Avoid Fraud by Filing Your Taxes Early

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Courtesy of 401kcalculator.org

Over the past couple of years, tax fraud and identity theft have been on the rise. We have tried to warn everyone when a new scam comes up.  We’ve covered many ways thieves have used to steal your money and/or your identity.  There have been phone calls demanding money, the IRS has been hacked into, and most recently fraudulent tax returns have been filed. There is a way you can minimize the likelihood of someone filing a fraudulent tax return in your name. File early.

How are thieves able to pull this off?

Employers are required to file W-2 forms to their employee and the IRS each year.  They must send the W-2 forms to the employees by January 31st but they don’t have to file them with the IRS until the end of February.  That means there is one month where a tax return can be filed before the IRS gets the forms, they have no way of verifying that there is going to be a W-2 form to match it.

So if a thief has stolen a taxpayer’s identity, they use the that person’s name and social security number to make fake W-2 forms and file a fake tax return so they can steal large refunds.  They start in January as soon as the IRS starts accepting tax returns.  If the taxpayer waits until after the end of February to file their return, their tax return will be rejected because the tax return has already been filed n their name and social security number.

To correct this, the real tax payer has to mail their tax return to the fraud division of the IRS.  They will receive a letter from the IRS and they must call the IRS to verify their identity.  Then they will receive a PIN that they must use to file for the next three years.  This process takes weeks sometimes months to complete which also delays refunds.

Again, the best way to avoid this particular scam, we suggest you file your tax return as early as possible.

Soulence has Moved and Year-end Tax Reviews

HA0521 - Bedford staff and M1. A set of images  of HA staff in the Bedford office and new section of M1, north of junction 9. March 2010

Photo Courtesy of Photo Highways. View Terms and Conditions at http://www.photos.highways.gov.uk

If you haven’t heard, Soulence has moved locations. Our new address is 13961 S. Minuteman Drive, Suite 101. If you visited us at the previous office, then you shouldn’t have any problem finding us. We moved one building to the northeast and our entrance is now on the east side.

We have settled in well and really think that this was the right move to make. We have more space so that we can work more efficiently to bring you the service that you have come to expect from our employees.

Soulence is also currently conducting year-end tax reviews. If you are concerned about what your taxes may look like in the next year or if you just want to be prepared, a year-end tax review is a good way to go. We can look at everything that has happened for you and/or your business and decide if you need to make a purchase to help improve your taxes or if you simply need to pay into taxes.

We’ll work together to come up with a plan for next year’s taxes that will be best suited to you and/or or your company. If you have any questions or would like to schedule a year-end tax review, please contact us.

IRS Funding Cut

money-cut-up

There is good and bad news on the IRS front. Congress slashed the IRS budget by $838 million dollars for 2016. The IRS has not seen this low of a budget since 2004. Between the budget cuts and the recently added responsibility to monitor the Affordable Care Act, it is causing a lot of problems for the IRS.

So what is the good news for tax payers? The good news is that this cut will reduce the IRS’ ability to audit and collect delinquent taxes. There will be fewer auditors and collections officers available. Less random audits (pull your name out of a hat type audits) and there will be more paper audits which generally just ask for proof of a specific item.

The bad news is that because there are fewer employees available, it will be more difficult to get through to the IRS for questions and information. Between 2010 and 2015 there was a 25% drop in answered phone calls. This will only get worse. When and if you do get through, they officer will be less likely to provide any information that you could have found on the IRS website. Also, correspondences with the IRS and Amended returns will also take longer to process.

Fortunately, Soulence Tax and Accounting is on your side. We often have the answers to your questions and can usually decipher a letter from the IRS. We are also experienced in navigating around the IRS website. Before you get too frustrated with the IRS, feel free to contact us.

4 IRS Scams You Should Watch Out For

Photo Provided by Got Credit.

Photo Provided by Got Credit.

We have blogged about several scams in the past, but it continues to be a problem.  Here are four fraud items that you should be aware of.

Phone Scam

This continues to be a big problem.  We have had about six of our clients this year experience it.  It is very frightening.  You get a call from someone claiming to be from the IRS.  They usually have a thick accent that sounds like they are from India or the Philippines.  They say that you owe the IRS money (usually $1000 to $10,000).  They tell you that if you do not pay while you are on the phone with them they will file a lawsuit, your driver’s license will be deactivated and that if you hang up before you pay, the police will show up in 20 minutes, arrest you and you will spend 5 years in Federal Prison.  They will try to keep you on the line while you go get cash from your bank and then have you put it on a reloadable debit card.  They are very intimidating and scary.  If you get a call, write down the person’s name and badge number, hang up and call the IRS at 1-800-366-4474.

Email Scam

I personally got this one in my email the other day.  The email comes with an attachment.  It says the  revenue service is going to organize tax inspections to determine whether you as a taxpayer have settled the correct amount of taxes.  They ask you to open the attachment and fill out the form and return it to them or call them and give them the requested information over the phone.  The form contains a request for personal information such as Social Security numbers and bank accounts.  It comes from someone claiming to be a Tax Advisor.  If you get this email or any email that asks you for information for the IRS, forward it to phishing@irs.org.

IRS Information Breach

It was recently announced that between February and May of this year, the department of the IRS that holds taxpayers accounts for obtaining transcripts was hacked into.  This means that if during that time you tried to go online and get copies of your tax return transcripts or account transcripts, your information was compromised.  There are several reasons people go online to get these transcripts but the two most common are mortgage loans and college FASFA applications.  If you feel that you may have been affected by this there is little you can do.  Be sure to monitor your credit score and make sure no one opens accounts in your name.  Also carefully monitor your bank accounts or even open new ones.  We know of one person already that was affected by this .  A tax return was filed with his name and Social Security number.

