Taxpayers to Guard Against New Tricks by Scam Artists; Losses Top $20 Million
IR-2015-99, Aug. 6, 2015
WASHINGTON — Following the emergence of new variations of widespread tax scams, the Internal Revenue Service today issued another warning to taxpayers to remain on high alert and protect themselves against the ever-evolving array of deceitful tactics scammers use to trick people.
These schemes – which can occur over the phone, in e-mails or through letters with authentic looking letterhead – try to trick taxpayers into providing personal financial information or scare people into making a false tax payment that ends up with the criminal.
The Treasury Inspector General for Tax Administration (TIGTA) has received reports of roughly 600,000 contacts since October 2013. TIGTA is also aware of more than 4,000 victims who have collectively reported over $20 million in financial losses as a result of tax scams.
“We continue to see these aggressive tax scams across the country,” IRS Commissioner John Koskinen said. “Scam artists specialize in being deceptive and fooling people. The IRS urges taxpayers to be extra cautious and think twice before answering suspicious phone calls, emails or letters.”
Scammers posing as IRS agents first targeted those they viewed as most vulnerable, such as older Americans, newly arrived immigrants and those whose first language is not English. These criminals have expanded their net and are now targeting virtually anyone.
In a new variation, scammers alter what appears on your telephone caller ID to make it seem like they are with the IRS or another agency such as the Department of Motor Vehicles. They use fake names, titles and badge numbers. They use online resources to get your name, address and other details about your life to make the call sound official. They even go as far as copying official IRS letterhead for use in email or regular mail.
Brazen scammers will even provide their victims with directions to the nearest bank or business where the victim can obtain a means of payment such as a debit card. And in another new variation of these scams, con artists may then provide an actual IRS address where the victim can mail a receipt for the payment – all in an attempt to make the scheme look official.
The most common theme with these tricks seems to be fear. Scammers try to scare people into reacting immediately without taking a moment to think through what is actually happening.
These scam artists often angrily threaten police arrest, deportation, license revocation or other similarly unpleasant things. 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 telephone number or email address for your reply.
It is important to remember the official IRS website is IRS.gov. Taxpayers are urged not to be confused or misled by sites claiming to be the IRS but ending in .com, .net, .org or other designations instead of .gov. Taxpayers should never provide personal information, financial or otherwise, to suspicious websites or strangers calling out of the blue.
Below are five things scammers often do that the real IRS would never do:
The IRS will never:
• Angrily demand immediate payment over the phone, nor will the agency call about taxes owed without first having mailed you a bill.
• Threaten to bring in local police or other law-enforcement groups to have you arrested for not paying.
• Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
• Require you to use a specific payment method for your taxes, such as a prepaid debit card.
• Ask for credit or debit card numbers over the phone.
Here’s what you should do if you think you’re the target of an IRS impersonation scam:
• If you actually do owe taxes, call the IRS at 1-800-829-1040. IRS workers can help you with a payment issue.
• If you know you don’t owe taxes or do not immediately believe that you do, you can report the incident to the Treasury Inspector General for Tax Administration (TIGTA) at 1-800-366-4484.
• If you’ve been targeted by any scam, be sure to contact the Federal Trade Commission and use their FTC Compliant Assistant at FTC.gov. Please add “IRS Telephone Scam” to the comments of your complaint.
Moving Expense Deduction
If you move your home you may be able to deduct the cost of the move on your federal tax return next year. This may apply if you move to start a new job or to work at the same job in a new location. In order to deduct your moving expenses, your move must meet three requirements:
1. Your move must closely relate to the start of work. In most cases, you can consider moving expenses within one year of the date you start work at a new job location. Additional rules apply to this requirement.
2. Your move must meet the distance test. Your new main job location must be at least 50 miles farther from your old home than your prior job location. For example, let’s say that your old job was three miles from your old home. To meet this test, your new job must be at least 53 miles from your old home.
3. You must meet the time test. You must work full-time at your new job for at least 39 weeks the first year after the move. If you’re self-employed, you must also meet this test. In addition you must work full-time for a total of at least 78 weeks during the first two years at the new job site. If your tax return is due before you meet the time test, you can still claim the deduction if you expect to meet it.
