Filers warned about scams
Those filing income tax returns and trees have something to be happy about this tax season.
New programs present new tax breaks for filers and a majority of filers are choosing to file their taxes electronically for the ease of use and quick return of income tax refunds. But along with new programs come new rules that have the Internal Revenue Service (IRS) cautioning taxpayers about preparing their own tax returns.
“There are areas of the tax code that people might not know about that they should consider when filing,” said Lenny Curry, a certified public accountant and CEO of ICX Group, Inc. “With all the changes in the tax law recently, they should consult a certified tax advisor before taking advantage of new credits or deductions.”
Curry mentioned deductions including mileage for medical and charitable purposes, sales tax deductions for large purchases and home repair, capital gains deductions from selling a small business, with so many people working from home there are home office deductions, moving expenses and cancellation of debt.
Mike Dobzinski is a media relations specialist for the IRS covering Area 2 in Florida and his schedule has been filled with appearances on radio and television to get the word out for tax filing season.
“It’s been really busy,” said Dobzinski. “We are really pushing to get the information out to the people on what’s available.”
Some non-taxable items Dobzinski pointed out were, unemployment compensation up to $2,400, COBRA subsidy of 65 percent, “Cash for Clunkers” vouchers/payments of $3,500 or $4,500 and cancellation of debt on principal residence of up to $2 million. He also discussed deductions for sales & excise tax paid on a new car purchase of up to $49,500, which can increase a standard deduction (income limitations apply), property tax paid up to $1,000 ($500 for single filers) can also increase a standard deduction and contributions to charities for Haiti quake victims made from Jan. 11-Feb. 28 of this year can be claimed as an itemized deduction on 2009 or 2010 returns.
Credits can also benefit taxpayers. The Earned Income Tax Credit expanded for families with three or more children, which can claim a credit of up to $5,657 (adjusted gross income for joint returns cannot be more than $48,279). The American Opportunity Tax Credit (formerly Hope Credit) increased to $2,500 per student and now apples to the first four years of college. Home energy credits increased to 30 percent of cost up to maximum credit of $1,500 for windows, insulation, water heaters and heating and air conditioners. First-time home buyer credit has been extended and expanded. Eligible taxpayers must buy, or enter into a binding contract to buy, a principal residence on or before April 30 and close on the home by June 30. For qualifying purchases in 2010, taxpayers have the option of claiming the credit on either their 2009 or 2010 return.
Dobzinski also suggested tax payers utilize electronic filing to expedite the return of any refunds due to filers. The IRS experienced a record 90 million returns filed electronically last year with 30 million individual tax returns filed from home computers, which was up nearly 20 percent from 2008. The average refund was up nearly 10 percent and returned close to $3,000 for individual income tax returns.
What to look for when selecting a tax preparer:
• Be wary of tax preparers who claim they can obtain larger refunds than others.
• Avoid tax preparers who base their fees on a percentage of the refund.
• Use a reputable tax professional who signs the tax return and provides a copy.
• Consider whether the individual or firm will be around months or years after the return has been filed to answer questions about the preparation of the tax return.
• Check the person’s credentials. Only attorneys, CPAs and enrolled agents can represent taxpayers before the IRS in all matters, including audits, collection and appeals. Other return preparers may only represent taxpayers for audits of returns they actually prepared.
• Find out if the return preparer is affiliated with a professional organization that provides its members with continuing education and other resources and holds them to a code of ethics.
(courtesy of www.irs.gov)
IRS tips on how to spot a scam
Many e-mail scams are fairly sophisticated and hard to detect. However, there are signs to watch for, such as an e-mail that:
• Requests an unusual amount of personal and/or financial information, such as name, SSN, bank or credit card account numbers or security-related information, such as mother’s maiden name, either in the e-mail itself or on another site to which a link in the e-mail sends the recipient.
• Dangles bait to get the recipient to respond to the e-mail, such as mentioning a tax refund or offering to pay the recipient to participate in an IRS survey.
• Threatens a consequence for not responding to the e-mail, such as additional taxes or blocking access to the recipient’s funds.
• Gets the Internal Revenue Service or other federal agency names wrong.
• Uses incorrect grammar or odd phrasing (many of the e-mail scams originate overseas and are written by non-native English speakers).
• Uses a really long address in any link contained in the e-mail message or one that does not start with the actual IRS Web site address (www.irs.gov). The actual link’s address, or url, is revealed by moving the mouse over the link included in the text of the e-mail.
(courtesy of www.irs.gov)