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

New Safeguard for 2017

Building on the successes of last year, the IRS, state tax agencies and the tax industry are enacting a series of new initiatives for 2017. These initiatives will better protect you from identity theft and refund fraud. However, we need your help. Everyone has a role to play in protecting data.

In the tax community, we’ve been working together since 2015 to put in place improved safeguards. These safeguards make it harder for identity thieves to file fraudulent returns successfully. That means identity thieves try to steal even more data to impersonate taxpayers.

Many of the changes will be invisible to taxpayers but will be invaluable to helping keep you safer from identity thieves. Our focus is on “trusted customer” features that help us authenticate both the taxpayer and tax return. Here are a few things we’re doing for 2017:

Sharing new data elements from tax returns. This helps us validate the return and the taxpayer. These elements include items such as the time it takes to complete the return. This helps us guard against mechanized computer fraud.
Sharing new data elements from business tax returns. This extends more identity theft protections to business filers as well as individuals.
Creating a new program between states and the financial industry. This allows banks and others to flag suspicious refunds.
Expanding the Form W-2 Verification Code initiative.  This initiative, started by the IRS last year, expands to 50 million forms in 2017 from 2 million in 2016. When completing a tax return, users enter a 16-digit verification code when prompted by the tax software. Both individuals and tax professionals use this code to validate the information on the Form W-2. The IRS anticipates in future years that the initiative will impact all Forms W-2.
Continuing to enhance software password requirements for individuals and tax professional users. This provides additional safety prior to filing.

Courtesy of IRS

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

IRS Warns Taxpayers of Numerous Tax Scams Nationwide

 
As tax season approaches, the Internal Revenue Service, the states and the tax industry reminded taxpayers to be on the lookout for an array of evolving tax scams related to identity theft and refund fraud.

Some of the most prevalent IRS impersonation scams include:

Requesting fake tax payments: The IRS has seen automated calls where scammers leave urgent callback requests telling taxpayers to call back to settle their “tax bill.” These fake calls generally claim to be the last warning before legal action is taken. Taxpayers may also receive live calls from IRS impersonators. They may demand payments on prepaid debit cards, iTunes and other gift cards or wire transfer. The IRS reminds taxpayers that any request to settle a tax bill using any of these payment methods is a clear indication of a scam. (IR-2016-99)

Targeting students and parents and demanding payment for a fake “Federal Student Tax”: Telephone scammers are targeting students and parents demanding payments for fictitious taxes, such as the “Federal Student Tax.” If the person does not comply, the scammer becomes aggressive and threatens to report the student to the police to be arrested. (IR-2016-107)

Sending a fraudulent IRS bill for tax year 2015 related to the Affordable Care Act: The IRS has received numerous reports around the country of scammers sending a fraudulent version of CP2000 notices for tax year 2015. Generally, the scam involves an email or letter that includes the fake CP2000. The fraudulent notice includes a payment request that taxpayers mail a check made out to “I.R.S.” to the “Austin Processing Center” at a Post Office Box address. (IR-2016-123)

Soliciting W-2 information from payroll and human resources professionals:  Payroll and human resources professionals should be aware of phishing email schemes that pretend to be from company executives and request personal information on employees. The email contains the actual name of the company chief executive officer. In this scam, the “CEO” sends an email to a company payroll office employee and requests a list of employees and financial and personal information including Social Security numbers (SSN). (IR-2016-34)

Imitating software providers to trick tax professionals: Tax professionals may receive emails pretending to be from tax software companies. The email scheme requests the recipient download and install an important software update via a link included in the e-mail. Upon completion, tax professionals believe they have downloaded a software update when in fact they have loaded a program designed to track the tax professional’s key strokes, which is a common tactic used by cyber thieves to steal login information, passwords and other sensitive data. (IR-2016-103)

“Verifying” tax return information over the phone: Scam artists call saying they have your tax return, and they just need to verify a few details to process your return. The scam tries to get you to give up personal information such as a SSN or personal financial information, including bank numbers or credit cards. (IR-2016-40)

Pretending to be from the tax preparation industry: 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 or text messages can seek information related to refunds, filing status, confirming personal information, ordering transcripts and verifying PIN information. (IR-2016-28)
Courtesy of IRS
For more information contact Neikirk, Mahoney and Smith at 502-896-2999

Protect Your Clients; Protect Yourself

Due to the sensitive client data held by tax professionals, cybercriminals increasingly target the tax preparation community. Thieves use a variety of tactics, from remote computer takeovers to phishing scams.

The IRS, state tax agencies and the private-sector tax industry ask for your help to combat identity theft and fraudulent returns. Working in partnership with you, we can make a difference. That’s why we launched a public awareness campaign that we call, “Protect Your Clients; Protect Yourself.”

