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TAX SAVING TIPS FOR PARENTS!

Better Refund
02.25.2014

 Here are some great credits that all parents should have in mind when filing for this tax year, brought to you by the IRS!

IRS Tips!


Eight Tax Savers for Parents


Your children may help you qualify for valuable tax benefits. Here are eight tax benefits parents should look out for when filing their federal tax returns this year.

Dependents. 

In most cases, you can claim your child as a dependent. This applies even if your child was born anytime in 2013. For more details, see Publication 501, Exemptions, Standard Deduction and Filing Information.


Child Tax Credit. 

You may be able to claim the Child Tax Credit for each of your qualifying children under the age of 17 at the end of 2013. The maximum credit is $1,000 per child. If you get less than the full amount of the credit, you may be eligible for the Additional Child Tax Credit. For more about both credits, see the instructions for Schedule 8812, Child Tax Credit, and Publication 972, Child Tax Credit.


Child and Dependent Care Credit. 

You may be able to claim this credit if you paid someone to care for one or more qualifying persons. Your dependent child or children under age 13 are among those who are qualified. You must have paid for care so you could work or look for work. For more, see Publication 503, Child and Dependent Care Expenses.


Earned Income Tax Credit. 

If you worked but earned less than $51,567 last year, you may qualify for EITC. If you have three qualifying children, you may get up to $6,044 as EITC when you file and claim it on your tax return. Use the EITC Assistant tool at IRS.gov to find out if you qualify or see Publication 596, Earned Income Tax Credit.


Adoption Credit. 

 You may be able to claim a tax credit for certain expenses you paid to adopt a child. For details, see the instructions for Form 8839, Qualified Adoption Expenses.


Higher education credits.

If you paid for higher education for yourself or an immediate family member, you may qualify for either of two education tax credits. Both the American Opportunity Credit and the Lifetime Learning Credit may reduce the amount of tax you owe. If the American Opportunity Credit is more than the tax you owe, you could be eligible for a refund of up to $1,000. See Publication 970, Tax Benefits for Education.


Student loan interest. 

You may be able to deduct interest you paid on a qualified student loan, even if you don’t itemize deductions on your tax return. For more information, see Publication 970.


Self-employed health insurance deduction.

If you were self-employed and paid for health insurance, you may be able to deduct premiums you paid to cover your child under the Affordable Care Act. It applies to children under age 27 at the end of the year, even if not your dependent. See Notice 2010-38 for information.

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Source information at IRS.gov

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The "Dirty Dozen"

Better Refund
02.22.2014

 With every new tax year the general public is faced with new tax frauds and scams! Because of this startling news, the IRS has compiled a list of the Top 12 types of suspicious activity to avoid and report! 


IRS Tips!

IRS Releases the “Dirty Dozen” Tax Scams for 2014; Identity Theft, Phone Scams Lead List

WASHINGTON — The Internal Revenue Service today issued its annual “Dirty Dozen” list of tax scams, reminding taxpayers to use caution during tax season to protect themselves against a wide range of schemes ranging from identity theft to return preparer fraud.

The Dirty Dozen listing, compiled by the IRS each year, lists a variety of common scams taxpayers can encounter at any point during the year. But many of these schemes peak during filing season as people prepare their tax returns.

"Taxpayers should be on the lookout for tax scams using the IRS name,” said IRS Commissioner John Koskinen. “These schemes jump every year at tax time. Scams can be sophisticated and take many different forms. We urge people to protect themselves and use caution when viewing e-mails, receiving telephone calls or getting advice on tax issues.”

Illegal scams can lead to significant penalties and interest and possible criminal prosecution. IRS Criminal Investigation works closely with the Department of Justice (DOJ) to shutdown scams and prosecute the criminals behind them.

The following are the Dirty Dozen tax scams for 2014:

Identity Theft

Tax fraud through the use of identity theft tops this year’s Dirty Dozen list. Identity theft occurs when someone uses your personal information, such as your name, Social Security number (SSN) or other identifying information, without your permission, to commit fraud or other crimes. In many cases, an identity thief uses a legitimate taxpayer’s identity to fraudulently file a tax return and claim a refund.

The agency’s work on identity theft and refund fraud continues to grow, touching nearly every part of the organization. For the 2014 filing season, the IRS has expanded these efforts to better protect taxpayers and help victims.

The IRS has a special section on IRS.gov dedicated to identity theft issues, including YouTube videos, tips for taxpayers and an assistance guide. For victims, the information includes how to contact the IRS Identity Protection Specialized Unit. For other taxpayers, there are tips on how taxpayers can protect themselves against identity theft.

Taxpayers who believe they are at risk of identity theft due to lost or stolen personal information should contact the IRS immediately so the agency can take action to secure their tax account. Taxpayers can call the IRS Identity Protection Specialized Unit at 800-908-4490. More information can be found on the special identity protection page.

Pervasive Telephone Scams

The IRS has seen a recent increase in local phone scams across the country, with callers pretending to be from the IRS in hopes of stealing money or identities from victims.

These phone scams include many variations, ranging from instances from where callers say the victims owe money or are entitled to a huge refund. Some calls can threaten arrest and threaten a driver’s license revocation. Sometimes these calls are paired with follow-up calls from people saying they are from the local police department or the state motor vehicle department.

Characteristics of these scams can include:

• Scammers use fake names and IRS badge numbers. They generally use common names and surnames to identify themselves.
• Scammers may be able to recite the last four digits of a victim’s Social Security Number.
• Scammers “spoof” or imitate the IRS toll-free number on caller ID to make it appear that it’s the IRS calling.
• Scammers sometimes send bogus IRS emails to some victims to support their bogus calls.
• Victims hear background noise of other calls being conducted to mimic a call site.

After threatening victims with jail time or a driver’s license revocation, scammers hang up and others soon call back pretending to be from the local police or DMV, and the caller ID supports their claim.

In another variation, one sophisticated phone scam has targeted taxpayers, including recent immigrants, throughout the country. Victims are told they owe money to the IRS and it must be paid promptly through a pre-loaded debit card or wire transfer. If the victim refuses to cooperate, they are then threatened with arrest, deportation or suspension of a business or driver’s license. In many cases, the caller becomes hostile and insulting.

