Tuesday, August 1, 2017

Don’t Take the Bait, Step 4: Defend against Ransomware


  
WASHINGTON – The Internal Revenue Service, state tax agencies and the tax industry today warned tax professionals that ransomware attacks are on the rise worldwide as bad actors here and abroad infiltrate computer systems and hold sensitive data hostage.
The IRS is aware of a handful of tax practitioners who have been victimized by ransomware attacks. The Federal Bureau of Investigation recently cautioned that ransomware attacks are a growing and evolving crime threatening the private and public sectors as well as individuals.
The “Don’t Take the Bait” campaign, a 10-week security awareness campaign aimed at tax professionals, hopes to increase awareness about these attacks. The IRS, state tax agencies and the tax industry, working together as the Security Summit, urge practitioners to learn to protect themselves. This is part of the ongoing Protect Your Clients; Protect Yourself effort.
“Tax professionals face an array of security issues that could threaten their clients and their business,” IRS Commissioner John Koskinen said. “We urge people to take the time to understand these threats and take the steps to protect themselves. Don’t just assume your computers and systems are safe.”   Ransomware is a type of malware that infects computers, networks and servers and encrypts (locks) data. Cybercriminals then demand a ransom to release the data. Users generally are unaware that malware has infected their systems until they receive the ransom request.
The 2017 Phishing Trends and Intelligence Report issued annually by Phishlabs named ransomware one of two transformative events of 2016 and called its rapid rise a public epidemic.
In May 2017, a ransomware attack dubbed “WannaCry” targeted users who failed to install a critical update to their Microsoft Windows operating system or who were using pirated versions of the operating system. Within a day, criminals held data on 230,000 computers in 150 countries for ransom.
The most common delivery method of this malware is through phishing emails. The emails lure unsuspecting users to either open a link or an attachment. However, the FBI also has warned that ransomware is evolving and cybercriminals can infect computers by other methods, such as a link that redirects users to a website that infects their computer.
Victims should not pay a ransom. Paying it further encourages the criminals. Often the scammers won’t provide the decryption key even after a ransom is paid.
Tips to Prevent Ransomware Attacks
Tax practitioners – as well as businesses, payroll departments, human resource organizations and taxpayers – should talk to an IT security expert and consider these steps to help prepare for and protect against ransomware attacks:
  • Make sure employees are aware of ransomware and of their critical roles in protecting the organization’s data.
  • For digital devices, ensure that security patches are installed on operating systems, software and firmware. This step may be made easier through a centralized patch management system.
  • Ensure that antivirus and anti-malware solutions are set to automatically update and conduct regular scans.
  • Manage the use of privileged accounts — no users should be assigned administrative access unless necessary, and only use administrator accounts when needed.
  • Configure computer access controls, including file, directory and network share permissions, appropriately. If users require read-only information, do not provide them with write-access to those files or directories.
  • Disable macro scripts from office files transmitted over e-mail.
  • Implement software restriction policies or other controls to prevent programs from executing from common ransomware locations, such as temporary folders supporting popular Internet browsers, compression/decompression programs.
  • Back up data regularly and verify the integrity of those backups.
  • Secure backup data. Make sure the backup device isn’t constantly connected to the computers and networks they are backing up. This will ensure the backup data remains unaffected by ransomware attempts.
Victims should immediately report any ransomware attempt or attack to the FBI at the Internet Crime Complaint Center, www.IC3.gov. Tax practitioners who fall victim to a ransomware attack also should contact their local IRS stakeholder liaison.

Tips to Keep in Mind on Income Taxes and Selling a Home



Homeowners may qualify to exclude from their income all or part of any gain from the sale of their main home.
Below are tips to keep in mind when selling a home:
Ownership and Use. To claim the exclusion, the homeowner must meet the ownership and use tests. This means that during the five-year period ending on the date of the sale, the homeowner must have:
  • Owned the home for at least two years  
  • Lived in the home as their main home for at least two years    Gain.  If there is a gain from the sale of their main home, the homeowner may be able to exclude up to $250,000 of the gain from income or $500,000 on a joint return in most cases. Homeowners who can exclude all of the gain do not need to report the sale on their tax return
Loss.  A main home that sells for lower than purchased is not deductible.
Reporting a Sale.  Reporting the sale of a home on a tax return is required if all or part of the gain is not excludable. A sale must also be reported on a tax return if the taxpayer chooses not to claim the exclusion or receives a Form 1099-S, Proceeds from Real Estate Transactions.
Possible Exceptions.  There are exceptions to the rules above for persons with a disability, certain members of the military, intelligence community and Peace Corps workers, among others. More information is available in Publication 523, Selling Your Home.
Worksheets.  Worksheets are included in Publication 523, Selling Your Home, to help you figure the:
  • Adjusted basis of the home sold
  • Gain (or loss) on the sale
  • Gain that can be excluded
Items to Keep In Mind:
  • Taxpayers who own more than one home can only exclude the gain on the sale of their main home. Taxes must paid on the gain from selling any other home.
  • Taxpayers who used the first-time homebuyer credit to purchase their home have special rules that apply to the sale. For more on those rules, see Publication 523. Use the First Time Homebuyer Credit Account Look-up to get account information such as the total amount of your credit or your repayment amount.
  • Work-related moving expenses might be deductible, see Publication 521, Moving Expenses.
  • Taxpayers moving after the sale of their home should update their address with the IRS and the U.S. Postal Service by filing Form 8822, Change of Address.
  • Taxpayers who purchased health coverage through the Health Insurance Marketplace should notify the Marketplace when moving out of the area covered by the current Marketplace plan.
Avoid scams. The IRS does not initiate contact using social media or text message. The first contact normally comes in the mail. Those wondering if they owe money to the IRS can view their tax account information on IRS.gov to find out.