Identity thieves are a formidable enemy. Data breaches are increasing in number and scope. Thieves often use the stolen identity information to file tax returns. As a tax preparer, you play a critical role in protecting taxpayer data.

Most tax professional’s software includes security protections. You should take other defensive moves as well.

Here are a few critical steps:

Secure Data. Make sure that taxpayer data, including data left on hardware and media, is never left unsecured; use security software on all digital devices.
Shred Documents and Destroy Media. Securely dispose of taxpayer information.
Use Strong Passwords. Require strong passwords (numbers, symbols, upper and lowercase) on all computers, tax software programs and Wi-Fi.
Change Passwords. Require periodic password changes every 60 – 90 days.
Safely Store Data. Store taxpayer data in secure systems and encrypt information when transmitting across networks.
Encrypt Email. Encrypt e-mail that contains taxpayer data.

Courtesy of IRS

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

Tax Records – What to Keep

As tax filing season approaches, the Internal Revenue Service has information for taxpayers who wonder how long to keep tax returns and other documents.

Generally, the IRS recommends keeping copies of tax returns and supporting documents at least three years. Some documents should be kept up to seven years in case a taxpayer needs to file an amended return or if questions arise. Keep records relating to real estate up to seven years after disposing of the property.

Health care information statements should be kept with other tax records. Taxpayers do not need to send these forms to IRS as proof of health coverage. The records taxpayers should keep include records of any employer-provided coverage, premiums paid, advance payments of the premium tax credit received and type of coverage. Taxpayers should keep these – as they do other tax records – generally for three years after they file their tax returns.

Whether stored on paper or kept electronically, the IRS urges taxpayers to keep tax records safe and secure, especially any documents bearing Social Security numbers. The IRS also suggests scanning paper tax and financial records into a format that can be encrypted and stored securely on a flash drive, CD or DVD with photos or videos of valuables.

Now is a good time to set up a system to keep tax records safe and easy to find when filing next year, applying for a home loan or financial aid. Tax records must support the income, deductions and credits claimed on returns. Taxpayers need to keep these records if the IRS asks questions about a tax return or to file an amended return.

Courtesy of IRS

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

Interest Rates Remain the Same for the First Quarter

The Internal Revenue Service today announced that interest rates will remain the same for the calendar quarter beginning January 1, 2017.  The rates will be:

four (4) percent for overpayments [three (3) percent in the case of a corporation];
1 and one-half (1.5) percent for the portion of a corporate overpayment exceeding $10,000;
four (4) percent for underpayments; and
six (6) percent for large corporate underpayments.
Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis.  For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.

Courtesy of IRS

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

Tax tips for Businesses

The healthcare tax credit is offered on a sliding scale. Businesses that employ fewer than 10 full-time-equivalent employees with average wages under $25,000 per person get the most benefit. To claim the credit, use form 8941 to calculate your eligibility. If your business did not owe taxes in that year, you may be able to carry the credit forward. If a remainder of the tax premium exists, you can claim business expenses against it.

Deduct section 179 property

Small businesses can opt to deduct the full amount of certain property as expenses in the year the business began using them. This is referred to as section 179 property and can include up to $500,000 of eligible business property in the 2016 tax year. Some eligible deductions include:

Property used in manufacturing, transportation and production
Any type of facility used for business or research
Buildings used to hold livestock or horticultural products
Off-the-shelf computer software
Excluded:

Land
Investment property
Land outside of the U.S.
Buildings that provide lodging
Buildings that are used to store air conditioning or heating units
TurboTax can assist you in choosing what types of property are appropriate deductibles.

Courtesy of TurboTax

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

New Online Tool to Assist Taxpayers

The Internal Revenue Service announced today the launch of an online application that will assist taxpayers with straightforward balance inquiries in a safe, easy and convenient way.

This new and secure tool, available on IRS.gov allows taxpayers to view their IRS account balance, which will include the amount they owe for tax, penalties and interest. Taxpayers may also continue to take advantage of the various online payment options available by accessing any of the payment features including: direct pay, pay by card and Online Payment Agreement. As part of the IRS vision for the future taxpayer experience, the IRS anticipates that other capabilities will continue to be added to this platform as they are developed and tested.

Before accessing the tool, taxpayers must authenticate their identities through the rigorous Secure Access process. This is a two-step authentication process, which means returning users must have their credentials (username and password) plus a security code sent as a text to their mobile phones.

Taxpayers who have registered using Secure Access for Get Transcript Online or Get an IP PIN may use their same username and password. To register for the first time, taxpayers must have an email address, a text-enabled mobile phone in the user's name and specific financial information, such as a credit card number or specific loan numbers. Taxpayers may review the Secure Access process prior to starting registration.

As part of the security process to authenticate taxpayers, the IRS will send verification, activation or security codes via email and text. The IRS warns taxpayers that it will not initiate contact via text or email asking for log-in information or personal data. The IRS texts and emails will only contain one-time codes.