If you get a phone call from someone claiming to be from the IRS, here’s what you should do: If you know you owe taxes or you think you might owe taxes, call the IRS at 800-829-1040. The IRS employees at that line can help you with a payment issue – if there really is such an issue.

If you know you don’t owe taxes or have no reason to think that you owe any taxes (for example, you’ve never received a bill or the caller made some bogus threats as described above), then call and report the incident to the Treasury Inspector General for Tax Administration at 800-366-4484.

If you’ve been targeted by these scams, you should also contact the Federal Trade Commission and use their “FTC Complaint Assistant” at FTC.gov.  Please add "IRS Telephone Scam" to the comments of your complaint.

Phishing

Phishing is a scam typically carried out with the help of unsolicited email or a fake website that poses as a legitimate site to lure in potential victims and prompt them to provide valuable personal and financial information. Armed with this information, a criminal can commit identity theft or financial theft.

If you receive an unsolicited email that appears to be from either the IRS or an organization closely linked to the IRS, such as the Electronic Federal Tax Payment System (EFTPS), report it by sending it to phishing@irs.gov.

It is important to keep in mind the IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels. The IRS has information online that can help you protect yourself from email scams.

False Promises of “Free Money” from Inflated Refunds

Scam artists routinely pose as tax preparers during tax time, luring victims in by promising large federal tax refunds or refunds that people never dreamed they were due in the first place.

Scam artists use flyers, advertisements, phony store fronts and even word of mouth to throw out a wide net for victims. They may even spread the word through community groups or churches where trust is high. Scammers prey on people who do not have a filing requirement, such as low-income individuals or the elderly. They also prey on non-English speakers, who may or may not have a filing requirement.

Scammers build false hope by duping people into making claims for fictitious rebates, benefits or tax credits. They charge good money for very bad advice. Or worse, they file a false return in a person's name and that person never knows that a refund was paid.

Scam artists also victimize people with a filing requirement and due a refund by promising inflated refunds based on fictitious Social Security benefits and false claims for education credits, the Earned Income Tax Credit (EITC), or the American Opportunity Tax Credit, among others.

The IRS sometimes hears about scams from victims complaining about losing their federal benefits, such as Social Security benefits, certain veteran’s benefits or low-income housing benefits. The loss of benefits was the result of false claims being filed with the IRS that provided false income amounts.

While honest tax preparers provide their customers a copy of the tax return they’ve prepared, victims of scam frequently are not given a copy of what was filed. Victims also report that the fraudulent refund is deposited into the scammer’s bank account. The scammers deduct a large “fee” before cutting a check to the victim, a practice not used by legitimate tax preparers.

The IRS reminds all taxpayers that they are legally responsible for what’s on their returns even if it was prepared by someone else. Taxpayers who buy into such schemes can end up being penalized for filing false claims or receiving fraudulent refunds.

Taxpayers should take care when choosing an individual or firm to prepare their taxes. Honest return preparers generally: ask for proof of income and eligibility for credits and deductions; sign returns as the preparer; enter their IRS Preparer Tax Identification Number (PTIN); provide the taxpayer a copy of the return.

Beware: Intentional mistakes of this kind can result in a $5,000 penalty.

Return Preparer Fraud

About 60 percent of taxpayers will use tax professionals this year to prepare their tax returns. Most return preparers provide honest service to their clients. But, some unscrupulous preparers prey on unsuspecting taxpayers, and the result can be refund fraud or identity theft.

It is important to choose carefully when hiring an individual or firm to prepare your return. This year, the IRS wants to remind all taxpayers that they should use only preparers who sign the returns they prepare and enter their IRS Preparer Tax Identification Numbers (PTINs).

The IRS also has a web page to assist taxpayers. For tips about choosing a preparer, details on preparer qualifications and information on how and when to make a complaint, view IRS Fact Sheet 2014-5, IRS Offers Advice on How to Choose a Tax Preparer.

Remember: Taxpayers are legally responsible for what’s on their tax return even if it is prepared by someone else. Make sure the preparer you hire is up to the task.

IRS.gov has general information on reporting tax fraud. More specifically, you report abusive tax preparers to the IRS on Form 14157, Complaint: Tax Return Preparer. Download Form 14157 and fill it out or order by mail at 800-TAX FORM (800-829-3676). The form includes a return address.

Hiding Income Offshore

Over the years, numerous individuals have been identified as evading U.S. taxes by hiding income in offshore banks, brokerage accounts or nominee entities and then using debit cards, credit cards or wire transfers to access the funds. Others have employed foreign trusts, employee-leasing schemes, private annuities or insurance plans for the same purpose.

The IRS uses information gained from its investigations to pursue taxpayers with undeclared accounts, as well as the banks and bankers suspected of helping clients hide their assets overseas. The IRS works closely with the Department of Justice (DOJ) to prosecute tax evasion cases.

While there are legitimate reasons for maintaining financial accounts abroad, there are reporting requirements that need to be fulfilled. U.S. taxpayers who maintain such accounts and who do not comply with reporting requirements are breaking the law and risk significant penalties and fines, as well as the possibility of criminal prosecution.

Since 2009, tens of thousands of individuals have come forward voluntarily to disclose their foreign financial accounts, taking advantage of special opportunities to comply with the U.S. tax system and resolve their tax obligations. And, with new foreign account reporting requirements being phased in over the next few years, hiding income offshore is increasingly more difficult.

At the beginning of 2012, the IRS reopened the Offshore Voluntary Disclosure Program (OVDP) following continued strong interest from taxpayers and tax practitioners after the closure of the 2011 and 2009 programs. The IRS works on a wide range of international tax issues with DOJ to pursue criminal prosecution of international tax evasion. This program will be open for an indefinite period until otherwise announced.

The IRS has collected billions of dollars in back taxes, interest and penalties so far from people who participated in offshore voluntary disclosure programs since 2009. It is in the best long-term interest of taxpayers to come forward, catch up on their filing requirements and pay their fair share.

