Year: 2017

Debt Cancellation May be Taxable

Debt Cancellation May be Taxable

The IRS issued Tax Tip 2017-23 providing information about debt cancellation.  If a lender cancels part or all of a debt, a taxpayer must generally consider this as income. However, the law allows an exclusion that may apply to homeowners who had their mortgage debt canceled in 2016.

Here are 10 tips about debt cancellation:

  1. Main Home. If the canceled debt was a loan on a taxpayer’s main home, they may be  able to exclude the canceled amount from their income. They must have used the loan to buy, build or substantially improve their main home to qualify. Their main home must also secure the mortgage.
  2. Loan Modification. If a taxpayer’s lender canceled or reduced part of their mortgage balance through a loan modification or ‘workout,’ the taxpayer may be able to exclude that amount from their income. They may also be able to exclude debt discharged as part of the Home Affordable Modification Program, or HAMP. The exclusion may also apply to the amount of debt canceled in a foreclosure.
  3. Refinanced Mortgage. The exclusion may apply to amounts canceled on a refinanced mortgage. This applies only if the taxpayer used proceeds from the refinancing to buy, build or substantially improve their main home and only up to the amount of the old mortgage principal just before refinancing. Amounts used for other purposes do not qualify.
  4. Other Canceled Debt. Other types of canceled debt such as second homes, rental and business property, credit card debt or car loans do not qualify for this special exclusion. On the other hand, there are other rules that may allow those types of canceled debts to be nontaxable.
  5. Form 1099-C. If a lender reduced or canceled at least $600 of a taxpayer’s debt, the taxpayer should receive Form 1099-C, Cancellation of Debt, by Feb. 1. This form shows the amount of canceled debt and other information.
  6. Form 982. If a taxpayer qualifies, report the excluded debt on Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness. They should file the form with their income tax return.
  7. IRS.gov Tool. Taxpayers should use the Interactive Tax Assistant tool – Do I Have Cancellation of Debt Income on My Personal Residence? – on IRS.gov to find out if their canceled mortgage debt is taxable.
  8. Exclusion Extended. The law that authorized the exclusion of cancelled debt from income was extended through Dec. 31, 2016.
  9. IRS Free File.  IRS e-file is fastest, safest and easiest way to file. Taxpayers can use IRS Free File to e-file their tax return for free. If they earned $64,000 or less, they can use brand name tax software. The software does the math and completes the right forms for them. If they earned more than $64,000, they can use Free File Fillable Forms. This option uses electronic versions of IRS paper forms. It is best for those who are used to doing their own taxes. Free File is available only on IRS.gov/freefile.

More Information. For more on this topic see Publication 4681, Canceled Debts, Foreclosures, Repossessions and Abandonments.

$1 Billion IRS Unclaimed Refunds for 2013

IRS Has Refunds Totaling $1 Billion for People Who Have Not Filed a 2013 Federal Income Tax Return

The IRS Issued the Following:  Refund: Claim It or Lose It!

WASHINGTON — The Internal Revenue Service announced today that unclaimed federal income tax refunds totaling more than $1 billion may be waiting for an estimated 1 million taxpayers who did not file a 2013 federal income tax return.

To collect the money, taxpayers must file a 2013 tax return with the IRS no later than this year’s tax deadline, Tuesday, April 18.

“We’re trying to connect a million people with their share of 1 billion dollars in unclaimed refunds for the 2013 tax year,” said IRS Commissioner John Koskinen. “People across the nation haven’t filed tax returns to claim these refunds, and their window of opportunity is closing soon. Students and many others may not realize they’re due a tax refund. Remember, there’s no penalty for filing a late return if you’re due a refund.”

The IRS estimates the midpoint for potential refunds for 2013 to be $763; half of the refunds are more than $763 and half are less.

In cases where a tax return was not filed, the law provides most taxpayers with a three-year window of opportunity for claiming a refund. If they do not file a return within three years, the money becomes the property of the U.S. Treasury. For 2013 tax returns, the window closes April 18, 2017. The law requires taxpayers to properly address mail and postmark the tax return by that date.

The IRS reminds taxpayers seeking a 2013 refund that their checks may be held if they have not filed tax returns for 2014 and 2015. In addition, the refund will be applied to any amounts still owed to the IRS, or a state tax agency, and may be used to offset unpaid child support or past due federal debts, such as student loans.

