2017 taxes: tips on how to self-file and how to recognize scams
Federal Tax Day falls is normally April 15th, but because it falls on a Sunday this year, and Monday is Emancipation Day in Washington D.C., April 17 is the last day to file your 2017 tax returns.
The U.S. Tax Code is probably one of the most complex set of statutes, and it's very common that those who file their own taxes, without the help of a licensed professional, make mistakes. However, that doesn't mean a taxpayer has to hire an accountant to file their taxes for them. There are a number of self-file services available that are self explanatory and leave little room for mistake - such as TurboTax, Tax Slayer, Credit Karma, H&R Block.
First, find out if you even need to file taxes. You can find out using the IRS’s online Interactive Tax Assistant. By answering some basic questions about your filing status, gross income and whether you had federal income tax withheld, you will be able to determine whether or not you need to file for a particular tax year.
If you determine that you need to file, and you decide that filing your taxes yourself is something that you want to do this year, here are some tips from the IRS to help you out:
(1) Gather Records. Good recordkeeping is important. It helps to ensure that nothing gets overlooked. Records such as receipts and cancelled checks also provide expense documentation. Other documents you'll need include: (i) Form W-2 (wages), (ii) W-2G (gambling winnings), (iii) 1099-INT (interest), (iv) 1099-DIV (dividends), (v) 1099-B (investment sales), (vi) Combined 1099 (brokerage combined tax statement), (vii) 1099-MISC (independent contractor work, royalties), (viii) 1099-R (retirement distributions), (ix) K-1 (MLP, Partnership or S-Corp share of income), (x) SSA-1099 (Social Security benefits), (xi) 1099-G (unemployment benefits and state tax returns), (xii) 1099-C (forgiven debt), (xiii) Income Adjustment Documents, including Form 1098-E (student loan interest); 5498 (IRA contributions); 5498-SA (HSA/MSA contributions); and 1098-T (tuition).
(2) Use IRS Online Tools. The IRS has many useful online tools, including the Interactive Tax Assistant, which provides answers to many tax questions. It gives the same answers that an IRS representative would give over the phone.
(3) File Electronically. Most taxpayers file electronically these days. It offers ease and convenience. The tax software guides people through the entire process. There are no forms to fill out. Electronic filing is also a more accurate way to file as the software does all the math for the user.
(4) Use IRS Free File. Free File is available only on IRS.gov. Taxpayers earning $66,000 or less last year can use free name-brand tax software to file a federal tax return. Free File Fillable Forms, an electronic version of IRS paper forms, is available for those who earned more than $66,000. People can use Free File to get an automatic six-month extension to file. An extension to file a tax return, however, is not an extension to pay any taxes owed. April 17 is still the deadline for any taxes owed.
(5) Taxpayers can now use their cell phone or tablet to prepare and e-file a federal tax return through IRS Free File. They can access Free File two ways. They can use the IRS app, IRS2Go, which has a link to the Free File Software Lookup Tool. They can go right to IRS.gov/freefile and select the Free File Software Lookup Tool or Start Free File Now to find the software product they want to use. The IRS2Go app is available for Android and iOS devices.
(6) Report All Income. Taxpayers must report all their income from Forms W-2, Wage and Tax Statements, and Forms 1099. Other income may be reportable as well, even if the taxpayer does not receive a statement.
(7) Taxpayers should keep a copy of their tax return. Taxpayers using a software product for the first time may need their Adjusted Gross Income amount from their prior-year tax return to verify their identity. Taxpayers can learn more about how to verify their identity and electronically sign tax returns at Validating Your Electronically Filed Tax Return.
Some other tips include:
(1) Determine whether or not you should itemize deductions. Itemizing deductions is only beneficial of those deductions will exceed the standard deduction. If you’re using a tax software program it will guide you as to what you should do. If you do opt to itemize your deductions, you will need forms including 1098 (mortgage interest) as well as receipts for expenses such as charitable contributions, unreimbursed employer business expenses, and medical expenses.
