Thursday February 11, 2016
IRS Tax Tips for 2015 Returns
In FS-2016-8 the IRS outlined seven tax tips helpful for filing your 2015 tax return. There are many new provisions and changes that may affect your tax return.
1. Timing – Because April 15 is Emancipation Day in Washington, the normal deadline for most taxpayers is Monday, April 18. However, due to Patriots’ Holiday in Maine and Massachusetts, residents of those states may file until Tuesday, April 19.
2. Tax Benefits – The Protecting Americans from Tax Hikes (PATH) Act passed in December of 2015. It extended and made permanent a number of tax benefits. If you itemize deductions, you may deduct your state and local sales taxes rather than state and local income taxes. Nonbusiness energy property such as energy-efficient windows, doors, furnaces and other improvements may qualify for credits by using Form 5695. Elementary and secondary teachers who pay for classroom expenses may take an “above the line” deduction. Some tuition and fees may be deducted using Form 8917. Finally, IRA owners over age 70½ may transfer up to $100,000 from their custodian to a qualified charity and the qualified charitable distribution (QCD) will not be taxed. It is reported on IRS Form 1040, lines 15a and 15b.
3. ABLE Accounts – Donors may contribute up to the $14,000 gift tax exclusion amount each year to tax-favored ABLE accounts for people who became disabled before age 26. These accounts enable people who have a disabled family member to pay for some disability-related costs. The IRS.gov site has complete information on the “Tax Benefit for Disability” page.
4. Mileage – The mileage rates for 2015 were 57.5 cents for business miles, 23 cents for medical or moving purposes and 14 cents for charitable purpose miles. The 2016 rates have been published and will be 54 cents per mile for business, 19 cents per mile for moving or medical and 14 cents per mile for charitable purpose travel.
5. Tax ID Number – A tax ID number (usually a Social Security Number) is required to obtain the Earned Income Tax Credit, Child Tax Credit or the American Opportunity Tax Credit.
6. IRA Rollover – An IRA owner may make one withdrawal and redeposit it in a new IRA per year. This includes all of your IRAs such as a traditional or ROTH IRA. It is permitted to make unlimited trustee-to-trustee IRA transfers. Additional information may be found on IRS.gov under “Can you move retirement plan assets?” found in Publication 590-A.
7. Healthcare Changes – Taxpayers may expect to receive the new IRS Form 1095-B or Form 1095-C. These forms and other supporting information may be used to prepare your tax return. All individuals in 2015 must either have healthcare coverage that qualifies under the Affordable Care Act (ACA), an exemption or make an “individual shared responsibility payment.”
There are major changes for you to understand in order to complete the healthcare section of your income tax return. First, most individuals with qualifying health insurance may simply check a box to show that they are in compliance. The “Qualifying Healthcare Coverage” information on IRS.gov will help you determine whether your health plan qualifies.
Second, some taxpayers qualify for an exemption from ACA. They need to complete IRS Form 8965, Health Coverage Exemptions. Some exemptions are also obtained through the healthcare.gov insurance marketplace.
Third, if you do not have qualifying coverage or an exemption, you will be required to make the “individual shared responsibility payment.” The IRS.gov site includes a helpful “calculating the payment” page.
Fourth, if you bought insurance through the Health Insurance Marketplace, you should receive Form 1095-A, Health Insurance Marketplace Statement. This should arrive by early February and will enable you to reconcile your premium tax credit. Some taxpayers may be required to make an additional payment.
IRS Warns of Four “Tax Scams”
Each year the IRS publishes the “Dirty Dozen” tax scams. Four IRS letters this week warned taxpayers about various tax scams.
A “phishing” email claims to be from the IRS. When you click on an email link, it will take you to a website created by con artists that looks like an official website. You may be asked for your name, Social Security number or other financial information. The criminals will use this information to steal your tax refund or money from your bank accounts.
IRS Commissioner Koskinen stated, “Criminals are constantly looking for new ways to trick you out of your personal financial information so be extremely cautious about opening strange emails. The IRS will not send you an email about a tax bill or refund out of the blue. We urge taxpayers not to click on any unexpected emails claiming to be from the IRS.”
Many taxpayers each year are victimized by phone scammers claiming to be IRS agents. They may threaten police arrest, deportation or revocation of your driver’s license. Commissioner Koskinen observes that there has been a “deluge of these aggressive phone scams.” He urges you to be cautious. Koskinen continued, “There are many variations. The caller may threaten you with arrest or court action to trick you into making a payment. Some schemes may say you are entitled to a huge refund. These all add up to trouble.”
Taxpayers should be on the lookout for fake caller ID numbers, IRS titles or badge numbers.
The IRS will never call you and demand immediate payment. It will not demand taxes without giving you an opportunity to respond. The IRS will not require specific payment methods such as a prepaid debit card or credit card. It also will not threaten you with arrest by your local police department.
Return Preparer Fraud
Over 60% of Americans use a paid tax preparer each year. Most of the tax preparers are honest and hardworking persons who provide excellent service. Koskinen warned, “Choose your tax return preparer carefully because you entrust them with your private financial information that needs to be protected. Most preparers provide high-quality service but we run across cases each year where unscrupulous preparers steal from their clients and misfile their taxes.”
There are five recommendations to ensure you are working with a qualified and capable preparer.
1. PTIN – Your preparer should have the IRS Preparer Tax Identification Number (PTIN). Preparers must include that on your filed tax return.
2. Qualifications – Your paid preparer may have professional qualifications as an attorney, CPA, enrolled agent or other professional. He or she should be willing to disclose those qualifications before your return is completed.
3. Service Fees – A preparer is not permitted to receive a percentage of the refund. You also should make sure that the refund goes to your account and not that of your tax preparer.
4. eFiling – The best and safest method is for your tax preparer to eFile your return. There have been over 1.5 billion eFiled returns since 2000.
5. Signing – Never sign a blank return. Review your entire return before it is signed and filed. Ask questions of your preparer if you are uncertain about any information or entries on your tax return.
During the past year, the IRS conducted a “Security Summit Initiative” to work with states and individual tax preparers in the effort to combat identity theft. Koskinen reports, “Our collaborations with the Security Summit have given the IRS additional tools to stop fraudulent returns at the door. The criminals will continue to look for increasingly sophisticated ways to breach the tax system. While the IRS has improved prevention and detection efforts, we are calling on taxpayers to protect their private information so thieves can’t steal personal data to file fraudulent returns.”
The best protection to preclude theft of your tax refund is to keep your computers secure and only give out your Social Security number when necessary.
The IRS has aggressively pursued tax refund thieves. During the past three years, over 2,000 persons have been convicted of identity theft of tax refunds. The average sentence for these persons has been 38 months in federal prison.
For further information, search www.IRS.gov for “Identity Theft.”
Published February 5, 2016
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