IRS 2013 Dirty Dozen Tax Scam #2

Posted April 5, 2013 By Erica

Each year the IRS publishes a list of tax scams that affect many taxpayers during the year. Many of these scams occur during tax preparation season.
The number 2 scam this year is Phishing. The following was published by the IRS in IR-2013-33, March 26, 2013.

Phishing is a scam typically carried out with the help of unsolicited email or a fake website that poses as a legitimate site to lure in potential victims and prompt them to provide valuable personal and financial information. Armed with this information, a criminal can commit identity theft or financial theft.

If you receive an unsolicited email that appears to be from either the IRS or an organization closely linked to the IRS, such as the Electronic Federal Tax Payment System (EFTPS), report it by sending it to phishing@irs.gov.

It is important to keep in mind 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 has information that can help you protect yourself from email scams.

       

IRS 2013 Dirty Dozen Tax Scam#1

Posted April 4, 2013 By Erica

Each year the IRS publishes a list of tax scams that affect many taxpayers during the year. Many of these scams occur during tax preparation season.
The number 1 scam this year is Identity Theft. The following was published by the IRS in IR-2013-33, March 26, 2013.

Tax fraud through the use of identity theft tops this year’s Dirty Dozen list. Identity theft occurs when someone uses your personal information such as your name, Social Security number (SSN) or other identifying information, without your permission, to commit fraud or other crimes. In many cases, an identity thief uses a legitimate taxpayer’s identity to fraudulently file a tax return and claim a refund.

Combating identity theft and refund fraud is a top priority for the IRS, and we are taking special steps to assist victims. For the 2013 tax season, the IRS has put in place a number of additional steps to prevent identity theft and detect refund fraud before it occurs. We have dramatically enhanced our systems, and we are committed to continuing to improve our prevention, detection and assistance efforts.

The IRS has a comprehensive and aggressive identity theft strategy employing a three-pronged effort focusing on fraud prevention, early detection and victim assistance. We are continually reviewing our processes and policies to ensure that we are doing everything possible to minimize identity theft incidents, to help those victimized by it and to investigate those who are committing the crimes.

The IRS continues to increase its efforts against refund fraud, which includes identity theft. During 2012, the IRS prevented the issuance of $20 billion of fraudulent refunds, including those related to identity theft, compared with $14 billion in 2011.

This January, the IRS also conducted a coordinated and highly successful identity theft enforcement sweep. The coast-to-coast effort against identity theft suspects led to 734 enforcement actions in January, including 298 indictments, informations, complaints and arrests. The effort comes on top of a growing identity theft effort that led to 2,400 other enforcement actions against identity thieves during fiscal year 2012. The Criminal Investigation unit has devoted more than 500,000 staff-hours to fighting this issue.

We know identity theft is a frustrating and complex process for victims. The IRS has 3,000 people working on identity theft related cases — more than double the number in late 2011. And we have trained 35,000 employees who work with taxpayers to help with identity theft situations.

The IRS has a special section on IRS.gov dedicated to identity theft issues, including YouTube videos, tips for taxpayers and an assistance guide. For victims, the information includes how to contact the IRS Identity Protection Specialized Unit. For other taxpayers, there are tips on how taxpayers can protect themselves against identity theft.

Taxpayers who believe they are at risk of identity theft due to lost or stolen personal information should contact the IRS immediately so the agency can take action to secure their tax account. Taxpayers can call the IRS Identity Protection Specialized Unit at 800-908-4490. More information can be found on the special identity protection page.

       

Convictions in Tax Fraud Scheme

Posted November 1, 2012 By Erica

On October 29, 2012, in United States v. Jones, (U.S. District Court, Southern District of Florida) the jury returned guilty verdicts for four men accused of filing false income tax returns that generated $160 million in fraudulent tax refunds. Michael D. Beiter Jr., David Clum Jr., Dale Peters, and Christopher Marrero were convicted of conspiracy to defraud the United States and filing false claims for tax refunds. The defendants prepared false income tax returns for 180 clients in 30 different states. The clients paid $750 for the tax return preparation and agreed to give the defendants 10% of their fraudulent tax refunds. Many of the clients were assessed civil penalties for participating in the scheme. Three other defendants who were involved in the tax fraud scheme previously plead guilty.

