by Daniel Kittell | Accounting News, Fraud, IRS, News, Online Payment, Professional Services, Resources, Tax, Tax Planning - Individual, Tax Preparation - Individual, Technology
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 protected] or call 317.549.3091.
by Daniel Kittell | Accounting News, Fraud, IRS, News, Tax, Tax Preparation - Individual, Technology
Although taxpayers should always be on the lookout for scammers and fraudulent activity, tax season is a time to be especially wary of unknown emails or phone calls. Aggressive phone scams where criminals call posed as IRS officials are extremely common and are a part of the “Dirty Dozen” list of tax-related scams targeting taxpayers. The Dirty Dozen is a list compiled annually by the IRS citing common recent scams taxpayers should be aware of.
How do these scams work? Frauds will make unsolicited calls claiming to be from the IRS and demanding individuals pay counterfeit tax bills. They may also send phishing emails or leave “urgent” phone messages with requests to call back immediately if you do not pick up. If successful, scammers will persuade their victims to send them cash either via prepaid debit card, gift card or wire transfer. Phone scammers often threaten their victims with deportation, arrest or driver’s license repeal in an attempt to bully taxpayers into sending the money.
To further convince their victims, criminals can modify the caller ID number to appear like the IRS or another federal agency and use IRS employee titles and fake badge numbers to make the call appear official. Frauds may also refer to the victim’s name, address or other personal information to persuade individuals of their legitimacy. Since October of 2013, the Treasury Inspector General for Tax Administration (TIGTA) has been made aware of 12,716 individuals who, due to phone scams, have paid over $63 million collectively.
The IRS also wants to remind taxpayers that while aggressive and threatening phone calls will always be a strategy used by scammers, especially during tax season, criminals do change their tactics and employ versions of this scam year round.
As a continued reminder, below are strategies frauds will use that the IRS will never use:
- Call via phone to demand payment using a specific payment method such as wire transfer. The IRS will mail a bill first if taxes are owed.
- Order that taxes be paid without allowing taxpayers to appeal or question what is owed.
- Ask for credit or debit card numbers over the phone.
- Threaten to include local police or other law enforcement for lack of payment.
- Call regarding a refund.
If you receive a call and think you may owe taxes, hang up immediately and call the IRS directly at 800-829-1040. If you know you do not owe taxes or are unsure, do not provide any information over the phone. Hang up and report the call the the TIGTA as well as the Federal Trade Commission. The TIGTA can be reached by phone at 800-366-4484 or on their website on the IRS Impersonation Scam Reporting page. To contact the Federal Trade Commission, go to FTC.gov and visit the FTC Complaint Assistant page and include IRS Telephone Scam in your notes.
by Jean Miller | Accounting News, Audit and Accounting, CPA, IRS, QuickBooks, Tax Consulting, Uncategorized
Gina Noy offers her clients stress-free tax preparation.
It’s not often you find “stress-free” and “tax” in the same sentence, especially during busy season, but for Noy, it’s a philosophy that carries through her Manhattan-based CPA firm.
Noy, who offers tax planning, budget advice, and bookkeeping services, works with a variety of different clients – from individuals and small businesses to start-ups and medium-sized companies. However, she said her sweet spot tends to be start-ups and companies in their second or third year of business – those moving toward a big growth stage.
According to Noy, many new businesses will experience a net loss in their first year – especially in the start-up phase – and she said that’s not necessarily a bad thing.
“If you have other income (such as W2), losses from your business can offset it, reducing your overall tax burden,” she said. “In other words, losses don’t have to be a total loss. However, they can impact your cash flow, your ability to grow your business, and attract investors and financing.”
She said many of her clients – especially those just starting a business – have to deal with correctly identifying whether they’ve hired an employee or a contractor. In the case of an employee, the business owner will be responsible for self-employment tax and keeping and filing additional documentation. Incorrectly identifying an employee’s status may expose the business owner to potential audits and penalties.
“My role in my clients’ business is to educate them,” Noy said. “Spending extra time, especially with new clients . . . educating them, helps them to succeed. I give my clients baby steps in tax, finance, and budgeting.”
It may only be a part, but for Noy, if her clients don’t understand the importance of tax in their business, they’re most likely not going to understand the importance of other financial matters.
“Especially with people who make a transition from working with a company and being self-employed, you feel like you’re floundering in the ocean. The income you earn isn’t always yours to keep, and you have to be responsible enough and realize that with the freedom of being a freelancer, you get a lot of responsibility.”
Noy recommends individuals just starting out to wait on incorporating and operate as a sole proprietor. She suggests saving the money on those start-up fees by purchasing insurance instead, and perhaps incorporating later on.
Many small business owners underestimate the responsibilities of running their business, and simply providing good service isn’t enough, Noy said.
“It’s very important to bill your clients, it’s very important to collect money from those clients and pay your bills on time. One thing leads to another. I find a lot of business owners will work extremely hard but will take a back seat to the financial part.”
And often, entrepreneurs and those just starting out will listen to advice from their friends and family rather than a professional, and they start making decisions, such as forming an LLC, without really having the information they need.
In January, Noy was a presenter at the Reboot Workshop in New York City, a networking event and “unconference” for freelancers and entrepreneurs. She said 90 percent of attendees’ questions were about incorporation and how entrepreneurs should move forward – “Should I incorporate, what type of incorporation should I be, when should I incorporate,” she recalled. “A lot of people incorporated but didn’t know what to do with it.”
Most new business owners are misinformed about write-offs as well. Noy said there are several that aren’t taken advantage of, including setting up a business retirement plan.
“Many clients don’t realize that they can put away as much as $49,000 for 2011 or $50,000 in 2012. Instead of looking for small deductions, business owners should start thinking big. By putting away money for retirement, they can save on taxes and provide for their future.”
Noy also added that many freelancers and entrepreneurs think health insurance is unapproachable and too expensive; therefore, they just put it to the side.
“There’s a way to offset a high deductible – put away pretax money into a Health Savings Account (HSA),” she said. “Tax savings are there. A little planning can go a long way.”
Cash flow management is vital to the successful operation of a small business. Noy says that once she walks her clients through their financial records, figures out how the money is flowing in and out, helps them value their business, and discusses how to price their services, the stress for the client goes away.
For many small business owners, especially freelancers, coming up with rates for services is often a trying and daunting process. Noy said she doesn’t figure out the rates for them, but she does walk them through their expenses and overhead to do some budgeting.
“A lot of people ask me what they should be charging. Of course, it really depends on what the industry expectations are, but it also depends on what their costs are,” she said.
If business owners’ costs are high due to their industry or overhead, then they may need to target corporate clients or more high net worth individuals. On the flip side, if business owners or entrepreneurs have low overhead and work out of a coffee shop on a laptop for the first two years, they can keep their pricing low and target a higher volume of clients – as many as they can service – and grow their business. They can raise their rates later.
The other piece, Noy points out, is knowing your market and pricing competitively. A business or entrepreneur charging too little, say $75 an hour for a service where everybody else is charging $125, could actually deter potential clients.
“I’m going to think something is wrong with your service because it’s too cheap,” she said. “I advise clients that you might want to offer $125, but offer a discount and say ‘I love your business, I really want to do work with you and I can give you a 20 percent discount.'”
Noy stresses that the most important thing for a small business owner or freelancer to remember is to learn how to budget and realize that money management is the key to their success.
“Without managing what’s coming into their business and what expenses have to be paid to come out of their business, it will be harder for them to grow.”
Full Article: http://www.accountingweb.com/topic/tax/making-taxes-less-taxing
