Don’t be Fooled; IRS Scams Continue to Pose Serious Threat

The Internal Revenue Service has some advice for taxpayers this April Fool’s Day that  may prevent them from being the victim of a tax scam: Don’t be fooled by scammers. Stay safe and be informed. Here are some of the most recent IRS-related scams to be on the lookout for:

Telephone Scams. Aggressive and threatening phone calls by criminals impersonating IRS agents remain an ongoing threat. The IRS has seen a surge of these phone scams in recent years as scam artists threaten taxpayers with police arrest, deportation, license revocation and more. These con artists often demand payment of back taxes on a prepaid debit card or by immediate wire transfer. Be alert to con artists impersonating IRS agents and demanding payment.
Note that the IRS will never:

• Call to demand immediate payment over the phone or call about taxes owed without first having mailed you a bill.
• Threaten to immediately bring in local police or other law enforcement groups to have you arrested for not paying.
• Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
• Require you to use a specific payment method for your taxes, such as a prepaid debit card.
• Ask for credit or debit card numbers over the phone or threaten to bring in local police or other law enforcement groups to have you arrested for not paying.

Scammers Change Tactics. The IRS is receiving new reports of scammers calling under the guise of verifying tax return information over the phone. The latest variation on this scam uses the current tax filing season as a hook. Scam artists call saying they are from the IRS and have received your tax return, and they just need to verify a few details to process it. The scam tries to get you to give up personal information such as a Social Security number or personal financial information, such as bank numbers or credit cards.

Tax Refund Scam Artists Posing as TAP. In this new email scam targeting taxpayers, people are receiving emails that appear to come from the Taxpayer Advocacy Panel, a volunteer board that advises the IRS on issues affecting taxpayers. They try to trick you into providing personal and financial information. Do not respond or click the links in these emails. If you receive an email that appears to be from TAP regarding your personal tax information, forward it to phishing@irs.gov.

E-mail, Phishing and Malware Schemes. The IRS has seen an approximate 400 percent surge in phishing and malware incidents so far in the 2016 tax season.
The emails are designed to trick taxpayers into thinking these are official communications from the IRS or others in the tax industry, including tax software companies. The phishing schemes can ask taxpayers about a wide range of topics. Emails can seek information related to refunds, filing status, confirming personal information, ordering transcripts and verifying PIN information.
Variations of these scams can be seen via text messages, and the communications are being reported in every section of the country.
When people click on these email links, they are taken to sites designed to imitate an official-looking website, such as IRS.gov. The sites ask for Social Security numbers and other personal information, which could be used to help file false tax returns. The sites also may carry malware, which can infect your computer and allow criminals to access your files or track your keystrokes to gain information.
If you get a ‘phishing’ email, the IRS offers this advice:

• Don’t reply to the message.
• Don’t give out your personal or financial information.
• Forward the email to phishing@irs.gov. Then delete it.
• Don’t open any attachments or click on any links. They may have malicious code that will infect your computer.

More information on how to report phishing or phone scams is available on IRS.gov.

Six Facts You Should Know Before Deducting a Charitable Donation

If you gave money or goods to a charity in 2015, you may be able to claim a deduction on your federal tax return. Here are six important facts you should know about charitable donations.

1. Qualified Charities. You must donate to a qualified charity. Gifts to individuals, political organizations or candidates are not deductible. An exception to this rule is contributions under the Slain Officer Family Support Act of 2015. To check the status of a charity, use the IRS Select Check tool.

2. Itemize Deductions. To deduct your contributions, you must file Form 1040 and itemize deductions. File Schedule A, Itemized Deductions, with your federal tax return.

3. Benefit in Return. If you get something in return for your donation, you may have to reduce your deduction. You can only deduct the amount of your gift that is more than the value of what you got in return. Examples of benefits include merchandise, meals, tickets to an event or other goods and services.

4. Type of Donation. If you give property instead of cash, your deduction amount is normally limited to the item’s fair market value. Fair market value is generally the price you would get if you sold the property on the open market. If you donate used clothing and household items, they generally must be in good condition, or better, to be deductible. Special rules apply to cars, boats and other types of property donations.

5. Form to File and Records to Keep. You must file Form 8283, Noncash Charitable Contributions, for all noncash gifts totaling more than $500 for the year. 


6. Donations of $250 or More. If you donated cash or goods of $250 or more, you must have a written statement from the charity. It must show the amount of the donation and a description of any property given. It must also say whether you received any goods or services in exchange for the gift.

Tax Savings from Higher Education Costs

Money you paid for higher education in 2015 can mean tax savings in 2016. If you, your spouse or your dependent took post-high school coursework last year, there may be a tax credit or deduction for you. Here are some facts from the IRS about key tax breaks for higher education.

The American Opportunity Credit (AOTC) is:

• Worth up to $2,500 per eligible student.
• Used only for the first four years at an eligible college or vocational school.
• For students earning a degree or other recognized credential.
• For students going to school at least half-time for at least one academic period that started  during or shortly after the tax year. Claimed on your tax return using Form 8863, Education Credits.  

