Harless Tax Blog

Harless Tax Blog

Don’t be Fooled; IRS Scams Continue to Pose Serious Threat

Tuesday, April 05, 2016

From the IRS.gov Website. Read Original Article >

The Internal Revenue Service has some advice for taxpayers this April Fool’s Day that may prevent them from being the victim of a tax scam: Don’t be fooled by scammers. Stay safe and be informed. Here are some of the most recent IRS-related scams to be on the lookout for:

Telephone Scams. Aggressive and threatening phone calls by criminals impersonating IRS agents remain an ongoing threat. The IRS has seen a surge of these phone scams in recent years as scam artists threaten taxpayers with police arrest, deportation, license revocation and more. These con artists often demand payment of back taxes on a prepaid debit card or by immediate wire transfer. Be alert to con artists impersonating IRS agents and demanding payment.

Note that the IRS will never:

  • Call to demand immediate payment over the phone or call about taxes owed without first having mailed you a bill.
  • Threaten to immediately bring in local police or other law enforcement groups to have you arrested for not paying.
  • Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
  • Require you to use a specific payment method for your taxes, such as a prepaid debit card.
  • Ask for credit or debit card numbers over the phone or threaten to bring in local police or other law enforcement groups to have you arrested for not paying.

Scammers Change Tactics. The IRS is receiving new reports of scammers calling under the guise of verifying tax return information over the phone. The latest variation on this scam uses the current tax filing season as a hook. Scam artists call saying they are from the IRS and have received your tax return, and they just need to verify a few details to process it. The scam tries to get you to give up personal information such as a Social Security number or personal financial information, such as bank numbers or credit cards.

Tax Refund Scam Artists Posing as TAP.In this new email scam targeting taxpayers, people are receiving emails that appear to come from the Taxpayer Advocacy Panel, a volunteer board that advises the IRS on issues affecting taxpayers. They try to trick you into providing personal and financial information. Do not respond or click the links in these emails. If you receive an email that appears to be from TAP regarding your personal tax information, forward it to phishing@irs.gov.

Email, Phishing and Malware Schemes. The IRS has seen an approximate 400 percent surge in phishing and malware incidents so far in the 2016 tax season.

The emails are designed to trick taxpayers into thinking these are official communications from the IRS or others in the tax industry, including tax software companies. The phishing schemes can ask taxpayers about a wide range of topics. Emails can seek information related to refunds, filing status, confirming personal information, ordering transcripts and verifying PIN information.

Variations of these scams can be seen via text messages, and the communications are being reported in every section of the country.

When people click on these email links, they are taken to sites designed to imitate an official-looking website, such as IRS.gov. The sites ask for Social Security numbers and other personal information, which could be used to help file false tax returns. The sites also may carry malware, which can infect your computer and allow criminals to access your files or track your keystrokes to gain information.

If you get a ‘phishing’ email, the IRS offers this advice:

  • Don’t reply to the message.
  • Don’t give out your personal or financial information.
  • Forward the email to phishing@irs.gov. Then delete it.
  • Don’t open any attachments or click on any links. They may have malicious code that will infect your computer.

More information on how to report phishing or phone scams is available on IRS.gov.

Who is likely to face a tax audit and who isn't?

Friday, April 01, 2016

From the Clark Howard website. Read the whole article here >

The IRS audit: Everyone dreads it and so few know how to handle it! Fortunately, the good news is that audits are less common in general because of a severe budget crunch at the IRS.

Bull's-eye target on the rich, the self-employed

With 25% fewer people on staff to do audits, the organization has really had to pick its battles. So the organization has modified who they go after. They used to beat up on taxpayers who didn't make much money in the past. But now they have to go where the money is.

In 2015, the IRS audited about one out of every 10 returns by people who made north of $1 million. That's up 2.5% year over year for the fiscal year ended Sept. 30, the agency said Monday.

