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How Do You Amend Your Taxes

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How Do You Amend Your Taxes

How do you amend your taxes 2. How do you amend your taxes   Tax Shelters and Other Reportable Transactions Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Abusive Tax SheltersRules To Curb Abusive Tax Shelters Investor Reporting Penalties Whether To Invest Introduction Investments that yield tax benefits are sometimes called “tax shelters. How do you amend your taxes ” In some cases, Congress has concluded that the loss of revenue is an acceptable side effect of special tax provisions designed to encourage taxpayers to make certain types of investments. How do you amend your taxes In many cases, however, losses from tax shelters produce little or no benefit to society, or the tax benefits are exaggerated beyond those intended. How do you amend your taxes Those cases are called “abusive tax shelters. How do you amend your taxes ” An investment that is considered a tax shelter is subject to restrictions, including the requirement that it be disclosed, as discussed later. How do you amend your taxes Topics - This chapter discusses: Abusive Tax Shelters , Rules To Curb Abusive Tax Shelters , Investor Reporting , Penalties , and Whether To Invest . How do you amend your taxes Useful Items - You may want to see: Publication 538 Accounting Periods and Methods 556 Examination of Returns, Appeal Rights, and Claims for Refund 561 Determining the Value of Donated Property 925 Passive Activity and At-Risk Rules Form (and Instructions) 8275 Disclosure Statement 8275-R Regulation Disclosure Statement 8283 Noncash Charitable Contributions 8886 Reportable Transaction Disclosure Statement See chapter 5, How To Get Tax Help , for information about getting these publications and forms. How do you amend your taxes Abusive Tax Shelters Abusive tax shelters are marketing schemes involving artificial transactions with little or no economic reality. How do you amend your taxes They often make use of unrealistic allocations, inflated appraisals, losses in connection with nonrecourse loans, mismatching of income and deductions, financing techniques that do not conform to standard commercial business practices, or mischaracterization of the substance of the transaction. How do you amend your taxes Despite appearances to the contrary, the taxpayer generally risks little. How do you amend your taxes Abusive tax shelters commonly involve package deals designed from the start to generate losses, deductions, or credits that will be far more than present or future investment. How do you amend your taxes Or, they may promise investors from the start that future inflated appraisals will enable them, for example, to reap charitable contribution deductions based on those appraisals. How do you amend your taxes (But see the appraisal requirements discussed under Rules To Curb Abusive Tax Shelters , later. How do you amend your taxes ) They are commonly marketed in terms of the ratio of tax deductions allegedly available to each dollar invested. How do you amend your taxes This ratio (or “write-off”) is frequently said to be several times greater than one-to-one. How do you amend your taxes Because there are many abusive tax shelters, it is not possible to list all the factors you should consider in determining whether an offering is an abusive tax shelter. How do you amend your taxes However, you should ask the following questions, which might provide a clue to the abusive nature of the plan. How do you amend your taxes Do the tax benefits far outweigh the economic benefits? Is this a transaction you would seriously consider, apart from the tax benefits, if you hoped to make a profit? Do shelter assets really exist and, if so, are they insured for less than their purchase price? Is there a nontax justification for the way profits and losses are allocated to partners? Do the facts and supporting documents make economic sense? In that connection, are there sales and resales of the tax shelter property at ever increasing prices? Does the investment plan involve a gimmick, device, or sham to hide the economic reality of the transaction? Does the promoter offer to backdate documents after the close of the year? Are you instructed to backdate checks covering your investment? Is your debt a real debt or are you assured by the promoter that you will never have to pay it? Does this transaction involve laundering United States source income through foreign corporations incorporated in a tax haven and owned by United States shareholders? Rules To Curb Abusive Tax Shelters Congress has enacted a series of income tax laws designed to halt the growth of abusive tax shelters. How do you amend your taxes These provisions include the following. How do you amend your taxes Disclosure of reportable transactions. How do you amend your taxes   You must disclose information for each reportable transaction in which you participate. How do you amend your taxes See Reportable Transaction Disclosure Statement , later. How do you amend your taxes   Material advisors with respect to any reportable transaction must disclose information about the transaction on Form 8918, Material Advisor Disclosure Statement. How do you amend your taxes To determine whether you are a material advisor to a transaction, see the Instructions for Form 8918. How do you amend your taxes   Material advisors will receive a reportable transaction number for the disclosed reportable transaction. How do you amend your taxes They must provide this number to all persons to whom they acted as a material advisor. How do you amend your taxes They must provide the number at the time the transaction is entered into. How do you amend your taxes If they do not have the number at that time, they must provide it within 60 days from the date the number is mailed to them. How do you amend your taxes For information on penalties for failure to disclose and failure to maintain lists, see Internal Revenue Code sections 6707, 6707A, and 6708. How do you amend your taxes Requirement to maintain list. How do you amend your taxes   Material advisors must maintain a list of persons to whom they provide material aid, assistance, or advice on any reportable transaction. How do you amend your taxes The list must be available for inspection by the IRS, and the information required to be included on the list generally must be kept for 7 years. How do you amend your taxes See Regulations section 301. How do you amend your taxes 6112-1 for more information (including what information