See Publication 521, Moving Expenses, for more information about the rules.
If you qualify for this deduction, here are a few more tips from the IRS:
• Travel. You can deduct certain transportation and lodging expenses while moving. This applies to costs for yourself and other household members while moving from your old home to your new home. You may not deduct your travel meal costs.
• Household goods and utilities. You can deduct the cost of packing, crating and shipping your property. This may include the cost to store or insure the items while in transit. You can deduct the cost to disconnect or connect utilities at your old and new homes.
• Expenses you can’t deduct. You may not deduct:
o Any part of the purchase price of your new home.
o The cost of selling your home.
o The cost of breaking or entering into a lease.
See Publication 521for more examples.
• Reimbursed expenses. If your employer later pays you for the cost of a move that you deducted on your tax return, you may need to include the payment as income. You must report any taxable amount on your tax return in the year you get the payment.
• Address change. When you move, make sure to update your address with the IRS and the U.S. Post Office. To notify the IRS, file Form 8822, Change of Address.
Premium Tax Credit – Changes in Circumstances. If you purchased health insurance coverage from the Health Insurance Marketplace, you may receive advance payments of the premium tax credit. It is important that you report changes in circumstances, such as when you move to a new address, to your Marketplace. Other changes that you should report include changes in your income, employment, family size, or eligibility for other coverage. Advance credit payments provide premium assistance to help you pay for the insurance you buy through the Marketplace. Reporting changes will help you get the proper type and amount of premium assistance so you can avoid getting too much or too little in advance.
Sleepless nights are the unfortunate reality when youre a parent. And nothing can help parents tossing and turning like thinking about how they must pay for their son or daughter’s college. For the very financially minded, this worry may arise as soon as you find out you’re expecting. Others may not start to worry until much later. No matter your child’s age, the staggering cost of college is likely to become a concern at some point. Consider this: a four-year education at a private college is on track to cost $323,900 by 2033. Might as well give up now, right? Wrong. You can build your child’s college fund slowly and steadily as you go from changing diapers to handing over the keys to the family car. The solution? A tax-deferred savings plan.
One of the most well-known college savings plans is the 529 savings plan. Aside from praying that you win the lottery or hoping your child becomes the next Mark Zuckerberg, 529 plans are a great way to incrementally save for college. Named after the section in the Internal Revenue Code, the 529 plan has been around since 1996. The government offers two types of 529 plans: college savings plans and prepaid tuition plans. With a college savings plan, you can use the funds at any college that’s accredited by the U.S. Department of Education. A prepaid tuition plan can only be used for undergraduate tuition at public colleges in your state.
529 plans offer some great benefits to whomever sets them up—parents, grandparents, or a generous aunt or uncle. Money saved can be used to pay for student tuition, any associated fees, textbooks, and room and board at accredited colleges and universities. Earnings in the 529 are not federally taxed, and generally not taxed at the state level when used for qualified education expenses of the designated beneficiary. And best of all, anyone can be named as a beneficiary — a son or daughter, a friend, even yourself. In Washington, DC, where Dan set up a DC College Savings Plan for his daughter, he can deduct up to $4,000 per year per plan ($8,000 total if he files jointly with his wife) on his DC return. In New York, where Lauren set up a plan for her son, she can deduct up to $5,000 per year on her state return (or $10,000 total if she files jointly with her husband). Unlike other investment plans (like Roth IRAs), 529 plans have no income restrictions on the contributor or the beneficiary. No limit exists to the number of plans you can set up, so have as many children as you want!
One note about 529 plans: If you already have one and your child will be attending school soon, be sure to request the money about two months before you need it to pay tuition, as it can take 4 to 6 weeks to get your money.
Coverdell Education Savings Account
A Coverdell Education Savings Account (ESA) is similar to a 529 plan, tax-wise, with a few exceptions. Unlike a 529, which must be used to pay for college to avoid penalties, a Coverdell ESA can be used for education at any level and can be used for school uniforms, books and school supplies. However, you can only contribute a maximum contribution of $2,000 annually per beneficiary in all accounts in the beneficiary’s name. Additionally, this type of account is only available to those whose modified gross adjusted income is less than $110,000 ($220,000 if filing jointly).
