Private Agencies Now Collecting for IRS – Your scam alert should be on high

Private Agencies Now Collecting for IRS – Your scam alert should be on high

The IRS recently announced its outside collection agencies are now actively collecting past due tax bills. This will impact all of us. Here is what you need to know

In a recent announcement, the IRS notified all taxpayers that outside collection of past-due tax bills is now beginning in mid-April 2017. This is a direct result of Congressional action in late 2015 requiring the IRS to turn over to outside companies billions in uncollected taxes it is no longer pursuing. This will impact all of us. Here is what you need to know.

Turn up your scam alert. Rest assured the tax-related identity theft epidemic is going to hit a new high as scam artists now will try to impersonate collection agencies. Never pay a collection agency directly for any tax owed. If you do not think you owe money to the IRS, ask for help.

Only four agencies have been authorized. Only four collection agencies have been authorized to collect unpaid taxes for the IRS. They are:

  • ConServe, of Fairport, New York
  • Pioneer, of Horseheads, New York
  • Performant, of Pleasanton, California
  • CBE Group, of Cedar Falls, Iowa

You will receive written notice…twice. Before an outside agency calls you, the IRS will send two written notices to you and your representative about the transfer of the bill to an outside collection agency. Without these notices, you must assume any contact with a collection agency saying they represent the IRS is a scam.

No payment to the agency. These collection agencies may not receive direct payment. You will be asked to use the IRS online payment system or to send your payment into the IRS. Payment is to be made to the U.S. Treasury and not to the collection agency.

The IRS has announced collection activity will now be starting, so be prepared and ask for help if you are impacted by this change within the IRS.

 

 

Taxpayers to forfeit more than $1 billion in refunds – Are you one of them?

Taxpayers to forfeit more than $1 billion in refunds – Are you one of them?

The IRS disclosed there will be more than $1 billion in federal tax refunds forfeited this year if taxpayers don’t claim them by April 18.

The IRS disclosed there will be more than $1 billion in federal tax refunds forfeited this year if taxpayers don’t claim them by April 18.

Refunds have to be claimed within three years or they are forfeited to the government. The unclaimed $1 billion comes from about 1 million taxpayers who still haven’t filed returns for the 2013 tax year. Often the people who leave these refunds behind are young adults, college students, senior citizens and low-income taxpayers.

Why refunds go unclaimed

Forgetting withholdings. Even if you have very little income, your employer may have taken some money from your paycheck for federal tax withholdings. The only way to get it back is to file a tax return.

Not claiming refundable credits. Many tax credits are “refundable credits.” This means you can receive a refund even if you owe no income tax. Common examples available to students and parents are the earned income tax credit and the premium tax credit.

Missing information. Some people don’t file because they’ve lost the information they need. If the reason you can’t file is because you lost your data, you can request an online transcript from the IRS that will give you your wage, income and other tax information. You can also mail the IRS a Form 4506-T to get paper copies mailed to you. However, this will take between five and 10 business days, so don’t delay.

Fear of penalties. Sometimes taxpayers fail to file old returns because they think the IRS may penalize them. There is no penalty for filing a late return if you are owed a refund.

Get your money

The IRS is great at tracking down people who owe them money, but not so great at reaching out to people they owe. This irony should motivate you to get your money back. To be safe, send your 2013 return by certified mail early enough so that the IRS receives it by April 18. Any refunds that aren’t claimed within the three-year due date will be gone forever, swallowed up by the U.S. Treasury Department.

Remember, just because you are not required to file a tax return doesn’t mean you shouldn’t. There are more than a billion dollars in unclaimed refunds – make sure you get yours.

Small Business Filing Deadline Approaching Fast Form W-2s and 1099-MISCs are Due Jan. 31

Small Business Filing Deadline Approaching Fast

Form W-2s and 1099-MISCs are Due Jan. 31

If you own your own business or have a side business in addition to your regular job, you may need to send out several IRS forms by Jan. 31 this year.