Courtesy of IRS

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

You Have More Time in 2017 to Provide Information Forms to Covered Individuals

The IRS extended the 2017 due date for employers and coverage providers to furnish information statements to individuals.  The due dates to file those returns with the IRS are not extended. This chart can help you understand the upcoming deadlines.                                  

Action	2017 Reporting Due Dates for…
	Applicable Large Employers – Including Those That Are Self-Insured	Self-insured Employers That Are NotApplicable Large Employers	Coverage Providers  – other than Self-Insured Applicable Large Employers*
Provide 1095-B to responsible individuals	Not Applicable**	Mar. 2	Mar. 2
File 1094-B and  1095-B with the IRS	Not Applicable**	Paper: Feb. 28 E-file: Mar. 31*	Paper: Feb. 28 E-file: Mar. 31*
Provide 1095-C to full-time employees	Mar. 2	Not Applicable	Not Applicable
File 1095-C and 1094-C with the IRS	Paper: Feb. 28 E-file: Mar. 31*	Not Applicable	Not Applicable

*If you file 250 or more Forms 1095-B or Forms 1095-C, you must electronically file them with the IRS. Electronically filing ACA information returns requires an application process separate from other electronic filing systems. Additional information about electronic filing of ACA Information Returns is on the Affordable Care Act Information Reporting (AIR) Program page on IRS.gov and in Publications 5164 and 5165.

**Applicable large employers that provide employer-sponsored self-insured health coverage to non-employees may use either Forms 1095-B or Form 1095-C to report coverage for those individuals and other family members.

This chart applies only for reporting in 2017 for coverage in 2016.

Courtesy of IRS

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

Remember Donations May Cut Tax Bills

As tax filing season approaches, the Internal Revenue Service reminds taxpayers who give money or goods to a charity by Dec. 31, 2016, that they may be able to claim a deduction on their 2016 federal income tax return and reduce their taxes.

Only donations to eligible organizations are tax-deductible. IRS Select Check on IRS.gov is a searchable online tool that lists most eligible charitable organizations. Churches, synagogues, temples, mosques and government agencies are eligible to receive deductible donations even if they are not listed in this database.

Claiming Charitable Donations
Only taxpayers who itemize using Form 1040 Schedule A can claim deductions for charitable contributions.

Monetary Donations
A bank record or a written statement from the charity is needed to prove the amount of any donation of money.

Donating Property
For donations of clothing and other household items the deduction amount is normally limited to the item’s fair market value.

Benefit in Return.
Donors who get something in return for their donation may have to reduce their deduction.

Older IRA Owners Have a Different Way to Give
IRA owners, age 70½ or older, can transfer up to $100,000 per year to an eligible charity tax-free.

Good Records
The type of records a taxpayer needs to keep depends on the amount and type of the donation.

Courtesy of IRS.

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

IRS, Partners Warn of Online Threats

The Internal Revenue Service, states and the tax industry remind you that online threats and annoyances abound. There are viruses, worms, Trojans, bots, spyware and adware – all fall under the malicious programs (malware) umbrella.

How do you protect your computer from hackers and identity thieves? You need security software and to keep it turned on. You also need security on all of your digital devices, including laptops, tablets and mobile phones.

The IRS, state tax agencies and the tax professional industry are asking for your help in their effort to combat identity theft and fraudulent returns. Working in partnership with you, we can make a difference.

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

Tens of thousands of new malware programs launch each day, making the use of security software essential to safe internet use. These malware programs can disable your computer, install viruses that give cybercriminals control, steal your data, track your keystrokes to give criminals your passwords and many other malicious acts.

Tax Help for Self-Employed and Sharing Economy

As tax filing season approaches, the Internal Revenue Service wants taxpayers who are self-employed or involved in the sharing economy to know about free resources that are available to help them with their taxes.

Sole proprietors and independent contractors can get helpful information from the IRS Small Business and Self-Employed Tax Center. This resource includes online tools such as the Tax Calendar for Businesses and Self-Employed, which has key tax dates and necessary actions for each month of the year.

For those who provide services to consumers, such as rides in personal vehicles for a fee or the use of property, such as apartments or homes for rent, the IRS created the Sharing Economy Resource Center. It has tips such as:

Income is generally taxable, even if the recipient does not receive a Form 1099, W-2 or some other income statement, but some or all business expenses may be deductible.
There are some simplified options available for deducting many business expenses.
People involved in the sharing economy often need to make estimated tax payments during the year to cover their tax obligation.
Alternatively, people involved in the sharing economy who are employees at another job can often avoid needing to make estimated tax payments by having more tax withheld from their paychecks.

