Tax Form Secrets Revealed


Tax forms have started rolling in and your mailbox looks like a can of alphabet soup exploded in it! What do you need and where do you start?

This is a tough time of year for people who don’t like paper. Starting at the end of January and continuing through March, taxpayers start drowning in paper. Sorting out what’s important and finding a place to store it is a big challenge, and it becomes harder if you don’t know what’s what. 

Fortunately, it’s easier to tell these forms apart than you might think. There are only a few types of forms you’ll need to deal with, and most of them don’t even need paper. Here are the four most common tax forms you’ll see and what to do with them! 

1.) W-2 
This is the most common informational form you’ll receive. It’s a statement from your employer that contains your yearly wages, how much tax you’ve had withheld and how much you’ve paid (pre-tax) for things like health care premiums. If you have one job, this may be the only major tax form you get. 

It’s also one of the most important forms. You’ll want to keep it with other tax documents until it’s time to file your taxes. This information – your yearly earnings and the amount of tax you’ve had withheld – are the most important factors for determining what your tax bill will be (or how big a refund you’ll get). 

2.) 1099 
This is a series of forms identifying income from sources other than a contract job. Most common is the 1099-INT, which lists interest income. You may get one of these from any financial institution where you have an account.
If you freelance or work as a contractor, you’ll probably receive a 1099-MISC. If you received unemployment or another source of government income, you’ll get a 1099-G. If you had debt canceled this year, you’ll get a 1099-C. There are a few other kinds of 1099 forms, but they all do basically the same thing.
You’ll need to hold on to these forms, too. They document income that you haven’t yet paid any taxes on. You’ll need the amounts on these forms when you get ready to file.
3.) 1095 
These are relatively new forms that deal with health insurance. Form 1095-A is a statement about insurance purchased through a marketplace exchange. 1095-B is for private health insurance. 1095-C is for employer-sponsored health care coverage.
These forms are important if you get a health insurance subsidy through the Affordable Care Act. If not, you can go ahead and put this form into long-term storage. You’ll be asked when you file if you had health insurance all 12 months of the year. The IRS receives a copy of this form to check your work, so you’ll only need it if issues come up regarding your coverage.
4.) 1098
Two forms, the 1098 and the 1098-T, report tax deductible expenses. The 1098 form lists mortgage interest and points on your primary residence, while the 1098-T itemizes tuition and other expenses paid to an institution of higher learning. The 1098-T is used in a variety of places, including claiming the Lifetime Learning Credit and the Hope Credit.
Unfortunately, in order to take advantage of deductions relating to mortgage expenses, you’ll need to itemize your deductions. Claiming the deductions listed on the 1098 requires you to forgo the standard deduction, which for most people turns out to be a bad idea. Unless you have a host of other deductions, or you bought or refinanced your home this year, claiming the standard deduction and filing the 1098 away for later will serve you best.
The bad news is you can’t file your taxes and be rid of the whole mess until you get all of your forms together. You’ll need to keep any W-2 forms, 1099 forms and your 1098-T form together until all of them arrive. Get a manila folder or a document envelope to keep them all in the same place. Keep that folder somewhere safe, and as soon as possible, file your taxes so you can put it into storage. Keep your returns for at least 3 years after you file. A paper copy of last year’s tax return in your filing cabinet can make a world of difference!
If you do your taxes yourself, you may want to look at an online resource like TurboTaxDestinations Credit Union members can get a discount of filing this way.
Your Turn: How do you keep up with the paperwork requirements of your tax return? Have a magical filing system? Share your best organizational strategies with us in the comments!


IRS Scams 2016


Every year, the Detroit Auto Show brings in visitors from around the world to see the newest models from major car manufacturers. The Consumer Electronics Expo gives us a chance to see all the new gadgets that will be on our wish lists come holiday time. Penny Arcade Expo unveils the year’s new video games that our teenagers will be using to ignore their homework. For those of us who spend our days protecting other people’s money, January is the time of year we get to see the newest makes and models of IRS scams. 

That’s right, they’re back. Scammers are using tax time to take advantage of the unwary, and much like the newest Ford at the auto show or yet another iteration of the Madden video game, all of the hype is kind of disappointing, because this year’s models look so much like last year’s. What happened to innovation? 

So let’s take a look at the “new and improved’ 2016 lineup of IRS scams. Of course, it’s important to remember that innovation can happen at any time, so just because something isn’t listed below, it does not mean it’s not a scam. If you have any suspicion you’re dealing with a scam, hang up, call the IRS or send an email to the Federal Trade Commission (FTC). Caution is your best approach. 

The telephone scams 

Up first is one of the oldest scams in the IRS scam lineup. You get a phone call from someone claiming to be from the IRS and claiming you owe money. They insist that if you don’t pay right now, you’ll go to jail. You might recognize this one as a variation on a grandparent scam or Nigerian Prince scam, but if not, the process is simple: You don’t owe the money and the scammers are trying to get you to give them money they don’t deserve. 

