Tag: IRS

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Life Events, Reviews

Easily Find Your Free File Options with the IRS Tool

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Tax return check

If your household grossed under $62,000 in 2015, you’re eligible to file your taxes using Free File from the IRS. Free File is a conglomeration of different online tax filing software providers that have partnered with the IRS to make their product available for no charge for low- and middle-income households.

When you look at all of your Free File options, you’ll see something like this:

IRS pic 1

Those aren’t even all of your options. As if filing your taxes weren’t enough of an exercise in tedium, now you have to go through each program, determine if you qualify, and decide which software will best suit your needs.

Except that you don’t. If you click on the “Help Me Find Free File Software” link in the furthest left hand column, the IRS will provide you with an online tool to help you weed out some of your options.

The tool, which can be found here, will ask you for a few pieces of information:

  • Your age
  • Your estimated Adjusted Gross Income (AGI) for 2015
  • Your state of residence
  • Your eligibility status for the Earned Income Tax Credit
  • If you or your spouse received military income in 2015
  • Your state, if you want to file a free state return

If you don’t know if you qualify for the Earned Income Tax Credit, clicking on the embedded link will bring up income limits. The real issue we see is inputting AGI if you have a variable income. When you have a steady income, you can reliably assume a number similar to your previous year’s return. Variable-income households may have to run some of their numbers first in order to see if they qualify, which partially defeats the purpose of using tax software.

We ran a couple of fictional profiles to see how the tools work. The first one is for a 30-year-old Pennsylvanian with an AGI of $61,000. They do not qualify for the Earned Income Tax Credit, and did not receive military pay in 2015.

IRS pic 2

These were their filing options, as brought up by the tool:

IRS 3

The only two options, if they want to file their state return for free, are H&R Block and OLT.com. This makes the decision a lot easier. We know from research that H&R Block’s tools are more in depth than OLT.com’s, so our filer will probably go with the former.

The next parameters we ran were for a 30-year old resident of New Hampshire who did not have any military income, but did qualify for the Earned Income Tax Credit with an income of $34,000, and one child. We were curious if free, state-filing options would be more limited, as New Hampshire’s unique tax laws often cause problems for online tax software providers.

Much to our surprise, we got more hits for our New Hampshire resident than the Pennsylvanian:

IRS 4

After some digging, we discovered that the two contributing factors were the lower income, and eligibility for the Earned Income Tax Credit. TaxACT’S Free File is only available to those with an income below $50,000, unless they meet a litany of alternative requirements, such as qualifying for the Earned Income Tax Credit. TaxACT, OLT.com, and H&R Block all offer free state returns, even for the difficult state of New Hampshire; it was the Pennsylvanian’s income that kept them out of the TaxACT bracket.

IRS Tools Saves You Valuable Time

The point is that the selection process is arduous if you try to go it on your own. As long as you can reliably predict your AGI, using this IRS tool will save you valuable time and headaches when choosing your Free File software provider.

Brynne Conroy
Brynne Conroy |

Brynne Conroy is a writer at MagnifyMoney. You can email Brynne at brynne@magnifymoney.com

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Consumer Watchdog

Consumer Watchdog: The IRS Reveals Dirty Dozen Tax Scams

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

The IRS Reveals Dirty Dozen Tax Scams

Updated for 2016

Tax time is high season for scams and identity theft. In fact, tax-refund fraud is expected to hit $21 billion this year. We’ve alerted you to some of the tactics crooks use during tax season like pretending to call as an IRS agent demanding payment, email scams saying your tax payment got rejected or that you owe back taxes, or simply stealing your W2 then filing your tax return and routing your refund to another bank account. The IRS also has its own list of 12 scams used to part you with your hard-earned money (or that they think you might be tempted to do).

We want you to be aware of every way a thief might try to take advantage of you during the often frustrating and trying time of filing taxes.

Here are the Dirty Dozen tax scams from the IRS:

1. Phone Scams

This scam is the most prevalent way a crook will try to use tax time to get your money. A fraudster will call you impersonating an IRS officer claiming you owe more money (or back taxes) and need to pay it now or risk being arrested, deported, getting your driver’s license revoked or whatever clever scare tactic he can come up with. Stay calm, never give out personal information and immediately hang up and report the incident to the Treasury Inspector General for Tax Administration at 1.800.366.4484 and file a complaint using the FTC Complaint Assistant (choose “Other” and then “Impostor Scams”).

[Learn how to protect yourself from tax scams here.]

2. Phishing

If it smells fishy, it probably is! The IRS won’t send you an email out of the blue about a refund or back taxes. In fact, first contact from the IRS almost always still comes via snail mail and not email or phone. If you get an email claiming to be from the IRS, don’t click any links until you contact the IRS directly to confirm it’s valid. The crooks are looking to steal your personal information.

[Read more about how to protect against Phishing Scams here.]

3. Identity Theft

Getting your identity stolen at any point during the year is a major hassle and could be costly. But getting your identity stolen at tax time is probably because a crook is filing for a tax return using your name and getting your refund first (or a fake version of your refund). One of the best ways to defend against this is to file your taxes as early as possible. Also be sure to track all your W2 or 1099 forms and reach out to an employer immediately if you haven’t received your forms by early February. Crooks are not above stealing your tax forms and using them to file.

