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Summer Travel Plans? Stay Protected From Identity Theft

 

The warm weather is finally here and with it comes the busy travel season that so many people have excitedly been anticipating. Some have been planning for months in advance, booking flights abroad and hoping to fit as many countries as they can into their itineraries.

Be cautious of being a target for identity thieves before you start to head out on your summer adventure. Travelers are an extremely attractive target for identity thieves, especially if you’re traveling to a place you’ve never ventured to before. Any locals – or scammers! – can probably pick up on this. Many travelers also rely on public Wi-Fi to look things up pertaining to their trip. Add to this the fact that you are likely carrying around more documentation than usual, and you’ve got all the makings for a sizable bull’s eye on their back.

An American Express Spending & Saving Tracker revealed that 8 in 10 Americans have summer travel plans, with 72% of these planning stateside escapes and 15% traveling overseas. No matter how you dice it, there’s going to be a lot of movement in the skies and on the roads in the coming summer months.

With millions of people packing their bags and leaving their homes for adventures, retreats and getaways, there will surely be an uptick in opportunities for identity thieves this summer. Experian’s Summer Travel and Budget survey showed that identity theft personally affects nearly one in ten travelers and that one in five people have had sensitive information lost or stolen while traveling.

Below are quick identity protection tips for each stage of your summer travels and adventures:

 BEFORE YOU GO:

  • Check for any travel warnings or alerts for your destination country. The Department of State provides the latest security messages. It’s always best to be in the know about any crime – such as pick pocketing – happening in your destination country so that you can be as vigilant as possible.
  • Put only your last name and phone number on your luggage tags. Your full name and address are one too many personal details if put in the wrong hands.
  • Notify your bank and credit card companies of your travel plans. Many such companies now place freezes on accounts when they see suspicious activity like out-of-country use as a means to prevent fraud – it’s easy to avoid this inconvenience!
  • Don’t post any vacation plans on social media. It’s okay to be excited about your trip, but you don’t need to publicize it. You never know who could be lurking behind a computer screen happy to learn that your house will be unattended for a period of time.
  • Put a hold on your mail while you’re gone. An overflowing mailbox is a jackpot for an identity thief. It not only signifies that you’re away, but thieves can then steal the pieces that contain your personally identifiable information (PII).
  • Clean out your wallet and/or purse before leaving. Remove any receipts and expired cards, along with anything else you don’t absolutely need to be carrying with you. Keep only the credit and debit cards you know you will need to use while traveling. Less is more!

WHILE TRAVELING:

  • Limit your use of public Wi-Fi as much as possible. While these networks are incredibly convenient, they are very often unsecured. This means that any information you input while connected to the hotspot could be viewed by someone else. Never access your financial account or any other sites that require a password when using public Wi-Fi.
  • Use cash when possible and credit cards over debit cards. Travelers are often warned of the dangers of carrying around large amounts of cash. However, depending on where you are traveling, some merchants still practice questionable transaction processes – making cash a safer method of payment. In most cases though, using a credit card is considered safe. Furthermore, it’s almost always recommended to use the credit option of your card versus the debit option. If your card numbers ever get into the wrong hands, most credit card companies will quickly reverse or cover fraudulent charges, while recovering funds from your drained bank account can be more complicated.
  • Be cautious when using ATMs. Inspect the machine carefully before inserting your card. Fraudsters can attach card skimmers to the slot that capture your information when you insert it; very often, these look like they are part of the machine. Also, always shield the keypad when entering your PIN – scammers can also set up hidden video recorders. The safest ATMs to use are attached to banks in well-lit areas.
  • Lock up valuables and personal documents at the hotel. This includes boarding passes, confirmation emails, passports, and jewelry. Even hotel staff have been known to go through rooms while they are cleaning and steal items. Everything is much more secure in a safe!
  • Keep your phone password-protected. If you’re not the type of person to keep a password guard on your phone, make an exception while traveling. If your phone is ever lost or stolen, an identity thief could easily access banking apps and social media accounts.