If someone calls you claiming to be from the IRS, even if your caller ID says “IRS” or the like, hang up and call the IRS. If it’s legitimate, then you will be able to find out from the IRS. If not, you’ll find out right away. Remember, you have a right to an attorney, you can have your accountant present if you’re being audited, and you have the right to due process no matter the charge. Don’t ever assume you have to pay anyone right away just because they called you and demanded payment. 

The email scam 

One newer variation of the telephone scam is an email version carrying the same threat, but asking for much less money. This is a traditional phishing scam in which scammers ask for a modest sum that’s payable online. Their hope is that you’ll see a small amount, compare it to the terrible consequences they’re threatening, and pay to make it go away. After all, who wouldn’t spend $50 or $100 to make the IRS go away? Unfortunately, though, you won’t be entering your financial info on a secure site that’s provided by the IRS. You’ll be entering your info on a dummy site that’s set up by scammers to grab your credit card or checking account information. They’ll in turn use that info to rack up all sorts of fraudulent charges. 

As a rule of thumb, never, ever, follow the link in an email to a site where you may be asked to enter financial information.  If you have an email from the IRS, see if you can find your account by going directly to the IRS website.  The same is true for eBay, Amazon, and other retailers that scammers love to impersonate. Yes, it’s easier to follow a link than it is to find the right page on your own, but scammers are counting on that.  A few clicks could save you thousands of dollars. 

The tax preparer scam 

The final variation of this scam is the tax preparer phishing email scam. In this one, the goal is the same as the variation described above. Instead of impersonating the IRS, they’re impersonating a tax preparer. They’ll likely have some authentic-looking credentials, which are fake, and assure you everything’s alright, but you need to update your info on the IRS’ e-file page. The problem is, the link in the email doesn’t take you to the IRS’ page. It takes you to … you guessed it! A dummy page that looks like an IRS page but actually captures the financial information you enter. 

Don’t be a victim. Always follow through with an extra phone call or email. Don’t follow links that are provided in emails and don’t assume that a webpage that looks OK must be OK. It’s tax time, the time of year where we get a national math test, and math tests are stressful for everyone. Scammers know that and they prey on it. 

If you suspect you’ve been the victim of identity theft, let us know. The sooner we know, the more protection we can offer. Also, file a complaint with the FTC and alert one of the major credit bureaus.

Sources:

https://www.irs.gov/uac/Tax-Scams-Consumer-Alerts

Property Taxes

Around this time of year, it seems like we get taxed coming and going. We get a bill for our income, then another for our house! There’s no end! In reality, these taxes are being levied by different levels of government and property taxes play an important part in funding schools, public transportation and other important civic goods.

That said, there’s no reason not to try minimizing your liability. If you can pay less, you should. The amount of your property taxes is determined by the value of your home, as determined by an assessor. The assessor looks at nearby houses, as well as improvements and features of your home, to determine what your property is worth.

Since assessments are scheduled affairs, you’ll have a chance to prepare yourself before your house is assessed. If you want to cut your property tax bill, try these four tricks: 

1.) Follow the assessor 

You don’t have to allow an assessor access to your home, but it’s always a good idea. If they don’t see the inside of the home, assessors usually make the least charitable assumptions. They’ll assume you have the newest possible appliances and fixtures in your home. You should let them in and follow them around your house.

While you’re doing so, be sure they take note of any flaws, damage or needed repairs. These can reduce the assessed value of your house. If you’re not there pointing those out, they may never see them. They’ll focus on the wonderful parts of your house and make the assessment based on that.

Additionally, following around the assessor and talking to him may encourage him to hurry the inspection. The assessor may miss new fixtures or overlook value-adding features of your house. By following them, you subconsciously rush them. This can also set you up well for an appeal (but more on that later). 

2.) Check for breaks 

Many localities have complicated property tax laws. They may allow for a standard deduction from your property tax bill. This is a portion of the value of your home that you’re not responsible for in terms of taxes.

Other localities may offer specific tax benefits to seniors, veterans, and people with disabilities. Breaks may also be available for renewable energy projects, energy efficient appliances and features, and other green improvements. Because these breaks vary by region, they’re usually not well-publicized. You may have to do some research to find out more. 

3.) Limit your curb appeal 

If you’re not selling your house soon, you may want to hold off on landscaping until after the assessment. Assessors are just as influenced by first impressions and aesthetics as everyone else. A beautiful front yard sets the tone for an expensive house. That’s exactly what you want for a potential buyer, but the opposite of what you want to show an assessor.

