Bogus IRS Phone Calls and Emails

From IRS Tax Tip 2015-20:
 
Tax scams take many different forms. Recently, the most common scams are phone calls and emails from thieves who pretend to be from the IRS. They use the IRS name, logo or a fake website to try to steal your money. They may try to steal your identity too. Here are several tips from the IRS to help you avoid being a victim of these tax scams:

The real IRS will not:

• Initiate contact with you by phone, email, text or social media to ask for your personal or financial information.

• Call you and demand immediate payment. The IRS will not call about taxes you owe without first mailing you a bill.

• Require that you pay your taxes a certain way. For example, telling you to pay with a prepaid debit card.

Be wary if you get a phone call from someone who claims to be from the IRS and demands that you pay immediately. Here are some steps you can take to avoid and stop these scams.

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

• Contact the Treasury Inspector General for Tax Administration. Use TIGTA’s “IRS Impersonation Scam Reporting” web page to report the incident.

• You should also report it to the Federal Trade Commission. Use the “FTC Complaint Assistant” on FTC.gov. Please add "IRS Telephone Scam" to the comments of your report.

If you think you may owe taxes:

• Ask for a call back number and an employee badge number.

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

In most cases, an IRS phishing scam is an unsolicited, bogus email that claims to come from the IRS. They often use fake refunds, phony tax bills, or threats of an audit. Some emails link to sham websites that look real.  The scammers’ goal is to lure victims to give up their personal and financial information. If they get what they’re after, they use it to steal a victim’s money and their identity.
If you get a ‘phishing’ email, the IRS offers this advice:

• Don’t reply to the message.

• Don’t give out your personal or financial information.

• Forward the email to phishing@irs.gov. Then delete it.

• Don’t open any attachments or click on any links. They may have malicious code that will infect your computer.

Stay alert to scams that use the IRS as a lure. More information on how to report phishing or phone scams is available on IRS.gov.
If you found this Tax Tip helpful, please share it through your social media platforms. A great way to get tax information is to use IRS Social Media. You can also subscribe to IRS Tax Tips or any of our e-news subscriptions.

Additional IRS Resources:

• Identity Protection Tips

• Identity Protection Home Page 

IRS YouTube Videos:

• Tax Scams – English | Spanish | ASL 

• Phishing-Malware – English | Spanish | ASL

• IRS Efforts On Identity Theft – English | Spanish | ASL

• IRS ID Theft FAQ – First Steps for Victims – English | Spanish | ASL

• IRS ID Theft FAQ – Going After the Bad Guys – English | Spanish | ASL

IRS Podcasts:

• Tax Scams – English | Spanish

• ID Theft: Protect Yourself from Identity Theft – English | Spanish

• IRS ID Theft FAQ – First Steps for Victims – English | Spanish

IRS ID Theft FAQ – Going After the Bad Guys – English | Spanish

Happy New Year! (Another New Tax Season!)

With a new year comes another new tax filing season! As we prepare for the upcoming tax season, we hope this past year has been filled with many blessings and finds you in good health. 

Below are items that may apply to your income tax situation for 2014. Take note of information on the 2014 health care reforms and a new mandatory reporting of health insurance coverage. Also take note of some of the last-minute changes from Congress in December that extended tax provisions which were previously set to expire at the end of 2013.

If you missed our annual tax letter in your inbox or mailbox, see the links at the bottom of the page.

HEALTH CARE REFORM

Taxpayers who don’t have health care coverage in 2014 may be subject to a penalty. As previously mentioned, the completed ACA checklist is required in order for us to complete the appropriate tax reporting compliance forms and disclosures.  You may also be receiving some new forms this year from your employer and insurance company.  These forms are labeled 1095-A, B and C.  If you receive any of these forms, it is imperative they be provided to us with your tax documentation.  If your tax and health insurance situation requires the additional forms and compliance reporting, we will need to increase our preparation fee.  The ACA rules and forms are extremely complex, and we have spent hundreds of hours over the past year becoming educated with this new law and how it affects taxpayers. 

FOREIGN ACCOUNTS

If you have a bank account, retirement account, or business interest with a value over $10,000 in a foreign country, or a foreign business ownership (not through a mutual fund), please let us know as some special rules will apply to you. There are substantial penalties for failure to disclose these items.

