IRS TAX PROBLEMS – IRS “Dirty Dozen” Tax Scams

IRS TAX PROBLEMS – Dirty Dozen – The Dirty Dozen represents the worst of the worst tax scams.
Compiled annually by the IRS, the “Dirty Dozen” lists a variety of common scams that taxpayers may encounter anytime but many of these schemes peak during filing season as people prepare their returns or hire someone to help with their taxes. Don’t fall prey.

  • IRS Includes Falsifying Income Scam in 2017 List of “Dirty Dozen” — The Internal Revenue Service has continued issuing its annual list of common tax scams by warning taxpayers to avoid schemes to erroneously claim tax credits.
  • IRS Annual “Dirty Dozen” List of Tax Scams to Avoid Includes Falsely Padding Deductions — Avoid the temptation to falsely inflate deductions or expenses on tax returns, the IRS warned in its 2017 “Dirty Dozen” list of tax scams. Doing so may result in paying less than is owed or receiving a larger refund than is due.
  • Excessive Claims for Business Credits Makes the IRS “Dirty Dozen” List of Tax Scams — The Internal Revenue Service warned that taxpayers should watch for improper claims for business credits, which is on the “Dirty Dozen” list of tax scams for the 2017 filing season.
  • Falsely Inflating Refund Claims on the IRS “Dirty Dozen” List of Tax Scams for 2017 — The Internal Revenue Service warned taxpayers to be alert to unscrupulous tax return preparers touting inflated tax refunds. This scam remains on the annual list of tax scams known as the “Dirty Dozen” for 2017.
  • Fake Charities on the IRS “Dirty Dozen” List of Tax Scams for 2017 – The Internal Revenue Service warned taxpayers about groups masquerading as charitable organizations to attract donations from unsuspecting contributors, one of the “Dirty Dozen” Tax Scams for the 2017 filing season.
  • IRS “Dirty Dozen” Series of Tax Scams for 2017 Includes Return Preparer Fraud; Choose Reputable Return Preparers — The IRS warned taxpayers to be on the lookout for unscrupulous return preparers, one of the most common “Dirty Dozen” tax scams seen during tax season.
  • Identity Theft Remains on “Dirty Dozen” List of Tax Scams; IRS, States, Tax Industry Urge People to be Vigilant Against Criminals — The IRS issued a filing season alert, warning taxpayers and tax professionals to watch out for identity theft at tax time, and highlighted the crime as a recurring scam in the agency’s “Dirty Dozen” series.
  • Phone Scams a Serious Threat; Remain on the IRS “Dirty Dozen” List of Tax Scams for 2017 — Aggressive and threatening phone calls by criminals impersonating IRS agents remain a major threat to taxpayers, remain on the annual “Dirty Dozen” list of tax scams for the 2017 filing season, the Internal Revenue Service announced.
  • Phishing Schemes Lead the IRS “Dirty Dozen” List of Tax Scams for 2017; Remain Tax-Time Threat — The Internal Revenue Service warned taxpayers to watch out for fake emails or websites looking to steal personal information. These “phishing” schemes continue to be on the annual IRS list of “Dirty Dozen” tax scams for the 2017 filing season.

IRS TAX PROBLEMS – Exemptions and Dependents Reduce Taxable Income

IRS TAX PROBLEMS – How Exemptions and Dependents Can Reduce Taxable Income

Most taxpayers can claim an exemption for themselves and reduce their taxable income on their tax return. They may also be able to claim an exemption for each of their dependents. Each exemption normally allows them to deduct $4,050 on their 2016 tax return. Here are some key points to keep in mind on dependents and exemptions:

  1. Personal Exemptions.  Taxpayers can usually claim exemptions for themselves and their spouses on a jointly filed tax return. For married taxpayers filing separate returns, an exemption can only be claimed for a spouse if that spouse:
  • Had no gross income,
  • Is not filing a tax return, and
  • Was not the dependent of another taxpayer.
  1. Exemptions for Dependents. A dependent is either a child or a relative who meets a set of tests. Taxpayers can normally claim dependents as exemptions. List a Social Security number for each dependent. For more on these rules, see IRS Publication 501, “Exemptions, Standard Deduction and Filing Information”.
  2. No Exemption on Dependent’s Return. If a taxpayer can claim a person as a dependent, then that dependent cannot claim a personal exemption on his or her own tax return. This is true even if no one claims that person on a tax return.
  3. Dependents May Have to File. A dependent may have to file a tax return. This depends on certain factors like total income, whether they are married and if they owe certain taxes.
  4. Exemption Phase-Out.  Taxpayers earning above a certain amount will lose part or all the $4,050 exemption. See IRS Publication 501 for details.

