The IRS and its Security Summit partners are spearheading an awareness campaign for tax professionals in an effort to protect client data in its ongoing fight against various security threats. Although our clients’ security is something that we consider a high priority, many of the tips put out for professionals work on the personal level, as well. The best security takes place at many levels, so I wanted to pass along some of these tips to you this week.
First, have anti-malware and anti-virus security on all electronic devices. This can hold off many attacks that could expose your information without you ever knowing. A critical addendum to this, though, can be setting your software to automatically update. I know it can be annoying when your phone or some software programs keep telling you to download the latest version, but many times those updates include fixes that enhance security.
After that, keep passwords on everything that can have one. This includes password protecting wireless devices. After all, even if you don’t think you have critical personal information saved on the device, have you ever visited your banking website on its browser? Or checked a credit card balance? You may have information saved on the device that you are unaware of, and could be used against you if it fell into the wrong hands.
Then, of course, there are the passwords you use to access all those websites mentioned above – or any website really. For are you using the same password to get into your bank as you are your Netflix account? Once a password is found somewhere, it is easier to track down usernames, and if you’re using the same password everywhere, you’re making it easier to get at your information.
Not only should your passwords be different everywhere, but you also want to use different kinds of passwords. Sure, your kid’s name and birthday is easier to remember, but using special characters, random capitalizations, numbers, etc., all make it more difficult to figure out just what that password is.
If you are saving any sensitive information on your computer or in any cloud-based service, you want it to be protected by more than just a password, too. Ensure that these places are encrypting information. If they’re not, I promise that with only minimal research you can find a similar service for the same price that will do so and give you that extra level of safety.
Finally, if you do keep some of that information on a hard drive, remember that before you get rid of the device. This is easier to think about if you know it is still going to be used by someone else, but can be overlooked if you’re just trashing a device. But if you are throwing it away, hey, destroying that hard drive can even be a little fun and help you take out some aggression (just think of every time technology has made you throw up your hands).
None of these tips will have you doing things the easiest way, but they are the safest way. And if you are ever in a situation where someone has information about you that you wish they didn’t, you will think that it would have been time well spent.
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Every once in a while, things build up on us. Hopefully this is not something you’re feeling in the middle of the summer, as ideally this is the time when you are pulling a little less onto your plate, and not just in an attempt to get that beach body. That hasn’t been the case for things that I thought I should mention in this space, though, so here are a few quick hits to get these off my plate.
The biggest one of these may be the Supreme Court’s recent ruling in South Dakota v. Wayfair that will let states and local jurisdictions impose sales tax on online sales. For many, online purchases have been most wonderful because of their ease and convenience, but sometimes they came with the bonus of not needing to pay sales tax, but those days seem to be over.
This is most important to note for those who run businesses online, where thinking about sales tax outside of where you are located had not been a concern. If you are in this position, I implore you to find a solution before it is too late, and there are online tools that will help with this. It will take some initial setup, but this is the type of thing that eventually becomes a seamless part of your business. This initial outlay of time and effort will be better than getting into a situation where you are called upon to make sales tax payments when you never collected the money.
On the payroll side of things, the Department of Labor seems set to propose new overtime rules in October. We can speak about this a little more when/if it actually happens, but I thought it was worth mentioning it here to put it into business owners’ heads. Once you appropriately set up payroll, after all, much of making sure you’re in compliance takes care of itself, but the rules do sometimes change and require attention.
Finally, the AICPA (an accounting professional group) sent a letter to the IRS requesting guidance on some FAQs concerning how cryptocurrencies are taxed. This does not mean that anything will necessarily not be taxed (rest assured, whenever there are things of value out there, the IRS is going to want to tax it), but just how it is taxed.
Without getting too deep into the weeds, this is mostly about how things are taxed, and possibly when they are taxed. And it could be that the IRS chooses not to react toward this and nothing changes. If it does, however, there could be some tweaks you may want to make to put yourself in the most advantageous tax position. So if you are involved this world, this is something to keep tabs on.
And of course these aren’t the only things to have come across the radar that never get to see a full blog treatment. So as always, if you have any issues that you would like to discuss, we are always happy to hear from you and give you some more personal direction.
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As part of the Republican’s tax overhaul that culminated in the passage late last year of the Tax Cuts and Jobs Act, there was often talk of wanting taxes to be simple enough that they could be filed on a postcard. Now that has come to pass … sort of … with the official unveiling of a new form 1040 on Friday.
First, I just want to say that for the most part I try to stay apolitical when discussing tax policy. Whether I agree with the rules or not is less important in my situation than making sure everyone follows the rules (and puts them to their best use). In this case, though, this postcard really is a rather empty gesture calculated for its use as a sound bite and photo op. This is just a different look for an old form, it does not reflect any new policy or change in how your tax obligation will be calculated.
Now let’s start from the fact that calling this a postcard can only be done by thinking of it as a rather big postcard. Sure, the form is smaller, but it is still bigger than what you find on spinner racks in tourist destinations, is double-sided, and could still require other forms to make it part of a complete tax return. Some of the things that would require other forms are rather frequently used, too, like student loan interest and education tax credits.
