Maximize Your “Gift” Of A Tax Refund

Next to Christmas, getting a tax refund is probably one of the greatest gifts you can get all year. What’s more, you can influence just how great that gift will be by the number of deductions you include in your tax return.AdobeStock_57719094

And there are plenty of deductions to take advantage of, some common and some not so common. Here’s a mix of both to consider when preparing your return:

  • If you’re paying your child’s college tuition, you usually are eligible for education tax credits or deduction of interest on loans. Depending how much you’re shelling out for their education, you could realize a substantial savings.
  • Are you a single taxpayer caring for a parent? Then you may qualify for the more coveted head-of-household status if you paid more than half of the cost of maintaining that parent’s residence for the whole year. And if you pay more than half of the cost for that parent to live in a home for seniors or a rest home, you can also claim head of household.
  • You have until April 18 (the tax filing deadline) to open a traditional IRA for the previous tax year. If you do so, you can claim the credit on your return. By filing early, you can use your refund to open the account. Traditional IRA contributions reduce your taxable income.
  • You can deduct the fair market value for clothing and household items that you donate to charity. But make sure you ask for a receipt from the charitable organization you made the donation to. In addition, you may be able to deduct mileage and travel expenses associated directly with volunteering if you helped out your favorite charity.
  • State and local income taxes withheld from your wages are deductible, as well as any prior year’s state and local income taxes paid during the year. However, you need to itemize to take advantage of this deduction.
  • The cost of preparing a tax return qualifies as a deduction. So whether you hire an accountant or use tax preparation software to get the job done, you can write off that expense.
  • If you have un-reimbursed business expenses such as mileage or the cost of seminars or professional publications directly related to your employment, those are valid deductions if they are more than two percent of your adjusted gross income.

You can make life easier for yourself by keeping track of specific types of expenses throughout the year that would qualify as deductions. There is software available to help you do this, or if you use a tax preparation professional, they can provide you with an organizer that will help collect all the appropriate documentation.

Make note that the filing deadline to submit 2016 tax returns is Tuesday, April 18 of this year, rather than the traditional April 15 date. In 2017, April 15 falls on a Saturday. This would usually move the filing deadline to the following Monday, or April 17. But Emancipation Day – a legal holiday in the District of Columbia – will be observed on that Monday, which pushes the filing deadline to April 18. Under the tax law, legal holidays in the District of Columbia affect the filing deadline across the nation.

More information about filing your taxes is available on the Internal Revenue Service website at https://www.irs.gov/filingAs a courtesy, you will be leaving Blog.Bank5Connect.com and going to another website. We have approved this site as a reliable partner, but you will no longer be under the security policy of Bank5Connect.com. Come back soon!.

Beware of Online & Phone Tax Scams

Tax returns and stress seem to go hand in hand, and adding to that stress are crooks looking to cash in on unsuspecting taxpayers. As people gear up to get their returns completed, the last thing they need is to fall prey to these fraudsters. During this time of year, it’s very common for criminals to utilize online and telephone phishing scams in order to obtain your personal information. Both of these activities rank among the top tax scams compiled each year by the Internal Revenue Service (IRS).

One of the recent online tax scams making the rounds has come in the form of an email that appears to be from the IRS, asking taxpayers to immediately update their IRS e-filing information. Other iterations of this scam include emails where the criminals pose as a bank, credit card company, tax software provider, or government agency. These emails typically include a link to a bogus website that appears legitimate, but contains phony log-in pages that are used to capture the victim’s personal information such as passwords, account numbers, Social Security numbers, etc.

You should be aware that the IRS generally does not initiate contact with taxpayers via email (or other modes of electronic communication like text messaging or social media) to obtain personal or financial information, or demand payment.

If you receive an unsolicited email that appears to be from either the IRS or an organization closely linked to the IRS, such as the Electronic Federal Tax Payment System (EFTPS), you should refrain from following links in the email or responding to it with any of your personal information. The IRS encourages taxpayers to report these types of suspicious emails by sending them to phishing@irs.gov.

The IRS also warns about a spike in the number of phone tax scams in which victims are threatened with things such as police arrest, deportation, court action, and revocation of their driver’s license if they don’t pay the caller immediately. Typically, the imposters make unsolicited calls claiming to be IRS officials. They tell the victims that they must immediately pay a bogus tax bill or face retaliatory action, and they con them into sending cash, usually through a prepaid debit card or wire transfer. In the event that the taxpayer doesn’t answer the phone, the criminals will typically leave urgent-sounding callback requests.

And don’t let your caller-ID serve as barometer for whether the call is legitimate. According to the IRS, scammers will often alter caller ID numbers to make it look like the IRS is actually calling. It’s also common for the callers to use IRS titles and fake badge numbers to sound legitimate, and they may also use your name, address and other personal information to make the discussion more believable.

According to a recent announcement from the Treasury Inspector General for Tax Administration (TIGTA), roughly 896,000 of these tax scam calls have been reported since October 2013 and more than 5,000 victims have collectively paid more than $26.5 million as a result of them.

It’s important to keep in mind that when you have a tax problem, the IRS will first contact you by mail through the U.S. Post Office, rather than by phone. Furthermore, the IRS will not do the following:

  • Ask for your credit or debit card numbers over the phone.
  • Threaten to have you arrested for not paying.
  • Demand immediate payment from you. The IRS will never call about taxes owed without first having mailed you a bill.
  • Require that you use a specific payment method to pay your taxes, such as a prepaid debit card or a wire transfer.
  • Demand that you pay taxes without giving you an opportunity to question or appeal the amount they claim you owe.

If you do get a phone call demanding payment from someone claiming to be from the IRS, be sure to follow these recommendations:

  • If you have no reason to think that you owe taxes, do not give out any information to the caller and hang up immediately.
  • Report the call to TIGTA by dialing 800-366-4484, or by filling out their “IRS Impersonation Scam Reporting” form at https://www.treasury.gov/tigta/contact_report_scam.shtml.
  • Report the call to the Federal Trade Commission using the “FTC Complaint Assistant” on FTC.gov (add “IRS Telephone Scam” in the notes).

As you keep these types of online and phone tax scams on your radar this tax season, you should also keep in mind that direct deposit is a simple, fast, and secure way to receive your tax refund. Both the IRS and U.S. Treasury encourage taxpayers to use this method instead of having paper refund checks mailed to them, as direct deposit helps eliminate the possibility of a lost, stolen, or undeliverable refund check.