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Uncle Sam wants you to save for retirement

The Saver’s Credit—a little-known tax credit made available by the IRS to eligible taxpayers—could make saving for retirement more affordable than many people realize.

(NAPS)—If you ever feel your finances are too stretched to save for retirement, you’re not alone—and there could be good news for you. The Saver’s Credit—a little-known tax credit made available by the IRS to eligible taxpayers—could make saving for retirement more affordable than you think. It may reduce your federal income taxes when you save for retirement through a qualified retirement plan or an Individual Retirement Account (IRA).

“The Saver’s Credit is a fantastic tax credit because it pays you to save for retirement. It offers eligible workers an added incentive to save for retirement on top of the benefits of tax-deferred savings when they contribute to a 401(k), 403(b), 457(b) or IRA,” says Catherine Collinson, president of nonprofit Transamerica Center for Retirement Studies®.

Here’s how it works:

1. Check Your Eligibility

Depending on your filing status and income level, you may qualify for a nonrefundable credit of up to $1,000 (or $2,000 if filing jointly) on your federal income taxes for that year when you contribute to a 401(k), 403(b), 457(b) or similar retirement plan, or IRA.

Single filers with a maximum Adjusted Gross Income (AGI) of up to $31,000 in 2017 or $31,500 in 2018 are eligible. For the head of a household, the AGI maximum is $46,500 in 2017 or $47,250 in 2018. For those who are married and file a joint return, the AGI maximum is $62,000 in 2017 or $63,000 in 2018.

You must be 18 years or older by January 1 and cannot be a full-time student or be claimed as a dependent on another person’s tax return. If you fit within these parameters, the Saver’s Credit may be for you.

2. Save for Retirement

Save for retirement in your employer’s retirement plan, if offered, or in an IRA. In general, for every dollar you contribute to a qualified retirement plan or IRA (up to the lesser of the limits permitted by an employer-sponsored plan or the IRS), you defer that amount from your current overall taxable income on your federal tax returns—and you may also qualify for the Saver’s Credit.

3. File Your Tax Return and Claim the Credit

When you prepare your federal tax returns, you can claim your Saver’s Credit by subtracting this tax credit from your federal income taxes owed.

Workers who are eligible to claim the Saver’s Credit are also eligible to take advantage of IRS’ Free File program for taxpayers with an AGI of $66,000 or less. Twelve commercial software companies make their tax preparation software available through the Free File program at www.irs.gov/FreeFile. 

  • If you are using tax preparation software, use Form 1040, Form 1040A or Form 1040NR. If your software has an interview process, be sure to answer questions about the Saver’s Credit, also referred to as the Retirement Savings Contributions Credit and/or Credit for Qualified Retirement Savings Contributions.
  • If you are preparing your tax returns manually, complete Form 8880, the Credit for Qualified Retirement Savings Contributions, to determine your exact credit rate and amount. Then transfer the amount to the designated line on Form 1040, Form 1040A or Form 1040NR.
  • If you are using a professional tax preparer, be sure to ask about the Saver’s Credit.
  • Consider having any refund you receive directly deposited to an IRA to further boost your retirement savings.

Note that the Saver’s Credit is not available with Form 1040EZ.

The 18th Annual Transamerica Retirement Survey found that just 36 percent of American workers are aware that the credit exists. Don’t overlook Uncle Sam’s Saver’s Credit; it may help you pay less in your current federal income taxes while saving for retirement.

For more details and resources on the Saver’s Credit and an online retirement planning calculator, visit Transamerica Center for Retirement Studies® at www.transamericacenter.org.

Transamerica Center for Retirement Studies® (TCRS) is a division of Transamerica Institute®, a nonprofit, private foundation. 

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Avoid making improper claims for business credits

 

WASHINGTON — The Internal Revenue Service warned that taxpayers should avoid making improper claims for business credits, a common scam used by unscrupulous tax preparers.

Two common credits targeted for abuse by shady return preparers include the research credit and the fuel tax credit. Both credits have legitimate uses, but there are specific criteria that taxpayers need to qualify for these.

As part of the 2018 “Dirty Dozen” tax scams, the IRS reminds taxpayers to watch out for these red flags involving business credits when dealing with return preparers. Remember, the taxpayer is responsible for the information on the tax return long after the scammer is gone.