Courtesy of IRS

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

Health Care Law’s Rules Around Seasonal Workers

As an employer, your size – for purposes of the Affordable Care Act –  is determined by the number of your employees. If you hire seasonal or holiday workers, you should know how these employees are counted under the health care law.

Employer benefits, opportunities and requirements are dependent upon your organization’s size and the applicable rules. If you have at least 50 full-time employees, including full-time equivalent employees, on average during the prior year, you are an ALE for the current calendar year.  However, there is an exception for seasonal workers.

If you have at least 50 full-time employees, including full-time equivalent employees, on average during the prior year, your organization is an ALE. Here’s the exception: If your workforce exceeds 50 full-time employees for 120 days or fewer during a calendar year, and the employees in excess of 50 during that period were seasonal workers, your organization is not considered an ALE. For this purpose, a seasonal worker is an employee who performs labor or services on a seasonal basis.

The terms seasonal worker and seasonal employee are both used in the employer shared responsibility provisions, but in two different contexts. Only the term seasonal worker is relevant for determining whether an employer is an applicable large employer subject to the employer shared responsibility provisions.

Courtesy of IRS

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

Small Business Tax Tips

Tax Tip #1: Home Office
Make sure that your office is distinct from your living area. Whether it is a room of its own or a part of a larger space, there should be a clear line between your workspace and the rest of the home
If you only have one computer, claiming it as the office computer will be difficult. No auditor will believe that it is not utilized for personal use as well. The burden of proof will be up to you, so either dedicate a computer solely to work, or omit the computer area from your office space.

Tax Tip #2: Technology Purchases
Up-and-coming businesses need to be up-to-date on their technology, and Uncle Sam does not hinder this. Under Section 179 of the tax code, equipment expenses such as computers, printers, and even company vehicles are tax-deductible, up to a certain amount. Depending on the item, you can deduct the full cost on the year of purchase, or split it between several years.
Business-related software also qualifies under section 179. So don’t be afraid to get the technology you need to perform necessary business tasks. Just be aware of the amount you can deduct under section 179 because it changes yearly.

Tax Tip #3: Travel Costs
Since travel can be necessary for business success and expansion, many of the expenses are completely tax deductible.
Feel free to take your family with you, but only the costs for you, and only those that are business-related, can be deducted.

If you’re taking clients out for a meal, those costs are 50% deductible, just make sure to write on the bill/receipt the reason for the meal.
Conference fees are deductible as long as the conference is directly useful for your business. If it’s a conference related to your industry or will help you run your business more smoothly, then it probably qualifies.

As always with finances, especially taxes, it’s important to keep your receipts and details about the reason for purchases. While doing this for every purchase may seem over-the-top, it’s easy once you get into the habit of it. It will also save you a lot of grief if you get audited, and it will help you keep peace of mind that your finances aren’t going to get your business in trouble.

Courtesy of LessAccounting

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

5 Ways to avoid Audit

While audits are rare, most Americans would probably like to avoid them altogether. The percentage of people who actually are audited is extremely small, according to the Internal Revenue Service, but the number has risen slowly since 2008. If the IRS does decide to audit you, there is little you may do to stop it. You may, however, reduce the odds that you will be singled out for that extra attention in the first place.

1. Check your figures

One of the most common red flags for auditors – erroneous data entry – is also one of the most preventable. It seems simple enough to follow the advice to “double-check your return,” but surprisingly, people often are too careless regarding their taxes. Correctly reporting dependents and exemptions, as well as ensuring that the numbers match, is important because the IRS's automated system will easily detect discrepancies. And they don’t know if that is a mistake or purposeful.

2. Honesty is the best policy

Perhaps it’s common sense, but being 100 percent truthful on your tax return is an absolute must to reduce the chances of an audit. Realistically reporting income, deductions, credits and other figures can help keep the tax man at bay. Not reporting all your income is a surefire way to attract attention.

3. Go vanilla

The largest pool of filers – which consists of individuals or joint filers who earned less than $200,000 but more than the lowest earners – tends to avoid overt scrutiny. Taxpayers who make more than $1 million a year and those in very low income brackets are most likely to be audited.

4. Realistic deductions

Unusual or unrealistic itemized deductions, either for individuals or small business owners, may raise a red flag for auditors.

For a sole proprietor who files Schedule C, which details profits and business expenses, reporting losses for three years or more could encourage an auditor to request proof that the filer is actually in business.

5. E-filing helps

The Internal Revenue Service maintains that filing returns electronically can “dramatically reduce errors,” lowering the odds of an audit. The error rate for a paper return, the IRS reported, is 21 percent. The rate for returns filed electronically is 0.5 percent.

