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Threat of IRS Phone Scam Continues

noreply@blogger.com (Anonymous) — Fri, 08 May 2015 16:38:00 +0000

Tax scams do not end with the tax season. The IRS phone scam continues to victimize taxpayers. Fraudsters make phone calls to taxpayers, pretending to be IRS agents, and inform them that they owe back taxes. They instruct the individual to transfer money to them. If a taxpayer refuses or protests, the scammers use intimidation and threats to pressure him or her into acting.

Taxpayers face the threat of this tax scam at any time because it highly profitable for fraudsters year round. Unlike the filing of fraudulent tax returns that typically occurs during the tax season, the IRS phone scam can be carried out any time of the year.

It’s important to understand that the IRS does not make phone calls to taxpayers to inform them that they owe back taxes. They send a notice that includes the debt amount and how it can be paid. The IRS never:

Demands immediate payment
Demands payment without giving the opportunity to question or appeal
Asks for a specific payment method, such as a prepaid debit card
Ask for credit or debit card numbers over the phone
Threatens law-enforcement action for not paying

Taxpayers should never share any personal, financial or tax information with any unverified sources. It’s critical to keep this type of information secure at all times. Before responding to any information requests, the identity of the party in question should always be verified.

Calls with requests for information should be ended immediately. Report the phone number to a law enforcement agency, TIGTA at 1-800-366-4484 or at www.tigta.gov, the Federal Trade Commission, or the IRS.

If you do owe back taxes or think that you might owe, call the IRS directly at 1-800-829-1040 instead of replying to an unverified communication.

How Late Payment of Taxes Affects You

noreply@blogger.com (Anonymous) — Fri, 01 May 2015 16:01:00 +0000

Every month your taxes remain unpaid after the April 15 deadline, you pay a penalty of 0.5%. In most cases, the penalty doesn’t go beyond 0.5%, but it can reach a maximum of 25% per month. Along with the penalty, you are also charged interest on the unpaid taxes at the federal short-term rate, plus 3 percent for a year. This is compounded daily. Penalties and interest increase the total taxes owed each month until they are paid or a permanent resolution achieved.

As long as you have taxes due for payment, the IRS will eventually contact you for collection. Even if you did not file a tax return, the IRS will file a Substitute for Return (SFR) to calculate how much you owe. After they determine your tax liability, they begin collection action. If you do not respond to their notices, the agency can place a levy on wages or even your bank accounts.

If you could not pay your taxes due to a reasonable cause such as a personal tragedy (divorce, theft, natural disaster, illness), then you can request the IRS to forgive the penalties charged on your back taxes.

Early resolution of back taxes is to your advantage, as it reduces the penalties and interest charged. There are various IRS payment plans that allow a comfortable resolution for taxpayers of different financial means. Instead of letting your tax debt increase over time, resolve it early to pay less in penalties and interest.

Benefits of a Retirement Plan

noreply@blogger.com (Anonymous) — Fri, 24 Apr 2015 18:58:00 +0000

Along with saving taxes, a retirement plan also secures your future. You can save more in taxes by choosing the right kind of retirement plans according to your financial situation. Before you select one, it’s important to know the various types of retirement plans available:

1. Individual Retirement Arrangements (IRAs)

2. Roth IRAs

3. 401(k) Plans

4. 403(b) Plans

5. SIMPLE IRA Plans (Savings Incentive Match Plans for Employees)

6. SEP Plans (Simplified Employee Pension)

7. SARSEP Plans (Salary Reduction Simplified Employee Pension)

8. Payroll Deduction IRAs

9. Profit-Sharing Plans

10. Defined Benefit Plans

11. Money Purchase Plans

12. Employee Stock Ownership Plans (ESOPs)

13. 457 Plans

14. 409A Nonqualified Deferred Compensation Plans

Contributions to retirement plans are usually tax deductible. You can claim a deduction on your individual federal income tax return for the amount you contributed to your IRA. Roth IRA deductions, however, are not deductible. With the exception of a Roth, contributions and investment gains are not taxed until they are distributed.

Businesses offering retirement plans to their employees can help them save taxes and reduce turnover by making this perk attractive to workers.

The sooner you start making contributions to your plan(s), the more you will have when you retire. Before setting up a retirement plan, consult a tax professional or a financial institution that can provide further insight.

Use Installment Agreement to Pay Back Taxes

noreply@blogger.com (Anonymous) — Fri, 17 Apr 2015 15:14:00 +0000

Tax season is over. At this point, any unpaid taxes for 2014 will be treated as back taxes. If you do owe taxes for 2014 or for any year before that, you can pay them in monthly installments. Even those who filed for an extension, but could not pay their entire tax bill, an Installment Agreement can be requested.

There are different types of Installment Agreements, each plan based on the amount of tax debt owed. The less you owe in back taxes, the easier it is to qualify for an installment agreement. You can apply for an online Installment Agreement if you owe $50,000 or less in back taxes.