is required to be included on the list). How do you amend your taxes Confidentiality privilege. How do you amend your taxes   The confidentiality privilege between you and a federally authorized tax practitioner does not apply to written communications made after October 21, 2004, regarding the promotion of your direct or indirect participation in any tax shelter. How do you amend your taxes Appraisal requirement for donated property. How do you amend your taxes   If you claim a deduction of more than $5,000 for an item or group of similar items of donated property, you generally must get a qualified appraisal from a qualified appraiser and complete and attach section B of Form 8283 to your return. How do you amend your taxes If you claim a deduction of more than $500,000 for the donated property, you generally must attach the qualified appraisal to your return. How do you amend your taxes If you file electronically, see Form 8453, U. How do you amend your taxes S. How do you amend your taxes Individual Income Tax Transmittal for an IRS e-file Return, and its instructions. How do you amend your taxes For more information about appraisals, including exceptions, see Publication 561. How do you amend your taxes Passive activity loss and credit limits. How do you amend your taxes   The passive activity loss and credit rules limit the amount of losses and credits that can be claimed from passive activities and limit the amount that can offset nonpassive income, such as certain portfolio income from investments. How do you amend your taxes For more detailed information about determining and reporting income, losses, and credits from passive activities, see Publication 925. How do you amend your taxes Interest on penalties. How do you amend your taxes   If you are assessed an accuracy-related or civil fraud penalty (as discussed under Penalties , later), interest will be imposed on the amount of the penalty from the due date of the return (including any extensions) to the date you pay the penalty. How do you amend your taxes Accounting method restriction. How do you amend your taxes   Tax shelters generally cannot use the cash method of accounting. How do you amend your taxes Uniform capitalization rules. How do you amend your taxes   The uniform capitalization rules generally apply to producing property or acquiring it for resale. How do you amend your taxes Under those rules, the direct cost and part of the indirect cost of the property must be capitalized or included in inventory. How do you amend your taxes For more information, see Publication 538. How do you amend your taxes Denial of deduction for interest on an underpayment due to a reportable transaction. How do you amend your taxes   You cannot deduct any interest you paid or accrued on any part of an underpayment of tax due to an understatement arising from a reportable transaction (discussed later) if the relevant facts affecting the tax treatment of the item are not adequately disclosed. How do you amend your taxes This rule applies to reportable transactions entered into in tax years beginning after October 22, 2004. How do you amend your taxes Authority for Disallowance of Tax Benefits The IRS has published guidance concluding that the claimed tax benefits of various abusive tax shelters should be disallowed. How do you amend your taxes The guidance is the conclusion of the IRS on how the law is applied to a particular set of facts. How do you amend your taxes Guidance is published in the Internal Revenue Bulletin for taxpayers' information and also for use by IRS officials. How do you amend your taxes So, if your return is examined and an abusive tax shelter is identified and challenged, published guidance dealing with that type of shelter, which disallows certain claimed tax shelter benefits, could serve as the basis for the examining official's challenge of the tax benefits you claimed. How do you amend your taxes In such a case, the examiner will not compromise even if you or your representative believes you have authority for the positions taken on your tax return. How do you amend your taxes The courts have generally been unsympathetic to taxpayers involved in abusive tax shelter schemes and have ruled in favor of the IRS in the majority of the cases in which these shelters have been challenged. How do you amend your taxes Investor Reporting You may be required to file a reportable transaction disclosure statement. How do you amend your taxes Reportable Transaction Disclosure Statement Use Form 8886 to disclose information for each reportable transaction (discussed later) in which you participated. How do you amend your taxes Generally, you must attach Form 8886 to your return for each tax year in which you participated in the transaction. How do you amend your taxes Under certain circumstances, a transaction must be disclosed within 90 days of the transaction being identified as a listed transaction or a transaction of interest (discussed later). How do you amend your taxes In addition, for the first year Form 8886 is attached to your return, you must send a copy of the form to: Internal Revenue Service OTSA Mail Stop 4915 1973 North Rulon White Blvd. How do you amend your taxes  Ogden, UT 84404 If you file your return electronically, the copy sent to OTSA must show exactly the same information, word for word, provided with the electronically filed return and it must be provided on the official IRS Form 8886 or an exact copy of the form. How do you amend your taxes If you use a computer-generated or substitute Form 8886, it must be an exact copy of the official IRS form. How do you amend your taxes If you fail to file Form 8886 as required or fail to include any required information on the form, you may have to pay a penalty. How do you amend your taxes See Penalty for failure to disclose a reportable transaction , later under Penalties. How do you amend your taxes The following discussion briefly describes reportable transactions. How do you amend your taxes For more details, see the Instructions for Form 8886. How do you amend your taxes Reportable transaction. How do you amend your taxes   A reportable transaction is any of the following. How do you amend your taxes A listed transaction. How do you amend your taxes A confidential transaction. How do you amend your taxes A transaction with contractual protection. How do you amend your taxes A loss transaction. How do you amend your taxes A transaction of interest entered into after November 1, 2006. How do you amend your taxes Note. How do you amend your taxes Transactions with a brief asset holding period were