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Identity Theft Leads List of IRS’s Roster of Dirty Dozen Tax Scams

Tax-related identity theft is the number one item on the IRS’s roster of “Dirty Dozen” tax scams, the Service has announced. The Dirty Dozen roster is compiled annually by the IRS and lists a variety of common scams taxpayers may encounter, especially during the filing season. The IRS reported that it has made significant progress over the past several years to address tax scams. Tax-related identity theft remains a top concern as the IRS works with states and the tax industry to protect taxpayers and help victims.

“Our collaborative efforts with the Security Summit have given the IRS additional tools to stop fraudulent returns at the door,” said IRS Commissioner John Koskinen. “Criminals continue to look for increasingly sophisticated ways to breach the tax system. While the IRS has improved prevention and detection efforts, we’re calling on taxpayers to protect their private information so thieves can’t steal personal data to file fraudulent returns.”

The IRS Criminal Investigation (CI) is helping to prosecute the criminals behind these scams and statistics show that in the most recent three fiscal years (FY), CI convicted around 2,000 identity thieves. In FY 2015, the IRS initiated 776 identity theft related investigations. The courts continue to impose significant jail time with the average months to serve in FY 2015 at 38 months, the longest sentencing being over 27 years, the Service added.

Top 10 Tax Tips about Filing an Amended Tax Return

The following is from a recent IRS Tax Tip regarding amended tax returns.  If you find that you need to amend, give us a call and we can take care of it for you.  Or, if you are unsure and would like to find out more, give us a call.

We all make mistakes so don’t panic if you made one on your tax return.  You can file an amended return if you need to fix an error.  You can also amend your tax return if you forgot to claim a tax credit or deduction.  Here are ten tips from the IRS if you need to amend your federal tax return.

  1. When to amend.  You should amend your tax return if you need to correct your filing status, the number of dependents you claimed, or your total income. You should also amend your return to claim tax deductions or tax credits that you did not claim when you filed your original return.  The instructions for Form 1040X, Amended U.S. Individual Income Tax Return, list more reasons to amend a return.

Note: If, as allowed by recent legislation, you plan to amend your tax year 2014 return to retroactively claim the Health Coverage Tax Credit, see IRS.Gov/HCTC first for more information.

  1. When NOT to amend.  In some cases, you don’t need to amend your tax return. The IRS usually corrects math errors when processing your original return.  If you didn’t include a required form or schedule, the IRS will send you a notice via U.S. mail about the missing item.
  2. Form 1040X.  Use Form 1040X to amend a federal income tax return that you filed before. Make sure you check the box at the top of the form that shows which year you are amending.  Since you can’t e-file an amended return, you’ll need to file your Form 1040X on paper and mail it to the IRS.

Form 1040X has three columns.  Column A shows amounts from the original return.  Column B shows the net increase or decrease for the amounts you are changing.  Column C shows the corrected amounts.  You should explain what you are changing and the reasons why on the back of the form.

  1. More than one year.  If you file an amended return for more than one year, use a separate 1040X for each tax year. Mail them in separate envelopes to the IRS.
  2. Other forms or schedules.  If your changes have to do with other tax forms or schedules, make sure you attach them to Form 1040X when you file the form. If you don’t, this will cause a delay in processing.
  3. Amending to claim an additional refund.  If you are waiting for a refund from your original tax return, don’t file your amended return until after you receive the refund. You may cash the refund check from your original return.  Amended returns take up to 16 weeks to process.  You will receive any additional refund you are owed.
  4. Amending to pay additional tax.  If you’re filing an amended tax return because you owe more tax, you should file Form 1040X and pay the tax as soon as possible. This will limit interest and penalty charges.
  5. Corrected Forms 1095-A.  If you or anyone on your return enrolled in qualifying health care coverage through the Health Insurance Marketplace, you should have received a Form 1095-A, Health Insurance Marketplace Statement. You may have also received a corrected Form 1095-A.  If you filed your tax return based on the original Form 1095-A, you do not need to file an amended return based on a corrected Form 1095-A.  This is true even if you would owe additional taxes based on the new information.  However, you may choose to file an amended return.

