Email scams

Let’s say you get an email from the IRS requesting your reply to the email with your social security number or other important information. Because it is from the IRS, you don’t want to ignore their request.  You comply and provide them with the information they have requested.

This is an email scam. The scammer created this legitimate looking email with official looking logos, and everything that the IRS would include in an email.

Phishing

Again, let’s say you get an email saying it is from the IRS. They ask you to log into your account and re-enter your payment information where you make your online installment payments. So, the page you usually go to in order to make your payment looks like the website you always go to and you follow the instructions given you from the email. You feel good you were able to comply with the request made by the IRS in a timely manner and you hit the “submit” button.

But do you know what really happened?

What happened is you were phished. The email you received looked like it was from the IRS, the link in the email led you to a page that looked like an IRS page, and you entered your financial information. A phishing email page looks legitimate, but it is not. These pages are “spoofed” pages, more or less duplicated from the real page. But a close look at the address bar will show that the address is not what the address would be for the legitimate page. Unfortunately, most people will not notice the address discrepancy unless they are aware of the difference.

The truth

The IRS is NEVER going to request personal information over the Internet. They are not going to send you an email that asks you to enter financial information. They are also not going to ask you for your social security number via email request. The Internet is wide-open and your personal information will never be put at risk by the IRS in such a way. If the IRS needs information from you, they will send you a letter asking for what they need and how you can provide that information to them. The IRS always corresponds via postal mail. It is your responsibility to provide them with the information they request either by mail or by calling them. All of this is done for the safety of your personal information.

If you are ever receive this type of email, you can contact the IRS at phishing@irs.gov and report the email. It is important the IRS knows when email scams or phishing emails pop up so they can work to shut them down.

The problem lies in new withholding tables issued by the IRS, which would cause taxpayers to get hundreds of dollars more than they are entitled to under the credit.  This is money that will have to be repaid at tax time.

Taxpayers affected by this problem include married couples in which both people work, taxpayers with more than one job, retirees who have income taxes withheld from their pension plans, and Social Security recipients with jobs providing taxable income.

What should you do?  Check your federal withholding to make sure you have enough taxes being taken out.  If you are married and both you and your spouse work, you might consider having taxes withheld at the higher single filer rate.  If you are currently working two jobs, you might consider having one of your employers withhold more taxes.  You can do this by requesting a W-4 from your employer.

Not sure if your taxes are being withheld properly?  You can use the IRS’ online withholding calculator at www.irs.gov.

Listed below are tips for individuals and businesses on preparing for a disaster.

1. Recordkeeping. Take advantage of paperless recordkeeping for financial and tax records. Many people receive bank statements and documents by e-mail. This method is an outstanding way to secure financial records. Important tax records such as W-2s, tax returns and other paper documents can be scanned onto an electronic format. You can copy them onto a ‘key’ or ‘jump drive’ periodically and then keep the electronic records in a safe place.
2. Document Valuables and Business Equipment. The IRS has disaster loss workbooks for individuals and businesses that can help you compile a room-by-room list of your belongings or business equipment. This will help you recall and prove the market value of items for insurance and casualty loss claims.
3. Check on Fiduciary Bonds. Employers who use payroll service providers should ask the provider if they have a fiduciary bond in place. The bond could protect the employer in the event of default by the payroll service provider.
4. Continuity of Operations Planning for Businesses. How quickly your company can get back to business after a disaster often depends on emergency planning done today. Start planning now to improve the likelihood that your company will survive and recover. Review your emergency plans annually. Just as your business changes over time, so do your preparedness needs. When you hire new employees or when there are changes in how your company functions, you should update your plans and inform your people.
5. Update Emergency Plans. Emergency plans should be reviewed annually. Individual taxpayers should make sure they are saving documents everybody should keep including such things as W-2s, home closing statements and insurance records. Make sure you have a means of receiving severe weather information; if you have a NOAA Weather Radio, put fresh batteries in it. Make sure you know what you should do if threatening weather approaches.
6. Count on the IRS. In the event of a disaster, the IRS stands ready to help. The IRS has valuable information you can request if your records are destroyed. If you have been impacted by a federally declared disaster, you may receive copies or transcripts of previously filed tax returns free of charge by submitting Form 4506, Request for Copy of Tax Form, or Form 4506-T, Request for Transcript of Tax Return, clearly identified as a disaster related request.

For more information type “Preparing for a Disaster” in the search box on the IRS.gov homepage.

Links:

• Disaster Assistance and Emergency Relief for Individuals and Businesses
• IRS Publication 584, Casualty, Disaster and Theft Loss Workbook
• IRS Publication 584-B, Business Casualty, Disaster and Theft Loss Workbook

Some individuals who did not get the economic stimulus payment, and a smaller number of those who did, may be eligible for the recovery rebate credit. However, most taxpayers who received the economic stimulus payment last year will not qualify for the recovery rebate credit on their 2008 federal income tax return.

