News

Protect Yourself from IRS-Related Scams

May 28, 2015 Posted by Tasha Helms

Since October 2013, the Treasury Inspector General for Tax Administration (TIGTA) has received reports of roughly 290,000 calls from IRS impersonators and has become aware of nearly 3,000 victims who have collectively paid over $14 million as a result of a phone scam in which individuals make unsolicited calls to taxpayers fraudulently claiming to be IRS officials and demanding that they send cash via prepaid debit cards.

To protect yourself from becoming a victim of an IRS-related phone scam, keep in mind that the IRS will never:
• Call to demand immediate payment, nor will the IRS call about taxes owed without first having mailed you a bill;
• Demand that you pay taxes without giving you an opportunity to question or appeal the amount they say you owe;
• Require you to use a specific payment method for your taxes, such as a prepaid debit card;
• Ask for credit or debit card numbers over the phone;
• Threaten to bring in local police or other law-enforcement groups to have you arrested for not paying.

If you get a phone call from someone claiming to be from the IRS and asking for money, here’s what you should do:
• If you know you owe taxes or think you might owe taxes, ask for a call back number and an employee badge number, then call the IRS at 1800-829-1040. IRS employees can help you with a payment issue.
• If you know you don’t owe taxes or have no reason to believe that you do, report the incident to the TIGTA at 1-800-366-4484 or at www.tigta.gov.
• If you’ve been targeted by this scam, also contact the Federal Trade Commission and use its “FTC Complaint Assistant” at FTC.gov. Please add “IRS Telephone Scam? to the comments of the complaint.

Remember, too, that the IRS does not use email, text messages, or any other social media to discuss your personal tax issue involving bills or refunds. 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 “as is” to phishing@irs.gov, then delete the email; and
• Don’t open any attachments or click on any links–they may have malicious code that will infect your computer.

For more information on IRS-related tax scams, go to www.irs.gov and type “scam” in the search box.

What to do if You Get a Notice from the IRS

July 9, 2014 Posted by Tasha Helms

Reposted from www.irs.gov

IRS Summertime Tax Tip 2014-01, July 2, 2014

Each year the IRS mails millions of notices. Here’s what you should do if you receive a notice from the IRS:
1.Don’t ignore it. You can respond to most IRS notices quickly and easily. And it’s important that you reply promptly.

2.IRS notices usually deal with a specific issue about your tax return or tax account. For example, it may say the IRS has corrected an error on your tax return. Or it may ask you for more information.

3.Read it carefully and follow the instructions about what you need to do.

4.If it says that the IRS corrected your tax return, review the information in the notice and compare it to your tax return.

If you agree, you don’t need to reply unless a payment is due.

If you don’t agree, it’s important that you respond to the IRS. Write a letter that explains why you don’t agree. Make sure to include information and any documents you want the IRS to consider. Include the bottom tear-off portion of the notice with your letter. Mail your reply to the IRS at the address shown in the lower left part of the notice. Allow at least 30 days for a response from the IRS.

5.You can handle most notices without calling or visiting the IRS. If you do have questions, call the phone number in the upper right corner of the notice. Make sure you have a copy of your tax return and the notice with you when you call.

6.Keep copies of any notices you get from the IRS.

7.Don’t fall for phone and phishing email scams that use the IRS as a lure. The IRS first contacts people about unpaid taxes by mail – not by phone. The IRS does not contact taxpayers by email, text or social media about their tax return or tax account.

False internet rumors about “real estate transaction tax” worry taxpayers

August 11, 2012 Posted by Tasha Helms

This article is taken from the Journal of Accountancy.

False internet rumors about “real estate transaction tax” worry taxpayers

By Jack Hagel and Alistair M. Nevis J.D. | July 30′ 2012

The National Association of Realtors has some tax advice for users of the internet: Don’t believe everything you read.

There has been a recent flare-up of chain emails purporting that, come Jan. 1, all real estate transactions will be subject to a 3.8% federal sales tax. The problem: That’s not true.

“This is grossly inaccurate,” said Stephanie Singer, a spokeswoman for the Washington-based Realtors association. “It’s not a sales tax on all properties.” 

The basis for the rumors is the new 3.8% Medicare tax on unearned income, which will take effect next year (Sec. 1411). That provision provides the rumors with a kernel of truth: A very small number of taxpayers will pay a surtax on gain from the sale of a principal residence. The new tax will only apply to single taxpayers with a modified adjusted gross income (MAGI) in excess of $200,000 and married taxpayers with a MAGI in excess of $250,000 if filing a joint return, or $125,000 if filing a separate return. Those taxpayers will pay the tax on gain from sale of a principal residence, but only on the amount of gain that exceeds the thresholds in Sec. 121 ($250,000 for single taxpayers; $500,000 for joint returns).  

