taxes

Combating Identity Theft And Tax Fraud

As tax season rolls around it is extremely important to secure your customer’s personal identifying information in order to protect them from identity theft. Identity theft, especially when it relates to filing your taxes, can be crippling for a person’s finances and land them in a nightmare situation filled with a maze to go through with the IRS. Learning more about how scammers target taxpayers in order to manipulate the system will allow you to take the necessary steps to protect the identity of your customers so that potential fraudsters cannot commit tax fraud.

How Does Tax Fraud Take Place?

Tax fraud is one of the worst forms of identity theft for the victim because it happens during a very chaotic and confusing time for most people. When customers are concerned with tax season they may be more likely to click on links sent to them by supposed “experts.” Fraudsters prey on people by sending emails that claim to need a Social Security number (SSN) and other identifying information in order for them to access their tax profile. They then use the Social Security number to file a forged tax return and draw a refund in the customer’s name. When done early in the year, it can be a long time before victims even realize that their identity has been stolen. The IRS has put together a list that helps customers determine if they are victims of tax fraud.

tax_auditBusiness Tips for Deterring Tax Fraud

It is important to educate your customers about safeguarding their personal information so that they do not become victims of identity theft. Remind them that the IRS will never initiate contact requesting personal or financial information, including PIN numbers, Social Security numbers or bank accounts. They should not reply to these messages, click on any links within emails or open attachments as they could contain computer viruses or phishing programs designed to steal information.

Your organization can do its part to deter tax fraud by using a comprehensive identity verification program. Identity verification will help you verify legitimate customers and secure personal information easily and with the confidence that comes with knowing you are working with the correct individual. As a result, your business will meet industry regulations that require you to do all that you can to validate the identity of your customers. By providing resources to your customers that explains your identity verification program and the steps you are taking to protect their identity and personal information, you will be able to build your existing relationship and draw in new business.

How Can Identity Verification Help?

Identity verification systems do not require customers to disclose more personal information than is necessary to complete the filing process. One of the toughest parts about combatting tax fraud is that fraudsters have access to a customer’s personal identifying information from the start. This is why it is smart to have a system in place that checks information provided against records available to catch any discrepancies before going any further. Identity verification is useful for both in-person and customer-not-present situations.

Deterring identity theft and tax fraud takes customers and businesses working together. Building trust and putting security measures in place will allow things to go smoothly in an otherwise hectic time for your organization and customers alike. Keeping these tips in mind at all times will enable you to fight back against fraud and identity theft at every opportunity.

Written by Britni Zandbergen, Senior Director of Marketing at Idology.  Britni has years of experience in identity management as well as dynamic SaaS solutions.


How To Fill Out Tax Forms To Get The Best Deductions

F.J. Raymond is credited with saying, “Next to being shot at and missed, nothing is quite as satisfying as an income tax refund.” While this may be a bit of an exaggeration it is true that a large tax refund can make you feel like Christmas came twice.

Tax formNobody takes great pleasure in filing income tax forms. But if you use discretion and fill those forms out strategically, you could be rewarded with a handsome tax return for your efforts. The first, and most important, step is knowing which tax forms you need to fill out. Many people find these forms intimidating, frustrating, and more difficult to decipher than stereo instructions. But knowledge is power, so let’s take a look at the different tax forms and discuss when it is appropriate to use them.

The Long and Short of It

  • 1040EZ (very short form)

This is by far the shortest and most straightforward of the income tax forms. But don’t allow yourself to be too drawn in by its simplicity – it can only be used by people who fulfill a number of requirements including having less than $100,000 total annual income, less than $1,500 total interest income, under 65 years of age, no income adjustments, and income that stems exclusively from wages, interest, or unemployment. Using 1040EZ also only allows you to claim the standard deductions and the Earned Income Credit. Therefore, this form is short and sweet, but usually won’t maximize your deductions.

  • 1040A (short form)

The vast majority of American taxpayers can use form 1040A. This form still requires that your total annual income be less than $100,000 but all other areas are more flexible than the 1040EZ. For instance, you can be any age, any filing status, have income from a variety of sources like Social Security benefits and IRA, claim certain income adjustments, and claim tax credits such as the child tax credit or education credits. Form 1040A gives you more flexibility in filing. However, it is very important to note that you cannot itemize your deductions in this form.

  • 1040 (long form)

Form 1040 can actually be used by all American taxpayers regardless of their financial circumstances. It is by far the longest tax form, but that also means it is comprehensive and can accommodate any and all tax situations. A big advantage of using 1040 is that you can itemize your deductions, which can help you boost your refund. Although anyone can use it, you must fill out 1040 if you have a total annual income of more than $100,000, want to itemize deductions, have income stemming from a rental or business, receive foreign wages, are claiming other adjustments to income such as tuition, or have sold bonds, stocks, or property. Again, the 1040 takes more time and patience to fill out, but gives you the ability to make itemized deductions.

General Tips for Maximizing Your Refund

  • Increase Your Withholding

This is something you can do well before you have to tackle the aforementioned income tax forms. Generally, you can change the number of exemptions you claim on your W-4 at any time.

  • Deduct Charitable Donations

You can get a huge refund boost by deducting charitable donations including donated property, cash, car mileage, and even tithes for religious institutions.

  • Pad Your IRA

By increasing your contributions to your IRA (Individual Retirement Account), you’ll decrease your total taxable income while helping ensure that you have a financially secure retirement.

  • Consult With a Professional

The most important step in optimizing your deductions and thus the sum of your tax refund is consulting with an expert in the field of taxes. Tax resolution firms that specialize in tax solutions can help you make sense of the often confusing financial jargon and forms to make sure you get the most deductions possible.

By following these tips and soliciting the advice of a tax attorney, you will be able reap the benefits of a better refund.

Written by Randy Otis of Levy Tax Help.


Common Factors That Increase Property Taxes

last minute taxing filing tipsWhile homeowners can expect to pay property taxes each and every year, they don’t always notice how much they are paying. Unlike a sales tax, property taxes are very complicated and often differ from town to town. Each local government has its own set of codes and rates that determine how much the local taxpayers will pay, and homeowners have seen a gradual increase in the amount that they must pay each year. Despite the fact that property taxes are determined using the local tax rate and the property’s value, there are still several factors that can cause taxes to go up.

Increase in Benefits for Public Employees

Most government employees enjoy benefits that are 45 percent higher than those earned by employees in the public sector. Unions and other organizations are constantly working to increase the amount of wages, healthcare benefits and pensions that employees are entitled to receive, and the national government cannot provide all of these benefits in the current economy. This causes local governments to make up the difference by raising property taxes for homeowners in the region.

Budget Cuts

If the state or local government has implemented budget cuts, homeowners are often required to cover the loss by paying more in property taxes. Since these taxes are used to pay for public schools, hospitals, fire departments, libraries and other public services, property taxes often rise even when the economy is suffering.

Renovations

When property owners renovate their homes, it can cause their property tax rates to increase. Since renovations are improvements, they raise the value of the home, which then causes the homeowner’s property values to go up. A tax assessor may look through building permits to determine what renovations have been done, or he may walk through the home to evaluate the building’s condition. Homeowners will also pay more if they have added on to the home or have converted the garage into a living space.

Outdoor Enhancements

If a homeowner has recently added a patio, deck, shed or garden to the property, then he can expect to pay more in property taxes. Many local governments consider these to be improvements to the property, which increases the overall value of the home.

Location

The location of a home is a large factor in determining its worth. If the property is near a popular lake or close to the city, then it will be assessed at a higher value. New businesses, such as a golf course, may also increase the value, which will mean that homeowners will pay higher taxes.

Homeowners do not have much control over what they pay in property taxes, but they can make sure that they are actively involved in the public process. If you are interested in learning more about your property taxes, attend meetings and hearings about the local tax rate. When you vote for local government officials, be knowledgeable about their position on taxes. You should also carefully examine your tax statement to identify any enhancements or errors in the value of your property. If you think a mistake has been made, you can file for an appeal. This will help you make sure that you are paying the lowest possible taxes on your home despite increasing property tax rates.

Jayson works for Republic Property Tax in Houston, TX. He enjoys studying personal finance and loves advising people on how to save money on their property taxes.


What Happens To Taxes And Insurance In 2014?

What Happens To Taxes And Insurance In 2014?

As President Barack Obama enters his last two years of presidency, many Americans are wondering what kinds of new taxation and insurance changes to expect for the future. Throughout the next year, there will be a number of new changes that all taxpaying citizens of the United States will face – including increased taxes and new policies that mandate documentation of insurance. Whether or not you agree with the initiative, you will be facing changes that may be affecting how you get medical care – and how you file your taxes.

Employer Health-Care Mandate: The Delay Will Finally End

TaxesOne of President Obama’s biggest plans has been the Affordable Care Act, which has been a critical part of the democratic party’s platform and has promised employed Americans a better chance of getting quality health care at a reasonable price. One of the biggest benefits to expect is that preventative health care measures will be covered as well, instead of only covering or reimbursing the costs of treatment for major injuries and sickness. This summer, the White House issued a statement that it has delayed the process of demanding documentation of compliance from businesses, allowing companies more time to deal with this drastic shift in benefits throughout the upcoming year. An unexpected delay such as this should impact taxpayers relatively little, but it will have a big impact on how insurance will be procured through employers. Companies are struggling to decide when to provide the insurance demanded by ACA, as the timeline remains unclear.

However, in that many of them have already invested a great deal of corporate energy and time – not to mention the great financial investments that have already taken place – to comply with the new reporting guidelines that now will be delayed for the upcoming year. The Department of Health and Human Services has already started rolling out the benefits to individuals and families who need coverage, including special coverage for women and those who have diseases or ailments such as high blood pressure, addictions, weight issues, and cancer-preventative treatment – and these costs have to draw from somewhere. Expect many companies to struggle to implement these new requirements for employer health-care benefits through 2014 and perhaps into the beginning of 2015, and for struggling families to begin using Obamacare at higher rates – nevertheless, mandatory employer-provided quality health insurance will become a reality by the end of President Obama’s term in office.

The Effects Of Insurance On Taxes In 2014: How The System Will Operate

Like never before, the American public will have to consider the impact of tax credits and penalties on insurance at the federal level – which will lead to fee spikes over the upcoming five years. Obama has pledged to not cut any Medicaid funding, and he will do so by changing the methods through which inflation is calculated on Social Security benefits. Totaling 21 new charges, tax hikes and other initiatives that help to fund the Obamacare program, these changes will surely have an effect on everyone, though the severity of the effect will differ based on insurance status and current income levels. In 2014, expect to have to pay a $95 fee if you choose not to buy insurance or have no coverage from your employer. This fee is expected to rise to an annual charge of approximately $700 by 2016 – intended to pressure employers and employees alike to seek out affordable insurance costs that provide quality care. High-income earners will be paying a higher percentage towards Medicare costs in order to make ACA a reality.

If you and your family are wondering what types of coverage and care might be provided to you through the Affordable Care Act, it is best to consult with a representative of the US Department of Health and Human Services, who can refer you to a social worker who can handle your family’s case to make sure that you and your loved ones are fairly protected with the minimum essential coverage to keep you healthy and strong as members that contribute to society.

The article was written by Audrey, who is working for Wallace & Associates CPA, a Pasadena CPA serving the Los Angeles area.


7 U.S. States With No Income Taxes

Texas Governor Rick Perry

When it comes to income tax, it is no mystery that there are large variances state by state. In fact, there are some states that have no income tax liability. Many of these states pick up the difference with changes in sales tax, property tax, and corporate taxes. There are seven states total that have various ways of avoiding income tax entirely.
Nevada
On the west coast, Nevada is most known for its gambling and entertainment industry. It is no surprise that much is made up in revenue through gambling. In a given fiscal year, Nevada is funded mostly through sales tax at the rate of 6.85%. They also lack a corporate tax. As a result, Nevada has attracted attention from various corporations moving out of other state s in the midwest, including Apple. Property tax for Nevada is rated at approximately $1,297 for the 2010 year.
Alaska
Alaska is a land of production and natural resources. It’s location is strategic to both Canada and the United States. Funding for the state comes from natural resource extraction with a 9.4% corporate tax rate. In fact, royalties from oil and gas make up the largest percentage of revenue. The average property tax per year is $1,338. There is no state sales tax levied either.
Texas
This vast state is situated in industry with a large cocktail of tax revenue that makes up for the loss of income tax. A 6.25% sales tax as well as an approximately 1% franchise tax bring in almost half the income for the state. Texas also levies motor vehicle tax as well as tax on natural resources. The average property tax annually is $1,292.
Washington
The vast state of Washington, complete with proximity to Canada and natural resources, levies a tax on sales and businesses. The state’s corporate tax, known as Business and Occupation Tax, is levied at 7%. Over half the revenue in the state is made up from sales tax. The average property tax rate for Washington is $1,257.
Wyoming
Abundant natural resources and property also help boost Wyoming’s tax revenue. A 4% sales tax and a tax on natural resources make up a large percentage of Wyoming’s revenue. Natural resource production is abundant and makes up a good amount of income through environmental levies. The recent per capita property tax was rated at $2,663.
Florida
The sunshine state of Florida is also a hub for entertainment and tourism. A 6% sales tax rate makes up over 70% of the income for the state due to the tourism industry. A 5.5% corporate income tax is included as well. Despite the introduction of a corporate tax, advantages exist for specific corporations that are limited to partnerships or S-corporations. The average property tax is $1,507 per year.
South Dakota
Unlike its northern twin, South Dakota does not collect income tax and retains funding through the use of a 5% sales and use tax as well as gas tax. There is no corporate income tax in the area. Known for its national parks and environmental tourism, the state recoups over 60% of its revenue from sales tax. An 8% fuel tax and car title tax is levied. The average property tax is rated at $1,142.

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Dan Grogan is a corporate accountant who has also written reviews of top-rated online accounting schools at Top Accounting Degrees.


How the Super Rich Avoid Paying Taxes

Avoid Paying Taxes

We’ve all heard tell of billionaires who can’t be bothered to pay taxes. Yet, how are they able to accomplish such a thing?

The top earners in America simply hire the best tax lawyers, who understand which tax loopholes are best able to keep money from going toward building roads and maintaining social security benefits. It’s not surprising, then, to learn that earners with an annual income of $10 million typically pay a 19% tax rate, or that estimated tax revenue losses are estimated to be around $70 to 100 billion each year.

Some of the most frequently used methods of skimping on taxes including sending money overseas and freezing assets. The wealthy are able to save money for a rainy day by transferring assets to their children, effectively freezing their worth and eliminating the need to pay taxes on them for many years. For the wealthy, the Cayman Islands are a popular place to do some banking. It’s estimated that about $21 trillion has been funneled into offshore accounts, effectively lowering tax bills for the wealthy.

Source: TopAccountingDegrees.org


If Income Taxes Increase, Will Rich People Leave the USA?

If Income Taxes Increase, Will Rich People Leave the USA?

Ever since this country was founded, Americans have hated paying taxes. So it should come as no surprise then that many rich American citizens are considering leaving the country and renounce their citizenship to avoid paying those taxes.

The Abroad Tax Issue

The United States is one of the few countries world-wide to tax its citizens on income earned, even if they earned it out of the country. For example, you could work in France for an entire year and still owe income taxes in the U.S. based on how much you earned. This issue has been a leading cause of more and more Americans renouncing their citizenship.

In 2011, almost 1,800 Americans gave back their green cards and renounced U.S. citizenship. This was nearly eight times more than in 2008 and more than 2007, 2008 and 2009 combined according to IRS statistics.

Many Filing Abroad Issues

While the last several years have experienced an increase in the ease of filing taxes from more resources to increased software options, overseas taxpayers still have many issues they must contend with. A report released by the National Taxpayer Advocate’s Office, an arm of the IRS, said that heavy paperwork, few online filing options and language issues hamper these taxpayers.

Other issues that weigh on overseas taxpayers are two old requirements: Reporting foreign bank and financial accounts. This might not seem like much, but if you have joint accounts you need to list all assets in them. This means if you are married to a foreign national, you are required to list all of your joint assets to the IRS.

According to many tax lawyers, tax questions arising from listing bank account assets are a big reason that many U.S. citizens renounce their citizenship.

Abroad Taxpayers Recourse

There are currently about 6.3 million U.S. citizens living abroad who pay taxes on incomes earned overseas. When they have had enough of paying taxes to a country they don’t live in, they are left really with only one option: Renounce their U.S. citizenship.

This problem has caused many sleepless nights for U.S. citizens living abroad as they wrestle with tax problems and keeping their citizenship. Many of these overseas citizens have been faced with large fines and thousands in back taxes attributed to lack of information related to tax regulations.

While Congress has gotten involved and is researching ways to reduce red tape and undue burden on taxpayers, it isn’t likely to be a rapid change. For now, paying taxes overseas can become a gigantic headache requiring the services of CPAs and tax attorneys.

If you find yourself in this situation it is advised that you speak with an experienced tax attorney.

Author Jason Lancaster writes several different tax-related articles for Olson Tax Consulting, a Denver tax attorney who works with businesses and families to help resolve tax issues.


Taxes and Bankruptcy: What You Need to Know

Taxes and Bankruptcy: What You Need to Know

There are so many intricacies in bankruptcy law that is can be very overwhelming, especially considering that getting to the point of having to file for bankruptcy is overwhelming in itself.  Often what affects what and how can get lost in the shuffle.  It is much easier to go forward with something, and less overwhelming, if you know all of the details beforehand.  Liken it to a doctor explaining each step of process as he does it so the patient always knows what is coming.  It may still not be pleasant, but it is at the very least not a surprise.  Consider your bankruptcy attorney your bankruptcy doctor.

Back Tax Returns

Filing for bankruptcy will affect your tax situation, but likely not in the way you expect. First thing first, before you can even file a bankruptcy claim all back taxes must be completed and filed.  If you happen to not realize this and file a claim while you still have unfiled tax returns from previous years, the clock starts ticking. You have a limited amount of time at that point to get those returns filed before the claim is thrown out.  This is where a CPA comes in very handy, as they can file the forms in the most effective, efficient manner possible.

Tax Debt

Tax debt is exempt from discharge.  This means that even when a bankruptcy claim is approved, tax debt will still be owed including any penalties and late fees. There is a possibility that collection efforts could be paused for a bit, but they will eventually start up again and fees and interest continue to accrue even when collection efforts are not being made.  Basically, bankruptcy is not a way out of paying the IRS. Other debt may be discharged, but tax debt will not be.  In fact, tax debt can even grow during this time if payments are not made during the proceedings.  A bankruptcy lawyer can help you come up with a plan of attack for this debt growth so that it does not get any more out of hand than necessary.

The Best Advice

If you see bankruptcy in your future, visit a Las Vegas bankruptcy lawyer and keep your taxes up to date. Go ahead and get back taxes filed or at least get them started so that does not hold up the process. Also, even if other debts have to be ignored, keep paying your tax debt as much as possible.  Those other debts may fall under discharge, so use what you can to pay the IRS and avoid as much in penalties and interest as possible.

This article was written on behalf of Top Nevada Bankruptcy Lawyer Anthony Deluca of Deluca & Associates.


Claiming a Home Office on You Taxes

Claiming a Home Office on You Taxes

A home office can be one of the best tax deductions for professionals that choose to work at home. Unfortunately, a home office tax deduction is also one of the biggest red flags for an IRS audit. To avoid tipping off the IRS audit monsters, make sure your home office follows the guidelines for a true home office.

Here are a few guidelines to follow to ensure that your home office won’t trigger an audit.

  • According to the IRS, areas in your home that are used for anything that’s not business related can’t be considered home offices. This means that you can’t use your dining room table as a tax deduction. Instead, make sure that your home office is a separate room in your house that you use for business and business only. Ideally, your home office should be a completely separate room from the rest of your home. If this isn’t possible, you may be able to separate a small portion of a larger room using room dividers.
  • In order for your home office to qualify for a deduction, you must use it for business more often than not. This means that you should spend more time doing business related tasks in your home office than anywhere else. For example, if you have an office at your employer’s place of business, you can only use your home office deduction if you spend over half of your business time in it.

Once you’ve determined whether or not your home office qualifies as a real home office in the eyes of the IRS, you can then start deducting your business expenses.

For example, a portion of your rent or mortgage, along with portions of your utilities and home insurance, can usually be deducted. You can’t deduct all of the money that you put into your home, however, and you must first calculate what percentage of these expenses that you can deduct.

To find out what percentage of your expenses that you can deduct, you will first need to measure the square footage of your home office as well as the square footage of your entire home. Once you have these measurements, divide the square footage of your home office by the entire square footage of your home.

Here’s an example…

  • Your home office is 150 square feet, and your entire home is 1,500 square feet.
  • Divide 150 by 1,500 to get 0.01.
  • Multiply 0.01 by 100 to get 10%.

This means that you can deduct 10% of all home expenses. As long as they are used solely for business, you may be able to deduct other expenses as well, including internet service and phone service.

Even if you follow all of the rules and deduct only business related expenses, there’s still a chance that the IRS might audit you. While this shouldn’t be anything to really worry about if you have nothing to hide, it can be quite inconvenient and annoying.

There are a few things that you can do, however, to lower the chances of being audited.

  • Don’t lie about your income. Ever. There’s really no point in trying to hide the amount of money that you make. Not only is it dishonest, but it’s the IRS that you’re trying to hide it from. They will find out.
  • Back up your deductions with physical proof. This will usually mean filing a paper tax return, but also lowers the chances that the IRS will pay you a visit. Keep all of your receipts throughout the year, and include copies with your tax return.
  • Include an explanation about any drastic income changes. One of the biggest red flags for an audit is an extreme change in income from one year to another. For example, if you made $200,000 last year and only made $20,000 this year, attach a note explaining the reason for this.

This article was written by Jonathan Koenig, who is an expert blogger on many different topics.  In addition to writing about finances and technology Jon also writes about cna training on http://cnathive.com


5 Top Tips to Avoid a Tax Audit

5 Top Tips to Avoid a Tax Audit

We all know taxes are a necessary part of our lifestyles. We need schools, emergency services and government. What we really don’t need as small and medium business owners is a comprehensive tax audit. Tax audits are a very lengthy and involved process, which usually calls for the services of a professional, so if there is any way to avoid being highlighted as a company that requires such an inspection, you can be sure your profits and costs will benefit from taking the appropriate action. Here are 5 top tips to help you avoid becoming one of this year’s tax audited companies.

1. Complete your return thoroughly and competently

Tax returns with calculation errors or prices of information missing will immediately flag you up to the tax authorities as someone who needs some help and an inspection. Make sure whatever you declare on your tax return can be easily matched up with what you have filed on PAYE or any other payroll system you are using, and be sure to fill in the form legibly, as forms the computer can’t understand will automatically be sent for checking.

2. Include ALL income, even that which you feel is insignificant

Whether you loaned the services of an employee to a business associate for a week, or sold your old computers on eBay, all these incomes should be stated on your tax return whether you deem them to be important or not. Similarly if you had capital in the bank that was accruing interest, or got paid on dividends during the last financial year, the best strategy is just to declare it all and then there is no grey area to investigate.

3. Check your income compared to last year

If you suddenly have an abnormally high income compared to last year, or even a really low one, this can raise a red flag to authorities and instigate further investigations to be made. If you have genuinely had a very different year to last year, then this just has to be swallowed and the potential for a full tax audit has to be dealt with, but if you are reporting an unusual income because of miscalculations or omission of some expenses, this should be easy to fix.

4. Itemized deductions

Of course you are entitled to the usual tax deductable expenses, whether these be cars, equipment or sustenance. However, be aware that if these deductions run to several pages of listings you will invariably be investigated by the auditing authority as this can highlight a potential problem to them.

5. Self employment

You can’t help working for yourself; indeed it is a commendable achievement. However, it does put you in the firing line for a tax audit, so make sure you have all your books in order all year round, so that audit time is not a stressful experience for you. If you have a small business that continually shows losses, the tax authorities may well start investigating deeper, so make sure anything you have put down as expenses actually is an expense relating to the business.

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