December 2018 Newsletter

Be aware when shopping online!

The IRS reminds holiday shoppers to protect their tax and financial data from identity thieves. All it takes is a few extra steps to prevent cybercriminals from stealing sensitive data, such as financial account information, Social Security numbers, and credit card information. Thieves could use this data to file a fraudulent tax return in 2019.

This tip is part of National Tax Security Awareness Week. The IRS is partnering with state tax agencies and its partners in the Security Summit to remind to taxpayers and tax professionals about the importance of protecting data.

Cybercriminals want to turn stolen data into quick cash. They do this by draining financial accounts, charging credit cards, creating new credit accounts or even using stolen identities to file a fraudulent tax return for a refund.

Here are seven steps taxpayers can follow to help protect their accounts and their money:

Avoid unprotected Wi-Fi. Unprotected public Wi-Fi hotspots may allow thieves to view transactions.

Shop at familiar online retailers. Generally, sites using the “s” designation in “https” at the start of the URL are secure. User can also look for the “lock” icon in the browser’s URL bar. That said, some thieves can get a security certificate, so the “s” may not always vouch for the site’s legitimacy. Beware of purchases at unfamiliar sites or clicks on links from pop-up ads.

Learn to recognize and avoid phishing emails. Thieves send these emails, posing as a trusted source, such a financial institution. or the IRS. The criminal’s goal is to entice users to open a link or attachment. The link may take users to a fake website that will steal usernames and passwords. An attachment may download malware that tracks keystrokes.

Keep a clean machine. This applies to computers, phones and tablets. Taxpayers should use security software to protect against malware that may steal data and viruses that may damage files.

Use passwords that are strong, long and unique. Experts suggest a minimum of 10 characters but longer is better. People should also avoid using a specific word in the password. They should also use a combination of letters, numbers and special characters.

Use multi-factor authentication when available. This means users may need a security code, usually sent as a text from a financial institution or email provider to a mobile phone. People use this code in addition to usernames and passwords.

Encrypt and password-protect sensitive data. If keeping financial records, tax returns or any personally identifiable information on computers, this data should be encrypted and protected by a strong password.

Warning – New Email Scam!

WASHINGTON — The Internal Revenue Service and Security Summit partners today warned the public of a surge of fraudulent emails impersonating the IRS and using tax transcripts as bait to entice users to open documents containing malware.

The scam is especially problematic for businesses whose employees might open the malware because this malware can spread throughout the network and potentially take months to successfully remove.

This well-known malware, known as Emotet, generally poses as specific banks and financial institutions in its effort to trick people into opening infected documents. The Summit partnership of the IRS, state tax agencies and the nation’s tax industry remind taxpayers to watch out for this scam.

However, in the past few weeks, the scam masqueraded as the IRS, pretending to be from “IRS Online.” The scam email carries an attachment labeled “Tax Account Transcript” or something similar, and the subject line uses some variation of the phrase “tax transcript.”
These clues can change with each version of the malware. Scores of these malicious Emotet emails were forwarded to phishing@irs.gov recently.

The IRS reminds taxpayers it does not send unsolicited emails to the public, nor would it email a sensitive document such as a tax transcript, which is a summary of a tax return. The IRS urges taxpayers not to open the email or the attachment. If using a personal computer, delete or forward the scam email to phishing@irs.gov. If you see these using an employer’s computer, notify the company’s technology professionals.

The United States Computer Emergency Readiness Team (US-CERT) issued a warning in July about earlier versions of the Emotet in Alert (TA18-201A) Emotet Malware.

US-CERT has labeled the Emotet Malware “among the most costly and destructive malware affecting state, local, tribal, and territorial (SLTT) governments, and the private and public sectors.”

