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Tag Archive | "IRS"

Be especially mindful with your W-2’s


TAX-W2scam

From the BBB of Western Michigan

Recently a BBB Accounts Payable Staff Member received an email from me, Phil Catlett, CEO of BBB, requesting that she wire money immediately, and to send a reply email to receive further details about where to send the funds. And had she responded to that email it would obviously have never reached me, it’d be headed to some scammer from who knows where.

The past couple of years, BBB has been hearing about scammers targeting W-2 employee tax forms.

W-2 forms have everything needed to file a fraudulent tax refund request, including the employer name, employer ID, address, taxpayer address, Social Security number and information about 2016 wages and taxes withheld.

The IRS just issued a warning that scammers are seeking W-2 information in order to file fraudulent tax refund requests. School districts, healthcare organizations, chain restaurants, temporary staffing agencies, tribal organizations and nonprofits are all mentioned in the IRS information as targets.

It could happen to any of us, but scammers don’t just stop after they get access to your sensitive information. The IRS reports that after they get your personal information, the W-2 scammers send an email to the payroll or comptroller of a company requesting that a wire transfer be made to a certain account.

“This is one of the most dangerous email phishing scams we’ve seen in a long time,” said the IRS Commissioner. “Although not tax related, the wire transfer scam is being coupled with the W-2 scam email, and some companies have lost both employees’ W-2s and thousands of dollars.” It is also being reported that scammers are selling 2016 employee W-2 forms that were stolen from victim organizations, peddling individual W-2 tax records for anywhere between $4 and $20 apiece.

But the simplest and best way for individuals to avoid becoming a victim of tax refund fraud is to file your taxes before criminals do it. To reduce risk of businesses being hit by these frauds, use two-factor authentication for email, such as telephone calls to verify significant banking transactions.  BBB advises that any information about employee activities listed on your websites or in social media can make you more vulnerable as well.

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Five things to know about the child tax credit


 

The Child Tax Credit is a tax credit that may save taxpayers up to $1,000 for each eligible qualifying child. Taxpayers should make sure they qualify before they claim it. Here are five facts from the IRS on the Child Tax Credit:

1. Qualifications. For the Child Tax Credit, a qualifying child must pass several tests:

  • Age. The child must have been under age 17 on Dec. 31, 2016.
  • Relationship. The child must be the taxpayer’s son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, half-brother or half-sister. The child may be a descendant of any of these individuals. A qualifying child could also include grandchildren, nieces or nephews. Taxpayers would always treat an adopted child as their own child. An adopted child includes a child lawfully placed with them for legal adoption.
  • Support. The child must have not provided more than half of their own support for the year.
  • Dependent. The child must be a dependent that a taxpayer claims on their federal tax return.
  • Joint return. The child cannot file a joint return for the year, unless the only reason they are filing is to claim a refund.
  • Citizenship. The child must be a U.S. citizen, a U.S. national or a U.S. resident alien.
  • Residence. In most cases, the child must have lived with the taxpayer for more than half of 2016.

The IRS Interactive Tax Assistant tool – Is My Child a Qualifying Child for the Child Tax Credit? – helps taxpayers determine if a child is a qualifying child for the Child Tax Credit. Visit https://www.irs.gov/uac/is-my-child-a-qualifying-child-for-the-child-tax-credit.

2. Limitations. The Child Tax Credit is subject to income limitations. The limits may reduce or eliminate a taxpayer’s credit depending on their filing status and income.

3. Additional Child Tax Credit If a taxpayer qualifies and gets less than the full Child Tax Credit, they could receive a refund, even if they owe no tax, with the Additional Child Tax Credit.

Because of a new tax-law change, the IRS cannot issue refunds before Feb. 15 for tax returns that claim the Earned Income Tax Credit (EITC) or the ACTC. This applies to the entire refund, even the portion not associated with these credits. The IRS will begin to release EITC/ACTC refunds starting Feb. 15. However, the IRS expects these refunds to be available in bank accounts or debit cards at the earliest, during the week of Feb. 27. This will happen as long as there are no processing issues with the tax return and the taxpayer chose direct deposit. Read more about refund timing for early EITC/ACTC filers.

4. Schedule 8812. If a taxpayer qualifies to claim the Child Tax Credit, they need to check to see if they must complete and attach Schedule 8812, Child Tax Credit, with their tax return. Taxpayers can visit IRS.gov to view, download or print IRS tax forms anytime.