The deadline is for forms you issue to employees and others who were paid as part of your business activities throughout the year. These W-2 and 1099-MISC forms will have to be postmarked or sent electronically to both the IRS and the person you did business with on or before Jan. 31, otherwise you may face fines for each late form.

Most businesses understand that a W-2 is required for each of your employees. But did you know that you also may need to issue a 1099-MISC to each contractor or vendor you’ve done business with during the year?

General rule

The general rule is to issue a 1099-MISC to each individual contractor or vendor you paid at least $600 over the course of the calendar year. This form requirement doesn’t usually apply to your expenditures on hobbies or personal items, just business activities. In most cases you do not have to issue 1099-MISCs to corporations – just other individuals and partnerships. Here is an example.

Andrea has a side business as a model on nights and weekends in addition to her career as a medical device analyst. Over the course of 2016, she paid $600 to a hair and makeup stylist at Hair Art Inc., $800 to a freelance photographer for headshots and a promotional portfolio, and $2,000 in fees to Viva Talent LLC, a local modeling agency.

Andrea doesn’t need to issue a 1099-MISC to the stylist, because he works for a corporation, but she will have to send one to the photographer, who is an independent contractor. She needs to send one to the modeling agency as well, because it operates as a limited liability company (LLC) and files its taxes as a partnership rather than as a corporation.

Hint: Andrea can make her filing activities easier by issuing Form W9 to each vendor to get their tax information. These forms should be kept on file.

Other examples of business activities that may require you to issue a 1099-MISC include:

  • Rents paid to a landlord for office space.
  • Expenses paid to a contractor to turn a room in your house into a home office.
  • Payments made to an attorney.

Fraud and fines

In the past, while most forms were filed by the end of January, you had until as late as March 31 to get the government their copies. The unified Jan. 31 deadline for these forms was changed as part of the IRS’s larger effort to crack down on refund fraud. Fraudsters have been filing bogus returns early in the year in an effort to snag a refund check before W-2s and 1099s arrive that contradict their returns.

Unfortunately, the fines on the self-employed and small business owners for missing the Jan. 31 deadline can be steep. Form W-2s and 1099s filed up to 30 days late are fined $50 each; $100 each for more than 30 days late; and $260 each for those filed after Aug. 1 or not filed at all.

The deadline is approaching fast, so don’t hesitate to call if you have any questions.

The IRS Grilling – IRS applies more scrutiny to child-related tax credits

The IRS Grilling – IRS applies more scrutiny to child-related tax credits

Get ready to answer additional questions this year if you claim some tax credits related to children and college costs

Get ready to answer additional questions this year if you claim some tax credits related to children and college costs.

You may already be familiar with the additional questions and documentation required when you use the Earned Income Tax Credit (EIC). Starting this year, the IRS is applying the same level of scrutiny to three more credits:

  • Child Tax Credit (CTC)
  • Additional Child Tax Credit (ACTC)
  • American Opportunity Tax Credit (AOTC)

Clarify child qualifications. For the CTC and ACTC credits, you may be asked how long your children lived with you over the past year, or whether they lived with an ex-spouse, relatives or other guardian. That is an issue particularly relevant to divorced parents, since only one parent is allowed to claim these credits.

More documents. If you are eligible for the AOTC, which is a credit to defray as much as $2,500 in higher education costs for you or your children, you will need to provide a tuition statement from the college or university. This is known as a Form 1098-T. You will also need receipts for related expenses, such as school textbooks.

Other common errors. You may also be asked to double check your forms to avoid submitting information that is incorrect, incomplete or inconsistent. Incorrect Social Security numbers and dates of birth for the dependents on your return are two common sources of error.

Cracking down on “improper payments.” Some of those common errors have helped to make the EIC and the other credits a major source of what the IRS calls “improper payments.” In fact, the agency estimates that of the $66 billion in EIC funds paid in 2015, nearly a quarter were collected by filers who didn’t actually qualify to receive them.

