Be Aware of Tax Scams this Tax Season

The Internal Revenue Service (IRS) recently announced that the 2020 federal income tax filing deadline for individuals would be extended from April 15th to May 17th in response to the ongoing recovery efforts surrounding the COVID-19 pandemic, and to help provide taxpayers some ongoing relief.

In the midst of tax season, it’s important to be reminded that there is often an increase of fraud attempts and tax scams. Annually, the IRS shares and emphasizes certain scams that may be of risk to taxpayers. This year, scams related to Coronavirus tax relief continue to target taxpayers.

Here are a few things to be on the lookout for this tax season, as extensions can create confusion and make tax payers more susceptible to fraud attempts. The IRS recently announced the following to be aware of for the 2021 tax filing season:

  • Phishing Scams: Taxpayers should be alert to potential fake emails, texts, phone calls, or websites looking to steal their personal information.
  • Phone Scams (Vishing):  These scam phone calls work hard to instill a sense of urgency, and often threaten arrest, deportation, or some type of retaliation if a tax bill is left unpaid.  
  • Charity Scams: These schemes share bogus information about a charity to trick people into sending money or into providing personal information. This is often attempted with a fake website, using names similar to legitimate charities, or unsolicited communication. 
  • Social Media Scams: Social media scams frequently use events (lately COVID-19) to trick people into disclosing personal information. Typically, this involves convincing a potential victim they are dealing with a person they trust via email, text, or social media direct messaging.
  • Refund Theft Scams: Refund and Economic Impact Payments (EIP) as provided by the Coronavirus Aid, Relief, and Economic Security (CARES) Act have been targeted in recent scams with identity theft and filing false tax returns to divert funds to the wrong address or bank account.
  • Elder Fraud: Seniors are more likely to be targeted and victimized by scammers due to unfamiliarity or uncertainty on how to respond across digital channels. 
  • Offer in Compromise (OIC) Scams: Misleading tax debt resolution companies can exaggerate chances to settle tax debt through an Offer in Compromise (OIC) and submit false applications for candidates. OIC offers are available for a bill reduction, but taxpayers must typically meet very specific criteria under law to qualify.
  • Payroll and HR Scams: Phishing scams are designed to steal W-2 and other tax information. This scheme has increased with many businesses still closed and employees working from home due to COVID-19. W-2 forms contain sensitive information and are highly valuable for identity thieves.
  • Ransomware Scams: This cybercrime targets human and technical weaknesses to infect a potential victim’s computer, network, or server. Once infected, ransomware looks for and locks critical or sensitive data with its own encryption. 

Consider these preventative tips to keep your personal and financial information safe this tax season:

  • Be cautious of communication: Communication requesting personal or financial information – tax related or otherwise, should be treated with caution. The IRS and state tax authorities will never reach out by phone, email, text, or social media.
  • Pay attention to how money is requested: The IRS does not require that taxes or bills be paid with a prepaid/reloadable debit card, gift card, or money wires through services like Western Union or MoneyGram.
  • Report threatening messages: Calls demanding immediate payment or threatening legal action are more than likely scam attempts. The IRS or state of residence will not call to discuss taxes you owe without first mailing you an official bill.
  • Don’t open attachments or click on links: This is especially true if you have suspicions about the communication source you received, which may contain a malicious code or virus that will infect your device. Cybercriminals will often use a phishing email to trick a potential victim into opening a link or an attachment containing ransomware.
  • Be wary of rejected file requests due to duplication: If an e-filed return is rejected because a duplicate EIN/SSN is already on file with the IRS, or an unexpected receipt of a tax transcript doesn’t correspond to anything previously submitted – it may be a warning sign of identity theft. 

If a tax scam is suspected, report it to your state authorities and/or the Federal Trade Commission here.

Find out more about tax scams from the IRS website here.

Think First because There’s Harm In Not Knowing!

Article Source: CUInsight.com

3 Reasons to File Your Taxes Sooner Rather Than Later

The Federal tax deadline has been extended to May 17, 2021. If you are planning on waiting until a lot closer to that day to get your taxes done, here are three reasons you should really get moving and file your taxes as soon as possible.

Sooner is better regardless of the outcome: The sooner you file, the sooner you’ll get money back if you are getting a refund. If 2020 hit you hard financially, that refund may be something you’ve been banking on. And if you get the opposite result and owe the government money, you’ll have more time to save up and pay. You can’t go wrong filing as early as possible.

