Computer problems have caused the IRS to cease accepting electronically filed tax returns until further notice:
The outage could affect refunds, but the agency said it doesn’t anticipate “major disruptions.”…”The IRS is still assessing the scope of the outage,” the agency said. “At this time, the IRS does not anticipate major refund disruptions; we continue to expect that nine out of 10 taxpayers will receive their refunds within 21 days.”
Filing taxes is a painstaking process for almost everyone and every year, without fail, many returns full of mistakes are sent in to the IRS. In fact, mistakes are extremely common on tax returns, with an error rate of 50 percent; on self-prepared returns, according to the Government Accountability Office. There is a near-infinite number of things that can be done wrong on tax returns, from simple computational errors to missing out on deductions. Knowing which mistakes people commonly make is a good place to start when trying to avoid making them yourself. To that end, here’s what not to do on your taxes.
Include Undocumented Charitable Contributions
Though many charitable contributions are deductible, not every donation qualifies, and those that do must be meticulously documented. Every donation requires an accurate record, complete with confirmation receipts of the donation amount from the recipient at a qualified charity. Many people now donate money to crowdfunding campaigns, such as those hosted through Kickstarter, but many of these, because donors receive goods or services in return, don’t qualify as charitable contributions.
Taking a Write-Off for College You Don’t Qualify For
There are currently two write-offs available for college education: a $4,000 tuition and fees deduction and the $2,500 American Opportunity Tax Credit. Most people take the tuition and fees deduction because it seems like more money, but because the AOTC gives a dollar-for-dollar reduction, as opposed to lowering the income subject to tax, it can often be a better deal. It’s worth crunching some numbers to figure out which is the better option for you each time you file.
Claiming State Refunds as Income
Many people make the mistake of claiming their state tax refunds as income on federal tax returns. The only time a state tax refund should be declared is if the filer does not receive a tax benefit from deducting the taxes. Taking a standard deduction as opposed to itemizing means the filer doesn’t need to show state tax refunds as income.
Confusing Real Estate Taxes
Confusion regarding real estate and other property is one of the biggest sources of tax mistakes. People often take the wrong deductions, on everything from home offices to mortgage interest payments. New homeowners should be particularly careful and make sure to check which taxes they paid during closing to ensure they apply for the accurate deductions on their returns.
Forgetting IRA Savings
Throughout the year many people make regular IRA contributions, but they often forget to report them when filing their tax returns. Many of these IRA contributions qualify individuals for tax breaks. Furthermore, reporting all contributions is mandatory and even nondeductible contributions should be reported in order to avoid paying for them during retirement.
Incorrectly Reporting Foreign Investments
Though foreign investments are only applicable to a relatively small percentage of the tax base, they are amongst the more costly areas to make mistakes. Failing to accurately report foreign bank or financial accounts unintentionally carries a penalty of $10,000 per violation. For willful violations, the fine is $100,000 or 50 percent of the balance of the unreported account at the time of violation, for each violation, if the IRS catches it in an audit. That’s a very expensive mistake!
Changing Jobs and Withholding Too Much/Too Little
Those who switch jobs during the middle of the year and have combined earnings of greater than $117,000 should make sure they are not having extra money withheld. The maximum withholding rate is 6.2% for the first $117,000 of income, but both employers may withhold this amount if the employee made less than that sum at each individual company, meaning the filer would pay too much. It might make for a nice, big tax return, but it also means you’re overpaying on your taxes, and no one wants that. On the flip-side, if you switch jobs or get promoted and withhold too little, you could be surprised you owe taxes come April 15th when you were expecting a refund.
Overpaying on Investments Sold
Making mistakes on investments sold is frequent as it requires many calculations and meticulous record keeping of stock splits, reinvested dividends, capital gains distributions, and sales commissions. There are several online tools available to help investors make accurate calculations of shares bought. Make sure to keep clear records of all your investments.
These are just a few of the things you absolutely shouldn’t do on your taxes. While it’s by no means an exhaustive list, these mistakes are some of the most frequent—and also some of the easiest to avoid. If you’re concerned that you’ve made mistakes (or will make mistakes) on your taxes, you can always contact an R&G Brenner tax professional for assistance.