WHEN YOU RETURN:

  • Check your credit card and bank statements often for any fraudulent activity. It’s best to catch fraud as early as possible so that you can take action immediately. This minimizes damage and makes resolution that much easier.
  • Check your credit report throughout the year. Federal law requires the three major credit bureaus to provide you with a free credit report once a year. You can stagger these free reports every four months from each bureau so that you’re seeing your report somewhat regularly. Make sure you recognize everything that’s on there – if anything doesn’t ring a bell, look into it!
  • Change your PINs and passwords after a trip. This is especially important if you logged into any accounts while on the road or accessed an ATM. Traveling can open you up to all kinds of vulnerabilities; don’t take the risk with your PINs and passwords.
  • Make sure you properly dispose all trip confirmation emails and boarding passes. This means shredding them before tossing them into the recycling bin. These types of documents contain more information than most people think. Barcodes on boarding passes can actually contain your frequent flyer information, and other such documents reveal itineraries and other personally identifiable information that identity thieves would be happy to misuse.
  • Lastly, now is the time to post about your adventure on social media. Now that you’ve returned, you can share all those stunning snaps you shot. We really do want to hear about how much you enjoyed your vacation!

Of course, nothing compares to the peace of mind you will receive from Optima’s ID Protection Plan, which includes services like suspicious activity alerts and identity monitoring that will provide you with an extra boost of confidence when you return from a trip. Most importantly, if you do fall victim to identity theft, our 24/7 Identity Theft Resolution Service Team will work to restore your identity and prevent further damage.

Learn more and enroll in Optima’s ID Protection Plan at https://optimatax.idprotectiononline.com/enrollment/.

Tax Tips: Your Child’s Summer Camp And Daycare Expense Tax Credit

Summer is right around the corner – the wonderful season of good ol’ sunshine and time for relaxing. School is out for summer vacation and with it comes a whirlwind of family activities and the seasonal tradition of sending your kids off to summer camp. And if you’re a working parent who depends on summer day camp and and daycare, you know summer also means dishing out some extra expenses.

Fortunately, you may have a break. Some of the added expenses may help you qualify for tax deductions and credits that can save you some money next tax season. Here are nine facts you need to know for claiming summer camp and daycare expenses, also known as the Child and Depended Care Credit:

  • Earned income. To qualify, you (and your spouse if filing jointly) must have earned income during the year.
  • Expenses must be work-related. Essentially, this means you’re paying for the camp or daycare for the qualifying child so you can work, or look for work.
  • Correct tax forms. To be able to claim this credit, you must file a Form 1040, 1040A, or Form 1040NR; you cannot claim the credit on Forms 1040EZ or 1040NR-EZ.
  • Age of your qualifying child or dependent. Qualifying child must be under the age of 13 and must be your dependent when care was provided.
  • Some qualifying care restrictions. Expenses for overnight camps or schooling/tutoring costs do not qualify – it is not considered a work-related expense for purposes of the credit. You also cannot claim the credit if you paid for someone else’s child or if someone else paid for your child.
  • Specialized summer camps. Camps that specialize in a particular activity, such as sport camps, math camps, or even art camps can qualify for the credit. Keep in mind expenses that go towards required, but personal items for the camp such as sports equipment, clothing, art supplies or even a laptop don’t qualify – they are still considered personal accessories.
  • Health-related expenses. The costs of “preparing” for the camp or daycare, such as required vaccinations or wellness exams are deductible if you itemize on Schedule A and if the total medical expenses during the year exceed 10% of your AGI, or adjusted gross income.
  • Qualifying childcare provider restriction. Your childcare provider cannot be your spouse, dependent, or the child’s parent.
  • “Are we there yet?” The costs to take your child to and from the daycare or camp location in your own transportation doesn’t qualify as an expense for purposes of the credit; however, if there are transportation fees associated with or included in the camp or daycare during operating hours, the costs may qualify as an expense.

The purpose of this tax break is to financially assists working parents and guardians involved with raising children (or caring for a disabled dependent). The tax credit can be up to 35 percent of your allowable expenses, depending on your income. The total expense limit is $3,000 for one qualifying child or $6,000 for two or more qualifying children.