Education Savings Bond Program
Bonds have fallen out of favor in recent years, but don’t count them out as part of your arsenal of savings options for college. Unlike 529 plans, the money is guaranteed. Also unlike 529 plans, bonds do not have as much opportunity for growth, so, they probably shouldn’t be your only savings program. Having a portion of your savings portfolio in bonds can be a good way to minimize any fluctuations in the stock market when you are ready to pay for college.
Shop Around for Loans
If your child will be starting college soon and your college savings plan doesn’t cover the cost of tuition and fees, be sure to shop around for loans. Some parent loans for college can carry interest rates of more than 7 percent!
While the prospect of paying college tuition is daunting, you can find a number of ways to save. If your kids will be starting college in roughly 17 years, like our respective daughter and son, start now. Who knows what tuition will look like by then? And even if you’ve got a college savings plan in place, it never hurts to buy a lottery ticket now and again. Just in case.
Daniel Bond, CAE, Senior Communications Manager-Consumer Education, American Institute of CPAs.
Lauren J. Sternberg, Communications Manager-American Institute of CPAs.
Five Tax Tips about Hobbies that Earn Income
Millions of people enjoy hobbies. They can also be a source of income. Some of these types of hobbies include stamp or coin collecting, craft making and horse breeding. You must report any income you get from a hobby on your tax return. How you report the income is different than how you report income from a business. There are special rules and limits for deductions you can claim for a hobby. Here are five basic tax tips you should know if you get income from your hobby:
1. Business versus Hobby. A key feature of a business is that you do the activity to make a profit. This differs from a hobby that you may do for sport or recreation. There are nine factors to consider when you determine if you do the activity to make a profit. Make sure you base your decision on all the facts and circumstances of your situation. Refer to Publication 535, Business Expenses to learn more. You can also visit IRS.gov and type “not-for-profit” in the search box.
2. Allowable Hobby Deductions. You may be able to deduct ordinary and necessary hobby expenses. An ordinary expense is one that is common and accepted for the activity. A necessary expense is one that is helpful or appropriate. See Publication 535 for more on these rules.
3. Limits on Expenses. As a general rule, you can only deduct your hobby expenses up to the amount of your hobby income. If your expenses are more than your income, you have a loss from the activity. You can’t deduct that loss from your other income.
4. How to Deduct Expenses. You must itemize deductions on your tax return in order to deduct hobby expenses. Your costs may fall into three types of expenses. Special rules apply to each type. See Publication 535 for how you should report them on Schedule A, Itemized Deductions.
5. Use IRS Free File. Hobby rules can be complex. IRS Free File can make filing your tax return easier. IRS Free File is available until Oct. 15. If you make $60,000 or less, you can use brand-name tax software. If you earn more, you can use Free File Fillable Forms, an electronic version of IRS paper forms. You can only access Free File through IRS.gov.
You can get Publication 535 on IRS.gov/forms at any time.
Additional IRS Resources:
• Business or Hobby? Answer Has Implications for Deductions
• Publication 525, Taxable and Nontaxable Income
• Publication 529, Miscellaneous Deductions
• Publication 17, Your Federal Income Tax
• IRC Section 183: Activities Not Engaged in For Profit (Audit Technique Guid
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.
For more see Publication 505, Tax Withholding and Estimated Tax. You can get it on IRS.gov/forms at any time.
Tips about Vacation Home Rentals from IRS
If you rent a home, you usually must report the income from rental on your tax return. However, you may not have to report the rent you get if the rental period is short and you also use the property as your home. In most cases, you can deduct your rental expenses. When you also use the rental as your home, your deduction may be limited. Here are some basic tax tips that you should know if you rent out a vacation home:
• Vacation Home. A vacation home can be a house, apartment, condominium, mobile home, boat or similar property.
• Schedule E. You usually report rental income and rental expenses on Schedule E, Supplemental Income and Loss. Your rental income may also be subject to Net Investment Income Tax.
• Used as a Home. If the property is “used as a home,” your rental expense deduction is limited. This means your deduction for rental expenses can’t be more than the rent you received. For more about these rules, see Publication 527, Residential Rental Property (Including Rental of Vacation Homes).
