Sunday, September 2, 2018

Six things for extension filers to remember

Oct. 15 is almost here, and it’s the last day to file for most people who requested an automatic six-month extension for their 2017 tax returns. These taxpayers should remember that they can file any time before Oct. 15 if they have all their required tax documents. They can also pay their tax bill in full, or make a partial payment, anytime, by visiting IRS.gov/payments.
As extension filers prepare to file, here are some things they should know:
  • They can still use IRS Free File. Nearly everyone can e-file their tax return for free through IRS Free File. The program is available on IRS.gov now through Oct. 15. IRS e-file is easy, safe and the most accurate way for people to file their taxes. E-file also helps people get all the tax benefits they’re entitled to claim.
  •  A refund may be waiting. Anyone due a refund should file as soon as possible to get their money. The sooner someone files, the sooner they’ll get it. Don’t forget to use Direct Deposit. It is the best and fastest way for taxpayers to get their tax refund electronically deposited for free into their financial account. 
  • They should consider IRS Direct Pay. Taxpayers who owe taxes can pay them with IRS Direct Pay. It’s the simple, quick and free way to pay from a checking or savings account. Taxpayers can just click on the ‘Pay’ at IRS.gov.
  • Here’s what taxpayers should do about a missed deadline. Anyone who did not request an extension by this year’s April 17 deadline should file and pay as soon as possible. This will stop additional interest and penalties from adding up. IRS Direct Pay offers a free, secure and easy way to pay taxes directly from a checking or savings account. There is no penalty for filing a late return for people who are due a refund. 
  • Taxpayers should remember the Oct. 15 Deadline. Taxpayers who aren’t ready to file yet should remember to file by Oct. 15 to avoid a failure-to-file penalty. Taxpayers who owe and can’t pay their balance in full should pay as much as they can to reduce interest and penalties for late payment. They can use the Online Payment Agreement tool to apply for more time to pay or set up an installment agreement. In most cases, the failure-to-file penalty is 10 times more than the failure-to-pay penalty.
  • More Time for the Military.  Members of the military and others serving in a combat zone get more time to file. These taxpayers typically have until at least 180 days after they leave the combat zone to both file returns and pay any taxes due.

Tax preparers should encrypt client data

To help protect their clients’ data from cyberthieves, tax preparers should consider encrypting all sensitive data. In fact, encryption protocols should be standard features of any data security plan that must be created by all professional tax return preparers, which is required by the Federal Trade Commission and its Safeguards Rule.

Here are a few basic steps for tax preparers to consider about encryption. These will help protect client data stored on computer systems. Preparers should:
  • Use drive encryption to lock all files on computers and on all devices. Drive or disk encryption often is a stand-alone software product. It converts text in files into an unreadable format for anyone who makes an unauthorized access. Entering the password unlocks the files for legitimate users.
  • Backup encrypted copies of client data to external hard drives or use cloud storage. If using external drives, preparers should keep them in a secure location. If choosing cloud storage, they should encrypt the data before uploading to the cloud.
  • Avoid attaching USB drives and external drives with client data to public computers.
  • Avoid installing unnecessary software or applications to the business network.
  • Avoid offers for “free” software, especially security software. This is often a ruse by criminals.
  • Download software or applications only from official sites.
  • Perform an inventory of devices where clients’ tax data are stored, such as laptops, smart phones, tablets and external hard drives.
  • Take an inventory of software used to process or send tax data, such as systems, browsers, applications, tax software and web sites.
  • Limit or disable internet access capabilities for devices that have stored taxpayer data.
  • Delete all information from devices, hard drives, flash drives, printers, tablets or phones before disposing of devices.
  • Physically destroy hard drives, tapes, USBs, CDs, tablets or phones by crushing, shredding or burning.
  • Shred or burn all documents containing taxpayer information before throwing them away.
The IRS and its partners in the Security Summit are reminding preparers about the importance of strong passwords as part of the Tax Security 101 awareness initiative. This is intended to provide tax professionals with the basic information they need to better protect taxpayer data and to help prevent the filing of fraudulent tax returns.

Taxpayers should be prepared for natural disasters

With hurricane season underway, it’s a good idea for taxpayers to think about what they can do to be prepared should a hurricane or other natural disaster strike where they live. Here are a few helpful tips for taxpayers to keep in mind.

The IRS can help

In the case of a federally declared disaster, taxpayers can call 866-562-5227 to speak with an IRS specialist trained to handle disaster-related issues.

Get a copy of a tax return

Taxpayers who need a copy of their prior-year tax return have several options. If they:
  • Went to a paid preparer, they might be able to get a copy of last year’s tax return from that preparer.
  • Used the same tax preparation software this year that they used last year, that software will likely have their prior-year tax return.
  • Didn’t use the same tax preparation software this year, they may be able to return to their prior-year software and view an electronic copy of that return.