removed from the definition of reportable transaction for transactions entered into after August 2, 2007. How do you amend your taxes Listed transaction. How do you amend your taxes   A listed transaction is the same as, or substantially similar to, one of the types of transactions the IRS has determined to be a tax-avoidance transaction. How do you amend your taxes These transactions have been identified in notices, regulations, and other published guidance issued by the IRS. How do you amend your taxes For a list of existing guidance, see Notice 2009-59 in Internal Revenue Bulletin 2009-31, available at www. How do you amend your taxes irs. How do you amend your taxes gov/irb/2009-31_IRB/ar07. How do you amend your taxes html. How do you amend your taxes Confidential transaction. How do you amend your taxes   A confidential transaction is offered to you under conditions of confidentiality and for which you have paid an advisor a minimum fee. How do you amend your taxes A transaction is offered under conditions of confidentiality if the advisor who is paid the fee places a limit on your disclosure of the tax treatment or tax structure of the transaction and the limit protects the confidentiality of the advisor's tax strategies. How do you amend your taxes The transaction is treated as confidential even if the conditions of confidentiality are not legally binding on you. How do you amend your taxes Transaction with contractual protection. How do you amend your taxes   Generally, a transaction with contractual protection is one in which you or a related party has the right to a full or partial refund of fees if all or part of the intended tax consequences of the transaction are not sustained, or a transaction for which the fees are contingent on your realizing the tax benefits from the transaction. How do you amend your taxes For information on exceptions, see Revenue Procedure 2007-20 in Internal Revenue Bulletin 2007-7, available at www. How do you amend your taxes irs. How do you amend your taxes gov/irb/2007-07_IRB/ar15. How do you amend your taxes html. How do you amend your taxes Loss transaction. How do you amend your taxes   For individuals, a loss transaction is one that results in a deductible loss if the gross amount of the loss is at least $2 million in a single tax year or $4 million in any combination of tax years. How do you amend your taxes A loss from a foreign currency transaction under Internal Revenue Code section 988 is a loss transaction if the gross amount of the loss is at least $50,000 in a single tax year, whether or not the loss flows through from an S corporation or partnership. How do you amend your taxes   Certain losses (such as losses from casualties, thefts, and condemnations) are excepted from this category and do not have to be reported on Form 8886. How do you amend your taxes For information on other exceptions, see Revenue Procedure 2004-66 in Internal Revenue Bulletin 2004-50, as modified and superseded by Revenue Procedure 2013-11, (or future published guidance) available at www. How do you amend your taxes irs. How do you amend your taxes gov/irb/2004-50_IRB/ar11. How do you amend your taxes html. How do you amend your taxes Transaction of interest. How do you amend your taxes   A transaction of interest is a transaction entered into after November 1, 2006, that is the same as, or substantially similar to, one of the types of transactions that the IRS has identified by notice, regulation, or other form of published guidance as a transaction of interest. How do you amend your taxes The IRS has identified the following transactions of interest. How do you amend your taxes “Toggling” grantor trusts as described in Notice 2007-73, 2007-36 I. How do you amend your taxes R. How do you amend your taxes B. How do you amend your taxes 545, available at www. How do you amend your taxes irs. How do you amend your taxes gov/irb/2007-36_IRB/ar20. How do you amend your taxes html. How do you amend your taxes Certain transactions involving contributions of a successor member interest in a limited liability company as described in Notice 2007-72, 2007-36 I. How do you amend your taxes R. How do you amend your taxes B. How do you amend your taxes 544, available at www. How do you amend your taxes irs. How do you amend your taxes gov/irb/2007-36_IRB/ar19. How do you amend your taxes html. How do you amend your taxes Certain transactions involving the sale or other disposition of all interests in a charitable remainder trust and claiming little or no taxable gain as described in Notice 2008-99, 2008-47 I. How do you amend your taxes R. How do you amend your taxes B. How do you amend your taxes 1194, available at www. How do you amend your taxes irs. How do you amend your taxes gov/irb/2008-47_IRB/ar11. How do you amend your taxes html. How do you amend your taxes Certain transactions involving a U. How do you amend your taxes S. How do you amend your taxes taxpayer owning controlled foreign corporations (CFCs) that hold stock of a lower-tier CFC through a domestic partnership to avoid reporting income as described in Notice 2009-7, 2009-3 I. How do you amend your taxes R. How do you amend your taxes B. How do you amend your taxes 312, available at www. How do you amend your taxes irs. How do you amend your taxes gov/irb/2009-03_IRB/ar10. How do you amend your taxes html. How do you amend your taxes   For updates to this list, go to www. How do you amend your taxes irs. How do you amend your taxes gov/Businesses/Corporations/Abusive-Tax-Shelters-and-Transactions. How do you amend your taxes Penalties Investing in an abusive tax shelter may lead to substantial expenses. How do you amend your taxes First, the promoter generally charges a substantial fee. How do you amend your taxes If your return is examined by the IRS and a tax deficiency is determined, you will be faced with payment of more tax, interest on the underpayment, possibly a 20%, 30%, or even 40% accuracy-related penalty, or a 75% civil fraud penalty. How do you amend your taxes You may also be subject to the penalty for failure to pay tax. How do you amend your taxes These penalties are explained in the following paragraphs. How do you amend your taxes Accuracy-related penalties. How do you amend your taxes   An accuracy-related penalty of 20% can be imposed for underpayments of tax due to: Negligence or disregard of rules or regulations, Substantial understatement of tax, Substantial valuation misstatement (increased to 40% for gross valuation misstatement), Transaction lacking economic substance (increased to 40% for undisclosed transaction lacking