Linda M. Lacek, CPA

03/02/2016

The Internal Revenue Service issued an alert Tuesday to payroll and human resources professionals to beware of an emerging phishing email scheme that purports to come from company executives and requests personal information on employees.

The IRS said it has learned this scheme—part of the surge in phishing emails seen this year—already has claimed several victims as payroll and human resources offices mistakenly email payroll data, including Forms W-2 that contain Social Security numbers and other personally identifiable information, to cybercriminals posing as company executives.

“This is a new twist on an old scheme using the cover of the tax season and W-2 filings to try tricking people into sharing personal data,” said IRS Commissioner John Koskinen in a statement. “Now the criminals are focusing their schemes on company payroll departments. If your CEO appears to be emailing you for a list of company employees, check it out before you respond. Everyone has a responsibility to remain diligent about confirming the identity of people requesting personal information about employees.”

IRS Criminal Investigation already is reviewing several cases in which people have been tricked into sharing SSNs with what turned out to be cybercriminals. Criminals using personal information stolen elsewhere seek to monetize data, including by filing fraudulent tax returns for refunds.

This phishing variation is known as a “spoofing” email. It will contain, for example, the actual name of the company chief executive officer. In this variation, the “CEO” sends an email to a company payroll office employee and requests a list of employees and information including SSNs.

The following are some of the details contained in the e-mails:

• Kindly send me the individual 2015 W-2 (PDF) and earnings summary of all W-2 of our company staff for a quick review

• Can you send me the updated list of employees with full details (Name, Social Security Number, Date of Birth, Home Address, Salary) as at 2/2/2016.

• I want you to send me the list of W-2 copy of employees wage and tax statement for 2015, I need them in PDF file type, you can send it as an attachment. Kindly prepare the lists and email them to me asap.

Among the companies that were scammed was the social media mobile app developer Snapchat. “We’re a company that takes privacy and security seriously,” the company said in an apology to its employees Friday. “So it’s with real remorse–and embarrassment–that one of our employees fell for a phishing scam and revealed some payroll information about our employees. The good news is that our servers were not breached, and our users’ data was totally unaffected by this. The bad news is that a number of our employees have now had their identity compromised. And for that, we’re just impossibly sorry.”

Snapchat said that last Friday its payroll department was targeted by an email phishing scam in which a scammer impersonated the company’s CEO and asked for employee payroll information.

“Unfortunately, the phishing email wasn’t recognized for what it was–a scam–and payroll information about some current and former employees was disclosed externally,” said the company. “To be perfectly clear though: None of our internal systems were breached, and no user information was accessed.”

The IRS noted that it recently renewed a wider consumer alert for e-mail schemes after seeing an approximate 400 percent surge in phishing and malware incidents so far this tax season and other reports of scams targeting others in a wider tax community.

The emails are designed to trick taxpayers into thinking these are official communications from the IRS or others in the tax industry, including tax software companies. The phishing schemes can ask taxpayers about a wide range of topics. E-mails can seek information related to refunds, filing status, confirming personal information, ordering transcripts and verifying PIN information.

The IRS, state tax agencies and tax industry have joined together in a public awareness campaign – Taxes. Security. Together. – to encourage taxpayers and tax professionals to do more to protect personal, financial and tax data. See IRS.gov/taxessecuritytogether or Publication 4524 for additional steps.

The IRS, the states and the tax industry came together in 2015 to identify even more safeguards to protect your federal and state tax accounts from identity thieves.

02/25/2016

I know you probably can compile a very long list of things you’d rather do than tackle your 2015 tax returns. But please listen to me: procrastination could cost you big time this year, if you anticipate you will be receiving a refund.

The big risk you face is that if you dawdle and don’t get your taxes filed quickly, there’s a chance a criminal could file a fraudulent return using your Social Security number and pocket a refund. This is not some small outlier problem. In 2013, the Internal Revenue Service paid out an estimated $5.8 billion in refunds to identity thieves. That created a major hassle for people whose identities were hacked: when they filed their legitimate return that entitled them to a refund, their return was put in limbo, because according to the IRS, they had already filed a return and the refund had been paid. I want to be clear: the IRS has a system for people to get their refunds if they are ID theft victims. But c’mon, that takes time, and it is an unnerving hassle.

