Tag Archives: tax scams

Tax Updates Mid April

Dirty Dozen Tax Scams, Part 2

The IRS has completed their Dirty Dozen tax scam series, warning individuals and businesses about popular schemes and scams targeting taxpayers. Information to help recognize a scam, and steps to take for those who have been targeted or have fallen prey to such predators. The final scams to be aware of are:

  • Tax advice on social media can lure otherwise honest taxpayers into compromising tax situations. Two recent schemes currently circulating involve filing fraudulent Form 8944 and Form W-2. 
  • Spearfishing emails, where fraudsters attempt to steal client data or professional credentials from tax preparers. These can look like potential new clients or a request targeting payroll or human resource departments asking for Form W-2 information.
  • Offer in Compromise “mills” claiming they can help settle IRS debts for pennies on the dollar. Taxpayers who don’t meet the technical requirements for an offer often face excessive fees from promoters for information easily obtained themselves. Taxpayers should know they can check their eligibility using the IRS’s Offer in Compromise Pre-Qualifier tool.
  • Abusive tax arrangements targeting wealthy taxpayers may involve things like Charitable Remainder Annuity Trusts and monetized installment sales. The promoters often misapply the rules, leaving filers vulnerable. “People should seek out trusted, reputable tax advice and not be fooled by aggressive advertising,” says IRS commissioner Danny Werfel.
  • Bogus schemes to reduce or avoid taxes may involve syndicated conservation easements, micro-captive insurance arrangements. They can also involve international methods; hiding cash and digital assets offshore or using Maltese foreign individual retirement accounts or foreign captive insurance. 
  • A summary of the scams may be found here.

April 18 Deadline Reminder

The IRS reminds taxpayers that Tax Day, April 18, is also the deadline for first quarter estimated tax payments for tax year 2023. These payments are usually due from those who do not have taxes withheld from their paychecks throughout the year, such as the self-employed, retirees, investors, businesses and corporations. Income not subject to withholding includes interest, dividends, capital gains, alimony and rental income. Paying estimated taxes in a timely fashion will lessen and even eliminate any penalties. Eligible taxpayers in recent disaster areas in California, Alabama, Georgia and now Tennessee have several deadlines extended to make their estimated payments. A current list of areas qualifying for disaster relief can be found at Tax Relief in Disaster Situations.

Debunking Tax Myths

“I don’t need to report income since I didn’t receive a Form 1099-K.” “If I file an extension, I don’t have to pay anything until October.” Find the truth about these and other myths before Tax Day.

 

Tax Updates December 17

National Tax Security Awareness Week

The IRS and Security Summit partners spent a week sharing information with taxpayers and tax professionals about security risks and how to minimize them. 

  • Day 1: Tax scams and identity theft – identifying phishing and tax scams, protecting devices with security software and protecting your sensitive information.
  • Day 2: Fake charity scams – verifying a charity before you give, and tips on keeping your financial and personal information safe.
  • Day 3: Identity Protection PINs – participating in the IP PIN program helps individual taxpayers protect against identity theft. The IP PIN tool is scheduled to launch January 10, 2022.
  • Day 4: Tax Pros – pandemic circumstances have added to the security risks from cybercriminals. Using the “Security Six” measures helps protect client data.
  • Day 5: Businesses – cyberattacks and theft of customer and business information remain serious problems. Follow the Federal Trade Commission’s best practices to maintain cybersecurity.

New in 2022

The IRS is encouraging taxpayers to ready themselves for filing their 2021 federal tax return. Key changes affect millions of taxpayers, and special steps regarding Economic Impact Payments (EIPs) and advance Child Tax Credit payments must be taken. For instance, those who received less than the Child Tax Credit amount for which they were eligible may claim the remainder on their return, while those who received more will have to repay the excess payment when they file. Letters regarding these amounts, as well as EIP amounts paid, will begin arriving in January. There is also a charitable deduction which may be claimed by taxpayers who take the standard deduction.

Required Minimum Distributions for Retirees

The IRS reminds retirement plan participants and individual retirement account owners that required minimum distributions (RMDs) must usually be taken by December 31. These are generally minimum amounts that must be withdrawn annually, depending on age or date of retirement. Owners of traditional IRAs, traditional SEP IRAs, SIMPLE IRAs, and workplace retirement plans are subject to RMDs. Roth IRAs do not require distributions while the original owner is still alive. 