Intuit’s TurboTax–the leading do-it-yourself tax preparation software used by million of taxpayers–abruptly turned off the ability to file 2014 state tax returns citing “an increase in suspicious activity”. This comes on heals of claims of “price gouging” by its customers which caused a major public relations uproar forcing the CEO of TurboTax to pen an apology.
[Intuit] has found an increase in criminal activity where stolen personal data is used to file fake state returns with state authorities. This illegal act allows fraudsters to claim tax refunds from state governments.
An internal TurboTax investigation has found the breaches are not due to a problem with its own systems, but criminals digging up the personal information elsewhere. The company said the investigation is ongoing. Intuit says it’s working with state tax officials to get the e-filing security back to where it needs to be to turn it back on…
TurboTax stopped allowing state tax returns to be filed when the state of Minnesota alerted them that they would no longer accept returns filed thought their product. This was discovered when two Minnesota taxpayers logged onto TurboTax to file their returns and were surprised to find out that their returns where already filed. The state is now reviewing thousands of returns as part of its investigation which at best is sure to delay refunds. No word yet on when TurboTax or affected states will resume e-filling tax returns.
The issues with fraud surounding TurboTax may not be limited to State tax returns. The FBI is now investigating claims that the fraud has extended to returns filed with the IRS, putting federal tax returns in jeopardy.
Imagine getting a congratulatory email from TurboTax that your federal return is on file when you haven’t yet filed! Given that virtually everything is electronic these days, that has become a massive issue…
But is anyone completely safe? The IRS estimates that it paid out $5.2 billion in fraudulent tax refunds related to identify theft just in the tax return filing seas (sic) last year. That seems like a bad number until you add the amount of bogus refunds last year the IRS says it was able to stop: $24.2 billion. Still, straightening it out if you are the one hit can be challenging…
If you have been affected by tax return fraud–either using TurboTax or by other means–please tell us about in the comments section.
The IRS currently has over $760 Million in unclaimed refunds from tax year 2010, and the clock is running out for taxpayers to claim them. Any rightful refunds from 2010 not claimed by April 15, 2014 will become the property of the US Government. The majority of these refunds are in excess of $571 each.
“The window is quickly closing for people who are owed refunds from 2010 who haven’t filed a tax return,” said IRS Commissioner John Koskinen in a statement. “We encourage students, part-time workers and others who haven’t filed for 2010 to look into this before time runs out on April 15.”
Most of these unclaimed refunds are from students, part-time workers and the like who did not earn the minimum amount of income required to file a 2010 tax return. However, taxes were indeed taken from their paychecks even though they were not required to file a tax return, and these taxpayers are entitled to a refund.
If you did not file a 2010 tax return, but were employed that year, contact an R&G Brenner Tax Professional to see if you are entitled to refund. Why give the IRS your hard earned money?! Below is breakdown for IRS refunds due to taxpayers by State.
Each year, the Internal Revenue Service (IRS) puts out a list of common tax scams—dubbed the “Dirty Dozen”—to warn taxpayers. Ranging from identity theft to return preparer fraud, the list is intended to remind tax payers to use caution preparing, filing and discussing their annual taxes. Personal and other sensitive information can get into the wrong hands if the proper precautions aren’t taken. It’s wise to periodically review the IRS’ Dirty Dozen to keep apprised of scams.
It’s more common than you may think, and it’s on the rise. About 8.6 million households in 2010 were the victims of identity theft, according to the Bureau of Justice Statistics, up from 6.4 million households in 2005. Identity theft involves the unauthorized use of credit cards and checking accounts, as well as the misuse of personal information to open new accounts and loans or commit related crimes. The IRS lists tax fraud as a result of identity theft as a top concern in 2013. This can result when someone uses your personal info, such as social security number and name without obtaining your permission, and uses it to file a fraudulent tax return, thus getting a refund illegally. The IRS attempts to combat this type of identity theft through a comprehensive strategy involving three components: prevention of fraud, early detection and assistance for victims, preventing $20 billion in fraudulent refunds from being issued in 2012.
False 1099 Refunds
The IRS lists False Form 1099 refund claims as another of its top scams. Many people believe that the federal government manages top-secret accounts for citizens of the United States and that taxpayers can tap into those accounts through filing a 1099-OID (Original Issue Discount). This is an illegal scam, and can net perpetrators penalties and jail time.
This scam takes the form of unsolicited email or a fake website claiming to be legitimate but that lures unsuspecting people in and encourages them to give up personal information about their finances. The thieves can then turn around and commit identity theft. One common way this occurs is through emails claiming to come from the IRS. The IRS NEVER contacts taxpayers via email to obtain personal info. Recipients of such emails should be aware it’s a scam and forward the email to firstname.lastname@example.org to protect themselves and alert the authorities.
Offshore Income Fraud
Hiding income in offshore accounts remains one of the top scams reported by the IRS. Many individuals attempt to evade paying U.S. taxes by keeping their money in offshore banks, using wire transfers as well as debit and credit to get at the funds. Of course, there are legitimate needs for many people to have offshore accounts; however, taxpayers in these situations must comply with certain reporting and disclosure laws in order to operate within the law and avoid penalties, fines and jail time.
Return Preparer Scams
According to the IRS, approximately 60 percent of taxpayers will consult with tax professionals and companies in 2013 to assist in preparing their returns. Although most of these professionals are honest, many are not. This often can result in refund fraud or identity theft, so the IRS cautions taxpayers to be especially diligent in researching the firm they hire to do their taxes. Keep in mind that your tax return is your legal responsibility no matter who prepared it. Taxpayers should check that their tax pro enters his IRS Preparer Tax Identification Number (PTIN) and signs the return. A common scam is for a tax preparer to file a tax return they prepare for a taxpayer as “Self-Prepared”. This is illegal and any paid tax preparer who attempts this should not be used, and be reported to the IRS asap.
If you have encountered any other scams in regards to your tax return, please let us know in the comments section below.
WASHINGTON — The Internal Revenue Service today announced plans to open the 2014 filing season on Jan. 31…
The new opening date for individuals to file their 2013 tax returns will allow the IRS adequate time to program and test its tax processing systems. The annual process for updating IRS systems saw significant delays in October following the 16-day federal government closure.
“Our teams have been working hard throughout the fall to prepare for the upcoming tax season,” IRS Acting Commissioner Danny Werfel said. “The late January opening gives us enough time to get things right with our programming, testing and systems validation. It’s a complex process, and our bottom-line goal is to provide a smooth filing and refund process for the nation’s taxpayers.”
The government closure meant the IRS had to change the original opening date from Jan. 21 to Jan. 31, 2014. The 2014 date is one day later than the 2013 filing season opening, which started on Jan. 30, 2013, following January tax law changes made by Congress on Jan. 1 under the American Taxpayer Relief Act (ATRA). The extensive set of ATRA tax changes affected many 2012 tax returns, which led to the late January opening.
The IRS noted that several options are available to help taxpayers prepare for the 2014 tax season and get their refunds as easily as possible. New year-end tax planning information has been added to IRS.gov this week.
In addition, many software companies are expected to begin accepting tax returns in January and hold those returns until the IRS systems open on Jan. 31. More details will be available in January.
The IRS cautioned that it will not process any tax returns before Jan. 31, so there is no advantage to filing on paper before the opening date. Taxpayers will receive their tax refunds much faster by using e-file…with the direct deposit option.
The April 15 tax deadline is set by statute and will remain in place. However, the IRS reminds taxpayers that anyone can request an automatic six-month extension to file their tax return. The request is easily done with Form 4868, which can be filed electronically or on paper.
IRS systems, applications and databases must be updated annually to reflect tax law updates, business process changes and programming updates in time for the start of the filing season.
The October closure came during the peak period for preparing IRS systems for the 2014 filing season. Programming, testing and deployment of more than 50 IRS systems is needed to handle processing of nearly 150 million tax returns. Updating these core systems is a complex, year-round process with the majority of the work beginning in the fall of each year.
About 90 percent of IRS operations were closed during the shutdown, with some major work streams closed entirely during this period, putting the IRS nearly three weeks behind its tight timetable for being ready to start the 2014 filing season. There are additional training, programming and testing demands on IRS systems this year in order to provide additional refund fraud and identity theft detection and prevention.
The IRS is accepting 2013 Business Returns (Forms 1120, 1120S, 1065, 1041, 720, 940, 941, 2290) for filing January 13th, 2014.
According to the New York State Department of Finance and Taxation, the remainder of all delayed refunds should be ready by “early August”:
The wait for state tax refunds has progressively grown longer, reaching 12 weeks and beyond this year, said Phillip Goldstein of CPA firm Goldstein Lieberman & Co. in Mahwah, N.J. He blamed the delay on state labor cutbacks.
“They have fewer people working there, which is holding things up,” Goldstein said of the state. “And this isn’t just a New York issue. We’re seeing this in every state across the board.”
Geoffrey Gloak, spokesman for the state Department of Taxation and Finance, cited the inexperience of a new vendor processing the returns, the New York State Industries for the Disabled.
“The tax department is assisting the vendor to both speed processing and provide quality assurance,” according to a statement issued by the department. “Recovery of the department’s costs associated with this effort and interest payments (to taxpayers) is provided for in the contract and will not come at an additional taxpayer expense.”
If you still haven’t received your refund from NY State, hopefully you will soon. Have you received your NY State refund yet? Let us know in the comments section below.
President Obama–through Treasury Secretary Jacob Lew–forced acting IRS commissioner Steven Miller to tender his resignation today following the recent disclosure that the IRS actively and unfairly targeted conservative and Tea Party groups applying for tax exempt status; a gross violation of a government body that is supposed to be above the political fray.
The outrage has now reached a fevered pitch, with the FBI now getting involved with the investigation. While the President and his administration appears to be insulated from the fall out thus far, criminal charges may be forthcoming, with a key person of interest being Lois Lerner who is in charge of the Tax Exempt division of the IRS:
“Lois Lerner lied to me,” said Representative Jim Jordan, Republican of Ohio, who helped initiate the Congressional investigation of the I.R.S.
Ms. Lerner knew of the increased scrutiny given to Tea Party groups since 2010, but told reporters last Friday that she was not aware of any additional scrutiny given to any group and only heard about this through media reports. She along with many other IRS employees are expected to be called in front of congress shortly:
The House Oversight Committee requested five senior I.R.S. officials be made available for interviews by May 20, including the director of rulings and agreements, Holly Paz; a former screening group manager in the exempt-organizations determinations division, John Shafer; and a former advocacy group manager, Joseph Herr.
“Potentially dozens of I.R.S. employees are involved with the original targeting, the failure to correct the problem and the failure to promptly report the truth to Congress and the American people,” said Meghan Snyder, a spokeswoman for Mr. Jordan.
While Mr. Miller–and what is sure to be others–has taken the fall for this scandal, one can’t help but think what involvement if any the previous IRS Commissioner Douglas Shulman had. Mr. Shulman had been commissioner since May 2008, and just recently stepped down last November. He oversaw an aggressive agenda that made some of biggest changes the IRS has seen in decades. While initially lauded, many of these changes have been riddled with delays, errors and met with contempt.
Mr. Shulman was integral in developing and integrating a universal licensing and annual continuing education requirements for professional paid tax preparers. But these requirements were halted by a federal judge right before the 2013 tax season began citing that the IRS did not have the authority to implement these requirements. The IRS appealed part of the decision, but again were overruled. With millions of dollars already spent and industries spawned to provide these paid preparer requirements, it seems like a foregone conclusion that eventually they will go into effect; either by appealing the decision or by going through a body that does have the authority to regulate the industry. Nevertheless, this new scandal will only serve to divert more time & energy away from this project, ultimately leaving the consumer to suffer the most.
Furthermore, Mr. Shulman led the charge in “modernizing” the IRS; particularly the Modernized E-File Program (MeP). With the new MeP, taxpayers would get their refunds in a matter of days, not weeks; all while being kept abreast of their entire filing process with faster updates. The only problem was that it didn’t work. The MeP was put into effect for the 2012 tax season. When it became clear that the MeP was not functioning, it was scrapped, and the IRS was forced to go back to their old E-File program for the remainder of the 2012 tax season. This year (2013) the IRS fully replaced the old program with the MeP, but the tax season was already riddled by delays, due to the last minute fiscal cliff negotiations. At first, the MeP was working as advertised: refunds were being released quicker, and the IRS even claimed you could get updates on refund statuses every 24 hours. But since then its been glitch after glitch, culminating in what has been dubbed the “Education Credit Debacle“, where the IRS allowed hundreds of thousands of tax returns with IRS form 8863 to be filed early causing serious delays. Some of the affected taxpayers could not even get verification that their returns were filed! And the problems haven’t stopped yet. As of the writing of this post, many taxpayers who filed in February & March still have not received their refunds and the IRS is offering no explanation. Last but not least, the new MeP has done next to nothing to combat the explosion of Identity Theft and Fraud that plagued the IRS is recent years.
Once again, it is the hardworking taxpayer that is getting the short end of the stick. If we don’t file our taxes on time, penalties, interest, garnishments, liens, levies, etc. can be and are assessed. But what happens when the IRS does not live up to it’s end of the bargain? As of now, it appears nothing. Supposedly the IRS must pay interest after a certain date if they do not release refunds, but that date is not static. All the IRS has to do (and has done) is send a “document request” like requesting a copy of your W-2s…EVEN THOUGH THE IRS ALREADY HAS ACCESS TO THAT INFORMATION. I have yet to see a taxpayer actually receive interest from the IRS. And the interest rate they supposedly give is far less than what IRS charges us if we are late.
While there is sure to be more to come out from this story, the politicization of it is not good news for anyone. Some politicians have been searching for a scandal ever since Obama took office. So now that they have one, how will it play out to a public so tired of other “scandals”? It’s the “Boy Who Cried Wolf” syndrome. And that is the crux of the problem. While our elected officials have their hearings, while IRS employees start losing their jobs, and the midterm campaign season heats up, average American taxpayers of all stripes, creeds and political affiliations are ultimately the ones that are being ignored.
Do you have an IRS horror story? Share it with us in the comments section.
Acting IRS commissioner Steven Miller recently sat before a congressional panel and hinted that the best way to combat the explosion of tax fraud may be to either delay the tax filing season, or wait to release all refunds until after the filing season concludes on April 15th.
The reasoning goes something like this: The vast majority of fraud involving income taxes occurs early in the filing season (January & February). Delaying the filing season will reduce fraud because a) It gives the IRS a chance to cross reference filed tax data with what employers are required to send to the IRS and b) There will simply be less time to perpetrate fraud and thus less cases. Looking simply at the black & white numbers, yes this would seem like a good idea. However, like the tax code, this is not a black & white issue. Millions of honest taxpayers file their returns as early as possible because they really need the money. These are usually lower-income taxpayers who depend on their refunds to pay bills, rent, and put food on the table. When you consider the money spent for the holiday season, the urgency for these refunds is magnified. Delaying the start of the filing season could seriously put these taxpayers at risk.
Another proposal involves waiting until after April 15th to issue all refunds. That way every tax return can be reviewed and verified before refunds are released, and would virtually eliminate the majority of fraud cases. However, under current IRS regulations, the government would be required to pay taxpayers interest on their delayed refunds. This cost of combating fraud could outweigh the cost of the fraud itself.
Either way, it is very early to speculate proposed changes and whether or not they will be implemented. Nevertheless, if either of these proposals are ultimately implemented in full or in part, it appears the group that will be affected the most will be the lower income taxpayer.
The IRS currently has $917 Million for clients in unclaimed refunds for taxpayers just like you, that have not filed a 2009 tax return. If these returns are not filed by the April, 15th deadline, your money then becomes the property of the U.S. treasury. The most common reason for not filing a tax return is that many workers believe they did not make enough money to have to file a return. This very well may be true however, if you worked, you most likely had taxes taken out of your paycheck. This could equate to hundreds or even thousands of dollars that the IRS will be putting into their pockets instead of yours.
If you did not file a 2009 tax return and you worked that year, you may be due a refund. Please contact an R&G Brenner professional today, and we will help you determine if filing a tax return can get you back the cash you deserve.