More On Tax Planningfrom The Advisor's Professional Library
- IRAs: In General Individual Retirement Accounts are highly popular tools for contributing funds that grow on a tax deferred basis. Depending on the type of IRA, the accumulation can be tax free.
- Health Insurance: Health and Medical Savings Accounts A Health Savings Account is a trust created exclusively for the purpose of paying qualified medical expenses of an account beneficiary. Although they are popular, they are not without their pitfalls and the regulations can be complicated. Learn more about how to avoid federal taxation on the accumulation and distributions of HSA.
Now that it’s tax season again, not only taxpayers and tax preparers are gearing up to besiege the IRS with tons of returns; fraudsters and phishers are, too. The tighter money gets, it seems, the more determined the bad guys are to part you from yours so that they can party while you wait by the mailbox for that refund they’ve already spent.
As a result, the IRS has once again issued warnings to taxpayers to safeguard their information, take quick action if they suspect their identity has been stolen and guard against phishers looking to hook the Big One. And well they might; according to the National Taxpayer Advocate’s 2012 annual report to Congress, ID theft is mushrooming into a far bigger problem in the tax arena than many taxpayers may suspect.
While the IRS warns taxpayers, it suggests these strategies: guarding personal information, watching out for IRS impersonators (those phishermen, active via email and social media) and protecting tax information on your computer or on your tax preparer’s computer.
It also suggests ways you might discover that your refund is already being spent in the Bahamas while you’re still suffering through a cold winter. These include IRS notifications that a) you have filed more than one tax return (what, one wasn’t enough?), or that someone has already filed for you (and not out of the goodness of their hearts); b) you owe taxes for a year when you weren’t legally required to file a return and did not in fact file a return; or c) an employer you never heard of claims to have paid you for work you know you didn’t do.
If any of these nasty little missives come your way, beware. According to the Taxpayer Advocate, the IRS is getting worse, not better, at handling ID theft issues. As the problem balloons, the IRS is responding with more, not fewer, departments through whose hoops you may have to jump as you seek to prove that you’re really you and you really, really need that tax refund.
According to the report, rather than creating a centralized response center for taxpayers to turn to in cases of ID theft, “the IRS has now established 21 different units to address identity theft cases, many with their own rules and procedures …” Resolution of the soaring case load (for FY 2012, almost 450,000 cases, a 78% increase over FY 2011) is slow, taking months, not weeks, with much of the IRS’s focus on revenue protection rather than taxpayer claim resolution. The Taxpayer Advocate Service (TAS) has seen an increase of more than 650% in ID theft complaints since 2008.
So take those data protection suggestions seriously. Otherwise, that refund could be a long time in coming.
Check more tax planning stories at AdvisorOne's 20 Days of Tax Planning Advice for 2013.