Beware of Phone Scams

Phone Scams Warning

From the IRS Newswire, Issue Number: IR-2015-5

WASHINGTON — Aggressive and threatening phone calls by criminals impersonating IRS agents remain near the top of the annual “Dirty Dozen” list of tax scams for the 2015 filing season, the Internal Revenue Service announced today.

The IRS has seen a surge of these phone scams in recent months as scam artists threaten police arrest, deportation, license revocation and other things. The IRS reminds taxpayers to guard against all sorts of con games that arise during any filing season.

“If someone calls unexpectedly claiming to be from the IRS with aggressive threats if you don’t pay immediately, it’s a scam artist calling,” said IRS Commissioner John Koskinen. “The first IRS contact with taxpayers is usually through the mail. Taxpayers have rights, and this is not how we do business.”

The Dirty Dozen is compiled annually by the IRS and lists a variety of common scams taxpayers may encounter any time during the year. Many of these con games peak during filing season as people prepare their tax returns or hire someone to do so. This year for the first time, the IRS will issue the individual Dirty Dozen scams one at a time during the next 12 business days to raise consumer awareness.

Phone scams top the list this year because it has been a persistent and pervasive problem for many taxpayers for many months. Scammers are able to alter caller ID numbers to make it look like the IRS is calling. They use fake names and bogus IRS badge numbers. They often leave “urgent” callback requests. They prey on the most vulnerable people, such as the elderly, newly arrived immigrants and those whose first language is not English. Scammers have been known to impersonate agents from IRS Criminal Investigation as well.

“These criminals try to scare and shock you into providing personal financial information on the spot while you are off guard,” Koskinen said. “Don’t be taken in and don’t engage these people over the phone.”

The Treasury Inspector General for Tax Administration (TIGTA) has received reports of roughly 290,000 contacts since October 2013 and has become aware of nearly 3,000 victims who have collectively paid over $14 million as a result of the scam, in which individuals make unsolicited calls to taxpayers fraudulently claiming to be IRS officials and demanding that they send them cash via prepaid debit cards.

Protect Yourself

As telephone scams continue across the country, the IRS recently put out a new YouTube video with a renewed warning to taxpayers not to be fooled by imposters posing as tax agency representatives. The new Tax Scams video describes some basic tips to help protect taxpayers from tax scams.

These callers may demand money or may say you have a refund due and try to trick you into sharing private information. These con artists can sound convincing when they call. They may know a lot about you.

The IRS reminds people that they can know pretty easily when a supposed IRS caller is a fake. Here are five things the scammers often do but the IRS will not do. Any one of these five things is a tell-tale sign of a scam. The IRS will never:

1) Call to demand immediate payment, nor will the agency call about taxes owed without first having mailed you a bill.

2) Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.

3) Require you to use a specific payment method for your taxes, such as a prepaid debit card.

4) Ask for credit or debit card numbers over the phone.

5) Threaten to bring in local police or other law-enforcement groups to have you arrested for not paying.

If you get a phone call from someone claiming to be from the IRS and asking for money, here’s what you should do:

– If you know you owe taxes or think you might owe, call the IRS at 1-800-829-1040. The IRS workers can help you with a payment issue.

– If you know you don’t owe taxes or have no reason to believe that you do, report the incident to the TIGTA at 1-800-366-4484 or at www.tigta.gov.

– If you’ve been targeted by this scam, also contact the Federal Trade Commission and use their “FTC Complaint Assistant” at FTC.gov. Please add “IRS Telephone Scam” to the comments of your complaint.

Remember, too, the IRS does not use email, text messages or any social media to discuss your personal tax issue involving bills or refunds. For more information on reporting tax scams, go to www.irs.gov and type “scam” in the search box.

Additional information about tax scams is available on IRS social media sites, including YouTube http://www.youtube.com/irsvideos and Tumblr http://internalrevenueservice.tumblr.com, where people can search “scam” to find all the scam-related posts.

Charitable Giving

Charitable Giving

As 2014 winds down, you may be planning to complete your charitable giving for this year. Here are a few tax concerns to keep in mind.

1. Your gift is tax-deductible only if it is made to a “qualified” charity.

2. The value of services you render to a charity are not deductible.

3. Out-of-pocket expenses while doing volunteer work for a charity, such as telephone charges, travel and uniforms are deductible.

4. Auto expenses may be taken at the standard mileage rate of 14 cents per mile or you may deduct your actual expenses.

5. Tickets to charitable events are only deductible to the extent the price exceeds the value received. for example, you pay $35 for a show put on by the charity of which the price of the ticket is $10, your contribution deduction is $25.

6. Cash contributions of any amount must be substantiated by proper records. For those under $250, a bank record, cancelled check or credit card usually will suffice.

7. Those of $250 or more must generally be substantiated by a written acknowledgment from the charity obtained before you file you tax return.

8. Non-cash contributions exceeding $5,000 other than publicly traded securities require a qualified appraisal.

9. Contributions are deductible only if you itemize deductions. And, there are limited as to the amount you can deduct in any one tax year.

