The Tax Increase Prevention Act of 2014 (TIPA) was signed into law on December 19, 2014. Thankfully, TIPA retroactively extends most of the federal income tax breaks that would have affected many individuals and businesses through 2014. So, these provisions may have a positive impact on your 2014 returns. Unfortunately, these extended provisions expired again on December 31, 2014. So, unless Congress takes action again, these favorable provisions won’t be available for 2015.
Besides being the last day to file (or extend) your 2014 personal return and pay any tax that is due, 2015 first quarter estimated tax payments for individuals, trusts, and calendar-year corporations are due today. So are 2014 returns for trusts and calendar-year estates, partnerships, and LLCs, plus any final contribution you plan to make to an IRA or Education Savings Account for 2014. SEP and Keogh contributions are also due today if your return is not being extended.
Guess what? You have repayment options.
No one likes unexpected bills — especially big unexpected bills. This time of year, one of these nasty shocks can come in the form of owed income taxes. Common candidates for a hefty income tax bill include the self-employed, especially if you earned a decent income in 2014 but didn’t make sufficient quarterly payments.
State governments around the country are struggling with tax return identity theft, a problem so rampant that even TurboTax had to temporarily suspend electronic state filing. In Ohio, where 58,000 fraudulent tax returns have been intercepted this tax season, state officials have taken the drastic step of requiring some taxpayers to fill out an online quiz before accepting their returns.
Pressured by Congress, the IRS has apologized for seizing banks accounts from otherwise law-abiding business owners simply because those owners structured bank transactions to avoid federal reporting requirements.
The alleged crime was that they routinely made bank deposits of less than $10,000. That allowed the business owners to avoid reporting requirements designed to catch drug dealers and money launderers.
Are you prepared to spend more than a full day filling out your tax return? That’s the IRS’ estimate of how long it will take the average taxpayer to complete Form 1040.
Sure, that includes the time it takes to pull together and sort through all your necessary tax receipts and records, learn about the Form 1040, decipher its instructions, copy the completed form and send it in. But even discounting these ancillary duties, the IRS figures it still will take around four hours just to fill out this most popular income tax return.
Hackers are targeting your tax refunds. Just this month, TurboTax shut down for 24 hours because of a spike in fraudulent filings. And it’s the victims who are left to sort out the problems.
We spoke with a Polk County woman who found out she was a victim of tax fraud after using TurboTax.
“We got our W-2s on Friday, we filed on Sunday,” she said. “It was February 1. Nice and early. That’s what they say to do. And it was too late.”
The Internal Revenue Service wrapped up the 2015 Top 12 Tax Scams with a warning to taxpayers about aggressive telephone scams continuing coast-to-coast during the early weeks of this year’s filing season.
The aggressive, threatening phone calls from scam artists continue to be seen on a daily basis in states across the nation. The IRS urged taxpayers not give out money or personal financial information as a result of these phone calls or from emails claiming to be from the IRS.
Phone scams and email phishing schemes are among the Top 12 Tax Scams the IRS highlighted, for the first time, on 12 straight business days from Jan. 22 to Feb. 6. The IRS has also set up a special section on IRS highlighting these 12 schemes for taxpayers.
Illegal scams can lead to significant penalties and interest for taxpayers, as well as possible criminal prosecution. IRS Criminal Investigation works closely with the Department of Justice (DOJ) to shutdown scams and prosecute the criminals behind them. Taxpayers should remember that they are legally responsible for what is on their tax returns even if it is prepared by someone else. Make sure the preparer you hire is up to the task. For more see the Choosing a Tax Professional page.
A recap of this year’s Top 12 Tax Scams include:
• Phone Scams: Aggressive and threatening phone calls by criminals impersonating IRS agents remains an ongoing threat to taxpayers. The IRS has seen a surge of these phone scams in recent months as scam artists threaten police arrest, deportation, license revocation and other things.
•Phishing: Taxpayers need to be on guard against fake emails or websites looking to steal personal information. The IRS will not send you an email about a bill or refund out of the blue. Don’t click on one claiming to be from the IRS that takes you by surprise.
• Identity Theft: Taxpayers need to watch out for identity theft especially around tax time. The IRS continues to aggressively pursue the criminals that file fraudulent returns using someone else’s Social Security number.
• Return Preparer Fraud: Taxpayers need to be on the lookout for unscrupulous return preparers. The vast majority of tax professionals provide honest high-quality service. But there are some dishonest preparers who set up shop each filing season to perpetrate refund fraud, identity theft and other scams that hurt taxpayers.
• Offshore Tax Avoidance: The recent string of successful enforcement actions against offshore tax cheats and the financial organizations that help them shows that it’s a bad bet to hide money and income offshore. Taxpayers are best served by coming in voluntarily and getting their taxes and filing requirements in order.
• Inflated Refund Claims: Taxpayers need to be on the lookout for anyone promising inflated refunds. Taxpayers should be wary of anyone who asks them to sign a blank return, promise a big refund before looking at their records, or charge fees based on a percentage of the refund. Scam artists use flyers, advertisements, phony store fronts and word of mouth via community groups and churches in seeking victims.
• Fake Charities: Taxpayers should be on guard against groups masquerading as charitable organizations to attract donations from unsuspecting contributors. Contributors should take a few extra minutes to ensure their hard-earned money goes to legitimate and currently eligible charities. The IRS has the tools taxpayers need to check out the status of charitable organizations. Be wary of charities with names that are similar to familiar or nationally known organizations.
• Hiding Income with Fake Documents: Hiding taxable income by filing false Form 1099s or other fake documents is a scam that taxpayers should always avoid and guard against. The mere suggestion of falsifying documents to reduce tax bills or inflate tax refunds is a huge red flag when using a paid tax return preparer. Taxpayers are legally responsible for what is on their returns regardless of who prepares the returns.
• Abusive Tax Shelters: Taxpayers should avoid using abusive tax structures to avoid paying taxes. The IRS is committed to stopping complex tax avoidance schemes and the people who create and sell them. The vast majority of taxpayers pay their fair share, and everyone should be on the lookout for people peddling tax shelters that sound too good to be true. When in doubt, taxpayers should seek an independent opinion regarding complex products they are offered.
• Falsifying Income to Claim Credits: Taxpayers should avoid inventing income to erroneously claim tax credits. Taxpayers are sometimes talked into doing this by scam artists. Taxpayers are best served by filing the most-accurate return possible because they are legally responsible for what is on their return.
• Excessive Claims for Fuel Tax Credits: Taxpayers need to avoid improper claims for fuel tax credits. The fuel tax credit is generally limited to off-highway business use, including use in farming. Consequently, the credit is not available to most taxpayers. But yet, the IRS routinely finds unscrupulous preparers who have enticed sizable groups of taxpayers to erroneously claim the credit to inflate their refunds.
• Frivolous Tax Arguments: Taxpayers should avoid using frivolous tax arguments to avoid paying their taxes. Promoters of frivolous schemes encourage taxpayers to make unreasonable and outlandish claims to avoid paying the taxes they owe. These arguments are wrong and have been thrown out of court. While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law or disregard their responsibility to pay taxes. The penalty for filing a frivolous tax return is $5,000
This is shaping up to be a tough year for the IRS, and for taxpayers. Not only is the IRS plagued by budget cuts, but they also faces more demand due to ObamaCare. It is a fact: customer service will be worse than ever.
The IRS ideally projects an image of efficiency and fairness. But as a government agency, it also has to inform citizens about its inner workings. So want to know what the IRS doesn’t? Here are the facts: