This article contains general information only and is not intended to address the circumstances of any specific individual. The information contained herein is accurate as of the date of publication, but there is no guarantee that such information will be accurate in the future. Before making any decisions or taking any actions that may affect your tax or financial situation, you should consult your own professional advisor.
Another income tax filing season is now underway and as always you have to be your own best advocate. Every year has certain basic protocols, but also has some new – and, at times, challenging – wrinkles. One of those new wrinkles is the increased collaborative efforts of the IRS and state tax departments to work together to combat the rampant explosion in identity theft used to file fraudulent returns.
According to IRS statistics, in 2010 approximately 271,000 fraudulent returns were filed. Last year that figure rose to over 3 million. As a result, the IRS, states and the private sector tax industry announced new safeguards that include authentication, strategic threat assessment and information sharing. This increased protection may reduce fraudulent filings, but it will also likely cause delays in issuing refunds this year. Most states are suggesting – some more strongly than others – that you provide them with information from your driver’s license or state ID card to help improve the processing time of your return. So far, only Alabama actually requires this kind of information before it will process a return. You can take a deep breath…New York is not at that point yet.
If you have been or become the victim of a fraudulent federal tax return filing, we recommend you do the following:
1. File a police report
2. File IRS Form 14039 (Identity Theft Affidavit), available at www.irs.gov
3. Request a copy of the fraudulent return. Request this in writing from the IRS, P.O. Box 9039, Andover, MA 01810.
OTHER TAX UPDATES
The myRA account program has now been rolled out. This is a new starter retirement account offered through the U.S. Treasury. It is similar to a Roth IRA, but the risk of losing any principal has been eliminated. The maximum 2015 contribution is $5,500. For more information, please see www.myRA.gov. Another new account this year is the Achieving a Better Life Experience (ABLE). This is a savings account for individuals with disabilities. The annual contribution is $14,000. Similar to 529 college savings plans, the amount contributed is not tax deductible, but the earnings can accumulate tax-free if the distributions are used to pay for the beneficiary’s qualified expenses.
There was also some tax legislation that will affect both 2015 and future years tax returns. You may have heard news pundits talk about “tax extenders.” These were beneficial tax provisions that expired each year and that Congress would then reinstate, often retroactively. This made tax planning difficult. The good news is that many of these “tax extenders” have now been made permanent by the PATH Act, including the above-the-line $250 deduction for elementary and secondary school teachers for classroom supplies.
For those doing international touring or performing, beware that the FAST Act included a new provision that allows the IRS to request revocation of the U.S. passport of taxpayers with large balances due. The law says the State Department can revoke, deny or limit passports for anyone the IRS certifies as having a seriously delinquent tax debt exceeding $50,000.
In the New York State arena, starting this year, you must report information from any federal Form W-2 on New York Form IT-2 and federal Form 1099-R on Form IT-1099-R. W-2s and 1099-Rs are no longer accepted by New York. Individuals who are subject to the Metropolitan Commuter Transportation Mobility Tax (MCTMT) are now required to report and pay their MCTMT on their personal income tax return using either Form IT-201 (full-year residents) or IT-203 (part-year residents). Form MTA-6 is now obsolete. The New York City enhanced real property tax credit has been extended. See the instructions for Form NYC-208 to find out who qualifies and how to apply. Also new is a line on the return to make a voluntary contribution to help support homeless veterans.
Walter Gowens and Phyllis Jo Kubey are both Enrolled Agents who specialize in performing artists. Walter can be e-mailed at AAAA@PrudentialVanguard.net and Phyllis and be e-mailed at firstname.lastname@example.org.