The 2014 Tax Brackets
Introduction
Every year, the IRS adjusts more than forty tax provisions for inflation. This is done to prevent what is called “bracket creep.” This is the phenomenon by which people are pushed into higher income tax brackets or have reduced value from credits or deductions due to inflation instead of any increase in real income.
The IRS uses the Consumer Price Index (CPI) to calculate the past year’s inflation and adjusts income thresholds, deduction amounts, and credit values accordingly.
Income Tax Brackets and Rates
In 2014, the income limits for all brackets and all filers will be adjusted for inflation and will be as follows (Table 1).[1] The top marginal income tax rate of 39.6 percent will hit taxpayers with an adjusted gross income of $406,751 and higher for single filers and $457,601 and higher for married filers.
Table 1. 2014 Taxable Income Brackets and Rates
Rate Single Filers Married Joint Filers Head of Household Filers
10% $0 to $9,075 $0 to $18,150 $0 to $12,950
15% $9,076 to $36,900 $18,151 to$73,800 $12,951 to $49,400
25% $36,901 to $89,350 $73,801 to $148,850 $49,401 to $127,550
28% $89,351 to $186,350 $148,851 to $226,850 $127,551 to $206,600
33% $186,351 to $405,100 $226,851 to $405,100 $206,601 to $405,100
35% $405,101 to 406,750 $405,101 to 457,600 $405,101 to $432,200
39.6% $406,751+ $457,601+ $432,201+
Source: Internal Revenue Service
Standard Deduction and Personal Exemption
The standard deduction will increase by $100 from $6,100 to $6,200 for singles (Table 2). For married couples filing jointly, it will increase by $200 from $12,200 to $12,400.
Next year’s personal exemption will increase by $50 to $3,950.
Table 2. 2014 Standard Deduction and Personal Exemption
Filing Status Deduction Amount
Single $6,200.00
Married Filing Jointly $12,400.00
Head of Household $9,100.00
Personal Exemption $3,950.00
Source: Internal Revenue Service
PEP and Pease
PEP (personal exemption phase-out) and Pease are two provisions in the tax code that increase taxable income for high-income earners. PEP is the phase out of the personal exemption and Pease (named after former Senator Donald Pease) reduces the value of most itemized deductions once a taxpayer’s adjusted gross income reaches a certain point.
The income threshold for both PEP and Pease will be $254,200 for single filers and $305,050 for married filers (Tables 3 & 4). PEP will end at $376,700 for singles and $427,550 for couples filing jointly, meaning these taxpayers will no longer have a personal exemption.
Table 3. 2014 Pease Limitations on Itemized Deductions
Filing Status Income Threshold
Single $254,200.00
Married Filing Jointly $305,050.00
Head of Household $279,650.00
Source: Internal Revenue Service
Table 4. Personal Exemption Phase-out
Filing Status Phase out Begin Phase out Complete
Single $254,200.00 $376,700.00
Married Filing Jointly $305,050.00 $427,550.00
Head of Household $279,650.00 $402,150.00
Source: Internal Revenue Service
Alternative Minimum Tax
Since its creation in the 1960s, the Alternative Minimum Tax (AMT) has not been adjusted for inflation. Thus, Congress was forced to “patch” the AMT by raising the exemption amount to prevent middle class taxpayers from being hit by the tax as a result of inflation.
On January 2, 2013 the American Taxpayer Relief Act of 2012 finally indexed the income thresholds to inflation, preventing the necessity for an annual patch.
The AMT exemption amount for 2014 is $52,800 for singles and $82,100 for married couple filing jointly (Table 5).
Table 5. 2014 Alternative Minimum Tax
Filing Status Exemption Amount
Single $52,800.00
Married Filing Jointly $82,100.00
Married Filing Separately $41,050.00
Source: Internal Revenue Service
Earned Income Tax Credit
The 2014 maximum Earned Income Tax Credit for singles, heads of households, and joint filers is $496 if the filer has no children (Table 6). For one child the credit is $3,305, two children is $5,460, and three or more children is $6,143.