Impersonation of Charitable Organizations

Another long-standing type of abuse or fraud is scams that occur in the wake of significant natural disasters.

Following major disasters, it’s common for scam artists to impersonate charities to get money or private information from well-intentioned taxpayers. Scam artists can use a variety of tactics. Some scammers operating bogus charities may contact people by telephone or email to solicit money or financial information. They may even directly contact disaster victims and claim to be working for or on behalf of the IRS to help the victims file casualty loss claims and get tax refunds.

They may attempt to get personal financial information or Social Security numbers that can be used to steal the victims’ identities or financial resources. Bogus websites may solicit funds for disaster victims. The IRS cautions both victims of natural disasters and people wishing to make charitable donations to avoid scam artists by following these tips:

• To help disaster victims, donate to recognized charities.
• Be wary of charities with names that are similar to familiar or nationally known organizations. Some phony charities use names or websites that sound or look like those of respected, legitimate organizations. IRS.gov has a search feature, Exempt Organizations Select Check, which allows people to find legitimate, qualified charities to which donations may be tax-deductible.
• Don’t give out personal financial information, such as Social Security numbers or credit card and bank account numbers and passwords, to anyone who solicits a contribution from you. Scam artists may use this information to steal your identity and money.
• Don’t give or send cash. For security and tax record purposes, contribute by check or credit card or another way that provides documentation of the gift.

Call the IRS toll-free disaster assistance telephone number (866-562-5227) if you are a disaster victim with specific questions about tax relief or disaster related tax issues.

False Income, Expenses or Exemptions

Another scam involves inflating or including income on a tax return that was never earned, either as wages or as self-employment income in order to maximize refundable credits. Claiming income you did not earn or expenses you did not pay in order to secure larger refundable credits such as the Earned Income Tax Credit could have serious repercussions. This could result in repaying the erroneous refunds, including interest and penalties, and in some cases, even prosecution.

Additionally, some taxpayers are filing excessive claims for the fuel tax credit. Farmers and other taxpayers who use fuel for off-highway business purposes may be eligible for the fuel tax credit. But other individuals have claimed the tax credit although they were not eligible. Fraud involving the fuel tax credit is considered a frivolous tax claim and can result in a penalty of $5,000.

Frivolous Arguments

Promoters of frivolous schemes encourage taxpayers to make unreasonable and outlandish claims to avoid paying the taxes they owe. The IRS has a list of frivolous tax arguments that taxpayers should avoid. These arguments are wrong and have been thrown out of court. While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law or disregard their responsibility to pay taxes.

Those who promote or adopt frivolous positions risk a variety of penalties.  For example, taxpayers could be responsible for an accuracy-related penalty, a civil fraud penalty, an erroneous refund claim penalty, or a failure to file penalty.  The Tax Court may also impose a penalty against taxpayers who make frivolous arguments in court.   

Taxpayers who rely on frivolous arguments and schemes may also face criminal prosecution for attempting to evade or defeat tax. Similarly, taxpayers may be convicted of a felony for willfully making and signing under penalties of perjury any return, statement, or other document that the person does not believe to be true and correct as to every material matter.  Persons who promote frivolous arguments and those who assist taxpayers in claiming tax benefits based on frivolous arguments may be prosecuted for a criminal felony.

Falsely Claiming Zero Wages or Using False Form 1099

Filing a phony information return is an illegal way to lower the amount of taxes an individual owes. Typically, a Form 4852 (Substitute Form W-2) or a “corrected” Form 1099 is used as a way to improperly reduce taxable income to zero. The taxpayer may also submit a statement rebutting wages and taxes reported by a payer to the IRS.

Sometimes, fraudsters even include an explanation on their Form 4852 that cites statutory language on the definition of wages or may include some reference to a paying company that refuses to issue a corrected Form W-2 for fear of IRS retaliation. Taxpayers should resist any temptation to participate in any variations of this scheme. Filing this type of return may result in a $5,000 penalty.

Some people also attempt fraud using false Form 1099 refund claims. In some cases, individuals have made refund claims based on the bogus theory that the federal government maintains secret accounts for U.S. citizens and that taxpayers can gain access to the accounts by issuing 1099-OID forms to the IRS. In this ongoing scam, the perpetrator files a fake information return, such as a Form 1099 Original Issue Discount (OID), to justify a false refund claim on a corresponding tax return.

Don’t fall prey to people who encourage you to claim deductions or credits to which you are not entitled or willingly allow others to use your information to file false returns. If you are a party to such schemes, you could be liable for financial penalties or even face criminal prosecution.

Abusive Tax Structures

Abusive tax schemes have evolved from simple structuring of abusive domestic and foreign trust arrangements into sophisticated strategies that take advantage of the financial secrecy laws of some foreign jurisdictions and the availability of credit/debit cards issued from offshore financial institutions.

IRS Criminal Investigation (CI) has developed a nationally coordinated program to combat these abusive tax schemes. CI's primary focus is on the identification and investigation of the tax scheme promoters as well as those who play a substantial or integral role in facilitating, aiding, assisting, or furthering the abusive tax scheme (e.g., accountants, lawyers).  Secondarily, but equally important, is the investigation of investors who knowingly participate in abusive tax schemes.

What is an abusive scheme? The Abusive Tax Schemes program encompasses violations of the Internal Revenue Code (IRC) and related statutes where multiple flow-through entities are used as an integral part of the taxpayer's scheme to evade taxes.  These schemes are characterized by the use of Limited Liability Companies (LLCs), Limited Liability Partnerships (LLPs), International Business Companies (IBCs), foreign financial accounts, offshore credit/debit cards and other similar instruments.  The schemes are usually complex involving multi-layer transactions for the purpose of concealing the true nature and ownership of the taxable income and/or assets.

Form over substance are the most important words to remember before buying into any arrangements that promise to "eliminate" or "substantially reduce" your tax liability.  The promoters of abusive tax schemes often employ financial instruments in their schemes.  However, the instruments are used for improper purposes including the facilitation of tax evasion.