You’ll reduce your stress: Filing tax paperwork was probably simple when you were in your 20s. Once life gets more complicated, it’s not quite as easy or quick to file. If you know your taxes will be more difficult than in past years, lessen the stress it might cause by getting started as soon as you have your W-2. Filing early can prevent Tax Day from being a source of stress.

It’ll be a smoother process: Not only is the IRS less busy at the beginning of the year, but tax professionals typically are as well. Keep this important detail in mind if you’re not filing on your own. If you file online it won’t be a big deal, but if you need a tax professional to help sort you out, you’ll be glad you got started earlier. The closer you get to the tax deadline, the longer the whole process will take (as well as you probably won’t be the only last minute client).

The moral of the story: Start preparing your tax documents and file as soon as possible!

Article Source: CUInsight.com

Reasons Not to File Your Taxes Late

Tax Day was July 15th this year, after a 3 month extension due to COVID-19. If you still haven’t filed your 2019 taxes, you’ll need to contact the IRS for an extension – as soon as possible. You can find out more information and how to file for an extension at IRS.gov

Here are several reasons why it’s important to try to always file your taxes well in advance of the Tax Day deadline:

Possible Penalty Fees – Did you owe the IRS and your payment arrived late or got lost in the mail? You could be charged interest on everything you owe for late payments. Be sure to pay on time if you owe the government money to avoid any and all late fees.

You’ll Be Waiting for Your Refund – If you file late and are getting a tax refund this year, it’s basically withholding your own money from yourself.

You May Have Trouble Paying – If you owe money on your taxes, and it’s in the thousands – you unfortunately still need to pay by Tax Day. Filing late doesn’t give you any extra time to come up with your payment.

Underestimating the Time it Takes – Don’t underestimate the amount of time it takes to file your taxes, especially if you had a life change (marriage, new baby, changed jobs, bought a home) within the past year. It’s important to give yourself ample time before the filing deadline.

Not All Tax Forms May Be Available – It’s much easier these days with tax forms available online, but which ones do you need and how do you fill them out? Are you really sure you know exactly what’s needed and that it will be available if you need it right away? This requires advanced planning.

You Could Need More Information – You almost never have all the documents ready when you file your taxes. What happens if you need to locate an important form (like your W-2) or speak to your accountant, hours before the filing deadline?

Unexpected Things Happen – You may get sick or an emergency may come up. Also, what if you have a technology failure like your printer stops working or your computer won’t turn on? It’s always best to prepare and file early.

You Might Overpay for Advice – Sometimes, requesting last minute advice and service will cost you more. Plus if you’re in a time crunch, you won’t have extra time to find a discount or deal on tax services.

If you do end up filing late, here are some tips:

File for an Extension – If you can’t get your taxes filed by Tax Day, there’s always the option to file for an extension. The down side is that if you owe the government money, you’re still responsible for paying the estimated taxes when you file for the extension. In other words, it’s an extension on filing your taxes, not on paying what you owe. What happens if you can’t pay now? Failing to file for an extension will result in a penalty on top of the bill you already have. The IRS often offers an option to set up a payment installment plan. You can get started online here.

File Your Taxes Online – Filing online is faster and easier, especially if you’re running late. If you’ve never filed your taxes online before, a quick search will lead you to various tax prep businesses that usually offer free e-file along with paid services (like having your return reviewed by a tax professional). If your gross earnings fall under $69,000, you can also use the IRS Free File Program. E-filing requires an electronic pin you’ll use for e-signing, and also – don’t forget to save digital and print copies of your taxes for your records.

Watch for Mistakes – You’re more likely to make mistakes when you’re in a hurry to meet a deadline. The following mistakes are common and costly: Missed deductions, incorrect account or social security numbers, and forgetting to sign and date your return.

The moral of the story: File early next year!

 

Article Source: David Ning for Moneyning.com

How to Navigate Charitable Contributions and Tax Deductions

We all know the saying, “It’s better to give than to receive.” Giving makes us feel good, right? And we usually don’t think about what’s in it for us.

But, what about charitable giving? Depending on the amount of your charitable contributions, you could be in for a sizable tax benefit. As a matter of fact, if you factor your charitable donations into your budget, it will allow you to be more generous and lead to strategies that could improve your financial planning long term.

With tax season in full swing, let’s take a look at some benefits of charitable giving and what can be deducted.