Of course, we all know the tax code is very long and complex, so other exceptions and restrictions may apply. You can check out the IRS publication 503, Child and Dependent Care Expenses for full details about this tax credit on their website.

Identity Safety And Staying Secure With Wearable Devices


The increasingly connected world brings new conveniences that greatly benefit our everyday lives. No new connected device seems more ubiquitous than wearable devices – nearly 33 million were in use in the U.S. in 2015 by an estimated 20 million people. Smartwatches like Pebble and Apple watch allow us to access the internet with a flick of a wrist. Wearable health tech like the Fitbit and the gadget-class favorite Jawbone help improve the livelihoods of millions.

As much as wearables bring value to our lives, they also create a new opportunity for criminals to extract personally identifiable information. Like many other new technologies, security vulnerabilities in wearables are being exposed and potentially exploited.

The more information that’s collected, the easier it is to identify account numbers and passwords as well as medical ID numbers and tax return data. Better understanding the individual’s routines and habits ensures that criminal activity will go unnoticed for longer periods of time.

But some wearable data can provide quicker wins for identity thieves:

Most wearable devices use an accelerometer and gyroscope to track forward motion and directional orientation. Some even contain an altimeter to measure altitude for hikers and climbers. All of this data is crunched into code that orients the user’s specific location and tracks their activity – sometimes down to a few inches. Shockingly, new research found that ATM PIN codes could be discerned from the data in wearables’ sensors with 80% accuracy on one try and 90% accuracy after three tries.

A flash survey conducted by corporate identity management firm Centrify exposed some worrying trends:

  • 69% of wearable device owners don’t utilize login credentials such as passwords, fingerprint scans, or voice recognition to access their device, and
  • 56% of wearable owners use their device to access corporate applications such as Outlook, Dropbox, and Salesforce.
  • While the sample size was small, the survey was conducted at the RSA Conference, one of the world’s largest gatherings of information security professionals. If those on the frontline of data security leave their personal and corporate data at risk, it’s easy to imagine that the population at large may be even less cautious – jeopardizing their identities and your corporate data security.

Staying Secure With Wearable Devices

While wearables (and all technology, for that matter) are never 100% secure, there are a number of tactics that can be undertaken to minimize the risk of data theft:

  • Opt-out of automatic data transmission that will continually upload information via Wi-Fi or other networks.
  • When using a Wi-Fi, stick to known and/or secure networks.
  • Enable passwords and change them regularly. If available, use two-step authentication.
  • Physically secure the device if it’s not in use. Particularly, when traveling, utilize hotel safes.
  • Take time to learn how to remotely erase data so that the device can be “cleaned” if it’s lost or stolen.
  • Make sure to regularly update the operating system in order to patch known security gaps.

Looking for ways to minimize your risk of identity theft? Maintain a peace of mind while using your wearable device by enrolling in Optima’s ID Protection Plan at optimatax.idprotectiononline.com.

Spring Cleaning For a Secure Identity

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Spring is in full swing with its longer and sunnier days, and for many people, it is time for the annual spring cleaning to disentangle their homes from the build-up of wintertime clutter. However, much of that “clutter” can be pure gold for an identity thief. Junk mail such as credit card offers and unsolicited loan pre-approvals are chock full of valuable information about finances and lifestyle. Virtual clutter is also a target – unsecured and unorganized computer and smart phone data can be mined.

Minimize identity theft risk this spring with these easy tips:

  • Paperwork. Decide which documents need to be saved and then file them in a secure location. Unwanted items that contain personal information should be shredded, including receipts, bank and credit card statements, credit card offers, medical records, and health insurance statements.
  • Computers. Organize personal information and documents into password-protected folders. When deleting old or unneeded files, make sure to regularly empty the computer’s recycle bin. Ensure that all anti-virus software is up-to-date and run a full scan to ensure that the computer is free of viruses and malicious software.
  • Smartphone. Enable the phone’s password-protection features and only use secure networks, especially when using online banking or other apps that transmit sensitive information. When upgrading to a new device, wipe the old phone’s memory and restore to factory settings.
  • Wallet and Purses. Shred old receipts and outdated credit cards. Remove everything that isn’t necessary on a day-to-day basis – especially a Social Security card.

