TurboTax Suspicious Filings in 2015

TurboTax shut down access to state tax return filing after the company found what it called “an increase in suspicious filings.” Identity theft is a growing problem for the American taxpayer. Recently, the Internal Revenue Service revealed that it paid $5.2 billion in fraudulent identity theft refunds in 2013.

TurboTax Suspicious Filings in 2015

The tax-preparation software company has found an increase in criminal activity where stolen personal data are used to file fake state returns with state authorities. This illegal act allows fraudsters to claim tax refunds from state government. Particularly, Minnesota noted that it would no longer accept tax returns submitted through Intuit’s TurboTax program because it had noticed potential fraud. The state’s department of revenue said that some taxpayers filing through the platform had encountered a message that they had already submitted tax returns, despite having not yet done so.

Intuit has implemented a plan that includes a dedicated toll-free number, 800-944-8596, with direct access to specially trained identity protection agents who will provide comprehensive support and filing assistance.

 

What is the security concern with TurboTax?

One way how a potential fraud works is someone who has your SSN is able to create an account with something like turbotax or any other online tax prep site. They can then create a fraudulent return using your SSN to get a huge refund. If you file your taxes with turbotax (or any of the others), they keep your previous years returns on file so you don’t have to fill out the stuff that gets pulled from your previous returns. If someone has your SSN, then it fills that in for them and they can then create their false return and hopefully steal some money from the state without the return getting flagged before the refund is sent.

 

What is the TurboTax Scam?

Turns out people are creating dumby accounts with scratch information, and then just using the SSN of the taxpayer to submit a fraudulent form. TurboTax’s services just assume you are the same filer from the previous year and lets you send in the return with completely falsified information, as long as you had the correct SSN on the scratch account.People have just been creating accounts on TurboTax using stolen data from a number of different ways (one I heard was a massive identity theft in Miami where people were breaking into hotel rooms and stealing personal information).

 

 

Avoiding Security Issues with TurboTax

The problem they are having is when the actual person goes to file their taxes on TurboTax, an identity thief has already filed one using their information. And this is for State filings only, Federal filings have more fraud protection on their end. TurboTax is working with a company right now to see if they can boost their fraud protection on their end but it is kind of hard when the thief’s have all of the person’s personal data for verification.

Using a PIN to File Tax Return Electronically

If you file your tax returns electronically using software to file online, you must sign the tax return using the method of self-signed personal identification number ( PIN).This method allows taxpayers to electronically sign your tax on personal income by selecting a PIN five digits.

 

Using PIN to file Tax

The PIN consists of five digits (excluding all zeros) you choose to enter as your electronic signature. Each taxpayer who files a joint return need a PIN and each can select any combination of five digits. As part of the identity verification process, each taxpayer enters his birth date and the adjusted gross income ( AGI , for its acronym in English), as entered on the original return for the preceding year, or PIN last year .

If you can not access information from your tax return for tax year 2012 for purposes of verification of electronic signatures, the IRS will issue a PIN for electronic filing temporarily  to taxpayers who qualify . If you need an EFP, you can access the application on the IRS website.

 

E-File your Tax Return

Generally, you can electronically file your tax return even if you are required to submit certain paper forms or certain corroborating documents. Use  Form 8453, Report of Individual Income Tax in the United States by Means of E-filing IRS e-file, to transmit paper forms or corroborating documents required.

Taxpayers appearing as the main respondent who are under 16 years of age who have never presented and secondary taxpayers under age 16 who did not show for 2012 can not use the method of self-signing PIN to sign. Affected taxpayers can still file electronically using the method of PIN professional preparer.

Using a PIN to File Tax Return Electronically

The IRS advised taxpayers to retain a copy of your return for your records, so that this helps with the electronic signature of the declaration submitted electronically next year. If you need a copy of your tax transcript, you are also able to do this from the IRS website.

