Safeguarding Taxpayer Data

Cybercriminals want sensitive client data that tax professionals have, so the tax preparation community is a target. As a tax professional, you can take the initial step to safeguard taxpayer data by assessing your risks and making a security plan.

It’s more important than ever that tax professionals take aggressive steps to protect taxpayer information. Developing a good security plan not only makes you think about areas where you could be vulnerable to intrusions, it also helps you focus on prevention. How do you get started on developing a plan that is workable for your business?

Here are some initial steps:

Step 1: Complete a risk assessment
This means identifying the risks and potential impacts of unauthorized access, use or disclosure of information. It also means looking at what happens if someone modifies or destroys that information or the computer systems that can be used to access taxpayer data. Ask yourself these questions:

How vulnerable is your customer’s data to theft, disclosure, alteration or unrecoverable loss?
What can you do to reduce the impact to your customers and your business in such an event?
What can you do to reduce vulnerability?
Step 2: Write and follow an Information Security Plan
The plan should:

Address every item identified in the risk assessment.
Define safeguards you want staff, affiliates and service providers to follow.
Require a responsible person to review and approve the Information Security Plan
Require a responsible person to monitor, revise and test the Information Security Plan on a periodic (annual) basis to address any system or business changes or problems identified.

Step 3: At least once a year, if not more, perform an internal assessment

Evaluate and test the security plan and other safeguards you have in place.
Document any deficiencies. Create and execute a plan to address them.
Learn more about these and other steps by reviewing IRS Publication 4557, Safeguarding Taxpayer Data.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

Strengthen Anti-Fraud Effort

When you get your Form W-2 in early 2017, you may notice a new entry – a 16-digit verification code. This is part of an effort conducted by the Internal Revenue Service to protect taxpayers and strengthen anti-fraud efforts.

The expanded use of the W-2 Verification Code is a way to validate the wage and tax withholding information on the tax form. For taxpayers, taking a moment to add this code when filling out their taxes helps the IRS authenticate the information. This in turn helps protect against identity theft and unnecessary refund delays.

For 2017, the IRS and its partners in the payroll service provider industry will place the code on 50 million Forms W-2. This is up from two million forms in 2016.

The IRS, state tax agencies and the nation’s tax industry – partners in combating identity theft – ask for your help in their efforts. Working in partnership with you, we can make a difference.

That’s why we launched a public awareness campaign that we call Taxes. Security. Together. We’ve also launched a series of security awareness tips that can help protect you from cybercriminals.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

Many ITINs Expire Jan. 1

Time is running out for many ITIN holders who need to file a federal income tax return in 2017 and want to avoid a long wait for a refund, according to the Internal Revenue Service.

An Individual Taxpayer Identification Number (ITIN) is used by anyone who has tax-filing or payment obligations under U.S. law but is not eligible for a Social Security number. Under a recent law change by Congress, any ITIN not used on a tax return at least once in the past three years will expire on Sunday, Jan. 1, 2017. In addition, any ITIN with middle digits of either 78 or 79 (9NN-78-NNNN or 9NN-79-NNNN) will also expire on that date.

This means that anyone with an expiring ITIN should act now to make sure they have a renewed ITIN in time to file a return during the upcoming tax season. Failure to do so will result in refund delays and possible loss of eligibility for some tax benefits until the ITIN is renewed.

The IRS said that an ITIN renewal application filed now will be processed before one submitted in January or February at the height of tax season. Currently, a complete and accurate renewal application can be processed in as little as seven weeks. But this timeframe is expected to lengthen to 11 weeks during tax season.

Several common errors are currently slowing down and holding up some ITIN renewal applications. The mistakes generally center on missing information, and/or insufficient supporting documentation. The IRS urges any applicant to check over their form carefully before sending it to the IRS.

To avoid processing delays, ITIN renewal applicants should be sure to use the latest version of Form W-7, revised September 2016. This version of the form, along with its instructions, is currently posted on IRS.gov.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

Plan Now to Get Full Benefit of Saver’s Credit

As the tax filing season approaches, the Internal Revenue Service reminds low- and moderate-income workers that they can take steps now to save for retirement and earn a special tax credit in 2016 and years ahead.

The saver’s credit helps offset part of the first $2,000 workers voluntarily contribute to IRAs and 401(k) plans and similar workplace retirement programs. Also known as the retirement savings contributions credit, the saver’s credit is available in addition to any other tax savings that apply.