[Learn how to prevent and deal with identity theft here.]

4. Return Preparer Fraud

Looking for a good deal is great, but don’t go to cheap tax preparer (accountant) if he or she isn’t credible. Do your due diligence before giving over all your personal information to an accountant. Unfortunately, some of them use tax season as a chance to steal people’s identities.

5. Offshore Tax Avoidance

This one is on you. Don’t hide your money offshore, because you’ll be paying big time when Uncle Sam tracks it down. You can voluntarily admit to having an offshore account (even if you had one by accident – perhaps while working internationally) through the Offshore Voluntary Disclosure Program.

6. Inflated Refund Claims

It’s fine if a tax prep software company promises the biggest return compared to competitors, but don’t trust anyone claiming to get you an inflated refund. Never sign a blank return and be wary of anyone promising a big return without even looking at your information. Also, don’t agree to pay fees based on a percentage of a refund. This scam is typically perpetuated via word of mouth, flyers in storefronts and targets community and church groups.

7. Fake Charities

Check out any charity before donating. This is good practice year-round, but fake charities become especially popular during tax season to prey on people receiving refunds. Use tools like GuideStar.org to see if a charity is legit.

8. Hiding Income with Fake Documents

Much like hiding money offshore – this tax scam is on you to avoid. Don’t attempt to fake taxable income by filing false Form 1099s or other documents to inflate your tax refund. You are legally responsible for what is on your returns, regardless of who prepares them.

9. Abusive Tax Shelters

The IRS is committed to cracking down on abusive tax structures/ tax avoidance schemes and persecuting people who create and sell them. Be wary of anyone pushing tax shelters that sound like a great deal.

10. Falsifying Income to Claim Credits

Just report what you’ve earned. It’s really basic. Falsifying your income in anyway will not end well for you, no matter what a con artist tells you.

11. Excessive Claims for Fuel Tax Credits

Some prepares may try to talk you into making a fuel tax credit claim on your return. Be wary! The fuel tax credit is generally limited to off-highway business use, typically for farming. If you aren’t a farmer, it’s doubtful this tax credit is for you.

12. Frivolous Tax Arguments

Yes, you have the right to contest your tax liabilities in court. But don’t let a scam artist sell you snake oil. Often times frivolous tax arguments not only fail to hold up in court but filing a frivolous tax return results in a penalty of $5,000.

Be sure to check out the Dirty Dozen tax scams directly on IRS.gov and contact the IRS and FTC directly if you believe you’ve been a victim of a tax scam.

Think You’re a Victim of a Tax Scam?

Scams need to be reported immediately to the Federal Trade Commission (FTC). You can also hear an example of a scam IRS call here.

Erin Lowry
Erin Lowry |

Erin Lowry is a writer at MagnifyMoney. You can email Erin at erin@magnifymoney.com

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Fine Print Alert

Fine Print Alert: Hackers Hit the IRS

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

fineprintalert-full

In our weekly Fine Print Alert we call out news from the financial community and shine a spotlight on any sneaky changes in the fine print. We also share our favorite reads from the week.

FINE PRINT ALERT

Hackers hit the IRS…

Keep an eye on your credit reports folks. The IRS announced that over 100,000 people’s data was compromised in a recent breech by hackers. The thieves took taxpayers’ past returns, which means access to Social Security numbers, addresses and birth dates. That’s the information needed to steal someone’s identity and cause quite a financial headache.

The IRS will be notifying people who may have been affected via mail. The IRS will also provide free credit monitoring services to those who had their data compromised. You can also be proactive by pulling your credit reports to look for any recent activity.

MAGNIFYMONEY IN THE NEWS

Nooga.com: New graduates, read this to avoid financial mistakes of predecessors 

FAVORITE READS FROM AROUND THE WEB

How This Woman Tracked Down Her Identity Thief – When Jessamyn Lovell’s wallet went missing at an art gallery in 2009, she took all the right precautions. She canceled all of her credit cards and put a fraud alert on her credit report to prevent anyone taking out new lines of credit under her name. Despite these efforts, a year and a half later, Lovell, 38, received a phone call from a police officer who had strange news: A woman in San Francisco had been arrested for using Lovell’s driver’s license to check into a swanky hotel. Mandi Woodruff shares the story on Yahoo! Finance.

Why You’re Thinking About Your Budget All Wrong – In our conversation (which you can watch in full, above), Washington noted that living according to a budget can actually enhance our lives, because it gives us a sense of exactly what we have on hand to spend, and how we can plan for the future. Think of it as a guideline for getting what you want — and not a rigid set of rules that’s preventing you from buying coffee or spending a night on the town. Maggie McGrath covers how to budget on Forbes.

More Graduates are Repaying Their Parents for College – It’s fairly often you hear about parents making their children pay their own way through school. Some parents don’t save for college, while others want their children to simply pay their own way. However, a trend has emerged with parents offering to pay for college, but with the caveat that the student has to repay the debt. Robert Farrington explains the rationale behind this new trend on Forbes. 

 

Erin Lowry
Erin Lowry |

Erin Lowry is a writer at MagnifyMoney. You can email Erin at erin@magnifymoney.com

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