Monday, July 17, 2017

Members of the Armed Forces Get Special Tax Benefits



Members of the military may qualify for tax breaks and benefits. Special rules could lower the tax they owe or give them more time to file and pay taxes. In addition, some types of military pay are tax-free.
Here are some tips to find out who qualifies:

 
1. Combat Pay Exclusion.  If someone serves in a combat zone, or provides direct support, part or even all of their combat pay is tax-free. However, there are limits for commissioned officers. See Earned Income Tax Credit below for important information.
2. Deadline Extensions.  Some members of the military, such as those who serve in a combat zone, can postpone most tax deadlines. Those who qualify can get automatic extensions of time to file and pay their taxes.
3. Special Deductions:
  • Reservists’ Travel.  Reservists whose duties take them more than 100 miles away from home can deduct their unreimbursed travel expenses on Form 2106, even if they do not itemize their deductions.
  • Moving Expenses.  Taxpayers who serve may be able to deduct some of their unreimbursed moving costs on Form 3903. This normally applies if the move is due to a permanent change of station.
  • Uniform.  Members of the military can deduct the cost and upkeep of their uniform, but only if rules say they cannot wear it off duty. Also, they must reduce their deduction by any uniform allowance they get for those costs.
4. Earned Income Tax Credit or EITC.  If those serving get nontaxable combat pay, they may choose to include it in their taxable income to increase the amount of EITC. That means they could owe less tax and get a larger refund. For tax year 2016, the maximum credit for taxpayers is $6,269. It is best to figure the credit both ways to find out which works best.
5. Signing Joint Returns.  Both spouses normally must sign a joint income tax return. If military service prevents that, one spouse may be able to sign for the other or get a power of attorney.
6. ROTC Allowances.  Some amounts paid to ROTC students in advanced training are not taxable. This applies to allowances for education and subsistence. Active duty ROTC pay is taxable. For instance, pay for summer advanced camp is taxable.
7. Separation and Transition to Civilian Life.  If service members leave the military and look for work, they may be able to deduct some job search expenses, including travel, resume and job placement fees. Moving expenses may also qualify for a tax deduction.
8. Tax Help.  Most military bases offer free tax preparation and filing assistance during the tax filing season. Some also offer free tax help after the April deadline. Check with the installation’s tax office (if available) or legal office for more information.
For more, refer to IRS.gov/Military or Publication 3, Armed Forces’ Tax Guide, on IRS.gov.
Avoid scams. The IRS will never initiate contact using social media or text message. First contact generally comes in the mail. Those wondering if they owe money to the IRS can view their tax account information on IRS.gov to find out.

Monday, July 10, 2017

How to Handle an IRS Letter or Notice



The IRS mails millions of letters every year to taxpayers for a variety of reasons. Keep the following suggestions in mind on how to best handle a letter or notice from the IRS:

  1. Do not panic. Simply responding will take care of most IRS letters and notices.
  2. Do not ignore the letter. Most IRS notices are about federal tax returns or tax accounts. Each notice deals with a specific issue and includes specific instructions on what to do. Read the letter carefully; some notices or letters require a response by a specific date.
  3. Respond timely. A notice may likely be about changes to a taxpayer’s account, taxes owed or a payment request. Sometimes a notice may ask for more information about a specific issue or item on a tax return. A timely response could minimize additional interest and penalty charges.
  4. If a notice indicates a changed or corrected tax return, review the information and compare it with your original return. If the taxpayer agrees, they should note the corrections on their copy of the tax return for their records. There is usually no need to reply to a notice unless specifically instructed to do so, or to make a payment.
  5. Taxpayers must respond to a notice they do not agree with. They should mail a letter explaining why they disagree to the address on the contact stub at the bottom of the notice. Include information and documents for the IRS to consider and allow at least 30 days for a response.
  6. There is no need to call the IRS or make an appointment at a taxpayer assistance center for most notices. If a call seems necessary, use the phone number in the upper right-hand corner of the notice. Be sure to have a copy of the related tax return and notice when calling.
  7. Always keep copies of any notices received with tax records.
  8.  The IRS and its authorized private collection agency will send letters and notices by mail. The IRS will not demand payment a certain way, such as prepaid debit or credit card. Taxpayers have several payment options for taxes owed.