Beyond what this form actually contains, though, lies the bigger question of when is the last time you actually filled out a 1040? Many of us of a certain age, (cough, cough), can remember going line by line down a 1040 as the main action behind filling out a tax return, but with around 90% of filers having moved on to electronic filing, we are no longer really filling out tax returns in this line-by-line manner.
Right, remember electronic filing? The thing that meant you no longer needed to mail in a tax return.
And remember postcards? Those things that you have to actually put in a mailbox.
Also, I’m not sure that something is really a postcard if you have to put it in an envelope, either. And that is something you really would want to do with this new form, otherwise all your identifying information, including a social security number, is available to seen by all whose hands it passes through.
Did I mention that this is really a largely hollow gesture?
Taxes really are going to be very different when it comes time to file next year. And again, politics aside, the increased standard deduction is going to mean that many people have a simpler tax return. That was one of the main goals of the legislation passed, and that was certainly a way to back up those claims and goals. This new form, though, is just bluster with no real substance.
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It seems that all too often in this space I end up writing about tax scams and things that the IRS will not do. That space is warranted, as it has sadly become much more likely that you will hear from a tax scammer than from the IRS. I have come to realize, though, that I don’t spend a lot of time on what the IRS will do, and I thought that deserved to be highlighted.
The first step in almost all issues one has with the IRS comes in the form of a piece of actual mail. This is why you can default to not believing many phone calls that say they are from the IRS if you are not aware of any issue. If you happen to receive such correspondence in the mail, really read the letter and understand what the situation is. It is possible that you have made a payment that for some reason did not get recorded or got incorrectly recorded. Some situations can be fixed without too much of headache.
Even if you find that you are in a spot where you owe money, though, do not ignore the situation. Procrastination can open you up to owing more money through penalties and interest.
If you dispute what it says, this is when it becomes important to keep those documents squirreled away that we talked about a few weeks ago. If you hold onto them, and you know that everything in your return is legitimate, these can be used to dispute the IRS’s claims in the letter.
More frightening can be when an IRS representative actually shows up at your business. This does actually happen, and they may even be there to try to collect on a tax debt. If this happens, though, know that they will be carrying official credentials, and you should ask to see them. Legitimate officials will understand you are only carrying out a standard level of due diligence (if you respectfully voice the request).
But know that the IRS will only ever instruct you to make payments to “United States Treasury.” There are many different ways this can be done (debit card, credit card, check, wire, etc.), but it is the only place where legitimate tax payments will be sent.
I also want to mention here about calling the IRS. In general, this is something that is not always necessary, and is probably also something that you want to avoid. Their correspondence often will contain enough information to let you know what your next actions should be. There is a lot of information provided by the agency online, as well, which can answer questions that you have. If a call is necessary, however, I am sad to say that I can only confirm some of the horror stories you may have heard about how long the wait times can be.
I want to close by saying that I understand dealing with any of this is not a happy thing, (I’m pretty sure the only positive experience most ever have with the IRS is when you receive a tax refund), but it should not be seen as frightening or ominous. Handling it timely and with the proper steps will lessen any potential hardship. As always, if this is something you need help navigating, please do not hesitate to contact us.
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About a week ago, it was announced that H&R Block is closing hundreds of locations as it prepares to file fewer tax returns this coming year following the passage of the Tax Cuts and Job Act. Now I’m sure you can imagine that I don’t often like speaking about the big tax return factories, and I won’t be able to completely hold my virtual tongue here as I discuss them, but I have to do so as I find this to be interesting news.
First off, this is not completely surprising. The thinking is that more people will have less complicated tax returns because of the increased standard deduction. And yes, there are going to be more people who no longer will itemize their deductions, and their tax returns will become that much simpler. I believe, however, that if clients receive a higher level of service, they will not simply abandon their tax preparer.
If you feel your preparer is only putting the right things on the right lines of a tax return, then I can see why going it at it by yourself makes sense if you are anticipating having fewer lines to put numbers on. I, however, aim to give my tax clients more than this.
One of the best parts of tax season is making people aware of things we can use in their tax return that they were not even aware of. For it is one thing to be the person who can make sure you put all the right numbers on all the right lines, but it is much more gratifying to add in new numbers on new lines that can lead to a bigger refund. And this is a dynamic that is not going to go away with a new set of tax rules.
I believe that my clients should leave with the confidence that they are filing a tax return that utilized the tax rules to their greatest possible advantage. For really, if someone misses something on a tax return it’s usually not unreported income, but deductions that are not being used (at least if it’s all done ethically and legally). These things are missed because tax law is complicated. It was complicated before, and it is still complicated now.
So even though many tax returns will become simpler under the new rules, don’t you still want to file a return that reflects the best possible situation for you? Even if you only end up taking the standard deduction and there is little else needed to report on your return, is there not comfort in knowing that was your best possible choice?
I mean, we are months after the passage of the TCJA, and the IRS is still releasing notices advising on how many of the rules will be applied. If they are taking this long to figure things out, can it really be that simple?
And sure, my view on this is far from unbiased. I trust, however, that the level of service I provide to my clients will lead them to agree, and we will remain committed to getting through the new law together.
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