Eligible workers still have time to make qualifying retirement contributions and get the saver’s credit on their 2016 tax returns. People have until the due date for filing their 2016 return (April 18, 2017), to set up a new individual retirement arrangement or add money to an existing IRA for 2016. This includes the Treasury Department’s myRA. However, elective deferrals (contributions) must be made by the end of the year to a 401(k) plan or similar workplace program, such as a 403(b) plan for employees of public schools and certain tax-exempt organizations, a governmental 457 plan for state or local government employees, or the Thrift Savings Plan for federal employees.

Employees who are unable to set aside money for this year may want to schedule their 2017 contributions soon so their employer can begin withholding them in January.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

IRS Face-To-Face Help Now By Appointment

As the tax filing season approaches, the Internal Revenue Service reminds taxpayers that an appointment is required for in-person tax help at all IRS Taxpayer Assistance Centers (TAC).

IRS TACs continue to be a vital part of the service IRS provides when a tax issue cannot be resolved on-line or by phone. All IRS TACs now provide face-to-face service by-appointment. Instead of taxpayers going directly to their local TAC, they can call 844-545-5640 to reach an IRS representative, who is trained to either help them resolve their issue or schedule an appointment for them to get the help they need.

The Contact Your Local Office tool on IRS.gov helps taxpayers find the closest IRS TAC, the days and hours of operation, and a list of services provided. Studies show most taxpayers visit a TAC to make payments, inquire about a notice, ask about a refund, get a transcript or obtain a tax form. Many of these issues can be resolved at IRS.gov without traveling to an IRS office.

Check Publication 5136, the IRS Services Guide for additional information on available services.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

Tips on Validating Your Identity on Your Tax Return

You should always keep a copy of your tax return. It is even more important for 2017, as the Internal Revenue Service moves to strengthen its e-signature validation process.

You must use your 2015 adjusted gross income or your 2015 self-select PIN to validate your identity on your federal electronic tax return this tax season. The electronic filing PIN is no longer available as an option.

The IRS, state tax agencies and the nation’s tax industry – partners in combating identity theft -ask for your help in their efforts. Working in partnership with you, we can make a difference.

That’s why we launched a public awareness campaign that we call “Taxes. Security. Together.” We’ve also launched a series of security awareness tips that can help protect you from cybercriminals.

As part of the IRS efforts to protect taxpayers, the e-signature validation change mostly affects those taxpayers who have used tax software in the past but are changing software brands in 2017.

Here are a few important steps:

Find a copy of your 2015 tax return; the original return filed with the IRS.
Create a five-digit Self-Select PIN to serve as your electronic signature. It can be any five numbers except all zeros.
If married filing jointly, each taxpayer must create a self-select PIN.
Provide your date of birth when prompted
Provide either your 2015 adjusted gross income or your 2015 self-select PIN as the “shared secret” between you and the IRS. Either number, along with your date of birth, will serve to help validate your identity and verify your e-signature.
On your 2015 tax return, your adjusted gross income (AGI) is on line 37 of the Form 1040; line 21 on the Form 1040-A or line 4 on the Form 1040-EZ.
This change will not affect most taxpayers. For example, if you are a returning customer, your software generally will automatically populate your date of birth and “shared secret” information. Those of you who switched software products generally must enter the “shared secret” information yourself.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

What To Do Before The Tax Year Ends

As tax filing season approaches, the Internal Revenue Service is reminding taxpayers there are things they should do now to get ready for filing season.

For most taxpayers, Dec. 31 is the last day to take actions that will impact their 2016 tax returns. For example, charitable contributions are deductible in the year made. Donations charged to a credit card before the end of 2016 count for the 2016 tax year, even if the bill isn’t paid until 2017. Checks to a charity count for 2016 as long as they are mailed  by the last day of the year.

Taxpayers who are over age 70 ½ are generally required to receive payments from their individual retirement accounts and workplace retirement plans by the end of 2016, though a special rule allows those who reached 70 ½ in 2016 to wait until April 1, 2017 to receive them. Most workplace retirement account contributions should be made by the end of the year, but taxpayers can make 2016 IRA contributions until April 18, 2017. For 2016, the limit for a 401(k) is $18,000. For traditional and Roth IRAs, the limit is $6,500 if age 50 or older and up to $15,500 for a Simple IRA for age 50 or older.

Taxpayers who have moved should tell the US Postal Service, their employers and the IRS. To notify the IRS, mail IRS Form 8822, Change of Address, to the address listed on the form’s instructions. For taxpayers who purchase health insurance through the Health Insurance Marketplace, they should also notify the Marketplace when they move out of the area covered by their current Marketplace plan.

For name changes due to marriage or divorce, notify the Social Security Administration (SSA) so the new name will match IRS and SSA records. Also notify the SSA if a dependent’s name changed.  A mismatch between the name shown on your tax return and the SSA records can cause problems in the processing of your return and may even delay your refund.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 502-896-2999