Table 6. 2014 Earned Income Tax Credit Parameters
Filing Status No Children One Child Two Children Three or More Children
Single or Head of Household Earned Income Level for Max Credit
$6,480
$9,720
$13,650
$13,650
Maximum Credit
$496
$3,305
$5,460
$6,143
Income Level When Phase out Begins
$8,110
$17,830
$17,830
$17,830
Income Level When Phase-out Ends (Credit Equals Zero)
$14,590
$38,511
$43,756
$46,997
Married Filing Jointly Earned Income Level for Max Credit $6,480 $9,720 $13,650 $13,650
Maximum Credit
$496
$3,305
$5,460
$6,143
Earned Income Level When Phase-out Begins
$13,540
$23,260
$23,260
$23,260
Earned Income Level When Phase out Ends (Credit Equals Zero)
$20,020
$43,941
$49,186
$52,427
Source: Internal Revenue Service
[1] Internal Revenue Service, IRS Revenue Procedure 2013-35, in Internal Revenue Bulletin 2013-47, Nov. 18, 2013, http://www.irs.gov/pub/irs-drop/rp-13-35.pdf. All following charts and tables derive data from this document.
Source: http://taxfoundation.org/article/2014-tax-brackets
Tips for Navigating a Changing Tax Landscape
What’s new this tax season? In a word: Obamacare. That’s the answer given by many tax professionals.
People who overcame the challenges of Healthcare.gov and succeeded in buying health insurance under the Affordable Care Act last year now face a new set of hurdles in the form of daunting tax forms. So do business owners who offer coverage to employees under the law’s Small Business HealthOptions Program. But the good news for both is that they may receive a tax credit that reduces taxes dollar for dollar.
Barbara Weltman, a lawyer in Vero Beach, Fla., and the author of “J.K. Lasser’s 1001 Deductions & Tax Breaks 2015,” said it could be a big credit if you qualify for it, but warned, “It is not that easy to qualify.”
For qualifying business owners the credit for 2014 is 50 percent, up from 35 percent in 2013. Individuals who bought insurance through an exchange and had household income between $11,490 and $45,960 last year may be able to claim a tax credit on the new Form 8962.
Most people estimated their income when they bought their coverage and received an advance on the credit in the form of payments directly to their insurance company. Now that the income numbers are real, taxpayers may get a refund — or may owe the government more money.
“It is extremely complicated,” Ms. Weltman said, referring to the form and the instructions for filling it out. She recommended using tax software with interview questions rather than trying to fill out the form by hand based on the official instructions.
People with incomes below $60,000 qualify for the “Free File” program, in which the Internal Revenue Service teams up with various software providers. Information is available at irs.gov/uac/Free-File:-Do-Your-Federal-Taxes-for-Free.
In addition, Intuit, the maker of TurboTax software, offers free assistance at TurboTaxHealth.com to help people determine if they are eligible for low-cost health insurance and what the tax penalty will be if they have not bought it.
Most taxpayers — those with employer-provided health insurance or Medicare or Medicaid — do not have to fill out any complicated forms. All they have to do is check a box on the Form 1040. A third group of people qualify for exemption from coverage, and they need to fill out Form 8965. More information is available at irs.gov/pub/irs-pdf/p5201.pdf.
Large employers are required to report health insurance coverage on employee W-2 forms for 2014, but that shouldn’t cause any problems. “Don’t worry,” Ms. Weltman said. “It’s not taxable” to employees.
Identity Theft
Identity theft is not limited to stealing credit card data.
Thieves also use stolen Social Security numbers to file returns and claim refunds, generally early in the filing season. And the I.R.S. said last month that trying to stop this kind of theft is a top priority. It opened 1,063 identity theft investigations last year, it said, and that led to 748 sentences imposed in criminal cases.
Julian Block, a tax lawyer in Larchmont, N.Y., said taxpayers could protect themselves from identity thieves by filing a new Form W-4 with employers and keeping close tabs on quarterly payments of estimated taxes so that they have a balance due, not a refund, when they file their tax returns.
