Monthly Archives: February 2016

Phishing Scams and Tax Scams Part 1 of 4

Phishing ScamsPhishing scams (pronounced “fishing”) is the attempt to acquire sensitive information by masquerading as a trustworthy entity in an electronic communication. Phishing is done by someone sending an email to a user. They falsely claim to be a genuine business you may be familiar with. Do not be fooled, it is attempt to scam you into providing private information that will be used to steal your identity and possibly your tax refund.

Such information includes, but is not limited to: usernames, passwords, and credit card details (and sometimes, indirectly, money). There is even an email scam claiming to be the IRS. It is probably the most likely way you would least suspect to be hooked, when it comes to identity theft.

How Is Phishing Possible?

All of us say, “I would NEVER give out my private information.” We believe you, not knowingly. However, you could get dubbed into giving out. Phishing scams are typically carried out by e-mail spoofing or instant messaging. Communications claim to be from popular social websites, auction sites, popular paid apps,  banks, online payment processors or your own in-house IT administrators, are commonly used to lure you.

Phishing e-mails are designed to entice you to visit a fake website. Of course, this is done by fear tactics. “Your account has been compromised.” As the owner, you are asked to update details about your personal information, such as passwords and credit card, social security, and bank account numbers. This is information that a legitimate organization already has. The notice directs users to a fake website and enter details there. The website is designed to look and feel almost identical to a legitimate one. It is set up ONLY to steal your information. And these scammers are so nice, they even provide links for your convenience. DO NOT click on the links, as they may lead you to a bogus website with malware on it.

In the meantime, imagine trying to file your return and it gets rejected because the IRS has it already filed. You attempt to get a copy of the return but can’t because you don’t have the ID of the other unfortunate taxpayer who was used as the other spouse on the return. All the while, the scammers are enjoying your stolen refund freely.

Are You Concerned About Phishing Scams, Tactics and Your Taxes?

Our best advice to you is if you get an email from someone that you do know, or the email subject line does not sound right, delete it. Do not open it! Don’t open attachments, and if you did open it by mistake, do not click on the links.

At Worthtax, we want you to be aware of the tactics behind phishing scams, especially when it comes to your tax refunds. If you have not received your refund, and you believe you may have become a victim of tax identity theft, visit our Tax Identity Theft Information Center or call Alex Franch, BS EA at 781.849.7200. He can help you with the paper work involved to restore your right identity with the IRS. We have locations in Quincy, Weymouth and Dedham.

Other Tax Identity Theft Help Articles:

 

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Address Change? Let the IRS Know!

address change, change of addressHave you changed your address lately? You may want to keep these things in mind to make sure you receive your refunds or information from the IRS. This is true for your home or business address.

Here are 11 ways to change your address on file with the IRS.

  1. Write the new address in the correct boxes on your tax return.
  2. Inform your employer of your new address, this will ensure that you get your W-2 forms on time.
  3. Send the IRS your new address in writing when you file your return. Include your full name, old and new addresses, Social Security Number or Employer Identification Number and your signature. If you filed a joint return, make sure you include the both taxpayers information. If since filing, you and your spouse or partner have moved to separate address, both of you should notify the IRS of your new information.
  4. Use a Change of Address Form, Form 8822, to submit a name or address change. You can do this any time.
  5. Should an IRS employee contact you about your account for another reason, they will do so in writing and will provide phone number to call. You may be able to verbally provide a change of address by phone while handling that other business.
  6. Notify the post office of your address change. This will help you if you changed your address after you filed your return. Your mail can be forwarded. This is especially true if you file quarterly estimated payments.
  7. You can find the address of the IRS center where you file your tax return or download Form 8822 and Change of Address information. The form is also available by calling 800-TAX-FORM (800-829-3676).
  8. Complete your change of address online. If for some reason you think your check was returned to the IRS, you can access  Where’s My Refund? on the IRS website. You will be required to provide your social security number, filing status, and the amount of your refund. For more information, read Understanding your CP31 Notice.
  9. The IRS does use the Postal Service’s change of address files to update taxpayer addresses, but it is still wise to notify the IRS directly.
  10. If you use the mailing label that comes with your tax package, make sure the correction of the address is readable.
  11. Taxpayers who make estimated payments throughout the year should mail a completed Form 8822, Change of Address, or write the IRS center where you file your return. You may continue to use your old pre-printed payment vouchers until the IRS sends you new ones with your new address. However, do not correct the address on the old voucher.