You shouldn’t try to wreck your yard or do anything to compromise the value of your property. Such tactics will likely draw the attention of nosy neighbors and others who might consider your tasteless display a violation of zoning laws. Instead, just try holding off on major exterior improvements.

Minor tricks, like opening windows on one half of the facade to mess with the symmetry, can be effective in marring the assessor’s impression of the house. You might also hold off on resealing driveways and cleaning vinyl siding until after the assessment. These little tricks can nudge your property value down a bit. 

4.) Appeal your assessment 

If you’re really unhappy with your tax bill, you can appeal the decision of the assessor. To do this, you’ll need to research quite a bit. Finding your property card at the county courthouse is the first step.

Your property card lists details about your home, like square footage, number of bathrooms and so on. Identifying errors on this card can be an easy way to set up your appeal. You can also find out how quickly your property is appreciating in value, according to the assessor’s opinions. This will allow you to compare how quickly your property is increasing in value compared to others in your area.

You’ll also want to research comparable sales in your area. Find houses of similar size that have sold in the last year, and find the home value assessed to your neighbors. Property cards are public records, and in many areas are available online. This information can help you make the claim that the assessor has unfairly valued your home.

To start your appeal, you’ll likely need to visit the county courthouse and speak with a records clerk. They can direct you to the necessary forms. Be sure you’ve made copies of all supporting evidence and prepare your argument in advance. The first step will likely be an informal appeal, where you speak with a representative from the assessor’s office. If that fails, there are several other appeal levels available.

Property taxes can be a pain, but they’re one of the costs of home ownership. Know that you’re protecting the value of your home by investing in good schools and safe streets. Best of luck with the tax man!


SOURCES:

Don’t Panic: A Last-Minute Guide To Tax Preparation

It’s the second week in April. Spring is in the air. The flowers are blooming. We’re just past opening day for the Orioles (Go O’s!). As you begin to enjoy the pleasantness of this time of year, do you have that lingering feeling that you’ve forgotten something?

April 15 is Tax Day. That’s the day all returns must be postmarked or e-filed to the IRS. If you haven’t started yet, you may be feeling a bit of panic as the deadline races up to meet you.

In the immortal words of Douglas Adams, “Don’t panic!” There’s still plenty you can do, and so long as it’s in the mail or in the Internet tubes by midnight on April 15, you’ll be fine. Take a deep breath, grab a cup of coffee, and make a plan. Also consider these three handy tips: 

1.) You can file for an extension

If you do nothing else to prepare for tax day and there’s no hope for getting your return done on time, do this. The IRS will, in most cases, approve an automatic 6-month extension for individuals. Form 4868 asks you to estimate your tax obligation, your total payments and the balance due. If you’re due a refund, there’s no problem. You’ll get your refund as soon as you file your return and you’ll have until Oct. 15 to do so. If you owe additional taxes, Form 4868 also includes a way to send estimated payments.

If you’re filing on behalf of a corporation or partnership, you can still qualify for an automatic extension of five or six months, depending upon the entity type. The form to fill out there is 7004. It’s a bit longer, but requires the same basic information and also includes the option to pay your estimated tax immediately.

There’s a penalty involved in late payment. You’ll be charged 5% each month or part of a month your return is late, to a maximum of 25%. These charges will be at least $135 or the balance of your taxes due, whichever is smaller. The IRS may excuse these penalties if there’s a good reason you didn’t file on time. Attach a statement to your return explaining why you didn’t pay on time (not your request for extension) and the IRS may forgive the penalty amount. These exemptions are typically granted for people who were out of the country or deployed to a combat zone for a significant part of 2015.

You’ll be responsible for interest on the amount due, plus penalties. The IRS charges 0.5% per month or part of a month your account is past due. They’ll charge that on the whole unpaid amount. So, if you were to pay your tax bill in full on April 16, you’ll be charged a full month’s interest.

As expensive as filing for an extension can be, it’s better than the alternative. If you don’t file, the IRS will eventually file for you. They don’t have any incentive to get you any deductions or credits. If you end up owing more than $25,000 in interest and penalties, the IRS will be knocking on your door!

2.) Filing isn’t actually that hard

For most people, filing your taxes takes less than half an hour. If you worked only one job, have one bank account, and don’t have a lot of deductions, you won’t have to fill out more than a few forms. The 1040-EZ is pretty accurately named. It is, in fact, easy.

You really only need your W-2 and you can file from your computer desk. Make a game of it. Set a clock- see if you can beat a 20-minute time goal!

3.) Don’t forget the little deductions!

If you’re really scraping to cut your tax bill, there are a few easy deductions you might miss. For example, if you subscribe to a financial newsletter, that’s a deductible expense. If you consulted with an attorney or another paid professional to prepare a will or trust for your assets, that’s also deductible.

Your medical expenses can be somewhat flexible, too. For instance, if you installed a hot tub on the advice of a physical therapist, that can be deductible. Laser eye surgery can also be a deductible expense if it promotes the proper functioning of the body.