Easy Common Mistakes to Avoid When Filing Taxes

People with a tax return on paper are 20 times more likely to make a mistake that those who use e-file. IRS e-file is the most accurate way to file your tax return in 2015.    Here are eight common mistakes to avoid:

 

Easy Common Mistakes to Avoid When Filing Taxes

  1. Social Security Numbers (SSN) wrong or omitted.  Be sure to enter all SSNs on your tax return exactly as shown on your social security card.
  2. Incorrect. Names   Be sure to write the names of all those in your tax return as is displayed on their social security cards.
  3. Errors in marital status.    Some people select the wrong filing status, such as head of household instead of single. The Interactive Tax Assistant ,can help you choose the right filing status
  4. Mathematical errors.  Double check your math. For example, be careful when adding or subtracting or when using a form or worksheet to do your calculations. The tax preparation software does the math for you and will prevent errors that can occur on paper.
  5. Errors in the computation of credits or deductions.  Many taxpayers make mistakes when determining Tax Credits, Earned Income Credit for Child, Dependent Care and the Standard Deduction. For example, if you are 65 or older, or is blind, make sure to claim the higher standard deduction.
  6. Wrong bank account numbers.  You should choose the direct deposit of your refund. However, it is very important that bank routing numbers and account are correct in your tax return. The fastest and safest way to get your tax refund is to combine e-file with direct deposit. It may be a long process to recover funds that are sent to the wrong bank account.
  7. Forms without signatures or dates.   An unsigned tax return is like an unsigned check – it is invalid. Remember that both spouses must sign a joint return.
  8. Errors in the Electronic Submissions PIN.  When electronically must sign the return electronically using a Personal Identification Number (PIN). If you know the PIN that you used last year, you can use it now. Do not have it, you must enter your Adjusted Gross Income (AGI, for its acronym in English) of the federal income tax return for 2012. Do not use an AGI amount from the 2012 amended return or of a statement that has been corrected by the IRS.

Top Tips for Charitable Contributions on Tax Return

Charitable deductions can be a very useful tax saving tool for people in many different circumstances. If you are looking for a tax deduction, give to charity can be a “win and win.” It is good for them and for you. Here are eight things you need to know about deducting your charitable gifts:

 

Top Tips for Charitable Contributions on Tax Return

  1. Make a donation to a qualified charitable organization, if you want to deduct the gift. You can not deduct contributions made to either an individual, a political organization or a political candidate. No matter how charitable the purpose is, this kind of “donation” will not be viewed as charitable giving in the view of the IRS>
  2. You must file Form 1040 and itemize your deductions. Present on Schedule A , Itemized Deductions, to your federal tax return. This is a littler harder, but tax software programs can help you do it.
  3. If you receive a benefit of any kind in exchange for their contribution, the deduction is limited.You can only deduct the amount that exceeds the fair market value of the benefit received.Examples of benefits include merchandise, food, tickets to an event or other goods and services.
  4.  If you give tangible items instead of cash, the deduction is generally the fair market value of that item. The fair market value is generally the price if you sell the property on the open market.
  5. The used clothing and household items must generally be in good condition to be deductible.Special rules apply to vehicle donations.
  6. You must file Form 8283 , Noncash Charitable Contributions in English, if your deduction for all noncash gifts is more than $ 500 per year.
  7. You should keep a record of your donations made during the year how to test. The record type to keep depends on the amount and type of your donation. For example, you must have a written record of all cash donations regardless of amount in order to take the deduction. It can be a canceled check, a letter from the charity, a bank record or a record of payroll deduction. You must include the name of the charity, the date and amount of the contribution. Proof of wireless phone meets this requirement for donations through a text message if it shows the same information.
  8. To claim a charitable deduction of money or property valued at $ 250 or more, you must have a written statement from the organization. The statement must indicate the amount of cash or a description of any property donated. You should also indicate whether the organization provided goods or services in exchange for the gift.

 

Top Tips for Charitable Contributions on Tax Return

For more information, see Publication 526 Charitable Contributions and 561, Determining the Value of Donated Property (in English). Forms and publications are available at IRS.gov or by calling 800-829-3676.

 

Deducting Sales Tax as Itemized Deduction on Federal Tax Return

How do you deduct sales tax on a federal tax return?

