Identity Theft Is an Ongoing Concern and on the IRS Annual “Dirty Dozen” List of Tax Scams to Avoid

by NFS | Feb 2, 2016 | Archives

WASHINGTON — The Internal Revenue Service today issued a filing season alert warning taxpayers to watch out for identity theft at tax time and highlighted the crime as the first scam in the agency’s “Dirty Dozen” series.

Over the course of the past year, as part of the Security Summit initiative, the IRS partnered with states and the tax industry to enhance coordination and create a more secure system for taxpayers.

Security Summit participants, including the IRS, will regularly share details of fraudulent schemes detected this season so industry and government have the same information and can adjust accordingly to provide increased protection. Many changes will be invisible to the taxpayer, but the more than 20 shared data elements are critical to making sure the IRS, states and industry can better verify the taxpayer and the legitimacy of the tax return.

“Our collaborative efforts with the Security Summit have given the IRS additional tools to stop fraudulent returns at the door,” said IRS Commissioner John Koskinen. “The criminals continue to look for increasingly sophisticated ways to breach the tax system. While the IRS has improved prevention and detection efforts, we’re calling on taxpayers to protect their private information so thieves can’t steal personal data to file fraudulent returns.”

The IRS also joined with industry and states on a public awareness campaign to provide taxpayers with easy tips to better protect themselves.  The “Taxes. Security. Together.” campaign includes YouTube videos, Tax Tips and fact sheets to help taxpayers stay safe online.

The Dirty Dozen is compiled annually by the IRS and lists a variety of common scams taxpayers may encounter any time during the year. Many of these con games peak during filing season as people prepare their tax returns or hire someone to do so.

“We urge people to use caution when viewing e-mails, receiving telephone calls or getting advice on tax issues because scams can take on many sophisticated forms,” Koskinen said. “Keep your personal information secure by protecting your computers and only giving out your Social Security numbers when absolutely necessary.”

Tax-related identity theft occurs when someone uses your stolen Social Security number to file a tax return claiming a fraudulent refund. While the IRS has made significant strides over the past several years to address this issue, it remains a top concern for the IRS, which is why identity theft remains on the Dirty Dozen list again this year as the IRS works to protect taxpayers and help victims.

In the most recent three fiscal years, Criminal Investigation (CI) helped convict approximately 2,000 identity thieves. In fiscal year 2015, the IRS initiated 776 identity theft related investigations, which resulted in 774 sentencings through CI enforcement efforts. The courts continue to impose significant jail time with the average months to serve in fiscal year 2015 at 38 months— the longest sentencing being over 27 years.

The IRS understands that identity theft is a frustrating, complex process for victims. While identity thieves steal information from sources outside the tax system, the IRS is often the first to inform a victim that identity theft occurred. The IRS is working hard to resolve identity theft cases as quickly as possible.

For more information, please contact our office for your free guide entitled “Taking Charge – What To Do If Your Identity is Stolen”.

 

Have You Seen Your Social Security Card Lately?

by NFS | Feb 1, 2016 | Archives

We strive to provide you world-class service. With that in mind, Social Security rolled out a new service that allows some of our customers to request a replacement Social Security card online.

The new online version of the Application for a Replacement Social Security Card allows people in some states to request a replacement card online through our secure my Social Security portal without traveling to a field office.

Currently available in the District of Columbia, Michigan, Nebraska, Washington, and Wisconsin, it’s an easy, convenient, and secure way to request a replacement card online. First, you’ll need to create a my Social Security account. When you open a my Social Security account, we protect your information by using strict identity verification and security features. The application process has built-in features to detect fraud and confirm your identity. In certain cases, security experts at Social Security will contact you to ensure it is a legitimate application. We only issue a replacement card if there’s no suspicion of fraud and then we only mail it to a verified address.

To take advantage of this new service option, you must:

• Have or create a my Social Security account;
• Have a valid driver’s license in a participating state or the District of Columbia (or a state-issued identification card in some states);
• Be age 18 or older and a United States citizen with a domestic U.S. mailing address (this includes APO, FPO, and DPO addresses); and
• Not be requesting a name change or any other changes to your card.

We plan to add more states, so we encourage you to check with us later in the year!

Before you request a replacement card online, you may want to consider whether you need to get a replacement card at all. Most times, knowing your number is what’s important. You’ll rarely need the card itself, perhaps only when you get a new job and have to show it to your employer. If you decide that you do need a replacement card, log into your personal my Social Security account and select “Request a Replacement Card.” Next, answer the screening questions to confirm eligibility, complete personal data, and you’re done!

See how easy that was? If you are still having difficulty, please contact our office for assistance.