5. IRS E-file. The easiest way to claim the Child Tax Credit is with IRS E-file. This system is safe, accurate and easy to use. Taxpayers can also use IRS Free File to prepare and e-file their taxes for free. Go to IRS.gov/filing to learn more.

All taxpayers should keep a copy of their tax return. Beginning in 2017, taxpayers using a software product for the first time may need their Adjusted Gross Income (AGI) 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 https://www.irs.gov/individuals/electronic-filing-pin-request.

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Four tax changes that could impact your 2016 return


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(BPT) – With tax filing season upon us, it’s a good idea to educate yourself on what’s changed since last year. While it’s been a relatively quiet year in terms of new tax laws, there are a handful of items for which you’ll want to prepare.

1. The Tax Deadline is April 18.

This year, the deadline to file returns is Tuesday, April 18, 2017, rather than the traditional April 15 date. That’s because the April 15 falls on a Saturday and Emancipation Day, the anniversary of the abolition of slavery, is recognized on Monday, April 17, 2017 and is a holiday in the District of Columbia. For tax-filing purposes, the IRS treats this day as a federal holiday.

2. Delayed refunds for some early filers.

If you claim the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) this year, you’ll have to wait until after mid-February to get your refund. The Protecting Americans from Tax Hikes (PATH) Act, passed in late 2015, says the IRS cannot issue credits or refunds for an overpayment before Feb. 15, 2017 to any filer who claims the EITC or ACTC.

The delay gives the IRS more time to review income tax returns – and prevent the agency from inadvertently processing fraudulent returns. Fraudsters file bogus returns before the actual filer can complete their taxes and often claim credits like the EITC and ACTC.

Both the EITC and ACTC are refundable tax credits. That means they are beneficial even after reducing your tax liability to zero. If the amount of these credits is more than the amount of taxes due, you’ll get the difference back as a refund. Savvy criminals know this – and input numbers to make it look like they should get more money back.

If you don’t file either of these credits, the IRS says your refund will likely get processed in the typical time frame of 21 days.

3. Don’t be surprised if your state asks for your driver’s license number or state ID.

Depending on the state in which you live, you may be asked to provide your driver’s license number (DLN) or state ID number when you file your 2016 state return. This is part of a broad effort by the IRS, states and the entire tax industry to lessen the risk of tax-related identity theft. Identity thieves may have personal information such as your name and Social Security number, but not your DLN. The additional information helps states verify you are who you say you are.

“Some states, such as Alabama, will ask taxpayers who e-file to provide both the DLN as well as date of issue, expiration number and issuing state,” says Mark Jaeger, director of Tax Development for TaxAct. “If you use a DIY tax solution like TaxAct, you’ll be prompted to enter the information required by your state as you prepare your return.”

Implementing additional identity verification measures, such as requesting a filer’s DLN and related information, can help curtail the number of fraudulent returns states process this year. The IRS now requests this information, but it is not required to electronically file a federal return.

4. Affordable Care Act (ACA) forms may be late this year, but don’t wait to file your return.

By now, you’re probably accustomed to receiving ACA-related forms reporting whether you and members of your household met health insurance coverage requirements established by the ACA for the prior year. What’s new this year is when you’ll receive some of those forms.

The deadline for companies and insurers to issue Forms 1095-B and 1095-C to individuals has been delayed this year. Employers and insurance providers must mail your forms by March 2, 2017, considerably later than the original Jan. 31 deadline.

“Remember, you don’t need to file these forms with your return,” Jaeger says. “However, the forms can be helpful in identifying coverage months if the entire tax household did not have full-year health insurance coverage. Once you receive the applicable form, keep it with your other tax documents. The IRS gets their own copy so you don’t need to attach it to your return.”

Keep up to date with a little help from your friends.

Staying abreast of tax changes before you file your return can be tough. Fortunately, taxpayers can turn to a number of resources, including TaxAct, for help.

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Three ways to plan ahead for the 2017 tax season


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(BPT) – With the tax season approaching, now is the time to start thinking about creating a strategy to help maximize tax refunds in the year ahead. From the passage of the Protecting Americans from Tax Hikes (PATH) Act to the increase in health insurance penalties, here are a few items to keep in mind before the IRS begins accepting tax returns.

