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IRS Announces Top Tax Scams for 2017

The IRS has announced the completion of its annual “Dirty Dozen” list of tax scams. The annual list highlights various schemes that taxpayers might encounter throughout the year, and especially during tax-filing season. “Taxpayers need to guard against ploys to steal their personal information, scam them out of money or talk them into engaging in questionable behavior with their taxes,” the IRS said.

The “Dirty Dozen” scams the IRS highlighted in 2017 are as follows:

Phishing: Taxpayers are advised to be on guard against fake emails or websites looking to steal their personal information. Specifically, they are warned to avoid opening surprise emails or clicking on web links claiming to be from the IRS, as the IRS will never initiate contact with taxpayers via email about a bill or refund.

Phone Scams: Taxpayers are warned that aggressive and threatening phone calls from criminals impersonating IRS agents remain an ongoing danger. The IRS said it has seen a surge of these phone scams in recent years, as con artists threaten taxpayers with police arrest, deportation, and revocation of their driver’s license if they fail to pay a bogus tax bill.

Identity Theft: The IRS is advising taxpayers to watch out for identity theft, especially around tax time. Taxpayers are cautioned to always use security software with firewall and anti-virus protections, to make sure the security software is always turned on and can automatically update, to encrypt sensitive files such as tax records stored on the computer, and to use strong passwords.

Return Preparer Fraud: Taxpayers are cautioned to be on the lookout for unscrupulous return preparers, and to choose carefully when hiring an individual or firm to prepare a tax return.

Fake Charities: The IRS is warning taxpayers to be wary of groups masquerading as charitable organizations to attract donations from unsuspecting contributors, and especially of charities with names similar to familiar or nationally known organizations. Taxpayers should avoid giving out financial information to individuals soliciting for charity, and should check the status of charitable organizations using the IRS website.

Inflated Refund Claims: Taxpayers are cautioned to be on the lookout for individuals promising inflated refunds. In particular, taxpayers should be wary of anyone who asks them to sign a blank return, promises a big refund before looking at their records, or charges fees based on a percentage of the refund.

Excessive Claims for Business Credits: The IRS is warning taxpayers to avoid improperly claiming the fuel tax credit, pointing out that this tax benefit is generally not available to most taxpayers, as it is usually limited to off-highway business use. Taxpayers are also cautioned to avoid claiming the research credit unless they can demonstrate that they participated in qualified research activities or satisfy the requirements related to qualified research expenses.

Falsely Padding Deductions on Returns: Taxpayers are urged to resist the temptation to falsely inflate deductions or expenses on their returns. In particular, the IRS warned taxpayers against overstating deductions such as charitable contributions and business expenses, or improperly claiming credits such as the earned income tax credit or the child tax credit.

Falsifying Income to Claim Credits: The IRS is advising taxpayers to avoid inventing income to erroneously qualify for tax credits, such as the earned income tax credit. Taxpayers are warned that individuals are sometimes talked into falsifying their income by con artists. These scams can lead to taxpayers facing large bills to pay back taxes, interest, and penalties; and may even result in criminal prosecution.

Abusive Tax Shelters: Taxpayers are cautioned against using abusive tax structures to avoid paying taxes, and are advised to be on the lookout for individuals advertising tax shelters that sound too good to be true. The IRS emphasized that it is committed to stopping complex tax avoidance schemes and the individuals who create and sell them.

Frivolous Tax Arguments: Taxpayers are warned not to use frivolous tax arguments to avoid paying tax, as the penalty for filing a frivolous tax return is $5,000. The IRS noted that there are frivolous schemes that encourage taxpayers to make unreasonable and outlandish claims, even though such claims have been repeatedly thrown out of court.

Offshore Tax Avoidance: The IRS is cautioning taxpayers against trying to hide money and income offshore, pointing to a recent string of successful enforcement actions against offshore tax cheats and the financial organizations that help them. The IRS recommended that taxpayers with unreported funds in offshore accounts catch up on their filing and tax obligations through the Offshore Voluntary Disclosure Program.

*Content provided by MHM publications*

Tax Design Challenge: Reimagine The Taxpayer Experience

The IRS has created a tax design challenge for the taxpayers. Taxpayers are encouraged to reimagine the entire taxpayer experience and design the experience of the future. The IRS is offering a $10,000 award for the Best Overall Design and a number of other prizes for those that are most useful and most financially capable. To see the full Challenge outline: CLICK HERE! Submissions must be made by May 10, 2016 at 11:59AM Eastern Time.

Judging Criteria:

The review panel will make selections based upon the following criteria:

  • Overall Appeal
  • Taxpayer Usefulness
  • Financial Capability
  • Visual Hierarchy
  • Information Density
  • Accessibility
Prize Information

A review panel will select winners based on defined criteria and an individual submission can win multiple awards:

  • Overall Design—$10,000 (1st), and $5,000 (2nd).
  • Best Taxpayer Usefulness—$2,000 (1st), and $1,000 (2nd).
  • Best Financial Capability—$2,000 (1st), and $1,000 (2nd)
Think You Have What It Takes?

If you have been frustrated with the tax paying process and experience, then this is your chance to offer a solution. With this opportunity, you have a chance to make the tax paying experience easier, simpler, and better! Throughout the competition, participants will have the chance to engage with policy experts and a network of mentors that include world-class strategists and designers from government and non-government organizations. The team at LBA Haynes Strand will be happy to assist you with this tax design challenge!

Recent Tax Changes That Will Affect Individual Taxpayers

The Protecting Americans from Tax Hikes Act of 2015 (PATH Act) was passed by the US House and the US Senate and signed into law by the President on December 18, 2015.  Some of the provisions in the act are permanent and others are for a limited amount of time.

The following are some of the provisions that may affect you:

Charitable Distributions for IRA’s:

The PATH Act permanently extends the ability of individuals aged 70 ½ to exclude from income up to $100,000 per year of distributions transferred directly to a qualified charitable organization for 2015 and succeeding years.

American Opportunity Tax Credit: 

The Path Act makes the credit permanent.  The credit is increased to $2,500 per year for four years of post-secondary education.  A phase out starts at $80,000 for single taxpayers and $160,000 for married taxpayers.  Taxpayers with income in excess of the phase out amounts have a reduced amount of credit allowable.

Deduction of qualified tuition and related expenses:

The above the line deduction for qualified tuition and fees has been extended through 2016.

Deduction for elementary and secondary school teachers:

The above the line deduction for elementary and secondary school teachers’ classroom expenditures has been permanently extended for years after 2014.  The $250 deduction will be indexed for inflation for years starting in 2016.

Deduction of State and Local general sales taxes:

The election to claim an itemized deduction for state and local general sales tax has been permanently extended for 2015 and subsequent years.

Deduction of State and Local general sales taxes:

The treatment of mortgage insurance premiums as deductible qualified mortgage interest subject to AGI phase-out is extended for 2015 and 2016.

Exclusion of mortgage debt cancellation:

The Act excludes from income cancellation of mortgage debt on principal residence of up to $2,000,000 through 2016.

To discuss these changes and learn how they may affect you, contact LBA Haynes Strand today by clicking the button  below.