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Fall Tax Planning

Tax PlanningIf you think tax planning only happens in the spring, think again. Taxes are a year-round concern and there’s no better time than the present to plan for the future. Consider the following:

Fall means the end of summer and summer camp for many kids. Did you know there’s a tax credit for that? If your child attended a summer day camp (not summer school or an overnight camp) the cost of that camp may qualify for the Child and Dependent Care Credit. While this is often referred to as the “day care credit,” some summer camps also qualify. Keep good records and bring them to your tax appointment in the spring.

Fall also means college, and college football, and there are tax implications for both. The American Opportunity Tax Credit (AOTC), which has been extended through December 2017, is a great way to offset the costs of higher education. To qualify for the AOTC, you must meet all three of the following criteria:

  1. You, your dependent or a third party pays qualified education expenses for higher education.
  2. An eligible student must be enrolled at an eligible educational institution.
  3. The eligible student is yourself, your spouse or a dependent you list on your tax return.

The AOTC can offset 100% of the first $2,000 and 25% of the second $2,000 of qualified education expenses paid. There is a phaseout for higher income taxpayers and a refundable portion for lower income taxpayers so each situation is unique.

Pay special attention to #3 as this is a conversation to have with your children before you send them off to school. If a student claims himself as a dependent, he claims the education credit as well. However, students often qualify as dependents on their parents’ return and the parents often recognize a greater tax benefit when claiming the credit. Make sure your student knows to talk to you before asserting his independence and filing his own return.

In addition to the AOTC, higher education costs can be offset by the Lifetime Learning Credit, the Tuition and Fees Deduction and the Student Loan Interest Deduction. While education tax benefits are plentiful, they are also complicated. For more information, refer to IRS Publication 970 or give us a call.

As for football, many colleges and universities charge a booster fee for the right to purchase season tickets for football and other sports. While the cost of the tickets themselves is usually not deductible, the booster fee may be. If the fee is paid to the school or for the benefit of the school and gives you the right to purchase tickets, the cost of the booster fee may be 80% deductible as an itemized deduction on Form 1040, Schedule A.

Fall also means a third estimated tax payment is due on September 15. If you are self-employed or make estimated tax payments for other reasons, don’t miss this important deadline.

Finally, fall is the perfect time to do some planning to minimize your tax bill for 2016. Has your income changed since you filed your last return? Have you started school or started a business? Married or divorced? Retired? Had a baby? Purchased a house? Incurred serious medical expenses? Changed your health insurance? These and many other life experiences can affect your tax return so planning for those events now can save you money later. Waiting until January will be too late to influence your 2016 tax bill so call today and schedule an appointment with one of the enrolled agents in our office. Enrolled agents are America’s Tax Experts® and we pay attention to all this stuff so you don’t have to.

Home Energy Tax Credits Save You Money at Tax Time

energy-efficient-house2Certain energy-efficient home improvements can cut your energy bills and save you money at tax time. Here are some key facts that you should know about home energy tax credits:

Non-Business Energy Property Credit

  • Part of this credit is worth 10 percent of the cost of certain qualified energy-saving items you added to your main home last year. This may include items such as insulation, windows, doors and roofs.
  • The other part of the credit is not a percentage of the cost. This part of the credit is for the actual cost of certain property. This may include items such as water heaters and heating and air conditioning systems. The credit amount for each type of property has a different dollar limit.
  • This credit has a maximum lifetime limit of $500. You may only use $200 of this limit for windows.
  • Your main home must be located in the U.S. to qualify for the credit.
  • Be sure you have the written certification from the manufacturer that their product qualifies for this tax credit. They usually post it on their website or include it with the product’s packaging. You can rely on it to claim the credit, but do not attach it to your return. Keep it with your tax records.
  • You must place qualifying improvements in service in your principal residence by Dec. 31, 2016.

Residential Energy Efficient Property Credit

  • This tax credit is 30 percent of the cost of alternative energy equipment installed on or in your home.
  • Qualified equipment includes solar hot water heaters, solar electric equipment, wind turbines and fuel cell property.
  • Qualified wind turbine and fuel cell property must be placed into service by Dec. 31, 2016. Hot water heaters and solar electric equipment must be placed in to service by Dec. 31, 2021.
  • The tax credit for qualified fuel cell property is limited to $500 for each one-half kilowatt of capacity. The amount for other qualified expenditures does not have a limit. If your credit is more than the tax you owe, you can carry forward the unused portion of this credit to next year’s tax return.
  • The home must be in the U.S. It does not have to be your main home, unless the alternative energy equipment is qualified fuel cell property,

Source: IRS.gov

IRS Alerts Payroll and HR Professionals to Phishing Scheme Involving W-2s

IR-2016-34, March 1, 2016

WASHINGTON – The Internal Revenue Service today issued an alert to payroll and human resources professionals to beware of an emerging phishing email scheme that purports to be from company executives and requests personal information on employees.