Tax Updates July 12, 2021

“Dirty Dozen” Scams Identified

The IRS is alerting taxpayers to beware of specific tax scams with its ongoing “Dirty Dozen” series. Pandemic-related scams like Economic Impact Payment (EIP) theft (whether fraud or mailbox theft) continue to be an issue. Phishing scams persist, which include fake emails, text messages, websites and social media as tools to steal personal information. Phone calls, or “vishing” (voice-related phishing) are on the rise, many using fake tax lien information. Ransomware is also increasing (malicious software designed to block access to computer systems) with the aim of extorting ransom payments to restore access to the victims. Other schemes involve fraudsters targeting seniors or immigrants by impersonating the IRS and fake charities taking advantage of tragedies and disasters, or unscrupulous tax preparers or scammers offering “settlement” promises to people who have trouble paying their taxes. Unemployment insurance fraud continues to be a problem as well. Lastly, be aware of schemes like syndicated conservation easements, abusive micro-captive insurance arrangements and other abusive arrangements like misuse of the US-Malta tax treaty and monetized installment sales designed to defer paying taxes on the sale of appreciated property. Click the links for tips on protecting yourself and your business, choosing a qualified tax professional, legitimate settlement options from the IRS, and how to identify likely scams.

Safe Harbor Extended for Renewable Energy Projects

The IRS and Treasury have issued guidance for taxpayers involved in developing renewable energy projects, addressing delays related to the COVID-19 pandemic. Certain projects may not be placed in service in time to meet the production and investment tax credits, which may significantly impact project financing and development. The updated guidance allows additional time to satisfy the requirements for the Continuity Safe Harbor, and clarifies that if the Continuity Safe Harbor doesn’t apply, the taxpayer may demonstrate that Continuous Construction or Continuous Efforts Tests have been satisfied instead.

Employer Leave-Based Donation Relief 

The IRS has extended tax relief for employers whose employees donate their sick, vacation, or personal leave because of the COVID-19 pandemic. The relief, which includes cash payments employers make to charitable organizations that provide relief to victims of the pandemic in exchange for untaken leave, will be extended through the end of the calendar year. Employees will not be treated as receiving the value of the leave as income and cannot claim a deduction for the donated leave.

Tax Updates January 29

We are very busy with the tax season, but life continues. Here are the most recent updates from the IRS’s website.

Deferred Social Security Taxes Coming Due

Employers were given the option last year of deferring employees’ Social Security tax withholdings from September through the end of 2020. Those who elected to do so were originally obligated to begin withholding the deferred tax to be paid back over the first four months of 2021. However, as part of the Consolidated Appropriations Act, 2021, signed into law December 27, employers now have the entire year, from January 1, 2021 until December 31, 2021, to withhold and pay the deferred tax. Penalties, interest and additions to tax will now start to apply on January 1, 2022, for any unpaid balances.

COVID Employee Retention Tax Credit Extended

The Taxpayer Certainty and Disaster Tax Relief Act of 2020, enacted December 27, 2020, made a number of changes to the employee retention tax credits, modifying and extending the Employee Retention Credit (ERC) fr six months, through June 30, 2021. Eligible employers can now claim a refundable tax credit against the employer share of Social Security tax equal to 70% of wages paid to employees in the first half of 2021.

Qualified wages are limited to $10,000 per employee per calendar quarter, making a maximum ERC of $7,000 per employee per quarter.

Filing Season – Agency Preparing

The IRS has announced that the tax filing season will begin Friday, February 12. After the December 27 changes to tax law, including a second round of Economic Impact Payments (EIPs), further programming was required. Proper programming is critical to ensure refunds are not delayed, and that eligible people will receive any remaining EIP monies as a credit when they file their 2020 return. The IRS urges individuals and tax professionals to file electronically for the speediest processing. Note: Free File is open and returns can be filed. Software companies and Free File partners will begin transmitting returns to the IRS beginning February 12.

Beware Unemployment Fraud

The IRS is warning taxpayers who receive Forms 1099-G for unemployment benefits they did NOT actually get, to contact their state agency for a corrected form.

Unemployment benefits are taxable income, but receiving a 1099-G in error suggests identity theft. Scammers took advantage of the pandemic by filing fraudulent claims using stolen personal information from individuals who had not filed claims. See Identity Theft Central for more information about identity theft and steps to be taken if one believes they’ve been a victim of fraud in this way.