This spring, you can make sure you’re keeping your identity as clean and secure as possible by enrolling in Optima’s ID Protection Plan at optimatax.idprotectiononline.com.

 

Optima’s 2017 Annual Food Drive for Second Harvest Food Bank of OC

Cheers to the completion of another successful food drive supporting the Second Harvest Food Bank of Orange County! Our staff set an all-time record by donating 3,500 pounds of food and household supplies, beating the previous record of 2,000 pounds set by our staff last year.

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The wonderful people at Second Harvest informed us that our donation will provide for over 2,800 meals! We’re truly honored to be able to partner with Second Harvest to make this food drive an annual tradition and an important part of our culture at Optima.

Of course, our donation is just a drop in the bucket when compared to the enormity of Second Harvest’s mission. In Orange County alone, Second Harvest serves over 300,000 people, a third of which are children, who struggle with food insecurity. To learn more about their amazing organization and how you can help support them in their fight to end hunger here in Orange County, visit Second Harvest’s website at feedoc.org and be sure to “like” them on Facebook at facebook.com/SecondHarvestFoodBankOC/. There you’ll see the vital programs they run, such as the Kids Café Program, the School Pantry Program, the Senior Grocery Program and much more.

And if you live outside Orange County and want to support the local food banks near you, simply visit feedingamerica.org. There you can look up the non-profits and food banks that are doing this important work in your community. Together we can end hunger!

Tax Season Is Here…And So Are The Scammers

The start of each new year typically brings renewed resolve to get healthy, strengthened desires for personal improvement, and of course, tax season.

Tax season can mean different things to a lot of people. Some look forward to a large refund; for others, it’s one more thing to tack onto their to-do list. For the scammers out there, it means the annual opportunity to rake in fraudulent refunds has finally arrived. Tax scammers are ruthless. They’re unaffected by the thought of families and individuals dependent upon what is likely their biggest check of the year being denied this financial relief.

If there’s one thing we can be sure of, it’s that there will be scams this tax season. Fortunately, there are safeguards you can take to stay protected this tax season.

  • Schedule time with your tax preparer now so you can get your taxes done as early as possible. This will help decrease the chances that a fraudster will get your refund before you do.
  • Sign up for Scam Alerts from the FTC to stay abreast of all the dirty tricks scammers are currently using.
  • Talk to someone in your HR department to see if you can get your W-2 before it’s mailed out. This will help ensure that you actually receive it so you don’t have to risk it being lost or stolen in the mail.
  • Never send emails with personally identifiable information (PII) attached. It’s best to never send them through email at all, but if you must, you should encrypt your message by making a change in your email’s security settings.
  • Beware of computer scams. These can come via email or as popups on your computer asking for your personal information. The IRS saw an approximate 400% surge in phishing and malware incidents in the 2016 tax season.
  • Always use a professional, trustworthy tax preparer. Sometimes, even national tax preparation chains can scam you out of your money or use less-than-secure procedures when it comes to handling your personal information. Make sure you use someone you trust.
  • Never provide any personal information over the phone to someone who says they are from the IRS. The IRS will never contact you via phone, email or social media.

Tax season is stress enough as it is; worrying about tax fraud shouldn’t have to be a part of it. Maintain a peace of mind by filing taxes as early as possible and by enrolling in an Optima Protection Plan at optimatax.idprotectiononline.com.

New Year, New You: Invest in Your Identity Wellness

The holiday season is now a thing of the past and now, New Year’s resolutions are the hot topic of conversation. The ultra-motivated will have a ten-part list covering everything from weight loss goals to finding a new hobby. And then there will of course be some outliers (16% of us according to a Neilson sruvey) that will admit that resolutions just aren’t for them. Wherever your ambitions lie on the spectrum, the one area of your life that can’t afford to be brushed off is your identity wellness.