1. Donating to charity, making an extra student loan payment or contributing to an IRA can lower your adjusted gross and taxable income.

If you are a taxpayer that itemizes your deductions, donating to a qualified charity by Dec. 31 and saving the necessary documentation can lower your taxable income. Taxpayers can also deduct up to $2,500 of interest paid on their student loans each year, even if the payment is voluntary. For those contributing to their IRA, taxpayers can deduct up to $5,000, and have until April 16, 2016 to make contributions.

2. Your health insurance penalty will increase if you are uninsured and do not sign up by Jan. 31.

The per-person flat fee penalty for not having health insurance has increased more than 630 percent since it was first implemented in 2014.

Taxpayers will now have to pay a penalty of $695 per uncovered adult, plus $347.50 per uncovered child up to a maximum of $2,085 or 2.5 percent of their household income over the filing threshold, whichever is greater. That means a family of four earning $60,000 would pay a penalty of more than $2,000.

According to H&R Block’s estimates, taxpayers without insurance in 2015 paid an average penalty of $401. This was a 125 percent increase from 2014, when the average penalty was $178.

There are some cases where an uninsured taxpayer may qualify for an exemption from the penalty, but the only way to completely avoid it in 2017 is to enroll and stay covered under a qualified insurance plan.

3. If you claim the earned income tax credit (EITC) or additional child tax credit (ACTC), your refund will be delayed until at least Feb. 15.

The passage of the PATH Act now requires the Internal Revenue Service (IRS) to hold the entire refund for returns claiming the EITC and ACTC until at least Feb. 15, depending on when the return is filed.

The IRS estimates approximately one in five EITC payments are made through fraudulent filings or confusion due to the complexity in claiming the benefit. Employers are now required to send employee W-2s to the IRS by Jan. 31 to allow the IRS additional time to help prevent identity theft and fraud.

The IRS will begin releasing funds on Feb. 15, but taxpayers may not see the funds deposited into their banking accounts immediately. This law could affect approximately up to 30 million taxpayers who claim these tax credits.

If you are one of the 30 million taxpayers who claim these credits and are worried about a delayed refund, visit a local H&R Block professional to see how they might be able to help. For more information, visit hrblock.com/PATH.

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Top five tips on unemployment benefits


 

IRS tax tip 2016-34

If you lose your job, you may qualify for unemployment benefits. While these payments may come as a relief, it’s important to remember that they may be taxable. Here are five key facts about unemployment compensation:

1. Unemployment is Taxable. You must include all unemployment compensation as income for the year. You should receive a Form 1099-G, Certain Government Payments by Jan. 31 of the following year. This form will show the amount paid to you and the amount of any federal income tax withheld.

2. Paid Under U.S. or State Law. There are various types of unemployment compensation. Unemployment includes amounts paid under U.S. or state unemployment compensation laws. For more information, see Publication 525, Taxable and Nontaxable Income.

3. Union Benefits May be Taxable. You must include benefits paid to you from regular union dues in your income. Other rules may apply if you contributed to a special union fund and your contributions to the fund are not deductible. In that case, you only include as income any amount that you got that was more than the contributions you made.

4. You May have Tax Withheld. You can choose to have federal income tax withheld from your unemployment. You can have this done using Form W-4V, Voluntary Withholding Request. If you choose not to have tax withheld, you may need to make estimated tax payments during the year.

5. Visit IRS.gov for Help. If you’re facing financial difficulties, you should visit the IRS.gov page: “What Ifs” for Struggling Taxpayers. This page explains the tax effect of events such as job loss. For example, if your income decreased, you may be eligible for certain tax credits, like the Earned Income Tax Credit. If you owe federal taxes and can’t pay your bill check the Payments tab on IRS.gov to review your options. In many cases, the IRS can take steps to help ease your financial burden.

For more details visit IRS.gov and check Publication 525. You can view, download and print Form W-4V at IRS.gov/forms anytime.

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

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Social Security benefits may be taxable


If you receive Social Security benefits, you may have to pay federal income tax on part of your benefits. These IRS tips will help you determine if you need to pay taxes on your benefits.

Form SSA-1099.  If you received Social Security benefits in 2015, you should receive a Form SSA-1099, Social Security Benefit Statement, showing the amount of your benefits.

Only Social Security.  If Social Security was your only income in 2015, your benefits may not be taxable. You also may not need to file a federal income tax return. If you get income from other sources you may have to pay taxes on some of your benefits.

