Author Archives: Kursti Nakagawa

IRS Announces Online Security Breach

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New IRS Security Breach

New IRS Security Breach

IRS Announces Online Security Breach

On Tuesday, May 26, 2015, the IRS announced the detection of a huge security breach affecting over 100,000 United States taxpayers. This appears to be a significant online breach that occurred during the course of the 2015 tax season. According to the IRS, thieves used an online IRS agency service to obtain the previous year’s tax return information for about 100,000 individuals and families.

These identity thieves have been very persistent and sophisticated. From February to May, they have been using stolen social security numbers and other relevant personal information to access tax agency systems in order to file tax returns and get refunds. IRS Commissioner John Koskinen issued a statement saying that approximately 200,000 tax transcripts were downloaded with approximately 104,000 of those successfully accessed. Apparently the attempts by the thieves to gain access to the remainder of the downloaded returns were unsuccessful.  However, the IRS plans to inform all 200,000 taxpayers whose returns were in any way involved in the breach.

This is not a typical hack or data breach involving one account number or piece of personal information. Instead, these thieves are sitting on piles of personal information that they can use at any time.  In order to access the desired accounts, they had to clear a multi-phase questionnaire which involved providing such information as the taxpayer’s social security number, birthdate, address and tax filing status. Even more puzzling is the fact that the thieves had to answer personal questions about such things as the maiden name of the taxpayer’s mother, their high school mascot and where they attended college. The IRS believes that the thieves obtained some of this information by looking at public social media sites.

The thieves were hoping that their criminal efforts would go undetected by the IRS and that they would gain access to full tax returns that would give them vital personal information to use in the future. However, their attempts to stay under the radar have failed. The IRS has identified, not only those 104,000 tax returns that were actually accessed, but also the 100,000 returns where access was attempted but unsuccessful.  They have responded by providing free credit monitoring services to all of the taxpayers that were in any way affected by the breach. According to IRS officials, the budget cuts that they have recently experienced have made it increasingly difficult to fight the fraud issues that have been occurring at a rapid rate over the last several years.

If you have tax questions or a tax debt you are unable to pay, our tax settlement professionals are happy to discuss your tax resolution options free of charge. For more information about our services, visit us today at www.professionaltaxresolution.com or call us at 877.889.6527. With over 16 years in the business of resolving tax debt, we have a thorough understanding of tax law together with the experience to know which settlement option will be the best fit for your specific set of circumstances.

Smart Ideas for Spending an IRS Tax Refund

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Smart Ideas for Spending an IRS Tax Refund

Tax Refund Time?

Tax Refund Time?

After paying the government all year long, many taxpayers will see some money coming their way now that it is tax refund time. Even better is the fact that tax refunds have been on the rise over the past several years. The average tax refund check has risen from $2,371 in 2009 to $2,893 in 2015. However, before these funds are used to pay for an expensive vacation or a finance a wild spending spree, it might be wise consider some of the following smart ideas for putting your IRS tax refund dollars to work:

  • Invest in your home. Has your leaky roof been worrying you? Has your garage door not been working as well as it used to? First things first! Since your home is often the largest investment you have, it might be wise to use tax refund money to take care of home repairs and even some upgrades. Your tax refund is a nice chunk of money that is not part of your ordinary household budget and may very well be enough to take care of most minor home maintenance issues. You may be even able to get that fresh coat of paint on the outside of your house that you have been wanting to get for years! Being proactive about taking care of your home will usually save you money in the long run and is nearly always a good investment decision.
  • Get a home energy audit. Investing in a home energy audit is actually an excellent way to use tax refund Such an audit consists of hiring a professional to come into your home to assess energy consumption and suggest ways of making the home more energy efficient. After the inspection, the professional will issue a report suggesting such energy saving measures as sealing holes and adding insulation that can potentially result in significant savings on utility bills for years to come. Although a home energy audit can cost anywhere from $50 to a few hundred dollars, it is an investment that will more than repay itself over time. Go to https://energy.gov/public-services/homes/home-weatherization/home-energy-audits for more information on this money saving measure.
  • Contribute to your retirement account. Most individuals have access to some type of employee sponsored retirement plan such as a 401(k), a 403(b) or a 457. Even if you are already contributing to such a plan, your scheduled monthly contributions may not equal the maximum yearly contribution which is $18,000 ($24,000 for individuals over 50). If this is the case, you can use your tax refund to make a one-time contribution. This is an especially wise spending choice if your yearly contributions are under an amount matched by your employer. Similarly, if you are not working for a company that offers one of these retirement plans, you can use your tax refund dollars to contribute to a traditional IRA. Both of these investment choices defer taxes on the money in the year in which it is received and are a great way to boost savings since they allow the money to grow over time.
  • Invest in your career or education. If you want to get ahead in your career, your tax refund is a great way to invest in yourself. Take those extra college courses you have always wanted to take or enroll in a continuing education program. Although these educational opportunities may cost as little as a few hundred dollars, they can enhance your career skills and increase your earning potential. Weekend conferences may be another worthwhile career investment. There are actually numerous ways that tax refund dollars can be put to good use to advance a prudent taxpayer in their chosen field. Sometimes a little money up front goes a long way toward increasing future earnings!
  • Take care of everyday items. Do you need new tires? Is there some dental work you have been putting off? It may be a good use of tax refund dollars to take care of these types of chores, before they catch you off guard. Then maybe, if there is anything left after you have made an investment in your future, you can spend a little of your tax refund frivolously!

