What's That Long Number on My W-2?
Your employer will send your W-2 in early 2017. This year you might see a new item — a 16-digit authentication code. This code is part of an effort from the IRS which is meant to protect you from identity theft and make fraud more difficult.
Extended use of W-2 verification codes will aid verifying the wage and tax withholding data on your W-2. If you’re filing your taxes on your own, taking a moment to add this code helps the IRS verify your information. It might help protect you from identity theft and prevent a delay in receiving your refund. If Ellsworth & Associates handles your taxes, we will take care of that for you. You have nothing to worry about.
These codes were included on two million forms in 2016. In 2017, they will be included on 50 million W-2s. That’s a 2,400% increase. If you don’t see a code on your W-2, everything is fine. Your tax return will still be accepted.
The IRS says results from 2016 indicate this new system has the potential to reduce tax fraud. IRS processing systems use this number to verify the real taxpayer. Filing fake W-2s is one way that identity thieves try to back up their fake tax returns.
If you have a low- to moderate-income you can take steps now to save for retirement and receive a special tax credit.
The “Saver’s Credit” helps offset some of the first $2,000 that you voluntarily contribute to an IRA, 401(k) plan or similar workplace retirement program. Also known as the “Retirement Savings Contributions Credit”, the Saver’s Credit is available in addition to any other tax savings for which you may qualify.
If eligible, you still have time to make qualifying retirement contributions and get the Saver’s Credit on your 2016 tax returns. You have until the due date for filing your 2016 return (April 18, 2017), to set up a new IRA or add money to an existing IRA for 2016. Elective deferrals (contributions) to a 401(k) plan or similar workplace program must be made by the end of the year.
Who can claim the Saver’s Credit?
Similar to other tax credits, the Saver’s Credit can increase a taxpayer’s refund or reduce the tax owed. Although the maximum Saver’s Credit is $1,000 ($2,000 for married couples), it is often much less.
A taxpayer’s credit amount is based on his or her filing status, adjusted gross income, tax liability and amount contributed to qualifying retirement programs.
The Saver’s Credit supplements other tax benefits available to people who set money aside for retirement. For example, most workers may deduct their contributions to a traditional IRA. Roth IRA contributions are not deductible, but qualifying withdrawals, usually after retirement, are tax-free. Normally, contributions to a 401(k) or similar workplace plan are not taxed until they are withdrawn.
There are some other special rules that apply to the Saver’s Credit. To learn more or find out if you qualify, contact Ellsworth & Associates at (513) 272-8400. Mention this article and receive a free consultation.
The time to file taxes is growing closer. Don't just sit and wait for the inevitable. There are things you can do now to prepare.
Last Minute Deductible Donations
If you're like most taxpayers, December 31st is the final day to take actions that will affect your 2016 taxes. For instance, charitable donations are deductible in the year they were contributed. Donations charged to a credit card prior to the end of 2016 count for the 2016 tax year, even if the bill isn’t paid until 2017. If you write a check, it will count for 2016 as long you mail it by the last day of the year.
If you are over the age of 70 ½, you are usually required to take payments from your individual retirement accounts and workplace retirement plans by the end of 2016. Most workplace retirement account contributions should be made by the end of the year, but you 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 above and up to $15,500 for a Simple IRA if you are 50 or older.
Did You Move?
If you moved during 2016, make sure to tell the IRS. To do this, send IRS Form 8822 (the “Change of Address” form) to the address included in the form’s instructions.
Did Your Name Change?
If you were married or divorced in 2016 and your name changed, let the Social Security Administration (SSA) know so the new name will match in IRS and SSA records. Do the same for any name changes of your dependents. A mismatch between the name on your tax return and the name the SSA has on file for you can result in issues processing your return, and might actually slow down your refund.
Make Sure You're Saving Copies of Your Tax Returns
If you haven’t kept copies of your tax returns in the past, you’ll want to start doing that now. The IRS is making changes to help guard taxpayers and validate their identities. For example, you might need to know your adjusted gross income amount from a previous tax return to confirm your identity.
The IRS has announced the 2017 standard mileage rates. These rates can be (but are not required to be) used to calculate the deductible expenses of using a vehicle for business, charitable, medical or moving purposes.
The standard mileage rates for the use of a vehicle in 2017 will be:
The business mileage rate was reduced half a cent per mile and the medical and moving expense rates each fell 2 cents per mile from 2016. The charitable rate is designated by law and will not change.
The standard mileage rate for business is based on a yearly study of the fixed and variable expenses of operating a vehicle, unlike the rate for medical and moving purposes, which is based solely on the variable expenses.
Using these rates is optional. You can always calculate the actual cost of using your car instead.
The filing deadline to submit 2016 tax returns is Tuesday, April 18, 2017, instead of the April 15th date that that we normally consider “tax day”. In 2017, April 15th falls on a Saturday, and this would typically move the filing deadline to the next Monday — April 17th. However, Emancipation Day — a legal holiday in the District of Columbia — will be observed on that Monday, which pushes the filing deadline to Tuesday, April 18, 2017. Under the tax law, legal holidays in Washington, D.C. affect the filing deadline throughout the country.
Refunds Accepted Beginning Jan. 23, 2017
The IRS says it will start accepting electronic tax returns on Monday, Jan. 23, 2017. More than 153 million individual tax returns are anticipated to be filed in 2017. Keep in mind that a new law requires the IRS to hold refunds claiming the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC) until February 15th. In addition, it will take added time for these refunds to be released and processed through financial institutions. Taking into account weekends and President’s Day, many affected taxpayers may not have access to their refunds until the week of February 27th. So plan ahead.
Getting Your Refund
More than 90% of refunds are expected to be issued within 21 days. After refunds leave the IRS, it takes additional time for them to be processed and for financial institutions to accept and deposit the refunds to bank accounts.
Where's My Refund on the IRS website and the IRS2Go app will be updated with expected deposit dates for early EITC and ACTC refund filers a few days after February 15th. Taxpayers will not see a refund date before then.
The trusted tax professionals at Ellsworth & Associates can provide helpful information and guidance about the ever-changing tax code. Contact us to learn more.
Beware of Tax Scams
Every tax season we see more and more schemes that target innocent taxpayers by email, by phone and online. Watch out for these deceptive scams so you don't become a victim.
Some of the most common IRS impersonation scams include:
Demanding fake tax payments: Sometimes these are automated calls where scammers leave urgent requests telling people to call back to settle their “tax bill.” These fake calls usually claim to be the last warning before legal action is taken. You may also receive live calls from IRS impersonators. They might demand payments on prepaid debit cards, iTunes and other gift cards or wire transfer. Any request to settle a tax bill using any of these payment methods is a clear indication of a scam.
Calling students and parents and demanding payment for a fake tax: Ever heard of the "Federal Student Tax"? No? That's because it doesn't exist. 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 gets aggressive and threatens to have the student arrested.
A fake IRS bill for tax year 2015 related to the Affordable Care Act: 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 PO Box address.
“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 scammer tries to get you to give up personal information such as your social security number.
Pretending to be from the tax prep industry: These emails are designed to trick people into thinking they are official messages 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 might seek information related to refunds, filing status, confirming personal information, ordering transcripts or verifying PIN information.
If you receive an unexpected call, unsolicited email, letter or text message from someone claiming to be from the IRS, here are some of the tell-tale signs to help protect yourself.
The IRS Will Never:
If you get a suspicious phone call from someone claiming to be from the IRS and asking for money, here’s what you should do:
If you receive an unsolicited email that appears to be from the IRS report it by sending it to firstname.lastname@example.org.
Today starts National Tax Security Awareness Week. One vital part of cyber security is password protection. Passwords serve as the first line of defense to stop hackers and identity thieves from accessing your computer, cell phone, and other internet-accessible devices.
Here are a few basic steps for making passwords better and stronger:
Protect yourself from tax-related identity theft in 2017. Start by making your passwords more secure.
December 5-9 is “National Tax Security Awareness Week.” Take some time this week to educate yourself on steps you can take to protect yourself from identity theft and tax scams. Learn how to protect your valuable financial data in preparation for the upcoming filing season.
According to the IRS, over 100 million of the tax returns they receive this year will be completed using a computer. To help taxpayers keep their information secure the IRS has released, "Security Awareness for Taxpayers", which has helpful advice on staying technologically secure.
Some helpful reminders when it comes to computer security and tax scams:
The IRS announced today the launch of an online application that will assist taxpayers with straightforward balance inquiries in, what it calls, a safe, easy and convenient way.
The new tool 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. The IRS anticipates that other capabilities will continue to be added as they are developed and tested.
“This new tool is part of the IRS’s commitment to improve and expand taxpayer services by providing additional online taxpayer options,” said IRS Commissioner John Koskinen. “The new ‘balance due’ feature, paired with the existing online payment options, will increase the availability of self-service interactions with the IRS. This will give taxpayers another way to take care of their tax obligations in a fast and secure manner.”
Is it safe to open a portal to some of the most confidential and valuable information the government has on individuals? That remains to be seen. The IRS claims that this is a very secure tool, but in an age where hacking from foreign countries is now routine, is it secure enough?
Before accessing the tool, taxpayers must authenticate their identities through, what the IRS is calling, the "Secure Access" process. This is a two-step authentication process, which means returning users must have their username and password plus a security code sent as a text message to their mobile phones.
As part of the security process to authenticate taxpayers, the IRS will send verification, activation or security codes via email and text. The IRS is warning 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 use codes.