The IRS encourages taxpayers to report unlawful tax evasion. Where Do You Report Suspected Tax Fraud Activity?

Misuse of Trusts

Trusts also commonly show up in abusive tax structures. They are highlighted here because unscrupulous promoters continue to urge taxpayers to transfer large amounts of assets into trusts. These assets include not only cash and investments, but also successful on-going businesses. There are legitimate uses of trusts in tax and estate planning, but the IRS commonly sees highly questionable transactions. These transactions promise reduced taxable income, inflated deductions for personal expenses, the reduction or elimination of self-employment taxes and reduced estate or gift transfer taxes. These transactions commonly arise when taxpayers are transferring wealth from one generation to another. Questionable trusts rarely deliver the tax benefits promised and are used primarily as a means of avoiding income tax liability and hiding assets from creditors, including the IRS.

IRS personnel continue to see an increase in the improper use of private annuity trusts and foreign trusts to shift income and deduct personal expenses, as well as to avoid estate transfer taxes. As with other arrangements, taxpayers should seek the advice of a trusted professional before entering a trust arrangement.

The IRS reminds taxpayers that tax scams can take many forms beyond the “Dirty Dozen,” and people should be on the lookout for many other schemes. More information on tax scams is available at IRS.gov.

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Source material brought to you by IRS.gov

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IRS Transcripts!

Better Refund

02.20.2014

Recently the IRS has allowed for public viewing tools for IRS transcripts online! Here is the latest scoop on how the process works and how it might apply to you! 


Tax Tips:


Before the IRS provided this online tool, obtaining IRS transcripts was a manual process for taxpayers. They had to call the IRS, mail in a form, or use an online request for mailed transcripts that typically took at least seven days to arrive. Now, taxpayers can set up a personal account with the IRS to view the five types of transcripts right away.

With this new tool, more taxpayers will be accessing their tax information online – and many of those taxpayers will be viewing their IRS transcripts for the first time. Because IRS transcripts are not made for easy interpretation, many taxpayers accessing their transcripts will have more questions than answers.




Be prepared to help your clients understand the information available to them and translate the sometimes cryptic information contained in IRS transcripts. Here are some common questions your clients will have about IRS transcripts, and how you can answer them.



Who can get transcripts online?

The IRS Get Transcript tool is available only to individual taxpayers. Business taxpayers can call the IRS at (800) 829-4933, and tax professionals can call the Practitioner Priority Service at (866) 860-4259, option 4, to request IRS transcripts.



What are the types of transcripts?

There are five types of IRS transcripts, which taxpayers can now access online:

1. An account transcript provides an overview of your account. It shows filings, extensions, withholding, credits and any follow-up transactions on your account, including penalties, assessments, IRS inquiries and other account activity. Basically, if there have been any IRS actions on your account, they will appear on this transcript.

2. A return transcript shows most lines from the original tax return as it was processed. Changes made to the return after it was processed are not reflected, including any amended returns filed. If you need a copy of your tax return for any reason, such as a loan or financial aid application, this is the transcript to use.

3. A record of account transcript is simply a combination of the account and return transcripts. The IRS makes this available because it shows the big picture, from your original return filed to any changes made to the return after processing.

4. A wage and income transcript provides a listing of information statements (Forms W-2, 1099) that show income reported to the IRS under your Social Security number. You can use this transcript to help with your due diligence in filing an extended tax return, verify employment, or keep a personal record of income.

5. A verification of nonfiling letter is a transcript that is automatically produced when the IRS does not have your return on file or has not yet processed your filed return.



What years are available for each type of transcript?

The IRS generates separate transcripts for each tax year. In the IRS Get Transcript tool, each transcript is available as a separate link, listed by tax year. The following years are available for the five types of IRS transcripts:
Account transcripts: Current tax year and three prior tax years. Older account transcripts can appear if there has been activity within the past three years on the account.
Return transcripts: Current tax year and three prior tax years. If you don’t see a return transcript available for download, it likely means that no return was filed for that year, or that the IRS has not processed the return.
Record of account transcripts: Current tax year and three prior tax years.
Wage and income transcripts: Current tax year and nine prior tax years. In mid-May, wage and income transcripts become available for the previous tax year. For example, 2013 wage and income transcripts will be available in May 2014.
Verification of nonfiling letter: Current tax year and three prior tax years.


Why don’t my tax return transcript and account transcript reflect the return I have filed?

Your filed return isn’t reflected on your transcripts yet because the IRS has not finished processing the return. Your return should post to your account transcript in about one week. The return transcript takes longer for the IRS to post to your account.



What do the transaction codes mean on my account transcript?

Transcript transaction codes represent actions on your IRS account and provide a literal description of the action. For routine filers with no post-filing compliance activity, account transcripts are typically easy to interpret. However, if you have post-filing compliance activity, such as tax notices and correspondence back and forth with the IRS, transcripts can be confusing. The IRS Transaction Codes Pocket Guide offers explanations for transaction codes, but tax practitioners and taxpayers who use the guide can still misinterpret codes and draw the wrong conclusions.

Some transaction codes are particularly confusing to taxpayers and tax professionals because the IRS uses them to record many types of actions. The two most common examples are Transaction Codes 971 and 290:
For 2009 returns, the IRS used TC 971 to represent changes made to the first-time homebuyer credit. However, because TC 971 is used for miscellaneous transactions, and the IRS explanation for this transaction code was not updated with tax law changes in 2010, the IRS description stated that there was a challenge to the Earned Income Tax Credit.
TC 290, “Additional tax assessment,” often appears on transcripts with no additional tax assessment, confusing taxpayers and tax professionals about what is happening on the account.

If you find a confusing transaction code, your tax professional should call the Practitioner Priority Service at (866) 860-4259 to find out what’s actually happening on the account.



Can my account transcript tell me if I am selected for audit?

Every year, the IRS selects millions of returns for examination, but audits only a fraction of those selected. If you see TC 420, “Examination of tax return,” on your account transcript, it doesn’t necessarily mean you’ll be audited. If you’re actually being audited, you'll receive a separate notice from the IRS. Generally, the IRS will initiate an examination within a year after the return is filed.