State Scam

Most of the scams we see involve the IRS, but there is one going around the country involving corporations and LLCs.  You receive a letter saying that you need to file your annual meeting minutes with the State.  They tell you it is required and if you don’t you could be charged fines.  They offer to file the meeting minutes for you for $250.  This group goes from state to state creating an address in that state.  The problem is that you are not required to file meeting minutes with the State.  Some state require an update of who the offices and members are and some even require information updates about the assets of the business.  If your state requires that, then they send you a form.  If you get this letter ignore it and throw it away.

Just a reminder: The IRS does not call you.  The IRS does not email you.  If you get a phone call or email and you are not sure, call us and ask before you respond.  At Soulence, we fell it is very important to do what we can to protect and educate our clients.  We also fell it is important for all taxpayers to get this information, so please share it with everyone you know.

Thinking of Filing an Extension?

Photo provided by flickr.com

Photo provided by flickr.com

As the tax-filing deadline rapidly approaches, you may be considering filing an extension. The IRS allows one extension of up to six months. If you do not file your taxes within that six months, the extension is void and you receive penalties as if you never filed the extension.

Extensions extend the amount of time you have to file, but they do not extend the amount of time you have to pay fees you might owe. If you need more time to file your taxes and you think you will owe, you must pay what you think you will owe with the extension. There is a penalty and interest for not paying by April 15th. You’ll want to take the information you have, estimate the missing information, and then mail a check with the extension.

What if you don’t have the money to pay your tax bill? The IRS has an installment program. For a onetime enrollment fee of $120 ($52 if you set op direct deposit), you can break up your tax bill into payments spread out over 72 months, with a relatively modest interest rate of 3% annually. You can pay it off early. You can also pay with a credit card but the interest rates on a credit card are usually higher.

If you have your information ready then it is best to file on time. For more information or questions about your specific circumstances, feel free to contact Soulence Tax and Accounting.

Are You Missing Out on the Vehicle Expense?

Photo provided by Flickr.com

Photo provided by Flickr.com

The vehicle expense is one that many people miss out on, which is unfortunate because it is a great tax saving deduction. If you think the deduction isn’t significant enough to really make a difference or feel that it is too much of a hassle to keep track of, you’d be suprized how much it can save you at tax time.

There are two different types of vehicle expense that can be claimed on a tax return:

  • Actual—the cost of driving: repairs on the car, fuel, maintenance, etc.
  • Mileage—the total miles the car is driven for work.

Each tax return is different, so deciding whether actual expense or mileage would be best depends on your or your company’s situation. Sometimes one is more helpful than the other.

If a vehicle is used for both business driving (say to meet a client) and for personal driving, it may be easiest to simply keep track of the miles the car is driven, rather than taking the actual expense. If actual expense is taken, you would still need to keep track of the miles on top of the expenses so that we could take out the percentage that you drove the car for business.

If the car is owned by a company and used solely for business purposes, actual expense may be a good option. You would need to keep track of the expenses listed above on the vehicle so you can have an accurate amount to deduct on your return.

Contact us at Soulence to see if the taking the vehicle expense is right for you.

Employer Health Insurance Requirements

man working on computer

Photo Courtesy of Flickr.com

As tax season has started, we have had many people with concerns over the “Shared Responsibility Payment” as well as the business owner’s responsibility to provide health insurance coverage to their employees.

Let’s start with the Shared Responsibility Payment. If you did not have health insurance for all or part of 2014, you are required to pay a fee for not having insurance. This fee is called the Shared Responsibility payment and goes into a fund to pay for the credit for those who qualify to get assistance with their insurance premiums. So far we have seen payments between $25 and $500. The fee is based on your income and how many months you were uninsured.

What about the responsibility for business owners to provide health insurance? For most small business owners, providing health insurance is not an issue. For 2015, companies with 100 or more full time employees must offer health insurance coverage to full timers or pay a tax. Full time employees are those employed at least 30 hours a week on average. Starting in 2016, firms with 50 or more full time employees will be subject to the tax. Also required coverage will be expanded to include dependents, including kids up to age 26.

The fines for non-compliance are stiff. For 2015, the fine is $2,084 times the number of full time employees less 80. Next year the fine will increase dramatically. There is also an unaffordable insurance tax. This is a fine that companies will receive if the insurance they offer requires the employee to pay a portion of the premium that exceeds 9.56% of his/her wages. Also, the employer must provide at least 60% of the cost of the coverage.

The good news is that most small businesses have fewer than 50 employees. However, if you feel a moral responsibility to help pay for your employees’ health insurance there is one very important thing to understand. Your employees can go on the exchange and get their own health insurance and often get a lower rate and a tax credit. If, as an employer, you want to pay for part or all of the insurance premium, you must be very careful how you do it. You cannot give the employee a health insurance reimbursement or allowance. The only way you can do it, is by increasing their pay. You can give them a bonus or increase their wages by the amount you want to contribute to their insurance. The normal withholding and other payroll expenses will apply. For tax purposes, it will not be considered pre-taxed and what they do with the money is technically up to them.

This is just a brief summary of the employee health insurance issues. If you have questions about your particular situation, please feel free to call us at Soulence. We have the resources to assist you through this complicated Affordable Care Act maze.