Hot Topics
Choosing a Tax Professional
by Sheila M. Flint, CPA, LLC on 09/14/11
When it comes to income taxes, you can never be too careful. Choosing a qualified tax professional is essential to the accuracy of your income tax returns. If an inept indvidual prepares your tax retrurns, the repercussions could damage you financially for years to come. You are legally responsible for the information reported on the returns, and the IRS won't let you off the hook because they were prepared by someone else. Don't be afraid to ask about a preparer's credentials. Only certified public accountants, enrolled agents, and attorneys are authorized to represent taxpayers in all matters, including audits, collections, and appeals, and are bound by ethical standards.
However, the IRS is taking measures to help protect individuals from incompetent or fraudulent tax professionals. Effective January 1, 2011, all paid tax preparers who sign federal tax returns are required to register with the government and obtain a Preparer Tax Identification Number (PTIN). Keep in mind that all paid tax professionals MUST sign your returns. If your paid preparer does not sign the returns, they are not reputable and you should look for one who is.
What you should watch out for:
- Preparers who claim they can get you a larger refund than other preparers. A preparer can't estimate your refund without first reviewing your financial information.
- Preparers who base their fee on a percentage of your refund. These individuals have a greater incentive to create imaginary dependents, claim bogus deductions, and take other steps to fraudulently inflate your refund.
- Preparers who are unavailable after April 15. The IRS may have questions about your return months, or even years, after it was filed.
- Preparers who refuse to sign your returns. This is a huge red flag because it suggests that the preparer doesn't want to be held accountable for the information in your return. Reputable preparers should sign your return and give you a copy.
If you are seeking a tax professional, give our office a call. We would be happy to discuss your financial information and prepare your income tax returns.
Protecting Your Identity
by Sheila M. Flint, CPA, LLC on 09/16/10
Phishing, Spoofing, Vishing---What does all of this mean? Unfortunately, to criminals, these are all ways in which to steal or take over your identity. Approximately 500,000 individuals are victims each year of identity theft. Being an informed consumer is very important in defending yourself from becoming a victim. Let's look at a few of the techniques in which your information can become compromised.
Identity Theft: Occurs when someone pretends to be you when committing a crime. The crime could be in person, over the telephone or Internet, or through the mail. Once your personal information has been obtained, crooks can apply for credit in your name, run up huge bills, stiff creditors, and generally wreck your finances and credit record.
Bank Fraud: Check fraud is one of the largest challenges facing financial institutions. A significant amount of check fraud is due to counterfeiting through desktop publishing and copying to create or duplicate an actual financial document, as well as chemical alteration, which consists of removing some or all of the information and manipulating it to the benefit of the criminal. In most cases, these crimes begin with the theft of a financial document. It can be perpetrated as easily as someone stealing a blank check, searching through your garbage, or removing a check you have mailed to pay a bill from the mailbox. It has been estimated that the annual losses due to check fraud are in the billions, and continues to grow as criminals seek ways to earn a living by defrauding others.
Phishing: The criminally fraudulent process of attempting to acquire sensitive information such as usernames, passwords, and credit card details by masquerading as a trustworthy entity in an electronic communication. Phishing is typically carried out by e-mail or instant messaging, and it often directs users to enter details at a fake website whose look and fees are almost identical to the legitimate one.
Spoofing: E-mail spoofing is the forgery of an e-mail header so that the message appears to have originated from someone or somewhere other than the actual source. It is possible to send a message that appears to be from anyone, anywhere, saying whatever the sender wants it to say. Malicious spoofed e-mails can cause serious problems and security risks. For example, spoofed e-mail may purport to be from someone in a position of authority, asking for sensitive information--any of which can be used for a variety of criminal purposes.
Vishing: An electronic fraud tactic in which individuals are tricked into revealing critical financial or personal information. Vishing employs text messages, phone recordings, and email to persuade customers to dial a telephone number or respond to a telephone call. The potential victim receives a message indicating that suspicious activity has taken place in a credit card, bank, mortgage, or other financial account in their name. The victim is told to call a specific phone number and provide information to 'verify identity' or to 'insure that fraud does not occur'. Rather than calling a number given in an unsolicited message, a consumer should directly call the institution named, using a number that is known to be valid, to verify all recent activity and to ensure that the account information has not been tampered with.
Now you that you are familiar with some of the tactics used by criminals, what are some ways you can protect your identity? Here are a few tips to keep in mind:
1. Store your checks/canceled checks, deposit slips, bank or credit card statements, and any other documents containing personal and/or financial information in a secure location.
2. Reconcile you bank statements and verify charges on credit card statements within 30 days of receipt to detect any irregularities. Monitor your bank and credit card accounts frequently for unusual activity. Utilize banking features that alert you to suspicious activity.
3. NEVER give your account number to people you do not know, especially over the phone. Also, never reveal personal information on Web forums such as Facebook, MySpace, Twitter, or blog sites.
4. Unless needed for income tax purposes, destroy old canceled checks, account statements, deposit slips, ATM receipts, etc.
5. When you order checks, make sure all of the checks are there. Report any missing checks at once. Limit the information on your check--do not include your Social Security, driver's license, date of birth, or telephone numbers.