economic substance), or Undisclosed foreign financial asset understatement (40% in all cases). How do you amend your taxes Except for a transaction lacking economic substance, this penalty will not be imposed if you can show you had reasonable cause for any understatement of tax and that you acted in good faith. How do you amend your taxes Your failure to disclose a reportable transaction is a strong indication that you failed to act in good faith. How do you amend your taxes   If you are charged an accuracy-related penalty, interest will be imposed on the amount of the penalty from the due date of the return (including extensions) to the date you pay the penalty. How do you amend your taxes   The 20% penalties do not apply to any underpayment attributable to a reportable transaction understatement subject to an accuracy-related penalty (discussed later). How do you amend your taxes Negligence or disregard of rules or regulations. How do you amend your taxes   The penalty for negligence or disregard of rules or regulations is imposed only on the part of the underpayment due to negligence or disregard of rules or regulations. How do you amend your taxes The penalty will not be charged if you can show you had reasonable cause for understating your tax and that you acted in good faith. How do you amend your taxes    Negligence includes any failure to make a reasonable attempt to comply with the provisions of the Internal Revenue Code. How do you amend your taxes It also includes any failure to keep adequate books and records. How do you amend your taxes A return position that has a reasonable basis is not negligence. How do you amend your taxes   Disregard includes any careless, reckless, or intentional disregard of rules or regulations. How do you amend your taxes   The penalty for disregard of rules and regulations can be avoided if all the following are true. How do you amend your taxes You keep adequate books and records. How do you amend your taxes You have a reasonable basis for your position on the tax issue. How do you amend your taxes You make an adequate disclosure of your position. How do you amend your taxes Use Form 8275 to make your disclosure and attach it to your return. How do you amend your taxes To disclose a position contrary to a regulation, use Form 8275-R. How do you amend your taxes Use Form 8886 to disclose a reportable transaction (discussed earlier). How do you amend your taxes Substantial understatement of tax. How do you amend your taxes   An understatement is considered to be substantial if it is more than the greater of: 10% of the tax required to be shown on the return, or $5,000. How do you amend your taxes An “understatement” is the amount of tax required to be shown on your return for a tax year minus the amount of tax shown on the return, reduced by any rebates. How do you amend your taxes The term “rebate” generally means a decrease in the tax shown on your original return as the result of your filing an amended return or claim for refund. How do you amend your taxes   For items other than tax shelters, you can file Form 8275 or Form 8275-R to disclose items that could cause a substantial understatement of income tax. How do you amend your taxes In that way, you can avoid the substantial understatement penalty if you have a reasonable basis for your position on the tax issue. How do you amend your taxes Disclosure of the tax shelter item on a tax return does not reduce the amount of the understatement. How do you amend your taxes   Also, the understatement penalty will not be imposed if you can show there was reasonable cause for the underpayment caused by the understatement and that you acted in good faith. How do you amend your taxes An important factor in establishing reasonable cause and good faith will be the extent of your effort to determine your proper tax liability under the law. How do you amend your taxes Substantial valuation misstatement. How do you amend your taxes   In general, you are liable for a 20% penalty for a substantial valuation misstatement if all the following are true. How do you amend your taxes The value or adjusted basis of any property claimed on the return is 150% or more of the correct amount. How do you amend your taxes You underpaid your tax by more than $5,000 because of the misstatement. How do you amend your taxes You cannot establish that you had reasonable cause for the underpayment and that you acted in good faith. How do you amend your taxes   You may be assessed a penalty of 40% for a gross valuation misstatement. How do you amend your taxes If you misstate the value or the adjusted basis of property by 200% or more of the amount determined to be correct, you will be assessed a penalty of 40%, instead of 20%, of the amount you underpaid because of the gross valuation misstatement. How do you amend your taxes The penalty rate is also 40% if the property's correct value or adjusted basis is zero. How do you amend your taxes Transaction lacking economic substance. How do you amend your taxes   The economic substance doctrine only applies to an individual that entered into a transaction in connection with a trade or business or an activity engaged in for the production of income. How do you amend your taxes For transactions entered into after March 30, 2010, a transaction has economic substance for you as an individual taxpayer only if: The transaction changes your economic position in a meaningful way (apart from federal income tax effects), or You have a substantial purpose (apart from federal income tax effects) for entering into the transaction. How do you amend your taxes   For purposes of determining whether economic substance exists, a transaction's profit potential will only be taken into account if the present value of the reasonably expected pre-tax profit from the transaction is substantial compared to the present value of the expected net tax benefits that would be allowed if the transaction were respected. How do you amend your taxes   If any part of your underpayment is due to any disallowance of claimed tax benefits by reason of a transaction lacking economic substance or failing to meet the requirements of any similar rule of law, that part of your underpayment will be subject to the 20% accuracy-related penalty even if you had a reasonable cause and acted in good faith concerning that part. How do you amend your taxes   Additionally, the penalty increases to 40% if you do not adequately disclose on your return or in a statement attached to your return the relevant facts affecting the tax treatment of a transaction that lacks economic substance. How