Though often overlooked, your identity wellness deserves the kind of attention that people tend to put towards their health at the start of each new year. Your identity wellness encompasses everything from your financial security, credit profile, and credit score to digital privacy.

The New Year is the perfect time to make proactive identity protection a part of your everyday life. With these tips, you’ll be on your way to a smarter, safer, and more identity-secure you:

  • Check your bank and credit accounts frequently. It’s best to catch fraud as early as possible so that you can take action immediately; this minimizes damage and makes the resolution process easier.
  • Check your credit report regularly. Federal law requires the three major credit bureaus (Equifax, Experian, and TransUnion) to provide you with a free credit report once a year. You can stagger these free reports every four months from each bureau so that you’re seeing your report pretty often. This is why credit monitoring services are so valuable: alerts are sent at the first sign of suspicious activity on your credit profile.
  • Stop connecting to public Wi-Fi. It’s convenient, of course, but frequently it’s unsecure. This means that any information you input while connected could be accessible by someone else. So if you must, just be sure to never access your financial accounts or any other sites that require a password when using public Wi-Fi.
  • Don’t click the “Remember Me” box on your digital accounts. If your computer, laptop, or smartphone ever got into the wrong hands, the perpetrator could have a field day accessing your accounts and gathering important personal information. Even worse, they could log into your bank or credit accounts.
  • Keep your firewall and anti-malware up to date. Firewalls block unauthorized access to your computer’s information, while anti-malware prevents malicious software from being downloaded to it. You must be sure to keep them up to date though, as hackers are constantly creating new ways to infiltrate your computer.
  • Update your passwords or look into a password manager. We all know by now that we should change our passwords often with strong, secure ones. Let’s face it though: most of us don’t. An easier solution might be to keep all of them together in a password manager so that you can use complex ones – without forgetting!
  • Shred your documents before tossing them. This includes your credit card/bank statements, pre-approved credit card offers, utility bills, and anything else that contains your personal information.

Of course nothing beats having a comprehensive identity protection provider that is there 24/7 for when the unexpected happens. Services like credit and identity monitoring send alerts if any suspicious activity is found so that you can take action immediately. To find out how you can protect your identity with Optima’s Protection Plans, visit optimatax.idprotectiononline.com.

10 Tips for 1099 Filers and Small Business Owners

It’s tax time again and the growth of the Gig Economy is about to strain an already overburdened IRS. The proliferation of freelance or part time employees driven by job cutbacks from the recession and the rise of opportunities like Uber and others means that more Americans than ever will file 1099s in 2016.

However, while many 1099 filers are exceptional in their chosen line of work, they also lack familiarity with the form and tax requirements of the designation itself. 1099 essentially creates a tax trap for these individuals because they are lured by an increase in income only to realize a year later that they will likely earn less. Even worse, that means they likely were unaware of how much they needed to properly budget for and save for taxes.

As a result, tax experts expect that both the form itself and the tax implications of working in the new 1099 Economy will inevitably lead to a rash of questions for the IRS and its customer service teams. Unfortunately, the IRS has said it’s unprepared to handle even the standard amount of inquiries this tax season. Last year, roughly 35% of calls to the IRS were answered while the rest experienced “courtesy” hang-ups after wait times of more than 2+hours. The IRS has already forecasted more problems this year as staffing is reduced, more uncertainty looms with tax codes, and downsizing is in the air. This spells frustration and little help for the millions of Americans that are expected to file 1099s and that could turn to the IRS for answers to their tax assistance this year.

So how should small business owners and 1099 filers avoid this logjam on the phones? By understanding the unique challenges of filing as a 1099 workers and adhering to basic best practices in filing strategies, individuals and business owners should be able to avoid many of the most common questions this year. These ten tips should help you plan ahead of time for your tax needs and avoid long waits on the phone.

1.  Income and Self-Employment Tax

As a traditional W-2 filer, workers have taxes removed from their paycheck before they receive it. With a 1099, a filer is responsible for paying their own income taxes and self-employment taxes out of their income. If not properly budgeted for, this can create a much larger tax burden at the end of the year. Only proper budgeting will save the filer from this potentially crushing obligation.