Some of the important points to consider before applying for an Installment Agreement are the associated penalties and interest, as well as the rules of the agreement. With an Installment Agreement, you get more time to pay your back taxes, but you will pay more because of penalties and interest.

- The penalty for a late payment is charged at 0.5% each month on the amount of back taxes that remain to be paid.

- Interest is charged at the federal short-term rate plus 3% for a year. It is compounded every day.

To reduce your penalties and interest, you can pay more initially so that your total back tax amount is lower. Also, if you can, pay the back taxes in as few months as possible.

Once you have reached an agreement with the IRS, you will be required to cover the minimum payments each month. Any tax refunds will be offset, or taken, to pay your tax debt.

If you fail to make a payment for any month, the IRS is likely to terminate your agreement. If you cannot make the minimum payment for a particular month, contact the IRS and inform them of your situation.

Do This If You Can’t File or Pay Your Taxes

noreply@blogger.com (Anonymous) — Fri, 10 Apr 2015 17:48:00 +0000

The IRS received over 99 million tax returns and issued more than 77 million in refunds through April 3, 2015, with the average refund amount being $2,800. If you haven’t yet filed your tax return or paid your taxes, you should act now to avoid penalties. Here is how:

If you cannot file your tax return by April 15, you can request a tax-filing extension. You can do that by using the IRS Free File on irs.gov. This is a free service that provides you with an automatic extension of six months to file (until Oct. 15) on Form 4868. By filing this form, you avoid the late-payment penalty of 5 percent.

When filing for an extension, pay as much of your tax liability as you can to avoid the late-payment penalty of 0.5 percent. Even if you can only pay a small part of your tax bill, you must file your return. Any payments made with an extension request will reduce or eliminate interest and late-payment penalties. The failure-to-pay penalty is 0.5 percent per month and the interest rate is 3 percent per year, compounded daily.

Apart from free file, you can request an extension through a return preparer, tax-preparation software, or by filing Form 4868.

To pay your taxes, you may use the IRS Direct Pay facility or any other electronic payment option and pay your estimated tax liability by April 15.

If you owe taxes after filing season, you can set up a payment agreement with the IRS. If you owe $50,000 or less in back taxes (including penalties and interest), you may use the Online Payment Agreement feature on the IRS site to spread your payments over up to 72 months. If not, you can choose from a variety of payment agreements from the IRS, such as an Installment Agreement and Offer in Compromise, to resolve your back taxes.

When You Receive 5071C

noreply@blogger.com (Anonymous) — Fri, 03 Apr 2015 16:30:00 +0000

There is a possibility that you may receive Letter 5071C from the IRS after you have filed your tax return. If you receive this letter, the IRS wants you to verify your identity.

The IRS sends this letter after they receive your tax return with your name and/or social security number, but questions the authenticity of the return and wants to confirm that you filed it. Due to the increase in identity theft cases, the IRS is taking every precaution to prevent fraudulent returns from passing through.

· When you receive 5071C, log on to idverify.irs.gov to verify your identity. Have ready your previous year’s tax return and your current year’s tax return along with supporting documents.

· If you prefer, you can call the toll-free Identity Verification phone number on your 5071C to verify your identity.

If you did not file the tax return for which the IRS is inquiring, you can use either of the above methods to report the fraud.

When the IRS sends 5071C, the IRS suspends processing of the tax return until you verify your identity. After you provide the information that verifies that you have filed the return, the IRS will send you a confirmation that you submitted the return and renew processing. It will take approximately six weeks for the return to complete processing.

To check the current status of your refund, you can use IRS’ ‘Where’s My Refund?’ facility or the IRS2Go mobile app. Using these platforms, you can determing the approximate date when your refund is expected to reach you. ‘Where’s My Refund?’ is updated once every 24 hours.

What You Should Do If Your Identity was Stolen

noreply@blogger.com (Anonymous) — Fri, 27 Mar 2015 17:13:00 +0000

The threat of your identity being stolen is real. There are fraudsters that have developed ways to steal identities in order to file fraudulent tax returns and get refund money. This tax crime is becoming more and more widespread because it can be conducted remotely and anonymously.

Scammers depend on numbers and luck. They file a number of fraudulent tax returns, hoping that the IRS will approve at least some of them. The IRS, on the other hand, has increased its security protocols to prevent fraudulent tax returns from being processed.

To protect their identities, taxpayers should keep their Social Security Number, filing status, and personal information secure at all times. However, if they fall victim to a tax fraudster, they must immediately:

- File a complaint with the Federal Trade Commission (FTC) at www.identitytheft.gov or use their hotline number 1-877-438-4338 or TTY 1-866-653-4261.

- Place a fraud alert on your credit records by contacting one of the three major credit bureaus:

Equifax - www.Equifax.com - 1-800-525-6285

Experian - www.Experian.com - 1-888-397-3742

TransUnion - www.TransUnion.com - 1-800-680-7289

- Inform your financial institution about the identity theft to prevent outside access to your funds and prohibit unauthorized transactions.

