Ingenious Scan Targets Taxpayers

Crooks have tried all sorts of e-mail scams, but almost everyone has figured out that the IRS does not send out notices by e-mail.  So crooks have changed their tactics.  Now, there are reports of taxpayers receiving by mail fake notices requiring immediate payment to a P.O. Box.  The P.O. Boxes are located in cities where the IRS has service centers, but of course are not IRS P.O. Box addresses

These scammers have duplicated the look of official IRS mail notices, which to the untrained eye would lead one to believe a notice was really from the IRS.

So be extremely cautious of any notice your client may have received from the IRS.  If a notice is demanding immediate payment and there has not been any prior contact by the IRS over the issue, then the notice is probably from a scammer.  Reports indicate the initial letters were numbered CP-2000 and did not request payment.

Here is a sample fake IRS – CP-2000 notice:

IRS Warns of Back-to-School Scams; Encourages Students, Parents, Schools to Stay Alert

WASHINGTON — The Internal Revenue Service today warned taxpayers against telephone scammers targeting students and parents during the back-to-school season and demanding payments for non-existent taxes, such as the “Federal Student Tax.”

People should be on the lookout for IRS impersonators calling students and demanding that they wire money immediately to pay a fake “federal student tax.” If the person does not comply, the scammer becomes aggressive and threatens to report the student to the police to be arrested. As schools around the nation prepare to re-open, it is important for taxpayers to be particularly aware of this scheme going after students and parents.

“Although variations of the IRS impersonation scam continue year-round, they tend to peak when scammers find prime opportunities to strike”, said IRS Commissioner John Koskinen. “As students and parents enter the new school year, they should remain alert to bogus calls, including those demanding fake tax payments from students.”

The IRS encourages college and school communities to share this information so that students, parents and their families are aware of these scams.

Scammers are constantly identifying new tactics to carry out their crimes in new and unsuspecting ways. This year, the IRS has seen scammers use a variety of schemes to fool taxpayers into paying money or giving up personal information. Some of these include:

• Altering the caller ID on incoming phone calls in a “spoofing” attempt to make it seem like the IRS, the local police or another agency is calling
• Imitating software providers to trick tax professionals–IR-2016-103
• Demanding fake tax payments using iTunes gift cards–IR-2016-99
• Soliciting W-2 information from payroll and human resources professionals–IR-2016-34
• “Verifying” tax return information over the phone–IR-2016-40
• Pretending to be from the tax preparation industry–IR-2016-28

If you receive an unexpected call from someone claiming to be from the IRS, here are some of the telltale signs to help protect yourself.

The IRS Will Never:

• Call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer. Generally, the IRS will first mail you a bill if you owe any taxes.
• Threaten to immediately 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.
• Ask for credit or debit card numbers over the phone.

If you get a suspicious phone call from someone claiming to be from the IRS and asking for money, here’s what you should do:

• Do not give out any information. Hang up immediately.
• Search the web for telephone numbers scammers leave in your voicemail asking you to call back. Some of the phone numbers may be published online and linked to criminal activity.
• Contact TIGTA to report the call. Use their “IRS Impersonation Scam Reporting” web page or call 800-366-4484.

Report it to the Federal Trade Commission. Use the “FTC Complaint Assistant” on FTC.gov. Please add “IRS Telephone Scam” in the notes.

Tax Tips for Students Working this Summer

IRS Special Edition Tax Tip 2016-11, June 28, 2016

Many students get summer jobs. It’s a great way to earn extra spending money or to save for later. Here are some tips for students with summer jobs:

1. Withholding and Estimated Tax.If you are an employee, your employer normally withholds taxfrom your paychecks. If you are self-employed, you may be responsible for paying taxes directly to the IRS. One way to do that is by making estimated tax payments on set dates during the year. This is essentially how our pay-as-you-go tax system works.
2. New Employees. When you get a new job, you need to fill out aForm W-4, Employee’s Withholding Allowance Certificate. Employers use this form to calculate how much federal income tax to withhold from your pay. The IRS Withholding Calculator tool on IRS.gov can help you fill out the form.
3. Self-Employment.Money you earn working for others is taxable. Some work you do may count as self-employment. These can be jobs like baby-sitting or lawn care. Keep good records of your income and expenses related to your work. You may be able to deduct those costs. A tax deduction generally reduces the taxes you pay.
4. Tip Income.All tip income is taxable. Keep a daily log to report your tips. You must report $20 or more in cash tips received in any single month to your employer. And you must report all of your yearly tips on your tax return.
5. Payroll Taxes.You may earn too little from your summer job to owe income tax. But your employer usually must withhold Social Security and Medicare taxes from your pay. If you’re self-employed, you may have to pay them yourself. They count for your coverage under the Social Security system.
6. Newspaper Carriers.Special rules apply to a newspaper carrier or distributor. If you meet certain conditions, you are self-employed. If you do not meet those conditions, and are under age 18, you may be exempt from Social Security and Medicare taxes.
7. ROTC Pay.If you’re in ROTC, active duty pay, such as pay you get for summer advanced camp, is taxable. Other allowances you may receive may not be taxable, see Publication 3 for details.

  Owe Taxes? These Tips Can Help

The IRS offers many safe and easy ways to pay your taxes. These tips explain many of them:

• Mailed tax bills. The IRS sends bills in the U. S. mail. Try to pay soon and in full to avoid any extra charges. If you can’t pay in full, you’ll save if you pay as much as you can. The more you can pay the less interest and penalties you will owe for late payment. The IRS offers several payment options on IRS.gov.
• Use IRS Direct Pay. The best way to pay your taxes is with IRS Direct Pay. It’s the safe, easy and free way to pay from your checking or savings account. You can pay your tax in just five simple steps in one online session. Just click on the “Payment” tab on IRS.gov. You can now use Direct Pay with the IRS2Go mobile app.
• Get a short-term payment plan. If you owe more tax than you can pay, you may qualify for more time- up to 120 days- to pay in full. You do not have to pay a user fee to set up a short-term full payment agreement. However, the IRS will charge interest and penalties until you pay in full. It’s easy to apply online at IRS.gov. If you have questions about a bill from the IRS, you may call the phone number listed on it.
• Apply for an installment agreement. Most people who need more time to pay can apply for an Online Payment Agreement on IRS.gov. A direct debit payment plan is the hassle-free way to pay. The setup fee is much less than other plans and you won’t miss a payment. If you can’t apply online, or prefer to do so in writing, use Form 9465, Installment Agreement Request. Individuals can use Direct Pay to make their installment payments. For more about payment plan options, visit IRS.gov.
• Check out an offer in compromise. An offer in compromise or OIC may let you settle your tax debt for less than the full amount you owe. An OIC may also be helpful if full payment may cause you financial hardship. Not everyone qualifies, however, so make sure you explore all other ways to pay your tax before you submit one to the IRS. Use the OIC Pre-Qualifier tool to see if you qualify.

Avoid tax surprises. If you are an employee, you can avoid a tax bill by having more taxes withheld from your pay. To do this, file a new Form W-4, Employee’s Withholding Allowance Certificate, with your employer. Use the IRS Withholding Calculator tool on IRS.gov to see if you’re having the right amount withheld. If you are self-employed, you may need to make or change your estimated tax payments. See Form 1040-ES

Please consider these steps to protect yourselves from identity thieves:

Keep Your Computer Secure

• Use security software and make sure it updates automatically; essential tools include:

1. Firewall
2. Virus/malware protection
3. File encryption for sensitive data

• Treat your personal information like cash, don’t leave it lying around
• Check out companies to find out who you’re really dealing with
• Give personal information only over encrypted websites – look for “https” addresses
• Use strong passwords and protect them
• Back up your files

Avoid Phishing and Malware

• Avoid phishing emails, texts or calls that appear to be from the IRS and companies you know and trust, go directly to their websites instead
• Don’t open attachments in emails unless you know who sent it and what it is
• Download and install software only from websites you know and trust
• Use a pop-up blocker
• Talk to your family about safe computing

Protect Personal Information

Don’t routinely carry your social security card or documents with your SSN.  Do not overshare personal information on social media.  Information about past addresses, a new car, a new home and your children help identity thieves pose as you.  Keep old tax returns and tax records under lock and key or encrypted if electronic.  Shred tax documents before trashing.

