Posts with «taxes» label

You can try the IRS alternative to Turbo Tax in 12 states today

April is just around the corner, so if you're not stressed about filing taxes yet, it's likely coming any day now. Thanks to the lovely (read: horrible) tax lobby and the politicians who take their money, the headache taxes bring is as American as apple pie. The IRS is attempting to simplify things a bit with a Direct File tool, a free digital program that provides step-by-step guidance for taxpayers submitting their returns, The Associated Press reports. The IRS first announced this tool was on its way back in October.

To clarify, yes, even this development still requires filing your taxes and determining how much you owe (why tell us when we can just guess?), but it should be a more straightforward process and save you some money. However, it's far from open for all. The IRS pilot program is available to residents of 12 states and only those with a simple tax situation — we're talking basic W-2s and standard deductions here. Other potentially eligible reporting includes SSA-1099 Social Security income, the Child Tax Credit and student loan interest. The IRS has a complete list of eligibility requirements and a tool to check if you qualify.

Direct File is available to residents of Florida, Nevada, New Hampshire, South Dakota, Texas, Wyoming, Washington, Arizona, California, Massachusetts, and New York. The last four also require state tax returns, so their residents who use Direct File will be directed to tools for filing those once they are finished. Alaska was initially in the mix but has seemingly been dropped since last year's statement.

This article originally appeared on Engadget at

IRS will start piloting its free TurboTax alternative in 2024

It looks like the Internal Revenue Service (IRS) truly was working on a free TurboTax alternative like earlier reports had claimed. The US tax authority has announced that it will start pilot testing its new Direct File program for the 2024 filing season, though it will initially be available for select taxpayers in 13 states only. During its pilot period, Direct File will only cover individual federal tax returns and won't have the capability to prepare people's state returns. That's why 9 out of the 13 states testing it — namely Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming — don't levy state income taxes. 

Arizona, California, Massachusetts and New York, the other four states in the list, worked with the IRS to integrate their state taxes into the Direct File system for 2024. The IRS says it invited all states to join the pilot program, but not all of them were in a position to participate "at this time." In addition to being only available in certain locations, Direct File will only be accessible by people with "relatively simple returns" at the beginning. It will cover W-2 wages and tax credits like the Earned Income Tax Credit and the Child Tax Credit, for instance, but it will not cover self-employment income and itemized deductions. However, the agency is still finalizing the tax scope for the pilot, so it could still change over the coming months. 

Based on the screenshots the IRS shared with The Washington Post, taxpayers will only have to answer a questionnaire to be able to file their taxes directly, simplifying the process without having to pay for a third-party service. An IRS official told the publication that select eligible taxpayers in the aforementioned states will start getting invitations to use the service sometime around mid-February next year. The agency says it will begin with a small group of taxpayers before expanding access to more and more people as the filing season for the 2023 federal tax return progresses.

"This is a critical step forward for this innovative effort that will test the feasibility of providing taxpayers a new option to file their returns for free directly with the IRS," IRS Commissioner Danny Werfel said in a statement. "In this limited pilot for 2024, we'll be working closely with the states that have agreed to participate in an important test run of the state integration. This will help us gather important information about the future direction of the Direct File program."

The IRS is hoping to gather data and feedback during the pilot to be able to analyze how effective Direct File is. It's also hoping to identify areas of improvement for a "potential large-scale launch in the future."

This article originally appeared on Engadget at

Microsoft reveals IRS notice asking for $28.9 billion in back taxes

Microsoft owes the Internal Revenue Service (IRS) $28.9 billion in back taxes, not including penalties and interest, at least according to the tax authority. The tech giant has revealed in a filing with the Securities and Exchange Commission that it received a series of Notices of Proposed Adjustment (NOPAs) from the IRS for the tax years 2004 to 2013. In its filing, it said that it's been working with the IRS for nearly a decade to address the authority's questions about how it distributed its profits among countries and jurisdictions, and this is the agency's decision after a lengthy investigation. 

To be exact, the IRS audit centered around a practice known as "transfer pricing," which legally allowed companies to allocate profits and expenses between their operations in different regions. Microsoft explained that a lot of large multinational corporations practice this cost-sharing scheme to reflect "the global nature of their business." In its case, its subsidiaries shared in the costs of developing some IPs, which means that they're also entitled to the related profits. As AP notes, though, critics of the regulation argue that companies frequently use it to minimize the taxes they have to pay by reporting lower profits in high tax countries, and vice versa. 