do you amend your taxes Relevant facts include any facts affecting the tax treatment of the transaction. How do you amend your taxes    Any excessive amount of an erroneous claim for an income tax refund or credit (other than a refund or credit related to the earned income credit) that results from a transaction found to be lacking economic substance will not be treated as having a reasonable basis and could be subject to a 20% penalty. How do you amend your taxes Undisclosed foreign financial asset understatement. How do you amend your taxes   For tax years beginning after March 18, 2010, you may be liable for a 40% penalty for an understatement of your tax liability due to an undisclosed foreign financial asset. How do you amend your taxes An undisclosed foreign financial asset is any asset for which an information return, required to be provided under Internal Revenue Code section 6038, 6038B, 6038D, 6046A, or 6048 for any taxable year, is not provided. How do you amend your taxes The penalty applies to any part of an underpayment related to the following undisclosed foreign financial assets. How do you amend your taxes Any foreign business you control, reportable on Form 5471, Information Return of U. How do you amend your taxes S. How do you amend your taxes Persons With Respect To Certain Foreign Corporations, or Form 8865, Return of U. How do you amend your taxes S. How do you amend your taxes Persons With Respect to Certain Foreign Partnerships. How do you amend your taxes Certain transfers of property to a foreign corporation or partnership, reportable on Form 926, Return by a U. How do you amend your taxes S. How do you amend your taxes Transferor of Property to a Foreign Corporation, or certain distributions to a foreign person, reportable on Form 8865. How do you amend your taxes Your ownership interest in certain foreign financial assets, temporarily reportable on Form 8275 or 8275-R. How do you amend your taxes    Instead of, or in addition to, Form 8275 or 8275-R, you may have to file Form 8938, Statement of Specified Foreign Financial Assets, with your tax return. How do you amend your taxes See the Instructions for Form 8938 for details. How do you amend your taxes    Your acquisition, disposition, or substantial change in ownership interest in a foreign partnership, reportable on Form 8865. How do you amend your taxes Creation or transfer of money or property to certain foreign trusts, reportable on Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts. How do you amend your taxes Penalty for incorrect appraisals. How do you amend your taxes   The person who prepares an appraisal of the value of property may have to pay a penalty if: He or she knows, or reasonably should have known, that the appraisal would be used in connection with a return or claim for refund; and The claimed value of the property on a return or claim for refund based on that appraisal results in a substantial valuation misstatement or a gross valuation misstatement as discussed earlier. How do you amend your taxes For details on the penalty amount and exceptions, see Publication 561. How do you amend your taxes Penalty for failure to disclose a reportable transaction. How do you amend your taxes   If you fail to include any required information regarding a reportable transaction (discussed earlier) on a return or statement, you may have to pay a penalty of 75% of the decrease in tax shown on your return as a result of such transaction (or that would have resulted if the transaction were respected for federal tax purposes). How do you amend your taxes For an individual, the minimum penalty is $5,000 and the maximum is $10,000 (or $100,000 for a listed transaction). How do you amend your taxes This penalty is in addition to any other penalty that may be imposed. How do you amend your taxes   The IRS may rescind or abate the penalty for failing to disclose a reportable transaction under certain limited circumstances but cannot rescind the penalty for failing to disclose a listed transaction. How do you amend your taxes For information on rescission, see Revenue Procedure 2007-21 in Internal Revenue Bulletin 2007-9 available at www. How do you amend your taxes irs. How do you amend your taxes gov/irb/2007-09_IRB/ar12. How do you amend your taxes html. How do you amend your taxes Accuracy-related penalty for a reportable transaction understatement. How do you amend your taxes   If you have a reportable transaction understatement, you may have to pay a penalty equal to 20% of the amount of that understatement. How do you amend your taxes This applies to any item due to a listed transaction or other reportable transaction with a significant purpose of avoiding or evading federal income tax. How do you amend your taxes The penalty is 30% rather than 20% for the part of any reportable transaction understatement if the transaction was not properly disclosed. How do you amend your taxes You may not have to pay the 20% penalty if you meet the strengthened reasonable cause and good faith exception. How do you amend your taxes The reasonable cause and good faith exception does not apply to any part of a reportable transaction understatement attributable to one or more transactions that lack economic substance. How do you amend your taxes   This penalty does not apply to the part of an understatement on which the fraud penalty, gross valuation misstatement penalty, or penalty for nondisclosure of noneconomic substance transactions is imposed. How do you amend your taxes Civil fraud penalty. How do you amend your taxes   If any underpayment of tax on your return is due to fraud, a penalty of 75% of the underpayment will be added to your tax. How do you amend your taxes Joint return. How do you amend your taxes   The fraud penalty on a joint return applies to a spouse only if some part of the underpayment is due to the fraud of that spouse. How do you amend your taxes Failure to pay tax. How do you amend your taxes   If a deficiency is assessed and is not paid within 10 days of the demand for payment, an investor can be penalized with up to a 25% addition to tax if the failure to pay continues. How do you amend your taxes Whether To Invest In light of the adverse tax consequences and the substantial amount of penalties and interest that will result if the claimed tax benefits are disallowed, you should consider tax shelter investments carefully and seek competent legal and financial advice. How do you amend your taxes Prev  Up  Next   Home   More Online Publications
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Understanding Your CP187 Notice

