IRS Warns Against Corona Virus Fraud, and Other Scams

IRS Warns Against Corona Virus Fraud, and Other Scams

The IRS is reminding taxpayers to be on the lookout for corona virus fraud and other scams.

According to a release from the IRS, criminals continue to use the corona virus relief payments as a cover to steal personal information and money.

Below are some corona virus schemes the IRS is urging taxpayers to look out for:

  • Using relief payments as a cover to get personal information and money
  • Selling fake at-home test kits
  • Selling fake cures, vaccines, pills and advice
  • Selling large quantities of medical supplies through fake shops, websites, social media accounts and email addresses
  • Setting up fake charities
  • Offering opportunities to invest early in companies working on a vaccine for the disease
  • Phishing scams using emails, letters, texts and links

Scams should be reported to the National Center for Disaster Fraud hotline at 1-866-720-5721 or submitted through the
web complaint form here –> https://www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form

 

Delaying Payment of Old Tax Bills Is a Big Mistake

Delaying Payment of Old Tax Bills Is a Big Mistake

You know that long list of ways that the COVID-19 virus has affected our lives? Well, here’s another one. The IRS has completely flipped a switch on its priorities, and it is not even looking at paper tax returns that are being sent to it. The idea of all those envelopes piling up somewhere is a bit mind-boggling, but it’s apparently what’s happening as the Treasury Department focuses on generating the stimulus checks that American taxpayers need to get through the crisis.

If you don’t owe the IRS money and you’re not looking to amend a previously filed tax return, this shift won’t mean much to you. You can rest easy knowing that the tax return and payments that would have been due in April are now not due until July 15th. But if you were hoping to get a refund from a previous year’s return via a return you amended (or need to amend), or if you owe the IRS money, you need to pay attention.

For the first of these two categories – the folks with amended returns – what you need to know is that you’re not likely to see any kind of response for quite a while. There’s no way to find out what the status is and the agency is pointedly advising people not to interpret the lack of response as a need to send in a new one. Doing so would just confuse things more. You need to sit tight.

If, however, you owe the IRS money from before the crisis occurred, there are no breaks on the penalties and interest that are stacking up. It may take the agency a while to get around to figuring it out, but if you decide to sit and wait ‘til you hear from them, you’re going to be in for a big shock. Your liability is not only still there, it’s adding on interest from the time that it was due. This is true on amended returns that reflect a liability as well.

How much could the interest and penalty add up to?

In a word – it could add up to a lot. Not only do you owe the original amount, you are also subject to accruing interest and a failure-to-pay penalty of 0.5% of your original liability for each month (or partial month) that it hasn’t been paid. That can rack up to 25% of the liability. There’s also a penalty if you failed to file on time, and that can add up to another 5% of the amount that you owe each month. Even if you can’t afford to pay your entire liability all at once, you’re much better off paying small parts over time than waiting and having all of that interest added to your debt. You can contact the IRS online to arrange for one of their installment agreements.

Remember that mountain of returns piling up somewhere? Keep that in mind when you’re ready to send the IRS your money. If you write a check it’s going to just sit there, and your interest is going to keep adding up. Opt for paying electronically via direct payment. Don’t worry about the fact that the paperwork is sitting in that big pile. The agency will eventually get around to going through it, and they’ll figure out which payment goes with which amended return.

Don’t Fall For These 5 COVID-19 Relief Payment Myths

Don’t Fall For These 5 COVID-19 Relief Payment Myths

1. Everyone is going to get $1,200.
While many are, the maximum $1,200 person payout isn’t going to show up in every person’s bank account or snail mail box. People who have higher incomes will see their payments reduced phased out incrementally for individuals with no children where their adjusted gross income (AGI) is more than $75,000 for single people; $112,500 for taxpayers filing as head of household; or $150,000 for taxpayers filing a joint return.

The Coronavirus Aid, Relief and Economic Security (CARES) Act that created the payments also decreed that folks won’t get any COVID-19 relief money if their AGIs are more than $99,000 for single filers; $136,500 for head-of-household taxpayers; or $198,000 for married couples filing jointly.

The phase-out income levels are a bit higher for folks with kids. The Internal Revenue Service table below shows how the COVID-19 economic relief payment is reduced based on your AGI and number of eligible children (those age 16 or younger) you can claim.

COVID19 payment phase out for high earners with children_IRS table

Even those who do qualify for the maximum payout could see less when it arrives. The COVID relief payments are not subject to most types of federal offsets that usually are attached to things like your tax refund, such as overdue student loan payments or unpaid taxes. However, if a recipient is behind on child support, that due amount likely will be taken out before the relief payment is made. There’s also the possibility the payments could take a hit from some types of state or local government garnishments, as well as court-ordered paycheck collections.

2. Unemployment benefits disqualify you from getting the payment.
Not true, and that’s a huge sigh of relief you’re hearing across the country from the more than 30 million folks thrown out of jobs since the coronavirus began spreading across the United States. So collect that unemployment check (if your state government is able to get it to you) and expect your COVID-19 economic relief payment, too.

The federal relief payments being distributed now are based on the amount of money you made either in 2018 or 2019. The Treasury and IRS don’t care what you’re making (or not) in 2020. However, this year’s income could come into play as far as COVID-19 relief when you file your tax return next year. If you didn’t get the maximum amount based on your prior taxes, for example, you had an eligible dependent this year who was not shown on your earlier returns, you can claim that relief amount when you file your 2020 taxes in 2021. Yeah, I know. The wait is not what you need. But at least you’ll get your money eventually.

3. The COVID-19 economic relief payment is taxable income.
Again, no. The relief money is not income. It is a tax credit. Just like the child tax credit or Earned Income Tax Credit (EITC), it’s a tax break that’s calculated based on your eligibility and is used to offset any tax you owe. Tax credits aren’t taxed. In some cases, they’re even refundable, meaning you get money back even if you don’t owe taxes. You don’t owe taxes the next year on any credits you get on your prior tax filings.

This tax credit math is usually done when you file your return. But in order to get the COVID relief money out more quickly, it’s being issued as an advance tax credit on your 2020 taxes based on your 2018 or 2019 returns. But its tax treatment remains the same. It’s not taxable.

4. You’ll have to pay back a too-big COVID-19 economic relief payment.
This is the companion to the tax credit myth. Again, not true. While the multiple tax years involved in the COVID relief payments definitely lend to the confusion about the money, the good news here is that if you got an overly large amount based on your 2018 or 2019 returns, don’t worry about it.

Uncle Sam says that even if your 2020 taxes, for which the payment is an advance tax credit, shows you should have received less, you get to keep the over payment that the government made this year. That’s because at the time the IRS calculated the COVID-19 relief amount you were due, the agency was using the latest info it had, your prior filings. So even though it technically is a 2020 tax year advance credit, the timing of its early delivery means that the IRS doesn’t care about your 2020 money, at least as far as the COVID-19 economic relief payment is concerned.

And there’s even better news. As noted in myth #2 and worth repeating here, if you didn’t get as much this year in your COVID relief payment as you eventually find you are due based on your 2020 tax situation, you can collect that unpaid amount when you file your 2020 return next year.

5. There are special ways to speed up delivery of my relief payment.
Treasury and the IRS already have established the payment schedule for the COVID-19 economic relief money. It’s going to direct deposit accounts first, then paper checks will be dropped in the mail. The payments also are being sent to the lowest-income taxpayers first in either the electronic or snail mail delivery route.

The only sure-fire way to get your COVID-19 economic relief payment more quickly is to get your direct deposit data to the IRS using the enhanced Get My Payment tool. If the IRS doesn’t have that information, it will mail you a paper check via the U.S. Postal Service. But you need to hurry. If when you do try to let the IRS know your bank info you find that it’s already decided you’ll get a paper check, you can’t change that. You’ll get a paper check.

So don’t fall for “offers” that promise to get you your COVID-19 money more quickly. Any phone calls or texts or emails from folks, some pretending to be with Treasury, the IRS or the Social Security Administration, are coronavirus scams. Don’t fall for them. It could cost you even more than the relief payment amount you’re expecting.

Stimulus Payments Are Finally Flowing – Did You Get Yours; Was It Correct?

Stimulus Payments Are Finally Flowing – Did You Get Yours; Was It Correct?

The IRS has finally started making those much anticipated Economic Impact Payments, aka “Stimulus Payment.” However, not everyone who was expecting one has received theirs, and some may not be the amount expected.

The Treasury first looked for a filed 2019 return when they began making the payments. If a 2019 return was not filed in time to catch the payment dates, they used the family makeup and income from the 2018 return if one was filed. If neither was filed, then they paid rebates to recipients of Social Security, SSI disability, survivors, Railroad Retirement and veterans’ benefits.

Someone who does not fit into one of those categories is generally deemed to be a non-filer and will not receive a rebate until they either file a return or use the Non-Filer Tool on the IRS website.

You can check on the status of your rebate using the “Get My Payment” feature at the same IRS webpage as the non-filer tool. That same page also provides the ability for some taxpayers to enter their direct deposit information If the IRS doesn’t have your direct deposit information in their records, you can use Get My Payment to submit that information after properly verifying your identity and if the payment hasn’t already been scheduled for processing. To protect against potential fraud, Get My Payment won’t allow direct deposit bank information already on file with the IRS to be changed. However, direct deposit information can be updated for people whose direct deposit information on the last return filed was incorrect and resulted in a paper check being issued for their refund. Unfortunately, address changes cannot be made through Get My Payment.

Also realize there may have been births, deaths, under age 17 dependent children, marriages, separations, divorces, emancipations, and income changes that can cause the rebate amounts to be different from what may have been expected, or in some cases, be incorrect. On top of all that, the rebates are reduced (phased out) for higher income taxpayers, so based on your reported adjusted gross income on your 2019 return (or 2018 if 2019 hasn’t been filed yet), you may only qualify for a reduced rebate or no rebate at all.

The IRS provides an extensive Q&A related to rebate issues and situations that may answer any questions you may have related to your rebate.

Just a Reminder, Tax Day is July 15th

Just a Reminder, Tax Day is July 15th

The outbreak of COVID-15 is forcing people to make changes all around the world, and taxes couldn’t be an exception. That’s why the Internal Revenue Service determined to extend the filing deadline and federal tax payments from April 15 to July 15, 2020.

This measure aims to offer relief to American taxpayers that may have been affected by the outbreak, and may be experiencing difficulties filing their taxes.

An Automatic Measure

You don’t have to contact the IRS send any new forms, or take any additional action to take advantage of this extension. The new date will be automatically applied to all taxpayers, including individuals, trusts, estates, corporations, and other non-corporate tax filers as well as those who pay self-employment tax.

The IRS encourages tax payers who are owned a refund to file as soon as possible, as refunds are issued within 21 days. IRS Commissioner Chuck Rettig advises that filing electronically and with direct deposit is the quickest way to get your refund.

As part of this relief package, taxpayers will also be able to defer federal income tax payments to July 15, 2020, without penalties or interests regardless of the amount owed. Remember that these measures apply to federal taxes, so it’s advisable to check with a tax expert to know more about deadlines and possible extensions for state taxes.

If you would like to request an extension to file your taxes after July 15, you should use Form 4868 with the assistance of a tax professional or using tax software. Companies looking for an extension should use Form 7004.

Get More Information

The situation and measures related to COVID-19 in the United Stated are fluid. The IRS has created a website with specific information about this topic. You can check it here to read the most recent updates and information about relief measures for taxpayers. If you wish to obtain more general information regarding COVID-19, check this official page from the United States government where you’ll find information, resources as well as the latest official news. Go here: https://www.irs.gov/coronavirus

Who Qualifies as a Dependent on Taxes?

Who Qualifies as a Dependent on Taxes?

Deciding if Someone Qualifies as a Dependent on Your Tax Return

How Do I Know if I Can Claim Someone as a Dependent?
To start, there are a few basic requirements that need to be met to claim someone else as a dependent:

No one else can claim you, or your spouse if you’re filing a joint return, as a dependent. Even if the person chooses not to claim you as a dependent, the fact that they could makes you ineligible.
You generally can’t claim anyone who is married and files a joint return. However, there are exceptions if the person only files a joint return to get back income taxes that were withheld from paychecks or estimated tax payments.
The person you’re claiming must be a U.S. citizen, resident alien (which can include undocumented residents), U.S. national, or resident of Canada or Mexico. There are also some exceptions for adopted children who lived with you in the U.S.
These general rules apply to everyone. Additionally, the person you’re claiming must meet all the requirements to be your qualifying child or qualifying relative.

The Two Types of Qualifying Tax Dependents
Children and relatives can qualify as tax dependents—but their definitions are broader than you may suspect.

In addition to your birth child or an adopted child, your foster child, siblings, half-siblings and step-siblings (along with all the siblings’ descendants) can be qualifying children. And your son-in-law, mother-in-law, parents, grandparents and in-laws could all be qualifying relatives.

A person doesn’t even need to be a relative to count as a qualifying relative. A girlfriend, boyfriend or roommate could be your dependent as long as the person is a member of your household for the entire year and meets all the other requirements.

The IRS’ Publication 17, chapter 3, has a complete list of which relationships can qualify someone as a child or relative for dependent purposes.

In addition to the relationship requirement, the qualifying child or qualifying relative has to pass a series of “tests.”

Qualifying Children
There are four tests for qualifying children:

The child must be 19 or younger at the end of the tax year and younger than you (and your spouse if you file a joint return). Qualifying children can be up to 24 years old if they’re also full-time students for at least five months of the year, or they can be any age if they’re permanently and totally disabled.
The child has to live with you for at least half the year. There are exceptions for temporary absences, such as when you or the child are away from home for school, business, vacation or military service.
The child can’t provide more than half of his or her own support during the year (scholarships don’t count as support).
The child can’t file a joint tax return unless the only reason for filing is to get back the taxes that were withheld from his or her pay or were part of estimated tax payments.
The rules for who can claim a qualifying child can get fairly complex when both parents can claim the child as a dependent but they aren’t married, or they file their tax returns using the married filing separately status.

Some parents switch off, letting one person claim the child one year and the other parent claim the child the next. The IRS also has an official series of tiebreaker rules (see page 30 of Publication 17) to determine who can claim the child if you can’t come to an amicable agreement.

Qualifying Relatives
There are three additional tests for your qualifying relatives:

The person can’t be anyone’s qualifying child.
The person’s gross income must be below $4,150. Income could include money, property, goods or services they received, and it may include Social Security benefits. However, there are exceptions for people with disabilities who received income from certain tax-exempt schools.
You have to provide more than half of the person’s support for the year.
If working through all the tests sound like too much work, you could also try the IRS’ interactive tool, which can help you determine if you can claim someone as a dependent.

DISCLAIMER: Because each individual’s legal, tax, and financial situation is different, specific advice should be tailored to the particular
circumstances. For this reason, you are advised to consult with your own attorney, CPA, and/or other advisor regarding your specific situation. 

Have further questions?  Please contact our office and make an appointment.