Microsoft explained that the issues raised by the IRS are only relevant to those aforementioned years, because it has since changed its corporate structure and practices. Nevertheless, the IRS believes Microsoft owes $28.9 billion in back taxes. The tech giant disagrees, as expected, and said that newer tax laws could reduce the back taxes it owes from this particular audit by $10 billion. Based on its plan of action shared with the SEC, the company intends to contest the decision to the best of its ability: Microsoft said that it will pursue an appeal within the IRS, which typically takes years to complete, and will even "contest any unresolved issues through the courts" if needed. 

This article originally appeared on Engadget at

EV buyers will get an instant rebate for every car purchased starting in 2024

Car dealers can give buyers an instant rebate for purchasing certain electric vehicles starting in January of 2024, according to new guidance released by the IRS. The memo says eligible vehicles may qualify for a tax credit of up to $7,500. However, the credit amount will depend on whether an EV and its buyer meet certain requirements, and when a car is actually purchased. 

For an electric car to qualify, it needs to have a minimum battery capacity of seven kilowatt hours. Buyers can’t claim the credit if their adjusted gross income exceeds certain thresholds – $300,000 if married and filing jointly, and $150,000 for the majority of single taxpayers. The manufacturer’s suggested retail price for the EV also can not exceed specific price points. For sport utility vehicles and pickup trucks, the cap is $80,000, for example. But for average electric vehicles to qualify, they can't be more than $55,000, which really narrows the benefit for cheaper car makers. While it’s a bummer that you can't get the rebate for an $81,000 Porche Taycan, you can probably get the benefit for something like the Nissan Leaf S that goes for $27,400.

Some EVs bought before 2024 might qualify for the rebate too, if they were bought and weren't intended for resale. For vehicles placed in service on or after April 18, 2023, the IRS says the potential rebate will depend on a variety of factors including the vehicle’s make and battery capacity. There are also requirements in place for length of ownership to prevent unscrupulous buyers from snapping up an EV, reselling it and pocketing the rebate.

The IRS lists eligible vehicles, including battery electric, plug-in hybrid and fuel cell vehicles on It says the list will be updated as more vehicle eligibility requirements take effect.

All in all, the proposed guidance by the IRS is in line with the Biden administration’s goal of having 50 percent of new car sales be driven by EVs before 2030. The hope is an instant rebate will incentivize more buyers to purchase an electric car rather than having to wait to see any tangible reward for their purchase when they file their taxes. Albert Gore, executive director of the Zero Emissions Transportation Association, commends the IRS’ memo stating, “This guidance makes it easy for everyone to access the IRA’s new and used electric vehicle tax credits at the point of sale.”

This article originally appeared on Engadget at

The IRS wants to phase out most IRL tax documents by 2025

Most taxpayers will have the option of going entirely paperless starting with the 2024 filing season. The IRS said today that it aims to “achieve paperless processing for all tax returns” by 2025. The agency says the IRS Paperless Processing Initiative will “eliminate up to 200 million pieces of paper annually, cut processing times in half and expedite refunds by several weeks.” The project is funded by President Biden’s Inflation Reduction Act of 2022.

The IRS expects the changes will solve the annoyance of transmitting digital documents in some cases but still having to mail paper ones in others. “For decades, taxpayers had to respond to notices for things like document verification through the mail, and IRS employees had to manually enter numbers from paper returns into computers one digit at a time, creating significant delays for taxpayers and challenges for IRS staff,” the US Treasury Department wrote today.

Starting next year (2024 filling season), taxpayers can digitally submit all correspondence — including many non-tax forms. The IRS says at least 20 additional e-File tax forms will be available digitally starting then. It estimates that over 94 percent of individual filers will never have to mail another tax form or document. The initiative will spare taxpayers from sending approximately 125 million paper documents annually.

By the 2025 filling season, “an additional 150 of the most used non-tax forms will be available in digital, mobile-friendly formats.” (The IRS cites research showing that around 15 percent of Americans rely solely on their phones for internet access.) It says all paper-filed tax and information returns — an estimated 76 million paper documents per year — will be processed digitally as soon as it receives them. Similarly, half of paper-submitted correspondence, non-tax forms and notice responses (another 60 million paper docs) will be recorded digitally. Finally, the IRS also plans to digitize up to one billion historical documents, making accessing older filing data easier for customer service agents and taxpayers.