 

IRS TAX PROBLEMS – Don’t Fall for Scam Calls & Emails Posing as IRS

IRS TAX PROBLEMS – Don’t Fall for Scam Calls and Emails Posing as IRS

Scams continue to use the IRS as a lure. These tax scams take many different forms. The most common scams are phone calls and emails from thieves who pretend to be from the IRS. Scammers use the IRS name, logo or a fake website to try and steal money from taxpayers. Identity theft can also happen with these scams.

Taxpayers need to be wary of phone calls or automated messages from someone who claims to be from the IRS. Often these criminals will say the taxpayer owes money. They also demand payment right away. Other times scammers will lie to a taxpayer and say they are due a refund. The thieves ask for bank account information over the phone. The IRS warns taxpayers not to fall for these scams.

CALLS:

IRS employees will NOT:

  • Call demanding immediate payment. The IRS will not call a taxpayer if they owe tax without first sending a bill in the mail.
  • Demand payment without allowing the taxpayer to question or appeal the amount owed.
  • Require the taxpayer pay their taxes a certain way. For example, demand taxpayers use a prepaid debit card.
  • Ask for credit or debit card numbers over the phone.
  • Threaten to contact local police or similar agencies to arrest the taxpayer for non-payment of taxes.
  • Threaten legal action such as a lawsuit.

If a taxpayer doesn’t owe or think they owe any tax, they should:

  • Contact the Treasury Inspector General for Tax Administration (TIGTA). Use TIGTA’s “IRS Impersonation Scam Reporting” web page to report the incident.
  • Report the incident to the Federal Trade Commission. Use the “FTC Complaint Assistant” on “FTC.gov”. Please add “IRS Telephone Scam” to the comments of your report.

In most cases, an IRS phishing scam is an unsolicited, bogus email that claims to come from the IRS. Criminals often use fake refunds, phony tax bills or threats of an audit. Some emails link to sham websites that look real. The scammers’ goal is to lure victims to give up their personal and financial information. If they get what they’re after, they use it to steal a victim’s money and their identity.

 

EMAILS:

For those taxpayers who get a ‘phishing’ email, the IRS offers this advice:

  • Don’t reply to the message.
  • Don’t give out your personal or financial information.
  • Forward the email to “phishing@irs.gov”. Then delete it.
  • Do not open any attachments or click on any links. They may have malicious code that will infect your computer.

 

IC-DISC INCENTIVE FOR EXPORTERS

IC-DISC

 

THE LAST REMAINING EXPORT INCENTIVE FOR

U.S. MANUFACTURERS AND EXPORTERS

 

APPROVED BY THE IRS

 

AN IC-DISC CAN PROVIDE A 20% TAX SAVINGS FOR QUALIFYING U.S. MANUFACTURERS AND EXPORTERS

 

If you are unsure about whether or not an IC-DISC (Interest Charge – Domestic International Sales Company) will work for your Company, now or in the future, ask the following Questions:

 

  • Do you currently, or will you in the future, have any transactions outside the United States?
  • Do you currently, or will you in the future, use overseas distribution?
  • Does your product currently, or will it in the future, cross any borders?
  • Are you generating or projecting operating income?

 

If the answer to any of these Questions is “YES”, and you are currently Exporting or you would want to Export in the future, an IC-DISC could be a valuable tax-savings vehicle for your Company that could result in the following:

 

  • Permanent Tax Savings on Export Sales – CASH FLOW
  • Ability to Leverage Cost of Capital
  • Opportunities to Create Management Incentives
  • Means to Facilitate Succession Planning

 

AN IC-DISC CAN ONLY BENEFIT YOUR COMPANY PROSPECTIVELY – ONLY AFTER ITS FORMATION

IRS TAX PROBLEMS – IRS Now Accepting 2016 Tax Returns

IRS TAX PROBLEMS – IRS Now Accepting 2016 Tax Returns

 

The Internal Revenue Service (IRS) has successfully started accepting and processing 2016 federal individual income tax returns on schedule. More than 153 million returns are expected to be filed this year.

