Filing season starts Jan. 23

The IRS set Monday, Jan. 23, as the beginning of the nation’s 2023 tax season, when the agency will begin accepting and processing 2022 tax year returns. With the three previous tax seasons dramatically impacted by the pandemic, the IRS has taken additional steps for 2023 to improve service for taxpayers. As part of the August passage of the Inflation Reduction Act, the IRS has hired more than 5,000 new telephone assistors and added more in-person staff to help support taxpayers

DEPARTMENT OF TAXATION NEWS RELEASE: HAWAII FILING DEADLINE TO REMAIN APRIL 20, 2021

HAWAII FILING DEADLINE TO REMAIN APRIL 20, 2021

HONOLULU – After careful consideration, the Hawaii State Department of Taxation has decided not to extend the Tax Year 2020 filing deadline. Taxpayers must file their returns by April 20, 2021.

While the law requires taxpayers to file by April 20, taxpayers are granted an automatic 6-month extension (no form is required to request the extension) to file the return through October 20, 2021 if one of these two conditions is met:

  1. The taxpayer is due a refund, or

  2. The taxpayer pays the properly estimated tax amount owed by April 20, 2021. Taxpayers who are not able to pay the properly estimated tax amount owed should pay as much as they can to avoid additional interest and penalties.

Hawaii residents can file Form N-11, Hawaii Resident Income Tax Return, for FREE using Hawaii Tax Online (hitax.hawaii.gov). Payments can also be made using Hawaii Tax Online or by submitting Form N-200V with the payment.

Please visit tax.hawaii.gov for more information.

Tax Day for individuals extended to May 17: Treasury, IRS extend filing and payment deadline

WASHINGTON — The Treasury Department and Internal Revenue Service announced today that the federal income tax filing due date for individuals for the 2020 tax year will be automatically extended from April 15, 2021, to May 17, 2021. The IRS will be providing formal guidance in the coming days.

"This continues to be a tough time for many people, and the IRS wants to continue to do everything possible to help taxpayers navigate the unusual circumstances related to the pandemic, while also working on important tax administration responsibilities," said IRS Commissioner Chuck Rettig. "Even with the new deadline, we urge taxpayers to consider filing as soon as possible, especially those who are owed refunds. Filing electronically with direct deposit is the quickest way to get refunds, and it can help some taxpayers more quickly receive any remaining stimulus payments they may be entitled to."

Individual taxpayers can also postpone federal income tax payments for the 2020 tax year due on April 15, 2021, to May 17, 2021, without penalties and interest, regardless of the amount owed. This postponement applies to individual taxpayers, including individuals who pay self-employment tax. Penalties, interest and additions to tax will begin to accrue on any remaining unpaid balances as of May 17, 2021. Individual taxpayers will automatically avoid interest and penalties on the taxes paid by May 17.

Individual taxpayers do not need to file any forms or call the IRS to qualify for this automatic federal tax filing and payment relief. Individual taxpayers who need additional time to file beyond the May 17 deadline can request a filing extension until Oct. 15 by filing Form 4868 through their tax professional, tax software or using the Free File link on IRS.gov. Filing Form 4868 gives taxpayers until October 15 to file their 2020 tax return but does not grant an extension of time to pay taxes due. Taxpayers should pay their federal income tax due by May 17, 2021, to avoid interest and penalties.

The IRS urges taxpayers who are due a refund to file as soon as possible. Most tax refunds associated with e-filed returns are issued within 21 days.

This relief does not apply to estimated tax payments that are due on April 15, 2021. These payments are still due on April 15. Taxes must be paid as taxpayers earn or receive income during the year, either through withholding or estimated tax payments. In general, estimated tax payments are made quarterly to the IRS by people whose income isn't subject to income tax withholding, including self-employment income, interest, dividends, alimony or rental income. Most taxpayers automatically have their taxes withheld from their paychecks and submitted to the IRS by their employer.

State tax returns

The federal tax filing deadline postponement to May 17, 2021, only applies to individual federal income returns and tax (including tax on self-employment income) payments otherwise due April 15, 2021, not state tax payments or deposits or payments of any other type of federal tax. Taxpayers also will need to file income tax returns in 42 states plus the District of Columbia. State filing and payment deadlines vary and are not always the same as the federal filing deadline. The IRS urges taxpayers to check with their state tax agencies for those details.

Winter storm disaster relief for Louisiana, Oklahoma and Texas

Earlier this year, following the disaster declarations issued by the Federal Emergency Management Agency (FEMA), the IRS announced relief for victims of the February winter storms in Texas, Oklahoma and Louisiana. These states have until June 15, 2021, to file various individual and business tax returns and make tax payments. This extension to May 17 does not affect the June deadline.

For more information about this disaster relief, visit the disaster relief page on IRS.gov.

Consolidated Appropriations Act, 2021

On December 27, 2020, the Consolidated Appropriations Act, 2021 (“CAA”) was signed into law.  The CAA contains both the COVID-Related Tax Relief Act of 2020 (COVIDTRA) and the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (TCDTR).  In addition to providing for stimulus payments of $600 per taxpayer and qualifying child, the CAA also contains numerous tax provisions and extenders.

Individual Provisions

Increased deduction for medical expenses – The CAA permanently decreases the limitation for deducting medical expenses to 7.5% of adjusted gross income (“AGI”).  Previous law only allowed for a deduction of medical expenses in excess of 10% of AGI.

Child Tax Credit & Earned Income Credit (“CTC” & “EIC”) – The CAA allows individuals to use their earned income from 2019, if greater, to calculate their CTC & EIC for 2020.

Charitable contributions for taxpayers who do not itemize deductions – The CARES act, passed earlier in 2020, created a new above-the-line deduction for charitable contributions made in 2020 for taxpayers who do not itemize deductions.  The maximum allowable deduction is $300 ($600 for a married couple).  The CAA extends this rule through 2021.

Income limitations for charitable contributions – Under previous law, charitable contributions to qualified organizations were generally limited to 60% of a taxpayer’s AGI.  The CARES act removed the limitation for 2020; the new Act also removes the limitation for 2021.

Education credits – The CAA removes the above the line deduction for tuition and fees in exchange for an expanded application of the Lifetime Learning credit.  This applies to tax years 2021 and beyond.

Exclusion from income for forgiveness of qualified principal residence indebtedness – Forgiveness of debt is generally included in taxable income.  An exception applied for forgiveness of debt that was used to acquire a personal residence.  The maximum which could be excluded was $2 million for a married couple.  This provision was set to expire in 2020.  The CAA extends this exclusion through 2025, but at a reduced amount of $750,000.