In some cases, the information on the new Form 1095-A may lower the amount of taxes you owe or increase your refund.  You may also want to file an amended return if:

  • You filed and incorrectly claimed a premium tax credit, or
  • You filed an income tax return and failed to file Form 8962, Premium Tax Credit, to reconcile your advance payments of the premium tax credit.

Before amending your return, if you received a letter regarding your premium tax credit or Form 8962 you should follow the instructions in the letter.

  1. When to file.  To claim a refund file Form 1040X no more than three years from the date you filed your original tax return. You can also file it no more than two years from the date you paid the tax, if that date is later than the three-year rule.
  2. Track your return.  You can track the status of your amended tax return three weeks after you file with “Where’s My Amended Return?”  This tool is available on IRS.gov or by phone at 866-464-2050.

Job Search Expenses May be Deductible

The following is from a recent IRS Tax Tip on possible tax benefits of changing jobs.  If you have any questions about these or other tax issues, please give us call; we’re always here to help.

People often change their job in the summer.  If you look for a job in the same line of work, you may be able to deduct some of your job search costs.  Here are some key tax facts you should know about if you search for a new job:

  • Same Occupation.  Your expenses must be for a job search in your current line of work.  You can’t deduct expenses for a job search in a new occupation.
  • Résumé Costs.  You can deduct the cost of preparing and mailing your résumé.
  • Travel Expenses.  If you travel to look for a new job, you may be able to deduct the cost of the trip.  To deduct the cost of the travel to and from the area, the trip must be mainly to look for a new job.  You may still be able to deduct some costs if looking for a job is not the main purpose of the trip.
  • Placement Agency.  You can deduct some job placement agency fees you pay to look for a job.
  • First Job.  You can’t deduct job search expenses if you’re looking for a job for the first time.
  • Substantial Job Break.  You can’t deduct job search expenses if there was a long break between the end of your last job and the time you began looking for a new one.
  • Reimbursed Costs.  Reimbursed expenses are not deductible.
  • Schedule A.  You usually deduct your job search expenses on Schedule A, Itemized Deductions.  You’ll claim them as a miscellaneous deduction.  You can deduct the total miscellaneous deductions that are more than two percent of your adjusted gross income.
  • Premium Tax Credit.  If you receive advance payments of the premium tax credit it is important that you report changes in circumstances, such as changes in your income or eligibility for other coverage, to your Health Insurance Marketplace.  Other changes that you should report include changes in your family size or address.  Advance payments of the premium tax credit provide financial assistance to help you pay for the insurance you buy through the Health Insurance Marketplace.  Reporting changes will help you get the proper type and amount of financial assistance so you can avoid getting too much or too little in advance.

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Key Tax Tips on the Tax Effects of Divorce or Separation

The following is from a recent IRS Tax Tip regarding the tax impact of a divorce or separation.  Please let us know if you may be facing one of these and we can help you navigate the issues.

Income tax may be the last thing on your mind after a divorce or separation.  However, these events can have a big impact on your taxes.  Alimony and a name change are just a few items you may need to consider.  Here are some key tax tips to keep in mind if you get divorced or separated.

  • Child Support.  If you pay child support, you can’t deduct it on your tax return.  If you receive child support, the amount you receive is not taxable.
  • Alimony Paid.  If you make payments under a divorce or separate maintenance decree or written separation agreement you may be able to deduct them as alimony.  This applies only if the payments qualify as alimony for federal tax purposes.  If the decree or agreement does not require the payments, they do not qualify as alimony.
  • Alimony Received.  If you get alimony from your spouse or former spouse, it is taxable in the year you get it.  Alimony is not subject to tax withholding so you may need to increase the tax you pay during the year to avoid a penalty.  To do this, you can make estimated tax payments or increase the amount of tax withheld from your wages.
  • Spousal IRA.  If you get a final decree of divorce or separate maintenance by the end of your tax year, you can’t deduct contributions you make to your former spouse’s traditional IRA.  You may be able to deduct contributions you make to your own traditional IRA.
  • Name Changes.  If you change your name after your divorce, notify the Social Security Administration of the change.  File Form SS-5, Application for a Social Security Card.  You can get the form on SSA.gov or call 800-772-1213 to order it.  The name on your tax return must match SSA records.  A name mismatch can delay your refund.