Each year, the IRS publishes its “Dirty Dozen” list of a variety of common scams that taxpayers may encounter any time. These can especially peak during the tax filing season as people prepare their returns or hire people to help with their taxes.

Research Credit Scams

Section 41 of the Internal Revenue Code provides a credit for increasing research activities, commonly known as the “research credit.” Congress enacted the research credit in 1981 to provide an incentive for American private industry to invest in research and experimentation.

The IRS continues to see significant misuse of the research credit. Improper claims for this credit generally involve a failure to participate in or substantiate qualified research activities and/or a failure to satisfy the requirements related to qualified research expenses.

To qualify for the credit, a taxpayer’s research activities must, among other things, involve a process of experimentation using science with a goal of improving a product or process the taxpayer uses in its business or holds for sale or lease. However, there are certain activities specifically excluded from the credit, including research after commercial production, adaptation of an existing business product or process, foreign research and research funded by the customer. Qualified activities also do not include activities where there is no uncertainty about the taxpayer’s method or capability to achieve a desired result.

The IRS often sees expenses from non-qualified activities included in claims for the research credit. In addition, qualified research expenses include only in-house wages and supply expenses and 65 percent (typically) of payments to contractors. Qualified research expenses do not include expenses without a proven nexus between the claimed expenses and the qualified research activity.

Steps to Properly Claim the Credit

Taxpayers who qualify for the credit may claim up to 20 percent of qualified expenses above a base amount by completing and attaching Form 6765, Credit for Increasing Research Activities, to their tax return. For tax years beginning in 2016, eligible small businesses may use the research credit to offset the alternative minimum tax. Also for tax years beginning in 2016, qualified small businesses may elect to use a portion of the research credit as a payroll tax credit against the employer’s portion of the Social Security tax. Qualified small businesses make this election on Form 6765 and must complete and attach Form 8974, Qualified Small Business Payroll Tax Credit for Increasing Research Activities, to their Form 941, Employer’s Quarterly Federal Tax Return.

To claim a research credit, taxpayers must evaluate and document their research activities contemporaneously (i.e. over the period of time in which the research occurs) to establish the amount of qualified research expenses paid for each qualified research activity. While taxpayers may estimate some research expenses, taxpayers must have a factual basis for the assumptions used to create the estimates.

Unsupported claims for the research credit may subject taxpayers to penalties. Taxpayers should carefully review reports or studies prepared by third parties to ensure they accurately reflect the taxpayer’s activities. Third parties who are involved in the preparation of improper claims or research credit studies also may be subject to penalties

Fuel Tax Credit Scams

Fraud involving the fuel tax credit is considered a frivolous tax claim and can result in a penalty of $5,000. Furthermore, illegal scams can lead to significant penalties and interest and possible criminal prosecution. IRS Criminal Investigation works closely with the Department of Justice to shutdown scams and prosecute the criminals behind them.

The fuel tax credit is generally limited to off-highway business use or use in farming.  Consequently, the credit is not available to most taxpayers. Still, the IRS routinely finds unscrupulous tax return preparers who have enticed sizable groups of taxpayers to erroneously claim the credit to inflate their refunds.

The federal government taxes gasoline, diesel fuel, kerosene, alternative fuels and certain other types of fuel. Certain commercial uses of these fuels are nontaxable. Individuals and businesses that purchase fuel for one of those purposes can claim a tax credit by filing Form 4136, Credit for Federal Tax Paid on Fuels.

The tax is on fuels used to power vehicles and equipment on roads and highways. Taxes paid for fuel to power vehicles and equipment used off-road may qualify for the tax credit and may include farm equipment, certain boats, trains and airplanes.

Improper claims for the fuel tax credit generally come in two forms. An individual or business may make an erroneous claim on their otherwise legitimate tax return. It is also possible for an identity thief to claim the credit as part of a broader fraudulent scheme.

The IRS has taken a number of steps to improve compliance processes involving fuel tax credits. IRS compliance systems are preventing a significant number of questionable fuel tax credit claims from being processed. For example, new identity theft screening filters have also improved the IRS’s ability to identify questionable fuel tax credit claims during return processing. 