There’s a thin line to walk with aggression. It’s very unlikely you’ll get any grief from the IRS provided you can prove most of what you’re claiming. At the same time, saving a few bucks on your taxes isn’t worth a massive headache.

If you’re getting a refund, make sure to directly deposit it to your Destinations Credit Union account!


SOURCES

New Discoveries In TurboTax Fraud: Keep Informed And Stay Safe!


With the April 15th deadline now visible on the calendar, many Americans are finally sitting down to do their taxes. The good news? A standard return isn’t that hard and there’s still plenty of time to get it done. The bad news? One of the most popular online tax filing services is still compromised.

New reports in the Washington Post describe a new breed of tax fraud using the online platform. Previous attacks would focus on filing fraudulent returns using stolen personal information. Such returns were usually riddled with errors designed to inflate the amount of a potential refund, which would be routed to an account far away.

New attacks seem to have taken a different direction. Criminals use stolen email and password information to amend recently filed returns. The only change they make is the account number into which any refund will be deposited.

While only a few people have been victims of this kind of fraud, investigators are still working with TurboTax to identify the source of the leak. In the meantime, additional security measures have been added to online accounts. New logins will be required to answer credit report style identity verification questions, like former addresses, roommates and employers. So-called “knowledge-based authentication” (KBA) procedures are of suspect value.

Fraudsters with access to personal information can find it remarkably easy to get more. Real estate transaction databases can quickly eliminate possible choices about former addresses. The multiple choice nature of the questions makes it possible to mechanically “crack” the authentication procedure in relatively short order.

To make matters worse, fraudsters are getting better at covering their tracks. According to security blog KrebsOnSecurity, more and more scammers are registering accounts using stolen identity information on IRS.gov. Because IRS.gov accounts aren’t necessary for e-filing, many people never have cause to create one. One thing they are useful for, though, is getting copies of past tax returns. This is a vital step in protesting a fraudulent return.

Scammers have identified this weak point in fraud prevention and begun registering accounts using stolen personal information. This presents one more hurdle in the face of fraud reporting. It also gives scammers more time to take the money and run. Without an IRS.gov account, the IRS is bound by policy not to disclose any information on a tax return to anyone not designated on the return as an approved party. This does mean they’re protecting the privacy of criminals, but there’s little they can do about the policy at this point.

The core of the problem, according to Krebs, is that the IRS uses those same KBA procedures. Sophisticated scammers are increasingly adept at bypassing these procedures. That means one less barrier between them and your money.

If you think you’ve been the victim of tax-related fraud, there are still steps you can take. Read on for three ways you can fight back against tax fraud and get your money back!

1.) Create an IRS.gov account and use a strong password

The current KBA authentication protocol can be broken into relatively easily. If you register your account now, you can create a much stronger password to protect yourself. At time of press, the IRS is not allowing new accounts to be created, but new procedures for account verification are forthcoming.

Once you’ve created your account, use a strong password that includes numbers, letters and symbols. Make it unique to your IRS account to reduce the possibility that your password will be compromised. Once you create your login information, write it down and put it with this year’s tax documents (preferably locked in a safe location). You’ll need it again next year!

2.) Request a copy of this year’s tax return

If you think your information has been used to file a fraudulent tax return, you’ll need a copy of the return to file a dispute. If you can’t get it with an IRS.gov account, you’ll need to get a hard copy. The IRS has a form for this and they’ll charge a small fee for processing.

The from you’re looking for is Form 4506. This will get you a printed photocopy of the return, including all information about refund destination. This may help you track down the stolen money, and it will definitely help you in proving to the IRS that this wasn’t your work.

3.) Beware of ‘Money Mule’ scams

Increasingly, international fraudsters are having difficulty getting the money out of the country. That’s why they turn to Americans who are desperate for a buck. They’ll advertise on sites like Craigslist for “financial processing assistants.” They use your checking account to receive the funds, then you’ll wire or send a portion of the proceeds to another bank. It’s one way of eliminating the paper trail of tax fraud. That’s been the laundering scheme of choice for many tax fraud perpetrators this season.

It’s clearly illegal and very dangerous, but it also makes it possible for scammers to steal money in the first place. Beware of any job solicitation that offers to pay you for your ability to have a checking account. If they were a legitimate business, they could get one all their own and wouldn’t have to pay you for the privilege!

SOURCES:

https://krebsonsecurity.com/2015/03/sign-up-at-irs-gov-before-crooks-do-it-for-you/

Prior Year Tax Returns


Brought to you by Destinations Credit Union
If you didn’t file your taxes for the last couple of years because you didn’t think you made enough to pay taxes, what should you do?  You might be missing out on some refunds that you should have had!