- If you are a victim of a phishing scam, you can contact the IRS at phishing@irs.gov or call their toll-free number 1-800-366-4484. If you contacted the IRS and did not get a resolution, you may contact the Identity Protection Specialized Unit at 1-800-908-4490.

It is vital that you contact the appropriate agencies as soon as you discover the theft, especially your bank, credit cards, the IRS and the FTC. The IRS provides a unique PIN to victims of identity theft to help them protect their information in future transactions.

What To Do If You Owe Back Taxes

noreply@blogger.com (Anonymous) — Fri, 20 Mar 2015 16:57:00 +0000

If you discover that you owe back taxes to the IRS, you should resolve it as soon as you can to avoid paying costly penalties and interest. If you have not yet filed your tax return, it’s smart to pay as much as you can before the filing deadline, and satisfy the balance using a payment plan after filing season.

If you have filed your return and you owe back taxes, then you must choose the appropriate payment plan to resolve your debt. The IRS has various resolution plans depending upon taxpayers’ financial circumstances. Even if you can only afford to pay a partial amount of your tax debt, you may be able to achieve a permanent resolution.

Those who owe $50,000 or less in tax debt (including penalties and interest) can set up a payment agreement with the IRS. Taxpayers can pay their tax debt in installments for up to 72 months.

If you need to attempt to reduce your total balance, then you may request an Offer in Compromise plan or a Partial Payment Installment Agreement. Both these plans allow tax debt reduction and will bring you back into compliance.

If you cannot pay any amount of tax debt, then you may stop IRS collection actions by achieving the status of Currently Not Collectible. Even though penalties and interest continue to be charged on your tax debt, you escape harsh collection efforts such as a wage or bank levy.

Regardless of how much you can pay, you can avoid IRS collection actions and comfortably resolve your tax debt case by using the appropriate IRS payment plan. Resolving your tax issue is always preferable to ignoring it and inviting more cost and aggravation.

How to Resolve Back Taxes using Payment Plans

noreply@blogger.com (Anonymous) — Sat, 14 Mar 2015 02:35:00 +0000

If you discovered that you have a tax debt, you can obtain a formal resolution using an IRS payment plan.

Innocent Spouse Relief

If you filed jointly and you found that you owe back taxes because of information reported by your spouse, then you can claim full relief from the payment of the tax debt if:

· You had no knowledge of the understatement of income that led to the tax debt, and

· You had no reason to know about the understatement of income.

If both these criteria are met, then the responsibility of paying the entire tax debt may be shifted to the liable spouse. This resolution program is known as Innocent Spouse relief.

Installment Agreements

The IRS allows repayment of tax debts through Installment Agreement (IA) plans. Depending upon the amount of tax debt owed, the IRS has various kinds of installment agreements. You can choose the appropriate plan to pay your full tax debt in fixed monthly installments.

Offer in Compromise

If you cannot afford to pay your entire tax debt, you can apply for an Offer in Compromise. Before applying, ensure that you do not have property, income or assets that can be put toward your debt. Only taxpayers that can meet only basic, allowable living expenses will be approved for a tax debt reduction.

Currently Not Collectible

If you cannot pay any amount of your tax debt, you can stop all IRS collection actions by obtaining the status of Currently Not Collectible. Regardless of this status, penalties and interest continue to accrue on the tax debt until the ten-year statute of limitations expires.

Claiming the Premium Tax Credit

noreply@blogger.com (Anonymous) — Fri, 06 Mar 2015 16:49:00 +0000

For the first time, taxpayers are reporting their health care coverage status to the government. Many taxpayers that have purchased health care from the Marketplace can claim the premium tax credit. Taxpayers are able to take advantage of this credit by receiving it in advance. The credit is provided to help those with low and moderate income to afford health care.

The Marketplace calculates the amount of premium tax credit taxpayers are eligible for once information about their family’s details and projected household income have been provided. Taxpayers can have the credit paid to them in advance so that they can lower what they pay in their monthly premiums. They can choose to receive the entire credit amount, a partial amount or none of it in advance. Taxpayers can claim the total credit when they file their tax return for the year.

Taxpayers that are claiming the premium tax credit or have received advanced payments of premium tax credit need to complete a new form to report their health care coverage when filing their return.

The IRS advises taxpayers to use tax preparation software to make necessary calculations easier. Those that cannot afford to hire a tax professional can contact the IRS to get their questions answered.

The Top Five Tax Scams for 2015

noreply@blogger.com (Anonymous) — Fri, 27 Feb 2015 17:55:00 +0000

Information is one of the most effective ways to combat tax scams. If taxpayers know the methods tax scammers use to operate, they are less likely to be victimized. In an effort to spread awareness about tax scams, the IRS issues the “Dirty Dozen” tax scams list every year. For 2015, the top 5 tax scams that taxpayers should be aware of are:

1. Phone Scams

The IRS phone scams remains an ongoing threat to taxpayers. This has quickly became one of the biggest tax scams in the country. Scammers make unsolicited phone calls to taxpayers, demanding payment of back taxes. They use intimidation such as threatening police action, deportation, license revocation, etc. to get taxpayers to transfer them money that they claim is owed for back taxes.

