Tips to Help Understand and Avoid Tax Scams

You’ve just received a notice from the IRS.  It indicates that, after multiple attempts to get in touch with you, they are going to levy you. You start to panic; you don’t remember the IRS ever attempting to reach out to you.  Maybe you’ve never even owed a tax liability. After calling the number on the notice, the agent on the line tells you to pay up – or face the consequences. Afraid that the IRS will levy your bank account – and possibly seize your house – you provide your payment information over the phone. You check your bank account and your entire savings are gone. You contact the number again, but the line has been disconnected. When you do get in touch with a real IRS Agent, they tell you that you never owed a balance with them in the first place.  You were just scammed.

Millions of Americans will receive communication from scammers impersonating the IRS, using scare tactics to get people to fork over their hard earned money.  These scammers will attempt to take your money by calling your personal phone, sending malicious emails, and sending fake letters like the one in the example above.  Below we will break down these different forms of communication and the different tactics they will take to gain your trust and steal your money.

One of the most common forms of tax scams is by leaving automated voicemails on your personal phone that tell you the IRS will be collecting on owed taxes or that there is a warrant for your arrest. In some cases, they will even mirror their number to make it appear similar to an actual IRS number. These fraudsters will most likely ask for cash payments sent to a temporary address or try to get you to tell them your social security number. Some may even ask for your bank account number directly in an attempt to bleed your account dry.

Sending false emails is a tactic known as “phishing.” When people click on a link in these emails, it uploads a virus that steals your sensitive information, allowing them access to your passwords, and even your bank accounts and credit cards.

Fake IRS notices are sent in an attempt to have you call the number listed on the letter.  Once they have you on the line, they bully you just so they can gain access to your personal information. The letter itself may look like it was directly sent to you by an assigned revenue officer from the IRS, and it can be difficult to tell the difference.

There are ways to protect yourself from scammers. It is important to know that the IRS will never ask for your bank account or card information over the phone, nor will they ever demand you to pay back your supposed balance immediately without first providing you with balance due notices in the mail. The IRS will also never ask you for your payment in one specific or unusual way, such as with gift cards or prepaid cards.  In addition, if the IRS is claiming that there are discrepancies on your tax return and you feel as though their claim is wrong, the IRS will allow you to provide proof your tax return is accurate. Finally, the IRS will never call you and tell you that they are going to have you arrested or sued for not paying your tax liability back to them.

It is important to always verify where the source of notices, phone calls or emails you receive are coming from. Owing the IRS can be frightening, but what’s even scarier is knowing that there are scammers preying on taxpayers, trying to steal from them. Always be cautious and aware of your tax situation and be sure to verify who you’re speaking with and where your money is going. You can contact the IRS directly at 1-800-829-1040 or you can go directly onto the IRS’s website to learn more about preventative measures to take to ensure you won’t get scammed.

How IRS Debt Can Ruin Your Travel Plans (and Jeopardize Your Passport)

The stress of owing the IRS can be overwhelming. The ever-present threat of having a lien placed on your assets, the fear every time you check your bank account to discover it has been levied dry, the strain of having the IRS garnish your monthly wages; these are just a few of the things that millions of Americans go through every day. Now, the IRS has made further changes to crack down on Americans who have not paid their taxes.

As of February 2018, Americans who owe the IRS more than $50,000 are at risk of having their passports revoked. If you have unpaid taxes owed to the IRS, it is important to either pay your balance in full or go on a monthly installment agreement in order to avoid having these travel restrictions placed on you. The State Department is now working alongside the IRS to not only revoke existing passports but to also deny any passport application for those with seriously delinquent tax debt.  (If you are overseas and your passport is denied, the State may issue a temporary passport that has limited validity to return to the United States.)  Essentially, until the tax debt is settled with the IRS, people will be placed on this new “No Passport” list.

There are a few exceptions to be aware of.  You won’t be at risk of being placed on the “No Passport” list if you are currently going through bankruptcy, if the IRS acknowledges you have been the victim of identity theft, or if there is a natural disaster declared on a federal level.  You may also be able to keep or renew your passport if you have a request pending for an installment agreement, have a pending offer in compromise with the IRS or if the IRS has accepted an adjustment that will satisfy your debt. And if you are placed on the “No Passport” list, the IRS will hold your application for 90 days to allow you to resolve your tax liability, pay your balance in full or enter into an installment agreement before revoking your passport.

This is yet another sign that the IRS is escalating their collection efforts against Americans who have unpaid taxes and another reason for you, as a taxpayer,  to stay current and compliant with their IRS filings.  If you are in the unfortunate situation of having delinquent IRS debt, it is wise to speak to a qualified tax professional who can help you evaluate your options sooner rather than later. Because when it comes to owing money to the IRS, delaying is almost always a losing strategy. For more information regarding on the IRS passport revocation and denial policy, click here!

Tax Tips for Uber Drivers and those Working in the Gig Economy

So you just joined Uber. Now you have a little extra cash, and you’re the one picking up the tab at dinner when you go out with friends and family. There couldn’t possibly be a downside to earning this additional income, right? Well, while there isn’t necessarily a drawback to having more money in your pocket, there are a few factors to being an Uber driver that you should consider from a tax standpoint. Here are some common questions and tax tips that first time Uber drivers should think about before getting started.

What is the difference between a 1099 earner versus a W2 earner?
If you have taxes being deducted out of every paycheck, you are most likely a W2 earner. At the end of the year, a W2 earner will receive a form that will state their annual wages along with a breakdown of the taxes that were withheld throughout the year.

A 1099 earner, however, does not have any taxes withheld from their income. The total amount of pay you received from Uber (or any other person or entity for whom you were a 1099 earner) during the year will be reported on a 1099 form. It is the responsibility of the 1099 earner to either make estimated tax payments (more on this below) or pay any balance in full at the end of the tax year.

What are estimated tax payments and can they help me avoid owing at the end of the year?
Estimated tax payments, or ETPs, are based on the amount of income that you expect to have earned in the current tax year. ETPs are usually made if a taxpayer believes that they will have a tax balance at the end of the year. A taxpayer may also wish to make ETPs if they are not withholding enough taxes from their paycheck, or if taxes are not being deducted from their income at all. A 1099 earner (or even a W2 earner who does not have enough withholdings listed) has the choice to pay their estimated tax payments bi-weekly, monthly or even quarterly. ETPs must be made in order to avoid owing at the end of the year, and it is even possible to receive a penalty if ETPs are not being made. The IRS allows you to make your estimated tax payments by either mailing a payment in, paying over the phone, or even paying online.

What are tax write-offs and how do I keep track of all my business expenses?
Being that you are a 1099 earner for Uber, it’s a little like running your own business. And just like if you were running your own business, you must document and report any income you have received and expenses you have made. Many of these expenses are tax write-offs. Some expenses that you may experience as an Uber driver include car maintenance, gas, and mileage. You will need to keep proof of your expenses throughout the tax year in order to write them off with the IRS. In order to do this accurately, you will need to keep track of how much of your mileage is used for business and how much is used for your personal life. There are multiple downloadable apps on the market designed to keep track of this for you. If you forgot to do this, don’t worry – you can request this information directly from Uber. Once you know what percentage of your mileage is used for business, you can calculate what percentage of your gas and maintenance can be listed as a tax write-off. Don’t forget to save those receipts; you will need them in case you are ever audited by the IRS!

Whether you’re using Uber to pay the bills or to give you a little extra income on the side, paying your taxes doesn’t have to be scary. Following the steps above and stashing away a little bit of your income can help ensure you don’t get blindsided come tax season. Now get out there and have some fun with your extra cash and remember, drive safe!