Courtesy of TurboTax

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

Limited Penalty Relief for Filers of Form 1098-T

Announcement 2016-42 provides notice that the IRS will not impose penalties under section 6721 or 6722 on eligible educational institutions with respect to Forms 1098-T, Tuition Statement, required to be filed and furnished for the 2017 calendar year under section 6050S if the institution reports the aggregate amount billed for qualified tuition and related expenses on Form 1098-T instead of the aggregate amount of payments received as required by section 212 of the Protecting Americans from Tax Hikes Act of 2015 (Public Law 114-113 (129 Stat. 2242 (2015)).

Announcement 2016-42 will appear in IRB 2016-49  dated December 5, 2016.

Taxes. Security. Together.

The Internal Revenue Service, state tax agencies and the nation’s tax industry urge you to join their effort to combat identity theft by doing more to protect personal and financial data from online threats.

Working in partnership with you, we can make a difference. That’s why for the second year in a row, we have embarked on a public awareness campaign called “Taxes. Security. Together.” And, we’ve launched a series of security awareness tips that can help protect you from cybercriminals. This is all part of the Security Summit effort, a joint effort between the IRS, the states and the private-sector tax industry.

Here’s an overview of basic steps to help protect your data:

1. Use security software. Security software can protect your computer – and your data – from numerous threats posed by malicious programs, also known as malware.

2. Use encryption software to protect sensitive data. If you keep sensitive financial data such as prior-year tax returns or important records on your hard drive, consider investing in encryption software to safeguard documents with password protection.

3. Use strong passwords. Use strong passwords of 10 or more digits that include letters, numbers and special characters. Do not use the same password for all your accounts, especially your financial accounts.

4. Avoid phishing emails. Never reply to emails, texts or pop-up messages asking for your personal, tax or financial information.

5. Back up your data. Periodically back up all the data on your computer via your protected cloud storage or a separate disk.

6. Protect your wireless network. If you use a residential wireless network connection, make sure you have a strong password protection for it. And, if you use public Wi-Fi, never share sensitive data.

The IRS, state tax agencies and the tax industry joined together as the Security Summit to enact a series of initiatives to help protect you from tax-related identity theft in 2017. You can help by taking these basic steps.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith

Registration Now Open for 2017 Advance Monthly Payments of the Health Coverage Tax Credit

The Internal Revenue Service has opened the new registration and enrollment process for qualified taxpayers to receive the benefit of the Health Coverage Tax Credit (HCTC) on an advance monthly basis during 2017.

Eligible taxpayers can have 72.5 percent of their qualified health insurance premiums paid in advance directly to their health plan administrator each month. Each payment made on their behalf to the health plan administrator lowers their out-of-pocket premium costs.

Taxpayers may be eligible to elect the HCTC only if they are one of the following:

An eligible trade adjustment  assistance (TAA) recipient, alternative TAA recipient or      reemployment TAA recipient,
An eligible Pension Benefit Guaranty Corporation (PBGC) payee, or
The family member of an eligible TAA, ATAA, or RTAA recipient or PBGC payee who is deceased or who finalized a divorce with them.
Taxpayers can now begin the process of registering with the IRS and providing required information to participate in the 2017 Advance Monthly Payment program for the HCTC. This includes completing and mailing Form 13441-A, HCTC Monthly Registration and Update, with all required supporting documents to the IRS.

Bookkeeping tips

Entrepreneurs keep a lot of the financial details of their business in their heads. Doing so has its advantages: No new software to learn, no danger of a system crash that loses all your data, and you can tweak your budget as often as you need without sitting down at a desk.

But when you don't have a system and some processes in place, unpleasant surprises can pop up, goals can be easily missed and important paperwork forgotten. Getting a better handle on your money can help you to make and keep long-term goals, smooth out the seasonal ups and downs of your cash flow and maybe improve your profits. It can also help you to stay out of trouble with the Internal Revenue Service.

1. Plan for major expenses.
You're less likely to miss business opportunities or have to scramble for a loan when the expenses become unavoidable.

2. Track expenses.
You otherwise might some miss tax write-offs and may lose out on others.

3. Record deposits correctly.
You may be less likely to pay taxes on money that isn't income.

4. Set aside money for paying taxes.
The IRS can levy penalties and interest for not filing quarterly tax returns on time.

5. Keep a close eye on your invoices.
Late and unpaid bills hurt your cash flow.

Some entrepreneurs believe that once they've sent out an invoice, they've taken care of billing. Not so, Every late payment is an interest-free loan and hurts your cash flow.

Courtesy of Entrepreneurs

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

IRS Provides Special Relief to Encourage Leave-Based Donation Programs for Victims of Hurricane Matthew

The Internal Revenue Service today announced special relief designed to support leave-based donation programs to aid victims of Hurricane Matthew.

Under these programs, employees may forgo their vacation, sick or personal leave in exchange for cash payments the employer makes, before Jan. 1, 2018, to charitable organizations providing relief for the victims of this disaster.

