who speak English as a second language. For more information and to find a clinic, visit the LITC page on www.irs.gov/advocate or Publication 4134, Low Income Taxpayer Clinic List. This publication is also available by calling 800-829-3676 or at your local IRS office. Help in Other Languages and Formats The Multilingual Gateway on IRS.gov contains federal tax information in Chinese, Korean, Russian, Spanish and Vietnamese. For access to content in Spanish, taxpayers can also click on ‘Español’ from the IRS website, where in addition to tax information for individuals and businesses, taxpayers will find IRS Free File options in Spanish, useful tools like ¿Dónde está mi reembolso? and Asistente EITC or IRS news updates through Noticias en Español. IRS Taxpayer Assistance Centers provide help to taxpayers in more than 150 languages through interpretation services. Information about credits, deductions and tax law changes is available on YouTube through the IRSvideos, Spanish at IRSvideosmultilingua and in American Sign Language at IRSvideosASL. A variety of Braille materials can be downloaded from IRS.gov in .brf format that can be sent directly to an embosser for high quality Braille output. Braille materials are also available for order by calling the IRS at 800-829-3676 and for pick-up at certain libraries. Telephone The IRS has several toll-free phone lines that taxpayers may also use for help. Taxpayers may order current and prior year forms, instructions and publications by calling 800-829-3676. To find answers to tax questions, taxpayers may call 800-829-1040 for individual issues or 800-829-4933 for business issues. Operating hours are Monday through Friday 7:00 a.m. to 7:00 p.m. local time. Taxpayers can also get information with little or no wait time by calling TeleTax at 800-829-4477. This service offers pre-recorded messages covering various tax topics. TTY/TDD users may call 800-829-4059 to ask tax questions or order forms and publications. Taxpayer Advocate Service The Taxpayer Advocate Service (TAS) helps taxpayers whose problems with the IRS are causing financial difficulties; who have tried but haven’t been able to resolve their problems with the IRS; and those who believe an IRS system or procedure is not working as it should. Taxpayers who believe they are eligible for TAS assistance can call the TAS toll-free line 877-777-4778 or for more information, go to www.irs.gov/advocate. Other Resources The IRS also offers: Tax Tips –– Brief, to-the-point messages released daily during the filing season that cover topics such as common errors and extension requests. IRS2GO –– The IRS smartphone app, which gives taxpayers an on-the-go way to check on their federal tax refund, get tax help and more. IRSvideos –– Information about credits, deductions and tax law changes is available on the IRS YouTube channel. The IRS also has YouTube videos in American Sign Language ( IRSvideosASL) and Spanish ( IRSvideosmultilingua). @IRSnews and @IRSenEspanol –– IRS Twitter newsfeeds, which provide the latest federal tax news and information for taxpayers in English and Spanish. IRS audio files –– Informal tax messages in English and Spanish, to use for podcasts or to play on a portable music player. These are also available by subscription through iTunes. For a full list of free tax services, taxpayers can download IRS Publication 910, Guide to Free Tax Services, from www.IRS.gov or order the publication by calling 800-829-3676.

Get your refund faster -- Tell IRS to Direct Deposit Your Refund to One, Two or Three Accounts

You have several options for receiving your federal income tax refund. You can: Split your refund with direct deposits into two or three checking or savings accounts Direct deposit your refund into one checking or savings account Receive your refund as a paper check in the mail Buy up to $5,000 in U.S. Series I Savings Bonds with your refund Splitting your refund is easy. Use IRS’ Form 8888, Allocation of Refund (Including Savings Bond Purchases). Just follow the instructions on the form. If you want IRS to deposit your refund into just one account, use the direct deposit line on your tax form. With split refunds, you have a convenient option for managing your money — sending some of your refund to an account for immediate use and some for future savings — teamed with the speed and safety of direct deposit. Whether you file electronically or on paper, direct deposit gives you access to your refund faster than a paper check. Direct deposit also avoids the possibility that your check could be lost or stolen or returned to IRS as undeliverable. Speed, safety and choice — with direct deposit you can have it all.