-Posted on Social Security Matters February 1, 2016 by Jim Borland, Assistant Deputy Commissioner, Communications    

Six Reasons to E-file your Taxes in 2016

by NFS | Jan 29, 2016 | Archives

Are you one of the few tax filers who still file a paper return? If so, now may be the best time to switch to e-file. Last year almost 129 million taxpayers filed their taxes electronically. They chose to e-file because it’s the fastest and safest way to file.

Here are the top six reasons why you should file electronically in 2016:

1. Accurate and Easy. IRS e-file is the best way to file an accurate tax return. The tax software helps you avoid mistakes by doing the math for you. It guides you through each section of your tax return. It is much easier than doing your taxes by hand and mailing paper tax forms.
2. Safe and Secure. IRS e-file meets strict security guidelines. It uses modern encryption technology to protect tax returns. The IRS has processed more than 1.5 billion e-filed tax returns to date. This year, the IRS is working with states and tax industry leaders to protect your tax return from identity theft refund fraud. This new effort has put strong new safeguards in place to make tax filing safer than ever before.
3. Convenient and Often Free. You can ask your tax preparer to e-file your tax return. Most paid preparers are required to file their clients’ returns electronically.
4. Faster Refunds. In most cases, e-file helps get your refund faster. That’s because there is nothing to mail and your tax return is virtually mistake-free. The fastest way to get your refund is to combine e-file with direct deposit into your bank account. The IRS issues more than nine out of 10 refunds in less than 21 days.
5. Health Care Tax Reporting. IRS e-file can help with tax provisions of the health care law. The software will walk you through the lines on the tax forms that relate to the Affordable Care Act.
6. Payment Options. If you owe taxes, you can e-file early and set up an automatic payment on any day until the April 18 deadline. You can pay electronically from your bank account with IRS Direct Pay. You also have many other options to pay, including electronic funds withdrawal or payment by debit or credit card. Visit IRS.gov/payments for details.

Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on IRS.gov.

Of course, here at Northeast Financial Strategies we offer FREE E-File with every eligible return on both Federal and State returns. Contact our office for help today!

Lost or Stolen Refund Check?

by NFS | Jan 29, 2016 | Archives

Taxpayers can always check the status of their Federal Tax refund using “Where’s My Refund?” at IRS.gov or the IRS2Go mobile app. “Where’s My Refund?” is updated no more than once every 24 hours, usually overnight. If one of these apps indicates the IRS issued your refund, but you haven’t received it, your refund may have been stolen, lost, or misplaced.

If this is the case, you can ask the IRS to do a refund trace. This is the process the IRS uses to track a stolen, lost, or misplaced check or verify that a financial institution received a direct deposit.
The Taxpayer Advocate Service provides guidance on their website on the process to follow if you have not received your refund check.

• Direct Deposit Refunds: If your refund was a direct deposit, the financial institution will get a letter within 6 weeks from the Bureau of the Fiscal Service in the Treasury Department, to verify where the deposit went.
• Paper Check Refunds: If the check hasn’t been cashed, you’ll get a replacement in about 6 weeks. If your original refund check was cashed, you’ll receive a claim package within 6 weeks to complete and return to the Bureau of the Fiscal Service to pursue your claim.
• Denied Claims: If your claim is denied, the Bureau of the Fiscal Service will send you a denial letter with instructions on how to appeal the decision.

If you need further assistance in tracking down your refund, please let us know.

Tax Filing Season is Here! Free Organizers & Discounts from NFS!

by NFS | Jan 19, 2016 | Archives

WRENTHAM, MA – Tax Season is HERE!! Some people hire a tax professional and some people choose to do it themselves – either way – NFS has an option for you!!

No matter where in the world you are, NFS can help you to prepare your US Federal and State Income Tax Returns. In person, by mail or email, we are here to help! With pricing less than most national chains, we can prepare your taxes and maximize your refund or minimize your balance due if you are one of those folks who has to pay.

All new clients receive a $30 DISCOUNT and existing clients should inquire about other discounts that may be available to them. NFS also offers free Income Tax Organizers for you to save time & money!

For those deciding to do it themselves, we offer an option to prepare your own returns directly from our Do It Yourself Online Tax Prep Website with FREE (1040EZ) & Affordable options & in most cases less than the “Boxed Software” or other popular online tax prep websites!!

Do-It-Yourself Tax Filing

If you have any questions or want to set up an appointment, feel free to drop me an email jeff@nfsnet.com or give me a call toll free at 800-560-4NFS x 14.

Employee or Independent Contractor – Which Is It?

by NFS | Jan 14, 2016 | Archives

If you hire someone for a long-term, full-time project or a series of projects that are likely to last for an extended period, you must pay special attention to the difference between independent contractors and employees.

Why It Matters

The Internal Revenue Service and state regulators scrutinize the distinction between employees and independent contractors because many business owners try to categorize as many of their workers as possible as independent contractors rather than as employees. They do this because independent contractors are not covered by unemployment and workers’ compensation, or by federal and state wage, hour, anti-discrimination, and labor laws. In addition, businesses do not have to pay federal payroll taxes on amounts paid to independent contractors. 

Caution: If you incorrectly classify an employee as an independent contractor, you can be held liable for employment taxes for that worker, plus a penalty.

The Difference Between Employees and Independent Contractors

Independent Contractors are individuals who contract with a business to perform a specific project or set of projects. You, the payer, have the right to control or direct only the result of the work done by an independent contractor, and not the means and methods of accomplishing the result.

Example: Sam Smith, an electrician, submitted a job estimate to a housing complex for electrical work at $16 per hour for 400 hours. He is to receive $1,280 every 2 weeks for the next 10 weeks. This is not considered payment by the hour. Even if he works more or less than 400 hours to complete the work, Sam will receive $6,400. He also performs additional electrical installations under contracts with other companies that he obtained through advertisements. Sam Smith is an independent contractor.
Employees provide work in an ongoing, structured basis. In general, anyone who performs services for you is your employee if you can control what will be done and how it will be done. A worker is still considered an employee even when you give them freedom of action. What matters is that you have the right to control the details of how the services are performed.

Example: Sally Jones is a salesperson employed on a full-time basis by Rob Robinson, an auto dealer. She works 6 days a week and is on duty in Rob’s showroom on certain assigned days and times. She appraises trade-ins, but her appraisals are subject to the sales manager’s approval. Lists of prospective customers belong to the dealer. She has to develop leads and report results to the sales manager. Because of her experience, she requires only minimal assistance in closing and financing sales and in other phases of her work. She is paid a commission and is eligible for prizes and bonuses offered by Rob. Rob also pays the cost of health insurance and group term life insurance for Sally. Sally Jones is an employee of Rob Robinson.

Independent Contractor Qualification Checklist

The IRS, workers’ compensation boards, unemployment compensation boards, federal agencies, and even courts all have slightly different definitions of what an independent contractor is though their means of categorizing workers as independent contractors are similar.

One of the most prevalent approaches used to categorize a worker as either an employee or independent contractor is the analysis created by the IRS, which considers the following:

1. What instructions the employer gives the worker about when, where, and how to work. The more specific the instructions and the more control exercised, the more likely the worker will be considered an employee.
2. What training the employer gives the worker. Independent contractors generally do not receive training from an employer.
3. The extent to which the worker has business expenses that are not reimbursed. Independent contractors are more likely to have unreimbursed expenses.
4. The extent of the worker’s investment in the worker’s own business. Independent contractors typically invest their own money in equipment or facilities.
5. The extent to which the worker makes services available to other employers. Independent contractors are more likely to make their services available to other employers.
6. How the business pays the worker. An employee is generally paid by the hour, week, or month. An independent contractor is usually paid by the job.
7. The extent to which the worker can make a profit or incur a loss. An independent contractor can make a profit or loss, but an employee does not.
8. Whether there are written contracts describing the relationship the parties intended to create. Independent contractors generally sign written contracts stating that they are independent contractors and setting forth the terms of their employment.
9. Whether the business provides the worker with employee benefits, such as insurance, a pension plan, vacation pay, or sick pay. Independent contractors generally do not get benefits.
10. The terms of the working relationship. An employee generally is employed at will (meaning the relationship can be terminated by either party at any time). An independent contractor is usually hired for a set period.
11. Whether the worker’s services are a key aspect of the company’s regular business. If the services are necessary for regular business activity, it is more likely that the employer has the right to direct and control the worker’s activities. The more control an employer exerts over a worker, the more likely it is that the worker will be considered an employee.

Minimize the Risk of Misclassification

If you misclassify an employee as an independent contractor, you may end up before a state taxing authority or the IRS.

Sometimes the issue comes up when a terminated worker files for unemployment benefits and it’s unclear whether the worker was an independent contractor or employee. The filing can trigger state or federal investigations that can cost many thousands of dollars to defend, even if you successfully fight the challenge.

There are ways to reduce the risk of an investigation or challenge by a state or federal authority. At a minimum, you should:

• Familiarize yourself with the rules. Ignorance of the rules is not a legitimate defense. Knowledge of the rules will allow you to structure and carefully manage your relationships with your workers to minimize risk.
• Document relationships with your workers and vendors. Although it won’t always save you, it helps to have a written contract stating the terms of employment.

If you have any questions about how to classify workers, please contact our office.