IRS alerts taxpayers: Scammers scheming around Oct. 15 deadline; Here's what to do
WASHINGTON - The Internal Revenue Service is reminding taxpayers to beware of criminals who continue using devious tactics to steal money and personal information from unsuspecting victims, especially as the fall season approaches.
The agency warns that scammers continue to pose as the IRS, making threatening phone calls and using email phishing schemes to lure taxpayers. The scams may be particularly prevalent ahead of the Oct. 15 tax-filing extension deadline. Another tax scam, where criminals pose as charity organizations, tends to peak during hurricane season or following a natural disaster. Taxpayers should learn about these ongoing tax scams and know what to do if they're targeted.
The IRS urges taxpayers to look out for suspicious calls, emails and donation requests and take appropriate action if they experience any of the following:
How the scam works: Criminals pose as IRS employees and call victims, demanding immediate payment of a so-called tax debt. Payments are often requested via prepaid debit cards and/or money wires. The caller will ask to stay on the line or otherwise call repeatedly while the victim completes the transaction. The caller may use a condescending tone and will often threaten to file a lawsuit, call the police or involve federal law enforcement agencies if the victim doesn't comply. The call may appear to come from emergency services and/or a local/federal law enforcement agency but the fraudsters are faking, or "spoofing" the caller ID to only appear to come from a legitimate agency.
What taxpayers should do: Hang up the phone. Know that the IRS would never call to threaten or demand immediate tax payment. The agency offers taxpayers a chance to appeal any amount in question and offers numerous ways of resolving a tax liability.
Anyone wishing to check their account after receiving this type of call can visit the IRS website and register to view your account information online. The tool allows taxpayers to view up to 24 months of payment history and balance due for any given tax year. Taxpayers who want to report scam calls can visit the Treasury Inspector General for Tax Administration's website, TIGTA.gov, and also email firstname.lastname@example.org (Subject: IRS Phone Scam). Visit Report Phishing for more information.
How the scam works: Criminals send an email to your personal or business account(s) appearing to be from the IRS. The email usually features the IRS logo, uses agency language and asks taxpayers to provide sensitive information. It may also ask recipients to open an attachment or click on a link embedded within the email to supposedly give the taxpayer account access. In a more recent variation called "spear phishing," the criminal, having done research on the victim ahead of time, will send an email posing as a trusted source. The email will make an urgent plea to click on a link and update an account immediately. The link will then direct the victim to what seems to be a trusted website but is in reality a phishing website controlled by the thief who can install malicious software.
What taxpayers should do: Do not provide personal information, click on links or open attachments from emails pretending to be from the IRS. Know that the IRS does not initiate contact by email or social media channels. The agency gets in touch with taxpayers through paper letters mailed by the U.S. Postal Service. IRS letters and notices are mailed to the taxpayer's most recent address on file. Forward the email as-is, preferably with the full email headers to email@example.com.Delete the original email.
Fake charity donation requests
How the scam works: Criminals set up fake charities to attract donations from unsuspecting contributors. The scammers prey on well-intentioned taxpayers, especially during times of distress, such as following a natural disaster. They solicit money either by phone, email or even in person. The scammers may even contact disaster victims and claim to be working on behalf of the IRS with the goal of gaining access to personal information under the pretext of filing a casualty loss claim.
What taxpayers should do: Don't give out personal or financial information such as Social Security numbers. Be wary of charities with names that resemble nationally-known charity organizations. The IRS has an online search tool called the Tax Exempt Organization Search which allows people to find legitimate, qualified charities to whom a donation may be tax deductible. For security and tax record purposes, contribute by check or another way that provides documentation of the gift. Taxpayers who want to report suspected tax fraud activity can do so by completing Form 3949-A, Information Referral.
Eligible employers who provide paid family and medical leave to their employees during tax years 2018 and 2019 might qualify for a new business tax credit. This new employer credit for family and medical leave is part of tax reform legislation passed in December 2017. Here are some facts about the credit to help employers find out if they might be able to claim it.
To be eligible, an employer must:
The credit applies to these dates:
The amount of the credit:
Here's what kind of leave qualifies:
Some employers are eligible to claim the credit retroactively to the beginning of their taxable year:
To claim the credit, employers will:
The Notice sets out special rules and limitations that apply:
Under recent tax legislation, you can no longer claim personal exemptions, including ones for your children and other relatives (now through 2025). That means if you've been claiming an exemption for an elderly parent you support, you will no longer be able to. But you still may be able to salvage a tax benefit if a parent watches your kids so you and your spouse can work.
How to salvage a tax benefit
Consider turning your support into payment for child care. In other words, instead of giving your parent support, you may decide to pay him or her to look after the kids. This may entitle you to a Child and Dependent Care Credit.
The credit is generally equal to 20 percent of child care expenses of up to $3,000 for one child under 13 for the year, or $6,000 for two or more qualified children. So the maximum credit is $600 (or $1,200, respectively).
Here's an example: Say that you give your mother $1,000 a month to pay her rent. She watches your two kids after school while you and your spouse are working, but you don't pay for the child care.
Previously, you'd claim a dependency exemption for your mother if you provided more than half her annual support and she had less than the personal exemption amount in gross income ($4,050 for 2017).
