REPOST: US Tax Season is over, but the danger isn't

It's always better to be safe than sorry, especially knowing that the Digital Age comes with as much threat as convenience. Chloe Green of Information Age enumerates some tips on how to avoid hackers and attackers especially during tax time.

Digital tax returns are a key target for hackers and attackers | Image Source: information-age.com

Tax time is a busy and lucrative time for cyber hackers. In 2014, over 100 million tax returns were filed electronically, and considering 1 in 5 computers are not properly protected against cyber attacks, that leaves 20 million targets vulnerable.

In addition, there were almost 800 data breaches in 2014 in which confidential customer data was stolen from businesses across the U.S. by means of malware, phishing scams and even lost or stolen flash drives and other storage devices.

Because of these startling facts, it’s important for businesses to be aware of potential dangers that could affect their customer base and employees at all times – but especially once pertinent financial documents have been compiled and sent to the accountant.

Regularly update security software

Hackers are always exploring computer security measures to find weaknesses and develop ways in. In reaction, security software manufacturers are constantly developing patches and software updates to eliminate threats as they are discovered.

If your IT department doesn’t stay diligent regarding software and operating system updates, these known weaknesses remain like open doors inviting criminals into your business.

Identify what firewalls, anti-spam, antivirus, antimalware and antispyware software the IT department may have installed company-wide and always insure updates are being installed as they are made available.

Additionally, don’t ever attempt to download any software (security or otherwise) without visiting trusted review sites and researching its legitimacy. Otherwise, you may accidentally download software designed for the purpose of stealing information or damaging computers within your network.

Use strong passwords

Weak passwords are an easy way for someone to access your company’s data. However, all employees must be held to the same standard and comply with these rules for it to create a safety net against cyber attacks.

Strong passwords should be at least 7-10 characters long and include a mix of upper and lower case letters, without using single dictionary words or character substitution for dictionary words (like p@$$worD). One idea is using a string of three words 'smushed' together that are meaningful to you so that you can easily remember your password without having ti write it down and refer to it.

It’s vital to use different passwords for each account and change them every few months. Otherwise, a hacker only needs to crack one to have access to everything on a computer. A good password manager program can keep this from being overwhelming.

Don’t trust emails and phone calls from the IRS

Inform all employees to never provide any company information to anyone claiming to be the IRS unless they have initiated the contact. As stated on the IRS website, 'The IRS doesn't initiate contact with taxpayers by email, text messages or social media channels to request financial information.'

Be sure to report any unsolicited email or phone calls claiming to be from the IRS to phishing@irs.gov.

Research
For enterprises, it often takes a team of accountants to prepare business taxes; however, it’s important to research each tax preparer’s credentials before entrusting them with financial information.

Ask potential tax preparers how they protect your company’s information. Questions you should be asking include: how will it be stored? Will it be encrypted? What computer security softwre is used? Who has access? And is background screening used for employees?

Finally, never send financial information over public Wi-Fi networks—only use secure networks. Once your business’ return has been filed, have all files burned to two CDs (in case something happens to one of them) and remove the financial information from all company hard drives. The CDs should then be stored in a secure location such as a safe.


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Three tax breaks for new parents

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Parenting is extremely rewarding, but it can also be very expensive. According to the Department of Agriculture, a middle-income family with a child born in 2013 can expect to spend approximately $245,430 to raise him or her to the age of 18. The amount covers food, shelter, childcare, and general education, but it does not cover college.

Thankfully, there are several tax breaks available that can soften the financial impact of having children. The following are three examples.

1. Dependency exemption

Declaring a child as a dependent entitles a parent to a tax exemption of $3,950. This means that $3,950 of the parent's income will not be taxed. This exemption is given to help parents cover the child's basic needs until he or she turns 19. The amount of money saved depends on the tax bracket to which the child's parents belong. However, only one parent can claim a child as a dependent.

2. Child tax credit

Parents can reduce their federal income taxes by up to $1,000 for each qualifying minor child every year until the child turns 17. However, the credit begins to phase out once the parents' gross income is above a certain amount. Married couples filing jointly can claim the full credit if their income is under $110,000. For married couples filing separately, the phaseout starts at $55,000. All other tax payers, including single parents, can take the full credit if their income is $75,000 or below. The credit will be reduced by $50 for every $1,000 that exceeds income limits.

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3. Adoption credit

For adoptions finalized in 2014, the amount of the tax credit is up to $13,190 for each adopted child. Adoptive parents can claim a credit based on their qualified adoption expenses. Qualified expenses include adoption fees and court costs.

If the expenses do not reach $13,190, they can only claim the amount that was actually spent. For expenses that go beyond $13,190, the maximum credit is $13,190 for each adopted child. Adoptive parents of a child with special needs, however, can claim the full amount without documenting expenses.

To learn more about tax credits and exemptions for having children and the qualification requirements, parents should speak with a knowledgeable tax adviser or consultant.

Image Source: money.howstuffworks.com

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REPOST: Don't want to file your taxes? Get ready to pay ... a lot

While some people choose to delay important tasks like filing taxes, there are those who simply forget to file before the April 15th deadline, or just avoid doing so. This article explains how avoiding your annual tax return obligations can do more harm than good.

