Friday, February 2, 2018

Tax Pros Urged to Step Up Security as Filing Scheme Emerges, Reminded to Report Data Thefts



WASHINGTON – Seeing the emergence of a new filing season scam, the Internal Revenue Service today urged tax professionals to step up security and beware of phishing emails that can secretly download malicious software that can help cybercriminals steal client data.
Only a few days into the filing season, the IRS has already identified a new scam that began with cybercriminals stealing data from several tax practitioners’ computers and filing fraudulent tax returns.
In a new twist, the fraudulent returns in a few cases used the taxpayers' real bank accounts for the deposit. A woman posing as a debt collection agency official then contacted the taxpayers to say a refund was deposited in error and asked the taxpayers to forward the money to her.
This scheme is likely just the first of many that will be identified this year as the IRS, state tax agencies and tax industry continue to fight back against tax-related identity thieves. Because the Security Summit partners have made inroads against identity theft, cybercriminals have evolved their tactics to focus on tax professionals where they can steal client data.
Thieves know it is more difficult to identify and halt fraudulent tax returns when they are using real client data such as income, dependents, credits and deductions. Generally, criminals find alternative ways to get the fraudulent refunds delivered to themselves rather than the real taxpayers.
Tax professionals are reminded that there is a procedure for them to report data thefts to the IRS. They need only contact their state’s IRS Stakeholder Liaison, who will notify appropriate IRS officials and serve as a point of contact. All practitioners should review Data Theft Information for Tax Professionals for details about the process and the additional steps they should take.
When notified immediately IRS can take steps to help protect taxpayers from tax-related identity theft. 
IRS Criminal Investigation agents are still reviewing this latest data theft scam. However, the vast majority of data thefts occur because the tax preparer or someone in the office opened a phishing email and clicked on a link or attachment that contained malware. There are various forms of malware but some download secretly into computers and allow thieves to see each keystroke or give thieves remote access to computers. Both versions allow thieves to steal data stored on the computers.
Tax professionals should review the Security Summit’s Don’t Take the Bait campaign, which outlined the various scams used by criminals to trick practitioners.
Tax professionals are urged to seek cybersecurity experts to help better secure their data. Here’s a reminder of some basic steps tax professionals can take:
  • Educate all employees about phishing in general and spear phishing in particular.
  • Use strong, unique passwords. Better yet, use a phrase instead of a word. Use different passwords for each account. Use a mix of letters, numbers and special characters.
  • Never take an email from a familiar source at face value; example: an email from “IRS e-Services.” If it asks you to open a link or attachment, or includes a threat to close your account, think twice. Visit the e-Services website for confirmation.
  • If an email contains a link, hover your cursor over the link to see the web address (URL) destination. If it’s not a URL you recognize or if it’s an abbreviated URL, don’t open it.
  • Consider a verbal confirmation by phone if you receive an email from a new client sending you tax information or a client requesting last-minute changes to their refund destination.
  • Use security software to help defend against malware, viruses and known phishing sites and update the software automatically.
  • Use the security options that come with your tax preparation software.
  • Send suspicious tax-related phishing emails to phishing@irs.gov.
This newest scam also serves as a reminder to taxpayers that they should be alert to any unusual activity such as receiving a tax transcript or tax refund they did not request. Please review the Taxpayer Guide to Identity Theft for appropriate actions. 
Taxpayers who receive a direct deposit refund that they did not request should take the following steps:
  1. Contact the Automated Clearing House (ACH) department of the bank/financial institution where the direct deposit was received and have them return the refund to the IRS.
  2. Call the IRS toll-free at 800-829-1040 (individual) or 800-829-4933 (business) to explain why the direct deposit is being returned.
  3. Keep in mind interest may accrue on the erroneous refund.