“If you file a return claiming a refund and the I.R.S. says, ‘We’ve already received a return claiming a refund and paid it,’ they will investigate,” Mr. Block said. “Eventually you’ll get your refund, but it could be a considerable time. If you have a balance due and send in a check, if the I.R.S. has already sent a refund, they’ll have to sort that out, but you won’t have a problem.”
Tax professionals have long recommended that taxpayers limit withholding to avoid big refunds simply because too much withholding amounts to giving the Treasury an interest-free loan.
The Job Hunt
Job search expenses may provide a tax deduction for some people. After all, the nation’s unemployment rate fell to 5.6 percent at the end of last year from 9.9 percent five years earlier, and that surely reflects a lot of job searches.
Even so, many searchers may not qualify for a deduction, said Greg Rosica, a contributing author to the “EY Tax Guide 2015,” published by Wiley, and a tax partner at Ernst & Young. Mr. Rosica, who leads the firm’s southeast area private client services practice in Tampa, Fla., gave three reasons that would bar many job seekers from claiming a deduction:
■ These expenses are classified as “miscellaneous itemized deductions,” which can be taken only if the total exceeds 2 percent of adjusted gross income.
■ Online job searches these days do not generate all of the travel and printing expenses that seekers used to rack up.
■ The new job must be in the same field as one’s previous employment. Many people change fields to land a new job.
Of course job seekers who meet all the qualifications — perhaps paying for outplacement counseling, travel and other costs — may claim the deduction, even if their searches were not successful.
State Sales Taxes
State income taxes may be deducted on your federal tax forms, but Mr. Rosica said that for residents of some states, it may be worth considering whether to deduct state sales taxes instead.
This may be done on Schedule A, and for people in states like Florida and Texas that do not have a state income tax, deducting sales taxes makes a great deal of sense. It may also be the right thing to do for people in other states who have bought a big-ticket item like a car in the past year.
It may also make sense for retirees because many states give tax breaks for Social Security, retirement account distributions and pensions, thus lowering adjusted gross income.
Extra Medical Expenses
The Affordable Care Act hasn’t changed one reality: Health insurance doesn’t take care of all medical expenses.
Mr. Block pointed out that such unreimbursed expenses are still deductible — but only when they exceed certain thresholds. For most people, it is 10 percent of adjusted gross income — but it is 7.5 percent for people 65 or older.
The cost of hearing aids and dental care, private-duty nursing, travel to and from medical appointments, including tolls and parking, are frequently not reimbursed and are eligible for inclusion as deductions.
Volunteers, in a hospital or as a delegate to a religious convention for example, may also incur deductible expenses for travel, meals and other out-of-pocket costs, he said.
Keeping Good Records
Mileage deductions vary, depending on your reason for getting on the road. The I.R.S. allows 56 cents a mile for unreimbursed business miles last year, 23.5 cents a mile for medical or moving purposes and 14 cents a mile for charitable use.
Keeping good records is the key to being able to claim deductions of many sorts.
One way to help is to use a designated credit card for any outlay that may be deductible, Mr. Rosica said, and then go online to get an end-of-year report from the card issuer.
Brittney Saks, the United States personal financial services leader for PricewaterhouseCoopers, pointed out that most deductions need third-party documentation, like a Form 1098 from a bank reporting mortgage interest, or a receipt from a charity for contributions above $250, but the travel and out-of-pocket charitable expenses depend on personal records.
Many people overlook these deductions because of the bother of having to always carry a journal to jot them down. But most of us carry a smartphone, which can be used to take notes.
There is no specific requirement for how to keep records, Ms. Saks said. The important thing is to note the expenses as they are incurred.
Another area where record-keeping is important, she said, is investments. When a holding is sold, for example, both the cost basis and the sale price and the date of each must be reported to determine whether the taxpayer has a gain or loss.
Your brokerage firm or fund company may provide that information, but you may need to go over your own records to be sure the data is accurate, she said.