• Divide Expenses. If you personally use your property and also rent it to others, special rules apply. You must divide your expenses between the rental use and the personal use. To figure how to divide your costs, you must compare the number of days for each type of use with the total days of use.
• Personal Use. Personal use may include use by your family. It may also include use by any other property owners or their family. Use by anyone who pays less than a fair rental price is also personal use.
• Schedule A. Report deductible expenses for personal use on Schedule A, Itemized Deductions. These may include costs such as mortgage interest, property taxes and casualty losses.
• Rented Less than 15 Days. If the property is “used as a home” and you rent it out fewer than 15 days per year, you do not have to report the rental income. In this case you deduct your qualified expenses on schedule A.
• Use IRS Free File. If you still need to file your 2014 tax return, you can use IRS Free File to make filing easier. Free File is available until Oct. 15. If you make $60,000 or less, you can use brand-name tax software. If you earn more, you can use Free File Fillable Forms, an electronic version of IRS paper forms. Free File is available only through the IRS.gov website.
You can get forms and publications on IRS.gov/forms at any time.
Your medical expenses may save you money at tax time, but a few key rules apply. Here are some tax tips to help you determine if you can claim a tax deduction:
Las Vegas CPA Steven T Giorgione shares concerns of a threat to the public via the phone.
Are you still using the old school method of doing your taxes? Do you still mail paper forms to the IRS? If so, make this the year you switch to a much faster and safer way of filing your taxes. Join the nearly 126 million taxpayers who used IRS e-file to file their taxes last year. Here are the top five reasons why you should file electronically too:
While most people get a refund from the IRS when they file their taxes, some do not. If you owe federal taxes, the IRS has several ways for you to pay. Here are six tips for people who owe taxes:
1. Pay your tax bill. If you get a bill from the IRS, you’ll save money by paying it as soon as you can. If you can’t pay it in full, you should pay as much as you can. That will reduce the interest and penalties charged for late payment. You should think about using a credit card or getting a loan to pay the amount you owe.
2. Use IRS Direct Pay. The best way to pay your taxes is with the IRS Direct Pay tool. It’s the safe, easy and free way to pay from your checking or savings account. The tool walks you through five simple steps to pay your tax in one online session. Just click on the ‘Pay Your Tax Bill’ icon on the IRS home page.
3. Get a short-term extension to pay. You may qualify for extra time to pay your taxes if you can pay in full in 120 days or less. You can apply online at IRS.gov. If you received a bill from the IRS you can also call the phone number listed on it. If you don’t have a bill, call 800-829-1040 for help. There is usually no set-up fee for a short-term extension.
4. Apply for a monthly payment plan. If you owe $50,000 or less and need more time to pay, you can apply for an Online Payment Agreement on IRS.gov. A direct debit payment plan is your best option. This plan is the lower-cost, hassle-free way to pay. The set-up fee is less than other plans. There are no reminders, no missed payments and no checks to write and mail. You can also use Form 9465, Installment Agreement Request, to apply. For more about payment plan options visit IRS.gov.
5. Consider an Offer in Compromise. An Offer in Compromise lets you settle your tax debt for less than the full amount that you owe. An OIC may be an option if you can’t pay your tax in full. It may also apply if full payment will cause a financial hardship. You can use the OIC Pre-Qualifier tool to see if you qualify. It will also tell you what a reasonable offer might be.
6. Change your withholding or estimated tax. You may be able to avoid owing the IRS in the future by having more taxes withheld from your pay. Do this by filing a new Form W-4, Employee’s Withholding Allowance Certificate, with your employer. The IRS Withholding Calculator on IRS.gov can help you fill out a new W-4. If you have income that’s not subject to withholding you may need to make estimated tax payments. See Form 1040-ES, Estimated Tax for Individuals for more on this topic.
To find out more see Publication 594, The IRS Collection Process. You can get this booklet on IRS.gov. You may also call 800-TAX-FORM to get it by mail.
We can Assist with IRS collections.
Call us today for help Steven T. Giorgione C.P.A serving Las Vegas Henderson Boulder City Nevada.
Millions of people enjoy hobbies that are also a source of income. Some examples include stamp and coin collecting, craft making, and horsemanship.