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Software Or Tax Pro: What the difference can mean for you

Doing it yourself, even with the help of the latest technology, may not be the wisest course when it comes to figuring out your taxes. Sometimes, finances need a human touch—and brain.

(NAPS) According to the National Taxpayer Advocate, nearly 60 percent of taxpayers hire paid preparers to do their taxes. With all the tax software programs out there, why do so many people turn to a professional?

“It really depends on the situation,” explained Rich Rhodes, EA, an enrolled agent in Ohio. “Young, single adults with one or two W-2s can probably do fine with tax software, but what if you’re married, own a home, have kids, are going to college or have kids going to college? There are plenty of confusing tax traps just waiting for you.”

A knowledgeable tax pro should actually save you money because he or she will interview you in person and ask a lot of questions to determine for which deductions you may qualify. Tax laws change every year and, if it’s not your full-time job, it’s hard to keep up. 

Here are just a few areas where you could be missing out on saving money on taxes.

Education and child care. The IRS publication explaining the variety of education credits alone is 94 pages long. How about childcare expenses? That publication is a “quick read” at only 19 pages. Now consider this: Those two publications cover just two line items on most 1040 forms.

Volunteer expenses. Rhodes points out that if you are a Scout leader, volunteer in your church or food bank, deliver books to a hospital or meals to seniors, many of your volunteer expenses, including mileage, may be deductible.

Job-related expenses. Perhaps you’re a traveling nurse. Do you wear a uniform? Do you carry protective glasses and a stethoscope for which you’re not reimbursed? Do you have to renew a license or take continuing education courses to maintain a license? Job-related expenses may also be deductible on your tax return.

Filing status. Married people don’t always file jointly. There are many reasons why filing separately might be a good idea and many why it might be a bad one.

Are you paying off student loans? Wondering if you should contribute to a Traditional IRA? Paying alimony? You don’t even have to itemize deductions because these items can reduce your income and that reduces your tax bill. All these are questions that can affect the amount of taxes you have to pay—and a wrong answer can cost you money. Hiring a tax professional is a solid investment. 

Tax professionals such as enrolled agents are licensed and required to take continuing education courses every year to stay up-to-date on all the latest tax changes. In fact, EAs are known as America’s tax experts. They’re the only federally licensed tax practitioners who specialize in taxation and have unlimited rights to represent taxpayers before the IRS. Those who are members of the National Association of Enrolled Agents must also adhere to a stringent Code of Ethics and Rules of Professional Conduct.

Learn More

To find an EA nearby, you can use the “Find a Tax Expert” directory on www.eatax.org.

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Understanding the 2018 Tax Act

 

From Action Tax Service

The 2018 Tax Act officially titled the “Tax Cut and Job Act of 2017” will dramatically affect everyone’s tax returns. It has provisions that will eliminate deductions that we have grown accustomed to seeing such as the amount we claim for each exemption while it also increases the amount of some credits such as the Child Tax Credit that will offset the loss of the exemption amount. At a little over 1,000 pages, it has a tremendous amount of detail but ultimately we believe that almost everyone will see a decrease in tax for 2018 over 2017. Let’s go over what I would call as the Top Ten main provisions that will affect millions of taxpayers. 

1.  Increase the Standard Deduction.  The Standard Deduction is increased for single and married filing separate taxpayers from $6,350 to $12,000.  Joint filers and qualifying widows or widowers will increase from $12,700 to $24,000.  Head of household filers will increase from $9,350 to $18,000.  This provision will dramatically reduce the number of taxpayers who itemize deductions.

2.  Eliminate Exemption Amount.  The Exemption amount of $4,050 is no longer allowed. The increased Standard Deduction will offset this loss.

3.  Increase Child Tax Credit.  The current Child Tax Credit of $1,000 is increased to $2,000.  Up to $1,400 of that amount is refundable; an increase from the current $1,000.  

4.  Family Tax Credit. A new nonrefundable credit of $500 is added for 2018.   The $500 is allowed for each dependent who is not eligible for the Child Tax Credit.  Those dependents would be family members age 17 or older and could include dependent parents and adult disabled children.  

5.  Limited Deductions for Property Tax, Sales Tax, and State Income Tax. All of these deductions as a group will be limited to $10,000. There is no limit currently.