Under current rules, if the asset sold is an inherited one, Mr. Block said, its basis is not the original owner’s cost but its value on that owner’s day of death. If the inheritance is a publicly traded stock, the day-of-death value is easily obtained. The value of other assets — collectibles, real estate, artwork — may be more difficult to determine, but determining that value could bring big tax savings.
Say a man inherited a family home in 2014 from a parent who died in 2013. It may have cost $50,000 in 1970 and risen to 10 or 12 times that much by 2013, then risen just a few thousand more by 2014, when the son sold it. The son is liable for taxes on the relatively small gain in value after he inherited the house, not on the big gains that occurred in previous years.
Family matters can be important for current returns and for future tax planning. Sidney Kess, a certified public accountant and lawyer with Kostelanetz & Fink in New York, gave several examples.
In one, a widower who lived alone filed as single, but in late 2013 his daughter’s marriage broke up, and she and her three children moved in with him. It was intended as a temporary move but lasted all last year.
He can file as head of household and claim them as dependents because he provided more than half their support. That will substantially reduce his taxes.
Mr. Kess also pointed out that alimony is deductible by the payer, who must report the recipient’s name and Social Security number. The recipient must report alimony received as income, and a recipient who fails to do so is inviting trouble from the I.R.S., Mr. Kess said.
Many affluent people help adult children or grandchildren financially. Rather than writing a check, they should consider giving appreciated or dividend-paying stocks, Mr. Kess suggests.
That can help the recipients because long-term capital gains and dividends are tax-free for people in the 10 percent and 15 percent tax brackets. Any individual can give up to $14,000 each (that is $28,000 for a couple) to as many people as they like with no gift tax consequences.
Such gifts can also be a big tax saver for owners of incorporated small businesses, who can give shares in it to family members and set the size of any dividends they pay. They may use the gifts as a long-term estate-planning strategy to transfer assets to adult children. That is a complicated matter that needs individual tax advice from an expert in trusts and estates.
Correction: February 22, 2015
An article in the special Your Taxes section last Sunday about tips to avoid pitfalls in preparing 2014 tax returns misstated the downside of excess withholding. It amounts to an interest-free loan to the Treasury, not a tax-free loan.
A version of this article appears in print on February 15, 2015, on page BU8 of the New York edition with the headline: Tips for Navigating a Changing Tax Landscape. Order Reprints| Today’s Paper|Subscribe
Source: http://www.nytimes.com/2015/02/15/business/yourtaxes/tips-for-filing-taxes.html?ref=topics
Hire a veteran credit
You’ve been paying a professional – a CPA, attorney, enrolled agent or other paid preparer – to prepare your tax return. Some of your friends use tax software, an online product or an app (in many instances you can now combine these, changing from your desktop to a mobile app and back at your option). Is one better than the other? There’s no single answer for every taxpayer. Choose the tax preparation method that suits your situation. Here are some of the factors to consider in making your choice.
DECIDING POINT: COMPLEXITY OF TAX SITUATION
As a general rule, the more complex your tax situation, the more compelling it is for you to bring in a tax professional. What makes complexity? If you have any of the following situations:
You own a business, including a sideline business. This is because there are many complex rules and various tax elections that you may want to discuss with a tax pro. For example, if your business purchased equipment, you have several ways to write off the cost; the best way to do this depends on your current tax situation as well as your prospects for the future. You can, of course, handle complex situations with appropriate tax software (e.g., TurboTax Home and Business enables you to prepare a Schedule C for your sole proprietorship), but you won’t get personal advice.
You had a major life event this year. For example, if you sold a business, went through a divorce, sold a home or had any other major life change, a tax preparer can alert you to the rules that you now have to handle.
Extensive securities transactions. Software can automatically input the results from Form 1099-B, which reports securities transactions. However, you may need to work with a tax pro to make sure you have all the information required for your return (e.g., your tax basis); it may not all be on the 1099.
You want to itemize. Again, software enables you to put all your information into the mix; a tax preparer can provide advice about legitimate deductible expenses, the substantiation you need and other matters to help you optimize your deductions while avoiding problems with the IRS.