You must report on your tax return the income you earn from a hobby. The rules for how you report the income and expenses depend on whether the activity is a hobby or a business. There are special rules and limits for deductions you can claim for a hobby. Here are five tax tips you should know about hobbies:
1. Is it a Business or a Hobby? A key feature of a business is that you do it to make a profit. You often engage in a hobby for sport or recreation, not to make a profit. You should consider nine factors when you determine whether your activity is a hobby. Make sure to base your determination on all the facts and circumstances of your situation. For more about ‘not-for-profit’ rules see Publication 535, Business Expenses.
2. Allowable Hobby Deductions. Within certain limits, you can usually deduct ordinary and necessary hobby expenses. An ordinary expense is one that is common and accepted for the activity. A necessary expense is one that is appropriate for the activity.
3. Limits on Hobby Expenses. Generally, you can only deduct your hobby expenses up to the amount of hobby income. If your hobby expenses are more than your hobby income, you have a loss from the activity. You can’t deduct the loss from your other income.
4. How to Deduct Hobby Expenses. You must itemize deductions on your tax return in order to deduct hobby expenses. Your expenses may fall into three types of deductions, and special rules apply to each type. See of Publication 535 for the rules about how you claim them on Schedule A, Itemized Deductions.
5. Use IRS Free File. Hobby rules can be complex and IRS Free File can make filing your tax return easier. IRS Free File is available until Oct. 15. If you make $58,000 or less, you can use brand-name tax software. If you earn more, you can use Free File Fillable Forms, an electronic version of IRS paper forms. Free File is available only through the IRS.gov website.
For more on these rules see Publication 535. You can get it on IRS.gov or by calling 800-TAX-FORM (800-829-3676).
Additional IRS Resources:
• Business or Hobby? Answer Has Implications for Deductions
• Publication 525, Taxable and Nontaxable Income
• Publication 529, Miscellaneous Deductions
• Publication 17, Your Federal Income Tax
• IRC Section 183: Activities Not Engaged in For Profit (Audit Technique Guide) – details on the factors to determine ‘for profit’ or ‘not-for-profit’
How many frequent flyer or preferred hotel guest programs do you belong to? Did you know there's a risk in that?
While three-quarters (75 percent) of frequent travelers expect their loyalty program data to be secured to at least the same standard as a financial institution, only 33 percent feel their accounts are secure enough, according to a new Deloitte study, "Loyalty data security: Are hospitality and travel companies managing the risks of their rewards programs?"
Few frequent travelers appear fully aware of the wider risks involved when loyalty data — including travel schedules and other personal data — is lost or stolen. Roughly one in seven (15 percent) are simply concerned that a breach would result in a loss of loyalty points, while the majority of travelers (76 percent) worry about the loss of credit card numbers.
"Our study indicates a disconnect between travelers' expectations and perceptions about the security of their personal data," said Charles Carrington, partner, Deloitte & Touche LLP in the Travel, Hospitality and Leisure practice and author of the study. "Travelers consider protection of their physical security a basic expectation when they're in a hotel or in the air. This responsibility now extends into the cyber world. Travel companies increasingly request that customers share a detailed level of personal information. These same companies need to roll up their sleeves and move beyond mere policy compliance to ensure that customer data is truly secure. Failure to do so could not only frustrate, even endanger, travelers, but also cause serious reputational damage and revenue loss."
Personal preferences: Drawing the line
While rewards programs are often a critical way for airlines and hotels to build customer loyalty, simply offering frequent traveler points is no longer enough. As a result, airlines and hotels are continuously looking for ways to personalize programs and tailor travel experiences. However, the study reveals the low level of trust in these companies' security standards is restricting the amount and type of information travelers are willing to share.
Most consumers (93 percent) are willing to share travel preferences such as seating choices and nearly three- quarters (74 percent) are comfortable sharing their food and drink preferences. However, many draw the line at sharing more personal information, such as hobbies (32 percent), geolocation (28 percent) and health and fitness records (7 percent).
Despite millennia's typically being more receptive to sharing personal data with companies, the study revealed only a slight increase in the level of trust with loyalty programs — 37 percent will share hobbies, little more than one-third (34 percent) will share geolocation and just 14 percent are comfortable sharing health and fitness records with loyalty programs. Overall, only 40 percent of Millennia's believe their personal information is secure.