Thursday, July 6, 2017

IRS Offers Tips for Teenage Taxpayers with Summer Jobs


Students and teenagers often get summer jobs. This is a great way to earn extra spending money or to save for later. The IRS offers a few tax tips for taxpayers with a summer job:
  1. Withholding and Estimated Tax. Students and teenage employees normally have taxes withheld from their paychecks by the employer.  Some workers are considered self-employed and may be responsible for paying taxes directly to the IRS. One way to do that is by making estimated tax payments during the year.
  2. New Employees. When a person gets a new job, they need to fill out a Form W-4, Employee’s Withholding Allowance Certificate. Employers use this form to calculate how much federal income tax to withhold from the employee’s pay. The IRS Withholding Calculator tool on IRS.gov can help a taxpayer fill out the form.
  3. Self-Employment. A taxpayer may engage in types of work that may be considered self-employment. Money earned from self-employment is taxable. Self-employment work can be jobs like baby-sitting or lawn care. Keep good records on money received and expenses paid related to the work.  IRS rules may allow some, if not all, costs associated with self-employment to be deducted. A tax deduction generally reduces the taxes you pay.
  4. Tip Income. Employees should report tip income. Keep a daily log to accurately report tips. Report tips of $20 or more received in cash in any single month to the employer.
  5. Payroll Taxes. Taxpayers may earn too little from their summer job to owe income tax. Employers usually must withhold Social Security and Medicare taxes from their pay. If a taxpayer is self-employed, then Social Security and Medicare taxes may still be due and are generally paid by the taxpayer, in a timely manner.
  6. Newspaper Carriers. Special rules apply to a newspaper carrier or distributor. If a person meets certain conditions, then they are self-employed. If the taxpayer does not meet those conditions, and are under age 18, they may be exempt from Social Security and Medicare taxes.
  7. ROTC Pay. If a taxpayer is in a ROTC program, active duty pay, such as pay for summer advanced camp, is taxable. Other allowances the taxpayer may receive may not be taxable, see Publication 3 for details.

Monday, April 17, 2017

IRS Reminds Taxpayers of April 18 Tax-Filing Deadline


WASHINGTON — The Internal Revenue Service has received 103.6 million 2016 individual income tax returns as of April 7 and expects millions more to be filed by the April 18 deadline. Special filing deadline rules apply to members of the military serving in combat zones, those living outside the U.S. and those living in declared disaster areas.

The IRS also expects more than 13 million taxpayers to request a filing extension, giving them six additional months to complete and file their tax return.

Who Needs to File?
Not everyone is required to file a tax return. The requirement to file depends on a person’s income, filing status, age and whether they can be claimed as a dependent on someone else’s return. Anyone not sure whether they need to file a return should see Do I Need to File a Tax Return or refer to Publication 17, Your Federal Income Tax for Individuals, on IRS.gov.

For an estimated one million taxpayers who did not file a 2013 tax return, April 18, 2017, is the last day to file to claim their part of tax refunds totaling more than $1 billion. Taxpayers due a refund must file a return within three years of its due date or the money becomes the property of the U.S. Treasury. There are no late filing penalties if a refund is due.

According to the IRS, the most common reasons people do not file a return who should are: they don’t know how, may not have the documents needed or owe more tax than they can pay. Taxpayers who owe more than they can pay should pay as much as they can by the due date in order to minimize interest and penalties.

Extensions of Time to File
Taxpayers who are not ready to file by the deadline should request an extension of time to file. An extension gives the taxpayer until Oct. 16 to file but does not extend the time to pay. Penalties and interest will be charged on all taxes not paid by the April 18 filing deadline.


IRS will automatically process an extension of time to file when taxpayers select Form 4868 and they are making a full or partial federal tax payment using IRS Direct Pay, the Electronic Federal Tax Payment System or by paying with a credit or debit card by the April due date. There is no need to file a separate Form 4868 extension request when making an electronic payment and indicating it is for an extension.
Taxpayers also can complete and mail in Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, to get a six-month extension.

