The start of a new year is a time for fresh starts and new goals, but it’s also the beginning of the oft-dreaded tax season, which means Tax identity thieves are on the lookout for information they can use in order to create fraudulent tax returns. Here are some tips to help protect yourself from tax identity theft during tax season.
File Early to Prevent Tax Identity Theft
Tax-related identity theft most commonly occurs from February to early March because thieves want to beat real taxpayers to the punch by filing fraudulent returns before legitimate ones. Because the IRS allows only one tax return per Social Security number per year, your best defense against identity theft is to file your taxes as early as possible.
Use E-File Instead of Postal Mail
An e-filed tax return arrives instantly at the IRS, which then sends back an acknowledgement receipt. At this point you’ll be notified if there’s any suspicious activity, such as possible identity theft. The quicker you know, the quicker you can deal with it. Before you e-file, however, be sure that your firewall, antivirus, and anti-spyware software are all up to date. If you do send your tax return in by post, think about taking it directly to the post office rather than letting it sit in your mailbox.
Don’t Fall for Scams
The IRS will not contact you by phone, email, or text to ask for personal or financial information. Never give out your Social Security number, passwords, PINs, and credit card or bank information to someone who reaches out via these channels. Official correspondence from the IRS is issued in the form of a letter and sent through the mail. However, scammers are getting increasingly clever, and sometimes phony links can look just like the real IRS website. If you ever have questions about the legitimacy of an IRS related query, your best bet is to call the IRS at 800-829-1040.
Protect Your Financial Accounts
Start by using a different password for each of your financial accounts, preferably one that combines letters, numbers, and special characters. It’s also wise to use a two-factor authentication when available, which requires you to verify your login—typically a code sent via call or text.
How to Report Tax Identity Theft
If you’re a victim of tax-related identity theft, you’ll find out when you try to file your return and learn that a return has already been filed with your Social Security number, or you’ll receive a letter from the IRS stating that a suspicious return using your Social Security number has been identified. If either of these happen, you should do the following:
- Complete a paper return. As shocking as it is to learn that you’ve been the target of identity theft, you still need to file your tax return. In order to avoid tax penalties or late fees, submit a paper return by the filing deadline.
- Go to IdentityTheft.gov to file a report with the FTC and IRS.
- File an Identity Theft Affidavit (Form 14039). Fill out and attach this form to your paper return. It will make its way to the Identity Theft Victim Assistance Organization, which will work on your case. Be prepared to submit various forms of documentation proving your identity.
- Contact the three major credit bureaus—Equifax, Experian, and TransUnion—and ask them to place a fraud alert on your credit records. You should also consider asking them to freeze your credit in case the thief should try to open new credit accounts in your name.
- Request a copy of the fraudulent return via Form 4506-F. Seeing the fraudulent return will help you determine the specifics of the theft, such as what family information has been compromised.
- As a precaution, delete any stored credit card numbers from shopping sites and change saved passwords to online accounts.
If you have questions on tax identity theft or would like to discuss your 2019 tax return, please feel free to email me at email@example.com or call 317.549.3091.
Even those of us who have the best intentions with our money can fall victim to bad financial habits, which can cause unnecessary stress and anxiety. Some of the most common bad habits we fall into include:
- Impulse spending
- Not budgeting (or not sticking to a budget)
- Spending more than you earn
- Relying on credit cards
- Falling into the trap of convenience
Breaking bad financial habits takes time, intention, and effort. Below are some ideas for starting better habits to get your money to work for you.
Start an Emergency Savings Account
This isn’t anything you haven’t been told before, but if you want to quit the cycle of credit card debt, you’re going to need a savings account to fall back on in times of financial hardship or unforeseen costs. Start with a goal of saving $1,000 specifically for emergencies, so next time your car needs work, for example, you’ll have the funds to pay for it rather than sinking farther into credit card debt.
Nothing says “taking control of my money” like creating a budget that works for you. When you assign a purpose to every dollar, not only are you actively monitoring your income and spending habits, but you’re avoiding debt and reaching your financial goals more quickly. The trick is sticking to it. It’s important to track your spending monthly, and revisit your budget at the beginning of each month, adjusting as needed with the goal of spending less than you bring in. If you know you have a bigger expense coming up later that month, or even in a few months, you’ll have a big picture of your finances and you can begin to make a plan for saving. You can also decide what your priorities will be for that month, and start saving toward your goals.
