IRS Cautions Taxpayers to Watch for Summertime Scams

The Internal Revenue Service today issued a warning that tax-related scams continue across the nation even though the tax filing season has ended for most taxpayers. People should remain on alert to new and emerging schemes involving the tax system that continue to claim victims.

“We continue to urge people to watch out for new and evolving schemes this summer,” said IRS Commissioner John Koskinen. “Many of these are variations of a theme, involving fictitious tax bills and demands to pay by purchasing and transferring information involving a gift card or iTunes card. Taxpayers can avoid these and other tricky financial scams by taking a few minutes to review the tell-tale signs of these schemes.”

EFTPS Scam

A new scam which is linked to the Electronic Federal Tax Payment System (EFTPS) has been reported nationwide. In this ruse, con artists call to demand immediate tax payment. The caller claims to be from the IRS and says that two certified letters mailed to the taxpayer were returned as undeliverable. The scammer then threatens arrest if a payment is not made immediately by a specific prepaid debit card. Victims are told that the debit card is linked to the EFTPS when, in reality, it is controlled entirely by the scammer. Victims are warned not to talk to their tax preparer, attorney or the local IRS office until after the payment is made.

 “Robo-call” Messages

 The IRS does not call and leave prerecorded, urgent messages asking for a call back. In this tactic, scammers tell victims that if they do not call back, a warrant will be issued for their arrest. Those who do respond are told they must make immediate payment either by a specific prepaid debit card or by wire transfer.

 Private Debt Collection Scams

The IRS recently began sending letters to a relatively small group of taxpayers whose overdue federal tax accounts are being assigned to one of four private-sector collection agencies. Taxpayers should be on the lookout for scammers posing as private collection firms. The IRS-authorized firms will only be calling about a tax debt the person has had – and has been aware of – for years. The IRS would have previously contacted taxpayers about their tax debt.

Scams Targeting People with Limited English Proficiency

Taxpayers with limited English proficiency have been recent targets of phone scams and email phishing schemes that continue to occur across the country. Con artists often approach victims in their native language, threaten them with deportation, police arrest and license revocation among other things. They tell their victims they owe the IRS money and must pay it promptly through a preloaded debit card, gift card or wire transfer. They may also leave “urgent” callback requests through phone “robo-calls” or via a phishing email.

Tell Tale Signs of a Scam:

The IRS (and its authorized private collection agencies) will never:

  • Call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer. The IRS does not use these methods for tax payments. The IRS will usually first mail a bill to any taxpayer who owes taxes. All tax payments should only be made payable to the U.S. Treasury and checks should never be made payable to third parties.
  • Threaten to immediately bring in local police or other law-enforcement groups to have the taxpayer arrested for not paying.
  • Demand that taxes be paid without giving the taxpayer the opportunity to question or appeal the amount owed.
  • Ask for credit or debit card numbers over the phone.

For anyone who doesn’t owe taxes and has no reason to think they do:

  • Do not give out any information. Hang up immediately.
  • Contact the Treasury Inspector General for Tax Administration to report the call. Use their IRS Impersonation Scam Reportingweb page. Alternatively, call 800-366-4484.
  • Report it to the Federal Trade Commission. Use the FTC Complaint Assistant on FTC.gov. Please add “IRS Telephone Scam” in the notes.

For anyone who owes tax or thinks they do:

How to Know It’s Really the IRS Calling or Knocking
The IRS initiates most contacts through regular mail delivered by the United States Postal Service. However, there are special circumstances in which the IRS will call or come to a home or business, such as:

  • when a taxpayer has an overdue tax bill,
  • to secure a delinquent tax return or a delinquent employment tax payment, or,
  • to tour a business as part of an audit or during criminal investigations.

Even then, taxpayers will generally first receive several letters (called “notices”) from the IRS in the mail. For more information, visit “How to know it’s really the IRS calling or knocking on your door” on IRS.gov.

Tax-Related Identity Theft

If you are interested in tax-related identity theft, the IRS has some videos to check out.

Tax-Related Identity Theft   English | Spanish | ASL

Subscribe today: The IRS YouTube channels provide short, informative videos on various tax related topics in English, Spanish and ASL.

Five Tax Tips on Making Estimated Tax Payments

Here are five tips about making estimated tax payments:

  1. When the tax applies. Taxpayers should pay estimated taxes if they expect to owe at least $1,000 in tax for 2017 after subtracting their withholding and refundable credits. Special rules apply to farmers and fishermen.
  2. How to figure the tax. Taxpayers need to estimate the amount of income they expect to receive for the year. Taxpayers also need to make sure they take into account any tax deductions and credits that they will be eligible to claim. Use Form 1040-ES, Estimated Tax for Individuals, to figure and pay any estimated tax.
  3. When to make payments. Taxpayers normally make estimated tax payments four times a year. The dates that apply to most people for 2017 are April 18, June 15 and Sept. 15. There is one last payment on Jan. 16, 2018.
  4. When to change tax payments or withholding. Major life changes like the birth of a child can affect taxes. When these changes happen, taxpayers should consider revising their estimated tax payments for the year. If the taxpayer is an employee, they may need to change the amount of tax withheld from their pay. If this is the case, the taxpayer should give their employer a new Form W–4, Employee’s Withholding Allowance Certificate. Anyone can use the IRS Withholding Calculator tool at IRS.gov to complete the form.
  5. How to pay estimated tax. Taxpayers have a variety of ways available to them to pay estimated tax. They can pay online, by phone or from their mobile device. Direct Pay is a secure online service to pay a tax bill or pay estimated tax directly from a checking or savings account at no cost. Visit IRS.gov/payments for easy and secure ways to pay taxes. Paying by mail is another option. If a taxpayer pays estimated tax through the mail, they should use the payment vouchers that come with Form 1040-ES.

WannaCry Ransomware Attack

Seyfarth Shaw gave some sound advice for how to address this ransomeware attack. The link to this is here.  Because of the importance of this subject, I’ve taken the liberty to copy it in its entirety for you below.

WannaCry Ransomware Attack: What Happened and How to Address

By on May 15, 2017

Recently, a widespread global ransomware attack has struck hospitals, communication, and other types of companies and government offices around the world, seizing control of affected computers until the victims pay a ransom.  This widespread ransomware campaign has affected various organizations with reports of tens of thousands of infections in as many as 99 countries, including the United States, United Kingdom, Spain, Russia, Taiwan, France, and Japan. The software can run in as many as 27 different languages. The latest version of this ransomware variant, known as WannaCryWCry, or Wanna Decryptor, was discovered the morning of May 12, 2017, by an independent security researcher and has spread rapidly.

The risk posed by this ransomware is that it enumerates any and all of your “user data” files like Word, Excel, PDF, PowerPoint, loose email, pictures, movies, music, and other similar files.. Once it finds those files, it encrypts that data on your computer, making it impossible to recover the underlying user data without providing a decryption key. Also, the ransomeware is persistent, meaning that if you create new files on the computer while it’s infected, those will be discovered by the ransomware and encrypted immediately with an encryption key. To get the decryption key, you must pay a ransom in the form of Bitcoin, which provides the threat actors some minor level of anonymity.  In this case, the attackers are demanding roughly $300 USD. The threat actors are known to choose amounts that they feel the victim would be able to pay in order to increase their “return on investment.”

The ransomware works by exploiting a vulnerability in Microsoft Windows. The working theory right now is that this ransomware was based off of the “EternalBlue” exploit, which was developed by the U.S. National Security Agency and leaked by the Shadowbrokers on April 14, 2017. Despite the fact that this particular vulnerability had been patched since March 2017 by Microsoft, many Windows users had still not installed this security patch, and all Windows versions preceding Windows 10 are subject to infection.

The spread of the malware was stemmed on Saturday, when a “kill switch” was activated by a researcher who registered a previously unregistered domain to which the malware was making requests. However, multiple sources have reported that a new version of the malware had been deployed, with the kill switch removed. At this time, global malware analysts have not observed any evidence to substantiate those claims.

You should remain diligent and do the following:

  • Be aware and have a security-minded approach when using any computer. Never click on unsolicited links or open unsolicited attachments in emails, especially from sources you do not already know or trust.
  • Ensure that your antivirus and anti-malware are up-to-date.
  • Apply Security Updates! Enable automatic updates and reboot weekly. Systems that are receiving automatic updates should already be protected against this malware. If you aren’t sure, visit https://support.microsoft.com/en-us/help/3067639/how-to-get-an-update-through-windows-update.
  • Backup your data! The risk of malware is losing your data. If you perform regular backups, you won’t have to worry about ransomware. Make sure you utilize a backup system that is robust enough to have versioning so that unencrypted versions of your files are available to restore. Make sure your backup system isn’t erasing your unencrypted backups with the encrypted ones!

If your organization is the victim of a ransomware attack, please contact law enforcement immediately.

  1. Contact your FBI Field Office Cyber Task Force immediately to report a ransomware event and request assistance. These professionals work with state and local law enforcement and other federal and international partners to pursue cyber criminals globally and to assist victims of cyber-crime.
  2. Report cyber incidents to the US-CERT and  FBI’s Internet Crime Complaint Center.

Business or Hobby?

Millions of people enjoy hobbies that are also a source of income. From catering to cupcake baking, crafting homemade jewelry to glass blowing — no matter what a person’s passion, the Internal Revenue Service offers some tips on hobbies.

