Case Closed! currently Not Collectable CNC
Letter 4223 is the Letter IRS sends to let you know your case has been currently closed. HARDSHIP
What is Code Section 1201
Code 1201 is an administrative code that means there is a delay in processing your return.
While your return was selected, something triggered a desk audit, and is an IRS agent will review it. In most situations it causes one-two weeks of an additional processing time.
According to the IRS, 1201 is a “catch all” code when no other code applies. It is generated by the computer so if you call IRS – the agent might not know what exactly triggered the review. It may be random selection as well.
This is not an error and not an audit – this is a very normal IRS process – the assigned IRS agent will review your return and in most situation it will be processed without any problem.
I do not think that you need to worry at this moment – just wait couple weeks and see if the problem resolved.Everything in life that is delayed is a 1201, a life lesson
Top Ten IRS Questions
Top Frequently Asked Questions
1. What are the tax changes for this year?
2. Is there an age limit on claiming my children as dependents?
3. How much does an unmarried dependent student have to make before he or she has to file an income tax return?
4. If I claim my daughter as a dependent because she is a full-time college student, can she claim herself as a dependent when she files her return?
5. Can I receive a tax refund if I am currently in a payment plan for prior year’s federal taxes?
6. For head of household filing status, do you have to claim a child as a dependent to qualify?
7. What is the American Recovery and Reinvestment Act (ARRA) of 2009?
8. What should I do if I made a mistake on my federal return that I have already filed?
9. What is a split refund?
10. How do I know if I have to file quarterly individual estimated tax payments?
IRS Statistics for 2010
Electronically filed tax returns are on track with last year and overall refunds are running nearly 10 percent higher so far in 2010, according to statistics issued today by the Internal Revenue Service.
The statistics issued today, covering the period through March 12, show that while the overall number of tax returns filed this year is down slightly, the percentage of returns using e-file remains strong. More than 82 percent of the 69 million returns received this year have come in via e-file. Home usage of e-file is up almost 7 percent compared to this time last year.
Additionally, the average federal refund totaled $3,036, an increase of $266 compared with the same period a year ago.
The refund increase follows a number of federal tax incentives enacted last year as part of the American Recovery and Reinvestment Act, such as the home buyer credit and the American Opportunity Credit.
?There are several new credits and deductions this year, so we encourage taxpayers to see if they qualify when they fill out their tax return,? said IRS Commissioner Doug Shulman. ?To get their refunds quicker, the IRS reminds taxpayers that the fastest, easiest way is to e-file and use direct deposit.?
Taxpayers can check their eligibility for these credits and deductions on the IRS Web site at IRS.gov/recovery. This special section also contains instructions on how to claim the available tax incentives and provides answers to frequently asked questions. Detailed information is available on the:
Home buyer Credit
Making Work Pay Credit
Economic Recovery Payments
Earned Income Tax Credit
American Opportunity Tax Credit
Sales and excise tax deduction for new car purchases
Energy incentives for homeowners
2010 FILING SEASON STATISTICS
Cumulative through the weeks ending 03/13/09 and 03/12/10
Individual Income Tax Returns
2009
2010
% Change
Total Receipts
70,807,000
68,743,000
-2.9%
Total Processed
67,595,000
64,284,000
-4.9%
E-filing Receipts:
TOTAL
56,665,000
56,802,000
0.2%
Tax Professionals
36,751,000
35,509,000
-3.4%
Self-prepared
19,914,000
21,293,000
6.9%
Web Usage:
Visits to IRS.gov
126,091,068
121,091,068
-4.2
Total Refunds:
Number
61,042,000
57,779,000
-5.3%
Amount
$169.1
billion
$175.4
billion
3.7%
Average refund
$2,770
$3,036
9.6%
Direct Deposit Refunds:
Number
48,643,000
47,893,000
-1.5%
Amount
$146.4
billion
$154.8
billion
5.7%
Average refund
$3,010
$3,232
7.4%
Should you have any questions call Fresh Start Tax
Most common Errors made on a tax return
Errors made on tax returns may delay the processing of your tax return, which in turn, may cause your refund to arrive later. Here are nine common errors the IRS wants you to avoid to help guarantee your refund arrives on time.
Incorrect or missing Social Security Numbers When entering SSNs for anyone listed on your tax return, be sure to enter them exactly as they appear on the Social Security cards.
Incorrect or misspelling of dependent?s last name When entering a dependent?s last name on your tax return, ensure they are entered exactly as they appear on their Social Security card.
Filing status errors Make sure you choose the correct filing status for your situation. There are five filing statuses: Single, Married Filing Jointly, Married Filing Separately, Head of Household, and Qualifying Widow(er) With Dependent Child. See Publication 501, Exemptions, Standard Deduction, and Filing Information to determine the filing status that best fits your needs.
Math errors When preparing paper returns, review all math for accuracy. Remember, when you file electronically, the software takes care of the math for you!
Computation errors Take your time. Many taxpayers make mistakes when figuring their taxable income, withholding and estimated tax payments, Earned Income Tax Credit, Standard Deduction for age 65 or over or blind, the taxable amount of Social Security benefits, and the Child and Dependent Care Credit.