Wednesday, January 24, 2018

Many People in Rural Areas Can Benefit from EITC


The IRS wants taxpayers living in rural communities to be aware of the earned income tax credit and correctly claim it if they qualify. Many qualified individuals and families who live in rural areas don’t claim the EITC. There are many reasons for this. They may:
  • Think they are ineligible.
  • Not know about the credit.
  • Not think they made enough money to qualify.
  • Worry about paying for tax preparation services.
The average household income in many small towns and rural areas is below the national average. Because of this, many of these taxpayers may qualify for EITC. Here are some things that people living in these areas should remember about the credit and how it can benefit them:
  • Because it’s a refundable tax credit, those who qualify and claim the credit could pay less federal tax, pay no tax or even get a tax refund.
  • An eligible taxpayer must have earned income from employment or owning a business or farm and meet basic rules.
  • To get the credit, taxpayers must file a tax return, even if they don’t owe any tax or aren’t required to file.
  • Single workers without a qualifying child who earn less than $15,010 may qualify for a smaller amount of the credit.
  • There are special rules for individuals receiving disability benefits and for members of the military.
  • The IRS recommends using the EITC Assistant on IRS.gov to determine eligibility and estimate the amount of credit.
Qualified taxpayers should consider claiming the EITC by filing electronically, which they can do:
By law, the IRS cannot issue refunds before mid-February for tax returns that claim the EITC or the additional child tax credit. The law requires the IRS to hold the entire refund — even the portion not associated with the EITC or ACTC.  The IRS expects the earliest EITC/ACTC related refunds to be available in taxpayer bank accounts or on debit cards starting Feb. 27, 2018, if these taxpayers choose direct deposit and there are no other issues with their tax return.

Tuesday, January 23, 2018

Grandparents Caring for Grandchildren Should Check Their Eligibility for EITC


Grandparents who work and are also raising grandchildren might benefit from the earned income tax credit. The IRS encourages these grandparents to find out, not guess, if they qualify for this credit. This is important because grandparents who care for children are often not aware that they could claim these children for the EITC.
The EITC is a refundable tax credit. This means that those who qualify and claim the credit could pay less  federal tax, pay no tax, or even get a tax refund. Grandparents who are the primary caretakers of their grandchildren should remember these facts about the credit:
  • A grandparent who is working and has a grandchild living with them may qualify for the EITC, even if the grandparent is 65 years of age or older.  
  • Generally, to be a qualified child for EITC purposes, the grandchild must meet the dependency and qualifying child requirements for EITC.  
  • The rules for grandparents claiming the EITC are the same for parents claiming the EITC.  
  • Special rules and restrictions apply if the child’s parents or other family members also qualify for the EITC.  
  • There are also special rules for individuals receiving disability benefits and members of the military.  
  • To qualify for the EITC, the grandparent must have earned income either from a job or self-employment and meet basic rules.  
  • The IRS recommends using the EITC Assistant, available in English or Spanish, on IRS.gov, to determine eligibility and estimate the amount of credit.  
  • Eligible grandparents must file a tax return, even if they don’t owe any tax or aren’t required to file.
Qualified taxpayers should consider filing electronically. It’s the fastest and most secure way to file a tax return and get a refund.
By law, the IRS cannot issue refunds before mid-February for tax returns that claim the EITC or the additional child tax credit. The law requires the IRS to hold the entire refund — even the portion not associated with the EITC or ACTC.  The IRS expects the earliest EITC/ACTC related refunds to be available in taxpayer bank accounts or on debit cards starting Feb. 27, 2018, if these taxpayers choose direct deposit and there are no other issues with their tax return.

Thursday, December 14, 2017

Consumer Alert: IRS Warns Taxpayers, Tax Pros of New Email Scam Targeting Hotmail Users



WASHINGTON — The Internal Revenue Service today warned taxpayers and tax professionals of a new email scam targeting Hotmail users that is being used to steal personal and financial information.
The phishing email subject line reads: “Internal Revenue Service Email No. XXXX | We’re processing your request soon | TXXXXXX-XXXXXXXX”. The email leads taxpayers to sign in to a fake Microsoft page and then asks for personal and financial information.
The IRS has received over 900 complaints about this new phishing scheme that seems to exclusively target Hotmail users. The suspect websites associated with this scam have been shut down, but taxpayers should be on the lookout for similar schemes.
Individuals who receive unsolicited emails claiming to be from the IRS should forward it to phishing@irs.gov and then delete it. It is important to keep in mind the IRS generally does not initiate contact with taxpayers by email to request personal or financial information. For more information, visit the “Tax Scams and Consumer Alerts” page on IRS.gov.
The IRS reminds tax professionals to be aware of phishing emails, free offers and other common tricks by scammers. Tax professionals who have data breaches should contact the IRS immediately through their Stakeholder Liaison. See Data Theft Information for Tax Professionals.

Thursday, November 16, 2017

Individual Taxpayers: Nine Things to Do When an IRS Letter Arrives



The IRS mails millions of letters to taxpayers every year for many reasons. Here are Nine suggestions on how individuals can handle a letter or notice from the IRS:
  1. Don’t panic. Simply responding will take care of most IRS letters and notices.
  2. Read the entire letter carefully. Most letters deal with a specific issue and provide specific instructions on what to do.
  3. Compare it with the tax return. If a letter indicates a changed or corrected tax return, the taxpayer should review the information and compare it with their original return.
  4. Only reply if necessary. There is usually no need to reply to a letter unless specifically instructed to do so, or to make a payment.
  5. Respond timely. Taxpayers should respond to a letter with which they do not agree. They should mail a letter explaining why they disagree. They should mail their response to the address listed at the bottom of the letter. The taxpayer should include information and documents for the IRS to consider. The taxpayer should allow at least 30 days for a response.
    When a specific date is listed in the letter, there are two main reasons taxpayers should respond by that date:
      • To minimize additional interest and penalty charges.
      • To preserve appeal rights if the taxpayers doesn’t agree.