That Altruistic Feeling

Whether we donate to them or not, we all have causes near and dear to our heart. If you’re an animal lover, ASPCA commercials probably tug at your heartstrings. If helping kids is where your passion lies, then charities like St. Jude’s and Shriner’s Hospital probably resonate with you. Regardless of where your loyalties lie, we all love the feeling of helping other people. Scientific studies have even shown that charitable giving activates pleasure centers in the brain.

Tax Benefits

Charitable donation deductions actually allow you to lower the amount of taxable income. Of course, you can’t donate to just any organization. In order for donations or gifts to qualify, they have to be recognized tax-exempt organizations. Typically – religious organizations, veterans’ organizations, and community organizations qualify as being tax-exempt.

Have you made any donations to state, federal, or local government for public purposes, such as to rehab a public park? You can deduct those donations. You can also deduct any expenses you incur as a volunteer for a qualified organization or if you donate a qualified vehicle.

What Does this Mean for You?

Let’s be honest. Taxes, deductions, and tax law can be overwhelming and difficult to understand if you don’t speak that language. It’s always a good idea to sit down with a qualified financial planner to come up with a plan for donating to charities. Your financial planner can help you figure out what types of donations will work for you and your future plans. They can also help you find organizations that share the same goals and ideals as you. Also, if you want to make charitable giving a recurring activity this year, look at setting aside money in a First Financial Special Savings Account.+ That way, you can save smaller amounts at a time to make it easier to give back instead of one lump sum all at once.

No matter which way you decide to give or which charity you choose to give to, giving back to organizations that do good – feels good. Additional information about charitable giving and tax deductions can be found in this article from the Investment & Retirement Center located at First Financial Federal Credit Union.* If you have other questions about charitable giving and how it may impact you this tax season, contact the Financial Advisors located at First Financial or click here.

*Securities sold, advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer and investment advisor. CBSI is under contract with the financial institution to make securities available to members. Not NCUA/NCUSIF/FDIC insured, May Lose Value, No Financial Institution Guarantee. Not a deposit of any financial institution. CUNA Brokerage Services, Inc., is a registered broker/dealer in all fifty states of the United States of America.

 +A $5 deposit in a base savings account is required for credit union membership prior to opening any other account. All personal memberships are part of the Rewards First program and a $5 per month non-participation fee is charged to the base savings account for memberships not meeting the minimum requirements of the program. Click here to view full Rewards First program details. 

How to Prepare for Tax Season

We’re in the midst of prime tax season. Have you filed your taxes yet? If not, or if you are unsure of how to be best prepared – keep reading! Being organized can help you reach your financial goals as well as make the filing process easier for both you and your tax professional.

What items should you bring with you when you have your taxes done?

  • A valid photo ID
  • A social security card or verification letter, or individual TIN (Taxpayer Identification Number) for all family members.
  • W-2 forms for all jobs worked the previous year
  • Form 1099-G for unemployment compensation, if applicable
  • Any childcare provider information from the previous year paid (name, address, tax ID number, and total paid).
  • A copy of last year’s state and federal tax returns
  • Any banking/mortgage interest statements, federal loan documents, retirement statements, and organizations you made charitable donations to with the amount donated.
  • Form 1095-A, B, or C and any affordable health care statements or health insurance exemption certificates.
  • Bank account information and a voided check (for receiving your return via direct deposit).

If you are married and filing jointly with your spouse, you will want to make sure you and your spouse are both present at the appointment so you can each sign your joint return. Depending upon your individual financial situation, there may be other documents you will need to bring with you. If you have questions about other items you think you may need to bring to your annual tax appointment, contact your tax preparer in advance.

How do you make the most of your tax return?

  • If you are getting a return back, it’s a good idea to have it deposited to your bank account with direct deposit. There is no cost to do so, it arrives faster than a check, and will be right there in your bank account for when you need it.
  • It’s always a good idea to save for the future – every little bit helps!
  • Do you have outstanding revolving credit card debt? Pay it down with this year’s tax return.
  • Another good use of your tax return is to save for retirement in an IRA account.

If you have additional questions, it’s a good idea to consult with your tax professional during your appointment. Staying organized and prepared is the best way to get through tax season, and should you receive a return – saving the money for a rainy day, your financial future, or to pay off debt is never a bad idea. Happy filing!

Article Source: Consumer Financial Protection Bureau

Let the Taxpayer Beware: Learn to Spot 6 Common Tax Scams

Now that your W2s and miscellaneous tax documents have arrived, tax season is officially in full swing. While it’s easy to get lost in optimistic daydreams about your tax refund and all you’re planning to do with it, it’s important to remember that scam artists are probably dreaming about what they could do with your refund as well.