You received this notice to remind you of the amount you owe in tax, penalty and interest.


What you need to do

  • Read your notice carefully ― it will explain how much money you owe on your taxes.

You may want to...


Answers to Common Questions

  • Am I charged interest on the money I owe?
    Yes, interest accrues on your unpaid balance until you pay it in full.

  • Do I receive a penalty if I cannot pay the full amount?
    Yes, you receive a late payment penalty.

  • What happens if I cannot pay the full amount I owe?
    You can arrange to make a payment plan with us if you cannot pay the full amount you owe.

  • How can I set up a payment plan?
    Call the toll-free number listed on the top right corner of your notice to discuss payment options or learn more about payment arrangements here.

  • What’s a Federal Tax Deposit Coupon Book? Do I need one?
    The coupon book allows you to make deposits at your bank of various business taxes such as income tax withholding, Social Security tax and Medicare tax collected from your employees’ pay. You can also make your tax liability deposits electronically through the Electronic Federal Tax Deposit System. If your employment taxes are less than $2500 each quarter, you can submit your employment tax payment with your Form 941, Employer’s QUARTERLY Federal Tax Return.

  •  


  • Tips for next year

    Consider filing your taxes electronically. Filing online can help you avoid mistakes and find credits and deductions for which you may qualify. In many cases, you can file free. Learn more about how to file electronically here.


    Understanding your notice

    Your notice may look different from the sample because the information contained in your notice is tailored to your situation.

    Notice CP187, Page 1

    Notice CP187, Page 2

    Notice CP187, Page 3

Page Last Reviewed or Updated: 09-Dec-2013

How to get help

  • Call the 1-800 number listed on the top right corner of your notice.
  • Authorize someone (e.g., accountant) to contact the IRS on your behalf using Form 2848.
  • See if you qualify for help from a Low Income Taxpayer Clinic.
     