My advice if you are going to get a refund this year is to get your return filed ASAP. Beat the thieves to the punch! And an even smarter move for the 2016 tax year is to do what you can to not be in line for a refund a year from now. You can adjust your withholding or your estimated tax if you are self-employed.
Suze Orman Website

11/18/2015

IRS Summertime Tax Tip 2015-26, August 31, 2015

10/28/2015

If you are a farmer or rancher forced to sell your livestock because of the drought that affects much of the nation, special IRS tax relief may help you. The IRS has extended the time to replace livestock that their owners were forced to sell due to drought. If you’re eligible, this may help you def…

10/21/2015

If you changed your name as a result of a recent marriage or divorce you’ll want to take the necessary steps to ensure the name on your tax return matches the name registered with the Social Security Administration. A mismatch between the name shown on your tax return and the SSA records can cause problems in the processing of your return and may even delay your refund.
Here are five tips from the IRS for recently married or divorced taxpayers who have a name change.
1. If you took your spouse’s last name or if both spouses hyphenate their last names, you may run into complications if you don’t notify the SSA. When newlyweds file a tax return using their new last names, IRS computers can’t match the new name with their Social Security Number.
2. If you were recently divorced and changed back to your previous last name, you’ll also need to notify the SSA of this name change.
3. Informing the SSA of a name change is easy; you’ll just need to file a Form SS-5, Application for a Social Security Card at your local SSA office and provide a recently issued document as proof of your legal name change.
4. Form SS-5 is available on SSA’s website at http://www.socialsecurity.gov, by calling 800-772-1213 or at local offices. Your new card will have the same number as your previous card, but will show your new name.
5. If you adopted your spouse’s children after getting married, you’ll want to make sure the children have an SSN. Taxpayers must provide an SSN for each dependent claimed on a tax return. For adopted children without SSNs, the parents can apply for an Adoption Taxpayer Identification Number – or ATIN – by filing Form W-7A, Application for Taxpayer Identification Number for Pending U.S. Adoptions with the IRS. The ATIN is a temporary number used in place of an SSN on the tax return. Form W-7A is available on the IRS website at http://www.irs.gov, or by calling 800-TAX-FORM (800-829-3676).

Social Security delivers a broad range of services online at socialsecurity.gov. We have a proud history of protecting the integrity of our programs and service to the public.

03/20/2014

If anyone has not yet filed their 2010 tax return, the deadline is April 15, 2014. After that date, any refund due will not be paid by the IRS.