Address Change or Other Tax Information

Alex Franch, can give you excellent advise on address changes and other important tax topics. Worthtax will prepare the notices needed for the Internal Revenue Service and your state tax information. You can reach Alex at 781.849.7200. In addition to our guaranteed pricing, we are giving $50 American Express gift cards to any new clients who have their taxes completed and filed by WorthTax. Worthtax provides ultra-convenient service and triple check accuracy. We have locations in Quincy, Weymouth and Dedham.

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Health Insurance: Ways to Deduct

health Insurance, Affordable Care ActHealth insurance premiums, especially in the light of the Affordable Care Act have risen dramatically. It is one of the largest expenses that most individuals pay. The cost of health insurance is allowed as part of an individual’s medical deductions when itemizing deductions. However, only the amount of total medical expenses that exceed 10% of the taxpayer’s adjusted gross income (AGI) is deductible. The 10% limitation is reduced to 7.5% through 2016 where a taxpayer or spouse (if any) is age 65 or over as of the end of the year. Prior to the increased limitation imposed by the Affordable Care Act, the limitation was 7.5% for everyone.

This article has two purposes:

  1. To remind you what insurance can be included as a medical deduction
  2. To inform you of an alternate means of deducting health insurance for certain self-employed individuals. A means that avoids the adjusted gross income limitation and allows for deduction without itemizing.

What is Deductible Health Insurance?

Let’s start by looking at what is treated as deductible health insurance. It includes the premiums you pay for coverage for yourself, your dependents, and your spouse, if applicable, for the following types of plans:

  • Health Care and Hospitalization Insurance
  • Long-Term Care Insurance (but limited based upon age)
  • Medicare-B
  • Medicare-C (aka Medicare Advantage Plans)
  • Medicare-D
  • Dental Insurance
  • Vision Insurance
  • Premiums Paid through a Government Marketplace net of the Premium Tax Credit

However, premiums paid on your or your family’s behalf by your employer are not deductible. This is because their cost is not included in your wage income. Or, if you pay premiums for coverage under your employer’s insurance plan through a “cafeteria” plan, those premiums are not deductible either because they are paid with pre-tax dollars.

For the Self-Employed, in Accounting Terms:

If you are a self-employed individual, you can deduct 100% of the premiums without itemizing your deductions, excluding an AGI reduction. This is an above-the-line deduction. It is limited to your net profits from self-employment. If you are a partner who performs services in the capacity of a partner and the partnership pays health insurance premiums on your behalf, those premiums are treated as guaranteed payments. Meaning they are deductible by the partnership and are included in your gross income. In turn, you may deduct the cost of the premiums as an above-the-line deduction under the rules discussed in this article.

Here is when no above-the-line deduction is permitted. This is when the self-employed individual is eligible to participate in an employer subsidized health plan of the taxpayer, the taxpayer’s spouse, any dependent, or any child of the taxpayer who has not reached age 27 as of the end of the tax year.

Long-Term Care Insurance

This rule is applied separately to plans that provide coverage for long-term care services. Therefore, an individual eligible for employer-subsidized health insurance may still be able to deduct long-term care insurance premiums. This is as long as the person is not eligible for employer-subsidized long-term care insurance. In addition, to be treated as subsidized, 50% or more of the premium must be paid by the employer.

This above-the-line deduction is also available to more-than-2% S corporation shareholders. For purposes of the income limitation, the shareholder’s wages from the S corporation are treated as his or her earned income.

Health Insurance Tax Questions?

