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Tax Credits

Inflated Refund Claims Remain on the IRS “Dirty Dozen” List of Tax Scams for the 2015 Filing Season

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WASHINGTON — The Internal Revenue Service today warned taxpayers to be on the lookout for unscrupulous tax return preparers pushing inflated tax refund claims. This scam remains on the annual list of tax scams known as the “Dirty Dozen” for the 2015 filing season.

“Every filing season, scam artists lure victims in by promising outlandish refunds,” said IRS Commissioner John Koskinen. “Taxpayers should be wary of anyone who asks them to sign a blank return, promise a big refund before looking at their records, or charge fees based on a percentage of the refund.”

Compiled annually, the “Dirty Dozen” lists a variety of common scams that taxpayers may encounter any time but many of these schemes peak during filing season as people prepare their returns or hire someone to help with their taxes.

Illegal scams 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.

Don’t Fall Victim to Promises of Outlandish Refunds

Scam artists routinely pose as tax preparers during tax time, luring victims in by promising large federal tax refunds or refunds that people never dreamed they were due in the first place.

Scam artists use flyers, advertisements, phony store fronts and even word of mouth to throw out a wide net for victims. They may even spread the word through community groups or churches where trust is high. Scammers prey on people who do not have a filing requirement, such as low-income individuals or the elderly. They also prey on non-English speakers, who may or may not have a filing requirement.

Scammers build false hope by duping people into making claims for fictitious rebates, benefits or tax credits. They charge good money for very bad advice. Or worse, they file a false return in a person’s name and that person never knows that a refund was paid.

Scam artists also victimize people with a filing requirement and due a refund by promising inflated refunds based on fictitious Social Security benefits and false claims for education credits, the Earned Income Tax Credit (EITC), or the American Opportunity Tax Credit, among others.

The IRS sometimes hears about scams from victims complaining about losing their federal benefits, such as Social Security benefits, certain veteran’s benefits or low-income housing benefits. The loss of benefits was the result of false claims being filed with the IRS that provided false income amounts.

While honest tax preparers provide their customers a copy of the tax return they’ve prepared, victims of scam frequently are not given a copy of what was filed. Victims also report that the fraudulent refund is deposited into the scammer’s bank account. The scammers deduct a large “fee” before paying victims, a practice not used by legitimate tax preparers.

The IRS reminds all taxpayers that they are legally responsible for what’s on their returns even if it was prepared by someone else. Taxpayers who buy into such schemes can end up being penalized for filing false claims or receiving fraudulent refunds.

Gilliland & Associates, PC is a full-service CPA firm specializing in tax planning for individuals and businesses in the Northern Virginia area. We are based in Falls Church, VA and also service clients in the McLean and Tysons Corner, VA. Gilliland & Associates specializes known for our superior knowledge and aggressive interpretation and application of tax laws, we help you keep more of your earnings by finding you the lowest possible tax on your business or personal tax return. You can connect with us on Google+, LinkedIn, Facebook, and Twitter.

 

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Guide your children to financial maturity

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Teaching your children about money and finances is easiest when you start early. Here’s a quick review of what you should teach your children at each age if you want them to become financially competent adults.

Preschool – Skills to Teach

* Identify coins and bills; learn what each is worth.

* Understand that you can’t buy everything; choices are necessary.

* Save money in a piggy bank.
Grade School – Skills to Teach

* Read price tags; learn comparison shopping.

* Do money arithmetic; make change.

* Manage an allowance; use it to pay for some of child’s own purchases.

* Open a savings account and learn about interest.

* Participate in family financial discussions about major purchases, vacation choices, etc.
Teens – Skills to Teach

* Work to earn money.

* Budget for larger purchases.

* Learn to use a checking account.

* Learn about investing – stocks, mutual funds, CDs, IRAs, etc.

* Share in financial planning (and saving) for college.
College/Young Adult – Skills to Teach

* Learn about borrowing money (interest, default, etc.).

* Use credit card judiciously.

* Participate in family estate planning discussions.
Knowing about money – how to earn it, use it, invest it, and share it – is a critical life skill. It’s never too early to start teaching your children about financial matters.

Gilliland & Associates, PC is a full-service CPA firm specializing in tax planning for individuals and businesses in the Northern Virginia area. We are based in Falls Church, VA and also service clients in the McLean and Tysons Corner, VA. Gilliland & Associates specializes known for our superior knowledge and aggressive interpretation and application of tax laws, we help you keep more of your earnings by finding you the lowest possible tax on your business or personal tax return. You can connect with us on Google+ , LinkedIn , Facebook, and Twitter.

 

 

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Consider making a charitable gift from your IRA

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The tax law signed last January extended the tax break that allows contributions of up to $100,000 from a traditional IRA to a qualified charity. Taxpayers aged 70½ or older can make a distribution directly from an IRA to a charity. The amount donated is not included in the taxpayer’s gross income and is considered part of the required minimum distribution for the year.

Gilliland & Associates, PC is a full-service CPA firm specializing in tax planning for individuals and businesses in the Northern Virginia area. We are based in Falls Church, VA and also service clients in the McLean and Tysons Corner, VA. Gilliland & Associates specializes known for our superior knowledge and aggressive interpretation and application of tax laws, we help you keep more of your earnings by finding you the lowest possible tax on your business or personal tax return. You can connect with us on Google+ , LinkedIn , Facebook, and Twitter.

 

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RMDs require careful planning

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After all the advice you’ve received about saving for retirement, taking money out of your traditional IRAs and other qualified retirement plans may feel strange. Yet once you reach age 70½, the required minimum distribution (RMD) rules say you have to do just that.

Under these rules, you must withdraw at least a minimum amount from your retirement plans each year. Since the withdrawals are considered ordinary income, planning in advance can help you prepare for the impact on your tax return.

Here are two suggestions.

* Make a list of your accounts. The rules require an RMD calculation for each plan. With traditional IRAs, including SEP and SIMPLE plans, you can take the total distribution from one or more accounts, in any amount you choose. You can also take more than the minimum.

However, withdrawals from different types of retirement plans can’t be combined. Say for instance, you have one 401(k) and one IRA. You have to figure the RMD for each and take separate distributions.

Why is that important? Failing to take distributions, or taking less than is required, could result in a penalty of 50% of the shortfall.

* Plan your required beginning date. In general, you’re required to withdraw RMDs by December 31, starting in the year you turn 70½. The rules provide one exception: You have the option of postponing your first withdrawal until April 1 of the following year.

Delaying income can be a sound tax move. But because you’ll still have to take your second distribution by December 31, you’ll receive two distributions in the same year, which can increase your taxes.

To discuss these and other RMD rules, give us a call. We can help you create a sound distribution plan.

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Retirement tax rules

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Three important birthdays affect your retirement plan:

* At age 50, you can make extra “catch-up” contributions to your IRA and 401(k) savings. For 2013, these are $1,000 and $5,500, respectively.

* After age 59½, you’re eligible to make penalty-free withdrawals from your IRAs.

* Beginning no later than the year after you reach age 70½, you’re required to take minimum distributions from your traditional IRAs each year.

Need more details? Contact our office.

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Check your income level and tax breaks

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Check into all the tax credits and deductions for which you might qualify this year. Because some of these tax breaks are reduced or eliminated entirely once your income reaches certain limits, you need to be aware of the income phase-out thresholds for those credits and deductions. While it doesn’t make sense to make less income just to qualify for a tax break, shifting income from one year to another may sometimes be a smart thing to do.

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Tax-saving tip: Watch phase-out levels

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Are you familiar with income phase-out levels for those tax credits and deductions you hope to take advantage of on your 2011 tax return? While it doesn’t make sense to make less income just to qualify for a tax break, shifting income from one year to another may sometimes be a smart move.

 Learn about the tax credits and deductions for which you might qualify. Then estimate your income for this year, and if it will be just beyond qualification range, look for opportunities to defer income until a later year. Investment income can often be shifted, or you might delay the exercise of stock options or the receipt of a bonus.

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It’s time to pay back the first-time homebuyer credit

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Did you buy your current home between April and December of 2008 and claim the then-new federal tax credit for first-time homebuyers?

If so, repayment of the credit begins this year, and the first installment is due with your 2010 tax return.

You might already have received a letter from the IRS summarizing how much you received and what amount you need to repay. Generally, your installments will be spread in equal amounts over the next fifteen years.

Example: Say you received the maximum credit of $7,500. Since $7,500 divided by 15 is $500, that’s how much you’d add to your tax liability, beginning with your 2010 return.

In some cases – such as if you sell your home or convert it to a rental – you may have to pay back some or all of the credit before the end of the 15-year “recapture” period. The repayment is due in the tax year that the ownership or use of your home changes.

In other situations, including when you move due to military or certain other government service orders, your repayment could be reduced or eliminated.

Other exceptions may apply. Please call if you have questions about how the payback requirements affect you.

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Homebuyer tax credit is extended

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If you signed a contract before May 1 to buy a home, but have been unable to close the deal, you still have time to apply for the homebuyer tax credit. The deadline for finalizing the paperwork on your new home has been extended through September 30, 2010.

Here’s what you need to know:

* The extension applies only if you already had a contract in place by April 30, 2010. The new deadline is available for first-time homebuyers and long-time residents.

* The maximum credit remains unchanged ($8,000 for first-time homebuyers and $6,500 for long-time residents), as do other rules for qualifying.

* You can claim the credit on your 2009 or 2010 federal income tax return. You’ll have to complete Form 5405, First-Time Homebuyer Credit and Repayment of the Credit, and attach proof that you meet the requirements.

Not sure if you qualify? We can help. Please call for more information.

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HIRE Act signed into law

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The “Hiring Incentives to Restore Employment Act” (HIRE Act), signed into law on March 18, 2010, creates two new business-friendly tax breaks that can save you money on your 2010 federal income tax return. The HIRE Act also extends a 2009 break.

 Here’s an overview.

 * Payroll tax forgiveness. The Act provides an exemption for your share of the social security payroll tax when you hire certain qualified workers after February 3, 2010 and before January 1, 2011.

 The break means you can forego paying the 6.2% matching portion of social security taxes on qualifying wages.

 Your new employees must certify that they haven’t worked more than 40 hours during the 60-day period before starting work for you.

 * Retained worker credit. When workers who qualify for payroll tax forgiveness stay on the job 52 weeks, you may be able to claim a credit on your business’s federal income tax return. Credits are applied against the tax you owe. The maximum credit is $1,000 per retained worker.

 * Section 179 extension. The enhanced Section 179 expensing rules are extended through the end of 2010. You can expense up to $250,000 of machinery and equipment you purchase and use in your business, as long as the total cost of the assets you buy does not exceed $800,000.

 The HIRE Act contains other tax provisions that may affect your business. Please call for the latest update.

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