There are many events that occur throughout the year that can affect your tax situation. Call Tim Pearson & Co. today at (248) 720-0608 or schedule an appointment online by clicking here.

Business Entity Pros and Cons

Tim Pearson & Co. Business Entity Pros and Cons

Are you thinking about starting your own business? One of the first steps to consider is what type of entity you should choose for your business. Here’s a list of the most common business entities along with the ‘Pros’ and ‘Cons’ of each:

Sole Proprietorship

Pros
– No formal creation process.
– Easy to operate and dissolve.
– No separate tax return.
– Easy to integrate business use of home deductions.
– No double taxation of profits.
Cons
– No liability protection.
– Self-employment tax is assessed on entire profit of the business.
– Transfer of ownership can be complex.
– Limited access to fringe benefits for owners.
Good Fit:
– Seasonal or part-time businesses.
– Businesses with little liability.
– Home based businesses.
– Businesses intended to operate for the owner’s life only.

Single Member LLC

Pros
– Simple creation process.
– Easy to operate and dissolve.
– No separate tax return.
– Easy to integrate business use of home deductions.
– Liability protection for member, except for malpractice.
– No double taxation of profits.

Cons
– Self-employment tax is assessed on entire profit of the business.
– Transfer of ownership can be complex.
– Limited access to fringe benefits for owners.
– Laws regulating LLCs vary widely among states.

Good Fit:
– Businesses with potential liability in operations.
– Businesses intended to operate for the owner’s life only.

Multimember LLC

Pros
– Limited liability for all members, except for malpractice.
– Unlimited number of members.
– Separate entity from members, allowing for greater flexibility in operations.
– Ownership is in the form of membership interest and can be transferred more easily than ownership in a single member LLC.
– No double taxation of profits.
Cons
– Requires a separate tax return.
– Laws regulating LLCs vary widely among states.
Good Fit
– Businesses requiring equity capital.
– Businesses with potential liability in operations.
– Businesses intended to exist beyond the lives of the members.
– Businesses expecting changes in ownership over time.

General Partnership

Pros
– Easy to create.
– No limit on partner number or type.
– Can be used to hold investments in other businesses and consolidate multiple lines of business.
– Flexible allocation of profit, loss, and distributions.
– Favorable tax treatment when liquidated.
– No double taxation of profits.
Cons
– Requires a separate tax return.
– Unlimited liability for all partners.
– Difficult to dissolve or change ownership without substantial planning.
– Requires tracking of basis for partners, both inside and outside the partnership.
– Individual partner’s share of income is subject to self-employment taxes.
Good Fit
– Two established businesses who wish to work as one.
– Partners wishing to consolidate multiple entities into one entity.

Limited Liability Partnership

Pros
– Liability protection for limited partners.
– Separate entity from partners.
– Ownership can be transferred within the rules of the partnership agreement.
– Limited partners’ liability is limited to their investment in the business.
– Limited partners pay self-employment tax on guaranteed payments only.
– No double taxation of profits.
Cons
– Must have one general partner with unlimited liability.
– Limited liability status for damages can be lost for a variety of administrative reasons.
– Restrictions on partners based on entity type.
– Requires a separate tax return.
– Requires tracking of basis for partners, both inside and outside the partnership.
Good Fit
– Businesses with partners not actively involved in business.
– Businesses with equity capital needs.
– Businesses with exposure to liability.

C Corporation

Pros
– No liability for non-active stockholders.
– No restrictions on ownership.
– Ownership can be transferred through the sale of stock.
– Separate entity from stockholders.
– Fringe benefits for owner-officers.
– Can have ownership interest in any other business entity.
– Perpetual existence.
– Raising capital can be achieved by issuing stock.
Cons
– Double taxation of profits.
– Complex and expensive to create and maintain.
– Require regular board of directors’ meetings and minutes.
– Requires a separate tax return.
Good Fit
– Businesses with ownership in multiple other entities.
– Businesses with significant exposure to liability.
– Businesses intended to exist eternally.

S Corporation

Pros
– Liability protection similar to that of C corporations.
– No double taxation of profits.
– Ownership is easily transferred through the sale of stock.
– Separate entity from stockholders.
– Self-employment tax is not assessed on the entire profit of the business.
– Losses can offset shareholders’ other taxable income.
Cons
– Complex and expensive to create and maintain.
– Requires a separate tax return.
– Requires regular board of directors’ meetings and minutes.
– Requires tracking of basis for stockholders.
– Ownership is limited to specific types of entities.
– Deductibility of fringe benefits for owner-employees is limited.
Good Fit
– Businesses with significant exposure to liability.

There are many events that occur throughout the year that can affect your tax situation. Call Tim Pearson & Co. today at (248) 720-0608 or schedule an appointment online by clicking here.

Tax Materials, Inc. “Business Entity Pros and Cons”. Retrieved from http://www.thetaxbook.com.