Mortgage insurance premiums – The CAA extends the deduction for qualified mortgage insurance premiums through 2021.

Retirement plan distributions – The CAA allows for distributions from retirement plans of up to $100,000 without being subject to the 10% penalty that applies to early retirement distributions.  The distribution, however, will be subject to income tax over a 3-year period.  This extends the relief provided in the CARES Act & expands the eligibility to all taxpayers.

Payroll Provisions

FSA Plans – Employers may choose to allow a carryover of unused funds from 2020 to 2021 and from 2021 to 2022 or to extend the grace period for spending unused FSA funds to 12 months after the plan year.

Extension of Families First Coronavirus Response Act (“FFCRA”) credits for paid sick and family leave – The FFCRA, passed earlier in 2020, provided employers a payroll tax credit for paid sick and family leave due to COVID-19.  The Act extends this credit through March 31, 2021.

Employer tax credit for paid family and medical leave – Earlier tax law allowed businesses to claim a general business credit for paid family and medical leave up to 12 weeks per year.  The provision was set to expire at the end of 2020; the Act extends this credit through 2025.

Work opportunity credit – The work opportunity credit is available to employers for hiring individuals from certain targeted groups.  The credit was set to expire at the end of 2020.  The CAA extends the credit through 2025.

Expansion of Employee Retention Credit (“ERC”) – The CARES Act provided a 50% credit for companies who continued to pay their employees during a COVID-19 imposed lockdown.  The CAA expands eligibility for the ERC, increases the credit to 70%, and extends the credit through June 30, 2021.

Extension of deferred payroll taxes – President Trump signed an executive memorandum in August 2020 allowing employers to defer the employee’s share of social security taxes between September 1, 2020 and December 31, 2020.  The taxes were required to be repaid through a reduction in the employee’s pay between January 1, 2021 and April 30, 2021.  The CAA extends the required repayment period to December 31, 2021.

Employer payment of student loans – The CAA extends the current CARES act provision which allows employers to repay education loans incurred by their employees, which was set to expire at the end of 2020.  The CAA extends the provision to 2025.  The maximum annual payment is $5,250.

Business Tax Provisions

Deductions for expenses paid using PPP loan proceeds – The CAA clarifies the original intention of the PPP loan program and allows for full deduction of any expense paid for using PPP loan proceeds.

Bringing back the business lunch – The CAA temporarily allows for a full 100% deduction for meals provided by restaurants that are paid or incurred in 2021 or 2022.

Qualified disaster relief contributions – The CAA creates a new category of “qualified disaster relief contributions” for qualifying contributions made to organizations for disaster relief efforts.  Contributions must be made between January 1, 2020 and 60 days after passage of the Act.  Corporations could receive a deduction of up to 100% of taxable income.

Accelerated depreciation of residential rental property for electing real property trade or business – Real property trades or businesses subject to the interest expense limitations of 163(j) may choose to make an election.  Under the election, the interest limitations will not apply; however, the taxpayer must use ADS depreciation rules resulting in a longer useful life and lower depreciation expense each year.  Under prior law, residential rental property placed in service prior to January 1, 2018 was subject to a 40-year ADS useful life.  The CAA changes this to a 30-year ADS useful life if the taxpayer was not subject to ADS prior to January 1, 2018.

Get ready to file taxes: What to do before the tax year ends

There are things taxpayers can do before the end of the year to help them get ready for the 2021 tax filing season. Below are a few of them.

Donate to charity
There is still time to make a 2020 donation. Taxpayers who don't itemize deductions may take a charitable deduction of up to $300 for cash contributions made in 2020 to qualifying charities. Cash donations include those made by check, credit card or debit card. Before making a donation, people can check the Tax Exempt Organization Search tool on IRS.gov to make sure the organization is eligible for tax-deductible donations.

The Coronavirus Aid, Relief, and Economic Security Act changed this law. The CARES Act also temporarily suspends limits on charitable contributions and temporarily increases limits on contributions of food inventory.
 
Report any name or address change
Taxpayers who moved should notify the IRS of their new address. They should also notify the Social Security Administration of any name change.

Connect with the IRS
Taxpayers can use social media to get the latest tax and filing tips from the IRS. The IRS shares information on things like tax changes, scam alerts, initiatives, tax products and taxpayer services. These social media tools are available in different languages, including English, Spanish and American Sign Language.

Find information about retirement plans
IRS.gov has end-of-year find tax information about retirement plans. This includes resources for individuals about retirement planning, contributions and withdrawals. The CARES Act retirement plan relief waived required minimum distributions during 2020 for IRA or retirement plan accounts. Also, eligible individuals can take a coronavirus-related distribution of up to $100,000 by December 30, 2020 and repay it over three years or pay the tax due over three years.

Contribute salary deferral
Taxpayers can make a salary deferral to a retirement plan. This helps maximize the tax credit available for eligible contributions. Taxpayers should make sure their total salary deferral contributions do not exceed the $19,500 limit for 2020.

Think about tax refunds
Taxpayers should be careful not to expect getting a refund by a certain date. This is especially true for those who plan to use their refund to make major purchases or pay bills. Just as each tax return is unique to the individual, so is each taxpayer's refund. Taxpayers can take steps now to get ready to file their federal tax return in 2021.

More Information:
About Schedule A, Form 1040, Itemized Deductions
Tax Topic No. 500, Itemized Deductions
Charitable Contribution Deductions
Interactive Tax Assistant

Coronavirus Tax Relief

The IRS has established a special section focused on steps to help taxpayers, businesses and others affected by the coronavirus. This page (https://www.irs.gov/coronavirus) will be updated as new information is available. For other information about the COVID-19 virus, people should visit the Centers for Disease Control and Prevention (CDC) (https://www.coronavirus.gov) for health information. Other information about actions being taken by the U.S. government is available at https://www.usa.gov/coronavirus and in Spanish at https://gobierno.usa.gov/coronavirus. The Department of Treasury also has information available at Coronavirus: Resources, Updates, and What You Should Know.

New downloadable assistant helps small businesses withhold the right amount of income tax

The Internal Revenue Service has launched a new online assistant designed to help employers, especially small businesses, easily determine the right amount of federal income tax to withhold from their workers’ pay.

Known as the Income Tax Withholding Assistant for Employers, this new spreadsheet-based tool is designed to help employers easily transition to the redesigned withholding system (no longer based on withholding allowances), which goes into effect on Jan. 1. It does this by helping them easily implement new income-tax withholding requests from employees who fill out the completely redesigned 2020 Form W-4, Employee’s Withholding Certificate.