If you have any questions related to deducting health insurance premiums, either as an itemized deduction or an above-the-line deduction for self-employed individuals, call Alex Franch at 781.849.7200. Worthtax has a sign-on bonus of our own. In addition to our guaranteed pricing, we are giving $50 American Express gift cards to any new clients who have their taxes completed and filed by WorthTax. Worthtax provides ultra-convenient service and triple check accuracy. We have locations in Quincy, Weymouth and Dedham.

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March Madness: Tax Season, Tax Team

March Madness, Tax Season, Tax TeamMarch Madness is right around the corner! I know we just got through the Superbowl. Before you get glued to your flat screen watching the NCAA playoffs, you may want to confront your own March Madness – did you do your taxes yet? If you have not gathered all those receipts, set up those spreadsheets, and managed to make sense out of your taxes, you might want to get started. At least get all your stuff together and consider calling one of our tax team experts.

Alex Franch, Tax Team, March MadnessView Alex Franch's profile on LinkedIn

Alex Franch | BS EA

Mr. Franch is a Tax Specialist and Partner at Joseph Cahill & Associates / WorthTax. He has a diverse background including a Bachelor of Science from Boston College in Mathematics and extensive military service. Mr. Franch is an Enrolled Agent and has eight years of tax preparation experience. He has been serving individuals, families, and businesses for several years with tax and financial planning strategies and is a junior partner with the firm.

Mr. Franch is licensed by the Financial Industry Regulatory Authority (FINRA) with a Series 6, 63, 65, and 7, and by the Commonwealth of Massachusetts Division of Insurance.

Alex Franch is a registered representative of and offers securities and investment advisory services through Commonwealth Financial Network, A registered broker-dealer, Member FINRA/SIPC.

 

Susan McQuarrie, Tax Team, March Madness

Susanne McQuarrie | BS

Ms. McQuarrie has over 25 years experience in tax preparation and bookkeeping, including her years at Joseph Cahill & Associates / WorthTax.

Susanne graduated from Salem State College with a degree in Accounting/Business Management. She is a registered tax preparer.

John Clapp, Tax Team, March Madness

John Clapp | EA, RTRP

Mr. Clapp recently joined the tax team at Joseph Cahill & Associates / WorthTax, and has experience since 2010 of tax preparation experience. Previously, he had a 30+ year career working in and managing statistical programs for the federal government.

John graduated from Worcester State College with a degree in economics, and is a registered tax preparer and an Enrolled Agent.

Connie French| ES

Ms. French has over 15 years experience in tax preparation and bookkeeping, including her years at Joseph Cahill & Associates / WorthTax.
Connie graduated from Bunker Hill Community College with a degree in Accounting. She is a registered tax preparer. (picture not shown).

Need help dealing with the March Madness of Taxes?

So now that the Superbowl is over, get your tax stuff together before March Madness fast approaches. And if you are really good, and you don’t need a sit down with a tax expert from our team, Worthtax is running a special, $35 off for customers who drop off their taxes at one of our convenient locations in Quincy, Dedham and Weymouth. If you need to schedule an appointment, no problem, call 781-849-7200 to meet with any of our team members.

 

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Broncos Win Super Bowl 50 – California Wins With Jock Tax

bronchos winBroncos win of Super Bowl 50 was a surprise to some. Not to me, they had a tight defense. I just hope their defense was just as good when planning to pay the Jock Tax.

Superbowl 50 was in California this year. California is one of those states that charges a “jock tax.” I know your are moaning, are you kidding me? A Jock Tax? It’s true! Payton Manning will have a hefty amount to share with the state after the Broncos win. But take comfort, the referees will be subject too.

Just like you may earn overtime or a bonus at your job, these Bronco and Panther athletes make a hefty bonuses for the playoffs and Superbowl. The athletes who play for the Broncos, Panthers or our beloved Patriots are subject to taxes on a State and local basis. This makes their taxes are very complicated. They have to have a really good CPA on their team. Hum, they should call Worthtax!

Since these athletes play in many cities throughout the US, each city may have a local tax imposed. And, each city is located in a state that may require a jock tax on a portion of their multi-million dollar contracts. This jock tax, another form of income tax, is not only collected where they are based, but also where they live.