This reluctance to provide more personal details could limit the degree to which airlines and hotels will be able to customize experiences to engage their most valuable patrons and drive repeat business.
A breach of data is a breach of brand loyalty and trust
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The study showed that any breach of loyalty data would have a significant impact on the brand
involved. Nearly one-quarter (23 percent) of survey respondents said that should such a breach occur, they would be less likely to use the company responsible and 15 percent said they would be a lot less likely to do so.
"Frequent travelers are often the most valuable customer segment for hotels and airlines," continued Carrington. "Companies that can persuade these customers to share detailed information about their interests, hobbies and preferences will create a highly valuable and continuous cycle: the more information they gather, the more they will be able to personalize the travel experience and the tighter their bond with customers. But if they fail to live up to their custodial responsibility to secure customer information, that bond can be shattered in an instant."
Educating and engaging the customer
The study revealed that the lack of confidence consumers have in the security of their frequent traveler accounts is not leading them to be more vigilant in their security practices. Only 21 percent of survey respondents change their passwords at least once per quarter and more than half (53 percent) use the same password for other accounts.
Additionally, 41 percent of consumers indicated that they had little or no knowledge at all about travel companies' privacy and security policies of their frequent traveler programs.
These findings present an opportunity for travel companies to educate and engage their customers, communicating with them more openly, making them aware of enhancements to privacy and security measures and explaining how their data will be used and how it will benefit them. Ideas to improve traveler trust may include rewarding points to customers who regularly change their passwords, offering cyber security monitoring services, or offering reminders or links to change passwords .Read Complete Article http://www.cpapracticeadvisor.com/news/12005881/how-safe-is-personal-data-in-frequent-flyer-and-guest-reward-programs
Nevada CPA ― With another school year now in full swing, the Internal Revenue Service today reminded parents and students that now is a good time to see if they will qualify for either of two college tax credits or any of several other education-related tax benefits when they file their 2014 federal income tax returns.
In general, the American opportunity tax credit and lifetime learning credit are available to taxpayers who pay qualifying expenses for an eligible student. Eligible students include the taxpayer and his or her spouse and dependents. The American opportunity tax credit provides a credit for each eligible student, while the lifetime learning credit provides a maximum credit per tax return. Though a taxpayer often qualifies for both of these credits, he or she can only claim one of them for a particular student in a particular year. Claimed on Form 8863, these credits are available to all taxpayers — both those who itemize their deductions on Schedule A and those who claim a standard deduction.
For those eligible, including most undergraduate students, the American opportunity tax credit will generally yield the greater tax savings. Alternatively, the lifetime learning credit should be considered by part-time students and those attending graduate school.
Both credits are available for students enrolled in an eligible college, university or vocational school, including both nonprofit and for-profit institutions. Neither credit can be claimed by a nonresident alien, a married person filing a separate return or someone claimed as a dependent on another person’s return.
Normally, a student will receive a Form 1098-T from their institution by the end of January of the following year (Jan. 31, 2015 for calendar year 2014). This form will show information about tuition paid or billed along with other information. However, amounts shown on this form may differ from amounts taxpayers are eligible to claim for these tax credits. Taxpayers should see the instructions to Form 8863 and Publication 970 for details on properly figuring allowable tax benefits.
Many of those eligible for the American opportunity tax credit qualify for the maximum annual credit of $2,500 per student. Students can claim this credit for qualified educational expenses paid during the entire tax year for a certain number of years:
- The credit is only available for 4 tax years per eligible student.
- The credit is available only if the student has not completed the first 4 years of postsecondary education before 2014.
Here are some more key features of the credit:
- Qualified education expenses are amounts paid for tuition, fees and other related expenses for an eligible student. Other expenses, such as room and board, are not qualified expenses.
- The credit equals 100 percent of the first $2,000 spent and 25 percent of the next $2,000. That means the full $2,500 credit may be available to a taxpayer who pays $4,000 or more in qualified expenses for an eligible student.