At the same time, the tool can also help employers continue to properly withhold from employees who still have a withholding request on file using a past version of the W-4, which was based on withholding allowances.

Now available for download, without charge, on IRS.gov, the Income Tax Withholding Assistant for Employers is designed to help any employer who would otherwise figure withholding, manually, using a worksheet and either the percentage method or wage bracket tables found in Publication 15-T, Federal Income Tax Withholding Methods. Employers who already use an automated payroll system won’t need this new assistant because their system already does the math.

The Income Tax Withholding Assistant for Employers is available in Microsoft Excel. The employer can use the tool to create a profile for each employee that then automatically calculates their correct federal income tax withholding.

To use the Income Tax Withholding Assistant for Employers, the employer starts by indicating their pay period frequency (for example, weekly, bi-weekly, monthly, etc.), and then enters key information from an employee’s Form W-4. For the tool to work properly, the employer must indicate whether the employee submitted a 2020 Form W-4, which does not base withholding on the number of withholding allowances claimed, or a prior version of the W-4, which does.

The employer can then save a separate customized copy of the file for each employee containing that employee’s Form W-4 information. Then, each pay period, the employer simply opens the employee’s file and enters their gross wage or salary amount for that pay period. The tool will then automatically display the correct amount of federal income tax to withhold from that employee’s pay.

Social Security Unveils Online Form For Seniors To Report Impostor Scams

The Social Security Administration published an online form today for seniors to report they have been contacted by persons fraudulently claiming the scammers work for the agency.

In announcing the form, the agency noted Social Security phone scams are the #1 type of fraud reported to the Federal Trade Commission and Social Security.

The announcement of the form stressed a real Social Security employee will never tell a senior his or her Social Security number has been suspended and never ask for credit or debit card numbers over the phone.

The agency also assured Social Security employees will never threaten seniors.

The link to the form is: https://secure.ssa.gov/ipff/home

All taxpayers should check their withholding ASAP

All taxpayers should check their withholding – also known as doing a Paycheck Checkup – as soon as possible. They should do a checkup even if they did one last year. 

By checking their withholding, taxpayers can make sure enough is being taken out of their paychecks or other income to cover the tax owed. Here are some things taxpayers should know about withholding and why checking it is important:

  • Taxpayers should check their withholding as early in the year as possible. If someone still has not done a Paycheck Checkup, there’s still time to get their withholding on track. They should do a checkup ASAP.

  • Taxpayers should also check their withholding when life changes occur. These changes include things like:

    • Marriage or divorce

    • Birth or adoption of a child

    • Purchase of a home

    • Retirement

    • Chapter 11 bankruptcy

    • New job or loss of job

The best way for taxpayers to check their withholding is to use the Withholding Calculator on IRS.gov.

Tax reform brings changes to fringe benefits that can affect an employer’s bottom line

The IRS reminds employers that several programs have been affected as a result of the Tax Cuts and Jobs Act passed last year. This includes changes to fringe benefits, which can affect an employer's bottom line and its employees' deductions.

Here’s information about some of these changes that will affect employers:

Entertainment Expenses & Deduction for Meals
The new law generally eliminated the deduction for any expenses related to activities generally considered entertainment, amusement or recreation.
 
However, under the new law, taxpayers can continue to deduct 50 percent of the cost of business meals if the taxpayer or an employee of the taxpayer is present, and the food or beverages are not considered lavish or extravagant. The meals may be provided to a current or potential business customer, client, consultant or similar business contact. Food and beverages that are purchased or consumed during entertainment events will not be considered entertainment if either of these apply:

  • they are purchased separately from the entertainment

  • the cost is stated separately from the entertainment on one or more bills, invoices or receipts

Qualified Transportation
The new law also disallows deductions for expenses associated with qualified transportation fringe benefits or expenses incurred providing transportation for commuting. There is an exception when the transportation expenses are necessary for employee safety.

Bicycle Commuting Reimbursements
Under the new law, employers can deduct qualified bicycle commuting reimbursements as a business expense. The new tax law suspends the exclusion of qualified bicycle commuting reimbursements from an employee’s income. This means that employers must now include these reimbursements in the employee’s wages.
 
Qualified Moving Expenses Reimbursements
Employers must now include moving expense reimbursements in employees’ wages. The new tax law suspends the exclusion for qualified moving expense reimbursements.

There is one exception as members of the U.S. Armed Forces can still exclude qualified moving expense reimbursements from their income if they meet certain requirements.

Employee Achievement Award
Special rules allow an employee to exclude achievement awards from their wages if the awards are tangible personal property. An employer also may deduct awards that are tangible personal property, subject to certain deduction limits. The new law clarifies the definition of tangible personal property.

Tax credits help offset higher education costs

Taxpayers who pay for higher education in 2018 can see tax savings when they file their tax returns. If taxpayers, their spouses or their dependents take post-high school coursework, they may be eligible for a tax benefit.

There are two credits available to help taxpayers offset the costs of higher education. The American opportunity credit and the lifetime learning credit may reduce the amount of income tax owed. Taxpayers use Form 8863, Education Credits, to claim the credits.

The American opportunity credit is:

  • Worth a maximum benefit up to $2,500 per eligible student
  • Only for the first four years at an eligible college or vocational school
  • For students pursuing a degree or other recognized education credential
  • Partially refundable. This means if the credit brings the amount of tax owed to zero, 40 percent of any remaining amount of the credit, up to $1,000, is refundable.

The lifetime learning credit is:

  • Worth a maximum benefit up to $2,000 per tax return, per year, no matter how many students qualify
  • Available for all years of postsecondary education and for courses to acquire or improve job skills
  • Available for an unlimited number of tax years

To be eligible to claim the American opportunity credit, or the lifetime learning credit, the law requires a taxpayer or a dependent to have received a Form 1098-T from an eligible educational institution.

Real Property Tax Credit for Homeowners

The City & County of Honolulu offers a real property tax credit to property owners who meet certain eligibility requirements. Applicants who qualify, are entitled to a tax credit equal to the amount of taxes owed for the current tax year that exceed 3% of the titleholders’ combined gross income. This tax credit will be applied to next year’s taxes. 

What are the Eligibility Requirements?

  • Homeowner must have a home exemption in effect at the time of application and for the following tax year.
  • Any of the titleholders do not own any other property anywhere.
  • The combined income of all titleholders cannot exceed $60,000.