An early sampling of tax returns shows about 15 percent have errors involving the recovery rebate credit. Some tax returns erroneously claim the credit, do not claim the proper amount of recovery rebate credit or mistakenly enter the amount of the stimulus payment they received on the recovery rebate credit line.

To avoid delays in tax refunds, it is critical that taxpayers know the correct amount of the stimulus payment they received last year, if any, to help determine whether they qualify for the recovery rebate credit now.

The amount of the stimulus payment will not be entered directly on the tax return. For people using a paper tax return, the stimulus payment amount will be required when completing a related worksheet. For people using tax software, the stimulus payment amount will be needed as part of the return preparation process.

How to Get the Recovery Rebate Credit Right
The IRS sent taxpayers nearly 119 million stimulus payments last year. There are three ways individuals can find out how much they received:

• Check the amount listed on Notice 1378, which the IRS mailed last year to individuals who received the economic stimulus payment.
• Go to the How Much Was My Stimulus Payment? tool that is available on the IRS Web site, IRS.gov. This can provide the correct amount in a matter of a few seconds.
• Individuals can call the IRS at 1-866-234-2942. After a brief recorded announcement they can select option one to find out the amount of their economic stimulus payment. They will need to provide their filing status, Social Security Number and number of exemptions.

With the amount of last year’s economic stimulus payment in hand, the taxpayer can then enter the figure on the recovery rebate credit worksheet or in the appropriate location when tax preparation software requests it.

If the taxpayer or preparer is using tax software, the amount of the rebate recovery credit will automatically be calculated and reported properly. If the taxpayer is using the paper method, the rebate recovery credit, as determined through the worksheet, should be reported on Line 70 of Form 1040, Line 42 of Form 1040A or Line 9 of Form 1040EZ.

For most taxpayers, the correct entry for the recovery rebate credit will either be blank or zero.

If there is any question at all as to the amount that should be reported for the recovery rebate credit, the taxpayer or preparer should enter a zero on the appropriate line above, and the IRS will determine whether a recovery rebate credit is due, and, if so, how much.

Some of the major factors that could qualify you for the recovery rebate credit include:

• Your financial situation changed dramatically from 2007 to 2008.
• You did not file a 2007 tax return.
• Your family gained an additional qualifying child in 2008.
• You were claimed as a dependent on someone else’s return in 2007 but cannot be claimed as dependent by someone else in 2008.

Stimulus Payments Not Taxable; Reports of Extensive Refund Delays False
The IRS has received a number of recurring questions involving stimulus payments and the recovery rebate credit. Here are some important tips to keep in mind:

Taxability. The economic stimulus payment is not taxable and it should not be reported as income on the 2008 Form 1040, 1040A or 1040EZ.

Refund delays. IRS personnel are aware of reports that errors in claiming the recovery rebate credit could delay tax refunds for as much as eight to 12 weeks. These reports are false. As the IRS detects and corrects return errors concerning the recovery rebate credit, refund delays are currently no longer than about one week.

One payment. In addition, the IRS notes taxpayers will receive a single refund that includes any recovery rebate credit to which they are entitled. The IRS will not be issuing separate recovery rebate credit payments.

Refund amounts. The IRS reminds taxpayers they should not use their regular refund from last year in calculating the recovery rebate credit. Some taxpayers may be confusing their regular tax refunds with the economic stimulus payment they received when completing their 2008 tax return.

Direct Deposit Requests. Taxpayers who request a direct deposit will receive the refund in the form of a direct deposit even if errors are detected.

For more information, visit the Recovery Rebate Credit Information Center as well as the rebate questions and answers at www.irs.gov.

Here are six tips for finding how much you received and correctly claiming the credit on your return:

1. Get your notice. Check the amount listed on Notice 1378, which the IRS mailed last year to individuals who received the economic stimulus payment.
2. Visit IRS.gov to find the amount. If you don’t have your Notice 1378, go to the “How Much Was My 2008 Stimulus Payment?” tool that is available on the IRS Web site, www.IRS.gov. This tool can provide the correct amount in a matter of a few seconds.
3. Call the IRS at 1-866-234-2942. If you don’t have Internet access, call the IRS.  After a brief recorded announcement, select option one to find out the amount of your economic stimulus payment. You will need to provide your 2007 filing status, Social Security Number and the number of exemptions claimed on the tax return.
4. Keep the amount handy. With the amount of last year’s economic stimulus payment in hand, you will be able to enter the figure on the recovery rebate credit worksheet or in the appropriate location when your tax preparation software requests it. This number will not appear on your actual tax return but is vital to ensure the accurate determination of the recovery rebate credit amount.
5. Trust the software or the worksheet to get it right.   Tax preparation software will automatically and correctly calculate the amount of the rebate recovery credit for you. The software will also properly report the credit on your tax return. If you are filing a paper return, the worksheet will guide you in calculating the proper amount of the credit.  The recovery rebate credit should be reported on Line 70 of Form 1040, Line 42 of Form 1040A or Line 9 of Form 1040EZ.  In order to avoid an error, use extra care when responding to the software questions or when completing the worksheet.  Do not enter the stimulus payment directly on your return.
6. Most taxpayers won’t qualify for more.  For most taxpayers, the correct entry for the recovery rebate credit will either be blank or zero because they have already received the money as a stimulus payment.  If you complete the worksheet, and there is any question about the amount that should be reported for the recovery rebate credit, you or your preparer should enter a zero on the appropriate line above.  For most people this will be the correct amount, and for the others the IRS will determine whether a recovery rebate credit is due and, if so, how much. If the IRS calculates a different credit amount than is reflected on your return, you will receive a notice that alerts you to the change.

The Earned Income Tax Credit
The EITC is available to disabled taxpayers as well as to the parents of a child with a disability. The EITC is a tax credit that not only reduces a taxpayer’s tax liability but may also result in a refund. Many working individuals with a disability, who have no qualifying children, but are older than 25 and younger than 65 do, in fact, qualify for EITC. Additionally, if the taxpayer’s child is disabled, the age limitation for the EITC is waived. The EITC has no effect on certain public benefits. Any refund you receive because of the EITC will not be considered income when determining whether you are eligible for benefit programs such as Supplemental Security Income and Medicaid.

The Credit for the Elderly or Disabled
This credit may be available to taxpayers who are age 65 or older, or who are younger than 65 and are retired on permanent and total disability.

Child or Dependent Care Credit
Taxpayers who pay someone to come to their home and care for their dependent or spouse may be entitled to claim this credit. There is no age limit if the taxpayer’s spouse or dependent is unable to care for themselves.

Impairment-Related Work Expenses
Employees who have a physical or mental disability limiting their employment, may be able to claim business expenses in connection with their workplace. The expenses must be necessary for the taxpayer to work.

Impact on the Standard Deduction
Taxpayers who are legally blind may be entitled to a higher standard deduction on their tax return.

Gross Income
Certain disability-related payments, Veterans Administration disability benefits, and Supplemental Security Income may be excluded from a taxpayer’s gross income.

For more information on tax credits and benefits available to disabled taxpayers, see Publication 3966, Living and Working with Disabilities, or Publication 907, Tax Highlights for Persons with Disabilities, available on www.IRS.gov or by calling 800-TAX-FORM (800-829-3676).

1.    Contact your employer. If you have not received your Form W-2, contact your employer to inquire if and when the W-2 was mailed.  If it was mailed, it may have been returned to the employer because of an incorrect or incomplete address.  After contacting the employer, allow a reasonable amount of time for them to resend or to issue the W-2.

2.    Contact the IRS. If you still do not receive your W-2 by February 17th, contact the IRS for assistance at 800-829-1040. When you call, have the following information:

• Employer’s name, address, city, and state, including zip code;
• Your name, address, city and state, including zip code, and Social Security number; and
• An estimate of the wages you earned, the federal income tax withheld, and the period you worked for that employer. The estimate should be based on year-to-date information from your final pay stub or leave-and-earnings statement, if possible.

3.    File your return. You still must file your tax return on time even if you do not receive your Form W-2. If you have not received your Form W-2 by February 17th, and have completed steps 1 and 2 above, you may use Form 4852, Substitute for Form W-2, Wage and Tax Statement. Attach Form 4852 to the return, estimating income and withholding taxes as accurately as possible.  There may be a delay in any refund due while the information is verified.

4.    File a Form 1040X. On occasion, you may receive your missing documents at a later date and some may have conflicting information. You may receive a Form W-2 or W-2C (corrected form) after you filed your return using Form 4852, and the information differs from what you reported on your return. If this happens, you must amend your return by filing a Form 1040X, Amended U.S. Individual Income Tax Return.

Form 4852, Form 1040X, and instructions are available on the IRS Web site, www.IRS.gov or by calling 800-TAX-FORM (800-829-3676).

The Hope Credit

• The credit applies for the first two years of post-secondary education, such as college or vocational school. It does not apply to the third, fourth, or higher years of undergraduate programs, to graduate programs, or to professional-level programs.
• It can be worth up to $1,800 ($3,600 if a student in a Midwestern disaster area) per eligible student, per year.
• You’re allowed a credit of 100% of the first $1,200 ($2,400 if a student in a Midwestern disaster area) of qualified tuition and related fees paid during the tax year, plus 50% of the next $1,200 ($2,400 if a student in a Midwestern disaster area).
• Each student must be enrolled at least half-time for at least one academic period which began during the year.
•  The student must be free of any federal or state felony conviction for possessing or distributing a controlled substance as of the end of the tax year.