Don’t take it personally. In order to crack down on the problem, the IRS is requiring tax preparers to ask more questions. The agency’s new rules also have sharper teeth. Starting this year, tax preparers who don’t document their compliance with these new requirements could face fines of up to $510 per return.

So, please understand: if you get more questions than you are used to or are asked for additional documents, it’s not personal! It’s just what is now required.

2017 Mileage Rates – New mileage rates announced by the IRS

2017 Mileage Rates – New mileage rates announced by the IRS

Here are the standard mileage rates for 2017

2017 Mileage Rates

The IRS recently announced mileage rates to be used for travel in 2017. The Business mileage rate decreases by 0.5 cents while Medical and Moving mileage rates are lowered by 2 cents. Charitable mileage rates are unchanged.

2017 New Mileage Rates

Standard Mileage Rates
Mileage Rate/Mile
Business Travel 53.5¢
Medical/Moving 17¢
Charitable Work 14¢
Mileage Rates

Here are 2016 rates for your reference as well.

2016 Mileage Rates

Standard Mileage Rates
Mileage Rate/Mile
Business Travel 54.0¢
Medical/Moving 19¢
Charitable Work 14¢
Mileage Rates

Remember to properly document your mileage to receive full credit for your miles driven.

Key Tax Filing Date Changes

Key Tax Filing Date Changes

2016 tax return filing deadlines are changing for some. If you have foreign bank accounts, expect to receive a Form K-1 from a partnership or LLC, or participate within a C-corporation you will need to know this information

Key Tax Filing Date Changes

There are new tax filing deadlines effective for 2016 tax returns. Here are the major changes worth noting.

Small Business Partnership and Limited Liability Corps

Small businesses that are organized as a partnership or limited liability companies filing Form 1065 must file their tax return on or before March 15, 2017. This moves the required filing date up one month versus last year.

  • Who: Partnerships and LLC’s taxed on Form 1065
  • New filing deadline: March 15th (old filing Date was April 15th)

Calendar year C-Corporations

  • Year-end C Corporation tax filing date is a month later. The old filing date of March 15th is now moved to April 15th.

Who: Year-end C Corporations

  • New filing deadline: April 15th (old filing date was March 15th)

Note: If your C Corporation is a non-calendar year filer, your deadlines may change over the next few years so please be alert to this.

Foreign bank accounts

  • Foreign bank account reporting dates are changing. Annual reporting of foreign bank accounts moves from June 30 to April 15th. This is FBAR Form 114
  • Who: Anyone with foreign financial accounts.

    New filing deadline: April 15th (old filing date was June 30th)

 

Understanding Tax Terms: Structuring – IRS has broad authority to seize bank accounts

Understanding Tax Terms: Structuring

IRS has broad authority to seize bank accounts

The IRS has broad powers to seize bank accounts if it believes there is criminal activity and you are actively trying to avoid their financial transaction reporting requirements. Here is what you should know.

Understanding Tax Terms: Structuring

If someone manipulates cash transactions to avoid required bank reporting to the Treasury Department, they are using the technique of structuring their transactions. Knowing what is reported and the power given to the IRS to seize related assets can be important.

Background

In an effort to identify questionable illegal transactions, financial institutions are required to report any monetary amounts over $10,000 to the Treasury Department. If someone knowingly structures their transactions to avoid this reporting, the Bank Secrecy Act allows the IRS to legally seize these assets. The old rules provide fairly broad discretion in this area and many innocent taxpayers not only had assets frozen, but found it virtually impossible to get their funds returned to them.

Example

Vocatura’s Bakery in Norwich, CT did most of their bakery trade in cash. To help their local banker not have to fill out required federal forms when they deposited $10,000 or more, they tried to make lower deposits. One day in 2013 the IRS showed up at their business and seized over $65,000 of their deposits suspecting illegal activity through use of this structuring activity. Using civil forfeiture rules, the IRS permanently seized this small business’ assets. Three years and lots of legal fighting later, the business finally got their money back. Here is a link to their story; IRS Returns Bakery’s Money After 3 Years. Now It Wants To Put The Owners In Prison.