 2.  Be Aware of Deadlines

Missing the 2015 tax year filing deadline of April 18th and owing taxes can result in particularly high “failure to file” penalties as much as 25%. Make sure to track your deadline and file on time.

 3.  Get Organized

Small business owners can be notoriously bad record keepers, but this puts you or your tax preparer at a huge disadvantage comes tax season. Being organized will save you a significant amount of time and money.

4.  Documented Expenses & Deductions

As an independent contractor, a 1099 earner is able to deduct the costs of earning the money from the total amount earned. The challenge is that filers rarely keep detailed records, making it difficult for the tax preparer and creating a potential loss of income because of lost or forgotten deductions.  An example is a mileage deduction, which requires that the filer accurately record the miles they drove in service to their job over the course of a year. One way to get ahead of this is to work with your tax preparer to devise a preferred system of record-keeping or to learn which deductions are allowed in the coming year.

 5.  The At Home Work Deduction

If you have a qualified home office, you can deduct expenses that are normally not eligible such as portions of home insurance and utilities. The IRS has made it even easier by simplifying this to a maximum of $1,500 or $5 per square foot.

6.  Be Careful if Showing a “Loss”

Generally, the IRS considers your business a “hobby” if you are not able to turn a profit in three out of five consecutive years.  If you are reporting a loss in an effort to avoid taxes, you may want to double-check your records prior to filing.

 7.  Increase in Audits

Beyond a loss of possible deductions, an even more harmful potential result of this poor record keeping is an IRS audit. Self employed individuals are subject to audits because the deductions they have taken are not adequately documented or not backed up with saved receipts.

 8.  To Insure or Not Insure?

All individuals and families are required to hold health insurance as required by the Affordable Healthcare Act, or pay a fine for not carrying insurance. Self employed individuals without health coverage will face much bigger penalties this year, as much as $325 per adult in 2015. If you are uninsured, look into obtaining a qualified coverage to avoid penalties of up to $695 per adult in 2016.

9.  Health Insurance Requirements

The ACA includes an income verification component as part of its insurance requirement. This income verification is somewhat relaxed for 1099 filers because the IRS will actually reconcile your tax return with your ACA application at tax time. Because of this, it is always better to estimate your income higher (rather than lower) on your application because any over-estimation will result in a refund. If the reverse is true and you underestimate, then you will have to pay back a portion of the subsidy credit you received come tax time. An inaccurate guess either way will not incur penalties, but knowingly providing false information can result in fines or even criminal charges.

10.  Consider a “Silver” ACA Plan

ACA plans are ranked as bronze, silver, gold, or platinum, based on their out-of-pocket costs. They all come with the same benefit, but cheaper plans that come with high out-of-pocket costs can present a challenge for independent workers who might have long gaps with little or no income. If you qualify for a cost-sharing reductions based on your income and enroll in a silver plan you get the best of both worlds:  A fairly low premium, plus a lower deductible and other out-of-pocket costs.

 

If you do all the above and still need to call the IRS, remember to be professional and to the point. Agents have limited time to chat about issues unrelated to them and our own staff always get better results when they are polite and treat them professionally.

And above all, be honest. It is against the law to willfully disclose fraudulent information to the IRS and can result in some serious penalties.  The IRS takes notes on every conversation and it is always best to say that you are “unsure” if you are asked a direct question that you do not know how to answer.  If you communicate financial information that is erroneous or commit to a payment that you may not be able to afford it can cause problems later.  Consider hiring a Tax Attorney who has attorney/client privilege if you feel that you are in over your head.

 

About David King

David King is CEO of Optima Tax Relief.  David brings with him 12 years of experience in growing and running financial services firms. As a member of Optima’s founding leadership team, David’s emphasis on customer service and a “Client First” approach has been integral to developing Optima’s industry-leading tax resolution services.

