It’s that time of year where we are getting our tax information and many of you are getting ready to sit down and prepare your 2017 taxes. I thought I would run through some issues with regard to taxes that will be helpful for you. First, don’t let anyone fool you about the new tax law. The new tax law took effect January 2018 and does not affect your 2017 tax returns whatsoever.
It is important to remember that as taxpayers we are the ones who ultimately are responsible for our tax returns. Therefore, if you hire a paid professional to assist you in preparing your return, it is important to hire a qualified professional. That doesn’t necessarily mean you have to hire a certified public accountant, but it does mean you have some responsibility when it comes to hiring a preparer to make sure they are qualified. To me, one ingredient of a qualified preparer is that they have a commitment to continuing education. Even though the new tax law doesn’t affect this year’s tax return, there were many changes over the last year that impact 2017 returns. In addition, many people can do their tax return on their own. One option is to buy a software package such as TurboTax or one by H & R Block. For the great majority of people who do their own return, I strongly recommend some sort of software package. Tax returns have gotten more complex and it has become more and more difficult to do your return by hand.
Let’s also not forget that for those of you who make less than $66,000 a year, you can actually obtain free software to do your return through the IRS. To obtain this free software, all you need to do is go to the IRS’s website at IRS.gov and click on free file.
One last note regarding completing your tax returns and that is don’t forget that if time catches up to you and you are going to miss the April 17th deadline, you can automatically file for an extension. By completing form 4868, you get an automatic six month extension to file your return. In addition, contrary to popular belief, there is no increase in audit risk when you file an extension. The one caveat, however, is that when you file for an extension, it’s an extension of time to file your return, not to pay your taxes. You still need to guesstimate your tax liability and potentially make an estimated tax payment on form 4868.
I also want to remind you during this tax season that this is the time of year that the crooks crawl out of their hole with tax-related schemes. Every year, the crooks get smarter and look for more ways to take advantage of you. While it would be impossible to list all the types of tax scams, it is important to remember some of the basics. In most of these tax scams the crooks contact you either by email or phone claiming that you owe money to the IRS and that you must make a payment immediately or they will bring a lawsuit or even have you arrested. You should know right off the bat that if someone claims they are from the IRS and they contact you via email or phone, they are a fraud. The IRS does not make their initial contact with the taxpayer through email or phone. Therefore, if you get an email claiming it’s from the IRS, delete it immediately. If you get a phone call from someone who claims they are an IRS representative, hang up no matter what the caller ID says.
As I mentioned earlier, the crooks are getting smarter and they keep trying new ways to take advantage of you. One of the latest is the crooks will send you an email that they are from your tax preparer or your tax software company asking you to provide them information related to your refund. Once again, don’t open those emails, delete them.
I know that many of you are thinking what if it is a legitimate request. If you think that the email may be legitimate, I still recommend that you don’t click on the links or respond to that email. My advice is that you call the preparer or the tax software company yourself to determine if the email is legitimate or not. I think you will find in the great majority of cases the email is fraudulent.
Unfortunately, in this world we can never afford to let our guard down. At all times, you must prevent the crooks from getting your sensitive information. Always remember that just because someone request something doesn’t mean you need to provide it to them. Be very careful with your tax information and only deal with a professional. I guarantee you the few extra dollars that a professional will charge you to do your return is well worth it.
Good luck!
If you would like Rick to respond to your questions, please email Rick at rick@bloomassetmanagement.com.