Make a Plan to Get Out of Debt
Credit cards, student loans, and car payments eat into your budget, and limit the amount of money you can put toward retirement and other financial goals. In short, debt limits your choices.
One popular and time-tested method of getting out of debt is often referred to as the snowball method. You start by paying off the smallest debt, then once that’s paid off, you add that monthly payment toward the next smallest debt until that one’s paid off. For example, if your smallest debt is a doctor bill for $200 and you make arrangements to pay $50 per month until it’s paid off, for the next four months you’ll pay that $50 to your doctor’s office while paying the minimum on every other debt. Once the doctor bill is paid in full, you add that $50 to the monthly payment of your next smallest debt while continuing to pay the minimum on your other larger debts. As each debt is paid off, you’re adding more to the next debt and building momentum until even your largest debt is paid off.
Save for the Future and Start Investing
Once you set up an emergency savings account and pay off your debt, you can begin to save more aggressively. The first step is to bulk up your emergency savings fund to the equivalent of six months of living expenses so you’ll have something to fall back on in case of a major unexpected life event, such as a job loss. Once this is accomplished, you can grow your wealth by investing your money. You’ll need to work with a financial planner to help advise you in investments and diversify your portfolio.
It’s easy to get off track and lose focus when paying off debt, keeping on track with your budget, and saving for the future, so it helps to have some goals in mind. Whether your goals include a vacation home on a tropical island, paying for you child’s college education, or achieving early retirement (or maybe all three), keep these goals at the forefront of your mind whenever you lose steam. You can even create a vision board and put it someplace where you’ll see it every day, reminding you that good financial habits will pay off in the end.
If you have questions on setting healthy financial goals or would like to discuss your 2019 tax return, please feel free to email me at firstname.lastname@example.org or call 317.549.3091.
Summer is the perfect time to get your QuickBooks cleaned up. MKR provides hands-on training and consultation services for QuickBooks during this time of year. It is our pleasure to conduct an on-site visit to assist with any questions or concerns you have in working with your QuickBooks file(s).
We provide consultation by using our accountants’ tools. These tools can help reconcile bank accounts, troubleshoot payroll and bank imports, correct accounts receivable and accounts payable, and update inventory. We provide full-service training if you are new to the QuickBooks software, or partial-service training if you have been using QuickBooks but need assistance with just one area.
Our training is customized to your needs and your business. We walk through what you need from your QuickBooks and customize the best way for you to achieve those goals with your software. With QuickBooks products constantly changing, we are here to keep you updated on the modifications for your software. Now is the perfect time to take advantage of the assistance we provide, so that come tax time you are ready. Please do not hesitate to call!
We have three certified QuickBooks ProAdvisors. Learn more about what they can do.
QuickBooks, created by intuit, is an accounting software that many businesses use to track their financial information including invoices, bills, paychecks, and inventory. To become a certified QuickBooks ProAdvisor, one must complete a series of comprehensive tests to show their knowledge and skills with the QuickBooks software. Here at MKR CPA’s we have three certified QuickBooks ProAdvisors: Jean Miller, Amanda O’Brien, and Tiffany Evans.
Jean Miller has been a certified QuickBooks ProAdvisor since 2006. She is the manager of the accountants in the office and she has worked in the accounting industry for 34 years. She is certified on QuickBooks Desktop and QuickBooks Online. In our office she is our inventory and payroll specialist, and works on time consuming corrections, data reviews, and consultations. She just recently acquired her Advanced Desktop Certification.
Amanda O’Brien has been a certified QuickBooks ProAdvisor since 2011. She is a staff accountant and has worked in the accounting industry for 8 years. She is certified on QuickBooks Desktop and advance certified on QuickBooks Online. In our office she specializes in QuickBooks Online and QuickBooks for Mac. She works with, but not limited to, veterinary companies, nonprofits, and service-based companies. She also just recently acquired her Advanced Desktop Certification.
Tiffany Evans has been a certified QuickBooks ProAdvisor since 2012. She is a staff accountant and has worked in the accounting industry for 5 years. She is certified on QuickBooks Desktop and QuickBooks Enterprise. In our office she specializes in bookkeeping services and QuickBooks Enterprise. She works with, but not limited to, hardware companies, real estate investors, and product and inventory driven companies. She just recently acquired her Advanced Desktop Certification as well.
Is your QuickBooks ready for a cleaning? Learn about the tools to help you clean your QuickBooks.