Oh, and when we say the Broncos win got them a big, beautiful ring? They they may be taxed on the that as well. I guess in the end, we can really say, California won.

Each State Has Their Own Tax Rules

States tax all earnings of the residents residing in that state. However what about non-residents? That is not always the case. In Massachusetts, nonresidents are taxed on the income that results from sources within the Commonwealth.

Some states will tax nonresident income. Chances are if a city (and state they are located in) hosts a large NFL, NBA, NHL or other major league sports events, then it is likely that they have the jock tax. It is just one more opportunity for generating revenue, I guess you can say.

Not All Fun and Taxes When Broncos Win or Lose

You may ask yourself, “Why don’t more athletes live in Massachusetts?” Guess what?  Massachusetts has a jock tax. Think about it, we are home to the New England Patriots, the Boston Red Sox, Boston Celtics and New England Revolution. That is a lot of tax revenue to be made for the Commonwealth. States that do not have a jock tax are Florida, Washington, Texas and Tennessee. That is why those states, especially Florida, are able to successfully recruit those big names and keep them as residents. And I bet you thought the awesome weather was the only reason that athletes live in Florida? Well, partially, but professional athletes, who live in Florida do not have to pay taxes against the income they earn playing there.

So when a player happens to mention they would rather play in one city rather than another, it may not be due to loyalty or rivalry. Although, we would like to think that. They very well could be thinking about their tax return. Keep that in the back of your mind the next time you play fantasy football.

Regardless of the Broncos Win – We don’t discriminate if you are subject to a Jock Tax

Professional NFL player or not, we are here to help you sort through your taxes. Call Alex at 781.849.7200 . Worthtax has a sign-on bonus of our own. In addition to our guaranteed pricing, we are giving $50 American Express gift cards to any new clients who have their taxes completed and filed by WorthTax. Worthtax provides ultra-convenient service and triple check accuracy. We have locations in Quincy, Weymouth and Dedham. Although, if you are a Broncos’ fan and you booed our beloved Patriots, well … don’t do it again!

Superbowl 50 Fun Fact

What is Superbowl 50 without the commercials? Did you know that advertising for Superbowl 50 will generate $377 Million in advertising revenue. Imagine paying taxes on that!

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photo credit: Denver Broncos 2008 Schedule Wallpaper via photopin (license)
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Mortgage Interest Deductible or Not?

house-186400_640Mortgage Interest and Home Mortgage Tax Deduction is not all it may seem. One of the current IRS audit initiatives is checking to see if taxpayers are deducting too much home equity debt interest. Taxpayers are allowed to deduct the interest on up to $1 million of home acquisition debt. This debt includes debt incurred to make improvements, but not repairs. It also includes the interest on up to $100,000 of home equity debt. Equity debt is debt not incurred to acquire or improve the home. Taxpayers often exceed the equity debt limit. They fail to adjust their interest deduction accordingly.

The best way to explain this interest deduction limitation is by example. Let’s assume you have never refinanced the original loan that was used to purchase your home, and the current principal balance of that acquisition debt is less than $1 million. However, you also have a line of credit on the home. The debt on that line of credit is treated as equity debt. If the balance on that line of credit is $120,000, then you have exceeded the equity debt limitation. This debt is only 83.33% ($100,000/$120,000) of the equity line interest. It is deductible as home mortgage interest on Schedule A. The balance is not deductible unless you can trace the use of the excess debt to either investment or business use. If traceable to investments, the interest you pay on the amount traceable would be deductible as investment interest. This is deducted on Schedule A but is limited to an amount equal to your net investment income (investment income less investment expenses). If the excess debt was used for business, you could deduct the interest on that excess debt on the appropriate business schedule.

Secured or Not Secured

On the other hand, the IRS allows you to elect to treat the equity line debt as “not secured.”. This allows the interest on the entire equity debt to be traced to its use, as well as, if it was deducted on the appropriate schedule. For instance, you borrow from the equity line for a down payment on a rental. If you make the “not secured” election. The interest on the amount borrowed for the rental down payment would be deductible on the Schedule E rental income and expense schedule. But it would not be subject to the home equity debt limitations.

