Don’t Fall for New Tax Scam Tricks by IRS Posers

Though the tax season is over, tax scammers work year-round. The IRS advises you to stay alert to protect yourself against new ways criminals pose as the IRS to trick you out of your money or personal information. These scams first tried to sting older Americans, newly arrived immigrants and those who speak English as a second language. The crooks have expanded their net, and now try to swindle virtually anyone. Here are several tips from the IRS to help you avoid being a victim of these scams:

• Scams use scare tactics.  These aggressive and sophisticated scams try to scare people into making a false tax payment that ends up with the criminal. Many phone scams use threats to try to intimidate you so you will pay them your money. They often threaten arrest or deportation, or that they will revoke your license if you don’t pay. They may also leave “urgent” callback requests, sometimes through “robo-calls,” via phone or email. The emails will often contain a fake IRS document with a phone number or an email address for you to reply.
• Scams use caller ID spoofing.  Scammers often alter caller ID to make it look like the IRS or another agency is calling. The callers use IRS titles and fake badge numbers to appear legit. They may use online resources to get your name, address and other details about your life to make the call sound official.
• Scams use phishing email and regular mail.  Scammers copy official IRS letterhead to use in email or regular mail they send to victims. In another new variation, schemers provide an actual IRS address where they tell the victim to mail a receipt for the payment they make. All in an attempt to make the scheme look official.
• Scams cost victims over $20 million.  The Treasury Inspector General for Tax Administration, or TIGTA, has received reports of about 600,000 contacts since October 2013. TIGTA is also aware of nearly 4,000 victims who have collectively reported over $20 million in financial losses as a result of tax scams.

The real IRS will not:

• Call you to demand immediate payment. The IRS will not call you if you owe taxes without first sending you a bill in the mail.
• Demand that you pay taxes and not allow you to question or appeal the amount that you owe.
• Require that you pay your taxes a certain way. For instance, require that you pay with a prepaid debit card.
• Ask for credit or debit card numbers over the phone.
• Threaten to bring in police or other agencies to arrest you for not paying.

If you don’t owe taxes or have no reason to think that you do:

• Do not provide any information to the caller. Hang up immediately.
• Contact the Treasury Inspector General for Tax Administration. Use TIGTA’s “IRS Impersonation Scam Reporting” web page to report the incident.
• You should also 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 taxes:

• Call the IRS at 800-829-1040. IRS workers can help you if you do owe taxes.

Stay alert to scams that use the IRS as a lure. For more, visit “Tax Scams and Consumer Alerts” on IRS.gov.

Tax Tips for Starting a Business

When you start a business, a key to your success is to know your tax obligations. You may not only need to know about income tax rules, but also about payroll tax rules. Here are five IRS tax tips that can help you get your business off to a good start.

1. Business Structure.  An early choice you need to make is to decide on the type of structure for your business. The most common types are sole proprietor, partnership and corporation. The type of business you choose will determine which tax forms you will file.

2. Business Taxes.  There are four general types of business taxes. They are income tax, self-employment tax, employment tax and excise tax. In most cases, the types of tax your business pays depends on the type of business structure you set up. You may need to make estimated tax payments. If you do, use IRS Direct Payto pay them. It’s the fast, easy and secure way to pay from your checking or savings account.

3. Employer Identification Number.  You may need to get an EIN for federal tax purposes. Search “do you need an EIN” on IRS.gov to find out if you need this number. If you do need one, you can apply for it online.

4. Accounting Method.  An accounting method is a set of rules that you use to determine when to report income and expenses. You must use a consistent method. The two that are most common are the cash and accrual methods. Under the cash method, you normally report income and deduct expenses in the year that you receive or pay them. Under the accrual method, you generally report income and deduct expenses in the year that you earn or incur them. This is true even if you get the income or pay the expense in a later year.

5. Employee Health Care.  The Small Business Health Care Tax Credit helps small businesses and tax-exempt organizations pay for health care coverage they offer their employees. A small employer is eligible for the credit if it has fewer than 25 employees who work full-time, or a combination of full-time and part-time. The maximum credit is 50 percent of premiums paid for small business employers and 35 percent of premiums paid for small tax-exempt employers, such as charities.

