Compiled annually by the IRS, the “Dirty Dozen” is a list of common scams taxpayers may encounter in the coming months. While many of these scams peak during the tax filing season, they may be encountered at any time during the year. Here is this year’s list: Continue reading
As tax season approaches, taxpayers are reminded to be on the lookout for an array of evolving tax scams related to identity theft and refund fraud. Every year scam artists look for new ways to trick taxpayers out of their hard-earned money, sensitive financial information or even access to their computers. It seems that no matter how careful you are there’s always a possibility that identity thieves could steal your personal information and try to cash in by filing fraudulent tax returns in your name.
Here’s what you need to know: Continue reading
Starting in 2017 employers and small businesses face an earlier filing deadline of January 31 for Forms W-2. The new January 31 filing deadline also applies to certain Forms 1099-MISC reporting non-employee compensation such as payments to independent contractors. Also of note is that the IRS must also hold some refunds until February 15.
A new federal law, aimed at making it easier for the IRS to detect and prevent refund fraud, will accelerate the W-2 filing deadline for employers to January 31. For similar reasons, the new law also requires the IRS to hold refunds involving two key refundable tax credits until at least February 15 (also new). Here are details on each of these key dates. Continue reading
More than 50 tax provisions, including the tax rate schedules and other tax changes are adjusted for inflation in 2017. Let’s take a look at the ones most likely to affect taxpayers like you. Continue reading
Cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2017 have been announced by the IRS. Here are the highlights: Continue reading
Each year, the IRS mails millions of notices and letters to taxpayers for a variety of reasons. If you receive correspondence from the IRS here’s what to do: Continue reading
What should you do if you already filed your federal tax return and then discover a mistake? First of all, don’t worry. In most cases, all you have to do is file an amended tax return. But before you do that, here is what you should be aware of when filing an amended tax return. Continue reading
- Identity theft. Casually discarded or displayed personal information is an open invitation to criminals. Even when we are vigilant, multiple firewalls and strong passwords can fail to protect us. The Government Accountability Office says fraudsters stole $5.8 billion in false refunds in 2013 and the Treasury Inspector General Tax Administration thinks the losses will hit $21 billion next year. The IRS says it is “making progress” fighting this problem.
1. State Sales and Income Taxes
Thanks to last-minute tax extender legislation passed last December, taxpayers filing their 2014 returns can still deduct either state income tax paid or state sales tax paid, whichever is greater.
Here’s how it works. If you bought a big ticket item like a car or boat in 2014, it might be more advantageous to deduct the sales tax, but don’t forget to figure any state income taxes withheld from your paycheck just in case. If you’re self-employed, you can include the state income paid from your estimated payments. In addition, if you owed taxes when filing your 2013 tax return in 2014, you can include the amount when you itemize your state taxes this year on your 2014 return.
2. Child and Dependent Care Tax Credit
Most parents realize that there is a tax credit for daycare when their child is young, but they might not realize that once a child starts school, the same credit can be used for before and after school care, as well as day camps during school vacations. This child and dependent care tax credit can also be taken by anyone who pays a home health aide to care for a spouse or other dependent–such as an elderly parent–who is physically or mentally unable to care for him or herself. The credit is worth a maximum of $1,050 or 35 percent of $3,000 of eligible expenses per dependent.
3. Job Search Expenses
Job search expenses are 100 percent deductible, whether you are gainfully employed or not currently working–as long as you are looking for a position in your current profession. Expenses include fees paid to join professional organizations, as well as employment placement agencies that you used during your job search. Travel to interviews is also deductible (as long as it was not paid by your prospective employer) as is paper, envelopes, and costs associated with resumes or portfolios. The catch is that you can only deduct expenses greater than 2 percent of your adjusted gross income (AGI). Also, you cannot deduct job search expenses if you are looking for a job for the first time.
4. Student Loan Interest Paid by Parents
Typically, a taxpayer is only able to deduct interest on mortgage and student loans if he or she is liable for the debt; however, if a parent pays back their child’s student loans that money is treated by the IRS as if the child paid it. As long as the child is not claimed as a dependent, he or she can deduct up to $2,500 in student loan interest paid by the parent. The deduction can be claimed even if the child does not itemize.
5. Medical Expenses
Most people know that medical expenses are deductible as long as they are more than 10 percent of Adjusted Gross Income (AGI) for tax year 2014. What they often don’t realize is what medical expenses can be deducted, such as medical miles (23.5 cents per mile) driven to and from appointments and travel (airline fares or hotel rooms) for out of town medical treatment.
Other deductible medical expenses that taxpayers might not be aware of include health insurance premiums, prescription drugs, co-pays, and dental premiums and treatment. Long-term care insurance (deductible dollar amounts vary depending on age) is also deductible, as are prescription glasses and contacts, counseling, therapy, hearing aids and batteries, dentures, oxygen, walkers, and wheelchairs.
If you’re self-employed, you may be able to deduct medical, dental, or long term care insurance. Even better, you can deduct 100 percent of the premium. In addition, if you pay health insurance premiums for an adult child under age 27, you may be able to deduct those premiums as well.
6. Bad Debt
If you’ve ever loaned money to a friend, but were never repaid, you may qualify for a non-business bad debt tax deduction of up to $3,000 per year. To qualify however, the debt must be totally worthless, in that there is no reasonable expectation of payment.
Non-business bad debt is deducted as a short-term capital loss, subject to the capital loss limitations. You may take the deduction only in the year the debt becomes worthless. You do not have to wait until a debt is due to determine whether it is worthless. Any amount you are not able to deduct can be carried forward to reduce future tax liability.
Are you getting all of the tax credits and deductions that you are entitled to? Maybe you are…but maybe you’re not. Why take a chance? Call the office today and make sure you get all of the tax breaks you deserve.
The IRS impersonation phone scam has claimed nearly 3,000 victims who have collectively paid over $14 million, the Treasury Inspector General for Tax Administration recently warned.
Phishing email scams continue to be pervasive as well. Illegal scams such as these can lead to significant penalties and interest and possible criminal prosecution. IRS Criminal Investigation works closely with the Department of Justice (DOJ) to shutdown scams and prosecute the criminals behind them. Continue reading