Tax

Refund fraud caused by identity theft is one of the fastest growing crimes nationwide. Learn more about what the IRS is doing to protect your identity.

Stopping refund fraud related to identity theft is a top priority for the IRS. With more than 3,000 employees working on identity theft cases, the IRS is focused on preventing, detecting and resolving identity theft cases as soon as possible and has trained more than 35,000 employees to work with taxpayers to recognize and provide assistance when identity theft occurs.

Taxpayers might encounter identity theft involving their tax returns in several ways. One possible scenario is where identity thieves try filing fraudulent refund claims using another person’s identifying information, which has been stolen.

Here are some tips to protect you from becoming a victim, and steps to take if you think someone may have filed a tax return using your name:

Tips to protect you from becoming a victim of identity theft

If your tax records are not currently affected by identity theft, but you believe you may be at risk due to a lost or stolen purse or wallet, questionable credit card activity or credit report, contact the IRS Identity Protection Specialized Unit at 800-908-4490, extension 245 (Monday – Friday, 7 a.m. – 7 p.m. local time; Alaska and Hawaii follow Pacific time).

Be alert to possible identity theft if you receive a notice from the IRS, if you believe you’re a victim of identity theft, or if you learn from your tax professional that:

If you receive a notice from the IRS and suspect your identity has been used fraudulently, respond immediately by calling the number on the notice. Please call us if you’re not sure what to do or would like assistance with this.

If you did not receive an IRS notice but believe you’ve been the victim of identity theft, contact us or contact the IRS Identity Protection Specialized Unit directly at 800-908-4490, extension 245.

Also, you will need to fill out the IRS Identity Theft Affidavit, Form 14039. Please write legibly and follow the directions on the back of the form that relate to your specific circumstances. If you need help filling out this form, don’t hesitate to give us a call.

We also recommend that you take additional steps with agencies outside the IRS such as:

If you have reported an identity theft case to the IRS and are waiting for your federal tax refund, be assured that the IRS is working to speed up and further streamline identity theft case resolution to help innocent taxpayers.

In many instances, these are extremely complex cases to resolve, frequently touching on multiple issues and multiple tax years and cases of resolving identity can be complicated by the thieves themselves contacting the IRS.

Due to the complexity of the situation, this is a time-consuming process. Taxpayers are likely to see their refunds delayed for an extended period of time while we take the necessary actions to resolve the matter. A typical case can take about 180 days to resolve, and the IRS is working to reduce that time period.

Also, please note that even if you have an open identity theft case that is being worked by the IRS, you need to continue to file your tax returns during this period.

For victims of identity theft who have previously been in contact with the IRS and have not achieved a resolution to their case, you may contact the IRS Identity Protection Specialized Unit, toll-free, at 800-908-4490. If you are unable to get your issue resolved and are experiencing financial difficulties, contact the Taxpayer Advocate Service toll-free at 877-777-4778.

Identity theft is an issue that we, as tax professionals, take very seriously. If you have any questions or concerns, please do not think twice about calling us. We are here to help you.

• By Leon Clinton
• February 7, 2014

Thanks to the passage of the American Taxpayer Relief Act of 2012 (ATRA) in January 2013, several tax provisions were extended through 2013 that are of benefit to taxpayers filing 2013 returns this year. Here are six of them:

1. Mortgage Insurance Deductible as Qualified Interest

ATRA extended, through 2013 (and retroactive to 2012), a tax provision that expired in 2011 that allows taxpayers to deduct mortgage insurance premiums as qualified residence interest. As such, taxpayers can deduct, as qualified residence interest, mortgage insurance premiums paid or accrued before Jan. 1, 2014, subject to a phase-out based on the taxpayer’s AGI.

2. Limited Non-Business Energy Property Credits

Non-business energy credits expired in 2011, but were extended (retroactive to 2012) through 2013 by ATRA. For 2013 (as in 2011 and 2012), this credit generally equals 10 percent of what a homeowner spends on eligible energy-saving improvements, up to a maximum tax credit of $500 (down significantly from the $1,500 combined limit that applied for 2009 and 2010).

Because of the way the credit is figured however, in many cases, it may only be helpful to people who made energy-saving home improvements for the first time in 2013. That’s because homeowners must first subtract any non-business energy property credits claimed on their 2006, 2007, 2009, 2010, 2011, and 2012 returns before claiming this credit for 2013. In other words, if a taxpayer claimed a credit of $450 in 2012, the maximum credit that can be claimed in 2013 is $50 (for an aggregate of $500).

The cost of certain high-efficiency heating and air conditioning systems, water heaters and stoves that burn biomass all qualify, along with labor costs for installing these items. In addition, the cost of energy-efficient windows and skylights, energy-efficient doors, qualifying insulation and certain roofs also qualify for the credit, though the cost of installing these items do not.