Taxpayers Who Can’t Pay
Taxpayers should file by the deadline, even if they can’t pay, or pay as much as possible and ask the IRS about payment options. By filing a tax return, even without full payment, taxpayers will avoid the failure-to-file penalty. This penalty is assessed when the required return is not filed by the due date or extended due date if an extension is requested.

The failure-to-file penalty is generally 5 percent per month and can be as much of 25 percent of the unpaid tax. The penalty for returns filed more than 60 days late can be $205 or 100 percent of the unpaid tax.

The failure-to-pay penalty, which is the penalty for any taxes not paid by the deadline, is ½ of 1 percent of the unpaid taxes per month and can be up to 25 percent of the unpaid amount. Taxpayers must also pay interest on taxes not paid by the filing deadline.

The IRS reminds taxpayers that there is no law that permits taxpayers to refuse to file a federal tax return or refuse to pay their taxes. This includes for reasons based on programs or policies with which they disagree on moral, ethical, religious or other grounds. Taxpayers who file a frivolous tax return can be assessed a $5,000 penalty and civil penalties of up to 75 percent of the underpaid tax. Frivolous tax returns are those tax returns that do not include enough information to figure the correct tax or that contain information clearly showing that the tax reported is substantially incorrect.

Thursday, March 23, 2017

IRS Reminds Seniors to Remain on Alert to Phone Scams during Tax Season


WASHINGTON – With the 2017 tax season underway, the IRS reminds seniors to remain alert to aggressive and threatening phone calls by criminals impersonating IRS agents. The callers claim to be IRS employees, but are not.
These con artists can sound convincing when they call. They use fake names and bogus IRS identification badge numbers. They may know a lot about their targets, and they usually alter the caller ID to make it look like the IRS is calling.
The victims are told they owe money to the IRS and must pay it promptly through a preloaded debit card or wire transfer. If the victim refuses to cooperate, they are often threatened with arrest. In many cases, the caller becomes hostile and insulting. Alternately, victims may be told they have a refund due to try to trick them into sharing private information. If the phone isn’t answered, the phone scammers often leave an “urgent” callback request.
“The IRS warns seniors about these aggressive phone calls that can be frightening and intimidating. The IRS doesn't do business like that," said IRS Commissioner John Koskinen. “We urge seniors to safeguard their personal information at all times. Don't let the convincing tone of these scam calls lead you to provide personal or credit card information, potentially losing hundreds or thousands of dollars. Just hang up and avoid becoming a victim to these criminals‎."
In recent years, thousands of people have lost millions of dollars and their personal information to tax scams and fake IRS communication.
Later this spring, the only outside agencies authorized to contact taxpayers about their unpaid tax accounts will be one of the four authorized under the new private debt collection program. Even then, any affected taxpayer will be notified first by the IRS, not the private collection agency (PCA).
The private debt collection program, authorized under a federal law enacted by Congress in 2015, enables designated contractors to collect tax payments on the government’s behalf. The program begins later this spring. The IRS will give taxpayers and their representative written notice when their account is being transferred to a private collection agency. The collection agency will then send a second, separate letter to the taxpayer and their representative confirming this transfer. Information contained in these letters will help taxpayers identify the tax amount owed and help ensure that future collection agency calls are legitimate.
The IRS reminds seniors this tax season that they can easily identify when a supposed IRS caller is a fake. Here are four things the scammers often do but the IRS and its authorized PCAs will not do. Any one of these things is a telltale sign of a scam.
The IRS and its authorized private collection agencies will never:
  • Call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer. The IRS does not use these methods for tax payments. Generally, the IRS will first mail a bill to any taxpayer who owes taxes. All tax payments should only be made payable to the U.S. Treasury and checks should never be made payable to third parties.
  • Threaten to immediately bring in local police or other law-enforcement groups to have the taxpayer arrested for not paying.
  • Demand that taxes be paid without giving the taxpayer the opportunity to question or appeal the amount owed.
  • Ask for credit or debit card numbers over the phone.
If you don’t owe taxes, or have no reason to think that you do:
  • Do not give out any information. Hang up immediately.
  • Contact the Treasury Inspector General for Tax Administration to report the call. Use their “IRS Impersonation Scam Reporting” web page. You can also call 800-366-4484.
  • Report it to the Federal Trade Commission. Use the “FTC Complaint Assistant” on FTC.gov. Please add "IRS Telephone Scam" in the notes.
If you know you owe, or think you may owe tax:
  • Call the IRS at 800-829-1040. IRS workers can help you.
Remember, too, the IRS does not use email, text messages or social media to discuss personal tax issues involving bills or refunds. The IRS will continue to keep taxpayers informed about scams and provide tips to protect them. The IRS encourages taxpayers to visit IRS.gov for information including the “Tax Scams and Consumer Alerts” page.
Additional information about tax scams is available on IRS social media sites, including YouTube Tax Scams.