The IRS says its Paperless Processing Initiative will help eliminate errors from manual data entry, speed up processing and let the agency pour more resources into taxpayer support. “Customer service employees do not currently have easy access to the information from paper returns and other correspondence submitted by mail,” the Treasury Department wrote. “Digitization and data extraction will give them access to that information they need to better serve taxpayers.”

The agency also expects digitization will help them to hold billionaires and corporations accountable. “When combined with an improved data platform, digitization and data extraction will enable data scientists to implement advanced analytics and pattern recognition methods to pursue cases that can help address the tax gap, including wealthy individuals and large corporations using complex structures to evade taxes they owe.”

This article originally appeared on Engadget at

Congressional report condemns tax prep companies for sending data to Meta, Google

A Congressional investigation concluded that several tax prep providers shared sensitive filing data with Meta and Google. It follows a 2022 report from The Markup highlighting the practice in which TaxSlayer, H&R Block and TaxAct used Meta’s Pixel tracking tool to harvest info like filing status, approximate adjusted gross income, refund amount, names of dependents and which text-entry fields users clicked on. Meta is already facing a lawsuit connected with the initial reporting.

The panel sent the conclusions to the IRS, FTC, DOJ and Treasury Inspector General for Tax Administration (TIGA), urging the agencies to investigate and prosecute if applicable. “Big Tax Prep has recklessly shared tens of millions of taxpayers’ sensitive personal and financial data with Meta for years, without appropriately disclosing this data usage or protecting the data, and without appropriate taxpayer consent,” the report reads. “The findings of this report reveal a shocking breach of taxpayer privacy by tax prep companies and by Big Tech firms that appeared to violate taxpayers’ rights and may have violated taxpayer privacy law.”

The review found the Meta Pixel tracker also gathered data about “whether taxpayers had visited pages for many revealing tax situations, such as having dependents, certain types of income (such as rental income or capital gains), and certain tax credits or deductions.” In addition, it transmitted the full names, email, country, state, city, zip codes, phone numbers and gender as hashed values. The information was also collected from taxpayers using TaxAct’s Free File service — which is through a partnership with the IRS.

Congressional investigators listed in the report include Senators Elizabeth Warren (D-MA), Ron Wyden (D-OR), Richard Blumenthal (D-CT), Tammy Duckworth (D-IL), Bernie Sanders (I-VT) and Sheldon Whitehouse (D-RI) and Rep. Katie Porter (D-CA).

“The tax prep firms were shockingly careless with their treatment of taxpayer data,” the investigation concluded. “They indicated that they installed the Meta and Google tools on their websites without fully understanding the extent to which they would send taxpayer data to these tech firms, without consulting with independent compliance or privacy experts, and without full knowledge of Meta’s use of and disposition of the data.” The panel also chided Meta and Google for acting “with stunning disregard for taxpayer privacy.”

The report cites laws that say, “a tax return preparer may not disclose or use a taxpayer’s tax return information prior to obtaining a written consent from the taxpayer,” while mentioning that the tax prep companies failed to do that. Although tax-filing companies can legally hand data to “auxiliary service providers in connection with the preparation of a tax return,” the panel said Meta and Google don’t meet that definition since the tracking was used for advertising. Violations can lead to fines of up to $1,000 per instance (likely pocket change for these companies) and up to a year in prison.

This article originally appeared on Engadget at

The IRS reportedly has a free TurboTax alternative in the works

Doing your taxes in the United States can be famously convoluted. It can also be expensive: on top of paying their tax bills, Americans who have more complicated finances often have to pay for software to help them navigate the US tax code. That might change soon: a report from the Washington Post says that the Internal Revenue Services is preparing to roll out a free direct filing system that will allow Americans to complete their taxes digitally.

The first version of the direct filing system could be available as soon as next year, according to the report, with a pilot program launching for a small group of taxpayers in January of 2024. That would arrive just a year after the IRS publicly started exploring the option, when the tax agency tapped the New America think tank to help explore the feasibility of an agency-run filing program. That effort was kicked off in February of this year, after the Inflation Reduction Act earmarked $15 million to the IRS to research a "multi-lingual and mobile-friendly" free direct e-file system.

That focus on a user-friendly system might be the point. The IRS already offers a Free File Online tool, but according to the Government Accountability Offices, it's used by less than 3% of eligible taxpayers. If the program is a success, it could make filing taxes easier and more affordable for millions of Americans. If not? Well, TurboTax and H&R Block probably aren't going anywhere. After all, the US tax prep and filing industry is still worth about $14 billion.