       

The IRS announced the following new limits for retirement contributions in 2013:

• the elective deferral or contribution limit for employees who participate in Section 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan, increased from $17,000 in 2012 to $17,500 in 2013;
• the annual benefit limit for a defined benefit plan under Section 415(b)(1)(A), increased from $200,000 to $205,000;
• the annual contribution limit for a defined contribution plan under Section 415(c)(1)(A), increased from $50,000 to $51,000;
• the adjusted gross income phase-out limit for married couples filing jointly and making contributions to a Roth individual retirement account, increased from a phase-out range of $173,000 to $183,000 for 2012 to $178,000 to $188,000 for the 2013 tax year;
• the annual compensation limit under sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii), increased from $250,000 to $255,000;
• the dollar limit on deferrals under tax code Section 457(e)(15) for deferred compensation plans of state and local governments and tax-exempt organizations, increased from $17,000 to $17,500;
• the applicable dollar amount that may be contributed to SIMPLE retirement accounts under Section 408(p)(2)(E), increased from $11,500 to $12,000;
• the dollar limit under tax code Section 430(c)(7)(D)(i)(II) for determining excess employee compensation with respect to single-employer defined benefit pension plans for which a special election under tax code Section 430(c)(2)(D) is made, increased from $1,039,000 to $1,066,000;
• the phase-out limits on modified adjusted gross income affecting deductions for contributions to traditional IRAs taken by individual taxpayers and heads of household who are covered by a workplace retirement plan, increased from $58,000 to $68,000 for 2012 to $59,000 to $69,000 for 2013;
• the phase-out limits on modified AGI affecting deductions for contributions to traditional IRAs taken by married couples filing jointly in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, increased from $92,000 to $112,000 for 2012 to $95,000 to $115,000 for 2013; and
• the phase-out limits on a married couple’s modified AGI affecting deductions for contributions to traditional IRAs taken by IRA contributors who are not covered by a workplace retirement plan but are married to someone who is covered, increased from $173,000 to $183,000 for 2012 to $178,000 to $188,000 for 2013.

Additionally, on October 16, the Social Security Administration announced that the Social Security wage base will increase from $110,100 to $113,700. This means that $3,600 of wages and net self employment income previously exempt from Social Security tax will now be subject to the tax in 2013.

See IR 2012-77

       

The Health Care and Education Affordability Reconciliation Act of 2010 (“Health Care Act”) added two new Medicare taxes that will be effective on January 1, 2013. The taxes were added in order to help cover the cost of the new health care plan.

One of the new taxes is a 3.8% Medicare tax on net investment income for taxpayers whose income exceeds certain thresholds, depending upon their filing status.

The second new Medicare tax is a 0.9% Medicare tax on wages and net self employment income of taxpayers whose earnings exceed certain thresholds, also dependent upon their filing status.  A single taxpayer with wages or net self employment income exceeding $200,000 will be subject to the 0.9% Medicare tax. Married taxpayers with wages or net self employment income exceeding $250,000 will be subject to the 0.9% Medicare tax.

This new tax is in addition to the Social Security and Medicare taxes already deducted from earnings. The 2% Payroll Tax Cut Holiday has not been extended for 2013. Therefore, beginning on January 1, 2013, the employee’s share of payroll taxes will increase from 5.65% to 7.65% on wages up to the Social Security wage base.

Employers will be required to withhold the increased portion of the employee’s share of the payroll taxes in addition to the new 0.9% Medicare tax. Employers will be required to begin withholding the new 0.9% Medicare tax in the pay period in which it pays wages in excess of the applicable thresholds. Although required to withhold the new 0.9% Medicare tax, employers do not have a matching requirement.

Employers who fail to properly withhold and pay payroll taxes to the government may be personally liable for a portion of the unpaid payroll taxes via the Trust Fund Recovery Penalty. The Trust Fund Recovery Penalty equals the employees’ share of the payroll taxes that are withheld but not paid over to the government. The new 0.9% Medicare tax will be included in the Trust Fund Recovery Penalty if not properly paid to the government.

- Erica G. Pless