Under this special relief, the donated leave will not be included in the income or wages of the employees. Employers will be permitted to deduct the cash payments as business expenses.

This relief is similar to that provided following Hurricane Katrina in 2005, Hurricane Sandy in 2012, the Ebola outbreak in West Africa in 2014 and this summer’s severe flooding in Louisiana. Details of this relief are in Notice 2016-69, posted today on IRS.gov.

Courtesy of IRS

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

Special Tax Breaks for U. S. Armed Forces

As tax filing season approaches, the Internal Revenue Service wants members of the military and their families to know about the special tax benefits available to them.

IRS Publication 3, Armed Forces Tax Guide, is a free booklet packed with valuable information and tips designed to help service members and their families take advantage of all tax benefits allowed by law. Here are some of those tax benefits.

Combat pay is partially or fully tax-free.
The Earned Income Tax Credit may be worth up to $6,269 for low-and moderate-income service members.
An IRA or 401(k)-type plan might mean saving for retirement and cutting taxes too.
An automatic extension to file a federal income tax return is available to U.S. service members stationed abroad.
Most military bases offer free tax preparation and filing assistance during the tax filing season.
Both spouses normally must sign a joint income tax return, but if one spouse is absent due to certain military duty or conditions, the other spouse may be able to sign for him or her.
Those leaving the military and looking for work may be able to deduct some job search expenses, such as the costs of travel, preparing a resume and job placement agency fees.

Courtesy of IRS

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

What You Need To Know About U.S. Taxes & Moving Across The Border

As the Electoral College map turned red on Tuesday, many Americans saw red, too, and apparently had thoughts about moving to Canada. In fact, the official English version of the Canadian Citizenship and Immigration website went down more than once on Tuesday night through early Wednesday morning (it’s true, I checked it out), reportedly due to heavy traffic.

Because of its size and relatively low population, Canada has long embraced those from outside of its borders. On Tuesday, Canada reminded the world of its stance on immigration by tweeting out a reminder that it welcomes people of all cultures, perhaps a little nod to those threatening to leave the United States if the election results weren’t in their favor.

First things first: if you’re a U.S. citizen or tax resident, moving across the border won’t change your U.S. filing requirements all that much. Fleeing the country isn’t the silver bullet that you might expect to avoid reporting and paying taxes. So long as you’re a U.S. citizen or tax resident, you’re still required to file your federal income tax return with the Internal Revenue Service (IRS) every year and report your worldwide income. Yes, worldwide. We have a global tax system which means that you file and pay taxes on income earned all over the world – though certain credits, exclusions, and deductions may apply.

One factor that can change your tax picture is the existence of a tax treaty. The U.S. has nearly 70 tax treaties with countries all around the world, and as you’d expect, one of those is with Canada. It gets eyeballed so much that the IRS has a publication, Pub 597, Information on the United States – Canada Income Tax Treaty, explaining the highlights. The general idea of the treaty is to provide beneficial treatment for certain income items so that all income isn’t taxed in both countries. Here are a few highlights:

Dividends. For Canadian source dividends received by U.S. residents, the Canadian income tax generally may not be more than 15%.
Interest. Canadian source interest received by U.S. residents is typically exempt from Canadian income tax.
Gains from the sale of property. Generally, gains from the sale of personal property by a U.S. resident having no permanent establishment in Canada are exempt from Canadian income tax.
Royalties. Copyright royalties and other like payments for the production or reproduction of any literary, dramatic, musical, or artistic work (other than payments for motion pictures and works on film, videotape, or other means of reproduction for use in connection with television, which may be taxed at 10%) are typically exempt from Canadian tax.
Personal Services. A U.S. citizen or resident who is temporarily present in Canada during the tax year is exempt from Canadian income taxes on pay for services performed, or remittances received from the United States if the citizen or resident qualifies under one of the treaty provisions. (If you become a resident, all bets are off.)
Self-Employment Income. Income from services performed (other than those performed as an employee) is taxed in Canada if attributable to a permanent establishment in Canada.
Pensions and Annuities. Pensions and annuities from Canadian sources paid to U.S. residents are subject to tax by Canada, but the tax is limited to 15% of the gross amount (if a periodic pension payment) or of the taxable amount (if an annuity). Canadian pensions and annuities paid to U.S. residents may be taxed by the United States, but the amount of any pension included in income for U.S. tax purposes may not be more than the amount that would be included in income in Canada if the recipient were a Canadian resident. Pensions do not include Social Security benefits.
Charitable Contributions. You may deduct contributions to certain qualified Canadian charitable organizations on your U.S. income tax return.