Taxpayers might have the option to deduct state sales tax that they have paid during the tax year. This might be very useful to taxpayers who would like to deduct sales tax paid on a new car. Sales tax on a new car is often a large amount and taxpayers have decent records to substantiate this claim with the IRS.The sales tax deduction was extended again in legislation H.B. 5771 (section 105) signed by President Obama on December 19, 2014. Congress let sales-tax deductions expire in 2007, 2009, 20011, 2012 and 2013, only to renew it retroactively months or even a year later.

Deducting Sales Tax as Itemized Deduction on Federal Tax Return

If you file a Form 1040, and itemize deductions on Schedule A, you have the option of claiming either state and local income taxes or state and local sales taxes (you can’t claim both). If you saved your receipts throughout the year, you can add up the total amount of sales taxes you actually paid and claim that amount.

 

Deducting Sales Tax

Remember though that deducting sales tax is not available to all taxpayers. You must choose between the deduction for your state income tax payments and deducting sales tax, but you can never take both on your Schedule A. This also assumes that the taxpayer will be itemizing their returns which is something that not all taxpayers do. In addition, the sales tax deduction is available between 2005 through 2013. Beyond 2014, the sales tax deduction might go away unless Congress chooses to extend the sales tax tax deduction.

People who claim the sales tax deduction, maybe on a new car purchase, do not have to report any state income tax refund as taxable income in the following year. So if your sales tax deduction is about the same as your income tax deduction, most taxpayers are better off taking the sales tax deduction.

 

Deduct Sales Tax or Income Tax

For most people, the state and local income taxes paid usually gives them the higher deduction on their federal tax returns, but for some taxpayers, the sales tax deduction may give them a greater benefit. Below are special instances when taxpayers may be better off taking the sales tax deduction.

  • Residents of states that don not collect state and local income tax (Alaska, Florida, Nevada,  South Dakota, Texas, Washington, and Wyoming)
  • Taxpayers who made major purchases during the tax year that were subject to sales tax. Some examples might include cars, boats, and airplanes.
  • Residents of states with a high sales tax rate than income tax rate.

 

IRS Sales Tax Calculator

The IRS has posted tables for each state estimating how much someone might have in a sales tax deduction. However, if you paid a greater amount, you will be able to deduct that larger amount if you documentation to support your claim.

 

Using IRS Sales Tax Calculator

The IRS also have a tool that is used to calculate the amount of sales tax paid. It is called the IRS Sales Tax Calculator. To figure the amount of optional general sales tax you are eligible to claim, just answer a few online questions and the system does the rest. First select the tax year for which you are preparing a return. Then, using your ZIP Code and just a few entries from your draft Form 1040, the Sales Tax Deduction Calculator will automatically figure the amount of state and local sales tax you can claim. Your entries are anonymous and the information is collected solely to allow you to determine your total allowable deduction.

 

IRS Information on Sales Tax Deduction

The deduction is available to taxpayers that itemize deductions, not those who take the standard deduction. The deduction is based on adjusted gross income and number of exemptions claimed. Taxpayers who keep all their receipts can deduct actual sales tax and use tax paid. For taxpayers who didn’t keep receipts, the IRS has an online Sales Tax Deduction Calculator to determine the amount of optional general sales tax to claim, or taxpayers can use the Optional State Sales Tax Tables.

Who should deduct sales tax on tax returns?

For most people, the state and local income taxes paid usually gives them the higher deduction, but for others, the sales tax deduction may give them a greater benefit, for example:

  • Residents of states that don’t collect state and local income tax (Alaska, Florida, Nevada,  South Dakota, Texas, Washington, and Wyoming)
  • Taxpayers who made major purchases during the tax year that were subject to sales tax (we’re talking major as in cars, boats, airplanes, RVs, etc.)
  • Residents of states with a high sales tax rate.

Who Can File a Form 1040A?

Form 1040A is used by certain people to file taxes. Form 1040A is not as complex as Form 1040, but is longer than 1040EZ. Form 1040A allows you to claim a number of deductions that you are not able to on 1040EZ.

 

Who Can File a Form 1040A?

Individuals can file this form who have varied incomes and would like to take various deductions can file this tax form. While all the personal income tax forms — 1040, 1040A and 1040EZ — are designed to get the appropriate amount of your money to the Internal Revenue Service, the differences in these returns could cost you if you’re not paying attention. To file a 1040A, if you don’t meet requirements for Form 1040EZ, but have a simple tax situation, you could have an option to file this form.