The How Do You Amend Your Taxes

How do you amend your taxes Index A Adoption Taxpayer identification number, Adoption taxpayer identification number (ATIN). How do you amend your taxes Aliens, Individual taxpayer identification number (ITIN) for aliens. How do you amend your taxes Alternative minimum tax (AMT), Limit on credit. How do you amend your taxes Amount of credit, Amount of Credit, Payments for prior year's expenses. How do you amend your taxes Limit on, Limit on credit. How do you amend your taxes Assistance (see Tax help) C Calculation of credit, How To Figure the Credit, Payments for prior year's expenses. How do you amend your taxes Camp, overnight, Camp. How do you amend your taxes Care Dependent care benefits, Dependent care benefits. How do you amend your taxes , Dependent care benefits. How do you amend your taxes Employer-provided benefits, Dependent Care Benefits Outside home, Care outside your home. How do you amend your taxes Provider identification, Provider Identification Test Qualifying person, Care of a Qualifying Person Children Divorced or separated parents, Child of divorced or separated parents or parents living apart. How do you amend your taxes Physically or mentally disabled, Qualifying Person Test Under age 13, Qualifying Person Test Work-related expense payments to relatives, Payments to Relatives or Dependents Church employee, Clergy or church employee. How do you amend your taxes Claiming of credit, How To Claim the Credit Tests to claim credit, Tests To Claim the Credit Clergy, Clergy or church employee. How do you amend your taxes Community property, Community property laws. How do you amend your taxes D Death of spouse, Death of spouse. How do you amend your taxes Dependent care benefits, Dependent care benefits. How do you amend your taxes , Dependent Care Benefits Dependent care centers, Dependent care center. How do you amend your taxes Dependent defined, Dependent defined. How do you amend your taxes Dependents (see Qualifying person test) Deposits, Fees and deposits. How do you amend your taxes Disabilities, persons with Dependents, Qualifying Person Test Physically or mentally not able to care for self, Physically or mentally not able to care for oneself. How do you amend your taxes Spouse, Qualifying Person Test, Rule for student-spouse or spouse not able to care for self. How do you amend your taxes , Working or Looking for Work, You or your spouse is a student or not able to care for self. How do you amend your taxes Divorced parents, Child of divorced or separated parents or parents living apart. How do you amend your taxes Dollar limit, Dollar Limit, Yearly limit. How do you amend your taxes Reduced dollar limit, Tests To Claim the Credit, Reduced Dollar Limit Domestic help, Housekeeper. How do you amend your taxes Due diligence, Due diligence. How do you amend your taxes E Earned income Dependent care benefits, Exclusion or deduction. How do you amend your taxes For figuring credit, Earned Income Test Limit on, Earned Income Limit Net loss, Net loss. How do you amend your taxes Nonworking spouse, Rule for student-spouse or spouse not able to care for self. How do you amend your taxes Self-employment earnings, Self-employment earnings. How do you amend your taxes Statutory employees, Statutory employee. How do you amend your taxes What is not, What is not earned income? Earned income test, Earned Income Test, Full-time student. How do you amend your taxes Determination, Tests To Claim the Credit Education expenses, Education. How do you amend your taxes Employer-provided dependent care benefits, Dependent care benefits. How do you amend your taxes , Dependent Care Benefits Employment taxes, Reminders, Taxes paid on wages. How do you amend your taxes , How To Claim the Credit Exclusion from income Employer-provided dependent care benefits, Dependent care benefits. How do you amend your taxes , Exclusion or deduction. How do you amend your taxes Expenses, How To Figure the Credit (see also Work-related expenses) 2012 expenses paid in 2013 (Worksheet A), Worksheet A. How do you amend your taxes Worksheet for 2012 Expenses Paid in 2013 Education, Education. How do you amend your taxes Medical, Medical expenses. How do you amend your taxes Not for care, Expenses not for care. How do you amend your taxes Prepaid, Expenses prepaid in an earlier year. How do you amend your taxes Reimbursed, Expenses reimbursed. How do you amend your taxes F Fees, Fees and deposits. How do you amend your taxes Figures, Tests To Claim the Credit Figuring credit, How To Figure the Credit, Payments for prior year's expenses. How do you amend your taxes Earned income, Earned income. How do you amend your taxes Filing status Joint return test, Joint Return Test Tests to claim credit, Tests To Claim the Credit Form 1040 Claiming the credit, Tests To Claim the Credit, Form 1040, Form 1040A, or Form 1040NR. How do you amend your taxes Form 1040A Claiming the credit, Tests To Claim the Credit Form 2441, Form 1040, Form 1040A, or Form 1040NR. How do you amend your taxes Form 4029, Members of certain religious faiths opposed to social security. How do you amend your taxes , Form 4029. How do you amend your taxes Form 4361, Members of certain religious faiths opposed to social security. How do you amend your taxes , Form 4361. How do you amend your taxes Form W-10, Getting the information. How do you amend your taxes Form W-2 Dependent care benefits, Statement for employee. How do you amend your taxes Form W-7, Individual taxpayer identification number (ITIN) for aliens. How do you amend your taxes Free tax services, Free help with your tax return. How do you amend your taxes H Help (see Tax help) Household services, Care of a Qualifying Person, Household Services, Meals and lodging provided for housekeeper. How do you amend your taxes Employment taxes, How To Claim the Credit Housekeepers, Housekeeper. How do you amend your taxes I Identification of provider, Provider Identification Test, Provider refusal. How do you amend your taxes Individual taxpayer identification numbers (ITINs) For aliens, Individual taxpayer identification number (ITIN) for aliens. How do you amend your taxes Inmate, What is not earned income? J Joint return test, Joint Return Test, Costs of keeping up a home. How do you amend your taxes Tests to claim credit, Tests To Claim the Credit L Limits Amount of credit, Limit on credit. How do you amend your taxes Dollar, Dollar Limit Earned income, Earned Income Limit Reduced dollar, Tests To Claim the Credit, Reduced