Substance over form. Have you received a W-2 or 1099 with an error? Check forms carefully to ensure accuracy. If you discover a mistake, contact the payer promptly to obtain a revised form. Also, a payer may issue a corrected form on its own. Don’t ignore the change on the 1040 you file with the IRS. The IRS computers match up W-2s and 1099s and could produce an unexpected tax bill.
Eye on myRAs. The myRA opportunity is generating a weak response. Only 20,000 of these retirement-saving accounts have been opened since the program’s inception in 2015. With a myRA, you can contribute up to $5,500 a year ($6,500 if you’re age 50 or older) to be invested in short-term Treasury bonds. Once your account hits $15,000, the funds must be rolled over into a Roth IRA. You can elect to directly transfer a tax refund to a myRA on a 2016 return.
NTA chimes in. As required by law, National Taxpayer Advocate (NTA) Nina E. Olson released an annual report for 2016 to Congress in January. (IRS Internal Release IR-2017-02, 1/10/17) Notably, Olson recommended a revamping of the IRS “Future State” plan to better accommodate taxpayers. She also urged Congress to emphasize simplification when it considers tax reforms in 2017.
Tax pros beware. Taxpayers aren’t the only ones targeted by scammers: Crooks go after tax professionals, too. In a new press release, the IRS—along with state tax authorities and tax industry leaders—warns about cybercriminals posing as clients. (IRS Internal Release 2017-03, 1/11/17) This is a new variation of the traditional “phishing” scheme aimed at collecting sensitive information that can be used to prepare fraudulent tax returns. By sending emails asking about tax return preparation services, the scammer obtains the tax return preparer’s email address, password and other information through embedded data. The emails may appear to come from a legitimate sender or organization, perhaps even a friend or colleague. Tax pros are advised to remain vigilant and promptly report suspicious activities to the IRS.
IRS informs on informers. The IRS is reporting an increase in the number of “whistleblower” rewards being paid to tipsters. According to the latest available data, it said that the IRS Whistleblower Office received more than 29,000 claims in Fiscal Year 2016 (FY2016), the 10th year of the program. Approximately 12,400 claims were rejected because the allegations were “not specific, credible or speculative in nature.” Other claims failed because the information was either already known to the IRS, whistleblowers failed to file the correct forms or the examination resulted in “no change.” Since FY2007, the Whistleblower Office has handed out $465 million in rewards. In FY2016, rewards were made to 418 whistleblowers, compared to 101 in FY2014 and 99 in FY2015.
- Small Business Tax Deduction Strategies No matches