by Fresh Start Tax | Sep 6, 2017 | Tax Help
IRS, States, Industry Urge Taxpayers to Learn Signs of Identity Theft
No matter how careful you are, identity thieves may be able to steal your personal information. If this happens, thieves try to turn that data quickly into cash by filing fraudulent tax returns.
The IRS, state tax agencies and the nation’s tax industry ask for your help in their effort to combat identity theft and fraudulent returns. Working in partnership with you, we can make a difference.
That’s why we launched a public awareness campaign called “Taxes. Security. Together.”
We’ve also started a new series of security awareness tips that can help protect you from cybercriminals.
Here are a few signs that you may be a victim of tax-related identity theft:
1. Your attempt to file your tax return electronically is rejected. You get a message saying a return with a duplicate Social Security number has been filed. First, check to make sure you did not transpose any numbers.
Also, make sure one of your dependents, for example, your college-age child, did not file a tax return and claim themselves.
If your information is accurate, and you still can’t successfully e-file because of a duplicate SSN, you may be a victim of identity theft. You should complete Form 14039, Identity Theft Affidavit. Attach it to the top of a paper tax return and mail to the IRS.
2. You receive a letter from the IRS asking you to verify whether you sent a tax return bearing your name and SSN.
The IRS holds suspicious tax returns and sends taxpayers letters to verify them. If you did not file the tax return, follow the instructions in the IRS letter immediately.
3. You receive income information at tax time from an employer unknown to you.
Employment-related identity theft involves the use of your SSN by someone, generally an undocumented worker, for employment purposes only.
4. You receive a tax refund that you did not request.
You may receive a paper refund check by mail that the thief intended to have sent elsewhere.
If you receive a tax refund you did not request, return it to the IRS. Write “VOID” in the endorsement section, and include a note on why you are returning it. If it is a direct deposit refund that you did not request, contact your bank and ask them to return it to the IRS. Search IRS.gov for “Returning an Erroneous Refund” for more information.
5. You receive a tax transcript by mail that you did not request.
Identity thieves sometimes try to test the validity of the personal data they have chosen or they attempt to use your data to steal even more information. If you receive a tax transcript in the mail and you did not request it, be alert to the possibility of identity theft.
6. You receive a reloadable, pre-paid debit card in the mail that you did not request.
Identity thieves sometimes use your name and address to create an account for a reloadable prepaid debit card that they use for various schemes, including tax-related identity theft
by Fresh Start Tax | Aug 28, 2017 | Tax Help
Tips to Keep in Mind on Income Taxes and Selling a Home
Homeowners may qualify to exclude from their income all or part of any gain from the sale of their main home.
Below are tips to keep in mind when selling a home:
Ownership and Use.
To claim the exclusion, the homeowner must meet the ownership and use tests.
This means that during the five-year period ending on the date of the sale, the homeowner must have:
• Owned the home for at least two years
• Lived in the home as their main home for at least two years
Gain.
If there is a gain from the sale of their main home, the homeowner may be able to exclude up to $250,000 of the gain from income or $500,000 on a joint return in most cases. Homeowners who can exclude all of the gain do not need to report the sale on their tax return
Loss.
A main home that sells for lower than purchased is not deductible.
Reporting a Sale. Reporting the sale of a home on a tax return is required if all or part of the gain is not excludable. A sale must also be reported on a tax return if the taxpayer chooses not to claim the exclusion or receives a Form 1099-S, Proceeds from Real Estate
Transactions.
Possible Exceptions.
There are exceptions to the rules above for persons with a disability, certain members of the military, intelligence community and Peace Corps workers, among others. More information is available in Publication 523, Selling Your Home.
Worksheets.
Worksheets are included in Publication 523, Selling Your Home, to help you figure the:
• Adjusted basis of the home sold
• Gain (or loss) on the sale
• Gain that can be excluded
Items to Keep In Mind:
• Taxpayers who own more than one home can only exclude the gain on the sale of their main home. Taxes must paid on the gain from selling any other home.
• Taxpayers who used the first-time homebuyer credit to purchase their home have special rules that apply to the sale. For more on those rules, see Publication 523. Use the First Time Homebuyer Credit Account Look-up to get account information such as the total amount of your credit or your repayment amount.
• Work-related moving expenses might be deductible, see Publication 521, Moving
Expenses.
• Taxpayers moving after the sale of their home should update their address with the IRS and the U.S. Postal Service by filing Form 8822, Change of Address.
• Taxpayers who purchased health coverage through the Health Insurance Marketplace should notify the Marketplace when moving out of the area covered by the current Marketplace plan.
by Fresh Start Tax | Aug 24, 2017 | Tax Help
Taxpayer Guide to Identity Theft
For 2017, the IRS, the states and the tax industry joined together to enact new safeguards and take additional actions to combat tax-related identity theft. Many of these safeguards will be invisible to you, but invaluable to our fight against these criminal syndicates.
If you prepare your own return with tax software, you will see new log-on standards. Some states also have taken additional steps.
See your state revenue agency’s web site for additional details.
We also know identity theft is a frustrating process for victims. If you become a victim, we are committed to resolving your case as quickly as possible.
What is tax-related identity theft?
Tax-related identity theft occurs when someone uses your stolen Social Security number to file a tax return claiming a fraudulent refund.