DECIDING POINT: YOUR TAX PROFICIENCY
For some people, the very idea of numbers, taxes and the process of preparing and filing a return seems daunting. For others, taxes have become a routine chore that needs to be done each year.
If you’ve been doing your taxes year after year and not much has changed in your financial or personal situation, you’ll likely be more than able to handle your 2014 tax return. Just familiarize yourself with the new entries on the return related to the Affordable Care Act (which can be found in the instructions to the return).
If you’ve never done a return before, decide whether you’re up to the task. Recognize that you don’t have to be a math wizard because software or online preparation sites do calculations for you. And you don’t have to be a tax expert because you’ll be prompted to supply needed information to complete your return.
DECIDING POINT: YOUR SCHEDULE
Time is always an important factor in deciding whether to do your return yourself or hire a preparer. Either way, you’ll spend the same amount of time gathering the documentation needed to prepare the return: information returns you’ve received (Forms W-2, 1098, and Schedule K-1s), your canceled checks for itemized deductions, logs and other substantiation for certain expenses. (See 10 Steps To Tax Preparation.)
So, the difference is in the time spent doing the actual return. Depending on your situation, that could be modest (an hour or so), or lengthy (6 hours or more). If you don’t have this time, then using a preparer is the better choice.
DECIDING POINT: COST
Cost may influence your decision about who prepares your return. According to the National Society of Accountants, the average fee charged this year for a return that does not include itemized deductions is $159, or $273 for a return with itemized deductions. Fees may be higher or lower, depending on the region of the country.
You can do your own return for little or nothing, and not just with pen and paper, by hand. If your adjusted gross income is less than $60,000, you can use FreeFile, which is the IRS’s free service to prepare your return online and submit it electronically at no cost. (For more on FreeFile, read How do I use the IRS Free File tax forms?)
If your income precludes you from using FreeFile, you can buy software or use an online solution; prices for a federal return start around $20. If you itemize, the amount you spend this year will be an itemized deduction on your 2015 return. (For some free filing options, read Top Software To Prepare Taxes Free By April 2015.)
THE BOTTOM LINE
Hiring a tax preparer or using a software package or online tax site can both work well, depending on your tax situation and your comfort with the process.
If you want to use tax software, recognize that there have occasionally been issues with certain products – for example, some fraudulent state tax returns were filed using TurboTax earlier this year, leading to a suspension of state filings for 24 hours and inducing Congress to investigate the matter. (Tax-related identity theft is an issue that everyone needs to be aware of, regardless of the method you use to prepare your return.)
If you opt to use a paid preparer, make sure to find a reliable one. The IRS has tips to help you in this task as well as a tax return preparer directory listing those with valid IRS Preparer Tax Identification Numbers (PTINs).
Either way, the responsibility to file a tax return is on you. Good luck.
Source: http://www.investopedia.com/articles/personal-finance/022515/tax-preparer-vs-software-how-choose.asp
Tax Preparer Vs. Software: How To Choose
You’ve been paying a professional – a CPA, attorney, enrolled agent or other paid preparer – to prepare your tax return. Some of your friends use tax software, an online product or an app (in many instances you can now combine these, changing from your desktop to a mobile app and back at your option). Is one better than the other? There’s no single answer for every taxpayer. Choose the tax preparation method that suits your situation. Here are some of the factors to consider in making your choice.
DECIDING POINT: COMPLEXITY OF TAX SITUATION
As a general rule, the more complex your tax situation, the more compelling it is for you to bring in a tax professional. What makes complexity? If you have any of the following situations:
You own a business, including a sideline business. This is because there are many complex rules and various tax elections that you may want to discuss with a tax pro. For example, if your business purchased equipment, you have several ways to write off the cost; the best way to do this depends on your current tax situation as well as your prospects for the future. You can, of course, handle complex situations with appropriate tax software (e.g., TurboTax Home and Business enables you to prepare a Schedule C for your sole proprietorship), but you won’t get personal advice.