Taxpayers must report on their tax return the income earned from hobbies. The rules for how to report the income and expenses depend on whether the activity is a hobby or a business. There are special rules and limits for deductions taxpayers can claim for hobbies. Here are five tax tips to consider:

  1. Is it a Business or a Hobby?  A key feature of a business is that people do it to make a profit. People engage in a hobby for sport or recreation, not to make a profit. Consider nine factors when determining whether an activity is a hobby. Make sure to base the determination on all the facts and circumstances. For more about ‘not-for-profit’ rules, see IRS Publication 535, Business Expenses.
  2. Allowable Hobby Deductions.  Within certain limits, taxpayers can usually deduct ordinary and necessary hobby expenses. An ordinary expense is one that is common and accepted for the activity. A necessary expense is one that is appropriate for the activity.
  3. Limits on Hobby Expenses.  Generally, taxpayers can only deduct hobby expenses up to the amount of hobby income. If hobby expenses are more than its income, taxpayers have a loss from the activity. However, a hobby loss can’t be deducted from other income.
  4. How to Deduct Hobby Expenses.  Taxpayers must itemize deductions on their tax return to deduct hobby expenses. Expenses may fall into three types of deductions, and special rules apply to each type. See IRS Publication 535 for the rules about how to claim them on Schedule A, Itemized Deductions.
  5. Use IRS Free File.  Hobby rules can be complex and IRS Free File can make filing a tax return easier. IRS Free File is available until Oct. 16. Taxpayers earning $64,000 or less can use brand-name tax software. Those earning more can use Free File Fillable Forms, an electronic version of IRS paper forms. Free File is available only through the IRS.gov website.

Tips for Taxpayers Who Owe Taxes

The IRS offers a variety of payment options where taxpayers can pay immediately or arrange to pay in installments. Those who receive a bill from the IRS should not ignore it. A delay may cost more in the end. As more time passes, the more interest and penalties accumulate.

Here are some ways to make payments using IRS electronic payment options:

  • Direct Pay. Pay tax bills directly from a checking or savings account free with IRS Direct Pay. Taxpayers receive instant confirmation once they’ve made a payment. With Direct Pay, taxpayers can schedule payments up to 30 days in advance. Change or cancel a payment two business days before the scheduled payment date.
  • Credit or Debit Cards. Taxpayers can also pay their taxes by debit or credit card online, by phone or with a mobile device. A payment processor will process payments.  The IRS does not charge a fee but convenience fees apply and vary by processor.

Those wishing to use a mobile devise can access the IRS2Go app to pay with either Direct Pay or debit or credit card. IRS2Go is the official mobile app of the IRS. Download IRS2Go from Google Play, the Apple App Store or the Amazon App Store.

  • Installment Agreement. Taxpayers, who are unable to pay their tax debt immediately, may be able to make monthly payments. Before applying for any payment agreement, taxpayers must file all required tax returns. Apply for an installment agreement with the Online Payment Agreement tool.

Who’s eligible to apply for a monthly installment agreement online?

    • Individuals who owe $50,000 or less in combined  tax, penalties and interest and have filed all required returns
    • Businesses that owe $25,000 or less in combined tax, penalties and interest for the current year or last year’s liabilities and have filed all required returns

Those who owe taxes are reminded to pay as much as they can as soon as possible to minimize interest and penalties. Visit IRS.gov/payments for all payment options.

IRS Offers Tips for Disaster Preparedness

Not only is Hurricane Preparedness Week May 7-13, but many areas have suffered from severe flooding. The IRS has reminded taxpayers to prepare for hurricanes and other natural disasters, such as floods, now. By taking a few steps before disaster strikes, taxpayers can reduce their stress when it comes time to file claims or rebuild after the catastrophic event.

Here are some things to consider:

  • Update Emergency Plans — Because a disaster can strike any time, be sure to review emergency plans annually. Personal and business situations change over time, as do preparedness needs. Make plans ahead of time and be sure to practice them.
  • Create Electronic Copies of Documents — Taxpayers should keep a duplicate set of key documents. Keep documents including bank statements, tax returns and insurance policies in a safe place. Doing so is easier now that many financial institutions provide statements and documents electronically, available on the Internet. Even if original documents are available only on paper, scan them into an electronic format and store them on DVD, CD or cloud storage.
  • Document Valuables — It’s a good idea to photograph or videotape the contents of any home, especially items of higher value. Documenting these items ahead of time will make it easier to claim insurance and tax benefits after a disaster strikes. The IRS has a disaster loss workbook, Publication 584, which can help taxpayers compile a room-by-room list of belongings. Photographs can help prove the fair market value of items for insurance and casualty loss claims.
  • IRS Ready to Help — In the case of a federally declared disaster, impacted taxpayers can call 866-562-5227 to speak with an IRS specialist trained to handle disaster-related issues. Taxpayers can request copies of previously filed tax returns and attachments, including Forms W-2, by filing Form 4506, Request for Copy of Tax Return.  Alternatively, order transcripts showing most line items through the Get Transcript link on IRS.gov, by calling 800-908-9946 or by using Form 4506T-EZ, Short Form Request for Individual Tax Return Transcript or Form 4506-T, Request for Transcript of Tax Return.