Archive for February, 2013

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Cyber Crime = Identity Theft & Fraud

Thursday, February 21st, 2013

The exclusive purpose for the information which is provided from this website is to disseminate information, and not to provide tax advice.  

This is the fourth article on this subject which has been posted by me on this website (http://www.billseabrookecpa.com/blog/?s=identity+theft ).  Just as a fire needs air, heat, and fuel to exist,  in order for identity theft to occur, there has to be an unsuspecting victim, an account number, and a cyber-criminal.  It is beyond the scope of this article to present the multitude of scenarios that can or do facilitate identity theft.  However, the old adage “An ounce of prevention is worth a pound of cure” is certainly applicable. 

The nucleus of the identity theft situation is the “account number”.  Unfortunately, the most predominantly used account number is our Social Security account number.  Once a cyber-criminal has this number bank accounts and credit cards can be opened, financial transactions processed, identification cards created (fake driver’s licenses) etc.   

Additionally, cyber-criminals can fraudulently file a tax return using your account information and divert any refund which is due you to their own accounts.   There are several steps which you can follow to avoid becoming another “identity theft victim”: (more…)

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Are You Using The Correct (and Best) Filing Status on Your Tax Return?

Wednesday, February 13th, 2013

The exclusive purpose for the information which is provided from this website is to disseminate information, and not to provide tax advice.  

Your “Filing Status” determines both your tax rates and income tax brackets.  There are five groups or categories:  Married Filing Jointly, Married Filing Separately, Head of Household, Qualifying Widow (er) With A Dependent Child, and Single.  If you are not sure which group is correct (and the best) for your situation, you can follow this link to the IRS website (http://www.irs.gov/uac/What-is-My-Filing-Status%3F) and click on the “Begin” link.  After you have answered a series of questions this information will be provided to you.  For 2012, the tax brackets and tax rates can be obtained from page three of the Merrill Lynch document from this website (http://www.billseabrookecpa.com/resources/2012merrilllynchtaxplanningdocument.pdf )  After you have your filing status information, be sure to also read through the appropriate sections of IRS Publication 17 (“Your Federal Income Tax”) using this link   http://www.irs.gov/publications/p17/ch02.html   to confirm that you have made the correct and best choice, IF you have a choice between two categories, i.e. Married Filing Jointly or Married Filing Separately.  This publication also has important information that must be considered if you live in a “Community Property” state.  (more…)

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Income Tax Benefits For Parents

Monday, February 11th, 2013

The exclusive purpose for the information which is provided from this website is to disseminate information, and not to provide tax advice.  

Eight Tax Benefits for Parents

 

Your children may help you qualify for valuable tax benefits, such as certain credits and deductions. If you are a parent, here are eight benefits you shouldn’t miss when filing taxes this year.

1.   Dependents. In most cases, you can claim a child as a dependent even if your child was born anytime in 2012.   For more information, see IRS Publication 501, Exemptions, Standard Deduction and Filing Information.

2.   Child Tax Credit. You may be able to claim the Child Tax Credit for each of your children that were under age 17 at the end of 2012. If you do not benefit from the full amount of the credit, you may be eligible for the Additional Child Tax Credit. For more information, see the instructions for Schedule 8812, Child Tax Credit, and Publication 972, Child Tax Credit.

3.   Child and Dependent Care Credit. You may be able to claim this credit if you paid someone to care for your child or children under age 13, so that you could work or look for work. See IRS Publication 503, Child and Dependent Care Expenses.

4.   Earned Income Tax Credit. If you worked but earned less than $50,270 last year, you may qualify for EITC. If you have qualifying children, you may get up to $5,891 dollars extra back when you file a return and claim it. Use the EITC Assistant to find out if you qualify. See Publication 596, Earned Income Tax Credit.

5.   Adoption Credit. You may be able to take a tax credit for certain expenses you incurred to adopt a child. For details about this credit, see the instructions for IRS Form 8839, Qualified Adoption Expenses.

6.   Higher education credits. If you paid higher education costs for yourself or another student who is an immediate family member, you may qualify for either the American Opportunity Credit or the Lifetime Learning Credit. Both credits may reduce the amount of tax you owe. If the American Opportunity Credit is more than the tax you owe, you could be eligible for a refund of up to $1,000. See IRS Publication 970, Tax Benefits for Education.

7.   Student loan interest. You may be able to deduct interest you paid on a qualified student loan, even if you do not itemize your deductions. For more information, see IRS Publication 970, Tax Benefits for Education.