(2) Review last year’s tax returns. Reviewing the information from the previous year’s federal and state tax returns will make the current year’s filing much simpler. Much of the information will be the same, including employer federal ID numbers, children’s social security numbers, etc.
(3) Determine whether or not you should itemize deductions. Itemizing deductions is only beneficial of those deductions will exceed the standard deduction. If you’re using a tax software program it will guide you as to what you should do. If you do opt to itemize your deductions, you will need forms including 1098 (mortgage interest) as well as receipts for expenses such as charitable contributions, unreimbursed employer business expenses, and medical expenses.
(4) File on time. Even if you owe an amount you cannot pay in full by tax day, it’s important to file on time and to pay as much as you can. Doing so will allow you to avoid a late filing penalty and to minimize interest charges on any unpaid balance. If you cannot pay your taxes in full, you can request an installment agreement from the IRS.
(5) File electronically. You can still file paper returns and many filers do so because they’re uneasy sending their personal and tax information over the Internet. However, e-filing via the IRS website is very safe and it will expedite your refund if you’re getting one.
Regardless of whether you file your own taxes, or you have a tax preparer help you, you or your preparer may be victims of tax scams. Scams that target you as a taxpayer include the following:
(1) ‘Ghost’ tax return preparers. A ghost preparer is paid to prepare a tax return but does not sign it as the paid preparer. These phantom preparers who won't put their name on the tax return are a warning sign for taxpayers of a potential scam
(2) ‘IRS Refunds’ email. The “IRS Refunds” scam is a common tactic used by cybercriminals to trick people into opening a link or attachment associated with the email that takes people to a fake page where thieves try to steal personally identifiable information.
(3) Erroneous Refunds. After stealing client data from tax professionals and filing fraudulent tax returns, criminals use the taxpayers' real bank accounts for the deposit. Thieves are then using various tactics to reclaim the refund from the taxpayers, and their versions of the scam may continue to evolve.
(4) IRS-Impersonation Telephone Scams. Sophisticated phone scam targeting taxpayers, including recent immigrants, has been making the rounds throughout the country. Callers claim to be IRS employees, using fake names and bogus IRS identification badge numbers. They may know a lot about their targets, and they usually alter the caller ID to make it look like the IRS is calling. Victims are told they owe money to the IRS and it must be paid promptly through a gift card or wire transfer. Victims may be threatened with arrest, deportation or suspension of a business or driver’s license. In many cases, the caller becomes hostile and insulting. Victims may be told they have a refund due to try to trick them into sharing private information. If the phone isn't answered, the scammers often leave an “urgent” callback request.
Some thieves have used video relay services (VRS) to try to scam deaf and hard of hearing individuals. Taxpayers are urged not trust calls just because they are made through VRS, as interpreters don’t screen calls for validity. For details see the IRS video: Tax Scams via Video Relay Service.
It's important to know that the IRS initiates most contacts through regular mail delivered by the United States Postal Service. However, there are special circumstances in which the IRS will call or come to a home or business, such as when a taxpayer has an overdue tax bill, to secure a delinquent tax return or a delinquent employment tax payment, or to tour a business as part of an audit or during criminal investigations. Even then, taxpayers will generally first receive several letters (called “notices”) from the IRS in the mail.
The IRS will never call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer. Generally, the IRS will first mail a bill to any taxpayer who owes taxes.
It will also never demand that you pay taxes without the opportunity to question or appeal the amount they say you owe. You should also be advised of your rights as a taxpayer.
Finally, the IRS will never threaten to bring in local police, immigration officers or other law-enforcement to have you arrested for not paying. The IRS also cannot revoke your driver’s license, business licenses, or immigration status. Threats like these are common tactics scam artists use to trick victims into buying into their schemes.
If you think you need more time to file your taxes, you can request an extension through the IRS website.
And if you don't want to file your taxes yourself, but are worried about the cost, the AARP Foundation Tax-Aide offers free, individualized tax preparation for low-to moderate-income taxpayers - especially those 50 and older - at nearly 5,000 locations nationwide.