If you have tax questions or a tax debt you are unable to pay, our tax settlement professionals are happy to discuss your tax resolution options free of charge. For more information about our services, visit us today at www.professionaltaxresolution.com or call us at 877.889.6527. With over 16 years in the business of resolving tax debt, we have a thorough understanding of tax law together with the experience to know which settlement option will be the best fit for your specific

Common Misconceptions about the IRS

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A Few Common Misconceptions about the IRS

Audits are not as common as they may seem. Although many taxpayers worry that their tax return might be selected for an IRS audit, the fact is that less than two percent of personal tax returns are audited by the IRS each year. On top of this, even if a return is selected for further examination, the IRS usually just contacts the taxpayer by mail and asks them to provide documentation to support certain specific items. Following this communication (aptly labeled a correspondence audit), there are three possible outcomes, none of which are accompanied by a serious consequence. An additional tax amount will be assessed, the return will be accepted as originally submitted or, in some cases, a tax refund may even be issued.

Making an honest mistake on a tax return usually has no serious consequences. When

Common Misconceptions about the IRS

Common Misconceptions about the IRS

the IRS detects a mistake on a tax return, their normal procedure is to contact the taxpayer through some form of written communication and request that the error be corrected. Although the taxpayer will be expected to pay any additional tax amount owed, there is usually no penalty for making an honest mistake on a tax return. Taking legitimate tax deductions does not flag a return for audit. The tax code provides taxpayers with certain tax credits and tax deductions with the expectation that they will make use of them. In fact, provided that they have the necessary documentation, taxpayers should claim all tax credits and tax deductions to which they are entitled because, to not do so, almost certainly means that they will be paying a higher tax bill than they would otherwise need to pay. Unless that sum total of the tax breaks claimed on a return is excessive compared to the reported income, it is unlikely that they will cause the return to be flagged for an IRS audit.

It is better to file a tax return even when resources are not available to pay the taxes owed. Although the IRS assesses a penalty for failing to pay an outstanding tax liability, they assess an additional penalty for failing to file a tax return by the filing deadline. Because of this late filing penalty, it is always advisable for a taxpayer to either submit a completed tax return by the due date or apply for an automatic six-month extension even when funds are not available to pay tax amounts owed. By doing so, the taxpayer avoids the late filing penalty which is calculated as 5% of the back tax balance for each month or partial month that the return is late up to a maximum penalty of 25 %. Once the return has been filed, there are numerous options available for resolving any back tax balance. These include setting up a payment plan or negotiating one of the various other tax settlement options offered by the IRS.

If you have tax questions or a tax debt you are unable to pay, our tax settlement professionals are happy to discuss your tax resolution options free of charge. For more information about our services, visit us today at www.professionaltaxresolution.com or call us at 877.889.6527. With over 16 years in the business of resolving tax debt, we have a thorough understanding of tax law together with the experience to know which settlement option will be the best fit for your specific set of circumstances.

Can the IRS Keep Your Refund?

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Who Won't Get a Tax Refund?

Who Won’t Get a Tax Refund?

It is tax refund time and most taxpayers already have a plan for their tax refund. They will save it, invest it, spend it or maybe do a little of each. However, some taxpayers will file their tax return and never receive a refund. This is due to the fact that the IRS can keep a taxpayer’s refund to cover certain types of debt, some of which are discussed below.

A Back Tax Balance with the IRS: If a taxpayer has a back tax balance with the IRS (even if they are currently enrolled in a payment plan), the agency will keep either all or part of that individual’s tax refund and credit it toward payment of their back tax balance. Although the delinquent taxpayer’s refund is either reduced or eliminated altogether for that tax year, they can at least take comfort in the fact that the IRS is helping them pay their back tax bill. It is important to keep in mind that federal income taxes and state income taxes are connected. Therefore, if an individual has a past due tax bill with the state they live in (or have lived in), they can expect that the IRS will take some or all of their refund to cover any back tax amount owed to the state.