“Paying” your taxes can be a misnomer for many folks. This year, 8 out of 10 people who filed taxes got a refund. The average refund was nearly $3,000, according to the IRS.

Many people think of tax refunds as bonuses, but it’s really an interest-free loan you gave the government. Filing your taxes is how you collect on that loan. If you don’t file, the IRS is only too happy to keep that money.

As a matter of fact, the window is closing on returns from prior years — with a big chunk of money still left unclaimed. About 1 million taxpayers didn’t file 2011 returns and are owed refunds. They have until April 15 to file for 2011 or they lose out on that money for good.

There’s quite a bit of money still unclaimed. About $1 billion in total tax refunds are still owed by the IRS. More than half of the refunds are for more than $698, with most of that money earmarked for seasonal or part-time workers. The reason for this is simple. If you only work for part of the year, your employer still “withholds,” or pre-pays income taxes, as though you were going to work all year.

Other people who are eligible for refunds include students and families. You may be entitled to a refund from so-called refundable credits. Programs like the Earned Income Tax Credit offer you a tax credit you can get even if you don’t owe taxes. The Earned Income Tax Credit provides relief for people with low incomes. Other refundable credits include the Child Tax Credit, which offers refunds of up to $1,000 per child. You might also qualify for the American Opportunity Tax Credit, which offers refunds for tuition and other expenses related to higher education.

Whatever the source, you won’t know for sure until you file. If you owed money, the IRS would not be so laid back about collecting, so there’s not much chance you’ll end up having to pay more. You’ve got nothing to lose and quite a bit to gain.

Ready to start filing your back taxes? Here are three steps you need to take!

1.) Gather your documents

You’ll need all your tax documents from the year for which you’re planning to file. Remember, these refer to year you earned, not the year you were supposed to file. Your 2011 tax return was due in April of 2012, but covers what you earned between Jan. 1 and Dec. 31, 2011.

If you’ve lost these forms, employers are supposed to keep them on file. Few people ever ask for them, so your employer’s HR representative may not be used to finding them. The information may also be available online if your employer uses an electronic workforce management system. It might take a few days for your employer to find the appropriate forms, but since you’ve waited this long, there’s no harm in waiting a few more days.

If you can’t find your documents, don’t guess! Filling in tax forms with incorrect information might be considered tax fraud, especially if you guess low. The IRS might accuse you of fudging the numbers to get more money. Make sure you’re only entering accurate information.

2.) Use the appropriate software

Tax rules and rates change from year-to-year. Always check in the upper left-hand corner of the federal forms for the year of the return. You’ll want to make sure you’re using the forms for the year you’re filing.

Most tax filing software will let you file prior years at a discounted rate, but you’ll still have to pay for e-filing. In some cases, you can deduct this amount from the refund you’d receive, so you won’t have to pay anything upfront. If paying for tax forms is too frustrating, you can always find the forms in the IRS form library.

3.) Plan for the money

It’s tempting to think of a tax refund as free money and spend it on a creature comfort or a silly luxury. In fact, the most common decision people make about their tax refund is to purchase a big-screen TV. For many people, this is the biggest influx of cash you’ll get all year. Spending it foolishly is a big mistake.

If you don’t have a plan for the money, it’ll disappear into a thousand momentary indulgences. Make a plan once you see how much you’ll get back. Just make sure your plan achieves a goal that’s important and impactful to you financially.

A prior year tax return would make a great start to paying down your credit card or other high-interest debts. It would also make a great emergency fund that could keep you out of debt in a crisis situation. This money could also be the start of a retirement nest egg that will get you in the habit of saving.

SOURCES:

Q & A: Anthem’s Data Breach And What You Need To Know



Q: I keep hearing about Anthem being a hacking target. What happened and am I at risk?

A: Anthem Inc., the second-largest health insurer in America, was targeted in a major security breach over the last month. New reports suggest hackers have been trying to compromise the company’s systems for months and may have been inside their system since December. According to the company, 80 million Anthem customers may have had their names, Social Security numbers and addresses compromised.

This is a unique event in the recent history of cybersecurity. Previous hacks, like those affecting Home Depot or Target, were attacking hardware. Hackers were exploiting vulnerabilities in computer hardware and software to gain access to confidential data. Here, the company is reporting that hackers had a different target: company employees.

Anthem reports that, beginning in December, hackers acquired login credentials of five employees. The employees could have been victimized by malware or social engineering scams. The hackers trying to beat Anthem didn’t need to find a flaw in the computer infrastructure. Instead, they just had to find a weakness in the people operating those systems.

Once they had these credentials, hackers used their access to do two things. First, they breached the company databases. Once inside, they exposed addresses, dates of birth, employment history, employment information, income data, medical ID’s, names and Social Security numbers. Particularly noteworthy is the fact that payment information was not compromised. That means there’s no need to cancel credit cards that were used to pay Anthem bills yet. Second, hackers created a number of phony email accounts with Anthem domains.