2. Phishing

Scammers use fake webpages and websites to steal taxpayers’ information. They lead people to fake sites by sending unsolicited emails pretending to be from the IRS, a bank or some other well-known institution. It’s important to remember that the IRS sends notices in the mail about tax payments, refunds, etc., not emails.

3. Identity Theft

Identity theft is one of the biggest tax scams in the country. Scammers send out scam emails, text messages, social media messages, and make phone calls to people to steal their personal and tax information. Taxpayers should not share their personal information on any platform without confirming the other person’s identity.

4. Return Preparer Fraud

Unscrupulous return preparers falsify information on their clients’ tax return to pocket huge refunds. Taxpayers should check the information on their return before filing, get their refund to their bank account or their home residence (and not the return preparer’s), and check the Personal Tax Identification Number (PTIN) of the tax preparer.

5. Offshore Tax Avoidance

Hiding income overseas to avoid paying taxes in the U.S. is a criminal offense. Taxpayers that have hidden income and assets overseas can gain back compliance by using the Offshore Voluntary Disclosure Program (OVDP).

Along with these, the other tax scams that taxpayers should protect themselves against are: inflated refund claims, fake charities, hiding income using fake documents, abusive tax shelters, falsifying income to claim credits, excessive claims for fuel tax credits, and frivolous arguments.

Why Direct Deposit Should Be Preferred

noreply@blogger.com (Anonymous) — Fri, 20 Feb 2015 18:50:00 +0000

More and more taxpayers are using direct deposit to receive their tax refunds. According to the IRS, more than 84 million taxpayers used direct deposit last year as their preferred payment method. Typically, the fastest way to receive your refund is to file your tax return electronically and use direct deposit.

The obvious advantage of using direct deposit is that it is fast and secure. That is because your refund is directly deposited into your bank account. In cases of identity theft, scammers can easily get the refund directed to another postal address.

With direct deposit, taxpayers do not need to worry about going to the bank to deposit the refund. That also reduces the risk of the refund check getting stolen or lost on its way to the taxpayer.

When using direct deposit, taxpayers must make sure that they enter the correct bank account(s) and routing number. You can use more than one bank account to receive your refund. This can be a checking, savings, certain retirement accounts, or health and education accounts. The maximum number of accounts you can use is three. If you use more than three accounts, the IRS sends you a notice and issues a paper refund instead.

If you file a joint return, you can get the tax refund routed directly into your bank account or your spouse’s bank account, or both. Confirm these details with your financial institution, as some banks only allow refund deposits into accounts that are in both you and your spouse’s names.

Do You Qualify for the Earned Income Tax Credit (EITC)?

noreply@blogger.com (Anonymous) — Fri, 13 Feb 2015 17:35:00 +0000

The Earned Income Tax Credit is a refundable tax credit designed to help taxpayers whose income is below $52, 427 per year. In 2014, as many as 28 million taxpayers and families received $66 billion in EITC; the average amount received in EITC was $2,400.

To find out if you qualify for the earned income tax credit, you may use the IRS EITC assistance. If you qualify, you can calculate the amount you’re eligible for. This number is based on your income, family size (number of dependents), and filing status. The credit limits for 2014 are:

•    $2 to $496 with no qualifying children
•    $9 to $3,305 with one qualifying child
•    $10 to $5,460 with two qualifying children
•    $11 to $6,143 with three or more qualifying children

Both W2 workers and the self-employed that earned $52,427 or less during 2014 can qualify for the EITC. Even those that do not owe any taxes for 2014 can file a tax return and claim the EITC to get a refund.

Some important factors that taxpayers should keep in mind before claiming the EITC are:

•    You must have earned income (wages, tips, self-employed income). Retirement pensions and unemployment benefits are not considered earned income.
•    You must have a valid Social Security number.
•    Your investment income must be $3,350 or less.
•    You must use a filing status of single, head of household, married filing jointly or qualifying widow or widower. If you are married filing separately, then you cannot get the credit.

Individuals that do not owe any taxes and cannot afford to hire a return preparer can easily prepare their tax return using preparation software, or by using free tax preparation help provided by the IRS.

Deductions You Can Claim This Tax Season

noreply@blogger.com (Anonymous) — Fri, 06 Feb 2015 16:28:00 +0000

Tax deductions can ease your liability by reducing the amount of taxable income you have. Though tax deductions can substantially reduce what you owe, you must ensure you’re eligible for those you claim on your tax return. If you have not yet filed your taxes, consider using the following deductions to lower what you owe:

Capital Losses

You can deduct any capital losses to help offset your tax liability. The losses that you incurred must be greater than what you gained. If you are married filing separately, you can claim up to $1,500 annually for 2014. For those filing jointly, the limit is $3,000 for a year.