You may be unaware that this has happened until you efile your return and discover that a return already has been filed using your SSN. Or, the IRS may send you a letter saying we have identified a suspicious return using your SSN.
Know the warning signs
Be alert to possible tax-related identity theft if you are contacted by the IRS or your tax professional/provider about:
• More than one tax return was filed using your SSN.
• You owe additional tax, refund offset or have had collection actions taken against you for a year you did not file a tax return.
• IRS records indicate you received wages or other income from an employer for whom you did not work.
If you suspect you are a victim of identity theft, continue to pay your taxes and file your tax return, even if you must do so by paper.
Steps to take if you become a victim
If you are a victim of identity theft, the Federal Trade Commission recommends these steps:
• File a complaint with the FTC at identity theft.gov.
• Contact one of the three major credit bureaus to place a ‘fraud alert’ on your credit records:
◦ Equifax, www.Equifax.com, 1-888-766-0008
◦ Experian, www.Experian.com, 1-888-397-3742
◦ TransUnion, www.TransUnion.com, 1-800-680-7289
• Contact your financial institutions, and close any financial or credit accounts opened without your permission or tampered with by identity thieves.
If your SSN is compromised and you know or suspect you are a victim of tax-related identity theft, the IRS recommends these additional steps:
• Respond immediately to any IRS notice; call the number provided.
• Complete IRS Form 14039, Identity Theft Affidavit, if your e-filed return rejects because of a duplicate filing under your SSN or you are instructed to do so. Use a fillable form at IRS.gov, print, then attach the form to your return and mail according to instructions.
If you previously contacted the IRS and did not have a resolution, contact us for specialized assistance at 1-800-908-4490. We have teams available to assist.
About data breaches and your taxes
Not all data breaches or computer hacks result in tax-related identity theft. It’s important to know what type of personal information was stolen.
If you’ve been a victim of a data breach, keep in touch with the company to learn what it is doing to protect you and follow the “Steps for victims of identity theft.” Data breach victims should submit a Form 14039, Identity Theft Affidavit, only if your Social Security number has been compromised and your efile return was rejected as a duplicate or IRS has informed you that you may be a victim of tax-related identity theft.
How to reduce your risk
Join efforts by the IRS, states and tax industry to protect your data. Taxes. Security. Together. We all have a role to play. Here’s how you can help:
• Always use security software with firewall and anti-virus protections. Use strong passwords.
• Learn to recognize and avoid phishing emails, threatening calls and texts from thieves posing as legitimate organizations such as your bank, credit card companies and even the IRS.
• Do not click on links or download attachments from unknown or suspicious emails.
• Protect your personal data. Don’t routinely carry your Social Security card, and make sure your tax records are secure.
The IRS 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.
by Fresh Start Tax | Jul 7, 2017 | Tax Help
Plan Ahead for Tax Time When Renting Out Residential or Vacation Property
Summertime is a time of year when people rent out their property.
In addition to the standard clean up and maintenance, owners need to be aware of the tax implications of residential and vacation home rentals.
Receiving money for the use of a dwelling also used as a taxpayer’s personal residence generally requires reporting the rental income on a tax return.
It also means certain expenses become deductible to reduce the total amount of rental income that’s subject to tax.
Dwelling Unit.
This may be a house, an apartment, condominium, mobile home, boat, vacation home or similar property. It’s possible to use more than one dwelling unit as a residence during the year.
Used as a Home.
The dwelling unit is considered to be used as a residence if the taxpayer uses it for personal purposes during the tax year for more than the greater of: 14 days or 10% of the total days rented to others at a fair rental price. Rental expenses cannot be more than the rent received.
Personal Use.
Personal use means use by the owner, owner’s family, friends, other property owners and their families. Personal use includes anyone paying less than a fair rental price.
Divide Expenses.
Special rules generally apply to the rental of a home, apartment or other dwelling unit that is used by the taxpayer as a residence during the taxable year. Usually, rental income must be reported in full, and any expenses need to be divided between personal and business purposes. Special deduction limits apply.
How to Report.
Use Schedule E to report rental income and rental expenses on Supplemental Income and Loss. Rental income may also be subject to Net Investment
Income Tax.
Use Schedule A to report deductible expenses for personal use on Itemized
Deductions. This includes such costs as mortgage interest, property taxes and casualty losses.
Special Rules.
If the dwelling unit is rented out fewer than 15 days during the year, none of the rental income is reportable and none of the rental expenses are deductible. Find out more about these rules; see Publication 527, Residential Rental Property (Including Rental of Vacation Homes).
Use IRS Free File.
Renting a vacation home can be complicated and IRS Free File can make filing a tax return easier. IRS Free File is available until Oct. 16. Taxpayers earning $64,000 or less can use brand-name tax software.
Those earning more can use Free File Fillable Forms, an electronic version of IRS paper forms.
Free File is available only through the IRS.gov website. You can get forms and publications on IRS.gov/forms at any time.
Avoid scams.
The IRS will never initiate contact using social media or text message.
First contact generally comes in the mail. Those wondering if they owe money to the IRS can view their tax account information on IRS.gov to find out.
by Fresh Start Tax | Jul 6, 2017 | Tax Help
Asher Mellul is no longer associated with Fresh Start Tax LLC.
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