IRS Releases 2019 Qualified Retirement Plan Amounts

The IRS has released cost-of-living adjustments to pension plans and other retirement-related items for 2019. Many of the limits applicable to pension and other retirement plans have increased. For instance, the (1) elective deferral limit for employees participating in 401(k), 403(b), and most 457 plans has increased from $18,500 to $19,000; (2) limit on annual contributions to an IRA, which last increased in 2013, has increased from $5,500 to $6,000; (3) benefit limit for defined benefit plans has increased from $220,000 to $225,000; and (4) defined contribution plan limit has increased from $55,000 to $56,000. In addition, the income ranges for determining eligibility to make deductible contributions to traditional IRAs, to contribute to Roth IRAs, and to claim the saver’s credit all increased for 2019. News Release IR 2018-211 and Notice 2018-83.

How to Use Retirement Accounts to Reduce Your 2018 Tax Bill!

Retirement savers can reduce their 2018 income tax bill by contributing to a 401(k) plan or individual retirement account.

Retirees can also decrease their income tax due if they are willing to donate part of their IRA required distribution to charity. Here’s how traditional retirement accounts can be used to control how much income tax you owe in 2018.

Boost your 401(k) savings rate. Most people have their 401(k) contributions withheld from their paycheck before they ever get a chance to spend that money. Many 401(k) plans allow you to log in and increase your 401(k) withholding, which will qualify you for a bigger tax break.
Traditional 401(k) contributions are typically due by the end of the calendar year, so the money should be in the account by December 31. You can defer paying income tax on the money you deposit in a traditional 401(k) plan until the money is withdrawn from the account. A worker in the 24 percent tax bracket who contributes $10,000 to a 401(k) plan will reduce his tax bill by $2,400. However, workers can contribute as much as $18,500 to a 401(k) plan in 2018. If that same worker boosted his contribution to max out his 401(k) plan he could save $4,440 at tax time. Workers age 50 and older are eligible to make catch up contributions to 401(k) plans of up to an additional $6,000. A 55-year-old employee in the 24 percent tax bracket who maxes out her 401(k) by contributing $24,500 will save $5,880 on taxes. Your exact tax savings will depend on your tax bracket. Those who are in higher tax brackets have the most to gain by maxing out their 401(k) plan. An older worker in the 37 percent tax bracket who contributes $24,500 to a 401(k) plan could reduce his income tax bill by $9,065. Married couples who are both eligible for a 401(k) plan at work can max out a 401(k) in each of their names for double the tax savings.

Contribute to an IRA. Workers can defer paying income tax on up to $5,500 that they save in a traditional IRA, or $6,500 at age 50 or older. A 40-year-old worker in the 24 percent tax bracket can reduce his tax bill by $1,320 by putting $5,500 in a traditional IRA. IRA contributions for tax-year 2018 aren’t due until your tax filing deadline in April 2019, so you can plug in an IRA contribution while calculating your taxes to see exactly how much you can save if you shift some cash into an IRA. Some workers are eligible to contribute to a 401(k) and an IRA in the same year, but high earners are prohibited from claiming tax deductions on contributions to both types of accounts. “Your IRA contribution may not be entirely deductible. 401(k) participants can’t claim a tax deduction for an IRA contribution if they earn more than $73,000 ($121,000 for couples), and the deduction is phased out for those earning more than $63,000 ($101,000 for couples) in 2018. If only one spouse is eligible for a 401(k) plan, the IRA tax deduction is phased out if the couple’s income is between $189,000 and $199,000.

Claim the saver’s credit. Workers with small salaries who manage to save for retirement may be able to claim a tax credit in addition to the tax deduction for saving in a traditional 401(k) or IRA. Retirement savers who earn less than $31,500 as an individual, $47,250 as a head of household or $63,000 as part of a married couple are eligible for the saver’s credit in 2018. The credit is worth between 10 and 50 percent of retirement account contributions up to $2,000 for individuals and $4,000 for couples, with the biggest credit going to savers with the lowest incomes. The saver’s credit can be worth as much as $1,000 for individuals and $2,000 for married couples, but most workers who claim the credit receive closer to $100 for individuals and $200 for couples.