There are two ways victims might be affected by this scam. First, they might have their personal information stolen. This group exclusively consists of current and former Anthem customers. Given the timing of the hack, this will likely result in a fraudulent tax returns and possibly other instances of identity theft.
The second wave of victims is only just now emerging. The fake email accounts have been used to send wave after wave of “phishing” attacks to Anthem customers. These attacks take the form of an email apology with an offer for a year of free credit monitoring. Recipients of the email are redirected to another website to enter their Social Security number and other personally identifying information. This information is then used to commit any of a smorgasboard of identity theft crimes.

Anthem is currently being sued in several states. One lawsuit alleges current and former Anthem subscribers were misled about the security of their personal information and is seeking unspecified damages from the provider in overpaid premiums. Another pending lawsuit is seeking damages resulting from the frauds themselves. Until these lawsuits are settled, Anthem will likely not make any public statement of responsibility or apology, as this could be viewed by the courts as an admission of guilt. At this time, Anthem is offering no free credit monitoring service nor has it made any statement to members outside the press.

If you’re an Anthem subscriber, there are a few steps you should take as soon as possible. To find out if you’re an Anthem subscriber, check your insurance card. If you’re part of a group plan at work, you may need to ask your HR representative if your plan is administered through Anthem. In the meantime, take these three steps.

1.) File your taxes.

This will be one way to check if your Social Security number has been compromised. The state of Connecticut is encouraging their citizens to file early if they’re Anthem customers so hackers using stolen Social Security numbers will be easier to detect.

2.) Put a fraud alert on your credit report.

Contact any one of the three major reporting bureaus (Experian, Equifax, or Transunion) and explain your worries. A fraud report on one account will create a fraud report on all three, so there’s no need to duplicate your efforts. This report will notify you if anyone attempts to open an account in your name during the next 90 days. If you’re absolutely sure your number has been compromised, it might be worth putting a freeze on your credit history. This will prevent anyone from checking your credit or from opening up any account in your name, including you. While drastic, this measure is a sure-fire way to keep yourself safe.

3.) Get proactive with government services.

Notify the Social Security Administration and the Internal Revenue Service of the possible fraud to ensure that no one attempts to file a change of address form in your name. The US Postal Service also maintains a similar service. These steps will ensure that you’ll at least get a paper trail if someone makes an attempt to steal your identity.

Anthem is maintaining a toll-free question line.  Customers with concerns or fears should call 877-263-7995.  They have also created a website – www.AthemFacts.com – with up-to-date information about he scope and severity of the breach.  They have made it clear that future contact with customers affected by the breach will be made by mail. 
 
SOURCES:

Affordable Care Act Tax Forms


The Affordable Care Act (ACA), also called Obamacare, made a lot of changes to the tax system. This last year, people saw the healthcare side of the bill, including the healthcare exchange marketplace, pricing rules and simplified plans. This year, the funding side of the act goes into effect.

This change in regulation might seem like it’s happening somewhere far away from daily life. Most of the time, that’s true. When it comes to tax time, though, the ACA will get up close and personal.

There are a variety of new tax forms people must use to comply with the regulations of the act. They might seem confusing, but they’re no worse than any other tax form. Let’s take a look at three steps you might need to take under the new rules.

1.) Check a box on your 1040

The “master sheet” of your return, where you list your gross income and deductions, is called the 1040. This year, there’s a new line that asks you to certify you have health insurance. If you do, check that box. If you have insurance through your employer, or you’ve purchased private insurance, that’s all you need to do. Keep a copy of a statement from the company just in case the IRS needs proof and move on to the rest of your taxes.

The IRS estimates that 75% of taxpayers will have to do no more than this. “For the vast majority of Americans, tax filing under the Affordable Care Act will be as simple as checking a box to show they had coverage all year,” said Treasury Secretary Jacob Lew in a press statement. Line 61, where the check box is located, will be the only noticeable change to your tax form.


2.) Deal with new forms

Like many new government regulations, the ACA created several new forms to fill out. The most common of these is the 1095a, which provides proof of your coverage and how much of a credit you were advanced to cover the costs of your premiums.

People interested in claiming that credit will not be able to file a 1040-EZ, the simplified 1040 form used by people in straightforward tax situations. To claim the credit, they will have to fill out their return on the standard 1040 form, which is slightly longer. They will also need to fill out form 8962. This is also the form to use for reconciling the amount of tax credit advanced versus the amount due.

If you got a new job, got a raise or had another significant life event, you may have to pay back part of the subsidy on your insurance. If you had a child, lost your job or had your hours cut, you might be eligible for an additional credit. That same form, 8692, will help you figure out what your life changes mean for your taxes.