Although there are no exemptions in 2018, you can qualify for the Child and Dependent Care Credit if you switch things around. Simply pay your mom $1,000 monthly for child care when the kids go back to school in September instead of giving the $1,000 to her landlord.
The payments for the three remaining months in 2018 qualify for the Child and Dependent Care Credit. As a result, you can claim a $600 credit (20 percent of $3,000). Of course, the payments are taxable to your mother, but it's likely she won't owe any tax, anyway.
Keep in mind that the recent tax legislation also authorizes a $500 credit for supporting non-children dependents. This special credit is nonrefundable.
Taxpayers who need tax help can simply pull out their phone and download the IRS mobile app.
IRS2Go is available to use for free on any iOS or Android device.
Taxpayers can use IRS2Go to:
IRS2Go is available in both English and Spanish and available to download from Google Play, the Apple App Store or the Amazon Appstore.
WASHINGTON In the wake of Hurricane Florence, the Internal Revenue Service is reminding taxpayers that criminals and scammers try to take advantage of the generosity of taxpayers who want to help victims of major disasters.
Fraudulent schemes normally start with unsolicited contact by telephone, social media, e-mail or in-person using a variety of tactics.
Comprehensive information on disaster-related tax issues, including provisions for tax relief, can be found on the disaster relief page on IRS.gov.
In the case of a federally declared disaster, affected taxpayers may also call the IRS Special Services Help Line, 866-562-5227, with disaster-related tax questions. Details on available relief can be found on the disaster relief page on IRS.gov.
Donate to real charities
To help taxpayers donate to legitimate charities, the IRS website, IRS.gov, has a search feature, Tax Exempt Organization Search, that helps users find or verify qualified charities. Donations to these charities may be tax-deductible.
One type of retirement plan that often fits the needs of small business owners is the Simplified Employee Pension (SEP). Typically, accounts are set up as SEP IRAs, much like traditional IRAs.
What to know about SEPs
As the name implies, it's relatively simple to establish and operate a SEP plan. Unlike some other qualified plans - including 401(k)s - you don't have to file annual reports with the IRS. Here are some other key aspects of SEPs:
Of course, you have other options. The qualified SIMPLE plan is similar to the SEP, but offers a lower contribution limit. For 2018, the limit is $12,500 ($15,500 if you're 50 or older). Finally, you have until your tax return due date, plus extensions, to set up and fund a SEP for the tax year.
Although recent tax legislation has eliminated or scaled back many prized deductions for 2018 through 2025, it didn't touch the deduction for student loan interest. So the usual questions remain: Who can claim the deduction and for how much?
Student loan interest deduction basics
For starters, the deduction for student loan interest is claimed "above the line," so it's available to both itemizers and taxpayers who take a standard deduction. The annual deduction is limited to no more than $2,500 of the interest paid for qualified expenses like tuition and fees, room and board, books, supplies and equipment, and other necessary expenses (e.g., transportation).
The loan can be for your own education, as well as for your spouse or a dependent. Whoever pays the loan is eligible to deduct the interest, subject to the following rules.
Most importantly, the IRS says that student loan interest may be deductible only if all of the following apply:
The MAGI limit is indexed for inflation, although increases the last few years have been small or nonexistent. For 2018, the deduction is phased out for a MAGI between $65,000 and $80,000 for single filers or $135,000 and $165,000 of MAGI for joint filers. Once you exceed the upper threshold of this range, you can't claim any deduction.
Due to the MAGI limits, students may have a better chance than their parents of salvaging some tax benefit for paying off student loan payments.
Call today with questions about the student loan interest deduction, or other tax deductions for your situation.
Questions about taxes could come up any time of the year. Whether it's about tracking a refund or paying a bill, taxpayers can find answers to their questions on IRS.gov. Here are some of the most popular IRS tools:
With college football season kicking off soon, you might contribute to a booster club for your alma mater or a favorite in-state school.
In the past, you could claim a limited charitable deduction if your contributions provided you with preferred seating in the stadium or some other comparable benefit. But that's no longer the case.
Tax laws change for college charitable contributions
Previously, the deduction for booster club donations was equal to 80 percent of the payment if you were given the rights to buy tickets on the 50-yard-line or some other desirable location in the sporting venue.
For example, if you paid $10,000, you could write off $8,000. But the cost of the tickets you actually purchased was nondeductible.
Under recent tax legislation, the deduction for contributions to a college or university made in return for seating rights at athletic events has been eliminated. And, unlike many of the other tax law changes for individuals, this provision is permanent.
Nevertheless, you can still deduct donations that support a school if you don't receive any benefits in exchange, assuming you itemize on your return.
Now, if you contribute the same $10,000 to a booster club, you're not entitled to any preferred seating. Even though you might have to pay more to get the seats that you want, you can write off the entire $10,000 contribution (subject to the usual tax rules for charitable donations).
Keep in mind that new tax law provisions essentially double the standard deduction, while reducing certain tax benefits of itemized deductions. As a result, you may no longer itemize deductions during these years. Schedule an appointment with us if you have questions about itemizing for 2018.
To better serve our clients and friends, to keep you up-to-date and informed, our blog is a resource for tax tips and overall accounting related articles. We hope you find this useful!