6.  Mortgage Interest Paid Limited. In 2018, mortgage interest paid on acquisition debt of up to $750,000 will be the rule. The limit now is $1,000,000. The $1,000,000 rule will apply to future years for contracts in place as of 12/15/17. 

7.  Tuition Deduction Eliminated. The Tuition and Fees Deduction of up to $4,000of qualifying Tuition and Fees is no longer allowed.  This deduction worked in conjunction with the Education Credits.

 8.  Tax Rates Decreased. There will still be 7 Individual Tax Rates ranging from 10% up to a maximum of 37%. For the most part, the rates are decreased by 2-3%.  The result is that total income tax for a taxpayer with the same amount of income subject to tax in 2018 should be lower than the same number for 2017.  

9. Miscellaneous Itemized Deductions Eliminated. The 2% Miscellaneous Itemized Deductions such as Investment Expenses, Tax Preparation Fees, and Out of Pocket Employee Business Expenses will no longer be deductible.

10. Corporate Tax Rates Reduced. The Corporate Tax Rates have been reduced across the board to 21%. This lower rate will apply to tax years beginning after December 31, 2017.  

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Families eligible for homestead property tax credit 

 

Average tax credit was $521 for 2016 tax year

Working families and individuals with a household income of $50,000 or less a year may be eligible for a Homestead Property Tax Credit, according to the Michigan Department of Treasury.

Michigan’s Homestead Property Tax Credit can help taxpayers if they are a qualified homeowner or renter and meet certain requirements. For most people, the tax credit is based on a comparison between property taxes and total household income, with homeowners paying property taxes directly and renters paying them indirectly with their rent.

“Homestead Property Tax Credits provide tax relief for Michigan’s working families and individuals,” said Deputy State Treasurer Glenn White, head of Treasury’s Tax Administration Group. “These tax credits can reduce tax owed and may provide a refund.”

During the 2016 tax year, more than 1 million taxpayers claimed the Homestead Property Tax credit, totaling more than $532 million with an average credit at $521.

Taxpayers may claim a Homestead Property Tax Credit if ALL the following apply:

  • Your homestead is in Michigan
  • You were a resident of Michigan for at least six months during the year
  • You own or are contracted to pay rent and occupy a Michigan homestead on which property taxes were levied
  • If you own your home, your taxable value is $135,000 or less (unless unoccupied farmland)
  • Your total household resources are $50,000 or less

Taxpayers who are required to file a state income tax return should claim the Homestead Property Tax Credit with their return. Taxpayers may file a Homestead Property Tax Credit claim by itself.

To learn more about the Homestead Property Tax Credit, the forms required to obtain the credit or state income taxes, go to www.michigan.gov/incometax and click on “Credits and Exemptions” at the bottom of the page. 

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Itemize or take standard deduction for tax year 2017

 

IRS Tax Tip 2018-28

Most taxpayers claim the standard deduction when they file their federal tax return. However, some filers may be able to lower their tax bill by itemizing when they file their 2017 tax return. Before choosing to take the standard deduction or itemize, it’s a good idea to figure deductions using both methods and choose the method with the most benefit. The IRS offers the following tips to help taxpayers decide:

• Figure Itemized Deductions. Taxpayers who itemize basically add up the year’s deductible expenses to arrive at their total deduction. Deductions include: 

Home mortgage interest

State and local income taxes or sales taxes – but not both

Real estate and personal property taxes

Gifts to charities

Casualty or theft losses

Unreimbursed medical and employee business expenses above certain amounts

• Know the Standard Deduction. For taxpayers who don’t itemize, the standard deduction for 2017 depends on their filing status:   o Single — $6,350

Married Filing Jointly — $12,700

Head of Household — $9,350

Married Filing Separately — $6,350

Qualifying Widow(er) — $12,700

If a taxpayer is 65 or older, or blind, the standard deduction is more, but may be limited if another person claims that taxpayer as a dependent.

