Monthly Archives: May 2015
Help for Victims of Tax Identity Theft
Recent headlines have described how identity thieves were able to access taxpayer records through the IRS website. The fraudsters were able to access taxpayer transcripts by submitting previously obtained social security numbers and other personal information. The IRS estimates that 100,000 taxpayers’ accounts were accessed between February and May 2015.
This is a serious breach of sensitive information, but identity theft has been occurring for years. In 2014, the FTC received just over 109,000 complaints about tax identity theft. The FTC also states that tax-related identity theft was the most common form of reported identity theft in 2014. Fraudsters can commit tax identity theft to submit a false return under someone else’s SSN, claim bogus tax credits, and have the fraudulent refunds sent to an address where the fraudster obtains the refund.
Taxpayers are usually unaware that they have become a victim of identity theft until they receive a notice from the IRS stating that multiple returns have been filed or they received wages from an unknown employer. This situation will take many months to correct, and some taxpayers have had their refunds delayed by up to one year while the issue is being resolved.
The Identity Protection PIN
To help victims of identity theft, the IRS has issued roughly 1.5 million Identity Protection PINs (IP PINs.) The IP PIN is a unique, six-digit number that is assigned annually to victims of identity theft with resolved cases. When they file tax returns, the IP PIN must be submitted with the returns. When a taxpayer has an IP PIN, it prevents someone else from filing a tax return under his SSN as the taxpayer or spouse. When a taxpayer has been assigned an IP PIN, any return filed under that taxpayer’s SSN without the IP PIN will be rejected.
Identity Verification Website
In 2009, the IRS began placing markers on taxpayers’ accounts that have been subject to identity theft. The IRS has placed markers on more than one million accounts. Once a marker is placed on a taxpayer’s account, the IRS applies identity theft filters at the time the return is processed to determine whether a return is fraudulent.
Earlier this year, the IRS indicated that they would stop processing suspicious returns that may involve identity theft and send the taxpayer a letter requesting the taxpayer to confirm her identity through the Identification Verification (Idverify) website or by calling the IRS directly. The taxpayer has 30 days to respond to the letter. Once the taxpayer’s identity is verified, she can confirm whether she filed the return. If the taxpayer did not file the return, the IRS will treat the case like an identity theft case and follow appropriate procedures to assist the taxpayer.
Steps to Take
If you suspect that you are a victim of identity theft, you should file a complaint with the FTC and contact one or more of the three credit bureaus (Equifax, Experian, TransUnion) to place a fraud alert on your account.
You should also contact a tax practitioner to review your tax account for suspicious activity.
It should be noted that the IRS does not contact taxpayers by phone, text messaging, or email to request personal or financial information. First contact from the IRS will not be a phone call or email from out of the blue, but rather will be through official correspondence sent via U.S. mail.
Online or email scams can be reported to the IRS at phishing@irs.gov. Scams by phone, fax, or mail can be reported to the IRS at 800-366-4484.
If you have questions on how this relief applies to you, give us a call.
Buzzkill Disclaimer: This post contains general tax information that may or may not apply in your specific tax situation. Please consult a tax professional before relying on any information contained in this post.
Avoid the Penalty for Not Having Health Insurance
If you do not have health insurance during 2015, you will be subject to a penalty unless you meet the requirements of an
exemption.
The penalty for not having coverage during 2015 is the HIGHER of:
- 2% of your household income (only the amount of income above the tax filing threshold is subject to the penalty—the filing threshold is $20,600 for a married couple filing jointly with no children).
- $325 per person for the year ($162.50 for each child under 18). The per-person penalty is limited to $975.
The absolute limit on the amount of the penalty is the national average premium for a bronze plan.
Fortunately, if you qualify for an exemption, you will not be subject to the penalty.
The exemptions are:
Income Related Exemptions
- the lowest-price coverage available to you, either through the Marketplace of through your job, would cost more than 8.05% of your household income
- you don’t have to file a tax return because your income is below the filing threshold
Health Coverage Related Exemptions
- you were uninsured for 2 or fewer consecutive months during the year
- you lived in a state that did not expand its Medicaid program, but you would have qualified if your state had (Michigan did expand Medicaid coverage)
Exemptions for Certain Groups of People
- you are a member of a federally recognized tribe or eligible for services through an Indian Health Services provider
- you are a member of a recognized health care sharing ministry
- you are a member of a recognized religious sect with religious objection to insurance
- you are incarcerated
- you are a U.S. citizen living abroad, a certain type of non-citizen, or not legally present in the U.S.
Hardship Exemptions
You may also avoid the penalty if you meet one of the hardships below. To qualify for a hardship exemption, you must fill out a paper application and mail it to the Marketplace.
The hardship exemptions along with the required documentation include:
You were homeless (no documentation is required)
You were evicted in the past 6 months or are facing eviction or foreclosure (eviction or foreclosure notice)
You received a shut off notice from a utility company (copy of shut off notice)
You recently experience domestic violence (no documentation is required)
You recently experienced the death of a close family member (death certificate, death notice from newspaper, funeral services program, funeral expenses, coroner’s report, military notification of death, or other official notice of death).