Beginning in 2018, the new tax laws are officially implemented, which could spell a shift in take home pay for many workers. And, if your employer has begun using the new withholding tables, you could see a change in pay this month. The Congressional Budget Office has approximated that employers could withhold around $10-15 billion less from employees each month by utilizing the new withholding tables.
Many taxpayers may be wondering if they will actually see any of that $10-$15 billion on their regular paychecks? An increase in take-home pay will be based on the number of allowances you take, how often you are paid and if you file jointly or are a single filer. So, for the average single filer who makes between $46,000-$162,000 and is paid bi-weekly, your paycheck will likely increase between $40 and $190. For married filers who make between $61,000-$167,000, you could see a bi-weekly pay increase between $30 and $172.
However, there are other factors in play that could offset any pay increases taxpayers might see. While the federal tax cuts might increase take-home pay for the average workers, other changes in deductions might counteract a boost in pay. Although the federal tax rates changed, some state or local taxes may have increased for some workers. Many companies make health benefits or other benefit changes at the start of a new year as well, which would ultimately influence a worker’s final take-home amount.
Whether you see a pay increase or not, all employees should consider re-evaluating their withholding allowances. Why? Withholding tables are intended to provide a ballpark figure of how much tax should be taken from your pay, but this year’s estimation could be a bit looser than previous years.
The new tax laws change elements that affect how many allowances workers claim. For example, some personal exemptions have been eliminated, itemized deductions have been reduced and tax credits have been altered. The new withholding tables do incorporate the tax code changes, but taxpayers were not required to fill out a new W-4 form. Therefore, the number of allowances selected when your last W-4 was filed could be rather inaccurate now.
How do you know if your allowances need to be modified? Taxpayers can speak with a tax adviser to decide the correct withholding amounts. Another option is to use the new withholding calculator the IRS plans to release at the end of February, which is designed to help employees calculate if they are claiming too little or too much in light of the tax changes. If you do decide to change withholding amounts, you will need to submit new instructions to your employer.
In the midst of identity scams and credit card hacking, the IRS has warned against another scam, this time targeted at businesses and employers. There is a growing W-2 email scam threatening sensitive tax information and the IRS wants to alert payroll and human resources officials so they can be on their guard.
A simple email beginning with a casual greeting has quickly become one of the most dangerous phishing attacks. Hundreds of employers fell victim to the scheme last year, which left thousands of employees vulnerable to tax-related identity theft.
Since there have been significant improvements made in curbing stolen identity refund fraud, criminals are now seeking more advanced personal information in order to fraudulently file a return. W-2’s contain a wealth of detailed taxpayer income and withholding information, which is exactly what frauds are searching for and why they are targeting employers to acquire such information.
The scam has only grown larger in recent years, attacking a variety of businesses, from public universities and hospitals to charities and small businesses. The IRS wants to educate employees and employers, particularly payroll and HR associates who are often targeted first, to hopefully limit the number of successful attacks.
The scammer will likely spoof the email of someone high up in the organization or business, sending an email to someone with W-2 access using a subject line similar to “review” or “request.” The “request” will likely be a list of all the employees and their W-2 forms, potentially even specifying the file format. Since the employee believes they are corresponding with an executive of some sort, they may send the information without question, meaning weeks could go by before it is even evident they have been scammed. This gives frauds plenty of time to file numerous fake returns.
Because this scam poses such a major tax threat at both the local and state level, the IRS has set up a specific reporting process to alert the proper individuals, which is outlined briefly below:
- Email email@example.com to notify the IRS of a W-2 data loss and provide contact information. Type “W2 Data Loss” into the subject line so that the email can be routed properly and do not attach any employee personally identifiable information.
- Email the Federation of Tax Administrators at StateAlert@taxadmin.org to get state specific information on reporting victim information.
- Businesses or payroll service providers should file a complaint with the FBI’s Internet Crime Complaint Center (IC3.gov). They may be asked to file a report with local law enforcement as well.
- Notify employees so they are able to take protective steps against identity theft. The Federal Trade Commission website, www.identitytheft.gov, provides guidance on steps employees should take.
- Forward the scam email to firstname.lastname@example.org.
Beyond just educating employees, payroll officials and HR associates about the scam, employers are encouraged to set up policies or practices to avoid being hacked. Suggested policies include requiring verbal communication before sending sensitive information digitally, or requiring two or more individuals to receive and review any sensitive W-2 information before it can be sent out. The IRS is fighting diligently to protect taxpayers and lower the number of tax-related scams, so employers are encouraged to be on the defense as well and safeguard their own tax paying employees.