Health Care Law Considerations

  • Special Marketplace Enrollment Period.  If you lose your health insurance coverage due to divorce, you are still required to have coverage for every month of the year for yourself and the dependents you can claim on your tax return.  Losing coverage through a divorce is considered a qualifying life event that allows you to enroll in health coverage through the Health Insurance Marketplace during a Special Enrollment Period.
  • Changes in Circumstances.  If you purchase health insurance coverage through the Health Insurance Marketplace, you may get advance payments of the premium tax credit in 2015.  If you do, you should report changes in circumstances to your Marketplace throughout the year.  Changes to report include a change in marital status, a name change, and a change in your income or family size.  By reporting changes, you will help make sure that you get the proper type and amount of financial assistance.  This will also help you avoid getting too much or too little credit in advance.
  • Shared Policy Allocation.  If you divorced or are legally separated during the tax year and are enrolled in the same qualified health plan, you and your former spouse must allocate policy amounts on your separate tax returns to figure your premium tax credit and reconcile any advance payments made on your behalf.  Publication 974, Premium Tax Credit, has more information about the Shared Policy Allocation.

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Reminder: Highway Use Tax Return is due Aug. 31

WASHINGTON — The Internal Revenue Service recently reminded truckers and other owners of heavy highway vehicles that in most cases their next federal highway use tax return is due Monday, Aug. 31, 2015.

The deadline generally applies to Form 2290 and the accompanying tax payment for the tax year that begins July 1, 2015, and ends June 30, 2016. Returns must be filed and tax payments made by Aug. 31 for vehicles used on the road during July.  For vehicles first used after July, the deadline is the last day of the month following the month of first use.

Though some taxpayers have the option of filing Form 2290 on paper, the IRS encourages all taxpayers to take advantage of the speed and convenience of filing this form electronically and paying any tax due electronically.  Taxpayers reporting 25 or more vehicles must e-file.

The highway use tax applies to highway motor vehicles with a taxable gross weight of 55,000 pounds or more.  This generally includes trucks, truck tractors, and buses.  Ordinarily, vans, pick-ups, and panel trucks are not taxable because they fall below the 55,000-pound threshold.  The tax of up to $550 per vehicle is based on weight, and a variety of special rules apply, explained in the instructions to Form 2290.

Additional IRS Statement on the “Get Transcript” Incident

Following an incident involving the IRS’s “Get Transcript” web application discovered in May, the IRS conducted an extensive review covering the 2015 filing season to assess whether other suspicious activity occurred. Following this review, the IRS has identified more questionable attempts to obtain transcripts using sensitive information already in the hands of criminals. As a result, the IRS is moving immediately to notify and help protect these taxpayers.

As it did in May, the IRS is moving aggressively to protect taxpayers whose account information may have been accessed. The IRS will begin mailing letters in the next few days to about 220,000 taxpayers where there were instances of possible or potential access to “Get Transcript” taxpayer account information. As an additional protective step, the IRS will also be mailing letters to approximately 170,000 other households alerting them that their personal information could be at risk even though identity thieves failed in efforts to access the IRS system.

A wide variety of actions to protect taxpayers are being taken beyond the mailings, including offering taxpayers free credit protection as well as Identity Protection PINs. The IRS takes the security of taxpayer data extremely seriously, and we are working to continue to strengthen security for “Get Transcript,” including by enhancing taxpayer-identity authentication protocols.