Gifts

The annual gift tax exclusion amount for 2014 and 2015 is $14,000. The IRS says, “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.”

If your gift is less than $14,000, then you do not need to report it to the IRS. You will not be paying gift tax even if you gave gifts of more than 12,000 per person in a year, as long the total amount is less than $1 million.

Home-Based Office Expenses

You can claim certain expenses if you are using your living area for work purposes. You can only deduct those expenses if that space is used exclusively for your office. Self-employed persons who have this type of arrangement can also deduct these expenses.

Expenses for Pets

Even though expenses made for your pet are not typically tax-deductible, there are certain exceptions if the animal protects your health and well-being. You can also deduct expenses if you use the pet for guarding your business property. These can then be calculated as business expenses.

Tax Preparation: Life Events That Impact Your Taxes

noreply@blogger.com (Anonymous) — Fri, 30 Jan 2015 15:54:00 +0000

Major errors on a tax return can lead you to have to amend your return or possibly endure an IRS audit. The IRS corrects minor errors such as miscalculations, incorrectly claiming credits, etc. Yet, taxpayers must ensure that their return is accurate so that they may receive any refund on time, and not face delays and difficulties in getting their returns processed.

Often, taxpayers do not consider changes in their life such as marriage, birth of a child, or loss of a job and how this affects their taxes. When circumstances changes for taxpayers, they may be entitled to tax credits and deductions that they otherwise would not get. This works both ways, of course, as individuals who experience certain life changes may no longer be eligible for deductions or credits they had previously taken.

If you experienced any big change in your life during the year, it’s smart to see if it affects your taxes when you file your return. Some of the major life events that can significantly affect your taxes are:

•    Marriage
•    Divorce or Separation
•    Birth of a child
•    Adoption
•    Daycare
•    Retirement
•    Loss of Job
•    Health Care Law
•    Starting a New Carrier
•    Loss of Job
•    Disasters and Causalities
•    Lottery or prize money
•    Persons with Disabilities
•    Mutual Fund Distributions
•    First-time Home Owner
•    Sale of your Home
•    Renting of Home
•    Moving
•    Selling of Assets
•    Bankruptcy
•    Inheritance
•    Decedents

Simply put, any change in your life that impacts your income positively or negatively will likely impact your taxes as well. For example, if you lost your job and got another, which does not pay as much as the previous one, then you may reduce your tax bill by claiming the Earned Income Tax Credit if you qualify.

Free Tax Preparation Help

noreply@blogger.com (Anonymous) — Sat, 24 Jan 2015 04:18:00 +0000

You can use free tax return preparation help if you meet certain eligibility criteria. There are several reasons why an individual would not be to enlist the services of a paid tax preparer, or prefer to use a no-cost service. Below are the three most commonly used free return preparation services:

VITA

If you are making less than $53,000 a year, then you can get free help in tax return preparation at Volunteer Income Tax Assistance (VITA) centers. These centers are run only during tax season. IRS-certified volunteers that have tax knowledge and experience with return preparation offer basic filing assistance. The volunteers also file tax returns electronically.

You can find the VITA site near you by using this online facility on the IRS website provided by the U.S. Department of the Treasury and the IRS. You may also call the IRS at their toll-free number 1-800-906-9887 to find a site near you.

TCE

The Tax Counseling for the Elderly (TCE) can only be used by the elderly, specifically those who are 60 years or older. TCE centers specialize in retirement-related tax issues, such as retirement accounts, pension, tax on income after retirement, and so on. Again, IRS-certified volunteers provide free help to the elderly in return preparation.

You can find a TCE site by using the same online facility as used for finding a VITA site. Alternatively, you can call the IRS at the toll-free number, 1-888-227-7669.

AFTC

Those working in the Air Force, the Navy, the Army, Marine Corps, and the Coach Guards can use The Armed Forces Tax Council (AFTC) to receive free tax preparation help. These sites provide information and help in tax issues specific to the armed forces.

The AFTC partners with the IRS to provide help to military personnel and their families. The AFTC also oversees military tax programs worldwide.

Exercise Your Taxpayer Rights This Tax Season

noreply@blogger.com (Anonymous) — Fri, 16 Jan 2015 15:42:00 +0000

Taxpayers have certain rights when dealing with the IRS. Every taxpayer should be aware of these rights so that they can use them to receive efficient and fair service from the IRS and the tax system.

The 10 fundamental rights that every taxpayer has are:

1. The Right to Be Informed

You have the right to know what you need to do to comply with tax laws. The IRS must provide you with clear explanation of the tax laws and IRS procedures so that you can follow them to remain in compliance. You also have the right to be informed about your tax account and any changes made to it.

2. The Right to Quality Service

You have the right to receive polite and courteous service from the IRS. The IRS must communicate information to you in a simple manner so that you can fully understand it.

3. The Right to Pay No More than the Correct Amount of Tax

You have the right to pay only the amount of tax legally owed. Back taxes include interest and penalties. The IRS must provide you with accurate information on your taxes.

