Friday, December 15, 2017

Resources on IRS.gov Help Taxpayers Get Ready to File Taxes

IRS Tax Tip 
With the tax filing season right around the corner, the IRS encourages taxpayers to visit IRS.gov for tax tools and resources. Taxpayers can resolve nearly every tax issue on the IRS website.
IRS.gov provides many self-service tools and features, including these six:

Taxpayers Should Protect Data All Year Round

IRS Tax Tip 
With the online holiday shopping season in full swing, it’s the perfect time for all taxpayers to take steps to protect their identities and personal data. This year, the IRS kicked off this annual event with National Tax Security Awareness Week. The IRS partnered with state tax agencies, the tax industry and other groups across the country to encourage all taxpayers to think about data protection.
While the week is over, information on these five topics remains relevant year-round:

Eight Steps to Keep Online Data Safe

Anyone with an online presence can do a few simple things to protect their identity and personal information. Following these eight steps can also help taxpayers protect their tax return and refund in 2018:
  • Shop at familiar online retailers.
  • Avoid unprotected Wi-Fi.
  • Learn to recognize and avoid phishing emails that pose as a trusted source.
  •  Keep a secure machine.
  • Use passwords that are strong, long and unique.
  • Use multi-factor authentication when available.
  • Sign up for account alerts.
  • Encrypt sensitive data and protect it with a password.

Recognize Phishing Email Scams

The IRS reminds people to be on the lookout for new, sophisticated email phishing scams. These scams not only endanger someone’s personal information, but they can also affect a taxpayer’s refund in 2018. Even if an email is from a known source, people should use caution because cybercrooks are very good at mimicking trusted businesses, friends and family.

Five Steps Data Breach Victims Can Take

People who are the victim of a data breach should consider these five steps to help protect their sensitive information that can be used on a tax return:
  • Determine what information the thieves compromised.
  • Consider taking advantage of credit monitoring services offered to victims.
  • Place a freeze on credit accounts to prevent access to credit records.
  • Reset passwords on online accounts.
  • Use multi-factor authentication when available.

Thieves Use W-2 Scam to get Employee Data

The IRS warns the nation’s business, payroll and human resource communities about a growing W-2 email scam. Criminals use this scheme to gain access to W-2 and other sensitive tax information that employers have about their employees. The IRS recommends that all employers educate employees about this scheme, especially those in human resources and payroll departments.

Five Signs of Small Business Identity Theft

Business filers should be alert for signs of identity theft. They should contact the IRS if they experience any of these issues:
  • The IRS rejects an e-filed return saying it already has one with that identification number.
  • The IRS rejects an extension to file request saying it already has a return with that identification number.
  • The filer receives an unexpected tax transcript.
  • The filer receives an IRS notice that doesn’t relate to anything they submitted.
  • The filer doesn’t receive expected or routine mailings from the IRS.

Get to Know the Taxpayer Bill of Rights – Part 2

IRS Tax Tip 2017
This is the final tip in a two-part summary of the rights granted to all taxpayers.
Every taxpayer has rights. The Taxpayer Bill of Rights takes these rights from the tax code and groups them into 10 categories. Taxpayers interacting with the IRS should know their rights, which are highlighted in Publication 1, Your Rights as a Taxpayer:
The Right to Finality. Taxpayers have the right to know the maximum amount of time allowed to challenge an IRS position. They also have the right to know the maximum amount of time the IRS has to audit a particular tax year or collect a tax debt. Taxpayers have the right to know when the IRS concludes an audit.
The Right to Privacy. Taxpayers have the right to expect that any IRS inquiry, examination or enforcement action will comply with the law and be no more intrusive than necessary. During these proceedings, the IRS will respect all due process rights, including search and seizure protections. When applicable, the IRS will provide a collection due process hearing.
The Right to Confidentiality. Taxpayers have the right to expect that their tax information will remain confidential. The IRS will not disclose information unless authorized by the taxpayers or by law. Taxpayers should expect the IRS to take appropriate action against employees, return preparers and others who wrongfully disclose return information.
The Right to Retain Representation. Taxpayers have the right to retain an authorized representative of their choice for representation during dealings with the IRS. When a taxpayer cannot afford representation, they may seek assistance from a Low Income Taxpayer Clinic.
The Right to a Fair and Just Tax System. Taxpayers have the right to expect fairness from the tax system. The IRS must consider all facts and circumstances that might affect any liabilities, the ability to pay or the ability to provide information timely. Taxpayers have the right to receive assistance from the Taxpayer Advocate Service. TAS can help taxpayers who are experiencing financial difficulty. They can also help when the IRS has not resolved tax issues properly and timely through normal channels.
The IRS will include Publication 1 when sending a notice on a range of issues, such as an audit or collection matter. Publication 1 is available in English and Spanish. All IRS facilities will publicly display the rights for taxpayers.