By failing to file a tax return, people stand to lose more than just their refund of taxes withheld or paid during 2013. Many low-and-moderate income workers may have been eligible for the Earned Income Tax Credit (EITC). For 2013, the credit was worth as much as $6,044. The EITC helps individuals and families whose incomes are below certain thresholds. The thresholds for 2013 were:

  • $46,227 ($51,567 if married filing jointly) for those with three or more qualifying children;
  • $43,038 ($48,378 if married filing jointly) for people with two qualifying children;
  • $37,870 ($43,210 if married filing jointly) for those with one qualifying child, and;
  • $14,340 ($19,680 if married filing jointly) for people without qualifying children.

Current and prior year tax forms (such as the Tax Year 2013 Form 1040, 1040A and 1040EZ) and instructions are available on the IRS.gov Forms and Publications page or by calling toll-free: 800- TAX-FORM (800-829-3676). Taxpayers who are missing Forms W-2, 1098, 1099 or 5498 for the years 2013, 2014 or 2015 should request copies from their employer, bank or other payer.

Taxpayers who are unable to get missing forms from their employer or other payer should go to IRS.gov and use the “Get Transcript Online” tool to obtain a Wage and Income transcript.  Taxpayers can also file Form 4506-T to request a transcript of their 2013 income. A Wage and Income transcript shows data from information returns we receive such as Forms W-2, 1099, 1098 and Form 5498, IRA Contribution Information. Taxpayers can use the information on the transcript to file their tax return.

State-by-state estimates of individuals who may be due 2013 tax refunds: 

State or District Estimated

Number of

Individuals

 Median

Potential

Refund

 Total

Potential

Refunds*
Alabama 18,100 $729 $17,549,000
Alaska 4,700 $917 $5,665,000
Arizona 24,800 $650 $22,642,000
Arkansas 9,900 $722 $9,571,000
California 97,200 $696 $93,406,000
Colorado 20,200 $699 $19,454,000
Connecticut 11,500 $846 $12,691,000
Delaware 4,300 $776 $4,321,000
District of Columbia 3,200 $762 $3,341,000
Florida 66,900 $776 $67,758,000
Georgia 34,400 $671 $32,082,000
Hawaii 6,500 $793 $6,876,000
Idaho 4,500 $619 $3,919,000
Illinois 40,000 $834 $42,673,000
Indiana 21,700 $788 $22,060,000
Iowa 10,200 $808 $10,193,000
Kansas 11,100 $746 $10,700,000
Kentucky 12,900 $772 $12,627,000
Louisiana 20,300 $767 $21,209,000
Maine 4,000 $715 $3,645,000
Maryland 22,200 $770 $23,080,000
Massachusetts 23,000 $838 $24,950,000
Michigan 33,600 $763 $33,998,000
Minnesota 15,600 $691 $14,544,000
Mississippi 10,400 $702 $10,041,000
Missouri 22,400 $705 $20,787,000
Montana 3,600 $727 $3,480,000
Nebraska 5,300 $745 $5,084,000
Nevada 12,300 $753 $12,078,000
New Hampshire 4,400 $892 $4,930,000
New Jersey 29,900 $873 $33,207,000
New Mexico 8,100 $753 $8,162,000
New York 54,700 $847 $59,416,000
North Carolina 29,800 $656 $26,874,000
North Dakota 2,900 $888 $3,209,000
Ohio 36,000 $749 $34,547,000
Oklahoma 17,700 $773 $17,979,000
Oregon 15,500 $658 $14,188,000
Pennsylvania 39,400 $835 $41,078,000
Rhode Island 2,900 $796 $2,906,000
South Carolina 12,100 $674 $11,267,000
South Dakota 2,700 $823 $2,709,000
Tennessee 19,500 $743 $18,829,000
Texas 104,700 $829 $115,580,000
Utah 7,900 $667 $7,443,000
Vermont 2,000 $747 $1,859,000
Virginia 29,000 $752 $29,578,000
Washington 27,600 $829 $30,330,000
West Virginia 5,000 $855 $5,258,000
Wisconsin 12,700 $675 $11,619,000
Wyoming 2,800 $911 $3,189,000
Totals 1,042,100 $763 $1,054,581,000

 * Excluding the Earned Income Tax Credit and other credits. 