What you should know

Be aware of the rule. As more small businesses try to avoid the high charges associated with credit cards, they must also be aware of the Bank Secrecy Act rules. Establish a good relationship with your banker and have them understand your business to help create a potential ally if needed. Do not knowingly try to avoid the $10,000 reporting rule.

Consistent numbers. Create a regular routine of sales deposits. Do not save up deposits and then deposit similar amounts. This could raise red flags.

The rules are changing. In a recent change, the IRS will still pursue structuring violations, but will try to more closely align action taken with knowledge of criminal activity. The government must show that the taxpayer knows of the rules and knowingly structures their transactions to avoid the reporting.

There are bad guys. Money laundering is a big problem. Whether it be drug money, terrorist fund raising, bootlegging or other illegal activity, excess cash deposits will raise suspicions. So while the IRS uses their tools to catch these crooks, they are making an active attempt to keep innocent taxpayers out of their net.

Prepare Now for Future Refund Delays – IRS now required to delay refunds to many taxpayers

Prepare Now for Future Refund Delays – IRS now required to delay refunds to many taxpayers

As part of recent tax legislation, the IRS is now mandated to delay sending out some refunds to taxpayers beginning with 2016 tax returns. If impacted, you will need to plan for this delay.

Topline: If next year’s tax return claims an Earned Income Tax Credit or the Additional Child Tax Credit your refund will be held by the IRS until February 15th.

The delay in sending out tax refunds is mandated by recent tax law legislation because of the proliferation of identity theft and tax fraud. This extra time will be used by the IRS to help prevent revenue loss from early tax return filings claiming invalid tax refunds. Those most impacted by this change are early tax return filers. While the IRS plans future correspondence to alert taxpayers to this change, here are some things to note.

  • Entire refund. If your tax return claims either of these credits, your entire refund will be held until February 15th.
  • Do not delay. If you typically file early, do not delay filing your tax return because of this rule change. Tax returns can still be processed. Only the refund payment is being delayed.
  • The bottleneck. Filing early can help you avoid the bottleneck of tax refund processing. On February 15thyou will want to be at the front of the line to receive your money.
  • Plan accordingly. If you historically plan on receiving and using an early refund, you will now need to plan for this delay.

IRS Gets Transcript Service Back On-line – Be prepared for more security hurdles

IRS Gets Transcript Service Back On-line – Be prepared for more security hurdles

After being off-line for over a year, the IRS recently announced the reactivation of their popular ”Get Transcript” service. Here is what you need to know.

A year ago the IRS closed down their popular “Get Transcript” online service after a severe security breach. With new security protocols now in place, this IRS service is available once again. Here is what you need to know.

Background. Last spring the IRS announced their “Get Transcript” online system had been compromised. The nature of the break-in suggested that thieves did not “hack” the system. They were able to get past security with identity information stolen from other sources. The IRS closed the service until the system could be better protected.

How used. Use this online system to obtain summary information of your tax records. Many use the service to verify current and prior year income for student loans, mortgages, and e-file verification.

The new 2-step. The new security will now entail a 2-step authentication process to log into the “Get Transcript” service. When you wish to log-in, the IRS will use email and/or text messaging to send you a one-time use code to enter the system. Without this additional code you will be denied access.

The MUST HAVES. To access the new online feature you must have:

  • An email address
  • A text-enabled mobile phone
  • Confirming financial account information (credit card number or loan numbers)

Give up more identity to get more security? While this extra security measure will make the system harder to breach, it is requiring you to give up more of your private information to the government. This means the IRS will now have your cell phone number, email address, and specific financial information. Given the track record of IRS systems, some may hesitate to provide this additional information.

Other options are available. Unfortunately, everyone must re-register to use the system. This includes those who have used the old system successfully. If you have problems using the newly enhanced security features you can still request your information via mail or online ordering. The IRS anticipates response time for these requests to be approximately 10 days so please plan accordingly.