Additional Information

In May, the IRS determined unauthorized third parties already had sufficient information from a source outside the tax agency before accessing the “Get Transcript” application. This allowed them to clear a multi-step authentication process, including several personal verification questions that typically are only known by the taxpayer.

When the IRS first identified the problem in May, it determined that these third parties with taxpayer-specific sensitive data from non-IRS sources cleared the Get Transcript verification process on about 114,000 total attempts. In addition, third parties made another 111,000 attempts that failed to pass the final verification step, meaning they were unable to have access to account information through the Get Transcript service.

Since then, as part of the IRS’s continued efforts to protect taxpayer data, the IRS conducted a deeper analysis over a wider time period covering the 2015 filing season, analyzing more than 23 million uses of the Get Transcript system.

The new review identified an estimated additional 220,000 attempts where individuals with taxpayer-specific sensitive data cleared the Get Transcript verification process. The review also identified an additional 170,000 suspected attempts that failed to clear the authentication processes.

The IRS will begin mailing letters in the next few days to the taxpayers whose accounts may have been accessed.  Given the uncertainty in many of these cases — where a tax return was filed before the Get Transcript access occurred for example — the IRS notices will advise taxpayers that they can disregard the letter if they were actually the ones seeking a copy of their tax return information.

The IRS believes some of this information may have been gathered for potentially filing fraudulent tax returns during the upcoming 2016 filing season so anyone receiving a letter should take steps to protect themselves by taking advantage of the free credit monitoring and IP PIN which can be used to verify the authenticity of next year’s tax return.

The “Get Transcript” application was shut down in May, and the IRS continues to work on strengthening the system. In the meantime, taxpayers have several other options to obtain transcripts.

The IRS takes the security of taxpayer data extremely seriously, and we are working aggressively to protect affected taxpayers and continue to strengthen our systems.

The matter remains under review by the Treasury Inspector General for Tax Administration as well as IRS Criminal Investigation.

Moving Expense Deduction

The following is from a recent IRS Tax Tip regarding moving expenses and how and what you can deduct.  As always, we are here to assist and direct you with completing your taxes and answering your questions.

If you move your home, you may be able to deduct the cost of the move on your federal tax return next year.  This may apply if you move to start a new job or to work at the same job in a new location.  In order to deduct your moving expenses, your move must meet three requirements:

  1. Your move must closely relate to the start of work.  In most cases, you can consider moving expenses within one year of the date you start work at a new job location. Additional rules apply to this requirement.
  2. Your move must meet the distance test.  Your new main job location must be at least 50 miles farther from your old home than your prior job location. For example, let’s say that your old job was three miles from your old home.  To meet this test, your new job must be at least 53 miles from your old home.
  3. You must meet the time test.  You must work full-time at your new job for at least 39 weeks the first year after the move. If you’re self-employed, you must also meet this test.  In addition, you must work full-time for a total of at least 78 weeks during the first two years at the new job site.  If your tax return is due before you meet the time test, you can still claim the deduction if you expect to meet it.

If you qualify for this deduction, here are a few more tips from the IRS:

  • Travel.  You can deduct certain transportation and lodging expenses while moving.  This applies to costs for yourself and other household members while moving from your old home to your new home.  You may not deduct your travel meal costs.
  • Household goods and utilities.  You can deduct the cost of packing, crating and shipping your property.  This may include the cost to store or insure the items while in transit.  You can deduct the cost to disconnect or connect utilities at your old and new homes.
  • Expenses you can’t deduct.  You may not deduct:
    • Any part of the purchase price of your new home.
    • The cost of selling your home.
    • The cost of breaking or entering into a lease.
  • Reimbursed expenses.  If your employer later pays you for the cost of a move that you deducted on your tax return, you may need to include the payment as income.  You must report any taxable amount on your tax return in the year you get the payment.
  • Address change.  When you move, make sure to update your address with the IRS and the U.S. Post Office.  To notify the IRS, file Form 8822, Change of Address.