3.) Pay a penalty (or request an exemption)

The reason for the check box on the 1040 is to ensure compliance with the so-called individual mandate that requires everyone have health insurance. If a person didn’t have health insurance in 2014, they can expect to pay a penalty this year. The penalty is calculated based upon how much their family earns above a certain level. Most tax experts predict the average penalty will be $301 this year and could go as high as $600 next year.  If you need to obtain insurance, Destinations Credit Union has partnered with TruStage to offer health insurance to our members.

There are a few available exceptions to the individual mandate. Individuals who make less than the income filing threshold, for example, are not required to purchase insurance. You may also claim an exemption if the cost of the premium would exceed 8% of your household income, or if the gap in your coverage was less than 3 consecutive months. These exceptions are all certified through form 8965.

If you can’t claim an exemption, it might be time to buckle down and get health insurance. The cost will continue to rise, and the longer you wait, the more you’ll pay. You’re also gambling that your health will hold. Insuring younger people without health problems is cheaper than insuring older people with health problems.

The IRS has devoted considerable resources to public outreach about the new changes. It is encouraging anyone who has questions about the new policy to visit its website, IRS.gov, and follow the link to the ACA help page. It’s also included video tutorials showing how the new forms work and providing walk-throughs of the trickier parts.

Tax time can be confusing! If you’re absolutely flummoxed by the new forms, it might be time to find an expert. You can also used a guided system like TurboTax Online to make it a lot easier.  Destinations Credit Union has partnered with TurboTax to provide a discount to our members!  Check it out for free.  Then make sure you directly deposit your refund check into your Destinations account!

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Refund Expectation Management: 3 Reasons Your Refund Might Not Be As Big As You’re Expecting


Everyone tells you not to plan on having a tax refund. If you’re living paycheck-to-paycheck, though, you know where every dollar is going. You might be counting on that money to give you the breathing space you need.

Even if you’re a little further ahead than that, you may still have made plans for your tax refund. You might be planning to pay off a credit card from the holidays or hoping to put a down payment on a car. You might just be hoping to take a little vacation over spring break!

Whatever your plans for the money, it’s a good idea to temper your expectations. Unfortunately, you can’t count on the same tax refund you got last year. Here’s why.

1.) Student loan garnishments

If you’re behind on your student loans, you might not see much of your refund. If you don’t have much of an income, it’s easy to get behind and it’s hard to catch up. One of the reasons lenders love these loans is that they’re very difficult to get rid of. If you’re in default or declare bankruptcy, those lenders are still trying to get their money.

Student loan companies know that, for people with minimal income, tax refunds are a source of a big chunk of money. Also, since it’s not a regular source of income, the rules regarding garnishment are more lenient. Ordinarily, creditors are only allowed to take 15% of your discretionary income if you have one loan, or 25% if you have multiple loans. For a tax refund, the Department of Education can instruct the IRS to apply the full amount of any tax refund you’re due to the balance of your loan.

Even if you’re paid off in full, it might be wise to check with your spouse. This process can also apply to your refund for his or her defaulted student loans. As far as the IRS is concerned, you’re one taxpayer with one set of obligations.

This process can apply to federal student loans, federally subsidized loans and some private loans. You’ll receive a notice of proposed offset from the IRS. You have 65 days from receipt of the notice to object to the offset. Deferments can be provided for up to 3 years for economic hardship and unemployment. They may be provided indefinitely for individuals seeking an advanced degree or for people with disabilities.

It’s also possible the “loan” may just be a paperwork error. If you’ve unenrolled from classes but haven’t yet received a repayment from the school, for instance, you might get your refund back with a short letter. The notice of referral will provide you instructions to request a review.

2.) You made more money

Usually, getting a raise is something to celebrate. If you got one this year, that’s good news for your career future. It’s less good news for your refund.

The refund is the difference between what you paid in taxes and what you ended up owing. Your taxes are withheld from your paychecks assuming they stay the same all year. If you got a raise in June, then you were effectively under-withholding for the first half of the year.

Beyond the difference in payment, you may find your raise puts you just above the threshold for credit programs. Credits like the Earned Income Tax Credit (EITC) have income eligibility requirements. If you made more money this year than you did last year, you may not qualify. The same is true for subsidized insurance premiums through the Affordable Care Act (Obamacare). If your income changed after you obtained coverage, you may have to hand back a part of that subsidy.

The EITC is fairly significant, particularly if you have kids. It may be worth your time to look for other deductions you can take to get your gross income under the threshold. Consider working with a professional tax preparer, too.

3.) You were the victim of identity theft

The past few years have seen an increase in tax returns filed fraudulently on behalf of victims of identity theft. A crook uses your Social Security number and fabricates financial information to get a hefty tax refund, then cashes the check. You’re not only out your tax refund, but also may be facing criminal charges for the phony info on “your” return.