- The full credit can only be claimed by taxpayers whose modified adjusted gross income (MAGI) is $80,000 or less. For married couples filing a joint return, the limit is $160,000. The credit is phased out for taxpayers with incomes above these levels. No credit can be claimed by joint filers whose MAGI is $180,000 or more and singles, heads of household and some widows and widowers whose MAGI is $90,000 or more.
- Forty percent of the American opportunity tax credit is refundable. This means that even people who owe no tax can get an annual payment of up to $1,000 for each eligible student.
The lifetime learning credit of up to $2,000 per tax return is available for both graduate and undergraduate students. Unlike the American opportunity tax credit, the limit on the lifetime learning credit applies to each tax return, rather than to each student. Also, the lifetime learning credit does not provide a benefit to people who owe no tax.
Though the half-time student requirement does not apply to the lifetime learning credit, the course of study must be either part of a post-secondary degree program or taken by the student to maintain or improve job skills. Other features of the credit include:
- Tuition and fees required for enrollment or attendance qualify as do other fees required for the course. Additional expenses do not.
- The credit equals 20 percent of the amount spent on eligible expenses across all students on the return. That means the full $2,000 credit is only available to a taxpayer who pays $10,000 or more in qualifying tuition and fees and has sufficient tax liability.
- Income limits are lower than under the American opportunity tax credit. For 2014, the full credit can be claimed by taxpayers whose MAGI is $54,000 or less. For married couples filing a joint return, the limit is $108,000. The credit is phased out for taxpayers with incomes above these levels. No credit can be claimed by joint filers whose MAGI is $128,000 or more and singles, heads of household and some widows and widowers whose MAGI is $64,000 or more.
You can use the IRS’s Interactive Tax Assistant tool to help determine if you are eligible for these benefits. The tool is available on IRS.gov. Eligible parents and students can get the benefit of these credits during the year by having less tax taken out of their paychecks. They can do this by filling out a new Form W-4, claiming additional withholding allowances, and giving it to their employer.
There are a variety of other education-related tax benefits that can help many taxpayers. They include:
- Scholarship and fellowship grants — generally tax-free if used to pay for tuition, required enrollment fees, books and other course materials, but taxable if used for room, board, research, travel or other expenses.
- Student loan interest deduction of up to $2,500 per year.
- Savings bonds used to pay for college — though income limits apply, interest is usually tax-free if bonds were purchased after 1989 by a taxpayer who, at time of purchase, was at least 24 years old.
- Qualified tuition programs, also called 529 plans, used by many families to prepay or save for a child’s college education.
Taxpayers with qualifying children who are students up to age 24 may be able to claim a dependent exemption and the earned income tax credit.
Tax season may be over, but scammers posing as IRS officials continue to call, saying people owe taxes and better pay up. They threaten to arrest or deport people, revoke a license, or even shut down a business. How do they do it? By rigging caller ID information to appear as if the IRS is calling, and sometimes even making a follow-up call claiming to be the police or the DMV.
We posted about this last month, and got a tremendous response from readers. Lots of people wrote to tell us about variations of the scam: robocalls from “Heather” from the IRS, or calls claiming to be from the Treasury Inspector General for Tax Administration (TIGTA) and mentioning IRS codes. But the scam always ends the same way: a demand for money loaded on a prepaid debit card, sent through a wire transfer, or paid by credit card.
Scam Phone Calls Continue; IRS Identifies Five Easy Ways to Spot Suspicious Calls:
Henderson NV — The Internal Revenue Service issued a consumer alert today providing taxpayers with additional tips to protect themselves from telephone scam artists calling and pretending to be with the IRS.
These callers may demand money or may say you have a refund due and try to trick you into sharing private information. These con artists can sound convincing when they call. They may know a lot about you, and they usually alter the caller ID to make it look like the IRS is calling. They use fake names and bogus IRS identification badge numbers. If you don’t answer, they often leave an “urgent” callback request.
“These telephone scams are being seen in every part of the country, and we urge people not to be deceived by these threatening phone calls,” IRS Commissioner John Koskinen said. “We have formal processes in place for people with tax issues. The IRS respects taxpayer rights, and these angry, shake-down calls are not how we do business.”