After reaching an all-time high of more than 700,000 cases in 2015, tax refund fraud has been declining thanks to significant enforcement efforts by federal, state, and private agencies. While these statistics are encouraging, they also highlight the ongoing need for caution and vigilance. So, before you file your 2018 taxes or pay someone to file for you, we want to remind you about six of the most common tax-related scams happening today.

Phishing Emails 

This one is relatively easy to spot. Why’s that, you ask? Because the IRS doesn’t initiate communication with taxpayers via email. So, if you see an email from the IRS pop up in your inbox—even one that looks remarkably official, don’t open it. For good measure, go ahead and mark it as spam before deleting it. Emails of this type have only one goal: to trick you into clicking a fraudulent hyperlink or responding with sensitive personal information.

Phishing 2.0

In 2018, the IRS reported a new twist on traditional phishing scams. In the new approach, fraudsters hacked the systems of legitimate tax professionals, stole tax returns containing personal details, and then deposited funds directly into taxpayer bank accounts. After those deposits hit the bank, the criminals posed as the IRS or collection agencies and contacted account holders demanding a resolution to the error. The goal of these scams is not to simply regain the money deposited “in error,” but to get the victim to share account details that can be used to access the account at another time. If you find yourself with an unexpected deposit in your bank account, the IRS offers helpful instructions here.

Phone scams 

Though they come via phone call, these scams are essentially the same as phishing emails. The difference lies in the fact that con artists can spoof IRS phone numbers in an attempt to convince unsuspecting people to answer the call. Once the phone call is underway, the person on the other end claims to be an IRS agent and tries to get the individual to confirm private account details in an attempt to “resolve the situation.” If they don’t get the results they’re hoping for, the fraudsters may even follow-up with phone calls where they impersonate law enforcement officials and threaten legal action. To avoid accidentally divulging personal details, it’s best to ignore these calls completely. Just as the IRS doesn’t initially contact taxpayers by email, they also don’t initiate official communication by phone either.

Refund Theft 

This type of scam takes place at the intersection of identity theft and financial fraud. Using a variety of tactics, criminals obtain taxpayer social security numbers and file fraudulent tax returns in their name—often claiming substantial refunds. Since this happens without the knowledge of the victim, it only comes to light when their legitimate tax return is rejected due to a previous return already filed under the same social security number. While the IRS is committed to resolving these issues when they happen, the process can be long and tedious. To safeguard yourself against tax refund theft, IRS officials recommend obtaining an Identity Protection PIN, also known as an IP PIN. Instructions for securing a PIN can be found on the official IRS website.

Shady Tax Prep Services

Since an estimated 79 million Americans use paid tax preparation services, there are considerable opportunities for dishonest preparers to abuse the system. One of the most common scams involves a preparer illegally inflating an individual’s refund and collecting a percentage of the taxpayer’s refund instead of a flat fee. Many times, the problem isn’t identified until after the refund has been issued and the preparer’s fee has been collected. In these scams, the preparer is long gone by the time that the problem is identified, and the taxpayer is responsible for handling the audit on their own. While the practice of a tax preparer charging a percentage of refund isn’t technically illegal, you’re better off avoiding this type of arrangement and opting for a flat-fee service instead.

Public Wi-Fi Scammers

It seems like this one should go without saying, but we could all use a reminder from time to time. The public Wi-Fi at coffee shops, libraries, and bookstores can be great for hopping online to browse social media, but it’s terrible for filing your taxes. Not only can these unsecured networks be accessed by almost anyone, but dishonest scammers can also set up hot spots that look like the establishment’s Wi-Fi and intercept logins, passwords, and personal information. So, if you’re filing taxes electronically this year (and considering the fact that approximately 90% of taxpayers filed electronically in 2018, you probably are), do yourself a favor: file at home from your personal computer and your secure Internet connection.

As with most financial scams, these can be simple to sidestep as long as you know the signs to look for. If you observe questionable practices, want to read up more on tax season scams, or have additional tax-related concerns, you can find more information and helpful instructions here on the official IRS website.

If you are receiving a federal or state tax refund this year and want to make the most of your money, contact us here at First Financial Federal Credit Union. Our financial specialists can help you assess your financial situation and show you all the beneficial programs and products available to you as a credit union member. Call, email, or stop by a branch today!