With cuts to the IRS budget this year, its enforcement and investigation of these crimes has dropped. You should contact the IRS immediately if you receive notice that more than one tax return was filed using your Social Security number or if you are issued a W-2 (an income statement report from your employer) by an employer you don’t recognize. These are red flags that someone is fraudulently using your identity.

The FTC recommends you contact the IRS’s Specialized Protection Unit at 1-800-908-4490.  You should also prepare proof of your identity, like a copy of your drivers’ license, Social Security card, or passport. The IRS has a form, IRS ID Theft Affidavit Form 14039, that will start the investigative process. Recovering from this crime will take time, but you will get the refund you’re due.
If you plan to do your own taxes, TurboTax is an option that can guide you through the process more easily.  The good news is that Destinations Credit Union members can get a discount on TurboTax!

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How To Choose A Tax Preparer (And Why You Might Need To)

After the confetti has been swept up on New Year’s Day, another festival requiring reams and reams of paper begins. That’s right, it’s tax time. As you’re gathering your pay stubs and receipts in preparation for your annual headache, it might be worth considering whether you need professional help this year. A few things have changed.
          
First, the IRS is losing funding. If you were counting on getting help with the forms from the IRS, you might be in for record wait times. The IRS budget has fallen by 10% in the last five years, while costs have increased. Staff reductions of around 8% have mostly affected customer service and fraud protection, while training budgets have been cut down to almost nothing. Even if you do get through, the person you’re talking to will  be less likely to help you. One taxpayer watchdog group claims 47% of calls going to the IRS this year won’t get answered. Those who do will have to wait an average of 34 minutes to talk to a human.
          
The IRS maintains a “priority” line for tax professionals, which is the first reason you should consider hiring one. While the wait times there will be just as long, it won’t be you who has to do the waiting.
          
Second, this will be the first year the IRS has had to implement the tax credits and penalties of the Affordable Care Act. There will also be new rules for foreign taxpayers thanks to the Foreign Account Compliance Act. This will be the most complicated tax return many consumers have ever filed, according to Charles McCabe, president of Peoples Tax Income.
          
Third, the IRS will have less ability to enforce and investigate tax returns. This means you can be a little bolder in claiming a deduction or credit you might be entitled to, but it also means you need to streamline your return for easy processing. A tax professional will be able to help you accomplish both those goals.
          
The problem, though, is that tax returns have become an increasingly common target for fraud. Criminals file bogus returns on behalf of identity theft victims. Unscrupulous tax preparers may also file negligent returns designed to get big refunds deposited into their own accounts. This can leave you robbed of your return and facing serious IRS penalties.
          
When you choose a professional, you need to be sure you’re getting someone who will keep your best interests at heart. You need to do your homework and only entrust your financial information to a certified professional.

Here are three steps to help you find one.
           
1.) Do it by the numbers
              
For the first time, the IRS doesn’t have the authority to regulate tax preparers. In 2014, all professional preparers were required to obtain a PTIN (preparer tax identification number) which meant they were regulated. A recent federal court decision, though, ruled that the program overstepped the IRS’s authority.
          
The IRS Return Preparer’s Office came out with a compromise program. While preparers are no longer required to have PTINs, those who are serious about being transparent can complete a voluntary continuing education program to receive one. If you’re going to sit down with someone and reveal all your financial secrets, make sure they’ve gone through the program.

2.) Get references

In the same way you’d ask your friends to refer you to a hair stylist or a contractor, you should ask around to see who uses a tax preparer. Hiring help with tax returns is done by 60% of Americans; so the odds are good you know someone who does. If all of your friends file their own taxes, consider asking the owner of a local business you frequent. Small business tax preparation is incredibly complicated, but a good preparer can save a small business owner good money. They may be willing to refer you to their preparer.
          
You can work backward, too. Before you sit down with a preparer, ask him or her for the names of happy clients. If you don’t get any, think twice. Tax professionals work on the same reputation-based advertising that drives other service professionals. Someone who’s not willing to talk about success stories may not have any.
           
3.) Go big
           
If all else fails, you can know you won’t get ripped off going to a big corporate preparer. H&R Block and others like them have been around forever and they don’t stay in business by robbing customers. Their size and stability can provide some safety.
          
That size, though, can also create problems for them. Their training programs are not as rigorous as the education that independent preparers usually have been through. They also tend not to retain employees for very long, leading to a lot of inexperienced preparers. Be sure you ask critical questions about the moves they’re making.

4.) Self-Directed Tax Preparation

If you are fairly confident in your ability to produce the taxes on your own, you may find a self-directed program like TurboTax online to be of benefit. This online program asks easy to follow questions and guides you every step of the way.  You can even request the help of a professional to review it if you choose to do so.  Destinations Credit Union members can get a discount when using TurboTax online.

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