Reporting Foreign Income: Eight Tax Tips From the IRS

Thursday, March 31, 2016

From the IRS.gov Website. Read Original Article >

Did you receive income from a foreign source in 2015? Are you a U.S. citizen or resident who worked abroad last year? If you answered 'yes' to either of those questions, here are eight tips to keep in mind about foreign income:

  1. Report Worldwide Income. R By law, U.S. citizens and residents must report their worldwide income. This includes income from foreign trusts and foreign bank and securities accounts.
  2. File Required Tax Forms. You may need to file Schedule B, Interest and Ordinary Dividends, with your U.S. tax return. You may also need to file Form 8938, Statement of Specified Foreign Financial Assets. In some cases, you may need to file FinCEN Form 114, Report of Foreign Bank and Financial Accounts. Visit IRS.gov for more information.
  3. Review the Foreign Earned Income Exclusion. If you live and work abroad, you may be able to claim the foreign earned income exclusion. If you qualify, you won’t pay tax on up to $100,800 of your wages and other foreign earned income in 2015. See Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income Exclusion, for more details.
  4. Don’t Overlook Credits and Deductions. You may be able to take a tax credit or a deduction for income taxes paid to a foreign country. These benefits can reduce your taxes if both countries tax the same income.
  5. Additional Child Tax Credit. You cannot claim the additional child tax credit if you file Form 2555, Foreign Earned Income, or 2555-EZ, Foreign Earned Income Exclusion.
  6. Use IRS Free File. Almost everyone can prepare and e-file their federal tax returns for free, using IRS Free File. If you make $62,000 or less, you can use brand-name tax software. If you earn more, you can use Free File Fillable Forms, an electronic version of IRS paper forms. Some Free File software products and fillable forms also support foreign addresses. Free File is available only through IRS.gov.
  7. Tax Filing Extension is Available. If you live outside the U.S. and can’t file your tax return by the April 18 due date, you may qualify for an automatic two-month extension until June 15. This extension also applies to those serving in the U.S. military abroad. You will need to attach a statement to your tax return explaining why you qualify for the extension.
  8. Get IRS Tax Help. Check the international services site for the types of help the IRS provides, including how to contact your local office internationally. All IRS tax tools and products are available at IRS.gov.

Six Tips You Should Know about Employee Business Expenses

Tuesday, March 29, 2016

From the IRS.gov Website. Read Original Article >

If you paid for work-related expenses out of your own pocket, you may be able to deduct those costs. In most cases, you can claim allowable expenses if you itemize on IRS Schedule A, Itemized Deductions. You can deduct the amount that is more than two percent of your adjusted gross income. Here are six other facts you should know:

  1. Ordinary and Necessary. You can only deduct unreimbursed expenses that are ordinary and necessary to your work as an employee. An ordinary expense is one that is common and accepted in your industry. A necessary expense is one that is appropriate and helpful to your business.
  2. Expense Examples. Some costs that you may be able to deduct include:
    • Required work clothes or uniforms not appropriate for everyday use.
    • Supplies and tools you use on the job.
    • Business use of your car.
    • Business meals and entertainment.
    • Business travel away from home.
    • Business use of your home.
    • Work-related education.

    This list is not all-inclusive. Special rules apply if your employer reimbursed you for your expenses. To learn more, check out Publication 529, Miscellaneous Deductions. You should also refer to Publication 463, Travel, Entertainment, Gift and Car Expenses.
  3. Forms to Use. In most cases, you report your expenses on Form 2106 or Form 2106-EZ. After you figure your allowable expenses, you then list the total on Schedule A as a miscellaneous deduction.
  4. Educator Expenses. If you are a K-12 teacher, you may be able to deduct up to $250 of certain expenses you paid in 2015. These may include books, supplies, equipment and other materials used in the classroom. You claim this deduction as an adjustment on your return, rather than an itemized deduction. For more on this topic see Publication 529.
  5. Keep Records. You must keep records to prove the expenses you deduct. For what records to keep, see Publication 17, Your Federal Income Tax.
  6. IRS Free File. Most people qualify to use free, brand-name software to prepare and e-file their federal tax returns with IRS Free File. Free File software will help you determine if you can deduct your expenses. It will do the math, fill out the forms and e-file your return – all for free. Check your other e-file options if you can’t use Free File.

Wondering what the value of your donated items mean for your taxes? Here's a valuation chart from Goodwill

Thursday, March 24, 2016

What You Need to Know About the Child and Dependent Care Tax Credit

Tuesday, March 22, 2016
From the IRS.gov Website.