Get Credit for Making a Home Energy Efficient

Get Credit for Making a Home Energy Efficient

IRS Tax Tip 2017-21

Taxpayers who made certain energy efficient improvements to their home last year may qualify for a tax credit this year. Here are some key facts to know about home energy tax credits:

Non-Business Energy Property Credit

  • Part of this credit is worth 10 percent of the cost of certain qualified energy-saving items added to a taxpayer’s main home last year. Qualified improvements include adding insulation, energy-efficient exterior windows and doors, and certain roofs. Do not include the cost to install these items.
  • The other part of the credit is not a percentage of the cost. It includes the installation costs of certain high-efficiency heating and air-conditioning systems, high-efficiency water heaters and stoves that burn biomass fuel. The credit amount for each type of property has a different dollar limit.
  • This credit has a maximum lifetime limit of $500. Taxpayers may only use $200 of this limit for windows.
  • A taxpayer’s main home must be located in the U.S. to qualify for the credit. The non-business energy property credit is only available for existing homes.
  • Be sure to have the written certification from the manufacturer that their product qualifies for this tax credit. They usually post it on their website or include it with the product’s packaging. Taxpayers can use this to claim the credit. Do not attach it to a tax return. Keep it with tax records.
  • Taxpayers may claim the credit on their 2016 tax return if they didn’t reach the lifetime limit in past years. Under current law, Dec. 31, 2016, was the deadline for qualifying improvements to the taxpayer’s main U. S. home.

Residential Energy Efficient Property Credit

  • This tax credit is 30 percent of the cost of alternative energy equipment installed on or in a home. This includes the cost of installation.
  • Qualified equipment includes solar hot water heaters, solar electric equipment, wind turbines and fuel cell property.
  • There is no dollar limit on the credit for most types of property. If the credit is more than the tax owed, carry forward the unused portion of this credit to next year’s tax return.
  • The home must be in the U.S. It does not have to be a taxpayer’s main home, unless the alternative energy equipment is qualified fuel cell property. The residential energy efficient property credit is available for both existing homes and homes under construction.
  • This credit is available through 2016.

If you need assistance, please call Prince Hansen Gray & Associates PLLC at (801) 892-5900.

Taxpayers should keep a copy of their tax return. Beginning in 2017, taxpayers using a software product for the first time may need their Adjusted Gross Income (AGI) amount from their prior-year tax return to verify their identity. Taxpayers can learn more about how to verify their identity and electronically sign tax returns at Validating Your Electronically Filed Tax Return.

居民外籍人士與非居民外籍人士

居民外籍人士與非居民外籍人士

方式不同，因此確定您的報稅身份是很重要的。

非居民外籍人士

您不是美國公民也不是居民外籍人士的任何期間，納稅時皆被視為非居民外籍人士。

居民外籍人士

如果您在日曆年度通過下列兩項測試的其中一項，您就被視為居民外籍人士：

1. 綠卡測試 – 如果您在日曆年度的任何時候被認定通過了綠卡測試，根據移民法，您是美國合法永久居民，並且這個身份尚未被撤銷或依法判定已經放棄。

2. 居住測試 – 就這個測試而言，美國一詞不包含美國屬地和領地或領空，而是涵蓋以下地區：

  • 全部50州和哥倫比亞特區，
  • 美國領海，以及
  • 與美國領海毗鄰的海底區域的海床和底土，美國根據國際法擁有在該處探索開發自然資源的專屬權利

要通過居住測試，您必須實際待在美國至少下列期間：

  1. 本年度31天，並且
  2. 3年期間（包括本年度和本年之前那兩年）183天。要符合183天的條件，算進：
    • 您本年度在美國的全部天數，以及
    • 您本年度之前第一年在美國天數的三分之一，以及
    • 您本年度之前第二年在美國天數的六分之一。

在美國的居住天數 – 居住測試不要算進在美國的下列日子：

  • 您從加拿大或墨西哥住處通勤到美國工作的日子，如果您定期從加拿大或墨西哥通勤過來的話。如果在您當年的工作期間有超過75%的工作日通勤到美國上班，您就被認定是定期通勤。
  • 您往返於美國境外兩個地方，途經美國不滿24小時的日子。
  • 您以一艘美國與外國或美國與美國屬地之間運輸的外國船隻的船員身份在美國的日子。但如果您在美國的時候從事其他貿易或生意，這條例外規定就不適用。
  • 您打算離開美國，但卻由於健康狀況或健康問題使您無法離開的日子。您是否打算在特定某一天離開美國是根據所有的事實與情況來決定的。
  • 您是免稅個人的日子。