Incorrect bank account numbers for Direct Deposit If you are due a refund and requested direct deposit, be sure to review the routing and account numbers for your financial institution.
Forgetting to sign and date the return An unsigned tax return is like an unsigned check ? it is invalid.
Incorrect Adjusted Gross Income information Taxpayers filing electronically must sign the return electronically using a Personal Identification Number. To verify their identity, taxpayers will be prompted to enter their AGI from their originally filed 2008 federal income tax return or their prior year PIN if they used one to file electronically last year. Taxpayers should not use an AGI amount from an amended return, Form 1040X, or a math error correction made by IRS.
Claiming the Making Work Pay Tax Credit Taxpayers with earned income should claim the Making Work Pay Tax Credit by attaching a Schedule M, Making Work Pay and Government Retiree Credits to their 2009 Form 1040 or 1040 A. Taxpayers who file Form 1040-EZ will use the worksheet for Line 8 on the back of the 1040-EZ to figure their Making Work Pay Tax Credit. The credit is worth up to $400 for individuals and $800 for married couples filing jointly. Many people who worked during 2009 are slowing down the processing of their tax return by not properly claiming this credit.
Should you have any questions call us a Fresh Start Tax.
Top Ten Dirty Scams
WASHINGTON ? The Internal Revenue Service today issued its 2010 ?dirty dozen? list of tax scams, including schemes involving return preparer fraud, hiding income offshore and phishing.
Taxpayers should be wary of anyone peddling scams that seem too good to be true,? IRS Commissioner Doug Shulman said. The IRS fights fraud by pursuing taxpayers who hide income abroad and by ensuring taxpayers get competent, ethical service from qualified professionals at home in the U.S.?
Tax schemes are illegal and can lead to imprisonment and fines for both scam artists and taxpayers. Taxpayers pulled into these schemes must repay unpaid taxes plus interest and penalties. The IRS pursues and shuts down promoters of these and numerous other scams.
The IRS urges taxpayers to avoid these common schemes:
Return Preparer Fraud
Dishonest return preparers can cause trouble for taxpayers who fall victim to their ploys. Such preparers derive financial gain by skimming a portion of their clients? refunds, charging inflated fees for return preparation services and attracting new clients by promising refunds that are too good to be true. Taxpayers should choose carefully when hiring a tax preparer. Federal courts have issued injunctions ordering hundreds of individuals to cease preparing returns and promoting fraud, and the Department of Justice has filed complaints against dozens of others, which are pending in court.
To increase confidence in the tax system and improve compliance with the tax law, the IRS is implementing a number of steps for future filing seasons. These include a requirement that all paid tax return preparers register with the IRS and obtain a preparer tax identification number (PTIN), as well as both competency tests and ongoing continuing professional education for all paid tax return preparers except attorneys, certified public accountants (CPA) and enrolled agents.
Setting higher standards for the tax preparer community will significantly enhance protections and services for taxpayers, increase confidence in the tax system and result in greater compliance with tax laws over the long term. Other measures the IRS anticipates taking are highlighted in the IRS Return Preparer review issued in December 2009.
Hiding Income Offshore
The IRS aggressively pursues taxpayers involved in abusive offshore transactions as well as the promoters, professionals and others who facilitate or enable these schemes. Taxpayers have tried to avoid or evade U.S. income tax by hiding income in offshore banks, brokerage accounts or through the use of nominee entities. Taxpayers also evade taxes by using offshore debit cards, credit cards, wire transfers, foreign trusts, employee-leasing schemes, private annuities or insurance plans.
IRS agents continue to develop their investigations of these offshore tax avoidance transactions using information gained from over 14,700 voluntary disclosures received last year. While special civil-penalty provisions for those with undisclosed offshore accounts expired in 2009, the IRS continues to urge taxpayers with offshore accounts or entities to voluntarily come forward and resolve their tax matters. By making a voluntary disclosure, taxpayers may mitigate their risk of criminal prosecution.
Phishing
Phishing is a tactic used by scam artists to trick unsuspecting victims into revealing personal or financial information online. IRS impersonation schemes flourish during the filing season and can take the form of e-mails, tweets or phony Web sites. Scammers may also use phones and faxes to reach their victims.
Scam artists will try to mislead consumers by telling them they are entitled to a tax refund from the IRS and that they must reveal personal information to claim it. Criminals use the information they get to steal the victim’s identity, access bank accounts, run up credit card charges or apply for loans in the victim’s name.
Taxpayers who receive suspicious e-mails claiming to come from the IRS should not open any attachments or click on any of the links in the e-mail. Suspicious e-mails claiming to be from the IRS or Web addresses that do not begin with http://www.irs.gov should be forwarded to the IRS mailbox: phishing@irs.gov.
Filing False or Misleading Forms
The IRS is seeing various instances where scam artists file false or misleading returns to claim refunds that they are not entitled to. Under the scheme, taxpayers fabricate an information return and falsely claim the corresponding amount as withholding as a way to seek a tax refund. Phony information returns, such as a Form 1099-Original Issue Discount (OID), claiming false withholding credits usually are used to legitimize erroneous refund claims. One version of the scheme is based on a false theory that the federal government maintains secret accounts for its citizens, and that taxpayers can gain access to funds in those accounts by issuing 1099-OID forms to their creditors, including the IRS.