The Lifetime Learning Credit (LLC) is:

• Worth up to $2,000 per tax return, per year, no matter how many students qualify.
• For all years of higher education, including classes for learning or improving job skills.
• Claimed on your tax return using Form 8863, Education Credits.

The Tuition and Fees Deduction is:

• Claimed as an adjustment to income.
• Claimed whether or not you itemize.
• Limited to tuition and certain related expenses required for enrollment or attendance at eligible schools.
• Worth up to $4,000.

Additionally:

• You should receive Form 1098-T, Tuition Statement, from your school by Feb. 1, 2016. Your school also sends a copy to the IRS.
• You may only claim qualifying expenses paid in 2015.
• You can’t claim either credit if someone else claims you as a dependent.
• You can’t claim either AOTC or LLC and the Tuition and Fees Deduction for the same student or for the same expense, in the same year.
• Income limits could reduce the amount of credits or deductions you can claim.
• The Interactive Tax Assistant tool on IRS.gov can help you check your eligibility.

Claiming a Tax Deduction for Medical and Dental Expenses

Your medical expenses may save you money at tax time, but a few key rules apply. Here are some tax tips to help you determine if you can deduct medical and dental expenses on your tax return:

• Itemize. You can only claim your medical expenses that you paid for in 2015 if you itemize deductions on your federal tax return.
• Income. Include all qualified medical costs that you paid for during the year, however, you only realize a tax benefit when your total amount is more than 10 percent of your adjusted gross income.
• Temporary Threshold for Age 65.  If you or your spouse is age 65 or older, then it’s 7.5 percent of your adjusted gross income. This exception applies through Dec. 31, 2016.
• Qualifying Expenses.  You can include most medical and dental costs that you paid for yourself, your spouse and your dependents including:
• The costs of diagnosing, treating, easing or preventing disease.
• The costs you pay for prescription drugs and insulin.
• The costs you pay for insurance premiums for policies that cover medical care qualify.
• Some long-term care insurance costs.

Exceptions and special rules apply. Costs reimbursed by insurance or other sources normally do not qualify for a deduction. For more examples of costs you can and can’t deduct, see IRS Publication 502, Medical and Dental Expenses. You can get it on IRS.gov/forms anytime.

• Travel Costs Count.  You may be able to deduct travel costs you pay for medical care. This includes costs such as public transportation, ambulance service, tolls and parking fees. If you use your car, you can deduct either the actual costs or the standard mileage rate for medical travel. The rate is 23 cents per mile for 2015.
• No Double Benefit.  You can’t claim a tax deduction for medical expenses paid with funds from your Health Savings Accounts or Flexible Spending Arrangements. Amounts paid with funds from those plans are usually tax-free.
• Use the Tool.  Use the Interactive Tax Assistant tool on IRS.gov to see if you can deduct your medical expenses. It can answer many of your questions on a wide range of tax topics including the health care law.

Capital Gains and Losses – 10 Helpful Facts to Know

When you sell a capital asset, the sale normally results in a capital gain or loss. A capital asset includes most property you own for personal use or own as an investment. Here are 10 facts that you should know about capital gains and losses:

1. Capital Assets.  Capital assets include property such as your home or car, as well as investment property, such as stocks and bonds.

2. Gains and Losses.  A capital gain or loss is the difference between your basis and the amount you get when you sell an asset. Your basis is usually what you paid for the asset.

3. Net Investment Income Tax.  You must include all capital gains in your income and you may be subject to the Net Investment Income Tax if your income is above certain amounts. The rate of this tax is 3.8 percent. 

4. Deductible Losses.  You can deduct capital losses on the sale of investment property. You cannot deduct losses on the sale of property that you hold for personal use.

5. Limit on Losses.  If your capital losses are more than your capital gains, you can deduct the difference as a loss on your tax return. This loss is limited to $3,000 per year, or $1,500 if you are married and file a separate return.

6. Carryover Losses.  If your total net capital loss is more than the limit you can deduct, you can carry it over to next year’s tax return.

7. Long and Short Term.  Capital gains and losses are treated as either long-term or short-term, depending on how long you held the property. If you held it for one year or less, the gain or loss is short-term.

8. Net Capital Gain.  If your long-term gains are more than your long-term losses, the difference between the two is a net long-term capital gain. If your net long-term capital gain is more than your net short-term capital loss, you have a net capital gain. 

9. Tax Rate.  The tax rate on a net capital gain usually depends on your income. The maximum tax rate on a net capital gain is 20 percent. However, for most taxpayers a zero or 15 percent rate will apply. A 25 or 28 percent tax rate can also apply to certain types of net capital gain.  

10. Forms to File.  You often will need to file Form 8949, Sales and Other Dispositions of Capital Assets, with your federal tax return to report your gains and losses. You also need to file Schedule D, Capital Gains and Losses, with your tax return.