Looking for ways to cut your tax bill? Here's an easy one: Just file your federal tax return by April 15. | Image Source: money.cnn.com

If you expect to owe money to the IRS, and you either don't want to or just can't afford to write that check by the deadline, file your 1040 anyway. Or at least file for an automatic six-month extension.

Otherwise, you will end up paying a failure-to-file penalty worth up to 25% of what you owe in the first place.

And that's before counting the failure-to-pay penalty and interest.

Both penalties would kick in on April 16.

For the first year, the biggest hit to your wallet will be that failure-to-file penalty, which amounts to 5% of the tax owed every month -- or part of a month -- for five months, capping out at 25%.

The failure-to-pay penalty is also capped at 25% of the tax you owe, but it accrues more slowly -- at 0.5% a month for 50 months.

But when both penalties apply in the same month, the combined maximum will be 5%, instead of 5.5%.

Former IRS attorneys Deborah and Garrett Gregory, co-authors of the upcoming book "An Insider's Guide to Fighting the IRS," crunched some numbers to show just how expensive sticking your head in the sand can be.

Say you owe an additional $5,000 on your 2014 tax return. But you don't get around to filing that return until Jan. 1, 2016 -- eight-and-a-half months after the deadline.

You'll ring in the new year owing an additional $1,125 in failure-to-file penalties alone.

On top of that, you would owe $225 for failure-to-pay penalties, plus $133 in interest.

Your grand total: $6,483, or 30% more than you owed in the first place.


If you do apply for a 6-month extension, you will avoid the failure-to-file penalty for those six months. And you might also avoid the late payment penalty if you have already paid 90% of the taxes you owed for the year by April 15. You will, however, still owe interest on your remaining tax debt until it's paid off.

The only way to steer clear of that is to actually pay what you owe by April 15.

Of course, like a lot of Americans, you may not expect to owe any more money on April 15 or may even be due a refund. Filing may be a pain, but do it anyway. Or at least file for an extension.

Why? First, let's say your assumption that you won't owe anything is wrong and it turns out you do owe money. If you don't file, you'll get hit with all of the above penalties plus interest.

Second, even if you're right and you're owed a refund, if you wait too long to file, you may lose it.
"You have 3 years to claim that refund. So you have to file your 2014 income tax return by April 15, 2018 or else you will be 'time barred' from claiming your refund," the Gregorys noted.

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Additional options for lowering 2014 taxes

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This is another reminder to begin preparations for filing 2014 tax returns. Whether one made some tax moves before the previous year ended or not, there could still be some time to lower the taxes one owes for 2014. Here are a few suggestions on the options available to taxpayers:

The self-employed can take a deduction for their contributions to their retirement plan. It’s a particularly valuable deduction because it is claimed as an adjustment to income on form 1040, line 28. However, this deduction is only available if the taxpayer had already established the SE 401(k) plan and the account before the year-end.

Otherwise, taxpayers can instead make a contribution to an IRA. This option is available until April 15 and if one qualifies for it, it can be claimed as an adjustment to income and can be used to increase other tax credits.

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Additionally, individuals who have enrolled in a high-deductible health insurance plan can make tax-deductible contributions to a health savings account. Like contributions to an IRA, this option is available until April 15 and can be claimed as an adjustment to income. Those who take this option will also need to include a completed Form 8889.

There are other common deductions that many people overlook when filing for tax returns. These include job search costs, mortgage costs, and lifetime learning credit, among others.

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REPOST: Tax returns to change with Affordable Care Act

Filing tax returns can be a tough and tedious task, and with the Affordable Care Act added in the picture, there could be even more confusion. Read the article below to know more about these changes.

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Filing tax returns will be different this year due to the onset of the Affordable Care Act, officials from the U.S. Department of Health and Human Services announced Thursday.

Tax filers who had health insurance in 2014 through work or an unsubsidized policy will check a box on their tax returns indicating they had coverage, said Treasury Secretary Jacob Lew.

But those who did not have health insurance or received a subsidy will be required to go further, Lew said in a news release from DHHS. “A fraction of taxpayers will take different steps, like claiming an exemption if they could not afford insurance or ensuring they received the correct amount of financial assistance,” he said. “A smaller fraction of taxpayers will pay a fee if they made a choice to not obtain coverage they could afford.”

Those with Marketplace coverage will receive a 1095-A form that will be used “to reconcile their upfront financial assistance,” the news release said. Over the next few weeks, government agencies will release various “consumer-friendly tools and resources” for tax payers who have health coverage through the Marketplaces, those seeking an exemption and those looking for information about the fee for those who could afford to purchase health coverage but chose not to, the news release said.

Some resources can already be found at www.IRS.gov/ACA, or www.healthcare.gov/taxes/.

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In addition, the government also will contact Marketplace enrollees directly through email, phone and text messages, the news release said.

“We will focus on providing targeted messaging to consumers who benefitted from an advanced premium tax credit last year to help them offset the cost of their Marketplace premiums,” the news release said.

The department also will work with community organizations and non-profits to provide assistance and resources and will form partnerships with top tax preparers to provide consumers with information.

Wall and Associates Inc helps businesses and individuals find solutions for settling outstanding taxes. For more information about filing tax returns, visit this blog.