Month: February 2015

If you are having trouble paying your debts, it is important to take action sooner rather than later. Doing nothing leads to much larger problems in the future, whether it’s a bad credit record or bankruptcy resulting in the loss of assets and even your home. If you’re in financial trouble, then here are some steps to take to avoid financial ruin in the future.

If you’ve accumulated a large amount of debt and are having difficulty paying your bills each month, now is the time to take action–before the bill collectors start calling.

1. Review each debt. Make sure that the debt creditors claim you owe is really what you owe and that the amount is correct. If you dispute a debt, first contact the creditor directly to resolve your questions. If you still have questions about the debt, contact your state or local consumer protection office or, in cases of serious creditor abuse, your state Attorney General.

2. Contact your creditors. Let your creditors know you are having difficulty making your payments. Tell them why you are having trouble-perhaps it is because you recently lost your job or have unexpected medical bills. Try to work out an acceptable payment schedule with your creditors. Most are willing to work with you and will appreciate your honesty and forthrightness.

Tip: Most automobile financing agreements permit your creditor to repossess your car any time you are in default, with no advance notice. If your car is repossessed you may have to pay the full balance due on the loan, as well as towing and storage costs, to get it back. Do not wait until you are in default. Try to solve the problem with your creditor when you realize you will not be able to meet your payments. It may be better to sell the car yourself and pay off your debt than to incur the added costs of repossession.

3. Budget your expenses. Create a spending plan that allows you to reduce your debts. Itemize your necessary expenses (such as housing and health care) and optional expenses (such as entertainment and vacation travel). Stick to the plan.

4. Try to reduce your expenses. Cut out any unnecessary spending such as eating out and purchasing expensive entertainment. Consider taking public transportation or using a car sharing service rather than owning a car. Clip coupons, purchase generic products at the supermarket and avoid impulse purchases. Above all, stop incurring new debt. Leave your credit cards at home. Pay for all purchases in cash or use a debit card instead of a credit card.

5. Pay down and consolidate your debts. Withdrawing savings from low-interest accounts to settle high-rate loans or credit card debt usually makes sense. In addition, there are a number of ways to pay off high-interest loans, such as credit cards, by getting a refinancing or consolidation loan, such as a second mortgage.

Tip: Selling off a second car not only provides cash but also reduces insurance and other maintenance expenses.

Caution: Be wary of any loan consolidations or other refinancing that actually increase interest owed, or require payments of points or large fees.

Caution: Second mortgages greatly increase the risk that you may lose your home.

You can regain financial health if you act responsibly. But don’t wait until bankruptcy court is your only option. If you’re having financial troubles, don’t hesitate to call.

• By Leon Clinton
• February 12, 2015

IRS impersonation phone scams, as well as phishing continue to be a serious threat to taxpayers topping the list of the IRS “Dirty Dozen” tax schemes once again.

The IRS impersonation phone scam has claimed nearly 3,000 victims who have collectively paid over $14 million, the Treasury Inspector General for Tax Administration recently warned.

Phishing email scams continue to be pervasive as well. Illegal scams such as these can lead to significant penalties and interest and possible criminal prosecution. IRS Criminal Investigation works closely with the Department of Justice (DOJ) to shutdown scams and prosecute the criminals behind them.

Both IRS impersonation phone scams and phishing are on the list of the annual IRS list of “Dirty Dozen” tax schemes. Compiled annually, the “Dirty Dozen” lists a variety of common scams that taxpayers may encounter anytime but many of these schemes peak during filing season as people prepare their returns or find people to help with their taxes.

IRS Impersonation Phone Scams

Phone scams, which have hit taxpayers in every State in the country top the “Dirty Dozen” list this year because it has been a persistent and pervasive problem for many taxpayers for many months. Here’s how it works:

Callers claiming to be from the IRS tell intended victims they owe taxes and must pay using a pre-paid debit card or wire transfer. Anyone who refuses to pay is threatened with immediate arrest, deportation or loss of a business or driver’s license.

Scammers are able to alter caller ID numbers to make it look like the IRS is calling. They use fake names and bogus IRS badge numbers. They often leave “urgent” callback requests.

They prey on the most vulnerable people, such as the elderly, newly arrived immigrants and those whose first language is not English. Scammers have also been known to impersonate agents from IRS Criminal Investigation as well.

“It is critical that all taxpayers continue to be wary of unsolicited telephone calls from individuals claiming to be IRS employees,” said TIGTA Inspector General J. Russell George. “This scam, which is international in nature, has proven to be the largest scam of its kind that we have ever seen. The callers are aggressive, they are relentless, and they are ruthless. Once they have your attention, they will say anything to con you out of your hard-earned cash.”

Taxpayers should keep the following in mind:

• The IRS usually first contacts people by mail–not by phone–about unpaid taxes.
• The IRS won’t ask for payment using a pre-paid debit card or wire transfer.
• The IRS also won’t ask for a credit card number over the phone.
• The IRS will never threaten to bring in local police or other law-enforcement groups to have you arrested for not paying.