The IRS has learned this scheme – part of the surge in phishing emails seen this year – already has claimed several victims as payroll and human resources offices mistakenly email payroll data including Forms W-2 that contain Social Security numbers and other personally identifiable information to cybercriminals posing as company executives.

“This is a new twist on an old scheme using the cover of the tax season and W-2 filings to try tricking people into sharing personal data. Now the criminals are focusing their schemes on company payroll departments,” said IRS Commissioner John Koskinen. “If your CEO appears to be emailing you for a list of company employees, check it out before you respond. Everyone has a responsibility to remain diligent about confirming the identity of people requesting personal information about employees.”

IRS Criminal Investigation already is reviewing several cases in which people have been tricked into sharing SSNs with what turned out to be cybercriminals. Criminals using personal information stolen elsewhere seek to monetize data, including by filing fraudulent tax returns for refunds.

This phishing variation is known as a “spoofing” email. It will contain, for example, the actual name of the company chief executive officer. In this variation, the “CEO” sends an email to a company payroll office employee and requests a list of employees and information including SSNs.

The following are some of the details contained in the e-mails:

  • Kindly send me the individual 2015 W-2 (PDF) and earnings summary of all W-2 of our company staff for a quick review
  • Can you send me the updated list of employees with full details (Name, Social Security Number, Date of Birth, Home Address, Salary) as at 2/2/2016.
  • I want you to send me the list of W-2 copy of employees wage and tax statement for 2015, I need them in PDF file type, you can send it as an attachment. Kindly prepare the lists and email them to me asap.

The IRS recently renewed a wider consumer alert for e-mail schemes after seeing an approximate 400 percent surge in phishing and malware incidents so far this tax season and other reports of scams targeting others in a wider tax community.

The emails are designed to trick taxpayers into thinking these are official communications from the IRS or others in the tax industry, including tax software companies. The phishing schemes can ask taxpayers about a wide range of topics. E-mails can seek information related to refunds, filing status, confirming personal information, ordering transcripts and verifying PIN information.

The IRS, state tax agencies and tax industry are engaged in a public awareness campaign – Taxes. Security. Together. – to encourage everyone to do more to protect personal, financial and tax data. See IRS.gov/taxessecuritytogether or Publication 4524 for additional steps you can take to protect yourself.

Fighting Tax Scam Phone Fraud

Tax_Scam-Janet_SienickiThe Internal Revenue Service has a warning for many Americans (and it’s not about paying your taxes). Instead, the agency has tips on how to protect yourself from telephone scam artists calling and pretending to be with the IRS. These callers may demand money or say you have a refund due and try to trick you into sharing private information. The con artists can sound convincing when they call. They may know a lot about you, and they usually alter the caller ID to make it look like the IRS is calling. They use fake names and bogus IRS identification badge numbers. If you don’t answer, they often leave an “urgent” callback request. “We urge people not to be deceived by these threatening phone calls,” said IRS Commissioner John Koskinen. “We have formal processes in place for people with tax issues. The IRS respects taxpayer rights, and these angry shakedown calls are not how we do business.”

What to Watch For

The IRS reminds people that they can know pretty easily when a supposed IRS caller is a fake. Here are five things the scammers often do but the IRS will not:

  • Call to demand immediate payment or call about taxes owed without first having mailed you a bill.
  •  Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
  • Require you to use a specific payment method for your taxes, such as a prepaid debit card.
  • Ask for credit or debit card numbers over the phone.
  • Threaten to bring in the police or other law-enforcement groups to have you arrested for not paying.

What to Do

If you get a phone call from someone claiming to be from the IRS and asking for money, here are four things you can do:

  1. If you know you owe taxes or think you might, call the IRS at (800) 829-1040.
  2. If you know you don’t owe taxes or have no reason to believe that you do, report the incident to the Treasury Inspector General for Tax Administration (TIGTA) at (800) 366-4484 or at www.tigta.gov. You can also file a complaint with the Federal Trade Commission’s “FTC Complaint Assistant” at FTC.gov. Add “IRS Telephone Scam” to the comments of your complaint.
  3. Get help from a licensed tax professional such as an Enrolled Agent or CPA. EAs are the only federally licensed tax practitioners who specialize in taxation and also have unlimited rights to represent taxpayers before the IRS. If you are audited by the IRS, an EA can advocate on your behalf.