3. State and Local Sales Taxes

ATRA also extended, through 2013, (and retroactive to 2012) the tax provision that allows taxpayers who itemize deductions the option to deduct state and local general sales and use taxes instead of state and local income taxes.

4. Simplified Home Office Deduction

Starting with their 2013 tax return, taxpayers who claim deductions for business use of a home (“the home office deduction”) now have another option. Taxpayers claiming the home office deduction are generally required to fill out a 43-line form (Form 8829) often with complex calculations of allocated expenses, depreciation and carryovers of unused deductions.

Taxpayers claiming the optional deduction will complete a significantly simplified form. The new optional deduction is capped at $1,500 per year based on $5 per square foot for up to 300 square feet. Give us a call if you’d like more information on the simplified home office deduction for 2013.

5. Same-Sex Marriage

If you have a same-sex spouse whom you legally married in a state (or foreign country) that recognizes same-sex marriage, you and your spouse generally must use the married filing jointly or married filing separately filing status on your 2013 return, even if you and your spouse now live in a state (or foreign country) that does not recognize same-sex marriage.

If you meet certain requirements, you may be able to file amended returns to change your filing status for some earlier years. Please contact our office if you need to file an amended return or have any other questions.

6. Transportation “Fringe Benefits”

ATRA reinstated parity for transportation fringe benefits provided by employers for the benefit of their employees in 2013 (retroactive to 2012). As such, the monthly limit for qualified parking is $250 and the benefit for transportation in a commuter highway vehicle or a transit pass is $245 for tax year 2013.

If you have questions about these or other tax changes, please call us. We’d be happy to assist you.

• By Leon Clinton
• February 5, 2014

February 10

Employers – Federal unemployment tax. File Form 940 for 2013. This due date applies only if you deposited the tax for the year in full and on time.

Employers – Social Security, Medicare, and withheld income tax. File Form 941 for the fourth quarter of 2013. This due date applies only if you deposited the tax for the quarter in full and on time.

Farm Employers – File Form 943 to report Social Security and Medicare taxes and withheld income tax for 2013. This due date applies only if you deposited the tax for the year in full and on time.

Certain Small Employers – File Form 944 to report Social Security and Medicare taxes and withheld income tax for 2013. This tax due date applies only if you deposited the tax for the year in full and on time.

Employers – Nonpayroll taxes. File Form 945 to report income tax withheld for 2013 on all nonpayroll items. This due date applies only if you deposited the tax for the year in full and on time.

Employees – who work for tips. If you received $20 or more in tips during January, report them to your employer. You can use Form 4070.

February 18

Employers – Social Security, Medicare, and withheld income tax. If the monthly deposit rule applies, deposit the tax for payments in January.

Employers – Nonpayroll withholding. If the monthly deposit rule applies, deposit the tax for payments in January.

Individuals – If you claimed exemption from income tax withholding last year on the Form W-4 you gave your employer, you must file a new Form W-4 by this date to continue your exemption for another year.

February 19

Employers – Begin withholding income tax from the pay of any employee who claimed exemption from withholding in 2013, but did not give you a new Form W-4 to continue the exemption this year.

February 28

Businesses – File information returns (Form 1099) for certain payments you made during 2013. There are different forms for different types of payments. Use a separate Form 1096 to summarize and transmit the forms for each type of payment. See the 2013 Instructions for Forms 1099, 1098, 5498, and W-2G for information on what payments are covered, how much the payment must be before a return is required, what form to use, and extensions of time to file.

If you file Forms 1098, 1099, or W-2G electronically (not by magnetic media), your due date for filing them with the IRS will be extended to March 31. The due date for giving the recipient these forms is still January 31.

Payers of Gambling Winnings – File Form 1096, Annual Summary and transmittal of U.S. Information Returns, along with Copy A of all the Forms W-2G you issued for 2013. If you file Forms W-2G electronically (not by magnetic tape), your due date for filing them with the IRS will be extended to March 31. The due date for giving the recipient these forms remains January 31.

Employers – File Form W-3, Transmittal of Wage and Tax Statements, along with Copy A of all the Forms W-2 you issued for 2013.

If you file Forms W-2 electronically (not by magnetic media), your due date for filing them with the SSA will be extended to March 31. The due date for giving the recipient these forms is still January 31.

Employers – with employees who work for tips. File Form 8027, Employer’s Annual Information Return of Tip Income and Allocated Tips. Use Form 8027-T, Transmittal of Employer’s Annual Information Return of Tip Income and Allocated Tips, to summarize and transmit Forms 8027 if you have more than one establishment. If you file Forms 8027 electronically (not by magnetic tape), your due date for filing them with the IRS will be extended to March 31.

• By Leon Clinton
• February 4, 2014