免稅個人 – 如果您滿足以下條件，即屬於免稅個人：

  • 以一名持有 A 或 G 簽證的與外國政府有關的人士身份暫時待在美國；但是，此類別不包含以外國政府相關人士的家人身份待在美國的持有 A-3 或 G-5 簽證的人士；
  • 暫時待在美國的老師或受訓人員，持有J或Q簽證並遵守簽證要求。如果您在過去6個日曆年度中的兩年中有任何時間以老師或受訓人員或學生的身份獲得免稅，您將不是老師或受訓人員身份的免稅個人。然而，如果滿足以下所有條件，您將是免稅個人：
    • 如果您在過去6個日曆年度中的三年（或較短時間）中有任何時間以老師或受訓人員或學生的身份獲得免稅，
    • 一個外國雇主在今年支付您的所有報酬，而且
    • 一個外國雇主在過去六年中您以老師或受訓人員的身份留在美國的每一年支付您的所有報酬。
  • 暫時待在美國的學生，持有F、J、M或Q簽證並遵守簽證要求。如果您在五個以上的日曆年度中的任何時間以老師或受訓人員或學生的身份獲得免稅，您在今年將不是學生身份的免稅個人，除非您滿足以下兩個要求：
    • 您確立您無意永久住在美國。
    • 您遵守簽證要求。
  • 暫時待在美國參加慈善體育活動競賽的專業運動員

即使您通過了居住測試，但如果目前的日曆年度您待在美國的日子少於183天，您在年度中在外國有一個納稅的住所，同時您和那個國家的關係比和美國更密切，那麼您可能仍會被認定為非居民外籍人士。如果您已經申請成為美國合法永久居民，或您申請調整您的移民身份目前在審理中，那麼您不能再提出與一個外國更密切關係的申請。有時候，美國與另一個之間的稅收條約會為了滿足條約而對居民身份的認定提供特別規定。居住測試的更多資訊請看519號刊物【外籍人士的美國稅務指南】(Publication 519, U.S. Tax Guide for Aliens)。

雙重身份稅務年度 – 如果您在年度中將身份從居民外籍人士變更為非居民外籍人士，或者相反，通常您在該年度就有雙重身份，您在這兩個時期的所得稅將依每個期間適用的法律條款分被徵稅。雙重身份外籍人士的更多資訊請看519號刊物【外籍人士的美國稅務指南】(Publication 519, U.S. Tax Guide for Aliens)。

申報的表格

如果您是非居民外籍人士，若在美國從事貿易或生意，有任何其他美國來源的收入而且該收入的預扣稅金沒有扣足，或要求退還多預扣或多預付的稅金，那麼您必須申報1040NR表(Form 1040NR)或1040NR-EZ表(Form 1040NR-EZ)。更多資訊請參見1040NR的說明和1040NR-EZ的說明。

  • 如果您有會被預扣所得稅的工資，而您採用日曆年度的方式報稅，您稅表申報的到期日是4月15日。
  • 如果您沒有會被預扣所得稅的工資並且您採用日曆年度的申報方式，您要在6月15日前申報稅表。

居民外籍人士必須與美國公民遵循相同的稅法。如果您是居民外籍人士，您來自美國境內與美國境外所有來源的收入都要申報。您會根據您的稅務情況申報1040EZ表(Form 1040EZ)、1040A表(Form 1040A)或1040表(Form 1040)，請參閱「最簡單的報稅表格是什麼？」(What is the Simplest Form to use to File my Tax Return?)。

  • 如果您是按日曆年報稅的居民外籍人士，您稅表申報的到期日是4月15日，應向您地區的服務中心提交。

如果到期日正好落於星期六、星期日或法定假日時，到期日會順延至下一個業務日。

額外資訊

欲瞭解詳情，請參閱519號刊物【外籍人士的美國稅務指南】(Publication 519, U.S. Tax Guide for Aliens)以及美國公民和居民外籍人士網頁。

10 Inspirational Movies to Watch

10 Inspirational Movies to Watch

Posted by Ann Marie Maloney  – (Communications Manager – Tax and Personal Financial Planning, Public Accounting, Association of International Certified Professional Accountants. )

10 Inspirational Movies to WatchIf you’re one of the 111 million people who watched the New England Patriots power their way out of defeat at the Super Bowl, did you think it was just about over in the third quarter when the Atlanta Falcons were leading 28-3? I admit, I did. Even paid my tab and headed home. We were in for a surprise as the Patriots (led by quarterback Tom Brady) charged ahead and turned the game around to win 34-28.