Courtesy of Forbes

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

Accounting Tips for Small Business

Accounting can be tedious for any business, but if your small business doesn’t keep tight books it can make your taxes a nightmare. Without a system for your business’s finances a lot of things can slip through the cracks and end up costing you money in the long run. With a clear-cut process and some simple bookkeeping tips you can get a better grip on your financial situation, and even increase your earnings. The goal is to get a simplified process created detailing your businesses finances. Having a method that combines your expenses, invoices, deposit records and tax information can make your life as a small business owner ten times easier, especially as tax season rolls around.

1. Go Paperless by using Cloud-Based Accounting
Look for packages made for small business owners because they streamline the process by providing basic templates for your business like invoices, deposit slips, and business account check printing. With the addition of cloud-based accounting systems you can access your business information from anywhere.

2. Find A Good Advisor
Having a good advisor on payroll to help you out at least once a month can become invaluable. They can teach you how to handle your books properly, answer any questions and fix any mistakes that might have been made.

3. Keep Personal and Business finances separate
Never mix the two up, it will make your accounting much more difficult to handle. It’s a lot easier to keep accurate records if your only dealing with one type of account, so stay organized.

4. Plan for Major Expenses
Set aside money for major expenses like inventory, office supplies, repairs and maintenance.

5. Set Aside Money for Taxes
If you keep track of your financial records properly you can be prepared for year-end taxes. Setting aside a little bit of money each month towards paying your small businesses taxes you wont have to cutback at the end of the year or get a loan to pay your taxes, you will already be prepared.

6. Keep and Eye on Your Invoices
Late and unpaid bills can affect your businesses credit and effect your tax payments as well. Keep your bills organized and always pay on time.

7. Keep Daily Records and Reconcile bank accounts monthly
Double check your bank accounts and daily records at least once a month. Reconcile your withdrawals and deposits in your account so that discrepancies can be spotted more easily.

8. Avoid Cash
Using cash it is hard to keep track of spending. You also lose track easily of write-offs because there is no record of purchases. By using a debit or credit card you can keep track of amount spent, where it was spent and when it was spent.

9. Set up a specific time each week to go over your books
Giving yourself at least a half an hour ever week to go over your finances and make sure everything is in order.

10. Check Up Monthly On Your Accounts Receivable.
Having a client owe you money for services, especially at the end of the year, isn’t the same as having that money in your business account. Make sure you stay on top of your accounts receivable so that you are getting all the monthly payments you are owed. Without receivables, income dwindles.
Courtesy of Kabbage
For more information contact Neikirk, Mahoney and Smith at 502-896-2999

GO VOTE

Short as sweet today. It is simple, go vote! We are in the middle of making History today, make sure your candidate gets your vote!

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

IRS Warns Tax Professionals of New e-Services Email Scam

The Internal Revenue Service today issued an urgent alert to tax professionals who use IRS e-services to beware of an email asking them to update their accounts and directing them to a fake website.

The subject line for the fraudulent email is “Security Awareness for Tax Professionals.” The “From” line is “Your e-Services Team.” It has both an IRS logo and an e-services logo that hyperlinks to a URL verified as a phishing site. The spoofing site poses as an e-services registration page.

The scammers are attempting to exploit current IRS efforts to strengthen the e-services authentication process and its ongoing communications with tax professionals about their accounts. Scammers are attempting to steal e-services usernames and passwords or additional personal data through a registration page.

If e-services users have already clicked on the fake logo and provided their username and password, they should contact the e-services help desk to reset their accounts. If the same password is used for other accounts, these should be changed as well. As an extra precaution, users should perform a deep security scan on their computers, re-evaluate their security controls and be alert to any other signs of identity theft or data compromise.

Tax professionals should always go directly to IRS.gov to access e-services and never click on any links provided in emails.

Tax professionals who receive a suspicious email should send it as an attachment to Phishing@irs.gov and then delete it. Recipients should not click on any links.

The scammer email tells recipients that information was stolen from certain user accounts in 2015 from a state-sponsored actor. It says users are being asked to upgrade their e-service account to ensure protection of their information. It asks them to click on the login to access their accounts for security upgrade.

The IRS is in the process of upgrading e-services security and has been in communication with tax professionals about updating their accounts.

Courtesy of IRS

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

Visit IRS.gov/AIR for Resources about Reporting Process

Under the Affordable Care Act, certain organizations must report information to the IRS and individuals about health insurance coverage. The reporting requirements apply to insurance companies, self-insured companies, applicable large employers and employers that provide health insurance to their employees. ACA information returns and transmittals are electronically filed through the ACA Information Return system, also known as AIR.

The ACA Assurance Testing System opens November 7 for tax year 2016 testing. AATS is a process to test software and electronic transmissions prior to accepting software developers, transmitters, and issuers into the AIR program. Software developers – including employers and issuers – who passed AATS for tax year 2015 will not have to retest for tax year 2016; their tax year software packages will be moved into production status. New participants need to comply with test requirements for tax year 2016.