How Do I Apply for the Tax Credit Program?

What is the Application Deadline? October 1, 2018

Important Reminder: You must file annually for this credit.

For more information contact the Real Property Tax Relief Office at 768-3205 or view the brochure at http://www.honolulu.gov/rep/site/bfs/treasury_docs/2019_Tax_Credit_Information_Brochure.pdf

Information furnished is subject to change without notice.

Law change affects moving, mileage and travel expenses; Offers higher depreciation limits for some vehicles

The Internal Revenue Service today provided information to taxpayers and employers about changes from the Tax Cuts and Jobs Act that affect:

  • Move related vehicle expenses
  • Un-reimbursed employee expenses
  • Vehicle expensing

Changes to the deduction for move-related vehicle expenses

The Tax Cuts and Jobs Act suspends the deduction for moving expenses for tax years beginning after Dec. 31, 2017, and goes through Jan. 1, 2026. Thus, during the suspension no deduction is allowed for use of an automobile as part of a move using the mileage rate listed in Notice 2018-03.  This suspension does not apply to members of the Armed Forces of the United States on active duty who move pursuant to a military order related to a permanent change of station.

Changes to the deduction for un-reimbursed employee expenses

The Tax Cuts and Jobs Act also suspends all miscellaneous itemized deductions that are subject to the 2 percent of adjusted gross income floor. This change affects un-reimbursed employee expenses such as uniforms, union dues and the deduction for business-related meals, entertainment and travel.

Thus, the business standard mileage rate listed in Notice 2018-03, which was issued before the Tax Cuts and Jobs Act passed, cannot be used to claim an itemized deduction for un-reimbursed employee travel expenses in taxable years beginning after Dec. 31, 2017, and before Jan. 1, 2026. The IRS issued revised guidance today in Notice 2018-42.

Increased depreciation limits

The Tax Cuts and Jobs Act increases the depreciation limitations for passenger automobiles placed in service after Dec. 31, 2017, for purposes of computing the allowance under a fixed and variable rate plan. The maximum standard automobile cost may not exceed $50,000 for passenger automobiles, trucks and vans placed in service after Dec. 31, 2017. Previously, the maximum standard automobile cost was $27,300 for passenger automobiles and $31,000 for trucks and vans.

How the Employer Credit for Family and Medical Leave Benefits Employers

Here are some highlights of the new employer credit for paid family and medical leave created by the Tax Cuts and Jobs Act passed last year. Employers may claim the credit based on wages paid to qualifying employees while they are on family and medical leave.

Here are some facts about this credit and how it benefits employers:

  • To claim the credit, employers must have a written policy that meets certain requirements:
    • Employers must provide at least two weeks of paid family and medical leave annually to all qualifying employees who work full time. This can be prorated for employees who work part time.
    • The paid leave must be not less than 50 percent of the wages normally paid to the employee.
  • A qualifying employee is any employee who:
    • Has been employed for one year or more.
    • For the preceding year, had compensation that did not exceed a certain amount. For 2018, the employee must not have earned more than $72,000 in 2017.
  • For purposes of this credit, “family and medical leave” is leave for one or more of the following reasons:
    • Birth of an employee’s child and to care for the newborn.
    • Placement of a child with the employee for adoption or foster care.
    • To care for the employee’s spouse, child, or parent who has a serious health condition.
    • A serious health condition that makes the employee unable to perform the functions of his or her position.
    • Any qualifying event due to an employee’s spouse, child, or parent being on covered active duty – or being called to duty – in the Armed Forces.
    • To care for a service member who is the employee’s spouse, child, parent, or next of kin.
  • The credit is a percentage of the amount of wages paid to a qualifying employee while on family and medical leave for up to 12 weeks per taxable year. 
  • An employer must reduce its deduction for wages or salaries paid or incurred by the amount determined as a credit.  Any wages taken into account in determining any other general business credit may not be used toward this credit.
  • The credit is generally effective for wages paid in taxable years of the employer beginning after December 31, 2017. It is not available for wages paid in taxable years beginning after December 31, 2019.

2018 Tax Filing Season Begins Jan. 29

The Internal Revenue Service announced today that the nation’s tax season will begin Monday, Jan. 29, 2018 and reminded taxpayers claiming certain tax credits that refunds won’t be available before late February.

The IRS will begin accepting tax returns on Jan. 29, with nearly 155 million individual tax returns expected to be filed in 2018. The nation’s tax deadline will be April 17 this year – so taxpayers will have two additional days to file beyond April 15. 

Although the IRS will begin accepting both electronic and paper tax returns Jan. 29, paper returns will begin processing later in mid-February as system updates continue. The IRS strongly encourages people to file their tax returns electronically for faster refunds.

Tax Cuts and Jobs Act Summary on Law Passed on 12/22/17

The Tax Cuts and Jobs Act (H.R. 1) overhauls America’s tax code to deliver historic tax relief for workers, families and job creators, and revitalize our nation’s economy. By lowering taxes across the board, eliminating costly special-interest tax breaks, and modernizing our international tax system, the Tax Cuts and Jobs Act will help create more jobs, increase paychecks, and make the tax code simpler and fairer for Americans of all walks of life. With this bill, the typical family of four earning the median family income of $73,000 will receive a tax cut of $2,059.

For individuals and families, the Tax Cuts and Jobs Act:

• Lowers individual taxes and sets the rates at 0%, 10%, 12%, 22%, 24%, 32%, 35%, and 37% so people can keep more of their hard-earned money.

• Significantly increases the standard deduction to protect roughly double the amount of what you earn each year from taxes – from $6,500 and $13,000 under current law to $12,000 and $24,000 for individuals and marriedcouples, respectively.

• Continues to allow people to write off the cost of state and local taxes – up to $10,000. Gives individuals and families the ability to deduct property taxes and income – or sales – taxes to best fit their unique circumstances.

• Takes action to support more American families by:

• Expanding the Child Tax Credit from $1,000 to $2,000 for single filers and married couples to help parents with the cost of raising children. The tax credit is fully refundable up to $1,400 and begins to phase-out for families making over $400,000. Parents must provide a child’s valid Social Security Number in order to receive this credit.

• Preserving the Child and Dependent Care Tax Credit to help families care for their children and older dependents such as a disabled grandparent who may need additional support.

• Preserving the Adoption Tax Credit so parents can continue to receive additional tax relief as they open their hearts and homes to an adopted child.

• Preserves the mortgage interest deduction – providing tax relief to current and aspiring homeowners.

• For all homeowners with existing mortgages that were taken out to buy a home, there will be no change to the current mortgage interest deduction.

• For homeowners with new mortgages on a first or second home, the home mortgage interest deduction will be available up to $750,000.

• Provides relief for Americans with expensive medical bills by expanding the medical expense deduction for 2017 and 2018 for medical expenses exceeding 7.5 percent of adjusted gross income, and rising to 10 percent beginning in 2019.

• Continues and expands the deduction for charitable contributions so people can continue to donate to their local church, charity, or community organization.

• Eliminates Obamacare’s individual mandate penalty tax – providing families with much-needed relief and flexibility to buy the health care that’s right for them if they choose.

• Maintains the Earned Income Tax Credit to provide important tax relief for low-income Americans working to build better lives for themselves.

• Improves savings vehicles for education by allowing families to use 529 accounts to save for elementary, secondary and higher education.

• Provides support for graduate students by continuing to exempt the value of reduced tuition from taxes.

• Retains popular retirement savings options such as 401(k)s and Individual Retirement Accounts (IRAs) so Americans can continue to save for their future.

• Increases the exemption amount from the Alternative Minimum Tax (AMT) to reduce the complexity and tax burden for millions of Americans.

• Provides immediate relief from the Death Tax by doubling the amount of the current exemption to reduce uncertainty and costs for many family-owned farms and businesses when they pass down their life’s work to the next generation.

For job creators of all sizes, the Tax Cuts and Jobs Act:

• Lowers the corporate tax rate to 21% (beginning Jan. 1, 2018) – down from 35%, which today is the highest in the industrialized world – the largest reduction in the U.S. corporate tax rate in our nation’s history.

• Delivers significant tax relief to Main Street job creators by:

• Offering a first-ever 20% tax deduction that applies to the first $315,000 of joint income earned by all businesses organized as S corporations, partnerships, LLCs, and sole proprietorships. For Main Street job creators with income above this level, the bill generally provides a deduction for up to 20% on business profits– reducing their effective marginal tax rate to no more than 29.6%.

• Establishing strong safeguards so that wage income does not receive the lower marginal effective tax rates on business income – helping to ensure that Main Street tax relief goes to the local job creators it was designed to help most.

• Allows businesses to immediately write off the full cost of new equipment to improve operations and enhance the skills of their workers – unleashing growth of jobs, productivity, and paychecks.

• Protects the ability of small businesses to write off interest on loans, helping these Main Street entrepreneurs start or expand a business, hire workers, and increase paychecks.

• Preserves important elements of the existing business tax system, including:

• Retaining the low-income housing tax credit that encourages businesses to invest in affordable housing so families, individuals, and seniors can find a safe and comfortable place to call home.

• Preserving the Research & Development Tax Credit that encourages our businesses and workers to develop cutting-edge “Made in America” products and services.

• Retaining the tax-preferred status of private-activity bonds that are used to finance valuable infrastructure projects.

• Eliminates the Corporate Alternative Minimum Tax, thereby lowering taxes and eliminating confusion and uncertainty so American job creators can focus on growing their business and hiring more workers, rather than on burdensome paperwork.

• Modernizes our international tax system so America’s global businesses will no longer be held back by an outdated “worldwide” tax system that results in double taxation for many of our nation’s job creators.

• Makes it easier for American businesses to bring home foreign earnings to invest in growing jobs and paychecks in our local communities.

• Prevents American jobs, headquarters, and research from moving overseas by eliminating incentives that now reward companies for shifting jobs, profits, and manufacturing plants abroad.

For greater American energy security and economic growth, the Tax Cuts andJobs Act:

• Establishes an environmentally responsible oil and gas program in the non-wilderness 1002 Area of the Arctic National Wildlife Refuge (ANWR). Congress specifically set aside the 1.57-million acre 1002 Area for potential future development. Two lease sales will be held over the next decade and surface development will be limited to 2,000 federal acres – just one ten-thousandth of all of ANWR.

• Significantly boosts American energy production. Responsible development in the 1002 Area will raise tens of billions of dollars for deficit reduction in the decades to come, while creating thousands of new jobs, reducing our dependence on foreign oil, and helping to keep energy affordable for American families and businesses.

• Provides a temporary increase in offshore revenue sharing for the Gulf Coast in 2020 and 2021, allowing those states to invest in priorities such as coastal restoration and hurricane protection

A Preliminary Look at the Tax Overhaul

This is a great article by Deborah Jacobs that gives us a preliminary look at some the possible tax changes that will be officially announced later this week.

Deborah Jacobs - 10 Ways the Tax Overhaul Could Hurt You

 EXECUTIVE SUMMARY: The tax overhaul bill recently passed by the Senate and headed to a conference committee with the House, could create long-term hardships for people who made financial commitments based on a tax system long in effect. It also leaves much less room for all of us to employ financial strategies on a yearly basis. By imposing new restrictions on itemized deductions and raising the standard deduction, the tax overhaul would create a system in which there are not as many moving parts. Fewer people will have enough deductions to itemize, and therefore will wind up taking the standard deduction. Those hurt most by these changes are likely to be people who previously itemized, and whose total deductions in previous tax years exceed the new standard deduction. Before the draconian changes take effect, in 2018, there’s time for you to take a few steps between now and December 31 to reduce what you’ll owe in April. But after that, we’ll start feeling the chokehold. How tight things will be depends on the size of your household, where you live, whether you own a home (or would like to someday) and your stage of life. Depending on your situation, this ill-conceived scheme to benefit the rich and worsen income inequality may come between you and the American dream: a home of your own, a living wage and a comfortable retirement.

 FACTS: The tax overhaul bill passed by the Senate and headed to a conference committee with the House, eliminates some major tax breaks for individuals. That could create long-term hardships for people who made financial commitments based on a tax system long in effect. It also leaves much less room for all of us to employ financial strategies on a yearly basis. Don’t be distracted by the new brackets (Sec. 1001 of the House bill, Sec. 11001 of the Senate bill, and Sec. 1 of the Code). What I’m talking about are the amounts that get subtracted on your tax return before those rates are used to compute your tax. While the two houses of Congress agree on some of these, others are still in play and headed for reconciliation. The other aspect of the overhaul that will have a crucial effect on individuals is the increase in the standard deduction, which last year was $6,350 for single people and $12,700 for married couples. Both bills would roughly double it: The deduction would increase to $12,200 for singles ($24,400 for married couples) under the House bill; and $12,000 for singles ($24,000 for married couples) under the Senate bill.

 COMMENT: Without the income tax deductions and exemptions that Congress would curtail or eliminate, many of us will be worse off, at least for the next eight years. (For budgetary reasons, the provisions discussed here are set to expire December 31, 2025.) Before the draconian changes take effect, in 2018, there’s time for you to take a few steps between now and December 31 to reduce what you’ll owe in April. But after that, we’ll start feeling the chokehold. How tight things will be depends on the size of your household, where you live, whether you own a home (or would like to someday) and your stage of life. To be sure, for decades taxpayers have been using deductions to game the system, and in an ideal world tax reform would put an end to that. But the latest overhaul is not about tax policy, reform, or ideology. Instead, it is a scheme to benefit the top 1 percent, the richest of the rich, being sold to poor and middle-class voters as a simplification and tax cut plan. Lawyers and accountants are already gloating about the hefty fees they’ll collect to help wealthy clients exploit new loopholes. But, like many of the rest of us, the tax geeks may be in for some pain themselves. You’ll want to have your 2016 tax return and latest financial statements handy as you review the following list. It explains how, depending on your situation, the tax overhaul may come between you and the American dream: a home of your own, a living wage and a comfortable retirement.

 1. You’re married with kids. Currently you can claim a personal exemption of $4,050 for yourself, your spouse and each of your dependents. The Senate bill repeals that. Figure the amount on line 42 of your 2016 tax return would disappear, making your taxable income on the following line that much higher. An increase in the child tax credit (currently for children under 17 and for children under 18 in the Senate version), from $1,000 to $1,600 in the House bill ($2,000 in the Senate version), does not come close to making up for the loss of the personal exemption.

 2. You own a home – or aspire to. The ability to deduct property taxes and interest paid on a mortgage have long been crucial to figuring out how much one could afford to spend on a home. Both these deductions are at risk. And the overall economic effect could be disastrous. Proposed changes could deter new home building and purchases – both of primary residences and vacation homes; drive down real estate values; make it unaffordable for current homeowners with large mortgages and high property taxes to continue living in those homes; and make it more difficult to finance renovations. The effects could trickle down to all the businesses that help you feather your nest, from contractors, to granite fabricators, to plumbing supply stores. How bad it will get depends on how discrepancies between the two bills are resolved during reconciliation, but it is almost certain that the deduction for property taxes will be capped at $10,000. With respect to debt on a home, the bills differ in significant ways. The House bill would reduce the amount of debt for which mortgage interest can be deducted, from $1 million to $500,000 (mortgages obtained on or before November 2 of this year would be grandfathered at $1 million), and the interest would only be deductible on a personal residence (not a vacation home). Both bills would eliminate the deduction for interest on a home equity loan. Not surprisingly, the National Association of Realtors is already projecting the adverse impact on home prices. One example: If deductions for both mortgage interest and real estate taxes are eliminated, they predict that prices in New York will fall between 10 and 15 percent! While mortgage interest deductions get hashed out in reconciliation, consider the effect of the cap on real estate tax deductions. If you own your home (or apartment) and itemized deductions in 2016, check Schedule A, line 6, to see what you paid for these taxes. Assume that, instead of itemizing, you’ll be taking the standard deduction for your 2018 tax return. To get some idea of how much worse off you might be, start by subtracting from whatever standard deduction applies to your situation (it doesn’t really matter whether you use the House or the Senate amount) what you are now paying in real estate taxes. If the result is more than zero, multiply this amount by the tax rate that you expect will apply to you in 2018. That’s roughly how much more you will pay in taxes just because of the new limitations on real estate tax deductions. At one end of the demographic spectrum, this affects empty nesters like those in the New York City suburbs whose property taxes alone exceed the new standard deduction. At the other end, it impacts their children, like a millennial who, after getting his first job, bought an apartment in Portland, Maine. “His budget is already tight,” his concerned mother said in an email, when I alerted her to the tax break he is about to lose. With this in mind, consider prepaying your real estate taxes for 2018. If you do that before December 31, you can deduct whatever you paid in 2017 on this year’s tax return. After that, your deduction will be limited to $10,000 and won’t count at all unless you itemize. Figure you’ll “wait and see” if the law passes? Consider this: Even if that doesn’t happen until early next year, it is likely to be made retroactive. If, in reconciliation, deductions for loans secured by a personal residence are curtailed (whether for a mortgage or a home equity loan), another strategy to consider is paying off those loans more quickly than the bank requires. This is a great investment, because your rate of return equals the interest rate on the loan. Not persuaded? Think of it this way: When you’ve paid down a dollar of debt, that’s a dollar you no longer owe. When you invest a dollar, you can’t be sure whether it will grow or shrink.

 3. You need to sell your house. Under current law, if you lived in the house for at least two of the five years before the sale, you qualify for a special break that is available to homeowners who sell their principal residence (but not vacation homes): The first $250,000 ($500,000 for married couples) of their capital gain on the sale is not subject to tax. The tax overhaul will make it harder to qualify for this benefit, because you must have lived in the house for longer – five out of eight years – to qualify for the break. And the exclusion only applies to one residence every five years. For empty nesters, an alternative strategy to consider is renting out your primary residence and downsizing to smaller quarters that you rent, rather than own. This made tax sense even before the latest congressional fiasco, as I wrote here, but it could be even more attractive going forward. A growing number of people like me are leveraging their homes in this way to finance long stints overseas. (High-speed internet access, now available all over the world, makes it possible to work remotely.) Though sharing economy websites are not hospitable to older hosts, I have found that real estate agents, who may see home sales go down as a result of the tax overhaul, are happy to help. But this provision doesn’t just concern people who are downsizing. It also “will make it harder for people to move for a job, and potentially harder for employers to recruit good employees who would have to move,” says Wendy S. Goffe, a lawyer with Stoel Rives, in Seattle. If that young executive in Portland gets transferred by his company a few years from now and needs to sell his apartment (all of which could easily happen), he’ll have to pay tax on any appreciation.

 4. You live in a state or city that has an income tax. This deduction, too, will be eliminated next year. To measure the impact, check Schedule A, line 5, of your 2016 return. Add that to whatever you’re spending on real estate taxes. Then, as described in No. 2, above, figure out whether your current itemized deductions exceed the new standardized one. If they do, you’re worse off. If you find that to be true, try to pay all the state and local taxes you owe for 2017 before the end of this year. If, instead, you wait until tax time, it counts as a payment in 2018, when it can no longer be deducted.

 5. You have children or grandchildren who attend public school. By eliminating the deduction for state and local taxes, and capping the one for real estate taxes, the overhaul hurts public education, which relies on these revenues for funding. As taxpayers who have lost the deduction resist tax increases, funding for public education will constrict. Again, this will frustrate financial commitments people made based on certain assumptions: For example, buying a home in a certain community, even though the property taxes there are high, because it has a good public school system. Meantime, the overhaul contains incentives to send children to private or parochial school. Those who’ve been using 529 plans to save for higher education could withdraw up to $10,000 per year to pay for elementary or secondary education. It’s a provision that will only benefit parents who opt out of public education, and have the means to pay the rest of the tab; In New York City, where I live, kindergarten at a private school costs as much as a year at many colleges. Under the Senate bill this provision would also include certain home school expenses. One of the more penny-ante provisions of the tax overhaul applies to teachers, whose wages tend to be pathetically low, especially considering their important role in educating the next generation. The House Bill would repeal the $250 above-the-line (non-itemized) deduction they can currently take for spending their own money on “educator” expenses, such as books or classroom supplies. The Senate Bill would increase this deduction to $500.

 6. You have high medical expenses – or might someday. The House bill repeals the deduction for unreimbursed medical expenses, which last year were deductible if they exceeded 10 percent of adjusted gross income (7.5 percent if at least one spouse was older than 65). The Senate bill would retain this deduction, but lower the floor to 7.5 percent for the 2017 and 2018 tax years. But of course you need to itemize for it to do you any good.

 7. You’re career-oriented. It’s bitterly ironic that the bill is called the “Tax Cuts and Jobs Act,” because in fact it eliminates a bunch of deductions for money we might at various times spend to advance our careers. These are expenses that get lumped together on Schedule A under the heading “Job Expenses and Certain Miscellaneous Deductions.” Examples include unreimbursed job travel, training or moving costs. It has always been hard to get much juice out of these deductions, since you can claim them only if they total more than 2 percent of your adjusted gross income. But in some years that could certainly be the case. And the tax law, especially one with this title, ought to provide financial incentives for self-directed career growth rather than take them away. In a similar vein, the House bill would make it necessary for employees to pay tax on education expenses paid for by their companies. Currently $5,250 of these expenses are excluded from income.

 8. You’re in debt for your education. Before you blink, a handful of tax goodies that are less than a rounding error in the federal budget, but help people struggling with the high cost of education, would go poof if the House draftsmen have their way. One that could affect many people is the repeal of the deduction for interest on a student loan. Currently, up to $2,500 of that interest can be deducted each year. (The higher your adjusted gross income, the less you can deduct.) This is another provision that could hurt millennials who previously had enough deductions to itemize – like the young executive who recently bought an apartment in Portland.

 9. You’re retired – or nearing retirement. As our earned income declines, those of us who saved money in retirement accounts will start to take withdrawals to meet current expenses. When we do that from traditional IRAs or 401(k)s (as opposed to Roths, which are funded with after-tax dollars), the money is taxed at ordinary income rates. In an environment in which fewer deductions are available to offset that income, more of our retirement savings will go to taxes and less will be available for personal use. Knowing that, and with the stock market at an all-time high, you may want to skim off some of the growth in traditional IRAs before year-end, and load up on as many itemized deductions as you can possibly take before they disappear. (Warning: To do that without penalty, you must be older than 59 1/2.) Of course, people who converted traditional IRA assets to Roths will be able to take withdrawals from those accounts tax-free in future years. If you were clever enough to do that a couple of years ago and have benefited from this year’s stock market run-up, give yourself a big hug. The Roth strategy will become more risky under the tax overhaul because it would repeal a special rule that allows the conversion to be reversed, or “recharacterized.” If you converted IRA assets to a Roth this year, figuring you could undo the conversion if the stock market tanks – say in January – and later reconvert the assets at a lower tax cost, you will be out of luck. Though the bills are inartfully drafted, the Ways and Means Committee report clearly indicates that you will no longer get another bite at the apple: “Recharacterization of IRA contributions may enable an individual to avoid tax by retroactively manipulating the amount of income that must be recognized for tax purposes. The Committee intends to repeal the recharacterization rule in order to prevent such manipulation.” In a footnote, the Committee notes that it will not restrict the use of socalled backdoor IRAs (though it does not use this term): “The provision does not preclude an individual from making a contribution to a traditional IRA and converting the traditional IRA to a Roth IRA. Rather, the provision would preclude the individual from later unwinding the conversion through a recharacterization.”

 10. You own low-basis stock. Currently when you sell stock, you can choose which blocks to liquidate, in order to minimize capital gains or take advantage of capital losses. The Senate bill would require that you use the first-in, first-out method instead: sell the shares in the order in which you acquired them (whether by purchase, reinvestment of dividends or the exercise of stock options). This could result in your taking a big tax hit when selling shares with a low basis – for example, those acquired early in the life of a company or shortly before an IPO. If you hold a lot of stock in a particular company, you might want to engage in some year-end tax planning in anticipation of possible changes. That might involve harvesting gains and losses on certain shares yourself, and donating others to charity. Just be sure you will not regret this strategy if the provision in the Senate bill is dropped during reconciliation. Even when the state of the law is clear, it’s usually better not to let the tax tail wag the investment dog.

 I still hope our legislators will take all the commentary to heart, slow down and come up with a significantly less “one-percent sided” tax law. Not wanting to lose the support of wealthy donors, most of them rushed to vote for a bill that they couldn’t begin to understand (or perhaps did but thought the public would not). We will spend years suffering the consequences of their senseless and self-serving haste.

 

How to Know if the Knock on Your Door is Actually Someone from the IRS

Every Halloween, children knock on doors pretending they are everything from superheroes to movie stars. Scammers, on the other hand, don’t leave their impersonations to one day. They can happen any time of the year.

People can avoid taking the bait and falling victim to a scam by knowing how and when the IRS does contact a taxpayer in person. This can help someone determine whether an individual is truly an IRS employee.

Here are eight things to know about in-person contacts from the IRS.

  • The IRS initiates most contacts through regular mail delivered by the United States Postal Service.
  • There are special circumstances when the IRS will come to a home or business. This includes:
    • When a taxpayer has an overdue tax bill
    • When the IRS needs to secure a delinquent tax return or a delinquent employment tax payment
    • To tour a business as part of an audit
    • As part of a criminal investigation
  • Revenue officers are IRS employees who work cases that involve an amount owed by a taxpayer or a delinquent tax return. Generally, home or business visits are unannounced.
  • IRS revenue officers carry two forms of official identification.  Both forms of ID have serial numbers. Taxpayers can ask to see both IDs.
  • The IRS can assign certain cases to private debt collectors. The IRS does this only after giving written notice to the taxpayer and any appointed representative. Private collection agencies will never visit a taxpayer at their home or business.
  • The IRS will not ask that a taxpayer makes a payment to anyone other than the U.S. Department of the Treasury.
  • IRS employees conducting audits may call taxpayers to set up appointments, but not without having first notified them by mail. Therefore, by the time the IRS visits a taxpayer at home, the taxpayer would be well aware of the audit.   

IRS criminal investigators may visit a taxpayer’s home or business unannounced while conducting an investigation. However, these are federal law enforcement agents and they will not demand any sort of payment.

Gifts to Charity: Six Facts About Written Acknowledgements

Throughout the year, many taxpayers contribute money or gifts to qualified organizations eligible to receive tax-deductible charitable contributions. Taxpayers who plan to claim a charitable deduction on their tax return must do two things:

  • Have a bank record or written communication from a charity for any monetary contributions.
  • Get a written acknowledgment from the charity for any single donation of $250 or more.

Here are six things for taxpayers to remember about these donations and written acknowledgements:

  • Taxpayers who make single donations of $250 or more to a charity must have one of the following:
    • A separate acknowledgment from the organization for each donation of $250 or more.
    • One acknowledgment from the organization listing the amount and date of each contribution of $250 or more.
  • The $250 threshold doesn’t mean a taxpayer adds up separate contributions of less than $250 throughout the year.
    • For example, if someone gave a $25 offering to their church each week, they don’t need an acknowledgement from the church, even though their contributions for the year are more than $250.
  • Contributions made by payroll deduction are treated as separate contributions for each pay period.
  • If a taxpayer makes a payment that is partly for goods and services, their deductible contribution is the amount of the payment that is more than the value of those goods and services.
  • A taxpayer must get the acknowledgement on or before the earlier of these two dates:
    • The date they file their return for the year in which they make the contribution.
    • The due date, including extensions, for filing the return.
  • If the acknowledgment doesn't show the date of the contribution, the taxpayers must also have a bank record or receipt that does show the date.

 

IRS Issues Reminder to Taxpayers as Scams Continue Across the Nation

Internal Revenue Service today warned taxpayers to remain vigilant to scams as they continue to be reported around the country. Phishing, phone scams and identity theft top the list of items normally reported. However, following hurricanes and other disasters, the IRS urged taxpayers to be on the lookout for schemes stemming from these recent events.

While individuals and businesses deal with the devastation of Hurricanes Harvey, Irma and Maria and wildland fires in the West, criminals may take advantage of this situation by creating fake charities to get money or personal information from sympathetic taxpayers. They may also attempt to con victims by impersonating a relief agency or charity that will provide relief. Such fraudulent scams and solicitations for donations may involve contact by telephone, social media, e-mail or in person.

Below are some of the more typical scams the IRS has seen:

Email Phishing Scams          

The IRS has recently seen email schemes that target tax professionals, payroll professionals and human resources personnel in addition to individual taxpayers.

In email phishing attempts, criminals pose as a person or organization that taxpayers trust and recognize. They may hack an email account and send mass emails under another person’s name. They may pose as a bank, credit card company, tax software provider or government agency. If a person clicks on the link in these emails, it takes them to fake websites created by fraudsters to appear legitimate but contain phony login pages. These criminals hope victims will take the bait and provide money, passwords, Social Security numbers and other information that can lead to identity theft.

Scam emails and websites also can infect computers with malware without the user knowing it. The malware can give the criminal access to the device, enabling them to access sensitive files or track keyboard strokes, exposing logins and other sensitive information.

If a taxpayer receives an unsolicited email that appears to be from either the IRS or a program closely linked to the IRS, such as the Electronic Federal Tax Payment System (EFTPS), report it by sending it to phishing@irs.gov.  Learn more by going to the Report Phishing and Online Scams page.

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 has information online that can help protect taxpayers from email scams.

Phone Scams

The IRS does not call and leave prerecorded, urgent messages asking for a call back. In this tactic, the victim is told if they do not call back, a warrant will be issued for their arrest.

The IRS recently began sending letters to taxpayers whose overdue federal tax accounts are being assigned to one of four private-sector collection agencies. Because of this, taxpayers should be on the lookout for scammers posing as private collection firms. The IRS-authorized firms will only be calling about a tax debt the person has had – and has been aware of – for years. Taxpayers also would have been previously contacted by the IRS about their tax debt.

How to Know It’s Really the IRS Calling or Knocking on Your Door

The IRS initiates most contacts through regular mail delivered by the United States Postal Service.

However, there are special circumstances in which the IRS will call or come to a home or business, such as when a taxpayer has an overdue tax bill, to secure a delinquent tax return or delinquent employment tax payment, or to tour a business as part of an audit or during criminal investigations.

Even then, taxpayers will usually first receive several letters (called “notices”) from the IRS in the mail. For more information, visit “How to know it’s really the IRS calling or knocking on your door” on IRS.gov.

Tax Refund Fraud -- Identity Theft

Tax-related identity theft occurs when someone uses a stolen Social Security number or Individual Taxpayer Identification Number (ITIN) to file a tax return claiming a fraudulent refund.

In 2015, the IRS joined forces with representatives of the software industry, tax preparation firms, payroll and tax financial product processors and state tax administrators to combat identity-theft refund fraud and protect the nation's taxpayers. This group -- the Security Summit -- has held a series of public awareness campaigns directed at taxpayers called "Taxes.Security.Together."  For tax professionals, the “Protect Your Clients; Protect Yourself” and “Don’t Take the Bait” campaigns encourage the tax community to take steps to protect themselves from identity thieves and cybercriminals.

Security Reminders for Taxpayers

The IRS and its Summit partners remind taxpayers they can do their part to help in this effort. Taxpayers and tax professionals should:

  • Always use security software with firewall and anti-virus protections. Make sure the security software is always turned on and can automatically update. Encrypt sensitive files such as tax records stored on computers and devices. Use strong passwords.  
  • Learn to recognize phishing emails, threatening phone calls and texts from thieves posing as legitimate organizations, such as a bank, credit card company and government agencies. Do not click on links or download attachments from unknown or suspicious emails.
  • Protect personal data. Don’t routinely carry Social Security cards, and make sure tax records are secure. Treat personal information like cash; don’t leave it lying around.

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