This article originally appeared on Engadget at

The IRS says it accidentally exposed confidential information involving 120,000 taxpayers

Around 120,000 taxpayers who filed a Form 990-T will be hearing from the IRS in the coming weeks, telling them that the agency inadvertently exposed their information on its website. Exempted organizations, including charities and religious groups, with unrelated business income are required to file Form 990-T. As The Wall Street Journal notes, though, people with individual retirement accounts invested in assets that generate income, such as real estate, are also required to file the form. Filings by exempted organizations are supposed to be public, but those by private individuals aren't.

The agency said the issue stemmed from a human cording error last year when Form 990-T became available for electronic filing. As you can guess, the error led to the bundling of non-public data with public data, which were all made available for download. It wasn't until these past weeks that an employee discovered the issue and triggered an investigation that eventually led to the removal of the data that shouldn't have been public in the first place.

In its letter, the IRS said the leaked data included individual names and business contact information. Affected taxpayers' Social Security numbers, individual income details and other information that could impact their credit weren't made public. The Journal, which was able to download some of the data before it was removed, said it included people's income within their IRAs, as well.

Even though it has already removed the leaked data, the IRS is still reviewing the situation. The Treasury Department's Anna Canfield Roth also said that the agency "has instructed the IRS to conduct a prompt review of its practices to ensure necessary protections are in place to prevent unauthorized data disclosures."

Amazon reportedly paid no income tax on $55 billion in European sales in 2021

Although Amazon's main European business saw an increase in sales to around $55 billion last year, the company avoided paying income tax. It posted a loss of €1.16 billion euros ($1.26 billion) and it even received €1 billion in tax credits. According to filings obtained by Bloomberg, the credit was “mainly due to the use of net losses carried forward in accordance with the tax consolidation system.”

The Amazon EU Sarl unit is based in Luxembourg and reports revenue from its divisions in the UK, Germany, France, Italy, Spain, Poland, Sweden and the Netherlands. Its sales increased by 17 percent in 2021.

“Across Europe, we pay corporate tax amounting to hundreds of millions of euros,” an Amazon spokesperson told Bloomberg. They said revenue, profit and tax are reported to local authorities in each country. The company said it posted a loss after opening more than 50 new sites across the continent last year.

Amazon has been the subject of criticism for years for tax breaks it receives and how it reports income. In 2017, the European Union slapped Amazon with a €250 million ($280 million) tax bill over alleged illegal state aid practices dating back to the early 2000s. Amazon successfully appealed the bill last year. The European Commission has filed an appeal against that decision in the European Court of Justice.

You can now delete your selfies from’s website

Taxpayers can now delete any selfies they submitted to, the company tasked by the IRS to verify identities. Following uproar from privacy advocates, civil liberties groups and Congress, the federal agency last month axed a new requirement that taxpayers who want to access certain online services must comply with's facial recognition tool. Users were asked to verify their identity by uploading a selfie and government-issued ID onto’s portal, which uses automated facial recognition to vet the images. Beginning today, any account holders who wish to delete their presence on the site can do so by simply visiting Don’t worry if you don’t get around to it. will automatically delete all facial recognition data from taxpayers on March 11th.

Not all taxpayers were required to use (only users seeking to look up past tax returns or child tax credit refunds online, and this is only if you don't have a current online IRS account). Unfortunately, if you fall into those two groups, you’ll still need to jump through some extra hoops on's website. Users will need to schedule a video interview with an IRS agent, as well as submit a photo ID such as a driver’s license, passport or state ID. While a video call may be less of a privacy invasion than facial recognition, you may be in for a long wait. While some users connect to a video agent in a matter of minutes, some have reported wait times of a few hours or more. Automated facial recognition is still an option for those who can’t stand the wait time. The company announced that starting on March 11th, it will begin automatically deleting photos submitted by users within 24 hours. 

Luckily for those who already have an IRS online account, they can skip altogether. The IRS has promised to roll out a new authentication tool by next tax season that won’t require, but hasn’t detailed what it is. Tax-related identity theft surged during the pandemic, with many thieves filing fraudulent claims for unemployment benefits. The agency advises taxpayers to file early, and to be on the lookout for any letters from the IRS about potential identity fraud. Taxpayers can also file for an Identity Protection Pin (IP Pin), a special six-digit number issued by the IRS that provides another layer of security in case your social security number is compromised.