 

IRS Criminal Investigation Releases Fiscal Year 2014 Annual Report

The Internal Revenue Service announced the release of its IRS Criminal Investigation (CI) annual report for fiscal year 2014.   IRS CI initiated 4,297 cases in FY 2014, focusing on international tax fraud, return preparer and questionable refund fraud, identity theft, public corruption, bank secrecy act violations, significant money laundering investigations and terrorist financing cases.

BN-IG445_IRSCYB_J_20150505144950“There is no doubt that we have had to be creative to overcome some of the budget challenges this year,” said Richard Weber, Chief, IRS Criminal Investigation Division. “But in so doing, we maintained a steady focus on what is important. Our highest priority is to enforce our country’s tax laws and support tax administration to ensure compliance with the law and combat fraud.”

 

Historical Snapshot and Agency Priorities

The annual report highlights the agency’s successes while providing a historical snapshot of the makeup and priorities of the organization. Lincoln Irey, the first chief of IRS CI, released an annual report every year during his tenure, which extended from 1919 to 1946.

As the only federal law enforcement agency with jurisdiction over federal tax crimes, CI boasted the highest federal law enforcement conviction rate in FY 2014 — an impressive 93.4%. Prosecutors nationwide routinely call on IRS CI to lead financial investigations for financial crimes ranging from identity theft to international tax evasion and transnational organized crime.

“We are incredibly proud of our conviction rate,” said Weber. “As a federal law enforcement agency, that conviction rate reflects the pride of our agents and the quality of our case work. We are the best financial investigators in the world and I am extremely proud of our special agents and professional staff.”

Big Wins for IRS CI

CI investigates potential criminal violations of the Internal Revenue Code and related financial crimes in an effort to generate confidence in the tax system and encourage compliance with the law. The 40-page report includes case summaries on a range of tax crimes, including money laundering, public corruption, terrorist financing and narcotics trafficking financial crimes. The report also reflects the diversity and complexity of CI investigations, which touch almost every part of the world.

511aa8b798600.preview-620For example, two of the biggest tax fraud stories of the year — Credit Suisse and Bank Leumi — are included in the report. In the largest tax fraud case ever filed, Credit Suisse pleaded guilty to conspiracy to aid and assist U.S. taxpayers in filing false income tax returns and agreed to pay a total of 2.6 billion dollars. CI also led the investigation against Bank Leumi Group, a major Israeli international bank that admitted conspiring to aid and assist U.S. taxpayers to prepare and present false tax returns and agreed to pay 270 million dollars. Bank Leumi also pledged to cease providing banking and investment services for accounts held or beneficially owned by American taxpayers. The Bank Leumi Group case marks the first time an Israeli bank has admitted to such criminal conduct.

“The budget challenges facing our agency are nothing new. In the past five years, CI’s staff has been reduced approximately 11 percent bringing staffing to 1970’s levels. This trend cannot continue,” Weber added. “We will continue to remain focused on finding and investigating great cases that make a real difference in compliance of our nation’s tax laws.”

Historical Highlights of the IRS

Every taxpayer knows about the existence of the IRS, but many people do not realize that the United States only began collecting income taxes from individuals in 1862. The following timeline documents the history and intriguing development of the collection arm of the Treasury department.

The First Income Taxtax

1862 – President Lincoln issued a revenue-raising measure into law to help pay for Civil War expenses. The measure also created a Commissioner of Internal Revenue along with the nation’s first income tax. An additional 3 percent tax was levied on incomes between 600 and 10,000 dollars and a 5 percent tax on incomes of more than 10,000 dollars

1867 – Facing stiff public opposition, Congress cuts the income tax rate. As a result, from 1868 until 1913, 90 percent of all national revenue came from taxes on liquor, beer, wine and tobacco.

1872 – Income tax repealed.

Creation of the Bureau of Internal Revenue

1894 – The Wilson Tariff Act revived the income tax and created an income tax division within the Bureau of Internal Revenue.

1895 – The new tax was ruled unconstitutional by the Supreme Court on the grounds that it was a direct tax, not apportioned among the states on the basis of population. As a result, the income tax division was disbanded.