As a perennial backer of the underdog, I was rooting hard for the Falcons but that doesn’t lessen my respect for a team that resisted falling into a “it’s a lost cause, let’s just get this over with” mentality. Let’s face it, we’ve all been at that point: whether it’s a career challenge, relationship or financial difficulty, or perhaps a health problem, some hurdles seem impossible.

 

Of course, part of the challenge is knowing what’s truly beyond reach and what isn’t. Becoming a rock singer is out of the question for me unless every rock fan loses their hearing. But many goals are attainable; watching a few of the movies listed below may help reinforce that fact. These films, which include suggestions from AICPA colleagues, depict mental toughness in facing huge hurdles. While Hollywood does embellish, these feel real for the most part and many are based on real people and events.

  1. Erin Brokovich (2000) – Based on the real story of an unemployed mother who gets a job as a legal assistant and takes on “Goliath” (a large utility) in her investigation of groundwater pollution that is harming the townspeople nearby.
  2. Hello, My Name is Doris (2015) – A shy, unassuming 60-something woman gets inspired by a self-help seminar to pursue a crush on a much younger colleague, shaking up her sheltered and routine life in the process.
  3. Hidden Figures (2017) – The inspiring true story of three African-American female mathematicians who, despite the substantial gender and race barriers of the time, played a key role in the United States’ historic launch into space.
  4. I Know Why the Caged Bird Sings (1979) – This film traces author Maya Angelou’s life  growing up as a young black girl in the South during the Depression, and how she overcame a traumatic childhood to discover her true worth.
  5. Joy (2015) – The title character of this movie is a divorced mother of two coping with parents and an ex-husband who lean on her heavily. An inventor at heart, Joy creates a self-wringing mop and faces a lot of hurdles on a journey to make her invention a success.
  6. Miracle (2004) – Kurt Russell plays real-life coach Herb Brooks, who took the U.S. men’s hockey team to the 1980 Olympics to challenge the legendary Soviet Union team.
  7. Pursuit of Happyness (2006) – Broke, homeless and responsible for his young son, Chris Gardner refuses to give up on his dream to be a stockbroker (based on the book by the real Chris Gardner).
  8. Rudy (1993) – Being far smaller than any football player doesn’t prevent this determined kid from pursuing his goal of playing for the Notre Dame College football team.
  9. Secretariat (2010) – The first horse to win the Triple Crown in 25 years, Secretariat became a legend for his speed and size, but it took the persistence of co-owner Penny Chenery to stay in the race.
  10. Vision Quest (1985) – High school wrestler Louden Swain has to lose 23 pounds to challenge the state champion whom he is determined to beat. With little support from his coach or father, can he do it, especially when a romantic interest shows up?But what about…?Some of you may be protesting the absence of Rocky, The Blind Side, etc. They are excellent movies – there just wasn’t room for all of them and I wanted to include some that folks may have either forgotten or didn’t know about and, for those who mainly watch the Super Bowl for the commercials, some without a sports theme. Ray, Philadelphia and Lorenzo’s Oil are a few more I would recommend to celebrate the human spirit.

International Taxpayers Tax Obligations and Rules for Tax Withholding Agents

IRS Reminds International Taxpayers of Tax Obligations; Clarifies Rules for Tax Withholding Agents

International TaxpayersWASHINGTON – The Internal Revenue Service today reminded non-U.S. citizens who may have taxable income, such as international students and scholars who may be working or receiving scholarship funds, that they may have special requirements to file a U.S. tax return.

The IRS also reminded withholding agents — such as payroll professionals or universities — that accurately filed Forms 1042-S help speed any refunds due to their non-U.S. citizen taxpayers. Errors on forms or returns could result in some refunds being delayed.

What Non-U.S. Citizen Taxpayers Must Do

The Internal Revenue Code generally requires non-U.S. citizens, whom the code defines as either resident or non-resident aliens, who are engaged in a trade or business within the U.S. to file tax returns. Non-resident aliens such as foreign students, teachers or trainees temporarily in the United States on F, J, M or Q visas are considered engaged in a trade or business.