Free File.  Use IRS Free File to prepare and e-file your tax return for free. If you earned $62,000 or less, you can use brand-name software. The software does the math for you and helps avoid mistakes. If you earned more, you can use Free File Fillable Forms. This option uses electronic versions of IRS paper forms. It’s best for people who are used to doing their own taxes. Free File is available only by going to IRS.gov/freefile.

Interactive Tax Assistant.  You can get answers to your tax questions with this helpful tool and see if any of your benefits are taxable.  Visit IRS.gov and use the Interactive Tax Assistant tool.

Tax Formula.  Here’s a quick way to find out if you must pay taxes on your Social Security benefits: Add one-half of your Social Security to all your other income, including tax-exempt interest. Then compare the total to the base amount for your filing status. If your total is more than the base amount, some of your benefits may be taxable.

Base Amounts.  The three base amounts are:

$25,000 – if you are single, head of household, qualifying widow or widower with a dependent child or married filing separately and lived apart from your spouse for all of 2015

$32,000 – if you are married filing jointly

$0 – if you are married filing separately and lived with your spouse at any time during the year

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

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Seven tips to avoid Presidents Day rush


WASHINGTON—The period around Presidents Day marks the peak busy season for IRS toll-free phone service, but there are faster ways to find answers to your questions. The Internal Revenue Service provides tools and apps on IRS.gov that can help many of taxpayers get answers immediately online.

Traditionally, the Tuesday after Presidents Day is the busiest day of the year for phone calls. The IRS will staff the toll-free lines on Saturday, February 13 and Monday, February 15, the Presidents Day holiday in an effort to answer more taxpayer calls.

The hours of operations are 9 a.m. to 5 p.m. local time on Saturday and 7 a.m. to 7 p.m. local time on Monday.

But on IRS.gov, taxpayers can, among many things, check the status of their refund, request a copy of their tax transcript or get an answer to their tax questions around the clock.

The entire week of the Presidents Day holiday marks a peak time for the IRS,” said IRS Commissioner John Koskinen. “We’re keeping our phones open over part of the holiday weekend to manage the increased demand.”

To save time and find answers faster, taxpayers should make IRS.gov their first stop. A good place to start is the “IRS Services Guide” for a quick overview of online services and resources. IRS information and some tools also are in Spanish.

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

Want to know where your refund is?

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

Didn’t get a W-2?

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

After exhausting all options with the employer, employees may contact the IRS and we will send a letter to the employer. However, we would urge you to wait until the end of February to avoid long wait times on the telephone.

Need a copy of your tax return or transcript?

Taxpayers can easily order a return or transcript on the IRS.gov website, or by mailing us a completed Form 4506-T. See our Get Transcript application to have a transcript mailed to you. More information on these options is available at IRS.gov.

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

Wondering how the Affordable Care Act will affect you?

This year almost all taxpayers must do something related to health care reporting requirements. The majority of taxpayers—more than three out of four—will simply need to check a box to verify they have health insurance coverage. For the minority of taxpayers who will have to do more, IRS.gov/aca features useful information and tips regarding the premium tax credit, the individual shared responsibility requirement and other tax features of the ACA. Publication 5201, The Health Care Law and Your Taxes, also provides a snapshot of ACA requirements.

Need answers to tax law questions?

Questions about what filing status means, whether to file a tax return or who can be claimed as a dependent? There’s the Interactive Tax Assistant that takes you through a series of questions just like one of our customer service representatives would. You can also do a keyword search on IRS.gov; use Publication 17, the annual, searchable income tax guide; or the IRS Tax Map, which allows search by topic or keyword for single-point access to tax law information by subject.

Can’t pay a tax bill?

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

Need help preparing your taxes?

Free tax return preparation help is available nationwide from volunteers and on IRS.gov with Free File. Local community partners operate roughly 13,000 Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) sites nationwide. Find a location nearby by searching “Free Tax Help” on IRS.gov.

IRS Free File is offered by 13 tax software companies that make their brand-name products available for free to the 70 percent of taxpayers who earned $62,000 or less last year. Free File Fillable Forms is available for households whose earnings are more than $62,000 and are comfortable preparing their taxes.

Taxpayers may also use our searchable directory on IRS.gov for help on finding a tax professional with credentials and select qualifications to help them prepare their tax returns.