Other non-ACA information returns – such as Forms 1099 – can be electronically transmitted through the Filing Information Returns Electronically system, also known as FIRE.  Even if you previously used FIRE, if you are transmitting to AIR, you should familiarize yourself with the AIR procedures, which are different than those for FIRE.

If you are required to file 250 or more information returns, you must file them electronically. This requirement applies separately for each type of return and separately to each type of corrected return. All filers are encouraged to electronically file even if you have less than 250 returns.

Courtesy of IRS

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

Accounting 101

This assumption requires us as small business owners...

to keep all of our business transactions separate from our personal transactions.

The easiest and best way to so this is to open a business bank account.

Some people think that just keeping separate records is enough in separating business from personal. It is not. You should physically keep your money separate. Some business owners will go as far as keeping their personal and business accounts in different banks.

They said it is better for them as they have to write out a check to deposit instead of transferring between accounts in the same bank.

The main thing is not to pay for personal expenses out of that business account. If you need money from your business for personal expenses write yourself a check or transfer the money into your personal bank account.

One of the biggest justifications for keeping a separate bank account for your business is for clean and accurate bookkeeping.

If you have a separate bank account for all of your business transactions then it will be easier to match and record all of those transactions.

I have even missed recording a few expenses and caught them when I did my bank reconciliation...which by the way is 100 times easier when you have a separate account.

Come tax time, you or your accountant will be happy you maintained separate accounts too.

Also if you were ever audited...you do not want to bring in a bank record that has your personal expenses mixed in. Auditors tend to frown upon that.

Courtesy of BasicAccountingHelp

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Jan. 31 W-2 Filing Deadline; Some Refunds Delayed Until Feb. 15

A new federal law moves up the W-2 filing deadline for employers and small businesses to Jan. 31. The new law makes it easier for the IRS to find and stop refund fraud. It also delays some taxpayer refunds. Those taxpayers claiming the Earned Income Tax Credit or the Additional Child Tax Credit won’t see refunds until Feb.15, at the earliest.

Here are some key points to keep in mind:

Protecting Americans from Tax Hikes (PATH) Act.
Different from past deadline.
Helps stop fraud or errors.
Some refunds delayed.
File tax returns normally.
Use IRS.gov online tools.

Taxpayers should keep a copy of their tax return. Beginning in 2017, taxpayers may need their Adjusted Gross Income amount from a prior tax return to verify their identity. They can get a transcript of their return at www.irs.gov/transcript.

Courtesy of IRS

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

Dozens of Individuals Indicted in Multimillion-Dollar Indian Call Center Scam Targeting U.S. Victims

The indictment was returned by a grand jury in the U.S. District Court for the Southern District of Texas on Oct. 19, 2016, and charges the defendants with conspiracy to commit identity theft, false personation of an officer of the United States, wire fraud and money laundering.  One of the defendants is separately charged with passport fraud.

The indictment alleges that the defendants were involved in a sophisticated fraudulent scheme organized by conspirators in India, including a network of call centers in Ahmedabad, India.  Using information obtained from data brokers and other sources, call center operators allegedly called potential victims while impersonating officials from the Internal Revenue Service (IRS) or U.S. Citizenship and Immigration Services.  According to the indictment, the call center operators then threatened potential victims with arrest, imprisonment, fines or deportation if they did not pay taxes or penalties to the government.  If the victims agreed to pay, the call centers would then immediately turn to a network of U.S.-based co-conspirators to liquidate and launder the extorted funds as quickly as possible by purchasing prepaid debit cards or through wire transfers.  The prepaid debit cards were often registered using misappropriated personal identifying information of thousands of identity theft victims, and the wire transfers were directed by the criminal associates using fake names and fraudulent identifications.

The co-conspirators allegedly used “hawalas,” in which money is transferred internationally outside of the formal banking system, to direct the extorted funds to accounts belonging to U.S.-based individuals.  According to the indictment, these individuals were expecting the hawala transfers but were not aware of the illicit nature of the funds.  The co-conspirators also allegedly kept a percentage of the proceeds for themselves.

According to the indictment, one of the call centers extorted $12,300 from an 85-year-old victim from San Diego, California, after threatening her with arrest if she did not pay fictitious tax violations.  On the same day that she was extorted, one of the U.S.-based defendants allegedly used a reloadable debit card funded with the victim’s money to purchase money orders in Frisco, Texas.

The indictment also alleges that the defendants extorted $136,000 from a victim in Hayward, California, who they called multiple times over a period of 20 days, fraudulently purporting to be IRS agents and demanding payment for alleged tax violations.  The victim was then directed to purchase 276 stored value cards which the defendants then transferred to reloadable debit cards.  Some of the victim’s money ended up on cards which were activated using stolen personal identifying information from U.S.- based victims.  

Courtesy of Justice

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