People have until Tuesday, April 18, 2017 to file their 2016 returns and pay any taxes due. The deadline is later this year due to several factors. The usual April 15 deadline falls on Saturday this year, which would normally give taxpayers until at least the following Monday. However, Emancipation Day, a D.C. holiday, is observed on Monday, April 17, giving taxpayers nationwide an additional day to file. By law, D.C. holidays impact tax deadlines for everyone in the same way federal holidays do. Taxpayers requesting an extension will have until Monday, Oct. 16, 2017 to file.

DELAY IN REFUNDS:

The IRS expects more than 70 percent of taxpayers to get tax refunds this year. Last year, 111 million refunds were issued, with an average refund of $2,860.
A law change now requires the IRS to hold refunds on tax returns claiming the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) until Feb. 15. Under this change required by the Protecting Americans from Tax Hikes (PATH) Act, the IRS must hold the entire refund — even the portion not associated with the EITC and ACTC. Even though the IRS will begin releasing EITC and ACTC refunds on Feb. 15, many early filers will still not have actual access to their refunds until the week of Feb. 27. The additional delay is due to several factors, including weekends, the Presidents Day holiday and the time banks often need to process direct deposits.

This law change gives the IRS more time to detect and prevent fraud. Beyond the EITC and ACTC refunds and the additional security safeguards, the IRS anticipates issuing more than nine out of 10 refunds in less than 21 days. However, it’s possible a particular return may require additional review and take longer. Taxpayers are reminded that state tax agencies have their own refund processing timeframes that vary, and some states may make additional reviews to ensure their refunds are being issued properly.

 

PENNSYLVANIA TAX PROBLEMS – Pennsylvania Tax Amnesty Program – 2017

PENNSYLVANIA TAX AMNESTY PROGRAM – 2017

 

Act 84 of 2016 established the “Pennsylvania Tax Amnesty Program” (the “Amnesty Program”). The Amnesty Program period begins April 21, 2017, and ends on June 19, 2017 (the “Amnesty Period”). All taxes owed to the Commonwealth administered by the Department of Revenue (Department) are eligible for the Amnesty Program. Taxes, interest and penalties collected under the International Fuel Tax Agreement owed to other states or provinces are not eligible for the Amnesty Program. Eligible periods are those where a known or unknown delinquency exists as of December 31, 2015.

 

The Department may use the services of a third party vendor to assist with implementation of the Amnesty Program and provide services to its participants.

 

To participate, taxpayers must file an online Amnesty Return, file all delinquent tax returns and make the required payment within the Amnesty Period. All penalties, collection and lien fees and one-half of the interest due will be waived.

 

Unpaid taxes, penalties and interest that result from periods subsequent to December 31, 2015, are not eligible for the Amnesty Program. However, if a taxpayer has unpaid taxes or unfiled returns for periods not eligible for Amnesty (due after December 31, 2015), those periods must be filed for the taxpayer’s participation in the 2017 Amnesty Program to be approved.

IRS TAX PROBLEMS – TAX ON SALE OF PERSONAL RESIDENCE

IRS TAX PROBLEMS – Sale of Residence – Real Estate Tax

You may qualify to exclude from your income all or part of any gain from the sale of your main home. Your main home is the one in which you live most of the time.

Ownership and Use Tests

To claim the exclusion, you must meet the Ownership and Use tests. This means that during the Five (5) -Year period ending on the date of the sale, you must have:

  • Owned the home for at least Two (2) Years (the “Ownership Test”)
  • Lived in the home as your main home for at least Two (2) years (the “Use Test”)

Gain

If you have a gain from the sale of your main home, you may be able to exclude up to $250,000 of the gain from your income ($500,000 on a joint return in most cases).

  • If you can exclude all of the gain, you do not need to report the sale on your tax return
  • If you have gain that cannot be excluded, it is taxable. Report it on Schedule D (Form 1040)

Loss

You cannot deduct a loss from the sale of your main home.

Worksheets

Worksheets are included in IRS Publication 523, “Selling Your Home”, to help you figure the:

  • Adjusted basis of the home you sold
  • Gain (or loss) on the sale
  • Gain that you can exclude

Reporting the Sale

Do not report the sale of your main home on your tax return unless:

  • You have a gain and do not qualify to exclude all of it,
  • You have a gain and choose not to exclude it, or
  • You have a loss and received a Form 1099-S.

More Than One Home

If you have more than one home, you can exclude gain only from the sale of your main home. You must pay tax on the gain from selling any other home. If you have two homes and live in both of them, your main home is ordinarily the one you live in most of the time.