6. Promptly remove mail from your mailbox. Do not mail your bills from your mailbox at night. Always place outgoing mail in post office collection boxes. If you have to use your personal mail box for sending mail, refrain from raising the flag. This is a signal to crooks that personal information could be hiding there. Better yet, go paperless and pay bills online.
7. Report lost or stolen cards immediately.
8. Memorize your PINS and change them regularly. Create strong passwords of eight or more alpha and numeric characters for online financial accounts. Avoid using the same passwords for multiple accounts, and passwords created using personal information such as birthdays, anniversaries, children and/or pet names, etc.
9. Shop websites displaying a locked padlock icon or green address bar indicating a secure site.
10. Make sure that you computer has security software that is up-to-date to protect yourself from computer viruses and malware that can log your keystrokes and steal your data. Consider setting your Internet browser to delete browsing history and cookies upon logging off.
11. Don't make checks payable to 'cash', and never endorse a check until you are ready to cash or deposit it. Use your own pre-printed deposit slips and make sure the account number is correct. The type of pen you use can make a big difference. Most ballpoint and marker inks are dye based, meaning that the pigments are dissolved in ink. However, studies show that the ink in gel pens contains tiny particles of color that become trapped in the paper, making alteration of the check more difficult.
12. Monitor your credit report. You are entitled to a free copy of your credit report annually from each of the three national credit reporting agencies. Visit www.annualcreditreport.com for details. In addition, there are monthly credit reporting services that are available from companies such as www.TrueCredit.com for a monthly fee.
13. Take advantage of all fraud prevention services available from you banking institution. Utilizing services such as direct deposit and on-line bill paying reduces your chances of bank fraud.
14. Remember--most banks and financial institutions do not request personal account information via e-mail, telephone, text message, etc. Do not respond to any unsolicited phone calls, e-mails, pop-ups, or links that ask for personal information of any kind.
15. Do not use titles such as home, mom/dad, work, etc. to identify phone numbers in your cell phone. Also, do not identify directions to 'home' in your GPS devices. In the event that your cell phone or vehicle is lost or stolen, criminals have full access to your home address and list of contacts. They are also able to pose as an emergency professional calling your relative to inform them that you have been involved in an accident, thus gaining their trust. At which point, they ask for identifying information and your unsuspecting family member believes they are legitimate.
Congratulations on your new job!
by Sheila M. Flint, CPA, LLC on 07/23/10
Now it's time to fill out all those emloyment forms. But how do you know if you are having to much -or worse, too little- withheld? If you are single with no dependents, the forms are pretty straightforward. For everyone else though, they are a little more complicated.
Let's start with some simple questions:
Why two Forms W-4? There are separate forms (1 each) for your federal and state income withholding taxes. Depending on your particular situation, you may need to claim different numbers of exemptions, or have different additional amounts of tax withheld.
What is a Form I-9? Employers are required to have an I-9 on file for each employee. It is a form used to verify that you have a legal right to work in the United States.
Who is a dependent? A dependent is someone for whom you provide over half of all financial support, and who meets the tests for a qualifying child or relative. A spouse is not considered a dependent even if he or she does not work.
Who is Head of Household? Head of Household is an unmarried man or woman who has dependents and provides over half of the costs of keeping a home. Married people are not considered Head of Household even if they are the only wage earner.
Who is Exempt? Basically, if you had no tax liability last year, and you expect to have no tax liability this year, you can claim exempt. Tax liability is the amount of tax you owe on your wages. The exempt status does not apply if you answer "yes" to both of the following questions.
a.) Does your income exceed $950 and inclued $300 or more in unearned income such as interest or dividends?
b.) Can you be claimed as someone else's dependent?
When you file your annual income tax return, any refund is the amount of tax payments (or withholding) that is left over after you pay your tax. Having a refund does not mean you did not have a tax liability.
What do they mean by "Additional amount"? You can elect to have any dollar amount such as $5 extra tax held out of your check each pay period. It is another way to adjust your witholdings. For example, you may want additional withholding if you are claiming no exemptions and still have a balance due on your tax return at the end of the year.
It becomes a little more complicated when both you and your spouse work, or if one or both of you have more than one part-time job. We have a few simple guidelines that can help you decide how to complete your Forms W-4.
Married, spouse works: The spouse that earns the most money should claim -0- exemptions. The spouse that earns the least money should claim the number of exemptions that will be claimed on your tax return (one for each person in the family).
Multiple jobs: Do not claim exemptions on multiple W-4s.
When in doubt, remember that the amount of tax you pay is based on the amount of money you earn. This means it will be the same amount no matter how many exemptions you claim on your check. For example, let's say the income tax on your income for one year is $1,000. If you have $20 of income tax withholding on each weekly paycheck for the whole year, you will have paid in $1,040. In that case you get a refund of $40. But if you claimed more exemptions than you were supposed to, and only $12 of income tax was withheld each week, you would have paid $624. The remaining $376 would be due with your tax return.
We recommend checking your pay stubs regularly to make sure that at least 10% federal income tax is being withhled. For multiple jobs, add you gross pay from each job and multiply by 10%. If your federal income tax withholding is less than that, you might want to consider reducing your exemptions or having extra taxes withheld.
Also, if you get married, have a baby, or get a second job during the year, we recommend that you complete new Form W-4s to give to your employer.
If this all seems too confusing, take your W-4s to your tax professional. They can evaluate your particular situation and help you make the right choices.