The employer shared responsibility provisions of the Affordable Care Act affect employers employing at least a certain number of employees (generally 50 full-time employees or a combination of full-time and part-time employees). These employers’ are called applicable large employers. ALEs must either offer minimum essential coverage that is “affordable” and that provides “minimum value” to their full-time employees (and their dependents), or potentially make an employer shared responsibility payment to the IRS. The vast majority of employers will fall below the ALE threshold number of employees and, therefore, will not be subject to the employer shared responsibility provisions.

Employers also have information reporting responsibilities regarding minimum essential coverage they offer or provide to their fulltime employees.  Employers must send reports to employees and to the IRS on new forms the IRS created for this purpose.

Get all the tax basics of starting a business on IRS.gov at the Small Business and Self-Employed Tax Center.

Ten Things to Know about Identity Theft and Your Taxes

Learning you are a victim of identity theft can be a stressful event. Identity theft is also a challenge to businesses, organizations and government agencies, including the IRS. Tax-related identity theft occurs when someone uses your stolen Social Security number to file a tax return claiming a fraudulent refund.

Many times, you may not be aware that someone has stolen your identity. The IRS may be the first to let you know you’re a victim of ID theft after you try to file your taxes.

The IRS combats tax-related identity theft with a strategy of prevention, detection and victim assistance. The IRS is making progress against this crime and it remains one of the agency’s highest priorities.

Here are ten things to know about ID Theft:

1. Protect your Records.  Do not carry your Social Security card or other documents with your SSN on them. Only provide your SSN if it’s necessary and you know the person requesting it. Protect your personal information at home and protect your computers with anti-spam and anti-virus software. Routinely change passwords for Internet accounts.

2. Don’t Fall for Scams.  The IRS will not call you to demand immediate payment, nor will it call about taxes owed without first mailing you a bill. Beware of threatening phone calls from someone claiming to be from the IRS. If you have no reason to believe you owe taxes, report the incident to the Treasury Inspector General for Tax Administration (TIGTA) at 1-800-366-4484.

3. Report ID Theft to Law Enforcement.  If your SSN was compromised and you think you may be the victim of tax-related ID theft, file a police report. You can also file a report with the Federal Trade Commission using the FTC Complaint Assistant. It’s also important to contact one of the three credit bureaus so they can place a freeze on your account.

4. Complete an IRS Form 14039 Identity Theft Affidavit. Once you’ve filed a police report, file an IRS Form 14039 Identity Theft Affidavit.  Print the form and mail or fax it according to the instructions. Continue to pay your taxes and file your tax return, even if you must do so by paper.

5. Understand IRS Notices.  Once the IRS verifies a taxpayer’s identity, the agency will mail a particular letter to the taxpayer. The notice says that the IRS is monitoring the taxpayer’s account. Some notices may contain a unique Identity Protection Personal Identification Number (IP PIN) for tax filing purposes.

6. IP PINs.  If a taxpayer reports that they are a victim of ID theft or the IRS identifies a taxpayer as being a victim, they will be issued an IP PIN. The IP PIN is a unique six-digit number that a victim of ID theft uses to file a tax return. In 2014, the IRS launched an IP PIN Pilot program. The program offers residents of Florida, Georgia and Washington, D.C., the opportunity to apply for an IP PIN, due to high levels of tax-related identity theft there.

7. Data Breaches.  If you learn about a data breach that may have compromised your personal information, keep in mind not every data breach results in identity theft.  Further, not every identity theft case involves taxes. Make sure you know what kind of information has been stolen so you can take the appropriate steps before contacting the IRS.

8. Report Suspicious Activity.  If you suspect or know of an individual or business that is committing tax fraud, you can visit IRS.gov and follow the chart on How to Report Suspected Tax Fraud Activity.

9. Combating ID Theft.  Over the past few years, nearly 2,000 people were convicted in connection with refund fraud related to identity theft. The average prison sentence for identity theft-related tax refund fraud grew to 43 months in 2014 from 38 months in 2013, with the longest sentence being 27 years.   During 2014, the IRS stopped more than $15 billion of fraudulent refunds, including those related to identity theft.  Additionally, as the IRS improves its processing filters, the agency has also been able to halt more suspicious returns before they are processed. So far this year, new fraud filters stopped about 3 million suspicious returns for review, an increase of more than 700,000 from the year before. 

10. Service Options. Information about tax-related identity theft is available online. We have a special section on IRS.gov devoted to identity theft and a phone number available for victims to obtain assistance.

For more on this Topic, see the Taxpayer Guide to Identity Theft.