Get to Know the Taxpayer Bill of Rights – Part 1

IRS Tax Tip 2017
This is the first tip in a two-part summary of the rights granted to all taxpayers. 
Every taxpayer has rights. The Taxpayer Bill of Rights takes these rights from the tax code and groups them into 10 categories. Taxpayers interacting with the IRS should know their rights, which are highlighted in Publication 1, Your Rights as a Taxpayer. 
The Right to Be Informed. Taxpayers have the right to know how to comply with tax laws. They are entitled to clear explanations of the laws and IRS procedures. Taxpayers have the right to know about IRS decisions affecting their accounts with clear explanations of the outcomes.
The Right to Quality Service. Taxpayers have the right to receive prompt, courteous and professional assistance when dealing with the IRS. They also have the right to speak with a supervisor about inadequate service. Communications from the IRS should be clear and easy to understand.
The Right to Pay No More Than the Correct Amount of Tax. Taxpayers must pay only the amount of tax legally due. This includes interest and penalties. The IRS must apply all tax payments properly.
The Right to Challenge the IRS’s Position and Be Heard. Taxpayers have the right to object to formal IRS actions or proposed actions. They can also provide justification with additional documentation. Taxpayers can expect the IRS to consider timely objections and documentation promptly and fairly. Taxpayers can expect a response when the IRS disagrees with the taxpayer’s position.
The Right to Appeal an IRS Decision in an Independent Forum. Taxpayers are entitled to a fair and impartial appeal of most IRS decisions. This includes appealing certain penalties. Taxpayers have the right to receive a written response regarding a decision from the IRS. Taxpayers generally have the right to take their case to court.
The IRS will include Publication 1 when sending a notice on a range of issues, such as an audit or collection matter. Publication 1 is available in English and Spanish. All IRS facilities publicly display the rights for taxpayers.

Sunday, December 3, 2017

Reporting Tip Income - Restaurant Tax Tips

Tips your employees receive from customers are generally subject to withholding. Employees are required to claim all tip income received. This includes tips you paid over to the employee for charge customers and tips the employee received directly from customers.

Employee Requirements

Employees must report tip income on Form 4070, Employee's Report of Tips to Employer (PDF), or on a similar statement. This report is due on the 10th day of the month after the month the tips are received. This statement must be signed by the employee and must show the following:
  • The employee's name, address, and SSN.
  • Your name and address.
  • The month or period the report covers.
  • The total tips received.
No report is required from an employee for months when tips are less than $20.
Both Forms 4070 and 4070-A, Employee's Daily Record of Tips (PDF), are included in Publication 1244, Employee's Daily Record of Tips and Report to Employer (PDF).

Employer Requirements

Employers must collect income tax, employee social security tax and employee Medicare tax on tips reported by employees. You can collect these taxes from an employee's wages or from other funds he or she makes available.

Allocation of Tips

As an employer, you must ensure that the total tip income reported to you during any pay period is, at a minimum, equal to 8% of your total receipts for that period.
In calculating 8% of total receipts, you do not include nonallocable receipts. Nonallocable receipts are defined as receipts for carry out sales and receipts with a service charge added of 10% or more.
When the total reported to you is less than 8%, you must allocate the difference between the actual tip income reported and 8% of gross receipts. There are three methods for allocating tip income:
  • Gross Receipt Method
  • Hours Worked Method
  • Good Faith Agreement
Employers can request a lower rate (but not lower than 2%) for tip allocation purposes by submitting an application to the IRS. Detailed instructions for computing allocation of tips, reporting allocated tips to employees, and for requesting a lower rate can be found in the Instructions for Form 8027 (PDF).
Note: The amount shown as allocated tip income is for information purposes only. You are not required to withhold Income or Social Security taxes on the allocated tip income. The amount of tip income allocated to each employee is shown in box 8 of their Form W-2.

