New IRS Tax Payments Online!

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1 166 W. University Parkway; Suite B Tel: (731) Fax: (731) sipescpa.com August 2015 New IRS Tax Payments Online! You can now make a payment online direct to the Internal Revenue Service. Their new service, called Direct Pay, allows a taxpayer to make any type payment to the Internal Revenue Service without the hassle of setting up an account with EFTPS. This service is available to make the following type payments: Form 1040, 1040A, and 1040EZ Form 1040 ES (Quarterly Estimated Tax Payments) Form 1040X Bill Sipes Stacy Seaton LET US HELP YOU MAKE SENSE OF YOUR FINANCES Sipes & Seaton is a trusted financial partner that uses strong relationships and leadership to assist our clients in determining their vision of the future and to creatively assist them to locate a clear path to attain that future, which would include protecting assets, minimizing taxes, and building wealth. Tax Return Extension Payments This service allows the taxpayer to enter some basic information and make the payment, then instantly receive a confirmation of the payment directly from the Internal Revenue Service. To take advantage of this service go to and click Pay Your Tax Bill. If you need any assistance with this service feel free to give us a call. Inside this Issue 1.) Tax Payments Online 2.) Identity Theft 3.) Planning & Organizing Your Taxes 4.) HSA Requirements 5) Updating Beneficiary Designations

2 IRS CRACKS DOWN ON TAX ID THEFT: COULD YOU BE A VICTIM? For the past several years, the IRS has been cracking down on a frightening problem identity theft schemes that are aimed at stealing taxpayers refunds. When this type of fraud occurs, an individual s refund can be delayed for months or longer. Here s a look at how tax identity theft works, along with steps you can take to help protect yourself from becoming a victim and what to do if your identity is stolen. They may A Typical Tax ID Crime hack into An identity thief generally uses a legitimate taxpayer s identity victims and Social Security number to fraudulently file a tax return and computers or claim a refund. This is usually done early in the tax filing season. the unsecured The victim typically finds out about the fraud after he or she files websites and a tax return and is informed by the IRS that the return has been rejected because the Social Security number has already been networks of used to file a tax return for the same tax year. The IRS then businesses. delays processing the refund until it candetermine who the legitimate taxpayer is. How do thieves obtain Social Security numbers? They may hack into victims computers or the unsecured websites and networks of businesses. Or they might steal wallets or purses, rummage through trash or steal statements from mailboxes. The IRS itself was hacked earlier this year and thieves stole information from approximately 334,000 accounts. How To Protect Yourself There s no way to fully shield yourself from tax-related identity theft but there are steps you can take to minimize the chances or at least to identify a possible theft early to reduce the damage: Don t give out your Social Security number to businesses or medical providers just because they ask for it. Provide it only when required. Protect your financial information. Shred documents with personal identifying information. Don t provide information in response to or text messages. Don t give personal information over the phone unless you initiated the contact or you know whom you re dealing with. Don t carry your Social Security card or documents with your number on them. Keep these in a safe place at home. Don t respond to phishing schemes. The IRS doesn t get in touch with taxpayers by or text message to request personal information. An initial contact from the IRS about your tax return comes in the form of correspondence through the U.S. Mail. Protect personal computers by using firewalls, anti-spam/virus software and updated security patches. (Continued)

3 (Continued) Regularly change passwords for online accounts. Check your credit report at least every 12 months for any suspicious activity. Review your Social Security Administration earnings statement annually to ensure there are no reporting problems with your records. Set up an account at And, of course, file your income tax return as early as possible in the tax filing season. Tax Identity Theft May Not End at Death Each year, according to the IRS, thieves steal the identities of nearly 2.5 million deceased Americans. Refunds can be stolen from the estates of individuals. If you are an executor or personal representative of an estate, send the IRS a copy of the death certificate. The tax agency will use it to flag the account that the person is deceased. If You Become a Victim Respond immediately if you receive an IRS letter or notice stating that another return has been filed with your information or that you received wages from an employer other than your actual one. You may be asked to confirm your identification on the IRS website through the Identity Verification Service (IDVerify) or by phone at the IRS toll-free number provided in the letter. You should also prepare and submit an Identity Theft Affidavit on IRS Form If you re a victim of tax identity theft, you should also get an Identification Number from the IRS that proves you are the legitimate filer of future tax returns. The IRS issues an Identity Protection Personal Identification Number (IP PIN) to identity theft victims whose identities have been validated. It allows legitimate returns to be processed, and prevents processing of fraudulent returns. That can mitigate processing delays in victims federal tax return processing. Generally, the IP PIN is mailed out once the taxpayer s account has been resolved. Current programming allows one IP PIN to be generated each year. In addition to contacting the IRS, the government recommends that an identity theft victim file a complaint with the FTC at and file a local police report. You should close any accounts opened without your permission and notify one of the major credit bureaus (Equifax, Experian or TransUnion) to place a fraud alert on your credit file. Take Identity Theft Seriously Tax return fraud can cause major headaches to straighten out and significantly delay legitimate refunds. Let us know if you have concerns about fraud and your tax return. We can help. Courtesy of: Thomas Reuters