Back-to-School Education Tax Credits

If you, your spouse or a dependent are heading off to college in the fall, some of your costs may save you money at tax time. You may be able to claim a tax credit on your federal tax return. Here are some key IRS tips that you should know about e tax credits:   

• American Opportunity Tax Credit.  The AOTC is worth up to $2,500 per year for an eligible student. You may claim this credit only for the first four years of higher education. Forty percent of the AOTC is refundable. That means if you are eligible, you can get up to $1,000 of the credit as a refund, even if you do not owe any taxes.

• Lifetime Learning Credit.  The LLC is worth up to $2,000 on your tax return. There is no limit on the number of years that you can claim the LLC for an eligible student.

• One credit per student.  You can claim only one type of education credit per student on your tax return each year. If more than one student qualifies for a credit in the same year, you can claim a different credit for each student. For instance, you can claim the AOTC for one student, and claim the LLC for the other.

• Qualified expenses.  You may use qualified expensesto figure your credit. These include the costs you pay for tuition, fees and other related expenses for an eligible student. Refer to IRS.gov for more on the rules that apply to each credit.

•  Eligible educational institutions.  Eligible schools are those that offer education beyond high school. This includes most colleges and universities. Vocational schools or other postsecondary schools may also qualify. If you aren’t sure if your school is eligible:

o Ask your school if it is an eligible educational institution, or

o See if your school is on the U.S. Department of Education’s Accreditation database.

• Form 1098-T.  In most cases, you should receive Form 1098-T, Tuition Statement, from your school by Feb. 1, 2016. This form reports your qualified expenses to the IRS and to you. The amounts shown on the form may be different than the amounts you actually paid. That might happen because some of your related costs may not appear on the form. For instance, the cost of your textbooks may not appear on the form. However, you still may be able to include those costs when you figure your credit. Don’t forget that you can only claim an education credit for the qualified expenses that you paid in that same tax year.

• Nonresident alien.  If you are in the United States on an F-1 Student Visa, the tax rules generally treat you as a nonresident alien for federal tax purposes.  To find out more about your F-1 Student Visa status, visit U.S. Immigration Support. To learn more about resident and nonresident alien status and restrictions on claiming the education credits, refer to Publication 519, U.S. Tax Guide for Aliens.

• Income limits. These credits are subject to income limitations and may be reduced or eliminated, based on your income.

Ten Key Tax Facts about Home Sales

In most cases, gains from sales are taxable. But did you know that if you sell your home, you may not have to pay taxes? Here are ten facts to keep in mind if you sell your home this year.

1. Exclusion of Gain.  You may be able to exclude part or all of the gain from the sale of your home. This rule may apply if you meet the eligibility test. Parts of the test involve your ownership and use of the home. You must have owned and used it as your main home for at least two out of the five years before the date of sale.
2. Exceptions May Apply.  There are exceptions to the ownership, use and other rules. One exception applies to persons with a disability. Another applies to certain members of the military. That rule includes certain government and Peace Corps workers. For more on this topic, see Publication 523, Selling Your Home.
3. Exclusion Limit.  The most gain you can exclude from tax is $250,000. This limit is $500,000 for joint returns. The Net Investment Income Tax will not apply to the excluded gain.
4. May Not Need to Report Sale.  If the gain is not taxable, you may not need to report the sale to the IRS on your tax return.
5. When You Must Report the Sale.  You must report the sale on your tax return if you can’t exclude all or part of the gain. You must report the sale if you choose not to claim the exclusion. That’s also true if you get Form 1099-S, Proceeds From Real Estate Transactions. If you report the sale, you should review the Questions and Answers on the Net Investment Income Tax on IRS.gov.
6. Exclusion Frequency Limit.  Generally, you may exclude the gain from the sale of your main home only once every two years. Some exceptions may apply to this rule.
7. Only a Main Home Qualifies.  If you own more than one home, you may only exclude the gain on the sale of your main home. Your main home usually is the home that you live in most of the time.
8. First-time Homebuyer Credit.  If you claimed the first-time homebuyer credit when you bought the home, special rules apply to the sale. For more on those rules, see Publication 523.
9. Home Sold at a Loss.  If you sell your main home at a loss, you can’t deduct the loss on your tax return.
10. Report Your Address Change.  After you sell your home and move, update your address with the IRS. To do this, file Form 8822, Change of Address. You can find the address to send it to in the form’s instructions on page two. If you purchase health insurance through the Health Insurance Marketplace, you should also notify the Marketplace when you move out of the area covered by your current Marketplace plan.