4. The Right to Challenge the IRS’s Position and Be Heard

You have the right challenge IRS positions and to expect the IRS to consider your objections and documentation promptly and fairly, and to provide you with a timely and proper response.

5. The Right to Appeal an IRS Decision in an Independent Forum

You have the right to appeal against an IRS decision and have the right to receive a written response regarding the Office of Appeals’ decision. You can also take your case to the court.

6. The Right to Finality

You have the right to know the maximum amount of time that you have to challenge the IRS’s position. You also have the right know the maximum amount of time the IRS has to audit or collect tax debt. You have the right to know when the IRS has finished an audit.

7. The Right to Privacy

You have the right to expect the IRS to respect all due process rights. Furthermore, you have to right to expect that any IRS examination will be no more intrusive than is necessary.

8. The Right to Confidentiality

You have the right to expect that any information you provide to the IRS will not be disclosed unless authorized by you or by law.

9. The Right to Retain Representation

You have the right to choose the kind of representative you want in your dealings with the IRS. You can seek help from a Low Income Taxpayer Clinic if you cannot afford to hire professional assistance.

10. The Right to a Fair and Just Tax System

You have the right to expect the tax system to be fair and just, and to consider facts and circumstances that might affect your tax liabilities, ability to pay, or ability to provide information timely.

Types of Scams You May Face This Tax Season

noreply@blogger.com (Anonymous) — Fri, 09 Jan 2015 19:22:00 +0000

Tax season is still a few weeks away, but tax scammers are already active. To protect yourself from scams, it’s good to keep current on methods scammers employ. Some of the top tax scams that you are most likely to encounter this tax season are explained below.

IRS Phone Scam

The most talked about tax scam in 2014 was the IRS phone scam. When it was discovered, it was labeled as the worst tax scam of its kind. Scammers claim to be the IRS and call people over the phone to extract money, which they claim is owed for back taxes. They use intimidation techniques, threatening arrest, deportation and license revocation to force the victim to transfer money to them. They often use names of IRS agents and may duplicate, or spoof, IRS phone numbers.

If you receive an unsolicited call claiming to be from the IRS, do not share any personal, financial or tax information. Instead, call the IRS on 1-800-829-1040.

False Tax Returns

Scammers steal taxpayers’ personal and tax information to file fraudulent returns with the intent to pocket huge refunds. They use false deductions and credits, and manipulate income figures on tax returns to claim exaggerated refunds. To protect yourself from identity thieves, never share private information without first authenticating the identity of the communicator.

Phishing

Scammers use email to dupe taxpayers into sharing their tax filing information with them. They usually duplicate the logo, design, style of writing, and even signatures of a reputed establishment to deceive people into thinking them legitimate. They extract sensitive information that they then use to file fraudulent tax returns and to conduct other financial crimes.

Any unsolicited communication received over the phone, through email, text messages or the social media must be scrutinized to determine authenticity. If faced with repeated intimidation or threats, seek help from the federal trade commission, the IRS or a law enforcement agency. To avoid becoming a victim to a tax scam, it is best to file your return early in the tax season.

Top Factors that Affect Your Tax Preparation

noreply@blogger.com (Anonymous) — Fri, 02 Jan 2015 16:03:00 +0000

Tax season officially begins on January 20, 2015. Even though you still have plenty of time to file your return, it is best to file early to avoid scam attempts. Moreover, the earlier you prepare your taxes, the faster you get your refund. Filing early also helps you to make adjustments, if any, before the filing deadline.

Whether preparing your return for 2014 yourself or through a professional preparer, keep these factors in mind:

- The Affordable Care Act. Know how the Affordable Care Act (ACA) impacts you. Even though for most taxpayers the ACA will not present tax difficulties, you must ensure that you report any major changes in your life such as change of address, name, birth of a baby, divorce, and marriage. Also, consider if you are eligible for an exemption. If you are not covered and you are not eligible for an exemption, then the IRS will charge a penalty for non-compliance.

-    Credits and Deductions. Only claim deductions and credits that you qualify for. You may check the extended tax deductions and credits for 2014 and consider your eligibility.

-    Preparer Tax Identification Number. Make sure that your return preparer has a valid Preparer Tax Identification Number (PTIN). Every practicing return preparer must have a PTIN. Attorneys, CPAs and enrolled agents can also prepare tax returns. To find a legitimate tax return preparer, check the IRS list of tax professionals.

-    Tax Documents. Ensure the information that you indicate on your return is accurate. Gather any necessary documents, records and receipts to back up claims that you make in the return. In case of an audit, the IRS will ask you to provide proof of the deductions and credits that you claim on the return. Keep a copy of your return before you file.

-    Filing the Return. If your preparer is filing your return electronically, you must sign your return only after all the information has been filled in. Review the information and re-check calculations.