With limited resources, the IRS can’t help all of the taxpayers who contact the agency with questions. To lighten its customer service burden and meet increasing taxpayer demand for online tools, the IRS will continue to develop and enhance online tools for taxpayers. And, as taxpayers have more access to their online IRS information, they will have more questions for their tax professionals. You can help your clients understand the information on their accounts and reaffirm your role as their trusted tax advisor.


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For more information follow the IRS.gov.

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Scam Prevention!

Better Refund
02.18.2014

 Like every year, the IRS pushes forward to prevent Scams and ID theft! However, if you find yourself a target of an outsider scam, these are guidelines you should follow by the IRS! 


IRS Tips:



IRS Warns of Pervasive Telephone Scam


WASHINGTON — The Internal Revenue Service today warned consumers about a sophisticated phone scam targeting taxpayers, including recent immigrants, throughout the country.

Victims are told they owe money to the IRS and it must be paid promptly through a pre-loaded debit card or wire transfer. If the victim refuses to cooperate, they are then threatened with arrest, deportation or suspension of a business or driver’s license. In many cases, the caller becomes hostile and insulting.

“This scam has hit taxpayers in nearly every state in the country. We want to educate taxpayers so they can help protect themselves. Rest assured, we do not and will not ask for credit card numbers over the phone, nor request a pre-paid debit card or wire transfer,” says IRS Acting Commissioner Danny Werfel. “If someone unexpectedly calls claiming to be from the IRS and threatens police arrest, deportation or license revocation if you don’t pay immediately, that is a sign that it really isn’t the IRS calling.” Werfel noted that the first IRS contact with taxpayers on a tax issue is likely to occur via mail

Other characteristics of this scam include:

Scammers use fake names and IRS badge numbers. They generally use common names and surnames to identify themselves.

Scammers may be able to recite the last four digits of a victim’s Social Security Number.

Scammers spoof the IRS toll-free number on caller ID to make it appear that it’s the IRS calling.

Scammers sometimes send bogus IRS emails to some victims to support their bogus calls.

Victims hear background noise of other calls being conducted to mimic a call site.

After threatening victims with jail time or driver’s license revocation, scammers hang up and others soon call back pretending to be from the local police or DMV, and the caller ID supports their claim.

If you get a phone call from someone claiming to be from the IRS, here’s what you should do:

If you know you owe taxes or you think you might owe taxes, call the IRS at 1.800.829.1040. The IRS employees at that line can help you with a payment issue – if there really is such an issue.

If you know you don’t owe taxes or have no reason to think that you owe any taxes (for example, you’ve never received a bill or the caller made some bogus threats as described above), then call and report the incident to the Treasury Inspector General for Tax Administration at 1.800.366.4484.

If you’ve been targeted by this scam, you should also contact the Federal Trade Commission and use their “FTC Complaint Assistant” at FTC.gov. Please add "IRS Telephone Scam" to the comments of your complaint.

Taxpayers should be aware that there are other unrelated scams (such as a lottery sweepstakes) and solicitations (such as debt relief) that fraudulently claim to be from the IRS.

The IRS encourages taxpayers to be vigilant against phone and email scams that use the IRS as a lure. The IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels. The IRS also does not ask for PINs, passwords or similar confidential access information for credit card, bank or other financial accounts. Recipients should not open any attachments or click on any links contained in the message. Instead, forward the e-mail tophishing@irs.gov.



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Source information from IRS.gov

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Direct Deposit!

Better Refund
02.17.2014

 Here are some helpful reasons as to why many individuals choose Direct Deposit as their preferred refund method by the IRS!

IRS Tips:


Four Good Reasons to Direct Deposit Your Refund

IRS Tax Tip 2014-15, February 18, 2014

Would you choose direct deposit this year if you knew it’s the most popular way to get a federal tax refund? What if you learned it’s safe and easy, and combined with e-file, the fastest way to get a tax refund? The fact is almost 84 million taxpayers chose direct deposit in 2013.

Still not sure it’s for you? Here are four good reasons to choose direct deposit:

Convenience. With direct deposit, your refund goes directly into your bank account. There’s no need to make a trip to the bank to deposit a check.


Security. Since your refund goes directly into your account, there’s no risk of your refund check being stolen or lost in the mail.


Ease. Choosing direct deposit is easy. When you do your taxes, just follow the instructions in the tax software or with your tax forms. Be sure to enter the correct bank account and routing number.


Options. You can split your refund among up to three financial accounts. Checking, savings and certain retirement, health and education accounts may qualify. 

Use IRS Form 8888, Allocation of Refund (Including Savings Bond Purchases), to split your refund. Don’t use Form 8888 to designate part of your refund to pay your tax preparer.


You should deposit your refund directly into accounts that are in your own name, your spouse’s name or both. Don’t deposit it in accounts owned by others. Some banks require both spouses’ names on the account to deposit a tax refund from a joint return. Check with your bank for their direct deposit requirements.




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Source provided by IRS.gov

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Small business employers; IRS Q&A

Better Refund
02.17.2014

 This is a segment of the IRS Q&A over the changes that will occur for the current and future for small business owners! Many of us with questions over small business employers might find this IRS segment informative for 2014-15 tax year! 

IRS TIPS:

Basics for Small Employers

40. I am a small employer with 30 employees. How do the Employer Shared Responsibility provisions (Code section 4980H) affect me?

They don’t.  Employers that employ fewer than 50 full-time employees (including full-time equivalents) in their businesses are not subject to the Employer Shared Responsibility provisions. The vast majority of businesses fall below this threshold.

In addition, the preamble to the final regulations for the Employer Shared Responsibility provisions provides transition relief for 2015. Employers with at least 50 but fewer than 100 full-time employees (including full-time equivalents) in 2014 that meet conditions described in the preamble to the final regulations will not be subject to any Employer Shared Responsibility payments for 2015 (or for the 2015 plan year in the case of an employer with a non-calendar-year health plan).

41. If I hire additional employees, including some part-time employees, how do I determine if I have become large enough to be subject to the Employer Shared Responsibility provisions?