Tips on Travel While Giving Your Services to Charity

Do you plan to donate your services to charity this summer? Will you travel as part of the service? If so, some travel expenses may help lower your taxes when you file your tax return next year. Here are several tax tips that you should know if you travel while giving your services to charity.

• Qualified Charities.  In order to deduct your costs, your volunteer work must be for a qualified charity. Most groups must apply to the IRS to become qualified. Churches and governments are qualified, and do not need to apply to the IRS. Ask the group about its IRS status before you donate. You can also use the Select Check tool on IRS.gov to check the group’s status.

• Out-of-Pocket Expenses.  You may be able to deduct some costs you pay to give your services. This can include the cost of travel. The costs must be necessary while you are away from home giving your services for a qualified charity. All  costs must be:

o Unreimbursed,

o Directly connected with the services,

o Expenses you had only because of the services you gave, and

o Not personal, living or family expenses.

• Genuine and Substantial Duty.  Your charity work has to be real and substantial throughout the trip. You can’t deduct expenses if you only have nominal duties or do not have any duties for significant parts of the trip.

• Value of Time or Service.  You can’t deduct the value of your services that you give to charity. This includes income lost while you work as an unpaid volunteer for a qualified charity.

• Deductible travel.  The types of expenses that you may be able to deduct include:

o Air, rail and bus transportation,

o Car expenses,

o Lodging costs,

o The cost of meals, and

o Taxi or other transportation costs between the airport or station and your hotel.

• Nondeductible Travel.  Some types of travel do not qualify for a tax deduction. For example, you can’t deduct your costs if a significant part of the trip involves recreation or a vacation.

For more on these rules, see Publication 526, Charitable Contributions. You can get it on IRS.gov/forms at any time.

Review Your Taxes This Summer to Prevent a Surprise Next Spring

Each year, many people get a larger refund than they expected. Some find they owe a lot more tax than they thought they would. If this happened to you, review your situation to prevent another tax surprise. Did you marry? Have a child? Have a change in income? Some life events can have a major effect on your taxes. You can bring the tax you pay closer to the amount you owe. Here are some key IRS tips to help you come up with a plan of action:

• New Job.   When you start a new job, you must fill out a Form W-4, Employee’s Withholding Allowance Certificate and give it to your employer. Your employer will use the form to figure the amount of federal income tax to withhold from your pay. Use the IRS Withholding Calculator on IRS.gov to help you fill out the form. This tool is easy to use and it’s available 24/7.
• Estimated Tax.  If you earn income that is not subject to withholding you may need to pay estimated tax. This may include income such as self-employment, interest, dividends or rent. If you expect to owe a thousand dollars or more in tax, and meet other conditions, you may need to pay this tax. You normally pay it four times a year. Use the worksheet in Form 1040-ES, Estimated Tax for Individuals, to figure the tax.
• Life Events.  Check to see if you need to change your Form W-4 or change the amount of estimated tax you pay when certain life events take place. A change in your marital status, the birth of a child or buying a new home can change the amount of taxes you owe. In most cases, you can submit a new Form W–4 to your employer anytime. 
• Changes in Circumstances.   If you are receiving advance payments of the premium tax credit, it is important that you report changes in circumstances, such as changes in your income or family size, to your Health Insurance Marketplace. You should also notify the Marketplace when you move out of the area covered by your current Marketplace plan. Advance payments of the premium tax credit help you pay for the insurance you buy through the Health Insurance Marketplace. Reporting changes will help you get the proper type and amount of financial assistance so you can avoid getting too much or too little in advance.

The deadline for filing a business tax return or tax extension is the same date. For example, if your business return is due by March 16, you must file Form 7004 by March 16 in order to get an extension.

Business owners who report their business activities on their personal tax return (including sole proprietorships and single-member LLCs) should not request a business extension with Form 7004. Instead, these taxpayers should request a personal extension with Form 4868 to extend the filing deadline for both their personal and business taxes. Form 4868 must be filed by the original due date of your personal tax return (usually April 15).

