The IRS & ID Theft: "New" News!

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There is something about old doors and entry ways that fascinate me! Maybe it is the mystery of what lies beyond, the unknown, the thrill of opening closed doors to discover new places, new feelings, new people. But it is not as simple as that anymore, is it? These are different and more difficult times we live in now, I guess!

We could go down a very deep, philosophical route  examining what Identity is, but we have to limit our discussion here to what Identity is in a digital age, and we all know how that ties into our finances! We also know of all the hacks trying to get in on that precious information.  

So, What is ID Theft?:
If you are new to this, here's a dictionary definition, "The fraudulent acquisition and use of a person's private identifying information, usually for financial gain". So if someone stole your credit card information, social security number and used it to their advantage pretending to be you racking up hundreds & thousands of dollars in credit card payments, stealing your tax refund, getting medical care etc., you could consider your Identity to be stolen. 

I had written about some basic measures you can take to protect your ID from being stolen on this post back in January 2014. 

For past 2 years, there have been phone scam artists who have made off with millions successfully convincing people that they are calling from the IRS. 

The authorities arrested the scammers but more have surfaced since then, some targeting only millennials, who are being asked to pay up their so called IRS or other debts in i-Tunes gift cards!  More on that story by the Federal Trade Commission here. 

The Internal Revenue Service has had it's share of woes. Earlier this year, their website where one can download a personal transcript of taxes filed, the "Get My Transcript" page has been hacked multiple number of times. The crooks have gone a step further and have been able to put together enough information about people from the Internet and their social media profiles to be able to log into the website and get these transcripts. USA Today reported that story in February 2016. 

If you get a notice from the IRS of an "attempt" to get a transcript, or you actually get a transcript from the IRS for a previously filed tax return, you should immediately contact your tax provider. If they are not available or do not know what to do, submit Form 14039 immediately to the IRS. Link to form here.

We had quite a few converts over from Do-It-Yourself tax software programs during the 2016 Tax Season. This was due to the fact that many DIY software users had received letters from the IRS of potential or real identity theft. 

So if you were one of those converts and you switched over to or are thinking of switching to a tax professional/ Enrolled Agent to prepare your taxes, know that tax professionals themselves are potential targets for ID thieves. These are some questions you should ask of them:

• What are their data security policies?
• How do they back up their data?
• How is the data stored and is it at a safe location?
• Do they encrypt their emails or do they use secure portals for exchange of sensitive information? If you have such a portal, make sure your password is very strong. Check how secure your password is here. 

I for one really appreciate these questions because I can show off all that I do to protect my clients' information.

Be alert, be savvy and take all necessary steps to keep your information under your control. If by some unfortunate circumstance, your ID does get compromised or stolen, here is a list of steps you can take. The list has been put together by the Federal Trade Commission for www.identitytheft.gov.

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As always, read my disclaimer here. Please consult an Enrolled Agent for your unique tax needs. More of my contact information is on my website, www.mntaxbiz.com.

Summer Camp! What's Tax Deductible?

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My kids did their share of summer camps growing up and like many other parents, my husband & I dealt with guilt and whiny kids. Many are luckier than us, they have a FSA {Flex Spending Account} through their employer to defray some of the hefty costs of day-care. Let's take a look at what summer camp costs are tax-deductible. 

What Are Child Care Costs?

Instructions for Form 2441, defines Qualified Expenses as, "These include amounts paid for household services and care of the qualifying person while you worked or looked for work." So most amounts you pay to a day care or a baby sitter qualifies. Child support payments and expenses that are reimbursed do not qualify. 

Who Can Take Child Care Credit?

 All of the following should apply for you to be able to take the credit:

1.  Your filing status can be single, head of household, qualifying widower with qualifying child or married filing jointly. If filing as married filing separate, you may be able to take the credit depending on certain conditions. 
2. The care should be so you (and your spouse if filing jointly) could work or look for work. Or if you were full time students. 
3. The care should have been provided to qualifying persons. 
4. The person providing the care should not be your spouse, your dependent, or the parent of your qualifying person. 
5. You report the information of the care provider on line 1 of the Form 2441. 

The qualified expenses are limited to $6,000 per year. If you have more than one qualifying child, this amount does NOT have to be distributed equally. 

If you have a FSA from your employer, you can still claim the dependent care credit to the extent your expenses are more than the amount that you pay through your Flexible Spending Account. 

The maximum amount of dependent care costs you can fund through an FSA is $5,000.

But the credit applies to as much as $6,000 of expenses for filers with two or more kids

under the age of 13. In that case, you’d run the first $5,000 of dependent care costs

through the FSA, and the next $1,000 would be eligible for the credit on Form 2441.

For most filers in this situation, taking the credit will save an extra $200 in taxes. 

Summer Day Camp costs qualify for the dependent care credit.

If you send your child to any special day camps this summer, such as those for sports,

computers, math or theater, you can take a tax deduction on those expenses. If your kid is attending camps that focus on improving reading or study skills those costs are eligible under this form as well.

Caveat: The costs of summer school and tutoring programs aren’t eligible for the credit.

Neither are overnight camps. The other rules for the tax credit (as stated above) also must be satisfied. The child must be under 13, and expenses must be incurred so the parents can work.

The above list is not exhaustive and there are many more conditions that could preclude you from taking the credit or nuances that would qualify you for the same. Please consult with an Enrolled Agent if any of the above apply to you. 

Bibliography: Form 2441; Pub 503; The Kiplinger Tax Letters. 

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As always, read my disclaimer here. Please consult a qualified tax professional for your unique tax needs. More of my contact information is on my website, www.mntaxbiz.com.