 

Requirements for Filing 1040A Tax Form

To be eligible for filing a 1040A, a taxpayer must meet certain requirements:

  1. Only have income only from wages, salaries, tips, taxable scholarships, fellowship grants, pensions or annuities, taxable Social Security benefits, withdrawals from your individual retirement account (IRA), unemployment compensation, jury duty pay, interest, and dividends.
  2. Taxable income after deductions (line 27, page 2) is less than $100,000.
  3. No Itemizing of any deductions.

If all these requirements are met, a taxpayer can file a 1040A. It would be in the taxpayers best interest to also check if they can file a 1040EZ. It is possible to file form 1040 and still claim the earned income tax credit.The only adjustments to income you can claim are the IRA deduction and the student-loan interest deduction — and you can also claim educator expenses and the tuition and fees deduction.

The only credits you can claim on the Form 1040A are:

  • Child tax credit
  • Additional child tax credit
  • Education credits
  • Earned Income Credit (EIC)
  • Credit for child and dependent-care expenses
  • Credit for the elderly or the disabled
  • Retirement savings contributions credit

You can also use a 1040A if you receive dependent-care benefits or owe tax from the recapture of an education credit or the Alternative Minimum Tax (AMT).

 

Form 1040EZ and Form 1040A Filers

For 1040EZ and 1040A filers who dod not compute their tax liability, you can let the IRS compute your tax after you enter your basic information on the tax forms. If after entering your information, you’re entitled to a refund, the IRS will send you a check. If you owe money on taxes for any reason, the IRS will send you a bill.

 

Completing Schedule EIC

For the earned income tax credit,  whether a taxpayer is filing a Form 1040A or a Form 1040, they need to complete Schedule EIC and attach it form to the tax return in order to get the credit. Remember to accurately compute the EITC because the IRS has lots of audit focus on this area and the penalties for mis-filing an EIC can have consequences for up to 10 years for a a taxpayer.

The process to file a 1040A electronically is exactly the same as for a 1040EZ. You can mail or e-file this return by using the appropriate. Here is IRS Information about Form 1040A and more filing instructions.

 

Filing Form 1040

Form 1040 is the most complex of the 3 major individual tax forms — and it offers tax breaks that aren’t available on the simpler Form 1040EZ or Form 1040A. You can report all types of income, expenses, and credits on a 1040. If you were a nonresident alien during the tax year and you were married to a U.S. citizen or resident alien, you may use any one of these three forms, based on your circumstances, only if you elect to file a joint return with your spouse. Other nonresident aliens may have to file Form 1040NR (PDF) or Form 1040NR-EZ (PDF). For more information on resident and nonresident aliens, refer to Topic 851 and Publication 519, U.S. Tax Guide for Aliens.

 

More Information about 2015 and 2016 Earned Income Tax credit (2015 EIC)

Paying Taxes by Credit Card to IRS

Is it possible to pay your taxes due to the IRS with a credit card?

You can generally pay income taxes due and estimated tax payments with a credit card. Individuals can make these payments 24 hours a day, seven days a week, using certain types of credit cards.

It does not matter if you e-file your tax return or mail a tax return to pay by credit card. Taxpayers must use a third party. There are several third party companies, Official Payments Corporation and Link2Gov Corporation that are authorized by the IRS.

 

Paying Taxes by Credit Card to IRS

These are authorized service providers for purposes of accepting credit card charges from both electronic and paper tax filers. However, remember that these payment providers might charge an additional fee which is usually a percentage of the tax paid by credit card.

 

Using Credit Card to Pay Taxes

You can use American Express, Discover Card, MasterCard, or VISA to pay taxes. A taxpayer may even be able to earn credit card points on the purchases.  Often, even partial payments may be made, although there is a limit of two payments per type of tax (or per quarter for estimated tax). Even if you file your taxes early, you can still wait until April to make the credit card charge which could help save you money in an interest expense.