An employer determines if it is subject to these provisions for a current year by counting how many full-time employees and full-time equivalents it employed during the prior calendar year.  

First, for each month of the prior year, the employer counts its employees working an average of 30 or more hours per week as full-time employees and, if it has employees working less than that, adds the number of full-time equivalents (determined by simply adding up the hours that are worked by these less-than-full-time employees for the month, but no more than 120 hours per employee, and then dividing by 120). 

Second, the resulting totals for each month in the prior year are added together and then divided by 12 to get an average for the prior year.  If the result is less than 50, the employer is not subject to these rules for the current year and need not take any other action.

(If the result is 50 or more but some of the employees are seasonal workers, certain adjustments may still bring the average down to less than 50.)

Two transition rules apply in 2015 that are particularly relevant for small employers close to the 50 full-time employee (including full-time equivalents) threshold. First, employers with at least 50 but fewer than 100 full-time employees (including full-time equivalents) in 2014 that meet conditions described in the preamble to the final regulations will not be subject to any Employer Shared Responsibility payments for 2015 (or for the 2015 plan year in the case of an employer with a non-calendar-year health plan). These employers determine if they have 100 or more employees in the same manner as described above. And, second, rather than being required to use the full twelve months of 2014 to measure if it has 100 full-time employees (including full-time equivalents), an employer may measure during any consecutive six-month period (as chosen by the employer) during 2014. For example, an employer could use a period of at least six months through August 2014 to determine its applicable large employer status and, if it is an applicable large employer, the period from September through December 2014 to make any needed adjustments to its plan (or to establish a plan). See question 36 on 2015 transition relief.

42. What if I buy or start another business that has another group of employees, but my new business is in an entity that is separate from my existing business?

In that case, section 4980H provides for common ownership and control “aggregation” rules that may apply.  These are similar to rules that have applied to 401(k) and other retirement plans for years. Under these rules, the employees of businesses that are under common control are added together to determine if an employer employs the equivalent of at least 50 (or 100 under the 2015 transition rule noted above) full-time employees (including full-time equivalents).  

For example, if an individual owns 80% or more of two businesses that are separate legal entities, the total number of full-time employees of that employer is based on the full-time employees (including full-time equivalents) in both businesses combined together.  If the employees in the combined businesses add up to fewer than 50 full-time employees (including full-time equivalents) in a year, the Employer Shared Responsibility provisions will not apply to those businesses for the following year.

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For more detailed information on this segment, go to IRS.gov




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High call volumes for the IRS phone services.

Better Refund

02.13.2014

 The IRS has made a new helpful announcement for their call service, in order to better accommodate for their overwhelming call volume for this tax year! Here are a few tips that might ease the elevated wait time for those attempting to contact the IRS! 

IRS Announcement:

WASHINGTON – The IRS reminded taxpayers the Presidents Day holiday period typically marks one of the busiest weeks of the tax filing season for its phone lines. There are other alternatives to help taxpayers find answers to commonly asked tax questions.

The Internal Revenue Service has several easy-to-use, online tools on IRS.gov. Taxpayers can check the status of their refund, request a copy of their tax transcript or get an answer to their tax questions around the clock.

“The entire week of the Presidents Day holiday marks a peak time in the number of calls to the IRS, and we encourage taxpayers to visit IRS.gov as the best place to get quick help,” said IRS Commissioner John Koskinen.

Due to limited resources, the IRS has changed the services provided at the toll-free telephone number and IRS Taxpayer Assistance Centers. To save time and find answers faster, taxpayers should make IRS.gov their first stop. A good place to start is 1040 Central for a quick overview. TheIRS Services Guide also provides a list of resources.

Here are some of the most common reasons people call us over Presidents Day holiday week and the faster and easier ways to get answers:

Want to know where your refund is?

More than 90 percent of refunds are issued in less than 21 days. IRS representatives will not provide individual refund information before then. Taxpayers can easily find information about their refund by using the Where’s My Refund? tool. It’s available on IRS.gov and on the Smartphone app, IRS2Go. Where’s My Refund? provides taxpayers with the most up-to-date information available. Taxpayers must have information from their current, pending tax return to access their refund information. Refund information is updated just once a day, generally overnight, so there’s no need to check more than once a day.

Didn’t get a W-2?

Employers are required to send to their employees a Form W-2, Statement of Earnings, by January 31. Employees should allow enough time for their form to be mailed to their address of record. If form W-2 is not received by mid-February, employees should first contact their employer to ensure they have the correct address on file.

After exhausting all options with the employer, employees may contact the IRS and we will send a letter to the employer. However, we would urge you to call after Presidents Day week to avoid long wait times on the telephone.

Need a copy of your tax return or transcript?

Taxpayers can easily order a return or transcript on the IRS.gov website, on our IRS2Go Smartphone app or by mailing us a completed Form 4506-T. More information on these options is available at IRS.gov.

Ordering a tax return or tax transcript does not mean a taxpayer will get their refund faster. The two are not connected in any way. IRS transcripts are often used to validate income and tax filing status for mortgage, student and small business loan applications and to help with tax preparation.

Need answers to tax law questions?

Questions about what filing status means, whether to file a tax return or who can be claimed as a dependent? Simply do a keyword search on IRS.gov; use Publication 17, the annual, searchable income tax guide; or the IRS Tax Map, which allows search by topic or keyword for single-point access to tax law information by subject. Taxpayers can even call TeleTax at 1-800-829-4477 for recorded information on a variety of general and business tax topics.

Can’t pay a tax bill?

For taxpayers whose concern isn’t a refund, but rather, a tax bill they can’t pay, the Online Payment Agreement tool can help them determine in a matter of minutes whether they qualify for an installment agreement with the IRS. And those whose tax obligation is even more serious, the Offer in Compromise Pre-Qualifier can help them determine if they qualify for an offer in compromise, an agreement with the IRS that settles their tax liability for less than the full amount owed.

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Information provided by IRS.gov

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IRS Provides Help to Military Families

Better Refund
02.12.2014

This is a helpful guide from the IRS for those of our clients that have military experience and have questions about what to claim during the tax season! 