Dollar Limit Looking for work, Working or Looking for Work Losses, Net loss. How do you amend your taxes M Married and living apart, Married and living apart. How do you amend your taxes Meals and lodging for housekeeper, Meals and lodging provided for housekeeper. How do you amend your taxes Medical expenses, Medical expenses. How do you amend your taxes Minister, Clergy or church employee. How do you amend your taxes Missing children, photographs of, Reminders N Nonrefundability of credit, Tax credit not refundable. How do you amend your taxes Not able to care for self Qualifying person test, Physically or mentally not able to care for oneself. How do you amend your taxes Spouse, Qualifying Person Test, Rule for student-spouse or spouse not able to care for self. How do you amend your taxes , Working or Looking for Work, You or your spouse is a student or not able to care for self. How do you amend your taxes O Outside of home care, Care outside your home. How do you amend your taxes P Part of year Persons qualifying for, Person qualifying for part of year. How do you amend your taxes Work or looking for work, Work for part of year. How do you amend your taxes Part-time work, Part-time work. How do you amend your taxes Prepaid expenses, Expenses prepaid in an earlier year. How do you amend your taxes Prisoner, What is not earned income? Provider identification test, Tests To Claim the Credit, Provider Identification Test, Provider refusal. How do you amend your taxes Publications (see Tax help) Q Qualifying child, Qualifying child. How do you amend your taxes Qualifying person Care for, Care of a Qualifying Person Expenses not for care, Expenses not for care. How do you amend your taxes Qualifying person test, Qualifying Person Test, Child of divorced or separated parents or parents living apart. How do you amend your taxes Tests to claim credit, Tests To Claim the Credit R Recordkeeping requirements, How To Claim the Credit Reduced dollar limit, Reduced Dollar Limit Tests to claim credit, Tests To Claim the Credit Refusal by provider to give information, Provider refusal. How do you amend your taxes Reimbursed expenses, Expenses reimbursed. How do you amend your taxes Relatives, payments to, Tests To Claim the Credit, Payments to Relatives or Dependents Religious faiths opposed to social security programs, Members of certain religious faiths opposed to social security. How do you amend your taxes S School expenses, Education. How do you amend your taxes Self-employed persons, Self-employment earnings. How do you amend your taxes Separated parents, Child of divorced or separated parents or parents living apart. How do you amend your taxes , Legally separated. How do you amend your taxes Separated spouse, Separated spouse. How do you amend your taxes Sick days, Temporary absence from work. How do you amend your taxes Social Security, Employment Taxes for Household Employers (see also Employment taxes) Religious faiths opposed to, Members of certain religious faiths opposed to social security. How do you amend your taxes Social security numbers, Information needed. How do you amend your taxes Spouse Both spouses qualifying, Both spouses qualify. How do you amend your taxes Death of, Death of spouse. How do you amend your taxes Nonworking, earned income, Rule for student-spouse or spouse not able to care for self. How do you amend your taxes Not able to care for self, Qualifying Person Test, Rule for student-spouse or spouse not able to care for self. How do you amend your taxes , Working or Looking for Work, You or your spouse is a student or not able to care for self. How do you amend your taxes Qualifying person, Qualifying Person Test Separated, Separated spouse. How do you amend your taxes Student, Rule for student-spouse or spouse not able to care for self. How do you amend your taxes , You or your spouse is a student or not able to care for self. How do you amend your taxes Surviving, Surviving spouse. How do you amend your taxes Working, Spouse works. How do you amend your taxes Students Full-time, Full-time student. How do you amend your taxes Spouse, Rule for student-spouse or spouse not able to care for self. How do you amend your taxes , You or your spouse is a student or not able to care for self. How do you amend your taxes T Tax help, How To Get Tax Help Taxes on wages (see Employment taxes) Taxpayer identification number (TINs), Reminders, Taxpayer identification number. How do you amend your taxes Adoption, Adoption taxpayer identification number (ATIN). How do you amend your taxes Aliens, Individual taxpayer identification number (ITIN) for aliens. How do you amend your taxes Providers, Information needed. How do you amend your taxes Temporary absence, Temporary absence from work. How do you amend your taxes Tests to claim credit, Tests To Claim the Credit, Exclusion or deduction. How do you amend your taxes Determination, Tests To Claim the Credit Earned income, Earned Income Test Qualifying persons, Qualifying Person Test Work-related expenses, Work-Related Expense Test Transportation, Transportation. How do you amend your taxes TTY/TDD information, How To Get Tax Help U Unearned income, What is not earned income? V Vacation, Temporary absence from work. How do you amend your taxes Volunteer work, Volunteer work. How do you amend your taxes W Wages, taxes on (see Employment taxes) Withholding Federal income tax, Employment Taxes for Household Employers Work-related expense test, Work-Related Expense Test, Payments to Relatives or Dependents Partly work-related expenses, Expenses partly work-related. How do you amend your taxes Tests to claim credit, Tests To Claim the Credit Work-related expenses Earned income limit, Earned Income Limit Figuring of credit, Figuring Total Work-Related Expenses Medical, Medical expenses. How do you amend your taxes Paid following year, Expenses not paid until the following year. How do you amend your taxes , Payments for prior year's expenses. How do you amend your taxes , Worksheet A. How do you amend your taxes Worksheet for 2012 Expenses Paid in 2013 Partly work-related expenses, Expenses partly work-related. How do you amend your taxes Prepaid, Expenses prepaid in an earlier year. How do you amend your taxes Recordkeeping, How To Claim the Credit Reimbursed, Expenses reimbursed. How do you amend your taxes Worksheets 2012 expenses paid in 2013 (Worksheet A), Worksheet A. How do you amend your taxes Worksheet for 2012 Expenses Paid in 2013 Prev  Up     Home   More Online Publications