Get a Transcript

Taxpayers who are unable to access prior-year tax return using the above methods can get a copy of their transcript by going to IRS.gov and using the Get Transcript application. By selecting “Get Transcript Online,” the taxpayer can immediately view, print or download their transcript. If they prefer to have a copy sent to the address that the IRS has on file, they can select "Get Transcript by Mail." They should receive their transcript in the mail in five to 10 days from the time the IRS receives their request online.

Update emergency plans

Because a disaster can strike any time, taxpayers should review emergency plans annually. Personal and business situations change over time, as do preparedness needs. When employers hire new employees or when a company or organization changes functions, they should update plans accordingly. They should also tell employees about the changes.
Individuals and businesses should make plans ahead of time and be sure to practice them.

Create electronic copies of key documents

Taxpayers should keep a duplicate set of key documents in a safe place, such as in a waterproof container and away from the original set. Key documents includes bank statements, tax returns, identification documents and insurance policies.
Doing so is easier now that many financial institutions provide statements and documents electronically, and financial information is available on the Internet. Even if the original documents are provided only on paper, these can be scanned into a computer. This way, the taxpayer can download them to a storage device like an external hard drive or USB flash drive.

Document valuables

It’s a good idea for a taxpayer to photograph or videotape the contents of their home, especially items of higher value. Documenting these items ahead of time will make it easier to claim any available insurance and tax benefits after the disaster strikes.

Following new rules for strong passwords helps preparers protect data

Tax professionals should remember to use strong passwords on their accounts. This will help protect their clients’ data from cyberthieves.
Cybersecurity experts’ recommendations on what constitutes a strong password has recently changed. Here are some of the latest tips for tax professionals to follow when creating passwords to help keep data secure. They should:
  • Opt for a multi-factor authentication process when available. Many email providers now offer customers two-factor authentication protections to access email accounts.
  • Use word phrases that are easy to remember rather than random letters, characters and numbers that are harder to remember. By using a phrase, preparers don’t have to write down the password, which exposes it to more risk.
  • Use strong, unique passwords for all accounts, whether it’s to access a device, tax software products, cloud storage, wireless networks or encryption technology.
  • Use a minimum of eight characters; longer is better.
  • Use a combination of letters, numbers and symbols; something like SomethingYouCanRemember@30!
  • Avoid personal information or common passwords.
  • Change default and temporary passwords that come with accounts or devices.
  • Not reuse passwords. For example, changing Bgood!17 to Bgood!18 is not good enough.
  • Not use email addresses as usernames.
  • Store any password list in a secure location, such as a safe or locked file cabinet.
  • Not disclose passwords to anyone for any reason.
  • Use a password manager program to track passwords, but protect it with a strong password.
The IRS and its partners in the Security Summit are reminding preparers about the importance of strong passwords as part of the Tax Security 101 awareness initiative. This is intended to provide tax professionals with the basic information they need to better protect taxpayer data and to help prevent the filing of fraudulent tax returns.

Here’s what taxpayers do when they have to file a new W-4

The IRS reminds taxpayers to look into whether they need to adjust their paycheck withholding. Taxpayers who do need to adjust their withholding should submit a new Form W-4, Employee’s Withholding Allowance Certificate to their employers. Taxpayers can use the updated Withholding Calculator on IRS.gov to do a quick “paycheck checkup” to check that they’re not having too little or too much tax withheld at work.Among the groups who should check their withholding are:

  • Two-income families
  • People working two or more jobs or who only work for part of the year
  • People with children who claim credits such as the Child Tax Credit
  • People with older dependents, including children age 17 or older
  • People who itemized deductions on their 2017 tax return
  • People with high incomes and more complex tax returns
  • People with large tax refunds or large tax bills for 2017
Here are a few things for taxpayers to remember about updating Form W-4:
  • The Withholding Calculator will help determine if they should complete a new Form W-4.
  • The calculator will help users determine the information to put on a new Form W-4.
  • Taxpayers who use the calculator to check their withholding will save time because they don’t need to complete the Form W-4 worksheets. The calculator does the worksheet calculations.
  • Taxpayers who complete new Form W-4s should submit it to their employers as soon as possible. With withholding occurring throughout the year, it’s better to take this step sooner, rather than later.
As a general rule, the fewer withholding allowances a taxpayer enters on Form W-4, the higher their tax withholding. Entering “0” or “1” on line 5 of the W-4 instructs an employer to withhold more tax. Entering a larger number means less tax withholding, resulting in a smaller tax refund or potentially a tax bill or penalty.
Employees who have too little withheld are not paying enough taxes throughout the year, and they may face an unexpected tax bill or penalty when they file next year. People who have too much tax withheld will get less money in their regular paycheck. If those taxpayers change their withholding and enter more allowances on Form W-4, they’ll get more money in their paychecks throughout the year.
Having a completed 2017 tax return and their most recent pay stub can help taxpayers work with the Withholding Calculator to determine their proper withholding for 2018 and avoid issues when they file next year.

Taxpayers may also need to determine if they should make adjustments to their state or local withholding. They can contact their state's department of revenue to learn more.