Taxpayers also have the option of making credit card payments for the balance due on Form 1040, 1040A, or 1040EZ through tax software such at TurboTax and H and R Block.It is important to remember that if you do not pay the full amount by credit card, you may be liable for penalties and interest

 

You can e-file (or mail a paper return) and pay the following types of taxes by credit card over the phone or by using the Internet:

  • Current and past due Form 1040 series balance due
  • Form 4868 (automatic extension)
  • Form 1040-ES (estimated tax), and
  • Form 1040 advanced payment of a determined deficiency.

For credit card payment of any projected balance due on an automatic extension to file, service providers can be used to pay any taxes due.

 

Form 1040-ES or Form 4868

If you use the credit card method to pay your estimated taxes or any projected balance due on the automatic extension to file your return, you have the added advantage of not being required to file a paper Form 1040-ES or Form 4868. (Taxpayers can no longer file automatic extensions by phone.)

For any credit card payments, the authorization date of the credit card charge is considered the payment date for purposes of determining whether the payment was timely. Credit card payments cannot be cancelled once they are paid to the IRS. 

One advantage of using the credit card method, aside from the obvious one of being able to delay paying your tax liability, is that if you participate in any credit card incentive program, such as airline mileage, you will earn points by charging your taxes. A disadvantage is the convenience fee charged by service providers.

This nondeductible fee is in addition to any interest your credit card issuer will charge. Taxpayers are informed of the convenience fee amount before the payment is authorized.

MyFreeTaxes.com Free Online Tax Preparation

This is an article in a series about tax preparation software for 2013. FileYourTaxesNows.com does not sponsor or prefer any of the tax preparation sites reviewed in these article.

 

MyFreeTaxes.com Free Online Tax Preparation

Taxpayers can file their 2013 Federal and State Taxes Online for free if their income is less than $58,000 using www.MyFreeTaxes.com. If a taxpayer has a total combined income (Adjusted Gross Income or AGI) of under $58,000 and have a valid email address, they qualify for free tax filing using the MyFreeTaxes.com online platform and e-file software.
MyFreeTaxes is a partnership between United Way Worldwide, Goodwill Industries, and the National Disability Institute to provide FREE federal and state tax filing for Americans with under a certain AGI. The partnership is sponsored by the Walmart Foundation and uses the H&R Block At-Home Software as the backbone of their e-filing software.MyFreeTaxes.com has helped more than 6 million taxpayers receive billions of dollars in tax refunds since the project began in 2009.There are several ways to file for free using this website:

Filing Taxes Online at Home

1. Online At-Home: This is probably the most fast, easy, and secure way to file taxes at the convenience of your home computer. MyFreeTaxes has a customer service team to help you with tax questions you might have while preparing your 2013 income taxes and will help you answer these questions to make sure taxes are being properly filed.. Their support team could be contacted through phone, email, or chat. Contact information can be found on the “Contact Us” tab on the main website.2. In-Person Tax Filing: MyFreeTaxes has also partnered with more than 100 nonprofit & community organizations. These organizations will help to provide free, local tax assistance for taxpayers who quality for the services. This is different than the IRS sponsored VITA  tax preparation services that are provided to low income tax-payers by the IRS. Free tax assistance sites can be found using the tool on the homepage, which will direct you to the IRS search tool.
In filing your 2013 income taxes, please keep in mind the following dates:

 

1/08/14 – This is when the software for H&R Block Software in MyFreeTaxes.com, where taxpayers may submit their returns, will be turned on and taxpayers can enter their tax information. The IRS will start processing the returns when filing season start which is several weeks later.

1/23/14 – MyFreeTaxes customer support hotline starts.
1/31/14 – The official IRS filing season starts! Taxpayers are encouraged to e-file for the fastest way to receive refunds. Submitting your tax return early will also ensure that taxpayers who are eligible for a refund or EITC will receive it the quickest. More information on filing season could be found on the IRS Website.The most important thing for taxpayers is that they can start preparing their 2013 income tax return today for free. You can start preparing your taxes today, save your progress, and finish it after you receive your tax documents. This is important because many employers do not send W-2 forms until later in the tax filing season. It is useful to get a head start in order to make sure you have all your information submitted in time in order to avoid penalties and fines.