Tip Reporting Requirements for Employers

Employers who operate large food or beverage establishments must file Form 8027, Employer’s Annual Information Return of Tip Income and Allocated Tips (PDF) to report employee tip income. A large food or beverage establishment is defined as business where all of the following apply:
  • Food or beverage is provided for consumption on the premises
  • Tipping is a customary practice
  • More than 10 employees, who work more than 80 hours, were normally employed on a typical business day during the preceding calendar year.
A worksheet for determining whether a business meets the criteria listed above is included in the Instructions for Form 8027 (PDF).

Keep Your Online Data Safe

During the holiday shopping season, shoppers are looking for the perfect gifts. At the same time, criminals are looking for sensitive data. This data includes credit card numbers, financial accounts and Social Security numbers. Cybercriminals can use this information to file a fraudulent tax return.
This tip is part of National Tax Security Awareness Week. The IRS is partnering with state tax agencies, the tax industry and groups across the country to remind people about the importance of data protection.
Anyone with an online presence can do a few simple things to protect their identity and personal information. Following these eight steps can also help taxpayers protect their tax return and refund in 2018:
  • Shop at familiar online retailers. Generally, sites with an “s” in “https” at the start of the URL are secure. Users can also look for the “lock” icon in your browser’s URL bar. That said, some criminals may get a security certificate, so the “s” may not always mean a site is legitimate.
  • Avoid unprotected Wi-Fi. Users should not do online financial transactions when using unprotected public Wi-Fi. Unprotected public Wi-Fi hotspots may allow thieves to view transactions.
  • Learn to recognize and avoid phishing emails that pose as a trusted source. These emails can come from a source that looks like a legitimate bank or even the IRS. These emails may include a link that takes the user to a fake website. From there, the thieves can steal usernames and passwords.
  • Keep a clean machine. This includes computers, phones and tablets. Users should install security software to protect against malware that may steal data. This software also protects against viruses that may damage files.
  • Use passwords that are strong, long and unique. Experts suggest a minimum of 10 characters. Use a combination of letters, numbers and special characters. Use a different password for each account.
  • Use multi-factor authentication when available. Some financial institutions, email providers and social media sites allow users to set their accounts for multi-factor authentication. This means users may need a security code, usually sent as a text to their mobile phone, in addition to a username and password.
  • Sign up for account alerts. Some financial institutions will send email or text alerts to an account holder when there is a withdrawal or change to their accounts. Generally, people can check their account profile to see what added protections may be available.
  • Encrypt sensitive data and protect it with a password. People who keep financial records, tax returns or any personal information on their computer should protect this data. Users should also back up important data to an external source. When disposing of a computer, mobile phone or tablet, people should make sure they wipe the hard drive of all information before trashing.

Lookout for Phishing Email Scams

The IRS reminds people to be on the lookout for new, sophisticated email phishing scams. These scams not only endanger someone’s personal information, but they can also affect a taxpayer’s refund in 2018.
This tip is part of National Tax Security Awareness Week. The IRS is partnering with state tax agencies, the tax industry and groups across the country to remind people about the importance of data protection.
Phishing attacks use email or malicious websites to get personal information from the user. In many cases, the criminal fools someone into believing the phishing email is from someone they trust. The emails often have the look and feel of authentic communications. These targeted messages can trick even the most cautious person into doing something that may compromise data.
People should be vigilant and skeptical. Even if the email is from a known source, people should use caution because cybercrooks are very good at mimicking trusted businesses, friends and family.
Here are six examples of email phishing scams:
  • Emails requesting personal information. The thief might ask for bank account numbers, passwords, credit cards and Social Security numbers. This is the most common way thieves steal data.
     