The Lifetime Learning Credit

• The credit applies to undergraduate, graduate and professional degree courses, including instruction to acquire or improve job skills, regardless of the number of years in the program.
• If you qualify, your credit equals 20% (40% if a student in a Midwestern disaster area) of the first $10,000 of post-secondary tuition and fees you pay during the year, for a maximum credit of $2,000 ($4,000 if a student in a Midwestern disaster area) per tax return.

You cannot claim both the Hope and Lifetime Learning Credits for the same student in the same year. You also cannot claim either credit if you claim a tuition and fees deduction for the same student in the same year. To qualify for either credit, you must pay post-secondary tuition and certain related expenses for yourself, your spouse or your dependent. The parent or the student may claim the credit, but not both. Students who are claimed as a dependent cannot claim the credit.

These credits are phased out for Modified Adjusted Gross Income over $48,000 ($96,000 for married filing jointly) and eliminated completely for Modified Adjusted Gross Income of $58,000 or more ($116,000 for married filing jointly). If the taxpayer is married, the credit may be claimed only on a joint return.

For more information, see Publication 970, Tax Benefits for Education, which can be obtained online at IRS.gov or by calling the IRS at 800-TAX-FORM (800-829-3676).

For example, a married couple both under age 65 generally is not required to file until their joint income reaches $17,900. However, self-employed individuals generally must file a tax return if their net income from self employment was at least $400.

Check the “Individuals” section of the IRS Web site at IRS.gov or consult the instructions for form 1040, 1040A, or 1040EZ for specific details that may affect your need to file a tax return with IRS this year.

Even if you don’t have to file, here are six reasons why you may want to file:

1. Federal Income Tax Withheld. If you are not required to file, you should file to get money back if Federal Income Tax was withheld from your pay, if you made estimated tax payments, or had a prior year overpayment applied to this year’s tax.
2. Recovery Rebate Credit. If you did not qualify or did not receive the maximum amount for the 2008 Economic Stimulus Payment, you may be entitled to a Recovery Rebate Credit when you file your 2008 tax return
3. Earned Income Tax Credit. You may qualify for the Earned Income Tax Credit, or EITC, if you worked, but did not earn a lot of money.  EITC is a refundable tax credit meaning you could qualify for a tax refund.
4. Additional Child Tax Credit. This credit may be available to you if you have at least one qualifying child and you did not get the full amount of the Child Tax Credit.
5. First time Homebuyer Credit. If you bought a main home after April 8, 2008, and before July 1, 2009 and did not own a main home during the prior 3 years, you may be able to take this refundable credit.
6. Health Coverage Tax Credit.  Certain individuals, who are receiving certain Trade Adjustment Assistance, Alternative Trade Adjustment Assistance, or pension benefit payments from the Pension Benefit Guaranty Corporation, may be eligible for a Health Coverage Tax Credit when you file your 2008 tax return.

For more information about filing requirements and your eligibility to receive tax credits, visit the IRS Web site at IRS.gov.

Some common examples of items that are not included in your income are:

• Adoption Expense Reimbursements for qualifying expenses
• Child support payments
• Gifts, bequests and inheritances
• Workers’ compensation benefits
• Meals and Lodging for the convenience of your employer
• Compensatory Damages awarded for physical injury or physical sickness
• Welfare Benefits
• Cash Rebates from a dealer or manufacturer
• Economic Stimulus Payment received in 2008

Some income may be taxable under certain circumstance, but not taxable in other situations. Examples of items that may or may not be included in your income are:

• Life Insurance. If you surrender a life insurance policy for cash, you must include in income any proceeds that are more than the cost of the life insurance policy. Life insurance proceeds paid to you because of the death of the insured person are not taxable unless the policy was turned over to you for a price.
•  Scholarship or Fellowship Grant. If you are a candidate for a degree, you can exclude amounts you receive as a qualified scholarship or fellowship. Amounts used for room and board do not qualify.

All other items-including income such as wages, salaries and tips-must be included in your income, unless it is specifically excluded by law.

Taxable income may be in a form other than cash. One example of this is bartering, which is an exchange of property or services. The fair market value of goods and services exchanged is fully taxable and must be included as income on Form 1040 of both parties.

These examples are not all-inclusive. For more information, visit the IRS Web site at IRS.gov to view or download Publication 525, Taxable and Nontaxable Income from the Forms and Publications section or call 800-TAX-FORM (800-829-3676).