Delinquent Child Support:  If an individual is behind on court ordered child support payments, that person’s state of residence is authorized to take any one of a variety of actions.  The state can garnish their wages, seize their property or keep a portion or all of their tax refund.  These actions are all designed to retrieve the money that is owed in back child support.

Outstanding Student Loan Payments:  If an individual falls behind on student loan payments, the federal government can take some or all of their refund to repay a portion of their student loan. This action will normally occur only if a person’s student loan account is more than ninety (90) days past due. As with back tax balances with the IRS and overdue child support, any amount of a tax refund that is withheld will be applied to the existing student loan debt.

Overdue Obamacare Payments:  This is obviously a new reason as to why tax refunds can be held by the government. The Affordable Care Act has associated with it two instances where the government can withhold a person’s tax refund. The first instance occurs when an individual has not purchased health insurance coverage for the current year. In this case, the government uses the taxpayer’s refund as payment for their required health insurance coverage.  The second instance where a tax refund can be withheld occurs when a subsidy has been received to offset the cost of a health insurance policy. The subsidy is considered to be a tax credit and, just like any other tax credit, it is expected to be repaid. If a taxpayer has received such a tax credit and has not repaid it, the government has several options. They can put a lien on the taxpayer’s property, garnish their wages or keep some or all of their tax refund.

If you have tax questions or a tax debt you are unable to pay, our tax settlement professionals are happy to discuss your tax resolution options free of charge. For more information about our services, visit us today at www.professionaltaxresolution.com or call us at 877.889.6527. With over 16 years in the business of resolving tax debt, we have a thorough understanding of tax law together with the experience to know which settlement option will be the best fit for your specific set of circumstances.

The Tax Extension Option

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The Tax Extension Option

Tax Extension is a Very Good Option!

Tax Extension is a Very Good Option!

You are not alone if you do not file your tax return on or before April 15th. Although this is the official deadline for the filing of personal tax returns, each year more and more people apply for an automatic six-month tax extension. The number of taxpayers requesting an extension increased from 11 million in 2011 to over 13 million in 2013, an increase of almost 20% over the two-year period! Another interesting fact is that, in tax year 2014, 25% of those individuals who had requested and extension were still working on their tax returns in September, just one month before the October 15th extension deadline.

Although procrastination is one reason for requesting a tax extension, there are other factors that contribute to tax returns not getting filed by the April 15th filing deadline. Several of those are highlighted below:

  • Lacking Necessary Tax Information

    Although the deadline for the mailing of brokerage statements is February 15th, the information these statements contain may not be correct. These initial statements often say that changes may be coming. The mailing of corrected 1099s can actually occur right up until April 15th which does not give the taxpayer enough time to complete the tax return before the filing deadline.

  • Missing Required Tax Forms

    If a taxpayer holds investments that are structured as partnerships, they must wait for the K-1 Forms that are based on partnership income. These partnerships must first finish their own tax returns which can be extended until September 15th before these forms are generated. This means that partnership K-1 Forms could be in the hands of taxpayers as late as the month preceding the extension deadline.

  • Increased Complexity of Tax Code

    The increased complexity of the tax code has made tax returns more and more difficult to complete which, in turn, has made it harder to get them submitted by the April 15th tax filing deadline. In addition to the introduction of such changes as the net investment income tax, two different dividend tax rates and the alternative minimum tax, taxpayers must now report all overseas holdings. All of these changes require increased tax preparation time for certain categories of taxpayers which, in turn, has resulted in an increase in the number of requests for tax extensions.

Although filing a request for a tax extension does not relieve a taxpayer of the obligation to pay any taxes owed, it is definitely a better option than filing an incorrect or incomplete return. As long as the request for a tax extension is either e-filed or postmarked before the end of the day on April 15th, it will allow the requesting taxpayer to avoid the late filing penalty which usually amounts to 5% of any unpaid tax balance for any month or partial month that the return is late. In addition, it will give the requesting individual six full months to submit a complete and correct tax return.

If you have tax questions or a tax debt you are unable to pay, our tax settlement professionals are happy to discuss your tax resolution options free of charge. For more information about our services, visit us today at www.professionaltaxresolution.com or call us at 877.889.6527. With over 16 years in the business of resolving tax debt, we have a thorough understanding of tax law together with the experience to know which settlement option will be the best fit for your specific set of circumstances.