The IRS reminds people that they can know pretty easily when a supposed IRS caller is a fake. Here are five things the scammers often do but the IRS will not do. Any one of these five things is a tell-tale sign of a scam. The IRS will never:
1. Call you about taxes you owe without first mailing you an official notice.
2. Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
3. Require you to use a specific payment method for your taxes, such as a prepaid debit card.
4. Ask for credit or debit card numbers over the phone.
5. Threaten to bring in local police or other law-enforcement groups to have you arrested for not paying.
If you get a phone call from someone claiming to be from the IRS and asking for money, here’s what you should do:
• If you know you owe taxes or think you might owe, call the IRS at 1.800.829.1040. The IRS workers can help you with a payment issue.
• If you know you don’t owe taxes or have no reason to believe that you do, report the incident to the Treasury Inspector General for Tax Administration (TIGTA) at 1.800.366.4484 or at www.tigta.gov.
• If you’ve been targeted by this scam, also contact the Federal Trade Commission and use their “FTC Complaint Assistant” at FTC.gov. Please add "IRS Telephone Scam" to the comments of your complaint.
Remember, too, the IRS does not use email, text messages or any social media to discuss your personal tax issue. For more information on reporting tax scams, go to www.irs.gov and type “scam” in the search box.
Steven Giorgione CPA serving Henderson Nevada and Las Vegas thought you should Know!.
The Las Vegas CPA has Shared: Special tax benefits apply to members of the U. S. Armed Forces. For example, some types of pay are not taxable. And special rules may apply to some tax deductions, credits and deadlines. Here are ten of those benefits
Whether you like to play the ponies, roll the dice or pull the slots, your gambling winnings are taxable. You must report all your gambling income on your tax return. If you’re a casual gambler, odds are good that these basic tax tips can help you at tax time next year:
1. Gambling income. Gambling income includes winnings from lotteries, horse racing and casinos. It also includes cash prizes and the fair market value of prizes like cars and trips.
2. Payer tax form. If you win, you may get a Form W-2G, Certain Gambling Winnings, from the payer. The IRS also gets a copy of the W-2G. The payer issues the form depending on the type of game you played, the amount of your winnings and other factors. You’ll also get the form if the payer withholds taxes from what you won.
3. How to report winnings. You must report all your gambling winnings as income. This is true even if you don’t receive a Form W-2G. You normally report your winnings for the year on your tax return as ‘other income.’
4. How to deduct losses. You can deduct your gambling losses on Schedule A, Itemized Deductions. The amount you can deduct is limited to the amount of the gambling income you report on your return.
5. Keep gambling receipts. You should keep track of your wins and losses. This includes keeping items such as a gambling log or diary, receipts, statements or tickets.
Additional IRS Resources:
- Tax Topic 419, Gambling Income and Expenses
IRS YouTube Videos:
1. Don’t ignore it. You can respond to most IRS notices quickly and easily. And it’s important that you reply promptly. 2. IRS notices usually deal with a specific issue about your tax return or tax account. For example, it may say the IRS has corrected an error on your tax return. Or it may ask you for more information.
3. Read it carefully and follow the instructions about what you need to do.
4. If it says that the IRS corrected your tax return, review the information in the notice and compare it to your tax return.
If you agree, you don’t need to reply unless a payment is due.
If you don’t agree, it’s important that you respond to the IRS. Write a letter that explains why you don’t agree. Make sure to include information and any documents you want the IRS to consider. Include the bottom tear-off portion of the notice with your letter. Mail your reply to the IRS at the address shown in the lower left part of the notice. Allow at least 30 days for a response from the IRS.
5. You can handle most notices without calling or visiting the IRS. If you do have questions, call the phone number in the upper right corner of the notice. Make sure you have a copy of your tax return and the notice with you when you call.
6. Keep copies of any notices you get from the IRS.
7. Don’t fall for phone and phishing email scams that use the IRS as a lure. The IRS first contacts people about unpaid taxes by mail – not by phone. The IRS does not contact taxpayers by email, text or social media about their tax return or tax account.
For more on this topic visit IRS.gov. Click on ‘Responding to a Notice’ at the bottom left of the home page. Also see Publication 594, The IRS Collection Process. You can get it on IRS.gov or call 800-TAX-FORM (800-829-3676) to get it by mail.
For information on how Steven Giorgione CPA can help please contact us.