Don’t overlook the Child and Dependent Care Tax Credit. It can reduce the taxes you pay. Here are 10 facts from the IRS about this important tax credit:

  1. Child, Dependent or Spouse. You may be able to claim the credit if you paid someone to care for your child, dependent or spouse last year.
  2. Work-Related Expense.The care must have been necessary so you could work or look for work. If you are married, the care also must have been necessary so your spouse could work or look for work. This rule does not apply if your spouse was disabled or a full-time student.
  3. Qualifying Person. The care must have been for “qualifying persons.” A qualifying person can be your child under age 13. A qualifying person can also be your spouse or dependent who lived with you for more than half the year and is physically or mentally incapable of self-care.
  4. Earned Income. You must have earned income for the year, such as wages from a job. If you are married and file a joint tax return, your spouse must also have earned income. Special rules apply to a spouse who is a student or disabled.
  5. Credit Percentage/Expense Limits. The credit is worth between 20 and 35 percent of your allowable expenses. The percentage depends on the amount of your income. Your allowable expenses are limited to $3,000 if you paid for the care of one qualifying person. The limit is $6,000 if you paid for the care of two or more.
  6. Dependent Care Benefits. If your employer gives you dependent care benefits, special rules apply. For more on these rules see Form 2441, Child and Dependent Care Expenses.
  7. Qualifying Person’s SSN. You must include the Social Security number of each qualifying person to claim the credit.
  8. Care Provider Information. You must include the name, address and taxpayer identification number of your care provider on your tax return.
  9. Form 2441. You file Form 2441 with your tax return to claim the credit.
  10. IRS Free File. You can use IRS Free File to prepare and e-file your federal tax return, including Form 2441, Child and Dependent Care Expenses, for free. Free File is the fastest and easiest way to file your tax return and it’s only available at IRS.gov/freefile.

Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on IRS.gov.

Consumer Alert: Scammers Change Tactics, Once Again

Friday, March 18, 2016

WASHINGTON - Aggressive and threatening phone calls by criminals impersonating IRS agents remain a major threat to taxpayers, but now the IRS is receiving new reports of scammers calling under the guise of verifying tax return information over the phone.

From the IRS.gov Website.

The latest variation being seen in the last few weeks tries to play off the current tax season. Scam artists call saying they have your tax return, and they just need to verify a few details to process your return. The scam tries to get you to give up personal information such as a Social Security number or personal financial information, such as bank numbers or credit cards.

“These schemes continue to adapt and evolve in an attempt to catch people off guard just as they are preparing their tax returns,” said IRS Commissioner John Koskinen. “Don’t be fooled. The IRS won’t be calling you out of the blue asking you to verify your personal tax information or aggressively threatening you to make an immediate payment.”

The IRS reminds taxpayers to guard against all sorts of con games that continually change. The IRS, the states and the tax industry came together in 2015 and launched a public awareness campaign called Taxes. Security. Together. to help educate taxpayers about the need to maintain security online and to recognize and avoid “phishing” and other schemes.

The IRS continues to hear reports of phone scams as well as e-mail phishing schemes across the country. “These schemes touch people in every part of the country and in every walk of life. It’s a growing list of people who’ve encountered these. I’ve even gotten these calls myself,” Koskinen said.

This January, the Treasury Inspector General for Tax Administration (TIGTA) announced they have received reports of roughly 896,000 phone scam contacts since October 2013 and have become aware of over 5,000 victims who have collectively paid over $26.5 million as a result of the scam. Just this year, the IRS has seen a 400 percent increase in phishing schemes.

Protect Yourself
Scammers make unsolicited calls claiming to be IRS officials. They demand that the victim pay a bogus tax bill. They con the victim into sending cash, usually through a prepaid debit card or wire transfer. They may also leave “urgent” callback requests through phone “robo-calls,” or via a phishing email. They’ve even begun politely asking taxpayers to verify their identity over the phone.

Many phone scams use threats to intimidate and bully a victim into paying. They may even threaten to arrest, deport or revoke the license of their victim if they don’t get the money.

Scammers often alter caller ID numbers to make it look like the IRS or another agency is calling. The callers use IRS titles and fake badge numbers to appear legitimate. They may use the victim’s name, address and other personal information to make the call sound official.

Here are some things the scammers often do but the IRS will not do. Any one of these five things is a tell-tale sign of a scam.

The IRS will never:

  • Call to demand immediate payment over the phone, nor will the agency call about taxes owed without first having mailed you several bills.
  • Call or email you to verify your identity by asking for personal and financial information.
  • Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
  • Require you to use a specific payment method for your taxes, such as a prepaid debit card.
  • Ask for credit or debit card numbers over the phone or e-mail.
  • Threaten to immediately bring in local police or other law-enforcement groups to have you arrested for not paying.