Nontaxable Social Security Benefits with Exaggerated Withholding Credit
The IRS has identified returns where taxpayers report nontaxable Social Security Benefits with excessive withholding. This tactic results in no income reported to the IRS on the tax return. Often both the withholding amount and the reported income are incorrect. Taxpayers should avoid making these mistakes. Filings of this type of return may result in a $5,000 penalty.
Abuse of Charitable Organizations and Deductions
The IRS continues to observe the misuse of tax-exempt organizations. Abuse includes arrangements to improperly shield income or assets from taxation and attempts by donors to maintain control over donated assets or income from donated property. The IRS also continues to investigate various schemes involving the donation of non-cash assets including situations where several organizations claim the full value for both the receipt and distribution of the same non-cash contribution. Often these donations are highly overvalued or the organization receiving the donation promises that the donor can repurchase the items later at a price set by the donor. The Pension Protection Act of 2006 imposed increased penalties for inaccurate appraisals and set new definitions of qualified appraisals and qualified appraisers for taxpayers claiming charitable contributions.
Frivolous Arguments
Promoters of frivolous schemes encourage people to make unreasonable and outlandish claims to avoid paying the taxes they owe. If a scheme seems too good to be true, it probably is. The IRS has a list of frivolous legal positions that taxpayers should avoid. These arguments are false and have been thrown out of court. While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law or IRS guidance.
Abusive Retirement Plans
The IRS continues to find abuses in retirement plan arrangements, including Roth individual Retirement Arrangements (IRAs). The IRS is looking for transactions that taxpayers use to avoid the limits on contributions to IRAs, as well as transactions that are not properly reported as early distributions. Taxpayers should be wary of advisers who encourage them to shift appreciated assets at less than fair market value into IRAs or companies owned by their IRAs to circumvent annual contribution limits. Other variations have included the use of limited liability companies to engage in activity that is considered prohibited.
Disguised Corporate Ownership
Corporations and other entities are formed and operated in certain states for the purpose of disguising the ownership of the business or financial activity by means such as improperly using a third party to request an employer identification number.
Such entities can be used to facilitate under reporting of income, fictitious deductions, non-filing of tax returns, participating in listed transactions, money laundering, financial crimes and even terrorist financing. The IRS is working with state authorities to identify these entities and to bring the owners of these entities into compliance with the law.
Zero Wages
Filing a phony wage- or income-related information return to replace a legitimate information return has been used as an illegal method to lower the amount of taxes owed. Typically, a Form 4852 (Substitute Form W-2) or a ?corrected? Form 1099 is used as a way to improperly reduce taxable income to zero. The taxpayer also may submit a statement rebutting wages and taxes reported by a payer to the IRS.
Sometimes fraudsters even include an explanation on their Form 4852 that cites statutory language on the definition of wages or may include some reference to a paying company that refuses to issue a corrected Form W-2 for fear of IRS retaliation. Taxpayers should resist any temptation to participate in any of the variations of this scheme. Filings of this type of return may result in a $5,000 penalty.
Misuse of Trusts
For years, unscrupulous promoters have urged taxpayers to transfer assets into trusts. While there are many legitimate, valid uses of trusts in tax and estate planning, some promoted transactions promise reduction of income subject to tax, deductions for personal expenses and reduced estate or gift taxes. Such trusts rarely deliver the tax benefits promised and are used primarily as a means to avoid income tax liability and to hide assets from creditors, including the IRS.
The IRS has recently seen an increase in the improper use of private annuity trusts and foreign trusts to shift income and deduct personal expenses. As with other arrangements, taxpayers should seek the advice of a trusted professional before entering into a trust arrangement.
Fuel Tax Credit Scams
The IRS receives claims for the fuel tax credit that are excessive. Some taxpayers, such as farmers who use fuel for off-highway business purposes, may be eligible for the fuel tax credit. But other individuals are claiming the tax credit for nontaxable uses of fuel when their occupation or income level makes the claim unreasonable. Fraud involving the fuel tax credit is considered a frivolous tax claim and potentially subjects those who improperly claim the credit to a $5,000 penalty.
How to Report Suspected Tax Fraud Activity
Suspected tax fraud can be reported to the IRS using Form 3949-A, Information Referral. The completed form or a letter detailing the alleged fraudulent activity should be addressed to the Internal Revenue Service, Fresno, CA 93888. The mailing should include specific information about who is being reported, the activity being reported, how the activity became known, when the alleged violation took place, the amount of money involved and any other information that might be helpful in an investigation. The person filing the report is not required to self-identify, although it is helpful to do so. The identity of the person filing the report can be kept confidential.
Whistle blowers also may provide allegations of fraud to the IRS and may be eligible for a reward by filing Form 211, Application for Award for Original Information, and following the procedures outlined in Notice 2008-4, Claims Submitted to the IRS Whistle blower Office under Section 7623.