Save Taxes - Last Minute Tax Moves

noreply@blogger.com (Anonymous) — Fri, 26 Dec 2014 15:10:00 +0000

With the holiday season on, taxes might be the last thing on your mind, but saving on taxes means more cash in your pocket. There are only a few days left for this year to end, yet you can save on taxes by making some smart last-minute tax moves. These are:

Purchasing supplies - If you need to buy office supplies early next year, buy them in advance before Dec 31 this year and take advantage of section 179 deduction. This deduction is for computers and large office purchases of up to $500,000. This tax break was extended by the Congress for 2014. It may or may not be available in 2015.
Determine your income and expenditures - If you know your exact total income for this year and your expenditures, you can make adjustments to gain tax benefits. For example, postponing bonus and increasing expenditures can help you lower your tax bill. Consult your tax advisor to know which tax moves will give you the most benefits.

Contribute to a retirement plan - You can contribute to a retirement plan to save for your future and also to lower your tax liability. For 401K, the maximum contribution you can make is $17,500.
Contribute to Employee Pension Plan - If you are self-employed, you can set up an employee pension plan. You can contribute the lesser amount of up to 20 percent of your income or $52,000 before the tax-filing deadline of 2015.
Give Gifts - The annual gift tax exclusion for 2014 and 2015 is $14,000. To avoid paying gift tax, you can give gifts of up to $14,000 to any number of people before the end of this year. You will not need to file gift-tax return or pay taxes on it. If you are married filing jointly, you and your spouse can give gifts of up to $28,000.

Hiring a Tax Return Preparer - What You Must Know

noreply@blogger.com (Anonymous) — Fri, 19 Dec 2014 16:41:00 +0000

For 2013, more than 140 million tax returns were filed and half were prepared with the help of a paid return preparer. Many taxpayers hire a return preparer to handle their tax returns to assist with the ever changing tax credits and deductions; shifting tax laws make it difficult for individuals to save the most in taxes without professional help.

"With the upcoming filing season, some taxpayers may want to get help with the new provisions of the Affordable Care Act, and tax professionals provide one of several options available," IRS Commissioner Koskinen said. "Most people only have to check a box on their Form 1040 return to indicate they have health care coverage, but some taxpayers claiming exemptions from coverage and those without coverage and those with premium tax credits may have questions. Tax professionals will be able to help guide taxpayers through what they need to do in these circumstances."

Even though hiring a return preparer simplifies filing, falling victim to a fraudulent tax preparer leads to tax complications and, many times, loss of money. The following tips will help you choose a tax return preparer that is legitimate and competent:

Check the Preparer Tax Identification Number (PTIN) of your preparer and keep it in your records. Make sure the PTIN is valid for 2015. Only tax return preparers with a valid PTIN are allowed to prepare federal tax returns.
Research online about the return preparer to gain more information.
Gather information about the professional standing of the preparer. Tax attorneys, CPAs, and enrolled agents can prepare tax returns. Check to see if they attend continuing education classes or belong to a professional organization. Tax return preparers, however, are not required to be an attorney, CPA or enrolled agent to prepare tax returns.
Know the total fee to be paid. Never agree to a fee based on the percentage of your tax refund. Fraudulent tax preparers use this strategy to claim false credits and deductions on your return to increase their fee.
Never sign your return before all the information has been included in it.
Get the contact information of the tax preparer so that you can contact them after the filing if you wish to.
Your refund must reach your address or your bank account, and not the return preparer.

To learn about the different types of return preparers, you may visit this IRS page: IRS tax pro association partners.

IRA Adjustments to Make before April 15

noreply@blogger.com (Anonymous) — Fri, 12 Dec 2014 15:50:00 +0000

If you are still considering making Individual Retirement Accounts (IRA) adjustments, you do not need to hurry because you can make adjustments up until the end of the tax season next year. After the holiday season is over, you should take a look at the IRA limits for 2014 and other rules that will impact your 2014 taxes. If you want to open an IRA, then also you can use these tips to maximize your savings without falling out of compliance.

Your IRA contribution for 2014 must not exceed $5,500. If you are 50 years old or older, then the maximum limit is $6,500. You can make an IRA contribution up to April 15, 2015, for it to count for your 2014 taxes. If you make contribution that exceeds the IRA limit for 2014, then you will need to pay a 6% tax on the amount that is in excess.

Even if you have contributed in excess, if you remove the excess amount before April 15, 2014, you can avoid the 6% tax. If you take an extension to pay, then it also applies to taking out excess contributions from IRAs.

If you file jointly, you get an additional benefit. Even if only one of you has taxable income, both you and your spouse can contribute to an IRA.

If you are 70½ and older, then you must take a required minimum distribution (RMD) from your traditional IRA. If you have multiple IRAs, then you will need to calculate the RMD for each account separately. However, you can take out the total amount from one or more accounts.

If you do not take out the RMD from your IRAs, then you face a 50% excise tax on the RMD amount that you did not take out. You are not required to take out RMD from your Roth IRA.

If you contribute to IRA or another retirement plan, you may check if you qualify for the saver’s credit. The maximum credit allowed for individuals is $1,000. For married couples filing jointly, it is $2,000.