Most individuals in F-1, J-1, M-1, Q-1 and Q-2 non-immigrant status are eligible to be employed in the U.S. and are eligible to apply for a Social Security number if they are actually employed in the United States. Those not eligible for an SSN but who have a tax filing requirement may request an Individual Taxpayer Identification Number from the IRS.

The non-U.S. citizen’s name must be reported exactly as it appears on the official documentation provided to the withholding agent (such as a Social Security Administration card or some other form of official governmental documentation).

Filing a Form 1040-NR or 1040NR-EZ is required by non-U.S. citizens who have a taxable event such as:

  • A taxable scholarship or fellowship, as described in Chapter 1 of Publication 970, Tax Benefits for Education;
  • Income partially or totally exempt from tax under the terms of a tax treaty; and/or
  • Any other income, which is taxable under the Internal Revenue Code.

Non-U.S. citizens also must attach one copy (generally Copy B) for each Form 1042-S received to their tax returns. Non-U.S. citizens should review the Form 1042-S to ensure it accurately reflects their name and income. If the form does not contain accurate information, they must contact the withholding agent for an amended Form 1042-S.

What Withholding Agents Must Do

Generally, non-U.S. citizens who have taxable income also may have withholding of taxes by the source of their income. Withholding agents are required to complete Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding.

Withholding agents must provide five copies of the Form 1042-S. Copy A should go to the IRS; Copies B, C and D to the recipient of the income; and copy E should be retained by the withholding agent. All information, including the name of the taxpayer, must match exactly on all copies of Form 1042-S.

If withholding agents create a substitute Form 1042-S, all five copies must be in the same physical format. The size, shape and format of any substitute form must adhere to the rules of Publication 1179, General Rules and Specifications for Substitute Forms 1096, 1098, 1099, 5498, and Certain Other Information Returns. The official Form 1042-S is the standard for substitute forms.

A common error is to have a Form 1042-S listing two or more recipients in box 13a. The 2016 instructions to Form 1042-S have been updated to clarify that in the case of joint owners, Form 1042-S can only list one of the owners in box 13a.

Withholding agents should review Fact Sheet 2017-3, where they can find the latest changes to Form 1042-S instructions and common errors that delay processing of tax returns.

Taxes and Name Changes? – How it Impacts Taxes

Taxes and Name Changes? How It Impacts Taxes  

A name change can have an impact on taxes. All the names on a taxpayer’s tax return must match Social Security Administration records. A name mismatch can delay a tax refund. Here’s what taxpayers should know if they changed their name:

  • Reporting Name Changes. Got married and now using a new spouse’s last name or hyphenate a name? Divorced and now back to using a former last name? In either case, taxpayers should notify the SSA of a name change. That way the new name on IRS records will match the SSA records.
  • Making Dependent’s Name Change. Notify the SSA if a dependent had a name change. For example, if a taxpayer adopted a child and the child’s last name changed. If the child does not have a Social Security number, the taxpayer may use an Adoption Taxpayer Identification Number on their tax return. An ATIN is a temporary number. Apply for an ATIN by filing Form W-7A, Application for Taxpayer Identification Number for Pending U.S. Adoptions, with the IRS. Visit IRS.gov to get the form.
  • Getting a New SS Card. File Form SS-5, Application for a Social Security Card. The form is on SSA.gov or by calling 800-772-1213. The taxpayer’s new card will reflect the name change.

All taxpayers should keep a copy of their tax return. Beginning in 2017, taxpayers using a software product for the first time may need their Adjusted Gross Income (AGI) amount from their prior-year tax return to verify their identity. Taxpayers can learn more about how to verify their identity and electronically sign tax returns at Validating Your Electronically Filed Tax Return.

IRS Recaps “Dirty Dozen” List of Tax Scams for 2017

IRS Recaps “Dirty Dozen” List of Tax Scams for 2017

Tax Scams for 2017Each year, the Internal Revenue Service issues a list of the top 12 tax-related scams it sees throughout the year. The IRS “Dirty Dozen” highlights various schemes that taxpayers may encounter anytime, many of which peak during tax-filing season.

Taxpayers need to guard against ploys that steal their personal information, scam them out of money or talk them into engaging in questionable behavior with their taxes.