  • Use IRS Free File. Taxpayers who earned $66,000 or less in 2017 qualify to use free, brand-name software to prepare and file their federal tax returns electronically. IRS Free File software helps taxpayers determine if they should itemize. Taxpayers who can’t use Free File have other e-file options.
  • Check the Exceptions. There are some situations where the law doesn’t allow people to claim the standard deduction. This rule applies to married taxpayers who file separate returns, and either spouse itemizes. In this case, the standard deduction is zero and they should itemize any deductions.
  • Use IRS.gov Tool. Use the Interactive Tax Assistant on IRS.gov. There are several tools that can help people determine whether to itemize or take the standard deduction.  
  • File the Right Forms. For taxpayers to itemize their deductions, they must file Form 1040 and Schedule A, Itemized Deductions. Filers can take the standard deduction on Forms 1040, 1040A or 1040EZ.

More Information:

Publication 501, Exemptions, Standard Deduction, and Filing Information

Publication 17

Taxpayer Bill of Rights: #3, The Right to Pay No More than the Correct Amount of Tax

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Steps victims can take to minimize effect of data theft

 

Tax tip 2018-27

Every day, the theft of personal and financial information puts people at risk of identity theft. Generally, thieves try to use the stolen data as quickly as possible to:

  • Sell the information to other criminals.
  • Withdraw money from a bank account.
  • Make credit card purchases.
  • File a fraudulent tax return for a refund using victims’ names.

Victims of a data loss should follow these steps to minimize the effect of the theft:

  • Try to determine what information the thieves compromised. Compromised information may include emails and passwords, or more sensitive data, such as name and Social Security number.
  • Take advantage of credit monitoring services when offered by the affected organization.
  • Place a freeze on credit accounts to prevent access to credit records. It varies by state, but there may be a fee to place a freeze on an account. At a minimum, victims should place a fraud alert on their credit accounts by contacting one of the three major credit bureaus. A fraud alert isn’t as secure as a freeze, but it’s free.
  • Reset passwords on online accounts, especially those of financial sites and email and social media accounts. Use different passwords for each account. Some experts recommend at least 10-digit passwords, mixing letters, numbers and special characters. Victims may also wish to consider using a password manager or app.
  • Use multi-factor authentication, when available. Some financial institutions, email providers and social media sites allow users to set their accounts for multi-factor authentication, which requires a security code, usually sent as a text to their mobile phone, in addition to a username and password.

All taxpayers should keep a copy of their tax return. Taxpayers using a software product for the first time may need their Adjusted Gross Income amount from their prior-year tax return to verify their identity. Taxpayers can learn more about how to verify their identity and electronically sign tax returns at  Validating your electronically filed tax return at irs.gov.

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CS Brewing medals in 5th Annual Best of Craft Beer awards

 

245 medals awarded to breweries that entered across 44 states and 3 countries

 Cedar Springs Brewing Company is kicking off 2018 with another International beer style receiving recognition. Eire (“Air”), a traditional Irish dry stout created as a seasonal, was awarded a bronze medal in the Irish-Style Dry Stout or Export Stout category. It has earned a year-round following and has become one of the more popular beers in the Bier Hall.

In the state of Michigan only 3 breweries came away with medals: Cedar Springs Brewing, North Pier Brewing and Roak Brewing.

During the weekend of January 26-28, professional brewers and judges descended upon the picturesque beer/ski town of Bend, Oregon to judge over 2,000 entries into the 2018 Best of Craft Beer Awards competition. Breweries of all sizes, from nearly every state in the union, as well as Colombia, Canada, and Belgium, sent over 10,000 containers of their finest product for evaluation based on a combined 156 specific beer styles.
Judging took place in five sessions over a 3-day period by nearly 80 of the finest West Coast judges. They awarded 245 gold, silver, and bronze medals to 152 brewery locations in a total of 86 categories.

The Best of Craft Beer Awards just completed its 5th year of competition seeing a successive growth rate in participating breweries year over year. In that short amount of time, the competition has grown to be the third largest professional brewing competition in the country.

Cedar Springs Brewing Company is located at 95 N. Main, in the heart of downtown Cedar Springs, (and only 18 minutes away from Grand Rapids). It focuses on crafting German-inspired beers and offers a full-service restaurant and Brauhaus. Founded in 2015, Cedar Springs Brewing Company strives to create an atmosphere of family-friendly, casual comfort, a place where friends can get together to enjoy a good meal, a good drink, and good company. 
Schmeckt gut!