Inflation Adjustments to Consider for 2015 Taxes

noreply@blogger.com (Anonymous) — Fri, 05 Dec 2014 15:21:00 +0000

The New Year will begin in less than a month, tax season will be right behind it. Individuals who plan their taxes early are better able to manage their finances for 2015. In order to minimize tax liabilities, it’s good to review expenditures; transfer of money, property, assets; charitable contributions, gifts.

Some of the tax limits and inflation adjustments are shared below.

For individual taxpayers filing as single whose income is more than $413,200, the tax rate of 39.6% will be charged in 2015. For those filing jointly, the income limit must not be more than $464,850.

The standard deduction for 2015 goes up $100. From $6,200 for 2014, it rises to $6,300 for single taxpayers for 2015.
For married filing jointly, it goes up from $12,400 to $12,600.
For head of household it rises from $9,100 this year to $9,250 next year.

For individuals, the limitation for itemized deductions for 2015 starts with incomes of $258,250 or more. For those filing jointly, it starts at $309,900.

Personal exemption rises from $3,950 in 2014 to $4,000 in 2015. It should be noted that the exemption is phased-out. It begins with the adjusted gross incomes of $258,250 ($309,900 for married couples filing jointly) and phases out completely at $380,750.

Those who are eligible for the Earned Income Tax Credit should keep in mind that in 2015, the EIC amount is $6,242 for taxpayers filing jointly who have 3 or more qualifying children. For 2014, it is $6,143.

Estates of decedents who pass away during 2015 have a basic exclusion amount of $5,430,000, which has gone up from $5,340,000 for estates of decedents who died in 2014.

The annual exclusion for gifts remains at $14,000 for 2015.

The annual dollar limit on employee contributions to employer-sponsored healthcare flexible spending arrangements (FSA) goes up to $2,550 for 2015.

Tax Rules to Remember When Giving to Charity

noreply@blogger.com (Anonymous) — Fri, 28 Nov 2014 15:14:00 +0000

If you are looking to make contributions to charity during the holiday season, it’s important to keep in mind certain rules regarding donations to lower your tax bill. The first rule for claiming deductions on charitable donations is that you must itemize your deductions. Even if you used standard deductions when filing taxes for 2013, you can itemize your deductions for 2014.

Check if it is a qualified charity: You can only deduct contributions to qualified charities. To confirm that a charity is recognized, you may use this IRS tool. Along with charities, you may also deduct donations made to churches, synagogues, temples, mosques and government agencies.

Make sure you have written record of the donation: You may have made your contribution in cash, by check, credit card, payroll deduction or wire transfer. Whichever method you used to pay, you need to have written document (which can be a bank statement, credit card statement, etc.) with the following information:

The name of the charity
The date, and
The amount of the contribution.

If you have used payroll deduction to make your contribution, then you need to retain a pay stub, a Form W-2 wage statement, or documentation from your employer. The document must have the amount of the contribution and the pledge card with the name of the charity.

Donating used items: If you donate clothing, furniture, electronic appliances, and other household items, you can only claim them on your return if the item(s) donated are in good condition. If you include a qualified appraisal of an item for which you claim over $500 in deduction with your return, then this rule does not apply.

You need to have written documentation for each of the charitable contribution you make. A statement with the required details of multiple contributions will also suffice.

Things to Do Before Tax Season Begins

noreply@blogger.com (Anonymous) — Fri, 21 Nov 2014 16:28:00 +0000

To avoid any unpleasant surprises in the coming tax season, it's good to review a few simple rules now. As tax season is only a few months away, you can take some precautions to enjoy smooth and successful filing of taxes. Some of the most important things to consider in preventing errors in filing are explained below.

Adjust Your Withholding
As a W2 employee, you'll want to ensure that your tax withholding is not falling short of the minimum amount that you should be withholding. If you pay lower than the minimum amount from your wages, you'll have a balance due when you file your return. If you pay this past the filing deadline, the IRS will treat it as back taxes and charge you penalties and interest. On the other hand, if you withhold and pay more, you will get back the balance through a refund. Ideally, your withholding will be such that you're paying the correct amount throughout the year and you won’t see much of a balance either way.

Inform the IRS of Life Changes
If you were married, divorced, separated, had a child, became employed or unemployed, or began a business, then it will affect your tax filing status. If any major change happened in your personal or professional life, then you should confirm whether it alters your tax filing status.

If you moved or had your name changed, then you must inform the IRS of the change before you file your tax return. If you purchased health insurance coverage from the Marketplace, then you must report any changes in circumstances (changes in income, employment and/or family size) to your Marketplace so that you get the correct amount from premium tax credits.

Estimated Taxes
If you're a 1099 employee, then you'll be expected to file estimated taxes. The self-employed and those receiving income from interest or rent will need to file estimated taxes.

To pay estimated taxes, use Form 1040-ES, Estimated Tax for Individuals. When filing estimated taxes, remember that paying more is safer and helps prevent the chances of incurring a tax liability.