Top Tax Tips from the IRS
1. Gather your records. This includes receipts, canceled checks and records that support income, deductions or tax credits.
2. Report all your income from all of of your Forms W-2, Wage and Tax Statements, and Form 1099 income statements.
3. Use the Interactive Tax Assistant Tool on www.irs.gov to get answers to questions about tax credits, deductions and more.
4. E-file. Combining electronic filing and direct deposit is the safest and most accurate way to file.
5. Weigh your filing options. You can prepare it yourself or go to a tax preparer.
6. Look for tax credits. Don't overlook tax credits like the Earned Income Tax Credit, based on income, filing status and number of dependents; the Child and Dependent Care tax credit for the cost of day care and day camp; the Saver's Credit for people earning $59,000 or less and contributing to a retirement savings plan; the Child Tax Credit of up to $1,000 for each child younger than 17 in your household; and the American Opportunity Tax Credit for students enrolled full or part-time in college. Find out more from your tax preparer or at www.irs.gov.
7. Check out No. 17. IRS Publication 17, Your Federal Income Tax, contains helpful information such as whether you need to file a tax return and how to choose your status.
8. Review your return. Social Security numbers and math calculations are the most common mistakes that can delay a refund.
Top Tax Scams
1. Identity theft. Identity thieves use a legitimate taxpayer's identity to file a fake tax return and claim a refund. You may be a victim if you receive a letter – not an email or phone call – from the IRS indicating more than one tax return was filed for you or that you received wages from someone other than your employer. If you receive such a letter, respond immediately to the sender. If you're not sure if the letter came from the IRS, visit www.irs.gov or call 1-800-908-4490 to speak to the IRS Identity Protection Specialized Unit. You should also call if you suspect you may be at risk for identity theft due to a lost or stolen wallet or personal information. Don't carry your Social Security card on you, and when you e-file, use a strong password, save the information to a CD or flash drive, then delete it from your hard drive and keep the CD or flash drive in a secure place. If you use a professional tax preparer, ask them what measures they take to protect your identity.
2. Phone scams. There has been a surge in IRS phone scams. Callers may tell people they are entitled to a huge refund, or may say they owe taxes and threaten them with jail time or driver's license revocation. Threatening phone calls are sometimes followed up by a second scam phone call claiming to be from a police agency. If you receive a phone call from someone claiming to be with the IRS, hang up, then call 800-829-1040 to speak with the real IRS and determine if there is an issue and how to resolve it.
3. Phishing. Phishing scams use fake email or websites to lure in victims. The IRS does not initiate contact with taxpayers through email, text, or social media. If you receive an email that appears to be from the IRS or other government tax agency, report it to email@example.com.
4. Phony tax preparers. Scam artists sometimes pose as tax preparers. They often promise inflated refunds, then either charge large fees for returns they never file, or they file a false return in the victim's name and the victim never receives the refund. Legitimate tax preparers provide copies of returns to customers, while scammers usually do not. Scammers also have refunds direct deposited into their own accounts instead of the victim's, then deduct a "fee" before cutting the victim a check. Legitimate preparers should sign the returns and enter their IRS Preparer Tax Identification Number. Be careful when selecting a tax preparer.
5. Hiding income offshore. While there are legitimate reasons to maintain overseas accounts, there are reporting requirements. Make sure all of your income is properly reported.
6. Fake charities. After major disasters, it’s common for scam artists to impersonate charities to get money or private information from well-intentioned taxpayers. They may also try to defraud victims by impersonating a charity and asking for personal information like Social Security numbers. Donate to recognized charities, and beware of organizations with names similar to known charities. Don't give or send cash, and don't give out personal information like Social Security or bank account information to anyone who contacts you soliciting donations.
7. Lying about income, expenses or exemptions. Claiming income you did not earn or expenses you did not pay in order to secure larger refundable credits could have serious repercussions. This could result in repaying the erroneous refunds, including interest and penalties, and in some cases, even prosecution.
8. Misuse of trusts. Unscrupulous promoters urge taxpayers to transfer large amounts of assets into trusts. These assets include not only cash and investments, but also successful businesses. Before you accept an adviser's advice about transferring wealth into trusts, research the possible tax implications and make sure what you are doing is legal.