  6. Don’t call. For most letters, there is no need to call the IRS or make an appointment at a taxpayer assistance center. If a call seems necessary, the taxpayer can use the phone number in the upper right-hand corner of the letter. They should have a copy of the tax return and letter on hand when calling. 
  7. Keep the letter. A taxpayer should keep copies of any IRS letters or notices received with their tax records.  
  8. Contact your preparer.  If you had your tax return prepared by a paid preparer, contact them. They should assist you with any problems with a return they prepared. 
  9. Contact an Enrolled Agent (EA) If you didn't have a preparer, you may want to contact an Enrolled Agent (EA). EAs are the only federally licensed tax professionals who also have unlimited rights to represent taxpayers before the IRS. To find an EA in your area http://taxexperts.naea.org/.

Thursday, November 9, 2017

IRS has Resources for Veterans, Current Members of the Military



As the nation prepares to celebrate Veterans Day, the IRS reminds them that they may be eligible for certain tax benefits. There are also tax benefits that can affect current members of the military.
The IRS has resources for both these groups. The following tools will help military members and veterans navigate tax issues:
Resources for veterans
  • Frequently asked questions about veteran employment and retirement plan benefits. These include information about the re-employment of veterans and the restoration of retirement plan benefits.
  • The Resources for Disabled Veterans page features links to resources geared to this audience: ◦Where to get free help in preparing income tax returns.
    • Access to IRS forms and publications in formats accessible for people with disabilities.
Resources for current members of the military
  • The Tax Information for Members of the Military page on IRS.gov includes resources geared to several groups: ◦Current and former military personnel.
    • Those serving in a combat zone.
    • Disabled veterans.
  • Publication 3, Armed Forces Tax Guide covers special situations of active members of the Armed Forces, including: ◦Travel expenses of Armed Forces Reservists.
    • IRA contribution rules for members of the military serving in combat zones.
    • Rules for members of the Armed Forces deducting moving expenses.
  • The Tax Exclusion for Combat Service page highlights information for members of the military who serve in a combat zone.
  • The Notifying the IRS by E-mail about Combat Zone Service page includes information about the steps that someone serving in a combat zone follows to notify the IRS about their service.

Wednesday, October 4, 2017

Tips for Individuals Who Need to Reconstruct Records After a Disaster



Taxpayers who are victims of a disaster might need to reconstruct records to prove their loss. Doing this may be essential for tax purposes, getting federal assistance, or insurance reimbursement.
Here are 12 things taxpayers can do to help reconstruct their records after a disaster:
  • Taxpayers can get free tax return transcripts by using the Get Transcript tool on IRS.gov, or use their smartphone with the IRS2Go mobile phone app. They can also call 800-908-9946 to order them by phone.
  • To establish the extent of the damage, taxpayers should take photographs or videos as soon after the disaster as possible.
  • Taxpayers can contact the title company, escrow company, or bank that handled the purchase of their home to get copies of appropriate documents.
  • Home owners should review their insurance policy as the policy usually lists the value of a building to establish a base figure for replacement.
  • Taxpayers who made improvements to their home should contact the contractors who did the work to see if records are available. If possible, the home owner should get statements from the contractors to verify the work and cost. They can also get written accounts from friends and relatives who saw the house before and after any improvements.
  • For inherited property, taxpayers can check court records for probate values. If a trust or estate existed, the taxpayer can contact the attorney who handled the trust.
  • When no other records are available, taxpayers can check the county assessor’s office for old records that might address the value of the property.
  • There are several resources that can help someone determine the current fair-market value of most cars on the road. These resources are all available online and at most libraries:
    • Kelley’s Blue Book
    • National Automobile Dealers Association
    • Edmunds
  • Taxpayers can look on their mobile phone for pictures that show the damaged property before the disaster.
  • Taxpayers can support the valuation of property with photographs, videos, canceled checks, receipts, or other evidence.
  • If they bought items using a credit card or debit card, they should contact their credit card company or bank for past statements.
  • If a taxpayer doesn’t have photographs or videos of their property, a simple method to help them remember what items they lost is to sketch pictures of each room that was impacted.
More Information: