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IRS Repeats Warning about Phone Scams

The Internal Revenue Service and the Treasury Inspector General for Tax Administration continue to hear from taxpayers who have received unsolicited calls from individuals demanding payment while fraudulently claiming to be from the IRS.

Based on the 90,000 complaints that TIGTA has received through its telephone hotline, to date, TIGTA has identified approximately 1,100 victims who have lost an estimated $5 million from these scams.

“There are clear warning signs about these scams, which continue at high levels throughout the nation,” said IRS Commissioner John Koskinen. “Taxpayers should remember their first contact with the IRS will not be a call from out of the blue, but through official correspondence sent through the mail. A big red flag for these scams are angry, threatening calls from people who say they are from the IRS and urging immediate payment. This is not how we operate. People should hang up immediately and contact TIGTA or the IRS.”

Additionally, it is important for taxpayers to know that the IRS:

  • Never asks for credit card, debit card or prepaid card information over the telephone.
  • Never insists that taxpayers use a specific payment method to pay tax obligations
  • Never requests immediate payment over the telephone and will not take enforcement action immediately following a phone conversation. Taxpayers usually receive prior notification of IRS enforcement action involving IRS tax liens or levies.

Potential phone scam victims may be told that they owe money that must be paid immediately to the IRS or they are entitled to big refunds. When unsuccessful the first time, sometimes phone scammers call back trying a new strategy.

Other characteristics of these scams include:

  • Scammers use fake names and IRS badge numbers. They generally use common names and surnames to identify themselves.
  • Scammers may be able to recite the last four digits of a victim’s Social Security number.
  • Scammers spoof the IRS toll-free number on caller ID to make it appear that it’s the IRS calling.
  • Scammers sometimes send bogus IRS emails to some victims to support their bogus calls.
  • Victims hear background noise of other calls being conducted to mimic a call site.
  • After threatening victims with jail time or driver’s license revocation, scammers hang up and others soon call back pretending to be from the local police or DMV, and the caller ID supports their claim.

If you get a phone call from someone claiming to be from the IRS, here’s what you should do:

  • If you know you owe taxes or you think you might owe taxes, call the IRS at 1.800.829.1040. The IRS employees at that line can help you with a payment issue, if there really is such an issue.
  • If you know you don’t owe taxes or have no reason to think that you owe any taxes (for example, you’ve never received a bill or the caller made some bogus threats as described above), then call and report the incident to TIGTA at 1.800.366.4484.
  • You can file a complaint using the FTC Complaint Assistant; choose “Other” and then “Imposter Scams.” If the complaint involves someone impersonating the IRS, include the words “IRS Telephone Scam” in the notes.

Taxpayers should be aware that there are other unrelated scams (such as a lottery sweepstakes) and solicitations (such as debt relief) that fraudulently claim to be from the IRS.

The IRS encourages taxpayers to be vigilant against phone and email scams that use the IRS as a lure. The IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels. The IRS also does not ask for PINs, passwords or similar confidential access information for credit card, bank or other financial accounts. Recipients should not open any attachments or click on any links contained in the message. Instead, forward the email to phishing@irs.gov.

Back-to-School: Check Out College Tax Credits for 2014 and Years Ahead

With another school year now in full swing, now is a good time to see if taxpayers may qualify for either of two college tax credits or any of several other education-related tax benefits when they file their 2014 federal income tax returns.

In general, the American opportunity tax credit and lifetime learning credit are available to taxpayers who pay qualifying expenses for an eligible student. Eligible students include the taxpayer and his or her spouse and dependents. The American opportunity tax credit provides a credit for each eligible student, while the lifetime learning credit provides a maximum credit per tax return. Though a taxpayer often qualifies for both of these credits, he or she can only claim one of them for a particular student in a particular year. Claimed on Form 8863, these credits are available to all taxpayers — both those who itemize their deductions on Schedule A and those who claim a standard deduction.

For those eligible, including most undergraduate students, the American opportunity tax credit will generally yield the greater tax savings. Alternatively, the lifetime learning credit should be considered by part-time students and those attending graduate school.

Both credits are available for students enrolled in an eligible college, university or vocational school, including both nonprofit and for-profit institutions. Neither credit can be claimed by a nonresident alien, a married person filing a separate return or someone claimed as a dependent on another person’s return.

Normally, a student will receive a Form 1098-T from their institution by the end of January of the following year (Jan. 31, 2015 for calendar year 2014). This form will show information about tuition paid or billed along with other information. However, amounts shown on this form may differ from amounts taxpayers are eligible to claim for these tax credits.

Many of those eligible for the American opportunity tax credit qualify for the maximum annual credit of $2,500 per student. Students can claim this credit for qualified educational expenses paid during the entire tax year for a certain number of years:

  • The credit is only available for 4 tax years per eligible student.
  • The credit is available only if the student has not completed the first 4 years of postsecondary education before 2014.

Here are some more key features of the credit:

  • Qualified education expenses are amounts paid for tuition, fees and other related expenses for an eligible student. Other expenses, such as room and board, are not qualified expenses.
  • The credit equals 100 percent of the first $2,000 spent and 25 percent of the next $2,000. That means the full $2,500 credit may be available to a taxpayer who pays $4,000 or more in qualified expenses for an eligible student.
  • The full credit can only be claimed by taxpayers whose modified adjusted gross income (MAGI) is $80,000 or less. For married couples filing a joint return, the limit is $160,000. The credit is phased out for taxpayers with incomes above these levels. No credit can be claimed by joint filers whose MAGI is $180,000 or more and singles, heads of household and some widows and widowers whose MAGI is $90,000 or more.
  • Forty percent of the American opportunity tax credit is refundable. This means that even people who owe no tax can get an annual payment of up to $1,000 for each eligible student.

The lifetime learning credit of up to $2,000 per tax return is available for both graduate and undergraduate students. Unlike the American opportunity tax credit, the limit on the lifetime learning credit applies to each tax return, rather than to each student. Also, the lifetime learning credit does not provide a benefit to people who owe no tax.

Though the half-time student requirement does not apply to the lifetime learning credit, the course of study must be either part of a post-secondary degree program or taken by the student to maintain or improve job skills. Other features of the credit include:

  • Tuition and fees required for enrollment or attendance qualify as do other fees required for the course. Additional expenses do not.
  • The credit equals 20 percent of the amount spent on eligible expenses across all students on the return. That means the full $2,000 credit is only available to a taxpayer who pays $10,000 or more in qualifying tuition and fees and has sufficient tax liability.
  • Income limits are lower than under the American opportunity tax credit. For 2014, the full credit can be claimed by taxpayers whose MAGI is $54,000 or less. For married couples filing a joint return, the limit is $108,000. The credit is phased out for taxpayers with incomes above these levels. No credit can be claimed by joint filers whose MAGI is $128,000 or more and singles, heads of household and some widows and widowers whose MAGI is $64,000 or more.

You can use the IRS’s Interactive Tax Assistant tool to help determine if you are eligible for these benefits. The tool is available on IRS.gov. Eligible parents and students can get the benefit of these credits during the year by having less tax taken out of their paychecks.

There are a variety of other education-related tax benefits that can help many taxpayers. They include:

  • Scholarship and fellowship grants — generally tax-free if used to pay for tuition, required enrollment fees, books and other course materials, but taxable if used for room, board, research, travel or other expenses.
  • Student loan interest deduction of up to $2,500 per year.
  • Savings bonds used to pay for college — though income limits apply, interest is usually tax-free if bonds were purchased after 1989 by a taxpayer who, at time of purchase, was at least 24 years old.
  • Qualified tuition programs, also called 529 plans, used by many families to prepay or save for a child’s college education.

Taxpayers with qualifying children who are students up to age 24 may be able to claim a dependent exemption and the earned income tax credit.

The “What Ifs” for Struggling Taxpayers

People facing financial difficulties may find that there’s a tax impact to events such as job loss, debt forgiveness or tapping a retirement fund. For example, if your income decreased, you may be newly eligible for certain tax credits, such as the Earned Income Tax Credit.

Most importantly, if you believe you may have trouble paying your tax bill, action should be taken immediately. In many cases, there are steps we can take to help ease the burden. You also should file a tax return even if you are unable to pay so you can avoid additional penalties.

Here are some “what if” scenarios and the possible tax impact:

Job Related
What if I lose my job?
What if I receive unemployment compensation?
What if my income declines?
What if I am searching for a job?
What if my employer goes out of business?
What if I close my own business?
What if I withdraw money from my IRA?
What if my 401(k) drops in value?

Debt Related
What if I lose my home through foreclosure?
What if I sell my home for a loss?
What if my debt is forgiven?
What if I am insolvent?
What if I file for bankruptcy protection?

Tax Related
What if I can’t pay my taxes?
What if I can’t pay my installment agreement?
What if there is a federal tax lien on my home?
What if a levy on my wages is creating hardship?
What if I can’t resolve my tax problem with the IRS?
What if I need legal representation to help with my tax problem but can’t afford it?

IRS Announces Direct Deposit Limits

In an effort to combat fraud and identity theft, new IRS procedures effective January 2015 will limit the number of refunds electronically deposited into a single financial account or pre-paid debit card to three.

The fourth and subsequent refunds automatically will convert to a paper refund check and be mailed to the taxpayer.

Taxpayers also will receive a notice informing them that the account has exceeded the direct deposit limits and that they will receive a paper refund check in approximately four weeks if there are no other issues with the return. Taxpayers can track their refunds at Where’s My Refund?

The vast majority of taxpayers will not be affected by this limitation, and the IRS encourages taxpayers and tax preparers to continue to use direct deposit. It is the fastest, safest way for taxpayers to receive refunds.

The direct deposit limit will prevent criminals from easily obtaining multiple refunds. The limit applies to financial accounts, such as bank savings or checking accounts, and to prepaid, reloadable cards or debit cards.

However, the limitation may affect some taxpayers, such as families in which the parent’s and children’s refunds are deposited into a family-held bank account. Taxpayers in this situation should make other deposit arrangements or expect to receive paper refund checks.

Upcoming Tax Deadlines

October

Wed 1 Deposit payroll tax for payments on Sep 24-26 if the semiweekly deposit rule applies.
Fri 3 Deposit payroll tax for payments on Sep 27-30 if the semiweekly deposit rule applies.
Wed 8 Deposit payroll tax for payments on Oct 1-3 if the semiweekly deposit rule applies.
Fri 10 Employers: Employees are required to report to you tips of $20 or more earned during September.
Fri 10 Deposit payroll tax for payments on Oct 4-7 if the semiweekly deposit rule applies.
Wed 15 Deposit payroll tax for Sep if the monthly deposit rule applies.
Wed 15 Individuals: File Form 1040, 1040A, or 1040EZ if you timely requested a 6-month extension.
Wed 15 Electing Large Partnerships: File Form 1065-B if you timely requested a 6-month extension.
Wed 15 File Form 5500 if you timely requested an extension on Form 5558.
Thu 16 Deposit payroll tax for payments on Oct 8-10 if the semiweekly deposit rule applies.
Fri 17 Deposit payroll tax for payments on Oct 11-14 if the semiweekly deposit rule applies.
Wed 22 Deposit payroll tax for payments on Oct 15-17 if the semiweekly deposit rule applies.
Fri 24 Deposit payroll tax for payments on Oct 18-21 if the semiweekly deposit rule applies.
Wed 29 Deposit payroll tax for payments on Oct 22-24 if the semiweekly deposit rule applies.
Fri 31 Deposit payroll tax for payments on Oct 25-28 if the semiweekly deposit rule applies.
Fri 31 File Form 720 for the third quarter.
Fri 31 File Form 730 and pay tax on wagers accepted during September.
Fri 31 File Form 2290 and pay the tax for vehicles first used during September.
Fri 31 File Form 941 for the third quarter.
Fri 31 Deposit FUTA owed through Sep if more than $500.

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November

Wed 5 Deposit payroll tax for payments on Oct 29-31 if the semiweekly deposit rule applies.
Fri 7 Deposit payroll tax for payments on Nov 1-4 if the semiweekly deposit rule applies.
Mon 10 File Form 941 for the third quarter if you timely deposited all required payments.
Mon 10 Employers: Employees are required to report to you tips of $20 or more earned during October.
Thu 13 Deposit payroll tax for payments on Nov 5-7 if the semiweekly deposit rule applies.
Fri 14 Deposit payroll tax for payments on Nov 8-11 if the semiweekly deposit rule applies.
Mon 17 Deposit payroll tax for Oct if the monthly rule applies.
Wed 19 Deposit payroll tax for payments on Nov 12-14 if the semiweekly deposit rule applies.
Fri 21 Deposit payroll tax for payments on Nov 15-18 if the semiweekly deposit rule applies.
Wed 26 Deposit payroll tax for payments on Nov 19-21 if the semiweekly deposit rule applies.

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December

Mon 1 Deposit payroll tax for payments on Nov 22-25 if the semiweekly deposit rule applies.
Mon 1 File Form 730 and pay tax on wagers accepted during October.
Mon 1 File Form 2290 and pay the tax for vehicles first used during October.
Wed 3 Deposit payroll tax for payments on Nov 26-28 if the semiweekly deposit rule applies.
Fri 5 Deposit payroll tax for payments on Nov 29-Dec 2 if the semiweekly deposit rule applies.
Wed 10 Deposit payroll tax for payments on Dec 3-5 if the semiweekly deposit rule applies.
Wed 10 Employers: Employees are required to report to you tips of $20 or more earned during November.
Fri 12 Deposit payroll tax for payments on Dec 6-9 if the semiweekly deposit rule applies.
Mon 15 Corporations: Deposit the fourth installment of your 2014 estimated tax.
Mon 15 Deposit payroll tax for Nov if the monthly deposit rule applies.
Wed 17 Deposit payroll tax for payments on Dec 10-12 if the semiweekly deposit rule applies.
Fri 19 Deposit payroll tax for payments on Dec 13-16 if the semiweekly deposit rule applies.
Wed 24 Deposit payroll tax for payments on Dec 17-19 if the semiweekly deposit rule applies.
Mon 29 Deposit payroll tax for payments on Dec 20-23 if the semiweekly deposit rule applies.
Wed 31 File Form 730 and pay tax on wagers accepted during November.
Wed 31 File Form 2290 and pay the tax for vehicles first used during November.
Wed 31 Deposit payroll tax for payments on Dec 24-26 if the semiweekly deposit rule applies.

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