Here is a recap of this year’s “Dirty Dozen” scams:

Phishing: Taxpayers need to be on guard against fake emails or websites looking to steal personal information. The IRS will never initiate contact with taxpayers via email about a tax bill or refund. Don’t click on emails or fake websites claiming to be from the IRS. They may be nothing more than scams to steal personal information. (IR-2017-15)

Phone Scams: Phone calls from criminals impersonating IRS agents remain an ongoing threat to taxpayers. The IRS has seen a surge of these phone scams in recent years as con artists threaten taxpayers with police arrest, deportation and license revocation, among other things. (IR-2017-19)

Identity Theft: Taxpayers need to watch out for identity theft, especially around tax time. The IRS aggressively pursues criminals that file fraudulent returns using someone else’s Social Security number. Though the agency is making progress on this front, taxpayers still need to be extremely cautious and do everything they can to avoid becoming victimized. (IR-2017-22)

Return Preparer Fraud: Be on the lookout for unscrupulous return preparers. The vast majority of tax professionals provide honest high-quality service. There are some dishonest preparers who set up shop each filing season to perpetrate refund fraud, identity theft and other scams that hurt taxpayers. (IR-2017-23)

Fake Charities: Be on guard against groups masquerading as charitable organizations to attract donations from unsuspecting contributors. Look out for charities with names similar to familiar or nationally-known organizations. Contributors should take a few extra minutes to ensure their hard-earned money goes to legitimate and currently eligible charities. IRS.gov has the tools taxpayers need to check out the status of charitable organizations. (IR-2017-25)

Inflated Refund Claims: Taxpayers should be cautious of anyone promising inflated refunds. Avoid preparers who ask taxpayers to sign a blank return, promise a big refund before looking at any records or charge fees based on a percentage of the refund. Fraudsters use flyers, advertisements, phony storefronts and word of mouth via community groups where trust is high to find their victims. (IR-2017-26)

Excessive Claims for Business Credits: Avoid improperly claiming the fuel tax credit. This tax benefit is generally not available to most taxpayers. The credit is usually limited to off-highway business use, including use in farming. Taxpayers should also avoid misuse of the research credit. Improper claims often involve failures to participate in or substantiate qualified research activities and satisfy the requirements related to qualified research expenses. (IR-2017-27)

Falsely Padding Deductions on Returns: Taxpayers should avoid the temptation to falsify deductions or expenses on their tax returns in order to pay less than they owe or  receive larger refunds. Think twice before overstating deductions such as charitable contributions and business expenses or improperly claiming credits such as the Earned Income Tax Credit or Child Tax Credit. (IR-2017-28)

Falsifying Income to Claim Credits: Don’t invent income to erroneously qualify for tax credits, such as the Earned Income Tax Credit. Taxpayers should file the most accurate return possible because they are legally responsible for what is on their return. Claiming false income can lead to taxpayers facing large bills to pay back taxes, interest and penalties. In some cases, they may even face criminal prosecution. (IR-2017-29)

Abusive Tax Shelters: Don’t use abusive tax structures to avoid paying taxes. The IRS is committed to stopping complex tax avoidance schemes and the people who create and sell them. The vast majority of taxpayers pay their fair share, and everyone should be on the lookout for people peddling tax shelters that sound too good to be true. When in doubt, seek an independent opinion if offered complex products. (IR-2017-31)

Frivolous Tax Arguments: Don’t use frivolous tax arguments to avoid paying tax. Promoters of such schemes encourage taxpayers to make unreasonable and outlandish claims, even though they have been repeatedly 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 disregard their responsibility to pay taxes. The penalty for filing a frivolous tax return is $5,000. (IR-2017-33)

Offshore Tax Avoidance: The recent string of successful enforcement actions against offshore tax cheats — and the financial organizations that help them — show that it’s a bad bet to hide money and income offshore. Taxpayers are best served by coming in voluntarily and taking care of their tax-filing responsibilities. The IRS offers the Offshore Voluntary Disclosure Program to enable people to catch up on their filing and tax obligations. (IR-2017-35)

Top Tips to Prepare for Tax Season

Top Tips to Prepare for Tax Season

It’s here again, the most wonderful time of the year – tax season. Uncle Sam is the reason for the season, and the IRS is ready to give everyone a nice tax bill. Fortunately for you, we have the top tax tips, so you don’t end up with an excessive bill.