Avoid IRS Impersonators.  The IRS will not call you with threats of jail or lawsuits.  The IRS will not send you an unsolicited email suggesting you have a refund or that you need to update your account.  The IRS will not request any sensitive information online.  These are all scams, and they are persistent.  Don’t fall for them.  Forward IRS related scam emails to phishing@irs.gov.  Report IRS impersonation telephone call at www.tigta.gov.

Additional steps:

• Check your credit report annually; check your bank and credit card statements often;
• Review your Social Security Administration records annually: Sign up for My Social Security at ssa.gov.
• If you are an identity theft victim whose tax account is affected, review irs.gov/identitytheft for details.

Most Recent Scams

Tax Refund Scam Artists Posing as Taxpayer Advocacy Panel

A new email scam targeting taxpayers has emerged. According to the Taxpayer Advocacy Panel (TAP), taxpayers are receiving emails that appear to be from TAP about a tax refund. These emails are a phishing scam, where unsolicited emails which seem to come from legitimate organizations — but are really from scammers — try to trick unsuspecting victims into providing personal and financial information. Do not respond or click the links in them. If you receive an email that appears to be from TAP regarding your personal tax information, please forward it to phishing@irs.gov and note that it seems to be a scam email phishing for your information.

TAP is a volunteer board that advises the IRS on systemic issues affecting taxpayers. It never requests, and does not have access to, any taxpayer’s personal and financial information such as Social Security and PIN numbers or passwords and similar information for credit cards, banks or other financial institutions.

Scammers Change Tactics

Aggressive and threatening phone calls by criminals impersonating IRS agents remain a major threat to taxpayers, but now the IRS is receiving new reports of scammers calling under the guise of verifying tax return information over the phone.

The latest variation being seen in the last few weeks tries to play off the current tax season. Scam artists call saying they have your tax return, and they just need to verify a few details to process your return. The scam tries to get you to give up personal information such as a Social Security number or personal financial information, such as bank numbers or credit cards.

For more information, see IR-2016-40, Consumer Alert: Scammers Change Tactics, Once Again

W-2 Scam Targeting Payroll and Human Resources Professionals

Payroll and human resources professionals should be aware of an emerging phishing email scheme that purports to be from company executives and requests personal information on employees. The email contains the actual name of the company chief executive officer. In this scam, the “CEO” sends an email to a company payroll office employee and requests a list of employees and financial and personal information including SSNs.

For more details, see: IR-2016-34, IRS Alerts Payroll and HR Professionals to Phishing Scheme Involving W-2s

E-mail, Phishing and Malware Schemes

The IRS has seen an approximate 400 percent surge in phishing and malware incidents so far in the 2016 tax season.

The emails are designed to trick taxpayers into thinking these are official communications from the IRS or others in the tax industry, including tax software companies. The phishing schemes can ask taxpayers about a wide range of topics. E-mails can seek information related to refunds, filing status, confirming personal information, ordering transcripts and verifying PIN information.

Variations of these scams can be seen via text messages, and the communications are being reported in every section of the country.

When people click on these email links, they are taken to sites designed to imitate an official-looking website, such as IRS.gov. The sites ask for Social Security numbers and other personal information, which could be used to help file false tax returns. The sites also may carry malware, which can infect people’s computers and allow criminals to access your files or track your keystrokes to gain information.