Donate your IRA distribution to charity. Retirees are required to take distributions from traditional 401(k)s and IRAs each year after age 70 1/2 and pay income tax on each withdrawal. However, IRA owners age 70 1/2 and older can avoid taxes on distributions that they donate directly to a qualifying charity. You can transfer up to $100,000 to an eligible charity without paying income tax on the transaction, and the donation can also be used to satisfy your minimum distribution requirement. Couples who file a joint tax return can avoid paying income tax on up to $200,000 in IRA charitable donations. But you don’t need to make a large donation to qualify for the tax break. Even donating $100 directly from your IRA to a charity would save you $24 in taxes if you are in the 24 percent tax bracket. Qualified charitable contributions must be executed by December 31 to qualify for the tax break.

5 Tax Tips For Early Preparation

When it comes to working on your taxes, it’s always a good idea to get started early. In fact, the Internal Revenue Service recommends a solid head start – you’ll be ahead of the end of tax season rush and see your refund sooner.

Here are five simple and effective ways to get an early start on your taxes well before April 15 appears on your calendar:

Collect Records – Including forms like your W-2s and 1099s. Remember to make copies and save them in your records.

Correct Forms – All the tax forms you’ll need can be obtained anytime at IRS.gov in their Forms and Publications section.

Do Not Rush – Try not to rush while filling out your paperwork – mistakes can result in more time and avoidable expenses.

Verify – Verify that your calculations and other information like your Social Security number are correct. Caution while doing your taxes the first time through makes it less likely that you’ll hear back from the IRS.

Fast Refund – Get the fastest refund. By filing early, you’ll probably see that refund sooner. Filing electronically with direct deposit usually results in a refund faster than paper filing.

Start preparing for your 2018 tax return – now!

Tax Form Checklist

Before you prepare your tax return you should have a tax preparation checklist to help you get organized. Along with this, your tax preparation checklist should also get you in the right frame of mind. Once you are organized and ready to move forward, you will find that everything begins to fall into place.

What is the overall goal of a tax preparation checklist? Simply put, it will help you get everything together before you begin to file your tax return or show up for your appointment with a tax professional. As you move down the checklist, you will find items you may have missed as well as things that were accounted for in the past.

Listed below are some of the details that should be included on your tax preparation checklist.

Tax Preparation for Personal Information
The IRS needs to know who is filing the tax return, as well as how many people are covered on it. To make this easy, they require:

– Your Social Security number
– Your spouse’s Social Security number (if married)
– Social Security numbers for any dependents
– Tax Preparation for Income Information

The following documents will help you prepare all the income information that you need to file a federal tax return:

– W-2 Forms from all employers you (and your spouse, if filing a joint return) worked for during the past tax year.
– 1099 Forms if you (or your spouse) completed contract work and earned more than $600.
– Investment income information (including: interest income, dividend income, proceeds from the sale of bonds or stocks, and income from foreign investments).
– Income from local and state tax refunds from the prior year.
– Business income (accounting records for any business that you own)
– Unemployment income
– Rental property income
– Social Security benefits
– Miscellaneous income (including: jury duty, lottery and gambling winnings, Form 1099-MISC for prizes and awards, and Form 1099-MSA for distributions from medical savings accounts)
– Tax Preparation for Income Adjustments

The following adjustments can help reduce how much you owe in taxes, and in turn, increase your chance of receiving a tax refund:

– Homebuyer tax credit
– Green energy credits
– IRA contributions
– Mortgage interest
– Student loan interest
– Medical Savings Account (MSA) contributions
– Self-employed health insurance
– Moving expenses
– Tax Preparation for Credits and Deductions

There are many tax credits and tax deductions for various expenses, which are designed to help lower the amount of tax that an individual has to pay:

– Education costs
– Childcare costs
– Adoption costs
– Charitable contributions/donations
– Casualty and theft losses
– Qualified business expenses
– Medical expenses
– Job and moving expenses

Tax Preparation for Direct Deposit
Are you interested in having your tax refund directly deposited into your bank account? If so, you will need to provide two things:

– Your bank account number
– The bank’s routing number