However, one of the rules that allows home mortgage interest to be deductible is it must be secured by the home. If the unsecured election is used, none of the interest can be traced back to the home itself. What if the equity line was used partly for the rental down payment and partially for personal reasons? The interest associated with the personal portion of the loan would not be deductible since you elected to treat it as not secured by your home.

Using the unsecured election can have unexpected results in the current year and in the future. You should use that election only after consulting with this office. We admit, it can get confusing for people who are not familiar with the complicated rules associated with home mortgage interest. They may think that the interest shown on the Form 1098, issued by their lenders at the end of the year, is fully deductible. In many cases, when taxpayers have refinanced or have equity loans, that may be far from the truth. It could result in an IRS inquiry and potential multi-year adjustments. In fact, for Forms 1098 issued after 2016 (thus effective for 2016 information), the IRS will require lenders to include additional information, including:

1) the amount of the outstanding mortgage principal as of the beginning of the calendar year,
2) the mortgage origination date, and
3) the address of the property securing the mortgage

This information will provide the IRS additional tools for audits.

When in doubt about mortgage interest rules, ask:

When in doubt about how much interest you can deduct.  Or, if you have questions about how refinancing. Or, questions about taking on additional home mortgage debt and how it will impact your taxes? Please call Alex for assistance.

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Employer Relief: Affordable Care Act Reporting

Employer Relief, Affordable Care ActEmployer relief has been issued for ACA reporting. Starting the 2015 tax year, Applicable Large Employers (ALEs) were required to file Forms 1095-C and 1094-C with the IRS. They were also required to provide a copy of the 1095-C to each of their employees. An ALE is generally an employer with 50 or more equivalent full time employees (EFTEs) in the prior year. Even though ALE’s with 99 or fewer EFTEs are not subject to the insurance mandate for 2015, they are subject to the 1094-C and 1095-C filing requirements for 2015.

Employer Relief and Due Date Requirement

This is the first year for this requirement. The IRS has decided to provide first year (2015) filing relief for Forms 1095-B and 1095-C. The due dates for furnishing these forms are extended as follows:

  • The due date for providing the 2015 Form 1095-B and the 2015 Form 1095-C to the insured and employees is extended from February 1, 2016, to March 31, 2016.
  • The due date for health coverage providers and employers to furnish the 2015 Form 1094-B and the 2015 Form 1094-C to the IRS is extended from February 29, 2016, to May 31, 2016 if not filing electronically.
  • The due date for health coverage providers and employers electronically filing the 2015 Form 1094-B and the 2015 Form 1094-C with the IRS is extended from March 31, 2016, to June 30, 2016.

Those Who Cannot Meet the Original Deadline

The IRS is prepared to accept information reporting. For returns beginning in January 2016, employer relief is available for those who cannot meet the original deadlines are encouraged to furnish statements and file the information returns as soon as they are ready. This is true for other coverage providers, as well.

The information provided to individuals on their copy of Form 1095-B or 1095-C is generally used to confirm that the individual had minimum essential coverage. This allows them to avoid the penalty that applies when not covered for the full year. However, with the extension of the filing dates for these forms, individuals may not have the forms in hand before filing their 2015 returns. For 2015 only, individuals who rely on other information received from their coverage providers about their coverage for purposes of filing their returns do not need to amend their returns once they receive Form 1095-B or Form 1095-C or any corrections, according to the IRS.

Likewise, individuals who, when filing their 2015 income tax returns, rely upon other information received from employers about their offers of coverage for purposes of determining eligibility for the premium tax credit need not amend their returns once they receive their Forms 1095-C or any corrected Forms 1095-C.

Are you ready to file, but you don’t have your 1095-B or 1095-C Forms yet?

Alex Franch, BS EA is more than a tax advisor. Alex is a tax expert who can give you the tax advise you need. Worthtax provides ultra-convenient service and guaranteed pricing. We have locations in Quincy, Weymouth and Dedham. He can be reached at 781.849.7200 to answer your tax questions.

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Learn more information about 1095 forms here.

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