Example One:

You own and live in a house in the city. You also own a beach house, which you use during the summer months. The house in the city is your main home; the beach house is not.

Example Two:

You own a house, but you live in another house that you rent. The rented house is your main home.

Business Use or Rental of Home

You may be able to exclude your gain from the sale of a home that you have used for business or to produce rental income. But you must meet the Ownership and Use tests.

Example:

On May 30, 1997, Amy bought a house. She moved in on that date and lived in it until May 31, 1999, when she moved out of the house and put it up for rent. The house was rented from June 1, 1999, to March 31, 2001. Amy moved back into the house on April 1, 2001, and lived there until she sold it on January 31, 2003. During the 5-year period ending on the date of the sale (February 1, 1998 – January 31, 2003), Amy owned and lived in the house for more than 2 years as shown in the table below.

Five Year Period Used as Home Used as Rental
2/1/98-5/31/99 16 months  
6/1/99-3/31/01   22 months
4/1/01-1/31/03 22 months                
  38 months 22 months

Amy can exclude gain up to $250,000. However, she cannot exclude the part of the gain equal to the depreciation she claimed for renting the house.

 

 

IRS TAX PROBLEMS – Is Your Gift Taxable?

IRS TAX PROBLEMS – Is Your Gift Taxable?

If you gave money or property to someone as a gift, you may wonder about the federal gift tax. Many gifts are not subject to the gift tax. Here are Seven (7) basic rules for gifts and the gift tax.

  1. Nontaxable Gifts. The general rule is that any gift is a taxable gift. However, there are exceptions to this rule. The following are nontaxable gifts:
    • Gifts that do not exceed the “Annual Exclusion” for the calendar year,
    • Tuition or medical expenses you paid directly to a medical or educational institution for someone,
    • Gifts to your spouse
    • Gifts to a political organization for its use, and
    • Gifts to charities.
  1. Annual Exclusion. For 2016 and 2017, the “Annual Exclusion” is $14,000. Most gifts are not subject to the gift tax. For example, there is usually no tax if you make a gift to your spouse or to a charity. If you give a gift to someone else, the gift tax usually does not apply until the value of the gift exceeds the Annual Exclusion for the year.
  2. No Tax on Recipient. Generally, the person who receives your gift will not have to pay taxes on it.
  3. Gifts Not Deductible. Making a gift does not ordinarily affect your taxes. You cannot deduct the value of gifts you make (other than deductible charitable contributions).
  4. Forgiven Debt and Certain Loans. The gift tax may also apply when you forgive a debt or give a loan that is interest-free or below the market interest rate.
  5. Gift-Splitting. You and your spouse can give a gift up to $28,000 to a third party without making it a taxable gift. You can consider that one-half of the gift be given by you and one-half by your spouse.
  6. Filing Requirement. You must file IRS Form 709 – “United States Gift (and Generation-Skipping Transfer) Tax Return”, if any of the following apply:
    • You gave gifts to at least one person (other than your spouse) that amount to more than the Annual Exclusion for the year.
    • You and your spouse are splitting a gift. This is true even if half of the split gift is less than the Annual Exclusion.
    • You gave someone (other than your spouse) a gift of a “future interest” that they can’t actually possess, enjoy, or from which they’ll receive income later.
    • You gave your spouse an interest in property that will terminate due to a future event.

IRS TAX PROBLEMS – How the IRS “Taxpayer Bill of Rights” Works

IRS TAX PROBLEMS – How the IRS Taxpayer Bill of Rights Works

Taxpayers have fundamental rights under the law. The “Taxpayer Bill of Rights” presents these rights in TEN (10) categories. This helps taxpayers when they interact with the IRS.

In IRS Publication No. 1, your Rights as a Taxpayer, highlights a list of taxpayer rights and the IRS’s obligations to protect you. Here is a short summary of the Taxpayer Bill of Rights:

  1. The Right to Be Informed.
    Taxpayers have the right to know what is required to comply with the tax laws. They are entitled to clear explanations of the laws and IRS procedures in all tax forms, instructions, publications, notices and correspondence. They have the right to know about IRS decisions affecting their accounts and clear explanations of the outcomes.
  2. The Right to Quality Service.
    Taxpayers have the right to receive prompt, courteous and professional assistance in their dealings with the IRS and the freedom to speak to a supervisor about inadequate service. Communications from the IRS should be clear and easy to understand.
  3. The Right to Pay No More than the Correct Amount of Tax.
    Taxpayers have the right to pay only the amount of tax legally due, including interest and penalties. They should also expect the IRS to apply all tax payments properly.
  4. The Right to Challenge the IRS’s Position and Be Heard.
    Taxpayers have the right to object to formal IRS actions or proposed actions and provide justification with additional documentation. They should expect that the IRS will consider their timely objections and documentation promptly and fairly. If the IRS does not agree with their position, they should expect a response.
  5. The Right to Appeal an IRS Decision in an Independent Forum.
    Taxpayers are entitled to a fair and impartial administrative appeal of most IRS decisions, including certain penalties. Taxpayers have the right to receive a written response regarding a decision from the Office of Appeals. Taxpayers generally have the right to take their cases to court.
  6. The Right to Finality.
    Taxpayers have the right to know the maximum amount of time they have to challenge an IRS position and the maximum amount of time the IRS has to audit a particular tax year or collect a tax debt. Taxpayers have the right to know when the IRS concludes an audit.
  7. The Right to Privacy.
    Taxpayers have the right to expect that any IRS inquiry, examination or enforcement action will comply with the law and be no more intrusive than necessary. They should expect such proceedings to respect all due process rights, including search and seizure protections. The IRS will provide, where applicable, a collection due process hearing.
  8. The Right to Confidentiality.
    Taxpayers have the right to expect that their tax information will remain confidential. The IRS will not disclose information unless authorized by the taxpayer or by law. Taxpayers should expect the IRS to take appropriate action against employees, return preparers and others who wrongfully use or disclose their return information.
  9. The Right to Retain Representation.
    Taxpayers have the right to retain an authorized representative of their choice to represent them in their dealings with the IRS. Taxpayers have the right to seek assistance from a Low Income Taxpayer Clinic if they cannot afford representation.
  10. The Right to a Fair and Just Tax System.
    Taxpayers have the right to expect fairness from the tax system. This includes considering all facts and circumstances that might affect their underlying liabilities, ability to pay or ability to provide information timely. Taxpayers have the right to receive assistance from the “Taxpayer Advocate Service” if they are experiencing financial difficulty or if the IRS has not resolved their tax issues properly and timely through its normal channels.

 

IRS TAX PROBLEMS – irstaxproblems.net – Homeowner’s Debt Cancellation

IRS TAX PROBLEMS – irstaxproblems.net – Homeowner’s Debt Cancellation

If your Lender cancels part or all of your debt, it is usually considered income and you normally must pay tax on that amount. However, the law allows an exclusion that may apply to homeowners who had their mortgage debt cancelled in 2015. Here are some tips about debt cancellation:

  1. Main Home. If the cancelled debt was a loan on your main home, you may be able to exclude the cancelled amount from your income. You must have used the loan to buy, build or substantially improve your main home to qualify. Your main home must also secure the mortgage.
  2. Loan Modification. If your lender cancelled part of your mortgage through a loan modification or ‘workout,’ you may be able to exclude that amount from your income. You may also be able to exclude debt discharged as part of the Home Affordable Modification Program, or “HAMP”. The exclusion may also apply to the amount of debt cancelled in a foreclosure.
  3. Refinanced Mortgage. The exclusion may apply to amounts cancelled on a refinanced mortgage. This applies only if you used proceeds from the refinancing to buy, build or substantially improve your main home and only up to the amount of the old mortgage principal just before refinancing. Amounts used for other purposes do not qualify.
  4. Other Cancelled Debt. Other types of cancelled debt such as second homes, rental and business property, credit card debt or car loans do not qualify for this special exclusion. On the other hand, there are other rules that may allow those types of cancelled debts to be nontaxable.
  5. Form 1099-C. If your lender reduced or cancelled at least $600 of your debt, you should receive IRS Form 1099-C, Cancellation of Debt, by Feb. 1. This form shows the amount of cancelled debt and other information.
  6. Form 982. If you qualify, report the excluded debt on IRS Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness. File the form with your federal income tax return.
  7. IRS.gov Tool. Use the “Interactive Tax Assistant” tool on IRS.gov to find out if your cancelled mortgage debt is taxable.
  8. Exclusion Extended. The law that authorized the exclusion of cancelled debt from income was extended through Dec. 31, 2016.
  9. More Information. For more on this topic see IRS Publication 4681, Canceled Debts, Foreclosures, Repossessions and Abandonments.