02/28/2014

Considering the number of startups that fail in the first year of business, and the challenges entrepreneurs face on a daily basis, it's apparent that we must help startups understand the importance of working with dedicated professionals. Does an accountant cost money? Of course, and it’s one of the biggest reasons preventing entrepreneurs from seeking the services of a professional accountant. But startups should consider their services investment, not an expense.
An accountant’s scope of work does not end with tax preparation; they can and should be a year-round business partner that can lend expertise and perspective in your industry to help your business grow and navigate through an uncertain economy.
Here are nine reasons why all entrepreneurs should work with an accountant.
1. Focus on why you started your business. Entrepreneurs are passionate, and the more than half of small Canadian business owners surveyed went from business idea to opening in less than six months. With such rapid growth, business owners can’t afford to get bogged down with tasks that don’t help you continue to grow. Accountants can take on the heavy lifting of many different aspects of your business.
2. Find work-life balance. Regardless of how new or established a business is, owners across the board struggle with finding the right balance between work and having a life. In fact, maintaining a balance was the top challenge for startups. Accountants can take on the tasks you are less than thrilled about handling, and free you up to sell, market and grow during the day, and maybe even take your son to soccer practice at night.
3. A professional reputation. A good accountant will represent you and your company in the best possible way. This is particularly important as new businesses strive to build strong relationships with key players in their success, such as the bank.
4. It’s vital to a company’s success. As reported by the Sage survey, more established business owners report working with an accountant, agreeing that working with an accountant is a critical element in success.
5. A new perspective. Oftentimes entrepreneurs are so involved running the day-to-day operations of their business that they may not be able to see the whole picture. Someone who is removed from the business can provide a different perspective that may otherwise be missed. Meeting with an accountant can be like taking a step back, looking at the bigger picture and gaining a fresh, new perspective. Sometimes that’s all it takes to come up with the next big idea.
6. They have reach. Don’t underestimate how valuable it is to receive guidance from someone who has insight and knowledge across hundreds of businesses and industries. Accountants not only get to see the financial information of many businesses across a variety of industries, but they also have visibility into best practices that are working for other businesses as well as the mistakes others have made that have led to failure. Being able to have this insight and share information on what has or hasn’t worked for others is invaluable – why reinvent the wheel if you don’t have to?
7. Businesses need a plan. One reason thousands of businesses fail every year is because they didn’t have a plan. When asked why, they said, “I just didn’t know where to start.” This is where an accountant comes in. A good accountant will partner with a business to look at all the data and help build a road map to success. Poor planning isn’t necessary, and bringing a professional on board can help small businesses plan for success.
8. They understand tax. This may seem obvious, but keep in mind that rules and regulations change frequently, and it’s tough if not impossible for any business owner to keep up with it all. Twenty-nine per cent of Canadian small business owners admitted that accounting and bookkeeping is one of their biggest challenges. An accounting professional can take away your uncertainty and ensure your business stays compliant.
9. Analyze data for growth and profitability opportunities. If all of your data is just sitting in a database and you’re not interpreting, analyzing or using it to help drive your business direction and decisions, you’re missing out on a great opportunity. Have an accountant help you dive into the numbers and use them to propel greater business growth and profitability in the future. A great way to do this is through online collaboration in a small business accounting solution where accountants have visibility into clients’ financial data in real time.
Can your startup survive without the assistance of an outside accountant? Possibly, but the extra insight, guidance, and expertise an accountant offers can be the catalyst that makes your business thrive.
As vice-president and general manager of Sage Accountant Solutions at Sage North America, Jennifer Warawa is helping entrepreneurs work with accountants by introducing Sage One Accountant Edition, an online accounting solution. Prior to working with Sage, Ms. Warawa was a small business owner for 12 years.

12/13/2013

FIVE INVESTOR TAX PLANNING TIPS

Long-term versus short-term holding period makes a big tax difference. Even at its highest, the long-term capital gain tax rate is 20%, while the ordinary rate is as high as 39.6%. Making sure that stock is held more than one year saves lots of tax. But we all have had a client who waited for the long-term holding period to toll and lost more profit on falling stock prices than the tax differential would have been. So advise the client to always consider the investment quality before he or she considers the tax consequences.
Keep an eye out for that 0% tax rate. For a low income year, the tax rate on long-term capital gains can be zero. Free money is hard to come by in the tax system. Long-term capital gains and qualified dividends are taxed at a zero rate as long as 2013 taxable income does not exceed $36,250 single ($72,500 MFJ.)
Holding foreign stock in your pension plan can be expensive. Foreign tax is often withheld on investments in foreign companies. The foreign tax credit may offset tax on the investor’s tax return, but if the account is a pension account, there is no tax credit and tax is paid on an otherwise tax-deferred account (albeit to a foreign country.)
The 28% rate applies to collectibles held in your taxable account. Long-term gains on the sale of gold and silver held in a taxable account are taxed at 28% rather than the lower 0%/15%/20% rates. Make sure that your client knows his or her tax burden on the various type of investments.
Selling stock with the highest basis is usually best. The law requires the brokerage company to report to the IRS the basis and holding period of stock sold. Without specific instructions to the contrary, the broker must calculate the basis using first in, first out (FIFO). Identify specific stock to be sold to maximize tax benefits from basis and holding period considerations.

08/29/2013

Five Tax Tips If You’re Starting a Business:

If you’ve just opened your doors, it is important for you to know your federal tax responsibilities. Here are five tips to get you started.

1. Type of Business. Early on, you will need to decide the type of business entity you are going to establish. The most common types are sole proprietorship, partnership, corporation,
S corporation and Limited Liability Company. Each type reports its income on a specific federal tax form.