Premium Tax Credit – Changes in Circumstances.  If you purchased health insurance coverage from the Health Insurance Marketplace, you may receive advance payments of the premium tax credit. It is important that you report changes in circumstances, such as when you move to a new address, to your Marketplace.  Other changes that you should report include changes in your income, employment, family size, or eligibility for other coverage.  Advance credit payments provide premium assistance to help you pay for the insurance you buy through the Marketplace.  Reporting changes will help you get the proper type and amount of premium assistance so you can avoid getting too much or too little in advance.

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Determine If You Are Subject to the Individual Shared Responsibility Provision

The following is from a recent IRS Tax Tip outlining who is responsible for the PPACA’s Individual Shared Responsibility payment.  As always, if you have any questions, please don’t hesitate to call or write with your questions.

The Affordable Care Act includes the individual shared responsibility provision that requires all taxpayers, including their spouse and dependents, to have qualifying health insurance for the entire year, report a health coverage exemption, or make a payment when you file.

Who is subject to this provision?

All U.S. citizens living in the United States are subject to the individual shared responsibility provision.

Children are subject to the individual shared responsibility provision.

  • Each child must have minimum essential coverage or qualify for an exemption for each month in the calendar year.  Otherwise, the adult or married couple who can claim the child as a dependent for federal income tax purposes will generally owe a shared responsibility payment for the child.

Senior citizens are subject to the individual shared responsibility provision.

  • Both Medicare Part A and Medicare Part C – also known as Medicare Advantage – qualify as minimum essential coverage.

All permanent residents and all foreign nationals who are in the United States long enough during a calendar year to qualify as resident aliens for tax purposes are subject to the individual shared responsibility provision.

  • Foreign nationals who live in the United States for a short enough period that they do not become resident aliens for federal income tax purposes are not subject to the individual shared responsibility payment even though they may have to file a U.S. income tax return.
  • Individuals who are not U.S. citizens or nationals and are not lawfully present in the United States are exempt from the individual shared responsibility provision.  For this purpose, an immigrant with Deferred Action for Childhood Arrivals status is considered not lawfully present, and therefore is eligible for this exemption even if he or she has a social security number.  Claim coverage exemptions on Form 8965, Health Coverage Exemptions.
  • U.S. citizens living abroad are subject to the individual shared responsibility provision.
  • However, U.S. citizens who are not physically present in the United States for at least 330 full days within a 12-month period are treated as having minimum essential coverage for that 12-month period.  In addition, U.S. citizens who are bona fide residents of a foreign country or countries for an entire taxable year are treated as having minimum essential coverage for that year.
  • All bona fide residents of the United States territories are treated by law as having minimum essential coverage.

Don’t Fall for New Tax Scam Tricks by IRS Posers

The following is from a recent IRS Tax Tip warning taxpayers to beware of scams.  It’s very important that you be as well armed as you can be and be mindful that tricksters are real and dangerous.  As always, if you have any questions, we are here to help you in any way we can.

Though the tax season is over, tax scammers work year-round.  The IRS advises you to stay alert to protect yourself against new ways criminals pose as the IRS to trick you out of your money or personal information.  These scams first tried to sting older Americans, newly arrived immigrants and those who speak English as a second language.  The crooks have expanded their net, and now try to swindle virtually anyone.  Here are several tips from the IRS to help you avoid being a victim of these scams:

