Be On The Alert For Fake Tax Bills
The Internal Revenue Service and its Security Summit partners are releasing an alert to taxpayers to be on the lookout for fake IRS tax bills that may arrive by email, as an attachment, or by mail purportedly related to the Affordable Care Act. If you have received one ofthese notices, do not open any ernail attachments. There are subtle differences between these notices and those sent by the IRS. Do not pay these until you consult with me. It's better to be safe than sorry.
Remember: Scammers Change Tactics - Aggressive and threatening phone calls by criminals impersonating IRS agents remain a major threat to taxpayers, but variations of the-IRS - impersonation scam continue year- round and they tend to peak when scammers find prime opportunities to strike.
IRS-Impersonation Telephone Scams Continue
I have spent a lot of time relaying and exposing these IRS scams to you.
The scams continue to evolve. An aggressive and sophisticated phone scam targeting taxpayers, including recent immigrants, has been making new rounds throughout the country. Callers claim to be employees of the IRS, but are not. These con artists can sound convincing when they call. They use fake names and bogus IRS identification badge numbers. They may know a lot about their targets, and they usually alter the caller ID to make it look like the IRS is calling.
Victims are told they owe money to the IRS and it must be paid promptly through a pre-loaded debit card, gift card or wire transfer. If the victim refuses to cooperate, they are then threatened with arrest, deportation or suspension of a business or driver's license. In many cases, the caller becomes hostile and insulting. Or, victims may be told they have a refund due to try to trick them into sharing private information. If the phone isn't answered, the scammers often leave an "urgent" callback request.
Tax Law Changes? Tax Extenders On Hold? Good News!
Most of the usual year-end tax laws that required Congress to act were either already extended through December 31, 2016 or permanently extended to years in the future. We are no longer waiting for the most frequently used laws to be passed retroactively!
Note: The Social Security Administration has increased the cap on income subject to tax. The limit has been raised to $127,200 in 2017 from $118,500 in 2016.
Tax Provisions For 2016 With Major Impacts On-Your Return!
Retirement Plan Contributions.
The limit on contributions to 401 (k), 403(b) and most 457 Plans for 2016 is $18,000. If you are age 50 or older, then additional catch-up contributions are allowed up to $6,000.
Roth and Traditional IRA Contributions.
Limits are $5,500 plus an additional $1,000 catch-up for those age 50 and older.
Each qualifying child under age 17 reduces your tax bill up to $1,000 (subject to limitations).
Two big credits and one adjustment to income are available. The American Opportunity Credit can reduce your tax bill by up to $2,500 per eligible student or up to $2,000 through the Lifetime Learning Credit. The Tuition and Fees deduction can reduce the amount of your income subject to tax by up to $4,000.
Capital Gains Rate!
This capital gains rate is available to all taxpayers in the 10 and 15 tax brackets. Married taxpayers qualify for the 0 rate if their taxable income is $75,300 or less, for single taxpayers $37,650 or less.
Tax Free Gains on Home Sales.
Married couples can exclude up to $500,000 in gain from their income on the sale of their home, for single taxpayer the maximum exclusion is $250,000 (limitations apply).
January 2017 Isn’t Far Off. Watch Mail for “Important Tax Information Enclosed” & Let’s Be Prepared!
Collection of the information is easy if you start early. Most tax records will show up in the mail in January. Keep all of these together in a special place. Compiling all of your tax related documents is important so that we report a complete and accurate return.
The IRS also gets copies of many of these documents ... we don't want to miss any!
Let's review what you should be looking for.
W-2s. Read them carefully. Contact your employer if there is a problem or -if you don't receive them by the end of January.
1099s. You get 1099-INT or 1099-OIV for any accounts that pay interest or dividends. Even tax- exempt interest will be reported. IMPORTANT: "Corrected" forms are always a possibility. Be alert for any announcements that warn you of these situations.
1095-A, 1095-B & 1095-C. You will receive these forms if you purchased Health Care through the Health Insurance Marketplace or from your employer on company sponsored insurance plans.
Other 1099s. Real estate sales are reported on 1099-S. Stock sales on 1099-B. Pension, 401 K and IRA distributions are reflected on 1099-R. Pay special attention to forms 1099-A and 1099-C. These report foreclosures and debt consolidation and may not result in taxable income. We need to see them to correctly prepare your return.
Form 1098. Reports mortgage interest paid to a bank, savings & loan or credit union. These forms may also report real estate taxes (if payments are escrowed by the lender) and mortgage insurance premiums if applicable (limits apply). Form 1098-T shows college tuitions. These forms are mailed to the student or may be available through the school's web site. Make sure Billy and Suzy watch for these forms or email notices to have them downloaded - you'll need them.
Other Income. Look for reports of State Tax Refunds, Unemployment Income, Prizes or Gambling Winnings or Rents that you collect. Read each one carefully and keep them with all of your other tax documents. We don't want to miss anything!
Your Records. Check all of your records for income or deductions. Review everything that occurred during the past year. Check registers or calendars and previous tax returns will help jog your memory of items or events to review. Look for medical related receipts as well as receipts for any taxes paid. If you recall paying -a deductible expense but don’to. have a receipt, jot it down and we will discuss before I prepare your return.
Charitable Contributions (cash and/ or non-cash donations). These are different - you must have receipts or your deduction could be challenged and denied!
Start Now. Make a list of any items that you are missing. Take a few minutes each week to gather and review your documents and records. Short reviews help you remember items that you are missing or might have forgotten. Make note of any questions and/or issues for us to discuss.
Myth vs. Truth
Your refund is at stake here -let's make sure that you protect it by claiming all legitimate deductions!
Filing a tax extension increases my chances of an IRS audit.
Filing for an extension actually reduces your risk of an audit because we have up to six extra months to make sure we have complete and accurate information and documents. If there aren't any math errors or other red flags, the IRS will more than likely pass you over for an audit.
Paying taxes is voluntary.
U.S. Courts have universally found these tax avoidance arguments to be frivolous. Furthermore, the people who make these arguments usually end up liable for taxes and are sometimes hit with additional tax penalties.
It's Easy To Write Off Gambling Losses.
Taxpayers can only claim deduction on losses equal to or less than their winnings. For example, you win $500 gambling, but you lose $1,000 in gambling in the same year. Under the rule, you can only claim up to $500 (the amount of your winnings) in losses on your tax return.
Gambling income and losses are among the favorite red flags that the IRS looks for when ordering an audit. If you do write off your gambling losses, be sure that you have all your paperwork to back up your claims. Many casinos offer a "profit & loss statement" that will substantiate those activities.
Social Security income is tax-free.
In reality, up to 85 of your Social Security income may be taxed. The IRS uses a formula to determine the taxable amount. The amount of your Benefit that will be subject to tax is based upon other income reported on your tax return.
Need to Send 1099-MISC?
Businesses (including landlords). If you paid $600 or more for services performed by non-employees, then you are required to file forms 1099-MISC and 1096 with the IRS by January 31 (this is a new ruling, deadline was previously February 28). A copy of form 1 099-MISC must be given to the worker no later than January 31. You pay a penalty for not sending them!
Getting the Forms. The IRS can send you the forms. Start early. Let me know if you need my help. Call the IRS at 1-800-829-3676 for forms. You can see the forms on the IRS website but you will need the official paper forms for filing. You will need to use the proper Form 1099 and Form 1096 as a cover sheet.
Would you like to read a past issue. Please check out one of these issues:
Year End 2015
Year End 2014
Year End 2013