  • An email urgently warning the recipient to update online financial accounts at a hyperlink provided in the email. The link goes to a fake site.
     
  • A message with an email address spoofing a familiar address to look like trusted businesses, friends and family. The fake address has a slight change in text, such as name@example.com vs narne@example.com. Merely changing the “m” to an “r” and “n” can trick people.
     
  • Emails saying the recipient has a tax refund waiting at the IRS or that the IRS needs information about insurance policies. The IRS doesn't initiate spontaneous contact with taxpayers by email to request personal or financial information.
     
  • The message has hyperlinks that take someone to a fake site. In one example, the email says: “Following recent calculations, we notice that you are eligible to receive a tax refund. In order to start the refund procedure, please visit this link and follow the steps required.” The link goes to a fake site. The IRS doesn’t send emails asking for refund verification.
     
  • The message includes a PDF attachment that may download malware or viruses. Never open an attachment from a suspicious email address.

Tips for Data Breach Victim

Every day, data thefts put people’s personal and financial information at risk. There are steps that identity theft victims can take to protect their financial accounts, their identities and their tax returns.
This tip is part of National Tax Security Awareness Week. The IRS is partnering with state tax agencies, the tax industry and groups across the country to remind people about the importance of data protection.
Generally, thieves want to use the stolen data as quickly as possible. That may mean selling the data on the Dark Web for use by other criminals. It may also mean the crook tries to withdraw money from bank accounts or charge credit cards. A thief might also try to file a fraudulent tax return using victims’ names for a refund.
People who are the victim of a data breach should consider these five steps to help protect their sensitive information that can be used on a tax return:
  • If possible, the victim should try to determine what information the thieves compromised. Victims can try to find out if the criminals accessed emails and passwords, or more sensitive data such as name and Social Security number.
  • Breached companies often offer credit monitoring services to victims. Victims should consider taking advantage of these offers.
  • Victims should place a freeze on credit accounts to prevent access to credit records. There may be a fee that varies by state. At a minimum, victims should place a fraud alert on their credit accounts by contacting one of the three major credit bureaus. A fraud alert on credit records is not as secure as a freeze, but a fraud alert is free.
  • Victims should reset passwords on online accounts. It is especially important to reset passwords of financial sites, email and social media accounts. Some experts recommend at least 10-digit passwords mixing letters, numbers and special characters. People should use different passwords for each account, using a password manager or password app if necessary.
  • People should use multi-factor authentication when available. Some financial institutions, email providers and social media sites allow users to set their accounts for multi-factor authentication. This means users may need a security code, usually sent as a text to their mobile phone, in addition to a username and password.

Things you need to know about W-2 Scam

The IRS warns the nation’s business, payroll and human resource communities about a growing W-2 email scam. Criminals use this scheme to gain access to W-2 and other sensitive tax information that employers have about their employees.
This tip is part of National Tax Security Awareness Week. The IRS is partnering with state tax agencies, the tax industry and groups across the country to remind people about the importance of data protection.
This W-2 scam puts workers at risk for tax-related identity theft. The IRS recommends that all employers educate employees about this scheme, especially those in human resources and payroll departments. These employees are usually the first targets. Here are five warning signs about the W-2 scam:
  • The thief poses as a company executive, school official or other leader in the organization.
  • These scam emails often start with a simple greeting. It can be something like, “Hey, you in today?”
  • The crook sends an email to one employee with payroll access. The sender requests a list of all employees and their Forms W-2. The thief may even specify the format in which they want the information.
  • The thieves use many different subject lines. The criminal might use words like “review,” “manual review” or “request.” In some cases, the thief may send a follow up email asking for a wire transfer.
  • Because payroll officials believe they are corresponding with an executive, it may take weeks for someone to realize a data theft occurred. The criminals usually try to use the information quickly, sometimes filing fraudulent tax returns within a day or two.
This scam is such a threat to taxpayers and to tax administration that a special IRS reporting process has been set up. Anyone who thinks they were a victim of this scam can visit Form W-2/SSN Data Theft: Information for Businesses and Payroll Service Providers to find out how to report it.