IRS Tips:


IRS Provides Help to Get Tax Assistance to Military Families;
New Web Page Created for U.S. Armed Services


WASHINGTON — The Internal Revenue Service has created a new section on its Web site containing important information to help ensure members of the U.S. Armed Forces serving in a combat zone get all of the tax benefits available to them.

The new section highlights several special tax provisions that apply to those in combat, which can include extensions for filing tax returns and paying taxes and exclusion of some military pay from taxes.

The new Web section includes:

Questions and answers on exclusions, extensions and other tax benefits available to members of the Armed Forces serving in a combat zone.

Publication 3, Armed Forces’ Tax Guide, which covers the special tax situations of active members of the U.S. Armed Forces.

Several recent news releases and notices, including Tax Tip 2003-41, Reservists, New Enlistees May Get Deferral for Back Taxes; news release IR-2002-18, Tax Relief for Troops in Afghanistan Combat Zone; Notice 2002-17, Tax Relief for those Involved in Operation Enduring Freedom.

A special e-mail address for members of the U.S. Armed Forces, their spouses, authorized agents or representatives, which can be used to notify the IRS about someone serving in a combat zone.

"At this important time, our dedicated military personnel in combat zones should not be worried about tax issues," said IRS Acting Commissioner Bob Wenzel. "We want each of them to receive all of the tax benefits that they are entitled to. We want all of our servicemen and servicewomen — and their families — to know that we are here to help."

Generally, enlistees up to warrant officers (including commissioned warrant officers) exclude all their military pay received for military service in a combat zone. For commissioned officers, the monthly exclusion is capped at the highest enlisted pay, plus any hostile fire or imminent danger pay received. For 2002, this limit was $5,532.90 and for 2003, it is $5,882.70. Amounts excluded from gross income are not subject to federal income tax.

The IRS automatically extends the deadline for filing tax returns, paying taxes, filing claims for refund and taking other actions related to federal income tax for U.S. Armed Forces personnel serving in a combat zone. The IRS also extends the deadline for those in the U.S. Armed Forces deployed overseas away from their permanent duty station in support of operations in a qualified hazardous duty area but who are outside that area.

The deadline for filing returns, making payments or taking any other action with the IRS is extended for at least 180 days after:

The last day of qualifying combat zone service, or
The last day of any continuous qualified hospitalization for injury from the combat zone.

The IRS is currently working with the military to obtain information about reservists and regular military personnel serving in combat areas. During this interim period, people in the military, their spouses or their authorized representatives have several options to claim the filing extensions or filing exclusions:

When filing returns, mark “Combat Zone” at the top of the form along with the date of deployment.

Contact the IRS through the special e-mail address at IRS.gov. Correspondence should include the name, stateside address, date of birth, and date of deployment of the service member. (No Social Security numbers should be included in the e-mail.) The IRS emphasizes only military-related e-mails should go to this address. 

Calls can also be made to the main IRS help line at 800-829-1040.

These two steps also apply if a notice inadvertently goes to an individual serving in a combat zone or his or her spouse. The notice can be deferred by following the e-mail steps or by sending the notice back to the IRS marked with the words “Combat Zone” and the date of deployment.

The IRS plans to take additional steps and provide additional guidance on issues involving military personnel and combat zones. This new information will also be posted to the Armed Forces page on IRS.gov.

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For detailed information on Military tax deductions, visit IRS.gov

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Gift Taxes!

Better Refund
02.11.2014

  When gift giving during the holidays or special occasions, it is good to know the benefits of tax deduction possibilities! Here are some helpful guides for gift giving from the IRS!



IRS Tips:

Who pays the gift tax?

The donor is generally responsible for paying the gift tax. Under special arrangements the donor may agree to pay the tax instead. Please visit with your tax professional if you are considering this type of arrangement.

What is considered a gift?

Any transfer to an individual, either directly or indirectly, where full consideration (measured in money or money's worth) is not received in return.

What can be excluded from gifts?

The general rule is that any gift is a taxable gift. However, there are many exceptions to this rule. Generally, the following gifts are not taxable gifts.
Gifts that are not more than the annual exclusion for the calendar year.
Tuition or medical expenses you pay for someone (the educational and medical exclusions).
Gifts to your spouse.
Gifts to a political organization for its use.

In addition to this, gifts to qualifying charities are deductible from the value of the gift(s) made.

May I deduct gifts on my income tax return?
Making a gift or leaving your estate to your heirs does not ordinarily affect your federal income tax. You cannot deduct the value of gifts you make (other than gifts that are deductible charitable contributions). If you are not sure whether the gift tax or the estate tax applies to your situation, refer to Publication 950, Introduction to Estate and Gift Taxes.

How many annual exclusions are available?

The annual exclusion applies to gifts to each donee. In other words, if you give each of your children $11,000 in 2002-2005, $12,000 in 2006-2008, $13,000 in 2009-2012 and $14,000 on or after January 1, 2013, the annual exclusion applies to each gift.

What if my spouse and I want to give away property that we own together?

You are each entitled to the annual exclusion amount on the gift. Together, you can give $22,000 to each donee (2002-2005) or $24,000 (2006-2008), $26,000 (2009-2012) and $28,000 on or after January 1, 2013.

What other information do I need to include with the return?

Refer to Form 709 (PDF), 709 Instructions and Publication 950. Among other items listed:
Copies of appraisals.
Copies of relevant documents regarding the transfer.
Documentation of any unusual items shown on the return (partially-gifted assets, other items relevant to the transfer(s)).


What is "Fair Market Value?"

Fair Market Value is defined as: "The fair market value is the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts. The fair market value of a particular item of property includible in the decedent's gross estate is not to be determined by a forced sale price. Nor is the fair market value of an item of property to be determined by the sale price of the item in a market other than that in which such item is most commonly sold to the public, taking into account the location of the item wherever appropriate." Regulation §20.2031-1.


Who should I hire to represent me and prepare and file the return?