Here are the original filing due dates for various types of business entities (for calendar year filers):

• Sole Proprietorships (Form 1040): April 15
• Single-Member LLCs (Form 1040): April 15
• Partnerships (Form 1065): April 15
• Estates & Trusts (Form 1041): April 15
• Corporations (Form 1120): March 15 (March 16, 2015 this year)
• S-Corporations (Form 1120S): March 15 (March 16, 2015 this year)
• Homeowners Associations (Form 1120-H): March 15 (March 16, 2015 this year)
• Cooperative Associations (Form 1120-C): March 15 (March 16, 2015 this year)
• Real Estate Investment Trusts, REITs (Form 1120-REIT): March 15 (March 16, 2015 this year)
• Real Estate Mortgage Investment Conduits, REMICs (Form 1066): April 15

NOTE: If a corporation files based on the fiscal year, the original filing due date is the 15th day of the 3rd month following the close of the taxable year.

A business tax extension will give you either 5 or 6 more months to file. Businesses that are requesting an extension for Form 1065 (partnerships), Form 8804 (partnership withholding), or Form 1041 (trusts and non-bankruptcy estates) are limited to a 5-month extension. Most other types of businesses, including corporations and REITs, are permitted a 6-month tax extension.

If your business return is originally due by March 16, 2015 and you obtain a 6-month extension, you will have until September 15, 2015 to file your return. If you business return is originally due by April 15, 2015 and you obtain a 5-month extension, you will have until September 15, 2015 to file your return.

It’s highly recommended that you use an Authorized IRS e-file Provider to file your taxes online.

Most people claim the standard deduction when they file their federal tax return. But did you know that you may lower your taxes if you itemize your deductions? Find out if you can save by doing your taxes using both methods. Usually, the bigger the deduction, the lower the tax you have to pay. You should file your tax return using the method that allows you to pay the least amount of tax. The IRS offers these five tips to help you choose:

1. Figure your itemized deductions. Add up deductible expenses you paid during the year. These may include expenses such as:

Home mortgage interest
State and local income taxes or sales taxes (but not both)
Real estate and personal property taxes
Gifts to charities
Casualty or theft losses
Unreimbursed medical expenses
Unreimbursed employee business expenses
Special rules and limits apply. Visit IRS.gov and refer to Publication 17, Your Federal Income Tax, for more details.

2. Know your standard deduction. If you don’t itemize, your basic standard deduction for 2014 depends on your filing status:

Single $6,200
Married Filing Jointly $12,400
Head of Household $9,100
Married Filing Separately $6,200
Qualifying Widow(er) $12,400
If you’re 65 or older or blind, your standard deduction is higher than these amounts. If someone can claim you as a dependent, your deduction may be limited.

3. Check the exceptions. There are some situations where the law does not allow a person to claim the standard deduction. This rule applies if you are married filing a separate return and your spouse itemizes. In this case, you can’t claim a standard deduction. You usually will pay less tax if you itemize. See Pub. 17 for more on these rules.

4. Use the IRS ITA tool. Visit IRS.gov and use the Interactive Tax Assistant that takes you through a series of questions just like one of our customer service representatives would. The tool can help determine your standard deduction. It can also help you figure several of your itemized deductions.

5. File the right forms. To itemize your deductions, use Form 1040 and Schedule A, Itemized Deductions. You can take the standard deduction on Forms 1040, 1040A or 1040EZ.

Some people take an early withdrawal from their IRA or retirement plan. Doing so in many cases triggers an added tax on top of the income tax you may have to pay. Here are some key points you should know about taking an early distribution:

1.Early Withdrawals. An early withdrawal normally means taking the money out of your retirement plan before you reach age 59½.

2.Additional Tax. If you took an early withdrawal from a plan last year, you must report it to the IRS. You may have to pay income tax on the amount you took out. If it was an early withdrawal, you may have to pay an added 10 percent tax.

3.Nontaxable Withdrawals. The added 10 percent tax does not apply to nontaxable withdrawals. They include withdrawals of your cost to participate in the plan. Your cost includes contributions that you paid tax on before you put them into the plan.

A rollover is a type of nontaxable withdrawal. A rollover occurs when you take cash or other assets from one plan and contribute the amount to another plan. You normally have 60 days to complete a rollover to make it tax-free.

4.Check Exceptions. There are many exceptions to the additional 10 percent tax. Some of the rules for retirement plans are different from the rules for IRAs. See IRS.gov for details about these rules.

5.File Form 5329. If you made an early withdrawal last year, you may need to file a form with your federal tax return. See Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts, for details.