2. Types of Taxes. The type of business you run usually determines the type of taxes you pay. The four general types of business taxes are income tax, self-employment tax, payroll tax and excise tax.

3. Employer Identification Number. A business often needs to get a federal EIN for tax purposes. Check with me to find out whether you need the number. If you do, I can help you apply for one.

4. Recordkeeping. Record keeping helps you when it’s time to file your business tax forms at the end of the year. It helps track deductible expenses and supports all the items you report on your tax return. Good records also help you monitor your business progress and prepare your financial statements. You may choose any recordkeeping system that clearly shows your income and expenses. Call me if you need assistance setting up your recordkeeping system.

5. Accounting Method. Each taxpayer must also use a consistent accounting method, which is a set of rules that determine when to report income and expenses. The most common are the cash method and the accrual method. Under the cash method, you normally report income in the year you receive it and deduct expenses in the year you pay them. Under the accrual method, you generally report income in the year you earn it and deduct expenses in the year you incur them. This is even if you receive the income or pay the expenses in a future year. I can help you figure out which accounting method is best for your business.

08/22/2013

Beginning in tax year 2013 (returns filed in 2014), taxpayers may use a simplified option when figuring the deduction for business use of their home.

Note: This simplified option does not change the criteria for who may claim a home office deduction. It merely simplifies the calculation and recordkeeping requirements of the allowable deduction.

Highlights of the simplified option:
•Standard deduction of $5 per square foot of home used for business (maximum 300 square feet).
•Allowable home-related itemized deductions claimed in full on Schedule A. (For example: Mortgage interest, real estate taxes).
•No home depreciation deduction or later recapture of depreciation for the years the simplified option is used.

Comparison of methods

Simplified Option

Regular Method

Deduction for home office use of a portion of a residence allowed only if that portion is exclusively used on a regular basis for business purposes Same
Allowable square footage of home use for business (not to exceed 300 square feet) Percentage of home used for business
Standard $5 per square foot used to determine home business deduction Actual expenses determined and records maintained
Home-related itemized deductions claimed in full on Schedule A Home-related itemized deductions apportioned between Schedule A and business schedule (Sch. C or Sch. F)
No depreciation deduction Depreciation deduction for portion of home used for business
No recapture of depreciation upon sale of home Recapture of depreciation on gain upon sale of home
Deduction cannot exceed gross income from business use of home less business expenses Same
Amount in excess of gross income limitation may not be carried over Amount in excess of gross income limitation may be carried over
Loss carryover from use of regular method in prior year may not be claimed Loss carryover from use of regular method in prior year may be claimed if gross income test is met in current year

Selecting a Method
•You may choose to use either the simplified method or the regular method for any taxable year.
•You choose a method by using that method on your timely filed, original federal income tax return for the taxable year.
•Once you have chosen a method for a taxable year, you cannot later change to the other method for that same year.
•If you use the simplified method for one year and use the regular method for any subsequent year, you must calculate the depreciation deduction for the subsequent year using the appropriate optional depreciation table. This is true regardless of whether you used an optional depreciation table for the first year the property was used in business.

Full details on the new option can be found in Revenue Procedure 2013-13.

08/08/2013

You can make monthly payments through an installment agreement if you're not financially able to pay your tax debt immediately. However, you will reduce or eliminate the amount of penalties and interest you pay and avoid the fee associated with setting up an installment agreement if you pay your tax bill in full. Before you apply:
•File all required tax returns;
•Consider other sources (loan or credit card) to pay your tax debt in full to save money;
•Determine the largest monthly payment you can make ($25 minimum); and
•Know that your future refunds will be applied to your tax debt until it is paid in full.

Fees for setting up an installment agreement:
•$52 for a direct debit agreement;
•$105 for a standard agreement or payroll deduction agreement; or
•$43 if your income is below a certain level.

Apply for an installment agreement
•Apply online if you owe $50,000 or less in combined individual income tax, penalties and interest;
•Call the phone number on your bill or notice;
•Complete and mail Form 9465, Installment Agreement Request (PDF). If you owe more than $50,000, you will also need to complete Form 433-F, Collection Information Statement (PDF