General ITIN Information

What is an ITIN? An Individual Taxpayer Identification Number (ITIN) is a tax processing number issued by the Internal Revenue Service. It is a nine-digit number that always begins with the number 9 and has a range of 70-88 in the fourth and fifth digit. Effective April 12, 2011, the range was extended to include 90-92 and 94-99 in the fourth and fifth digit, example 9XX-90-XXXX. IRS issues ITINs to individuals who are required to have a U.S. taxpayer identification number but who do not have, and are not eligible to obtain a Social Security Number (SSN) from the Social Security Administration (SSA). ITINs are issued regardless of immigration status because both resident and nonresident aliens may have a U.S. filing or reporting requirement under the Internal Revenue Code. Individuals must have a filing requirement and file a valid federal income tax return to receive an ITIN, unless they meet an exception. What is an ITIN used for? ITINs are for federal tax reporting only, and are not intended to serve any other purpose. IRS issues ITINs to help individuals comply with the U.S. tax laws, and to provide a means to efficiently process and account for tax returns and payments for those not eligible for Social Security Numbers (SSNs). An ITIN does not authorize work in the U.S. or provide eligibility for Social Security benefits or the Earned Income Tax Credit. Who needs an ITIN? IRS issues ITINs to foreign nationals and others who have federal tax reporting or filing requirements and do not qualify for SSNs. A non-resident alien individual not eligible for a SSN who is required to file a U.S. tax return only to claim a refund of tax under the provisions of a U.S. tax treaty needs an ITIN. Other examples of individuals who need ITINs include: • A nonresident alien required to file a U.S. tax return • A U.S. resident alien (based on days present in the United States) filing a U.S. tax return • A dependent or spouse of a U.S. citizen/resident alien • A dependent or spouse of a nonresident alien visa holder How do I know if I need an ITIN? If you do not have a SSN and are not eligible to obtain a SSN, but you have a requirement to furnish a federal tax identification number or file a federal income tax return, you must apply for an ITIN. If you have an application for a SSN pending, do not file Form W-7. Complete Form W-7 only if the Social Security Administration (SSA) notifies you that a SSN cannot be issued. To obtain a SSN, see Form SS-5, Application for a Social Security Card. To get Form SS-5 or to find out if you are eligible to obtain a SSN, go to Social Security Administration Website or contact a SSA office. By law, an alien individual cannot have both an ITIN and a SSN. IRS processes returns showing SSNs or ITINs in the blanks where tax forms request SSNs. IRS no longer accepts, and will not process, forms showing "SSA205c," "applied for," "NRA," blanks, etc. How do I apply for an ITIN? Use the latest revision of Form W-7, Application for IRS Individual Taxpayer Identification Number to apply. Attach a valid federal income tax return, unless you qualify for an exception, and include your original, notarized, or certified proof of identity and foreign status documents. Because you are filing your tax return as an attachment to your ITIN application, you should not mail your return to the address listed in the Form 1040, 1040A or 1040EZ instructions. Instead, send your return, Form W-7 and proof of identity and foreign status documents to: Internal Revenue Service Austin Service Center ITIN Operation P.O. Box 149342 Austin, TX 78714-9342 You may also apply using the services of an IRS-authorized Acceptance Agent or visit an IRS Taxpayer Assistance Center in lieu of mailing your information to the IRS in Austin. Taxpayer Assistance Centers (TACs) in the United States provide in-person help with ITIN applications on a walk-in or appointment basis. Applicants outside the United States should contact an overseas IRS office to find out if that office accepts Form W-7 applications. The IRS's ITIN Unit in Austin issues all numbers by mail. When should I apply for an ITIN? You should complete Form W-7 as soon as you are ready to file your federal income tax return, since you need to attach the return to your application. If you meet one of the exceptions to the tax filing requirement, submit Form W-7, along with the documents that prove your identity and foreign status and the required supplemental documents to substantiate your qualification for the exception, as soon as possible after you determine that you are covered by that exception. You can apply for an ITIN any time during the year; however, if the tax return you attach to Form W-7 is filed after the return's due date, you may owe interest and/or penalties. You should file your current year return by the prescribed due date to avoid this. Where can I get help with my ITIN application? You may call the IRS toll-free at 1-800-829-1040 for information and help in completing your Form W-7 and your tax return, or to check on the status of your application six weeks after submitting Form W-7. Assistance is also available at IRS Taxpayer Assistance Centers in the United States to provide in-person help with ITIN applications on a walk-in or appointment basis. Applicants outside the United States may contact an overseas IRS office to find out if that office accepts Form W-7 applications. You may also use the services of an IRS-authorized Acceptance Agent. How and when can I expect to receive my ITIN? If you qualify for an ITIN and your application is complete, you will receive a letter from the IRS assigning your tax identification number, usually within six weeks. If you have not received your ITIN or other correspondence six weeks after applying, you may call the IRS toll-free number at 1-800-829-1040 to request the status of your application.

Fiscal Year Tax Deadline

To all those small business' that are fiscal year filers the deadline to file is set for October 15th.

Now you can buy U.S. Series I Savings Bonds with your tax refund for anyone

Starting in January 2011, you can buy U.S. Series I Savings Bonds with a portion or all of your tax refund for yourself or anyone. Issued by the Department of the Treasury, Series I bonds are low-risk bonds that grow in value for up to 30 years. While you own them they earn interest and protect you from inflation. Last year, the IRS received 22,520 tax returns requesting over 99,000 savings bonds totaling $11,190,200. Buying savings bonds with your tax refund is simple and easy Just tell your tax preparer you want to buy savings bonds with part or all of your refund! If you prepare your own return, file Form 8888, Allocation of Refund (Including Bond Purchases). The instructions explain what you need to do. In any single calendar year, you can purchase up to $5,000 of I bonds under this program. If you purchase bonds with your tax refund, the amount you request must be divisible by 50. If you don’t buy I bonds with 100 percent of your refund, you can elect to have the remaining amount not used to purchase bonds be deposited into a bank account or mailed to you as a check in the mail. For example, if your refund is $280; you can direct $250 to I bonds and the $30 balance to your savings account or request a check by mail. The choice is yours! Register Paper bonds in your name or someone else When you purchase savings bonds with your tax refund, you will receive paper bonds, issued in your name or the name you designate as primary owner, co-owner or beneficiary. If you are married and filed a joint return, the bonds will be issued in your and your spouse’s name. You can also designate a beneficiary or co-owner under this name registration option. Your request will be processed in two parts Part 1: Generally, you will receive the bonds after you receive the remainder of your tax refund from the IRS. The IRS will process the portion of your refund that you are not using to buy savings bonds. This amount will be deposited into the account you designate or sent to you in the form of a paper check in the mail. Go to Where’s My Refund? or call 1-800-829-1954 to see if Part 1 is complete. Part 2: The IRS will forward your request for savings bonds to the Treasury Retail Securities Site. It will take them up to three weeks send your bonds to you at the address on your tax return. You can call the Treasury Retail Securities Site at 1-800-245-2804 to check on the status of your bond issuance. More about savings bonds Series I bonds pay interest based on a combination of a fixed rate (currently 0.00%), which remains the same throughout the life of the savings bond, plus a semiannual inflation rate - currently 0.74%, which is updated each May and November. The interest earned by purchasing and holding savings bonds is subject to federal tax at the time the bonds are redeemed. However, interest earned on savings bonds is not taxable at the state or local level.