Phishing Email Scams

Phishing is a scam that is typically carried out with the help of unsolicited email or a fake website that poses as a legitimate site to lure in potential victims and prompt them to provide valuable personal and financial information. Armed with this information, a criminal can commit identity theft or financial theft.

It is important to keep in mind the IRS generally does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels.

“The IRS won’t 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,” said IRS Commissioner John Koskinen. “I urge taxpayers to be wary of clicking on strange emails and websites. They may be scams to steal your personal information.”

How to Protect Yourself

Don’t be fooled. These con artists can sound convincing when they call and they may know a lot about you.

“These criminals try to scare and shock you into providing personal financial information on the spot while you are off guard,” Koskinen said. “Don’t be taken in and don’t engage these people over the phone.”

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

• If you know you owe taxes or think you might owe, call the IRS at 1-800-829-1040. The IRS workers can help you with a payment issue.
• If you know you don’t owe taxes or have no reason to believe that you do, report the incident to the TIGTA at 1-800-366-4484 or atwww.TIGTA.gov.
• If you’ve been targeted by this scam, also contact the Federal Trade Commission and use their “FTC Complaint Assistant” at FTC.gov. Please add “IRS Telephone Scam” to the comments of your complaint.

If you receive an unsolicited email that appears to be from either the IRS or an organization closely linked to the IRS, such as the Electronic Federal Tax Payment System (EFTPS), report it by sending it to phishing@irs.gov.

If you think you’ve been a victim of an IRS impersonation phone scam or phishing don’t hesitate to call.

• By Leon Clinton
• February 8, 2015

Starting with this year’s filing season, taxpayers must report certain information related to health care coverage on their 2014 tax return when they file this April. In addition, taxpayers must provide proof of health insurance coverage or that they have received an exemption.

With that in mind, let’s take a look at how the Affordable Care Act might affect your tax situation, and based on your type of coverage, which new tax forms you might be receiving.

Tip: For additional information about IRS tax forms related to health care insurance, please see the article, Health Care Law: Changes to IRS Tax Forms, below.

Overview

The biggest change for most taxpayers is found on Line 61 of Form 1040, where individuals must either check a box to show they had health insurance or pay a penalty. In general, the penalty applies to individuals who did not have health insurance for more than three months in 2014.

In 2014, the penalty is the greater of one percent of modified adjusted gross income or $95 per adult ($47.50 per child under age 18, up to a maximum of $285 per family). While the IRS cannot issue a lien against you in order to make you pay the penalty, they are allowed to withhold the money from your refund.

Certain persons may qualify for an exemption from the penalty such as those who do not need to file a tax return ($10,150 for individuals, $13,050 for heads of household, and $20,300 for a married couples filing jointly). Other exceptions (there are eight in total) include being a member of a federally recognized tribe or qualifying for a hardship exemption if you filed for bankruptcy in the last 6 months or had medical expenses you couldn’t pay in the last 24 months that resulted in substantial debt.

Caution: Taxpayers who believe they qualify for an exemption must apply and receive an exemption certificate from the Marketplace.

There’s an additional twist for the approximately eight million people who purchased health insurance through the Healthcare Marketplace (“the Exchanges”), many of whom received subsidies that were paid to insurance companies and applied directly to their insurance premiums.

What taxpayers might not realize is that in many cases these subsidies were based on household size and income for 2012. Remember, the enrollment period began October 1, 2013 before taxpayers had filed their 2013 tax returns.

If income or household size changed in 2014 and the IRS was not notified of these updates, taxpayers may be liable for paying additional subsidy monies or conversely, receive refunds for amounts overpaid. In other words, if you received a bonus in 2014 (change in household income), it could mean that you owe the government money.

Enrollment through an Employer, Private Insurance, Medicaid or Medicare

New Tax Forms: 1095-B, 1095-C

1095-B. If your healthcare coverage is provided by private insurers or self-funded plans, you should receive Form 1095-B; however, because tax year 2014 is a transition year, these forms are not required when filing your 2014 tax return.

1095-C. If your healthcare coverage is provided by your employer, you should receive Form 1095-C; however, because tax year 2014 is a transition year, these forms are not required when filing your 2014 tax return.

Enrollment through the Healthcare Marketplace

New Tax Forms: 1095-A, Form 8962

Form 1095-A. If you purchased health insurance from the Marketplace you will receive Form 1095-A showing details of your coverage such as the effective date, amount of your premium payment, and any advanced premium credit you received.

Form 8962. The amount of any advanced premium credit you received in 2014 is reported on Form 8962. This form is also used to figure out the actual premium credit as well.

No Health Insurance

If you DO qualify for an exemption: Taxpayers must apply for the exemption from the Marketplace and if approved, will receive an exemption certificate number, which must be reported on Form 8965.

If you DO NOT qualify for an exemption: Taxpayers that do not qualify for an exemption and are uninsured are required to pay a penalty (see above) when filing their tax return. Form 8965 is used to calculate the penalty.

Don’t hesitate to call or email with any questions about the ACA and your taxes.

• By Leon Clinton
• February 4, 2015