You had a major life event this year. For example, if you sold a business, went through a divorce, sold a home or had any other major life change, a tax preparer can alert you to the rules that you now have to handle.
Extensive securities transactions. Software can automatically input the results from Form 1099-B, which reports securities transactions. However, you may need to work with a tax pro to make sure you have all the information required for your return (e.g., your tax basis); it may not all be on the 1099.
You want to itemize. Again, software enables you to put all your information into the mix; a tax preparer can provide advice about legitimate deductible expenses, the substantiation you need and other matters to help you optimize your deductions while avoiding problems with the IRS.
DECIDING POINT: YOUR TAX PROFICIENCY
For some people, the very idea of numbers, taxes and the process of preparing and filing a return seems daunting. For others, taxes have become a routine chore that needs to be done each year.
If you’ve been doing your taxes year after year and not much has changed in your financial or personal situation, you’ll likely be more than able to handle your 2014 tax return. Just familiarize yourself with the new entries on the return related to the Affordable Care Act (which can be found in the instructions to the return).
If you’ve never done a return before, decide whether you’re up to the task. Recognize that you don’t have to be a math wizard because software or online preparation sites do calculations for you. And you don’t have to be a tax expert because you’ll be prompted to supply needed information to complete your return.
DECIDING POINT: YOUR SCHEDULE
Time is always an important factor in deciding whether to do your return yourself or hire a preparer. Either way, you’ll spend the same amount of time gathering the documentation needed to prepare the return: information returns you’ve received (Forms W-2, 1098, and Schedule K-1s), your canceled checks for itemized deductions, logs and other substantiation for certain expenses. (See 10 Steps To Tax Preparation.)
So, the difference is in the time spent doing the actual return. Depending on your situation, that could be modest (an hour or so), or lengthy (6 hours or more). If you don’t have this time, then using a preparer is the better choice.
DECIDING POINT: COST
Cost may influence your decision about who prepares your return. According to the National Society of Accountants, the average fee charged this year for a return that does not include itemized deductions is $159, or $273 for a return with itemized deductions. Fees may be higher or lower, depending on the region of the country.
You can do your own return for little or nothing, and not just with pen and paper, by hand. If your adjusted gross income is less than $60,000, you can use FreeFile, which is the IRS’s free service to prepare your return online and submit it electronically at no cost. (For more on FreeFile, read How do I use the IRS Free File tax forms?)
If your income precludes you from using FreeFile, you can buy software or use an online solution; prices for a federal return start around $20. If you itemize, the amount you spend this year will be an itemized deduction on your 2015 return. (For some free filing options, read Top Software To Prepare Taxes Free By April 2015.)
THE BOTTOM LINE
Hiring a tax preparer or using a software package or online tax site can both work well, depending on your tax situation and your comfort with the process.
If you want to use tax software, recognize that there have occasionally been issues with certain products – for example, some fraudulent state tax returns were filed using TurboTax earlier this year, leading to a suspension of state filings for 24 hours and inducing Congress to investigate the matter. (Tax-related identity theft is an issue that everyone needs to be aware of, regardless of the method you use to prepare your return.)
If you opt to use a paid preparer, make sure to find a reliable one. The IRS has tips to help you in this task as well as a tax return preparer directory listing those with valid IRS Preparer Tax Identification Numbers (PTINs).
Either way, the responsibility to file a tax return is on you. Good luck.
Source: http://www.investopedia.com/articles/personal-finance/022515/tax-preparer-vs-software-how-choose.asp
Deferred Tax Liability
Deferred tax liability is a tax that has been assessed or is due for the current period, but has not yet been paid. The deferral arises because of timing differences between the accrual of the tax and payment of the tax. For instance, a company earned net income for the year, and thus knows it will have to pay corporate income taxes. The tax liability applies to the current year and so must reflect an expense for the current year. However, the tax will not actually be paid until the next calendar year. The solution for this accrual/cash timing difference is to record the tax as a deferred tax liability.