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A New Shingle

 

Dr. Andy Setaputri (left) is taking over the practice of Dr. Danette Martin (right) at Cedar Springs Dental. Courtesy photo.

Cedar Springs Dental welcomes new dentist

By Tom Noreen and Judy Reed

After 23 years of service to the Cedar Springs area, Dr. Danette Martin decided it was time to retire. In a letter to her clients she wrote, “I have reached the retirement phase of my life and will be leaving the practice of dentistry. I am excited about spending more time with my family, however, I am saddened because I won’t be able to continue being your dentist and seeing you on a regular basis. I want to thank you for the loyal support you have given me through the years. It has been my honor and a pleasure-to be your dentist and friend.”

Danette went to the Grand Rapids Education Center to become a dental hygienist after graduating from Cedar Springs High School in 1971, She worked for a number of dentists, including Dr. Robert Lorenz in Rockford. After about eight years, she decided to go to dental school. Dr. Lorenz encouraged her and she began night classes at Grand Rapids Junior College. Upon completing her undergrad requirements she applied and was accepted at the University of Michigan School of Dentistry.

After graduation she went to England for a month to learn about socialized dentistry as practiced there. She said, “I would not want that for our country.”

Upon returning to the US, she worked at the Sparta Migrant Center until the end of the season.

She next worked as an associate with a group of dentists in Big Rapids. In 1996, she was approached by Dr. Mike Palazek in Cedar Springs to join his practice. She accepted, and the next year he offered to sell it. So, from 1997 to January 2018, Danette served the community.

On retirement, she said, “I’ve worked since I was 15 beginning at the A&W Drive-In. I need to reorganize my life and see where the path leads next. I would like to travel.”

Danette married Bob Martin (Class of 71) in 1973 and they live near Howard City.

Dr. Martin also shared, “One of my chief concerns in planning my retirement has been your future dental care. I wanted an individual dentist committed to maintaining a family practice. Someone experienced and quality oriented who puts patient care first and foremost. Dr. Andy Setaputri more than meets those requirements. He is an excellent dentist who is also warm and personable. I selected Dr. Setaputri to begin assuming the clinical responsibilities of my practice on January 12, 2018.”

Dr. Setaputri shared with his new clients, “It is with honor and excitement that I write this letter. I would like to thank Dr. Martin for her confidence and trust in allowing me to continue her tradition of excellent patient care. I am fully committed to ensuring that you will receive the highest quality, ethical, and compassionate care that you have known with Dr. Martin.”

Dr. Setaputri shares Dr. Martin’s commitment to quality care and is looking forward to serving his new clientele. He provides comprehensive and advanced procedures such as extractions, root canals, implants, invisalign, crown and bridge, veneers, and composite restorations for both adults and children.

“At Cedar Springs Dental, we strive to provide the best care in a welcoming and comfortable environment. Our team values long-lasting patient relationships. Our focus is on providing world class customer service and delivering an ultimate patient experience,” he said. 

Dr. Setaputri has practiced dentistry in the Grand Rapids and Lakeview areas and is excited to join the Cedar Springs Family!

Cedar Springs Dental is located at 20 E. Church St. Hours are Monday through Thursday, 8 a.m. to 5 p.m. Call 696-9420 for an appointment or more information.

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Scam Alert: Watch out for erroneous refunds 

 

Beware of fake calls to return money to a collection agency  

WASHINGTON – The Internal Revenue Service is warning taxpayers of a quickly growing scam involving erroneous tax refunds being deposited into their bank accounts. The IRS also offered a step-by-step explanation for how to return the funds and avoid being scammed.

Following up on a Security Summit alert issued Feb. 2, the IRS issued this additional warning about the new scheme after discovering more tax practitioners’ computer files have been breached. In addition, the number of potential taxpayer victims jumped from a few hundred to several thousand in just days. The IRS Criminal Investigation division continues its investigation into the scope and breadth of this scheme.

These criminals have a new twist on an old scam. After stealing client data from tax professionals and filing fraudulent tax returns, these criminals use the taxpayers’ real bank accounts for the deposit.

Thieves are then using various tactics to reclaim the refund from the taxpayers, and their versions of the scam may continue to evolve.