If you get a phone call from someone claiming to be from the IRS and asking for money or to verify your identity, here’s what you should do:

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

  • Do not give out any information. Hang up immediately.
  • Contact TIGTA to report the call. Use their “IRS Impersonation Scam Reporting” web page. You can also call 800-366-4484.
  • Report it to the Federal Trade Commission. Use the “FTC Complaint Assistant” on FTC.gov. Please add “IRS Telephone Scam” in the notes.

If you know you owe, or think you may owe tax:

  • Call the IRS at 800-829-1040. IRS workers can help you.

Stay alert to scams that use the IRS as a lure. Tax scams can happen any time of year, not just at tax time. For more, visit “Tax Scams and Consumer Alerts” on IRS.gov.

Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on IRS.gov.

Early Retirement Distributions and Your Taxes

Tuesday, March 15, 2016

Thinking about an early distribution from you retirement? Read these tips from IRS website. Read original article >

Many people find it necessary to take out money early from their IRA or retirement plan. Doing so, however, can trigger an additional tax on top of the income tax you may have to pay. Here are a few key points to know about taking an early distribution:

No retirement plan at work? Use this

Friday, March 11, 2016

Four out of 10 people, or more than 30M full-time private-sector workers, do not have access to a retirement plan at work.

by Kelley Holland, special to CNBC | Wednesday, 17 Feb 2016 | 8:18 AM ET | Read Original Article on CNBC website >

Got a retirement savings plan at work? If you don't, you're not alone.

In fact, 4 out of 10 people do not have access to a retirement plan at work, according to an analysis by the Pew Charitable Trusts. That translates to more than 30 million full-time, private-sector workers ages 18 to 64, the report found.

That's just one reason why more and more Americans are nearing retirement age with little or nothing in the way of savings for later in life. While confidence in a financially secure retirement has increased over the past several years, as of 2015, only 22 percent are highly confident they will have enough money to last.

The good news is that workplace plans are not the only way to save for your retirement. President Obama included proposals to increase access to retirement savings plans in his budget, using state based retirement plans and more.

But even apart from those proposals, you have several ways you can save outside of a workplace plan.

Read Original Article on CNBC website >

Help! My identity has been stolen. What should I do?

Tuesday, March 08, 2016

A very important topic today found everywhere in the media, the front page news, and every month there seems to be a new security breach.  But what do you do if it actually happens to you?  Here's some advice:

  • Immediately after the discovery of identity theft, create an Identity Theft Affidavit through the Federal Trade Commission (FTC).
  • With your completed Affidavit, file a police report.
  • Together, your Affidavit and police report form your Identity Theft Report. You will need copies of this report to send to credit agencies and the IRS. 
  • Pull your credit report! (Equifax, Experian and TransUnion). These should be free because you have been the victim of fraud.
  • Have the credit reporting agencies place a fraud alert on your file. You will only need to contact one bureau, which will notify the others.
  • Write letters disputing each charge and send certified mail with a copy of your credit report highlighting the error. Do this for each error reporting from each agency.
  • Request to have information that was the result of the identity theft blocked from your credit report.
  • As problems are resolved, obtain a new credit report. Identity theft can have long-running ramifications, so keep up with your credit report regularly.
Contact Lending Institutions that Issued Credit

  • Get in touch with the fraud departments at the companies that erroneously authorized credit to the thief in your name.
  • Send these companies the same letters and credit report copies.
  • Ask the companies to block fraudulent information, and the company will have to stop reporting the fraudulent information and will not be able to sell the debt for collection.
  • Request copies of the documents that were fraudulently used to get credit or make changes in your name. This will enable you to have a copy of the fraudulent signature. The company is required to send it to you within 30 days of your request.
Inform the IRS

  • As indicated above, tax identity theft is also a problem. In this case, the thief has used a taxpayer’s identity and real or falsified W-2s to file fraudulent returns claiming a refund. You may not know this has happened until you file and find out your refund has already been taken.
  • If you think someone has stolen your refund or used your social security number, notify the IRS immediately.
  • Fill out the IRS Identity Theft Affidavit, Form 14039.
  • When you receive correspondence from the IRS, respond right away.