In addition, a deferred tax liability arises because of differences in the way net income is calculated for financial purposes and the way it’s calculated for income tax purposes. The most common book/tax difference is for depreciation, where tax rules may allow for accelerated depreciation methods that are not allowed for financial reporting.
Accounting for deferred tax liabilities is a result of adherence to the matching principle of accounting that states that expenses, like taxes, must be accounted for in the period for which they apply, rather than the period where cash is used to pay them.
Source: http://www.investopedia.com/video/play/deferred-tax-liability/
Call From the I.R.S.? Hang Up. It’s a Fraud.
A spate of fraudulent state income tax returns filed using TurboTax’s online software has unnerved consumers this filing season. But con artists also continue to use more traditional means to try to separate taxpayers from their money, like harassing them on the telephone.
The Internal Revenue Service has posted repeated warnings about tax phone frauds, in which criminals call consumers pretending to be agents from the I.R.S. The impostors claim the taxpayer owes back taxes, then threaten arrest or legal action, unless the individual makes a payment quickly. Sometimes victims are urged to wire money, but more commonly they are directed to obtain a prepaid money card at a retailer and provide the number to the caller.
The Federal Trade Commission, which investigates consumer fraud, says complaints about I.R.S. impostor fraud have spiked over the last year.
“The callers are aggressive, they are relentless and they are ruthless,” said J. Russell George, Treasury inspector general for tax administration, in a statement. His office, which oversees the I.R.S., said it had received reports of about 290,000 calls since October 2013, and nearly 3,000 victims had been cheated out of more than $14 million.
Garrett Gregory, a former senior lawyer with the I.R.S. who now has a tax practice in Dallas, said the calls were pervasive and that his office heard once or twice a week from clients who were concerned about getting such calls. Most people know to “laugh and hang up,” he said, but the calls still can be unnerving. His own father received such a call a month ago, he said.
The crooks aren’t particularly discriminating in their choice of targets: The Connecticut state tax commissioner received a call this month, according to a report in The Hartford Courant. And a lawyer for the Federal Trade Commission wrote this month on the agency’s blog that she had received such a call on her home answering machine. “Hello, we have been trying to reach you,” the message said. “This call is officially a final notice from the I.R.S., Internal Revenue Service. The reason of this call is to inform you that I.R.S. is filing a lawsuit against you.”
The callers strive to appear authentic; they may use robocalling technology that shows “I.R.S.” on your caller identification screen. They may know part or all of your Social Security number and they may provide a fake I.R.S. “badge” number. In some cases, follow-up calls may come, supposedly from local police or prosecutors.
But the telephone call itself, experts say, is the first tipoff that the call is bogus. The I.R.S. does not initiate contact through phone or email, but rather sends written correspondence through the United States mail. “The I.R.S. does not call people,” Mr. Gregory said.
Here are some questions about tax fraud schemes:
■ What should I do if a caller says they are with the I.R.S?
Don’t provide any personal information and don’t engage with the caller (other than, perhaps, to ask their name, the F.T.C. advises, so you can include it in a complaint). Then, hang up. You can report the incident to the Treasury inspector general for tax administration by filling out an online form.
When you file the complaint, you will be asked to choose a five-digit PIN. If you are contacted about the incident, you should ask for the PIN, so you can be sure you are speaking to a legitimate agent.
You can also file a complaint with the F.T.C. on its website.
■ What should I do if I get an email that indicates it is from the I.R.S.?
The agency says it generally does not initiate contact with taxpayers by email, so such messages are most likely “phishing” attempts to try to obtain sensitive information, like user names and passwords. (This month, for instance, the agency warned of “bogus” emails asking tax professionals to update information like their electronic filing identification numbers.) Don’t respond to such email or click on any attachments, the agency advises. Rather, forward it to phishing@irs.gov, then delete it.
■ What if I think I may actually owe taxes?
If you are concerned, you should contact the I.R.S. directly at 800-829-1040.
Email: yourmoneyadviser@nytimes.com
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Source: http://www.nytimes.com/2015/02/27/your-money/call-from-the-irs-hang-up-its-a-fraud.html?ref=topics