Different Versions of the Scam

In one version of the scam, criminals posing as debt collection agency officials acting on behalf of the IRS contacted the taxpayers to say a refund was deposited in error, and they asked the taxpayers to forward the money to their collection agency.

In another version, the taxpayer who received the erroneous refund gets an automated call with a recorded voice saying he is from the IRS and threatens the taxpayer with criminal fraud charges, an arrest warrant and a “blacklisting” of their Social Security Number. The recorded voice gives the taxpayer a case number and a telephone number to call to return the refund.

As it did last week, the IRS repeated its call for tax professionals to step up security of sensitive client tax and financial files files.

The IRS urged taxpayers to follow established procedures for returning an erroneous refund to the agency. The IRS also encouraged taxpayers to discuss the issue with their financial institutions because there may be a need to close bank accounts. Taxpayers receiving erroneous refunds also should contact their tax preparers immediately.

Because this is a peak season for filing tax returns, taxpayers who file electronically may find that their tax return will reject because a return bearing their Social Security number is already on file. If that’s the case, taxpayers should follow the steps outlined in the Taxpayer Guide to Identity Theft. Taxpayers unable to file electronically should mail a paper tax return along with Form 14039, Identity Theft Affidavit, stating they were victims of a tax preparer data breach.

Here are the official ways to return an erroneous refund to the IRS.

Taxpayers who receive the refunds should follow the steps outlined by Tax Topic Number 161 – Returning an Erroneous Refund. The tax topic contains full details, including mailing addresses should there be a need to return paper checks. By law, interest may accrue on erroneous refunds.

If the erroneous refund was a direct deposit:

Contact the Automated Clearing House (ACH) department of the bank/financial institution where the direct deposit was received and have them return the refund to the IRS.

Call the IRS toll-free at 800-829-1040 (individual) or 800-829-4933 (business) to explain why the direct deposit is being returned.

If the erroneous refund was a paper check and hasn’t been cashed:

Write “Void” in the endorsement section on the back of the check.

Submit the check immediately to the appropriate IRS location listed below. The location is based on the city (possibly abbreviated) on the bottom text line in front of the words TAX REFUND on your refund check.

Don’t staple, bend, or paper clip the check.

Include a note stating, “Return of erroneous refund check because (and give a brief explanation of the reason for returning the refund check).”

The erroneous refund was a paper check and you have cashed it:

Submit a personal check, money order, etc., immediately to the appropriate IRS location listed below.

If you no longer have access to a copy of the check, call the IRS toll-free at 800-829-1040 (individual) or 800-829-4933 (business) (see telephone and local assistance for hours of operation) and explain to the IRS assistor that you need information to repay a cashed refund check.

Write on the check/money order: Payment of Erroneous Refund, the tax period for which the refund was issued, and your taxpayer identification number (social security number, employer identification number, or individual taxpayer identification number).

Include a brief explanation of the reason for returning the refund.

Repaying an erroneous refund in this manner may result in interest due the IRS.

IRS mailing addresses for returning paper checks

For your paper refund check, here are the IRS mailing addresses to use based on the city (possibly abbreviated). These cities are located on the check’s bottom text line in front of the words TAX REFUND:  

ANDOVER – Internal Revenue Service, 310 Lowell Street, Andover MA 01810

ATLANTA – Internal Revenue Service, 4800 Buford Highway, Chamblee GA 30341

AUSTIN – Internal Revenue Service, 3651 South Interregional Highway 35, Austin TX 78741

BRKHAVN – Internal Revenue Service, 5000 Corporate Ct., Holtsville NY 11742

CNCNATI – Internal Revenue Service, 201 West Rivercenter Blvd., Covington KY 41011

FRESNO – Internal Revenue Service, 5045 East Butler Avenue, Fresno CA 93727

KANS CY – Internal Revenue Service, 333 W. Pershing Road, Kansas City MO 64108-4302

MEMPHIS – Internal Revenue Service, 5333 Getwell Road, Memphis TN 38118

OGDEN – Internal Revenue Service, 1973 Rulon White Blvd., Ogden UT 84201

PHILA – Internal Revenue Service, 2970 Market St., Philadelphia PA 19104

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