CHILDREN/STUDENT RETURNS

We strongly encourage you to have us prepare the tax returns of your dependent children.  If you qualify for a subsidy, the Affordable Care Act forms require reporting of all household income.   Additionally, analysis of the education credits requires information from both parent and child tax reporting to maximize these credits.

CAPITAL GAIN TAX RATES/NET INVESTMENT TAX

For taxpayers in the 15% tax bracket or below, the capital gain rates will remain at 0%. For taxpayers above the 15% bracket but below $450k taxable income, the long term capital gain tax rate is set at 15%. For taxpayers with taxable income above $450k, the capital gain tax rate will be 20%. In addition, the 3.8% net investment income tax applies to single taxpayers with adjusted gross income of $200,000 and joint filers earning $250,000. This tax may impact the effective after-tax return on the sale of your investments, but proper planning may serve to minimize tax liability.

HOME OWNER ENERGY CREDITS

This provision has been extended, so if you have purchased insulation, storm windows or doors, a high-efficiency furnace, a water heater or made similar energy improvements in 2014, you may qualify for a 10-30% federal income tax credit.  However, the lifetime credit is limited to $500 and other limits are imposed based on the type of improvement. Supporting documents must be provided.

OTHER NOTEWORTHY ITEMS

• The American Opportunity College Tuition tax credit is extended through 2017.
• The child tax credit of $1,000 for children under age 17 has been extended through 2017.
• The “above the line” deduction of qualified college tuition and related college expenses is extended through 2014.
• The $250 deduction for certain expenses of school teachers is extended through 2014.
• Tax free IRA distributions to qualified charitable organizations is extended through 2014.
• The mileage rates for 2014 are 56 cents per mile for business mileage, 24 cents for medical mileage and 14 cents charitable miles.  Please document and complete the applicable section of our questionnaire if you had deductible business miles, medical miles or charitable miles.

MICHIGAN TAX UPDATE AND REMINDERS

• For 2014, the Michigan tax law changes implemented in 2012 relating to taxation of retirement benefits, social security benefits and interest/dividends continue to be in effect.  Individuals born prior to 1946 will not be affected by the changes. Individuals born between 1946 and 1952 will be somewhat affected.  Individuals born after 1952 may see significant increases to income that is subject to state income tax.
• Contributions to public universities/colleges, food banks and homeless shelters, libraries, radio stations etc. are no longer eligible for any Michigan related tax credits. However, they remain deductible as an itemized deduction on the federal return.

As always, we strive to provide you with timely, complete and accurate service while keeping your tax liability to the lowest legal amount. We encourage you to forward your income tax information as soon as you have everything organized. Remember: if we receive your tax information after March 31, it is very likely that we will need to file an extension for you.

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1040 CLIENT FORM LINKS:

You can find the following forms on the 1040 Client Forms page on our website:

• 2014 Year-End 1040 Tax Letter
• 2014 Year-End 1040 Questionnaire
• ACA Checklist (MANDATORY)
• Business Income Worksheet (Schedule C)
• Rental Income Worksheet (Schedule E)

The Affordable Care Act: How it Affects Your 2014 Tax Reporting

MINIMUM ESSENTIAL COVERAGE

Starting on January 1, 2014, most Americans were required to obtain “minimum essential health care coverage” (Medicare, Medicaid, TRICARE, CHIP, Veteran’s Health, Employer Sponsored Plans, or at least a Bronze level plan as defined in the Exchange plan options). Those who did not cover themselves or their dependents claimed on their tax returns this year will most likely incur a penalty, also known as the “shared responsibility payment”.  

PENALTY OR "SHARED RESPONSIBILITY PAYMENT"

The penalty for not having coverage is calculated on a month-by-month basis. It is calculated and paid via your annual income tax return. Some may have heard that the penalty is “only $95” for the year. This may be true… but it may be MUCH worse: 

• 2014: $95 per adult, $47 per child, OR 1.0% of family income, whichever is greater.
• 2015: $325 per adult, $162 per child, OR 2% of family income, whichever is greater.
• 2016: $695 per adult, $348 per child, OR 2.5% of family income, whichever is greater.

