In this blog I’d like to cover what tax documents to take to your accountant and also a little update about fraud identity.

Identity theft is a growing crime with no limit in sight in the future.  There are so many ways to illegally obtain someone’s personal information.  There is dumpster diving, pick pocketing wallets and purses, unauthorized release of personal data from computer hackers and phone solicitations that obtain data illegally.

We can’t protect ourselves from data breaches when large companies like Athene in California or even the US government offices are breached by computer hackers.  We can at least be aware of some important basics.

The majority of IRS refund and identity hacks have happened through threatening phone calls.  So far in 2016, our small accounting firm received 3 clients calling about a threatening IRS over the phone.  So let’s be clear, the IRS doesn’t threaten.  They also never call before sending notices in the mail.  So if your first contact with an outstanding IRS tax bill is from the phone, chances are it’s an attempt to fraudulently obtain identity information.  The IRS doesn’t use email either.  The IRS staff don’t threaten people.  Anyone telling you to pay now with a credit card or suffer an ill fate in the future is likely to be a hacker.  An IRS agent can direct you to website to pay on line with a credit card.  No agent will take your credit card data to pay a bill over the phone, to my knowledge.  Any time you get a call from the IRS have them send you a letter with payment directions in writing.  Then take that notice to your tax advisor.

On the topic of seeing your tax advisor, what documents do you need to bring?

Every year our office sends out a welcoming letter advising our clients about what documents they need to bring or send to our office.

If you are prior year client, I don’t need last year’s tax return.  That copy is for you, we keep a copy of every return we file.  The most overlooked item in our office is estimated tax payments by our clients to IRS and NYS [and other states].  If you don’t pay tax estimated taxes, you can ignore this.  If you do pay estimated taxes be sure to bring complete records of your payments amounts and dates.  Not everyone pays their estimates timely; so dates paid count.

Our welcome letter a list of potential income items for you to examine.  Whichever items pertain to you, bring to your tax preparer.  Another important area people forget to include are new births [and the medical costs associated with it].  Children are in fact a small tax deduction.  Also, in the year of birth, extreme medical payments could amount to an itemized deduction for some taxpayers.

Recently the IRS has been enforcing foreign bank account reporting.  There is a tax form called schedule B for interest and dividends, and also includes an area about foreign bank accounts.  Failure to include foreign bank authorization in your taxes is an omission.  Deliberate omissions are a FELONY.  So don’t forget to include the fact that you may sign on an older relative’s bank account or brokerage account in another country.

This year the IRS made 2 major changes:

The first is reporting of foreign bank account amounts in excess of $10,000 US dollars in the prior year [reported on a treasury form we call an FBAR].  It used to be due by June 30^th every year [with no extensions].  It is now filed with the 1040 return making it due 4/15 [and can be extended].  Failure to report FBARS timely carry a whopping $10,000 or 50% of largest balance penalty.  This is for foreign bank accounts and foreign brokerage accounts.  So don’t forget to file your FBAR timely.

The other significant change is partnership reporting.  Used to be partnership tax returns were due 4/15.  This lead to many taxpayers unable to file their taxes timely, as receiving an k-1 from a partnership on the due date does very little to producing the tax return on the same day.  The IRS probably thought this lead to more extensions.  So partnerships, like corporation tax returns are now due 3/15.  With extensions, all entity returns are due by 9/15 [if an extension is filed by 3/15].

One last point on extensions.  An extension is the right to file your paperwork later on.  It does not excuse full payment by the 4/15 [or 3/15 for entities] due date.  You are required to settle up financially on time.  You have the right to request and extension to submit your tax paperwork.  The extension for filing paperwork has no change to paying your taxes timely.