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Missing Form W-2? IRS can help


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Most people get their W-2 forms by the end of January. Form W-2, Wage and Tax Statement, shows your income and the taxes withheld from your pay for the year. You need it to file an accurate tax return.

If you haven’t received your form by mid-February, here’s what you should do:

• Contact your Employer. Ask your employer (or former employer) for a copy. Be sure they have your correct address.

• Call the IRS. If you are unable to get a copy from your employer, you may call the IRS at 800-829-1040 after Feb. 23. The IRS will send a letter to your employer on your behalf. You’ll need the following when you call:

**Your name, address, Social Security number and phone number;

**Your employer’s name, address and phone number;

**The dates you worked for the employer; and

**An estimate of your wages and federal income tax withheld in 2015. You can use your final pay stub for these amounts.

• File on Time. Your tax return is normally due on or before April 18, 2016. Use Form 4852, Substitute for Form W-2, Wage and Tax Statement, if you don’t get your W-2 in time to file. Estimate your wages and taxes withheld as best as you can. If you can’t get it done by the due date, ask for an extra six months to file. Use Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, to request more time. You can also e-file a request for more time. Do it for free with IRS Free File.

• Correct if Necessary. You may need to correct your tax return if you get your missing W-2 after you file. If the tax information on the W-2 is different from what you originally reported, you may need to file an amended tax return. Use Form 1040X, Amended U.S. Individual Income Tax Return to make the change.

Note: Important 2015 Health Insurance Forms

Starting in 2016, most taxpayers will receive one or more forms relating to health care coverage they had during the previous year.

If you enrolled in 2015 coverage through the Health Insurance Marketplace, you should get Form 1095-A, Health Insurance Marketplace Statement by early February.

If you were enrolled in other health coverage for 2015, you should receive a Form 1095-B, Health Coverage, or Form 1095-C, Employer Provided Health insurance Offer and Coverage by the end of March. You should contact the issuer of the form – the Marketplace, your coverage provider or your employer – if you think you should have gotten a form but did not get it.

If you are expecting to receive a Form 1095-A, you should wait to file your 2015 income tax return until you receive that form. However, it is not necessary to wait for Forms 1095-B or 1095-C in order to file.

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

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Former credit union manager sentenced for embezzlement


 

Kathryn Sue Simmerman Embezzled Almost $2 Million From Shoreline Federal Credit Union 

A Muskegon woman will serve time in prison for stealing money from a Norton Shores credit union.

According to United States Attorney Patrick Miles Jr.,  Kathryn Sue Simmerman, 55, of Muskegon, Michigan, was sentenced to 78 months (six and a half years) in federal prison Monday, January 4, for embezzling $1.9 million from her former employer, Shoreline Federal Credit Union. She was also ordered to pay $1.9 million in restitution and serve two years of court supervision following her release from prison. U.S. District Judge Robert Holmes Bell imposed the sentence. He remanded Simmerman to prison immediately after issuing the sentence.

For more than 15 years, Simmerman embezzled $1,945,000 from Shoreline by removing cash from its vault and placing it in her purse. She deposited some of the cash into Shoreline accounts she controlled, and took the remainder of it home to spend on her own use and enjoyment. She hid her activity by manipulating Shoreline’s books and records.

The case was investigated by the Norton Shores Police Department and Special Agents from the FBI and IRS. It was prosecuted by Assistant U.S. Attorney Clay Stiffler.

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BBB Alert: IRS tax collection methods to change


 

The IRS will be hiring private collection companies to collect taxes in difficult cases.

The BBB is alerting consumers that the IRS is now required to use private debt collection companies to collect «inactive tax receivables.»

These include cases where the IRS can’t locate the taxpayer and more than a year has passed without interaction with the taxpayer for purposes of furthering the collection.

The law requires that IRS begin entering into agreements within three months. This provision was in the recent highway funding bill that Congress passed and the President signed into law.

The new law imposes specific reporting requirements on the IRS including an annual report of the number and amount of tax receivables provided to collection contractors, total amounts collected, and collection costs incurred by the IRS.

Also required is a report every two years of an independent evaluation of each private debt collection performance and a measurement plan that compares the best practices used by private debt collectors with those used by the IRS.

The timing of this new law follows a recent Federal Trade Commission crackdown on collections agencies related to questionable tactics used by some collectors.

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