OPEN ENROLLMENT PERIOD

You are only able to purchase insurance through the exchanges during the annual open enrollment period, November 15, 2014, through February 15, 2015, or for 60 days after a “Qualifying Life Event” (marriage, child birth, job change, etc).

INSURANCE EXCHANGE

An insurance exchange is a state or federally-run insurance store that acts as a middleman for insurers and consumers.  The exchanges establish certain requirements and guidelines for four different policy types of insurance (Bronze, Silver, Gold or Platinum… or similar designations), and insurers then submit policies to the exchanges for approval and classification.

EXCEPTIONS TO HAVING COVERAGE

• Religious conscience (opposed to accepting insurance benefits)
• Not required to file a tax return
• Short coverage gap of less than three months
• Unaffordable coverage options (based on income level and premium costs)
• “Hardships” (things like homelessness, bankruptcy, eviction, foreclosure, death of a close family member, human or natural disasters, and a few others) 

To qualify, you must obtain an exemption from either the Marketplace (exchange) or the IRS.

NEW TAX FORMS

Form 1095-A: If you get insurance through any federal or state health insurance exchange, you should receive this form from the exchange by January 31, 2015. We will require this tax form before we prepare a tax return, and before any related tax credits can be obtained.  We will be asking every client if they received one, and our Organizer Questionnaire will do the same.

Form 1095-B: This form will be from an insurance company and will report proof of minimum essential coverage so covered taxpayers can avoid a penalty. However, this form is optional for the 2014 tax year, so many taxpayers won’t see one. This means we will need to rely on written information from taxpayers… requiring a signed statement of coverage so we cover our responsibility to report properly. This form should be much more common by the 2015 filing season.

Form 1095-C:  This form will be from employers to show employees’ proof of coverage. Again, this form is optional for 2014, except employers with over 250 employees, which MUST file it this year. Hence, we need to receive this form if our clients receive it. Otherwise, we will require written statements by the taxpayer to report coverage properly.

FORM 8962 - PREMIUM TAX CREDIT

This tax form only applies to those who obtained health insurance through an exchange. It calculates any premium tax credit based on your actual reported 2014 income, and compares it to anticipated income when the exchange application was filed over a year prior. Any differences are either a tax due (underestimated income at the application process) or a tax refund (overestimated income at the application process).  Form 1095-A from the exchange is REQUIRED to complete this form.

There is a good chance that someone could have (honestly) underestimated their 2014 income when they applied for coverage at an exchange one year ago.  This could lead to a tax liability, basically having to “pay back” those prepaid tax credits (which were in the form of premium discounts).  

PENALTY WORKSHEET

This worksheet reports any penalties (shared responsibility payments) from not having minimum essential health coverage. Completion of this worksheet involves pulling information from various sources, will require numerous inquiries or reports to review… and may take well over an hour to prepare. Preparing this tax form, if necessary, is why many tax prep chains are talking about large fee increases. Sadly, it is often the taxpayers who can least afford additional fees that will need this additional filing requirement. 

FEE INCREASE

Due to the additional time involved in this entire process of ACA education, data gathering, reporting, filing accurate tax returns, and hiring additional staff, we may find it necessary to raise our fees a nominal amount this tax season. Those who obtained health insurance through the exchanges, or who did not have coverage for a portion of the year, may see more sizable increases due to the complex reporting requirements.  

** Please note: specific questions about your health care coverage should be directed to your benefits administrator.

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SUMMARY

At tax time, be prepared to supply the following information or documents:

1. Form 1095A, B, or C (treat this form just like a W2 or 1099 form… we must have it).
2. A listing of each person claimed on your tax return, and whether or not they had health insurance coverage, what company or government program it was through and, if not covered for any portion of the year, which months they were not covered. We will supply a worksheet for this purpose with our tax organizer packet. This will be necessary from all clients.
3. Be ready to have extra patience with the additional questions you have never been asked before by your tax preparer, as we work through this first year of ACA reporting.

If you get insurance through an exchange, take the time to understand how the Premium Reduction Credits and Premium Tax Credits work so you can avoid tax return surprises.