Now is a Good Time to Plan for Next Year’s Taxes

You may be tempted to forget about your taxes once you’ve filed but some tax planning done now may benefit you later. Now is a good time to set up a system so you can keep your tax records safe and easy to find.  Here are some IRS tips to give you a leg up on next year’s taxes:

• Take action when life changes occur.  Some life events can change the amount of tax you owe. Examples  include a change in marital status or the birth of a child. When these happen, you may need to change the amount of tax withheld from your pay. To do that, file a new Form W-4, Employee’s Withholding Allowance Certificate, with your employer. Use the IRS Withholding Calculator tool on IRS.gov to help you fill out the form.
• Report changes in circumstances to the Health Insurance Marketplace.  If you enroll in insurance coverage through the Health Insurance Marketplace for  2016 coverage, you should report changes in circumstances to the Marketplace when they happen. Report events such as changes in your income or family size. Doing so will help you avoid getting too much or too little financial assistance.
• Keep records safe.  Print and keep a copy of your 2015 tax return and supporting records together in a safe place. This includes  W-2 Forms, Forms 1099, bank records and records of your family’s health care insurance coverage. If you ever need your tax return or records, it will be easier for you to get them. For example, you may need a copy of your tax return if you apply for a home loan or financial aid for college. You should use your tax return as a guide when you do your taxes next year.
• Stay organized.  Make tax time easier. Have your family put tax records in the same place during the year. That way you won’t have to search for misplaced records when you file next year.
• Shop for a tax preparer.  If you want to hire a tax preparer to help you with tax planning, start your search now. Choose your tax preparer wisely. Use the Directory of Tax Return Preparers tool on IRS.gov to find tax preparers in your area with the credentials and qualifications that you prefer.
• Think about itemizing.  You may be able to lower your taxes if you itemize deductions instead of taking the standard deduction. Owning a home, paying medical expenses and qualified donations to charity could mean more tax savings. See the instructions for Schedule A, Itemized Deductions, for a list of deductions.

Things You Should Know about Filing Late and Paying Penalties

April 18 was this year’s deadline for most people to file their federal tax return and pay any tax they owe. If you are due a refund there is no penalty if you file a late tax return. If you owe tax, and you failed to file and pay on time, you will most likely owe interest and penalties on the tax you pay late. To keep interest and penalties to a minimum, you should file your tax return and pay the tax as soon as possible. Here are some facts that you should know.

1. Two penalties may apply. One penalty is for filing late and one is for paying late. They can add up fast. Interest accrues on top of the penalties.

2. Penalty for late filing. If you file your 2015 tax return more than 60 days after the due date or extended due date, the minimum penalty is $205 or, if you owe less than $205, 100 percent of the unpaid tax. Otherwise, the penalty can be as much as five percent of your unpaid taxes each month up to a maximum of 25 percent.

3. Penalty for late payment. The penalty is generally 0.5 percent of your unpaid taxes per month. It can build up to as much as 25 percent of your unpaid taxes.

4. Combined penalty per month. If both the late filing and late payment penalties apply, the maximum amount charged for the two penalties is 5 percent per month.

5. File even if you can’t pay. Filing on time and paying as much as you can will keep your interest and penalties to a minimum. If you can’t pay in full, getting a loan or paying by debit or credit card may be less expensive than owing the IRS. If you do owe the IRS, the sooner you pay your bill the less you will owe.

6. Payment Options. Explore your payment options on our website at IRS.gov/payments. For individuals, IRS Direct Pay is a fast and free way to pay directly from your checking or savings account. The IRS will work with you to help you resolve your tax debt. Most people can set up a payment plan using the Online Payment Agreement tool on IRS.gov.

7. Late payment penalty may not apply. If you requested an extension of time to file your income tax return by the tax due date and paid at least 90 percent of the taxes you owe, you may not face a failure-to-pay penalty. However, you must pay the remaining balance by the extended due date. You will owe interest on any taxes you pay after the April 18 due date.

Six Reasons to Choose Direct Deposit for Your Tax Refund

When you file your taxes, you have options on how to receive your refund. The best way to get it is by direct deposit. Eight out of 10 taxpayers get their refunds by direct deposit. Here are six good reasons why you should do the same in 2016:

IRS Direct Deposit:

1. Is Fast.  The fastest way to get your refund is to electronically file your federal tax return and use direct deposit. Use IRS Free File to prepare and e-file your federal return for free. You can still use direct deposit even if you file a paper tax return.