You experienced a fire, flood, or other natural or human-caused disaster that caused substantial damage to your property (Police or fire report, insurance claim, or other document from government agency, private entity, or news source about the event.)
You filed for bankruptcy in the last 6 months (Official bankruptcy filing documents from a date within the last 6 months)
You had medical expenses you couldn’t pay in the last 24 months (Medical bills from a date within the last 24 months)
You experienced unexpected increases in necessary expenses due to caring for an ill, disabled, or aging family member (Receipts for bills or services related to care, like medical bills, home care services, or transportation receipts)
You expect to claim a child as a tax dependent who’s been denied coverage in Medicaid and the Children’s Health Insurance Program (CHIP), and another person is required by court order to give medical support to the child (Court order that covers the time period for which you want the exemption AND copies of eligibility notices for Medicaid and CHIP which show that the child has been denied coverage)
As a result of an eligibility appeals decision, you’re eligible either for: 1) enrollment in a qualified health plan (QHP) through the Marketplace, 2) lower costs on your monthly premiums, or 3) cost-sharing reductions for a time period when you weren’t enrolled in a QHP through the Marketplace (Notice of appeals decision.)
You were determined ineligible for Medicaid because your state didn’t expand eligibility for Medicaid under the Affordable Care Act (Notice of denial of eligibility for Medicaid. The notice must be from a date during the time period for which you’re requesting the exemption)
You received a notice saying that your current health insurance plan purchased on the individual market (non-group coverage) will be cancelled, and you consider the other plans available unaffordable (Notice of cancellation from the insurance company)
You experienced a hardship that kept you from getting health insurance that’s NOT listed in categories #1-13 (There are a limited number of other hardships that qualify. Go to HealthCare.gov/fees-exemptions/ hardship-exemptions/ to see this list, and follow the instructions to claim another hardship on page 3)
If you have questions on how this relief applies to you, give us a call.
Buzzkill Disclaimer: This post contains general tax information that may or may not apply in your specific tax situation. Please consult a tax professional before relying on any information contained in this post.
The Right Way to Deduct Business Travel
Business travel can be an inconvenience and the tax treatment of travel expenses can be complicated. If proper procedures are
followed, business travel is fully deductible by the company and is tax-free to the employee. If proper procedures are not followed, business travel is still deductible by the company, but will be taxed to the employee. In addition payroll taxes will have to be paid by both the company and the employee if proper procedures are not followed.
Proper Procedure for Travel Expenses
An advance or reimbursement made to an employee under an accountable plan is deductible by the employer and is not subject to FICA and income tax withholding.
An allowance or reimbursement will be treated as made under an accountable plan if three requirements are met:
- the employee receives the advance for a deductible business expense that she paid or incurred while performing services as an employee of the employer
- the employee must adequately account to the employer for the expense within a reasonable period of time
- the employee must return any excess reimbursement or allowance within a reasonable period of time
An advance or reimbursement under a nonaccountable plan is fully taxable to the employee and is subject to FICA and income tax withholding. It will be treated as compensation to the employee and deducted by the employer, and the employee and employer will be subject to payroll taxes. The employee may then deduct the travel expenses as a miscellaneous itemized deduction subject to the 2% rule.
Qualifying as Business Travel
A business trip has the status of business travel only if:
- it involves overnight travel
- the taxpayer travels away from his tax home
- the trip is undertaken primarily for ordinary and necessary business reasons, and the trip is temporary
What is Overnight Travel?
The employee does not have to literally be away from home from dusk to dawn. Any trip that is of such a length as to require sleep or rest to enable the taxpayer to continue working is considered overnight.
There is a special rule for local lodging expenses that are deductible even if the overnight travel requirement is not met.
What is a Tax Home?
Deductions for meals and lodging on business trips are allowed because expenses for these items are duplicative of costs normally incurred at the taxpayer’s regular home and require the taxpayer to spend more money while traveling.
A taxpayer’s tax home is located at:
- his principal place of business
- if the taxpayer has no principal place of business, the taxpayer’s regular place of abode (his home in the normal sense of the word)
There may be situations where a taxpayer does not maintain a permanent residence. For example, a traveling salesperson who moves from place to place is home wherever he or she stays at each location. Since this taxpayer does not have duplicative expenses, there is no deduction.
What is Temporarily away from Home?
The IRS has ruled that if employment away from home is realistically expected to last for one year or less, the employment is temporary in the absence of circumstances indicating otherwise. If employment away from home is realistically expected to last for one year or less, but at some later point the employment is realistically expected to exceed one year, the employment is temporary until the date the taxpayer’s realistic expectation changes.
If you have questions on how this relief applies to you, give us a call.
Buzzkill Disclaimer: This post contains general tax information that may or may not apply in your specific tax situation. Please consult a tax professional before relying on any information contained in this post.