8.   Self-employed health insurance deduction – If you were self-employed and paid for health insurance, you may be able to deduct premiums you paid to cover your child. It applies to children under age 27 at the end of the year, even if not your dependent. See IRS.gov/aca for information on the Affordable Care Act. 

Forms and publications on these topics are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Additional IRS Resources:

IRS YouTube Videos:

IRS Podcasts:

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Are You Missing One or More W-2 Forms???

Friday, February 8th, 2013

The exclusive purpose for the information which is provided from this website is to disseminate information, and not to provide tax advice. 

If you were an employee at any time in 2012 your employer is required by law to provide you with a W-2 form which provides very important information regarding the salary, payroll taxes paid, and your employee benefits.  Beginning in 2012 there is a new code “DD” in Block #12.  Your employer is now required to report the cost of employer sponsored health care programs.  However, the amount which is reported is not taxable income to you.  If the payroll and employment information in your tax return does not agree with the IRS records, your tax return could be rejected and/or your income tax refund placed on hold, if you are entitled to a tax refund.  There are procedures to follow if you are missing one or more of your W-2 forms. 

Your employer submits all W-2 reports to the Social Security Administration annually.  This information is shared by both Federal agencies. Since the W-2 was required to be submitted by January 31st, the Internal Revenue Service will already have this information in their files when you electronically file your tax return.  (more…)

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Should You Contact A Tax Preparer This Year???

Wednesday, February 6th, 2013

The exclusive purpose for the information which is provided from this website is to disseminate information, and not to provide tax advice. 

The key provisions for many (if not most) of the tax laws have now changed, and more changes will be forthcoming during the remainder of this decade as the Federal government attemps to reduce the trillion-dollar budget deficit by increasing tax revenues.  You should also anticipate the fact that the complexity of the income tax laws will also concurrently change.  A tax preparer can certainly assist you with the preparation of all of your tax returns.  However, he or she can also analyze your current tax situation and then provide you with options and recommendations to reduce your annual tax liability. 

Ten Tips to Help You Choose a Tax Preparer

 

Many people look for help from professionals when it’s time to file their tax return. If you use a paid tax preparer to file your federal income tax return this year, the IRS urges you to choose that preparer carefully. Even if someone else prepares your return, you are legally responsible for what is on it.

Here are ten tips to keep in mind when choosing a tax return preparer:

1.   Check the preparer’s qualifications.  All paid tax return preparers are required to have a Preparer Tax Identification Number. In addition to making sure they have a PTIN, ask if the preparer belongs to a professional organization and attends continuing education classes. 

2.   Check on the preparer’s history.  Check with the Better Business Bureau to see if the preparer has a questionable history. Also check for any disciplinary actions and for the status of their licenses. For certified public accountants, check with the state boards of accountancy. For attorneys, check with the state bar associations. For enrolled agents, check with the IRS Office of Enrollment.

3.   Ask about service fees.  Avoid preparers who base their fee on a percentage of your refund or those who claim they can obtain larger refunds than other preparers can. Also, always make sure any refund due is sent to you or deposited into an account in your name. Taxpayers should not deposit their refund into a preparer’s bank account.

4.   Ask to e-file your return.  Make sure your preparer offers IRS e-file. Any paid preparer who prepares and files more than 10 returns for clients must file the returns electronically, unless the client opts to file a paper return. IRS has safely and securely processed more than one billion individual tax returns since the debut of electronic filing in 1990.

5.   Make sure the preparer is accessible.  Make sure you will be able to contact the tax preparer after you file your return, even after the April 15 due date. This may be helpful in the event questions arise about your tax return.

6.   Provide records and receipts.  Reputable preparers will request to see your records and receipts. They will ask you questions to determine your total income and your qualifications for deductions, credits and other items. Do not use a preparer who is willing to e-file your return by using your last pay stub before you receive your Form W-2. This is against IRS e-file rules.

7.   Never sign a blank return.  Avoid tax preparers that ask you to sign a blank tax form.

8.   Review the entire return before signing.  Before you sign your tax return, review it and ask questions. Make sure you understand everything and are comfortable with the accuracy of the return before you sign it.

9.   Make sure the preparer signs and includes their PTIN.  A paid preparer must sign the return and include their PTIN as required by law. The preparer must also give you a copy of the return.

10.   Report abusive tax preparers to the IRS. You can report abusive tax preparers and suspected tax fraud to the IRS on Form 14157, Complaint: Tax Return Preparer. If you suspect a return preparer filed or altered a return without your consent, you should also file Form 14157-A, Return Preparer Fraud or Misconduct Affidavit. Download the forms on the IRS.gov website or order them by mail at 800-TAX-FORM (800-829-3676).  

Additional IRS Resources:

 

 

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