2. Is Secure.  Since your refund goes directly into your account, there’s no risk of having your refund check stolen or lost in the mail. This is the same electronic transfer system used to deposit nearly 98 percent of all Social Security and Veterans Affairs benefits into millions of accounts.

3. Is Convenient.  With direct deposit, your refund goes directly into your bank account. There’s no need to wait for your check to come in the mail.

4. Is Easy.  Choosing direct deposit is easy. When you e-file, just follow the instructions in the tax software. If you file a paper return, the tax form instructions will guide you. Make sure that you enter the correct bank account and routing number.

5. Has Options.  You can split your refund into several financial accounts. These include checking, savings, health, education and certain retirement accounts. Beginning this year, there is a new retirement account offered by the U.S. Treasury Department. It’s called a MyRA account and you can designate all or a portion of your refund to a new MyRA account if you mark the “savings” box in the refund section of your return. Use IRS Form 8888, Allocation of Refund (including Savings Bond Purchases), to deposit your refund in up to three accounts. Don’t use Form 8888 to designate part of your refund to pay your tax preparer.

6. Saves Money. Direct deposit also saves you money. It costs the nation’s taxpayers more than $1 for every paper refund check issued but only a dime for each direct deposit made.

You should deposit your refund into accounts in your own name, your spouse’s name or both. Avoid making a deposit into accounts owned by others. Some banks require both spouses’ names on the account to deposit a tax refund from a joint return. Check with your bank for their direct deposit requirements.

Six Reasons to E-file your Taxes in 2016

IRS Tax Tip 2016-01, January 19, 2016

Are you one of the few tax filers who still file a paper return? If so, now may be the best time to switch to e-file. Last year almost 129 million taxpayers filed their taxes electronically. They chose to e-file because it’s the fastest and safest way to file.

Here are the top six reasons why you should file electronically in 2016:

1. Accurate and Easy.IRS e-file is the best way to file an accurate tax return. The tax software helps you avoid mistakes by doing the math for you. It guides you through each section of your tax return. It is much easier than doing your taxes by hand and mailing paper tax forms.
2. Safe and Secure.IRS e-file meets strict security guidelines. It uses modern encryption technology to protect tax returns. The IRS has processed more than 1.5 billion e-filed tax returns to date. This year, the IRS is working with states and tax industry leaders to protect your tax return from identity theft refund fraud. This new effort has put strong new safeguards in place to make tax filing safer than ever before.
3. Convenient and Often Free. You can e-file for free throughIRS Free File. Free File is only available on IRS.gov. You may qualify to have your taxes e-filed for free through IRS volunteer programs. Volunteer Income Tax Assistance, or VITA, offers free tax preparation if you earned $54,000 or less. Tax Counseling for the Elderly, or TCE, generally helps people who are age 60 or older. You can buy commercial tax software to e-file or ask your tax preparer to e-file your tax return. Most paid preparers are required to file their clients’ returns electronically.
4. Faster Refunds.In most cases, e-file helps get your refund faster. That’s because there is nothing to mail and your tax return is virtually mistake-free. The fastest way to get your refund is to combine e-file with direct deposit into your bank account. The IRS issues more than nine out of 10 refunds in less than 21 days.
5. Health Care Tax Reporting.IRS e-file can help with tax provisions of the health care law. The software will walk you through the lines on the tax forms that relate to the Affordable Care Act.
6. Payment Options.If you owe taxes, you can e-file early and set up an automatic payment on any day until the April 18 deadline. You can pay electronically from your bank account with IRS Direct Pay. You also have many other options to pay, including electronic funds withdrawal or payment by debit or credit card. Visit gov/payments for details.

Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on IRS.gov.

The IRS has begun mailing follow-up letters to taxpayers noting that the Identity Protection (IP) PIN they received in a prior mailing is valid despite the incorrect reference to the year. Please be aware the IP PIN listed on the CP 01A notice dated Jan. 4, 2016, is valid for use on individual tax returns filed in 2016. The earlier notice incorrectly indicates the IP PIN issued is to be used for filing the 2014 tax return when it should be used for the 2015 tax return.