  • Scams use scare tactics.  These aggressive and sophisticated scams try to scare people into making a false tax payment that ends up with the criminal.  Many phone scams use threats to try to intimidate you so you will pay them your money.  They often threaten arrest or deportation, or that they will revoke your license if you don’t pay.  They may also leave “urgent” callback requests, sometimes through “robo-calls,” via phone or email.  The emails will often contain a fake IRS document with a phone number or an email address for you to reply.
  • Scams use caller ID spoofing.  Scammers often alter caller ID to make it look like the IRS or another agency is calling.  The callers use IRS titles and fake badge numbers to appear legit.  They may use online resources to get your name, address and other details about your life to make the call sound official.
  • Scams use phishing email and regular mail.  Scammers copy official IRS letterhead to use in email or regular mail they send to victims.  In another new variation, schemers provide an actual IRS address where they tell the victim to mail a receipt for the payment they make.  All in an attempt to make the scheme look official.
  • Scams cost victims over $20 million.  The Treasury Inspector General for Tax Administration, or TIGTA, has received reports of about 600,000 contacts since October 2013.  TIGTA is also aware of nearly 4,000 victims who have collectively reported over $20 million in financial losses as a result of tax scams.

The real IRS will not:

  • Call you to demand immediate payment.  The IRS will not call you if you owe taxes without first sending you a bill in the mail.
  • Demand that you pay taxes and not allow you to question or appeal the amount that you owe.
  • Require that you pay your taxes a certain way.  For instance, require that you pay with a prepaid debit card.
  • Ask for credit or debit card numbers over the phone.
  • Threaten to bring in police or other agencies to arrest you for not paying.

If you don’t owe taxes or have no reason to think that you do:

  • Do not provide any information to the caller.  Hang up immediately.
  • Contact the Treasury Inspector General for Tax Administration.  Use TIGTA’s “IRS Impersonation Scam Reporting” web page to report the incident.
  • You should also report it to the Federal Trade Commission.  Use the “FTC Complaint Assistant” on FTC.gov.  Please add “IRS Telephone Scam” in the notes.

 

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Back-to-School Education Tax Credits

The following is from a recent IRS Tax Tip regarding education tax credits.  If you believe you may qualify, let us know and we’ll help you determine your best options.

If you, your spouse or a dependent are heading off to college in the fall, some of your costs may save you money at tax time.  You may be able to claim a tax credit on your federal tax return.  Here are some key IRS tips that you should know about e tax credits:

  • American Opportunity Tax Credit.  The AOTC is worth up to $2,500 per year for an eligible student. You may claim this credit only for the first four years of higher education.  Forty percent of the AOTC is refundable.  That means if you are eligible, you can get up to $1,000 of the credit as a refund, even if you do not owe any taxes.
  • Lifetime Learning Credit.  The LLC is worth up to $2,000 on your tax return. There is no limit on the number of years that you can claim the LLC for an eligible student.
  • One credit per student.  You can claim only one type of education credit per student on your tax return each year. If more than one student qualifies for a credit in the same year, you can claim a different credit for each student.  For instance, you can claim the AOTC for one student, and claim the LLC for the other.
  • Qualified expenses.  You may use qualified expenses to figure your credit. These include the costs you pay for tuition, fees, and other related expenses for an eligible student.
  • Eligible educational institutions.  Eligible schools are those that offer education beyond high school.  This includes most colleges and universities.  Vocational schools or other postsecondary schools may also qualify.  If you aren’t sure if your school is eligible:
    • Ask your school if it is an eligible educational institution, or
    • See if your school is on the U.S. Department of Education’s Accreditation database.
  • Form 1098-T.  In most cases, you should receive Form 1098-T, Tuition Statement, from your school by Feb. 1, 2016. This form reports your qualified expenses to the IRS and to you.  The amounts shown on the form may be different than the amounts you actually paid.  That might happen because some of your related costs may not appear on the form.  For instance, the cost of your textbooks may not appear on the form.  However, you still may be able to include those costs when you figure your credit.  Don’t forget that you can only claim an education credit for the qualified expenses that you paid in that same tax year.
  • Nonresident alien.  If you are in the United States on an F-1 Student Visa, the tax rules generally treat you as a nonresident alien for federal tax purposes.  To find out more about your F-1 Student Visa status, visit U.S. Immigration Support.
  • Income limits. These credits are subject to income limitations and may be reduced or eliminated, based on your income.

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