Smith Dickson, An Accountancy Corporation 

August 2015
TAX IDENTITY THEFT:

According to a recent survey by the "Journal of Accountancy," sixty-three percent of CPAs who answered the survey said at least one of their clients was a victim of tax identity theft in the 2015 filing season.

 

In the survey, conducted in May, most CPAs reporting theft of clients' IDs said the problem affected fewer than 5% of their clients, although 76 respondents (2%) said between 6% and 10% of their clients were victims. Ten respondents reported between 11% and 15% of their clients were victims, and two respondents put the percentage at more than 15%.  

 

CPAs interviewed in connection with the survey's findings on identity theft detailed long telephone wait times and other frustrations experienced by victims of identity theft in dealing with the IRS.

 

Many respondents had some difficulty dealing with the IRS in resolving the issues, with only 27% saying it was easy or very easy to resolve, and 39% saying it was difficult or very difficult. A significant percentage of respondents, 44%, reported that the victims were unaware of the theft before attempting to file their 2014 returns, and another 42% said some victims were aware of it and others were not.  

 

Can it happen to you?

Smith Dickson has seen this happen to some of our clients as well. In certain cases, the IRS or Franchise Tax Board (FTB) will notice some irregularities (e.g., duplicate social security numbers, W-2 changes, number of dependents, different mortgage company vs. previous years) and will then contact the taxpayer to determine if someone is attempting to file a fraudulent tax return on his/her account.  According to Karen Reed, CPA, Senior Manager at Smith Dickson, "If your employer has reported that its system has been hacked, pay attention - your data may be used for tax identity theft."

 

What to do if it happens to you

Karen also suggests "The Federal Trade Commission has a very useful website, https://www.identitytheft.gov/, which provides a number of steps to recover from identity theft."  Some of the tips include:

 

Act quickly to limit the damage: (1) Call the companies where you know fraud occurred, (2) Place a fraud alert and get your credit report, (3) Report identity theft to the FTC, and (4) File a report with your local police department. Next, take steps to repair the damage: (1) Close new accounts opened in your name, (2) Remove bogus charges from your accounts, (3) Correct your credit report, and (4) Consider adding an extended fraud alert or credit freeze.

 

If you have any questions or concerns regarding tax identity theft, please contact our office. 

 

IRS CHANGES POLICY ON IDENTIFY THEFT

You have a right to know what thieves are doing with your information.  In a clear change in policy, IRS has agreed to provide victims of identity theft with copies of the fraudulent tax returns filed using their personal and financial information. Prior to this change, victims were notified that some or all of their information had been used to file fraudulent returns but no further information was made available. That left some taxpayers concerned about the amount of information that third parties had about their personal and financial details.

 

The change in policy is attributable to a request made by Sen. Kelly Ayotte (R-NH). On May 7, 2015, Sen. Ayotte wrote a letter to IRS Commissioner John Koskinen, noting that she found it "deeply troubling that the IRS does not help victims by providing them with copies of the fraudulent returns so that they may determine what information was stolen." She ended by saying that "Identity theft can cause problems for victims for years, and the IRS should do whatever it can to minimize this burden - starting with providing tax identity theft victims with a copy of the fraudulent return." (read full article on tax identity theft or Sen. Ayotte's letter

 

HOW FAR BACK CAN IRS CLAIM TAX EVASION OR FRAUD?

Anyone who is intentionally hiding income or assets from the taxman likely wonders how long they should be looking over their shoulder. Even innocent activities can sometimes be interpreted as suspect. It can help your peace of mind to know how long you can be asked to prove income, expenses, bank deposits and more. For all of these reasons, it's good to know about the normal IRS statute of limitations and how a tax evasion or fraud claim from the IRS can affect you.

 

Start with the basic rule that the IRS usually has three years after you file to audit you. If you omit more than 25% of your income, the IRS gets double that time, six years. But statutes are often extended, sometimes voluntarily. (read article on tax evasion fraud) 

 

TAX CALENDAR

Smith Dickson is pleased to provide our year-round "Tax Calendar" available on our website.  Reference it for key dates for individuals, businesses (of all types), employers and estates/fiduciaries.

 

Some of the important dates:

  • July 31: Form 941 due for employers for Social Security, Medicare, and withheld income tax.  Due for the second quarter of the current year.
  • August 15: Employers - Deposit withholding.  If the monthly rule applies, deposit the tax for payments in previous month for Social Security, Medicare, withheld income tax, and non-payroll withholding.

Be sure to contact us to discuss your tax questions and needs. 

 

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ABOUT SMITH DICKSON

 

Smith Dickson is a full-service Southern California CPA firm that specializes in providing high-quality services designed to create long-term value for our clients. Our services include accounting, tax compliance and planning, litigation support, business consulting and estate/trust tax compliance. Please contact us with your questions.

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Smith Dickson, An Accountancy Corporation | 18100 Von Karman Avenue | Suite 420 | Irvine | CA | 92612