  1. Shield Your Personal Information – You can get an Identity Protection (IP) PIN from the IRS to help protect your identity. An IP PIN is a six-digit number that helps prevent fraudulent use of your Social Security number on federal income tax returns. The IP PIN itself changes every year, and you’ll receive notification in the mail of your new PIN every year. You can learn more about IP PINs here at the IRS’s website: https://www.irs.gov/individuals/get-an-identity-protection-pin
  2. Keep Your Check in Check – Are you getting a huge refund, or none at all? If you are at either extreme, then it’s high time you look at your withholdings and consider changes. You’ll need to get a new Form W-4 from your employer and complete it to make the changes. Remember that tax withholding is a lot like porridge – best served just right. Withhold too much, and you’re essentially giving the government an interest-free loan. Withhold too little, and you’ll end up not only owing money but potentially interest and perhaps even penalties.
  3. Maximize Retirement Plans – Are you offered a retirement plan where you work? If so, a smart tax step is to do whatever you can to maximum your contributions, especially if your employer matches your contribution. Not only are you giving up free money through the matched contributions, but you are missing out on the opportunity to build a tax-deferred nest egg.
  4. Are You a Globetrotter? – Do you have a foreign bank account anywhere outside the United States? Did you have more than $10,000 in that account – and by that, I mean ever at any point in time, not just at the end of the year? If you answered yes to both of these, then make sure you file what accountants colloquially refer to as an FBAR – or a foreign bank account reporting form. The new name for this form is FinCEN Report 114.

    It can get even more detailed from here. If you and your spouse held “specified foreign assets” of more than $100,000 on the last day of the tax year or more than $150,000 at any time during the year, then you’ll also need to file a Form 8937, Statement of Specified Foreign Financial Assets.

    There is a slew of other foreign account reporting requirements – for example, if you own an interest in a foreign business or are the beneficiary of a foreign trust. The penal ties for noncompliance with foreign asset and account reporting can be high and repercussions severe.

  5. Clean Out the Closet – There’s a good chance you donated some old clothing, furniture or household items to charity. After all, noncash charitable donations are one of the most common deductions people take on Schedule A. Unfortunately, they are also one of the most abused – and the IRS knows it. Whether it’s because you moved or just wanted to declutter and simplify your life, the key is keeping good records. Deductions for donated items are limited to their fair market value and they must be in good condition; you don’t get a deduction for junk. The organization to which you donate should give you a receipt to prove your donation, but it also is a good idea to keep an itemized list of what you donated and even take pictures of the items, especially if the value is substantial.

Another tip: The IRS tends to scrutinize extra-large deductions. In other words, be careful when you claim a noncash charitable deduction that is a lot bigger than most people in similar situations. You can check out the IRS’s published statistics on Taxpayers with Noncash Charitable Contributions here: https://www.irs.gov/uac/soi-tax-stats-individual-statistical-tables-by-size-of-adjusted-gross-income

Conclusion

Keep these tips in mind to make tax season less taxing when you file. Remember, working with your accountant is the best way to minimize taxes and make sure you don’t pay a penny more than you should

Which States Require ID Before You Can Efile Your Return?

States Require Driver’s License for E-Filing Tax Returns

Which States Require ID Before You Can Efile Your Return?For individual filers who are required to e-file their income tax returns, don’t be surprised when your CPA tells you a copy of your driver’s license or other acceptable form of ID is required in order to efile or process your tax return.

During this tax filing season, more and more states are requiring tax return preparers to include driver’s license numbers (or another form of acceptable identification) on e-filings as a measure to help combat identity and refund theft.

In states that require it, failing to include this mandatory information will prevent your tax preparer from e-filing your return. (On the bright side, providing this information may help state taxing authorities process tax returns more quickly).

Currently, the following states either require or request a driver’s license number or other acceptable form of identification to be included with the e-filing of state returns:

Alabama

California

Illinois

Kansas

Louisiana

New York

Ohio

Virginia

Wisconsin

It is optional, for now, in New Jersey and Pennsylvania.

However, some tax preparation software programs may still require the ID in order to process returns, regardless of the state filing requirements. So, your tax preparer may still request you to provide an acceptable ID even if you do not file in any of the above states because their software requires an ID before it will create a return for efiling.

Currently, a driver’s license or other acceptable ID is not required to file a federal return.