The Internal Revenue Service cannot make recommendations about specific individuals, but there are several factors to consider:

How complex is the transfer?
How large is the transfer?
Do I need an attorney, CPA, Enrolled Agent (EA) or other professional(s)?


For most simple, small transfers (less than the annual exclusion amount) you may not need the services of a professional.


However, if the transfer is large or complicated or both, then these actions should be considered; It is a good idea to discuss the matter with several attorneys and CPAs or EAs. Ask about how much experience they have had and ask for referrals. This process should be similar to locating a good physician. Locate other individuals that have had similar experiences and ask for recommendations. Finally, after the individual(s) are employed and begin to work on transfer matters, make sure the lines of communication remain open so that there are no surprises.

Finally, people who make gifts as a part of their overall estate and financial plan often engage the services of both attorneys and CPAs, EAs and other professionals. The attorney usually handles wills, trusts and transfer documents that are involved and reviews the impact of documents on the gift tax return and overall plan. The CPA or EA often handles the actual return preparation and some representation of the donor in matters with the IRS. However, some attorneys handle all of the work. CPAs or EAs may also handle most of the work, but cannot take care of wills, trusts, deeds and other matters where a law license is required. In addition, other professionals (such as appraisers, surveyors, financial advisors and others) may need to be engaged during this time

Do I have to talk to the IRS during an examination?

You do not have to be present during an examination unless IRS representatives need to ask specific questions. Although you may represent yourself during an examination, most donors prefer that the professional(s) they have employed handle this phase of the examination. You may delegate authority for this by executing Form 2848 "Power of Attorney."


What if I disagree with the examination proposals?

You have many rights and avenues of appeal if you disagree with any proposals made by the IRS. See Publications 1 and 5 (PDF) for an explanation of these options.


What if I sell property that has been given to me?

The general rule is that your basis in the property is the same as the basis of the donor. For example, if you were given stock that the donor had purchased for $10 per share (and that was his/her basis), and you later sold it for $100 per share, you would pay income tax on a gain of $90 per share. (Note: The rules are different for property acquired from an estate).


Most information for this page came from the Internal Revenue Code: Chapter 12--Gift Tax (generally Internal Revenue Code §2501 and following, related regulations and other sources)


Can a married same sex donor claim the gift tax marital deduction for a transfer to his or her spouse?
For federal tax purposes, the terms “spouse,” “husband,” and “wife” includes individuals of the same sex who were lawfully married under the laws of a state whose laws authorize the marriage of two individuals of the same sex and who remain married. Also, the Service will recognize a marriage of individuals of the same sex that was validly created under the laws of the state of celebration even if the married couple resides in a state that does not recognize the validity of same-sex marriages.

However, the terms “spouse,” “husband and wife,” “husband,” and “wife” do not include individuals (whether of the opposite sex or the same sex) who have entered into a registered domestic partnership, civil union, or other similar formal relationship recognized under state law that is not denominated as a marriage under the laws of that state, and the term “marriage” does not include such formal relationships.


Gifts to your spouse are eligible for the marital deduction.

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Article source: IRS.gov

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Record Keeping

Better Refund
02.10.2014


 Here are some tips from the IRS on why you should keep records on all of your expenses and how long they should be kept! 



IRS TIPS!

Medical Q&A with the IRS!

Better Refund
02.08.2014

 Due to the overwhelming demand on further answers to Medical deduction questions, the IRS has set up a Q&A for this tax season. We hope that this helps answer any questions you might have for medical deductions! 


IRS 

Questions and Answers: Changes to the Itemized Deduction for 2013 Medical Expenses

1. When do changes to the itemized deduction for medical expenses take effect?

The rules are changing if you plan to itemize medical deductions on your 2013 federal tax return that you will file in 2014. The change will not affect income tax returns for the 2012 taxable year that will be filed in 2013.




2. What amount of my medical expenses can I deduct beginning Jan. 1, 2013?

If you and your spouse are both under age 65, on your 2013 tax return that you will file in 2014, you can deduct on Schedule A, Itemized Deductions (Form 1040) only the amount of your unreimbursed allowable medical and dental expenses that is more than 10 percent of your adjusted gross income (AGI) from Form 1040, line 38.

If you or your spouse is 65 or over, you are temporarily exempt from the increase. The exemption applies to any tax year beginning after December 31, 2012, and ending before January 1, 2017, if you or your spouse attained age 65 during or before the tax year.




3. If I turn 65 in 2014, what threshold percentage should I use?

You will file your 2013 tax return – which you will file in 2014 - using the 10 percent threshold of your adjusted gross income. When you turn 65 in 2014, you will file your 2014 tax return in 2015 and will use the 7.5 percent threshold of your adjusted gross income. Beginning with your 2017 tax return (filing in 2018), and thereafter, you will use the 10 percent threshold of your adjusted gross income.




4. Whose medical expenses can I include?

You can generally include medical expenses you pay for yourself, your spouse, and your dependents. IRS Publication 502, Medical and Dental Expenses, contains additional information on medical expenses including how you figure and report the deduction on your return.




5. How do I figure the deduction if I am under 65?

To figure your medical and dental expense deduction on your 2013 tax return that you will file in 2014, follow the instructions to complete lines 1 through 4 of Schedule A, Form 1040.

IRS Publication 502, Medical and Dental Expenses, contains additional information on medical expenses including how you figure and report the deduction on your return.




6. How do I figure the deduction if I am over 65?

To figure your medical and dental expense deduction on your 2013 tax return that you will file in 2014, follow the instructions to complete lines 1 through 4 of Schedule A, Form 1040.

IRS Publication 502, Medical and Dental Expenses, and Pub 554, Tax Guide for Seniors, contain additional information on medical expenses including how you figure and report the deduction on your return.




7. What records should I keep for each medical expense?

For each medical expense, you should keep a record of:
The name and address of each medical care provider you paid, and
The amount and date of each payment.

You should also keep a statement or itemized invoice showing the following:
A description of the medical care received
Who received the care
The nature and purpose of the medical expenses.

Do not send these records with your return. IRS Publication 502, Medical and Dental Expenses, contains additional information on medical expenses including how you figure and report the deduction on your return.


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