False rumors about a wider-reaching real-estate tax began to find their way to inboxes in 2010, when Congress passed sweeping health care reform legislation (the Patient Protection and Affordable Care Act, P.L. 111-148, and the Health Care and Education Reconciliation Act of 2010, P.L. 111-152)—the same legislation opponents have dubbed  “Obamacare”—which was the genesis of the Medicare tax.

Since June, when the U.S. Supreme Court upheld the legislation, there has been another spike in email-rumor activity, said Singer, who noted that the Realtor association does not have a position on the legislation.

As a result of the rumors, tax practitioners have been getting questions from concerned clients. The first thing for practitioners to convey to clients is that the “real estate sales tax”—at least, the version described in some emails—is largely a hoax. Practitioners should then be prepared to explain the facts:

The new tax would only apply to single taxpayers with a modified adjusted gross income (MAGI) in excess of $200,000 and married taxpayers with a MAGI in excess of $250,000 if filing a joint return, or $125,000 if filing a separate return.
The tax is equal to 3.8% of the lesser of the taxpayers’ “net investment income” or the amount by which their MAGI exceeds the threshold amount.
Under Sec. 1411(c)(1)(iii), net gain attributable to the disposition of property (other than property held in an active trade or business) is subject to this tax. That means taxable gain on the sale of a personal residence in excess of the Sec. 121 exclusion amount would be included. Sec. 121 provides that taxpayers may exclude up to $250,000 ($500,000 for joint returns) from the gain on the sale or exchange of a principal residence provided they meet certain ownership and use requirements.
Only taxpayers with MAGI over $200,000 (or $250,000 if married filing jointly) who sell their principal residence and realize more than $250,000 in gain ($500,000 if married filing jointly) will be subject to the 3.8% tax and only on the amount of gain they realize over the Sec. 121 threshold (and on their other net investment income).

Example: A married couple with MAGI of $325,000 purchased a home in California many years ago for $350,000 and sold it this year for $900,000, realizing a gain of $550,000. After excluding $500,000 gain under Sec. 121, they are left with $50,000 investment income (assume they have no other investment income). Since their AGI is $75,000 over the tax’s threshold amount for married taxpayers filing jointly, the lesser amount of $50,000 would be subject to taxation. At 3.8% they would owe $1,900.

Energy credits are still available to homeowners

November 30, 2011 Posted by Tasha Helms

Homeowners can still make energy-saving home improvements and qualify for either of two energy tax credits. The Nonbusiness Energy Property Credit can benefit homeowners who install energy efficient improvements such as insulation and new windows and furnaces. The Residential Energy Efficient Property Credit is aimed at encouraging investment in alternative energy equipment. Eligible homeowners can use Form 5695, Residential Energy Credits, to claim the credits on their 2011 tax returns. For more information, contact your CPA before year-end.

There’s still time to reduce your AGI for 2011

October 16, 2011 Posted by Tasha Helms

Many tax breaks, like tax credits, deductions and other tax benefits, are reduced or even eliminated if your adjusted gross income (AGI), or modified AGI exceed certain thresholds. The year-end is approaching quickly and those of you who otherwise qualify for these tax breaks should consider modifying or reducing your 2011 AGI. Here are some key tax breaks that may be limited by AGI thresholds.

  • Up to $4,000 deduction for qualified higher education expenses paid.
  • Nondeductible Roth IRA contributions.
  • Deductible contributions to traditional IRAs by those who are active participants in an employer-sponsored retirement plan.
  • Deductible contributions to traditional IRAs if you are married and not an active plan participant but your spouse is.
  • $1,ooo child tax credit for children under age 17.
  • American Opportunity Credit (formerly the Hope Credit) and the Lifetime Learning Credit for higher education expenses at accredited post-secondary education institutions.
  • Up to a $2,500 deduction for interest paid on qualified education loans.
  • Contributions (up to $2,500 annually) to a tax-exempt Coverdell Education Savings Account (CESA) for an individual under age 18.
  • Tax-free break on U.S. savings bonds redeemed to pay qualified higher education expenses.
  • Credit for qualified adoption expenses.
  • A limited offset of non-passive income against passive losses for an active participation rental real estate activity.

Other key items affected by AGI levels are miscellaneous itemized deductions, Social Security benefit taxation, medical expense deduction and non-business casualty loss deduction.

Contact your tax professional regarding the details of these tax breaks and how reducing your AGI levels may benefit you.

Stay tuned for some techniques that may assist in keeping your AGI levels below relevant phase-out thresholds and potentially reduce your income tax burden.