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.