Ratification of the 16th Amendment and World War I

16th ammendment1909 – President Taft requested Congress to propose a constitutional amendment giving the government power to tax incomes directly. Congress also levied a 1 percent tax on net corporate incomes of more than 5,000 dollars.

1913 – Under the looming threat of World War I, Wyoming became the crucial 36th state to ratify the 16th Amendment. The amendment stated, “Congress shall have the power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration.” Later, Congress adopted a 1 percent tax on net personal income of more than 3,000 dollars with a surtax of 6 percent on incomes of more than 500,000 dollars. Congress also repealed the 1909 corporate income tax. The first Form 1040 was introduced the same year.

1918 – The Revenue Act of 1918 raised more money to finance the World War I effort. The Act also codified all existing tax laws and imposed a progressive income tax structure, with rates up to 77 percent.

Prohibition and Taxationprohibition

1919 – The 18th Amendment was ratified, barring the manufacture, sale or transport of intoxicating beverages. Congress also passed the Volstead Act, granting the Commissioner of Internal Revenue primary responsibility for enforcement of Prohibition. The Department of Justice assumed primary prohibition enforcement duties eleven years later.

1931 – An undercover agent employed by the IRS Intelligence Unit gathered evidence against gangster Al Capone. The evidence was used to convict Capone of tax evasion. He died in prison before serving out his 11 year sentence.

1933 – Prohibition repealed. IRS resumed responsibility for alcohol taxation the following year, along with administration of the National Firearms Act. Enforcement of the tobacco tax was added later.

Individual Deductions and Employer Tax Withholding

1942 – The Revenue Act of 1942 which FDR hailed as “the greatest tax bill in American history,” passed Congress. The Act increased taxes along with the number of Americans required to pay income tax. The Act also created deductions for medical and investment expenses.

1943 – Current Tax Payment Act, which required employers to withhold taxes from employees’ wages and remit them quarterly was passed by Congress

1944 – Congress passed the Individual Income Tax Act, creating standard deductions on Form 1040.

The Creation of the IRS

IRS1952 – Reorganization Plan No. 1 proposed by President Truman. The Plan, designed to restore public confidence in the agency, replaced the patronage system at the IRS with a career civil service system and decentralized service to taxpayers.

1953 – Truman’s reorganization plan endorsed by President Eisenhower, who changed the name of the agency from the Bureau of Internal Revenue to the Internal Revenue Service.

Mid Century Modifications

1954 – Filing deadline for individual tax returns changed from March 15 to April 15.

1961 – The dedication of the National Computer Center at Martinsburg, W.Va. heralded the beginning of the computer age for the IRS

1965 – First toll-free telephone number instituted for the IRS.

1972 – The division of Alcohol, Tobacco and Firearms separated from the IRS to become the independent Bureau of Alcohol, Tobacco and Firearms.

1974 – Congress passed the Employee Retirement and Income Security Act, assigning the IRS regulatory responsibilities for employee benefit plans.

Electronic Filingefile

1986 – First year for limited electronic filing. President Reagan signed the Tax Reform Act, containing 300 provisions and requiring three years to implement. As the most significant piece of tax legislation in 30 years, the Act codified federal tax laws for the third time since the Revenue Act of 1918.

1992 – Taxpayers owing money to the IRS were allowed to file returns electronically.

21st Century Reform

1998 – Congress passed the IRS Restructuring and Reform Act, expanding taxpayer rights reorganizing the agency into four operating divisions aligned to address taxpayer needs.

2000 – IRS ended its geographic-based structure and instituted four major operating divisions: Wage and Investment, Small Business/Self-Employed, Large and Mid-Size Business and Tax Exempt and Government Entities. This change represented the most sweeping adjustment to the IRS since 1953.

Mid-Year Refunds Initiated

tax-refund2001 – Mid-year tax refund program to provide advance payments of a tax rate reduction administered by the IRS

2003 – A second mid-year refund program, this time providing an advance payment of an increase in the Child Tax Credit was administered by the IRS. During this same year, electronic filing reached 52.9 million tax returns, representing more than 40 percent of all individual tax returns — a new high.