4 Start Planning and Organizing Your Taxes You may be tempted to forget all about your taxes once you've filed your tax return, but that's not a good idea. If you start your tax planning now, you may avoid a tax surprise when you file next year. Also, now is a good time to set up a system so you can keep your tax records safe and easy to find. Here are some tips to give you a leg up on next year's taxes: Take action when life changes occur. Some life events (such as marriage, divorce, or the birth of a child) can change the amount of tax you pay. When they happen, you may need to change the amount of tax withheld from your pay. To do that, file a new Form W-4 ( Employee's Withholding Allowance Certificate ) with your employer. If you make estimated payments, those may need to be changed as well. Keep records safe. Put your 2014 tax return and supporting records in a safe place. If you ever need your tax return or records, it will be easy for you to get them. You'll need your supporting documents if you are ever audited by the IRS. You may need a copy of your tax return if you apply for a home loan or financial aid. Stay organized. Make tax time easier. Have your family put tax records in the same place during the year. That way you won't have to search for misplaced records when you file next year. If you are self-employed, here are a couple of additional tax tips to consider: Employ your child. Doing so shifts income (which is not subject to the kiddie tax ) from you to your child, who normally is in a lower tax bracket or may avoid tax entirely due to the standard deduction. There can also be payroll tax savings; plus, the earnings can enable the child to contribute to an IRA. However, the wages paid must be reasonable given the child's age and work skills. Also, if the child is in college, or is entering soon, having too much earned income can have a detrimental impact on the student's need-based financial aid eligibility. Avoid the hobby loss rules. A lot of businesses that are just starting out or have hit a bump in the road may wind up showing a loss for the year. The last thing the business owner wants in this situation is for the IRS to come knocking on the door arguing the business's losses aren't deductible because the activity is just a hobby for the owner. If your business is expecting a loss this year, we should talk as soon as possible to make sure you do everything possible to maximize the tax benefit of the loss and minimize its economic impact. Courtesy of: Howard J. Schneider, Certified Public Accountant Requirements for HEALTH SAVINGS ACCOUNTS (HSA s) HSA s are only available to an individual who carries health insurance coverage with a relatively high annual deductible. For 2015, the individual's health insurance coverage must come with at least a $1,300 deductible for single coverage or $2,600 for family coverage. Other requirements for setting up an HSA are that an individual can't be eligible for Medicare benefits or claimed as a dependent on another person's tax return. Individuals who meet these requirements can make tax-deductible HSA contributions in 2015 of up to $3,350 for single coverage or $6,650 for family coverage. The contribution for a particular tax year can be made as late as April 15 of the following year. The deduction is claimed in arriving at adjusted gross income. Thus, eligible individuals can benefit whether they itemize or not.

5 The importance of Updating beneficiary designations Most of us have more than enough to do. We're on the go from early in the morning until well into the evening six or seven days a week. Thus, it's no surprise that we may let some important things slide. We know we need to get to them, but it seems like they can just as easily wait until tomorrow, the next day, or whenever. A U.S. Supreme Court decision reminds us that sometimes "whenever" never gets here and the results can be tragic. The case involved a $400,000 employer-sponsored retirement account, owned by William, who had named his wife, Liv, as his beneficiary in 1974 shortly after they married. The couple divorced 20 years later. As part of the divorce decree, Liv waived her rights to benefits under William's employer-sponsored retirement plans. However, William never got around to changing his beneficiary designation form with his employer. When William died, Liv was still listed as his beneficiary. So, the plan paid the $400,000 to Liv. William's estate sued the plan, saying that because of Liv's waiver in the divorce decree, the funds should have been paid to the estate. The Court disagreed, ruling that the plan documents (which called for the beneficiary to be designated and changed in a specific way) trumped the divorce decree. William's designation of Liv as his beneficiary was done in the way the plan required; Liv's waiver was not. Thus, the plan rightfully paid $400,000 to Liv. The tragic outcome of this case was largely controlled by its unique facts. If the facts had been slightly different (such as the plan allowing a beneficiary to be designated on a document other than the plan's beneficiary form), the outcome could have been quite different and much less tragic. However, it still would have taken a lot of effort and expense to get there. This leads us to a couple of important points. If you want to change the beneficiary for a life insurance policy, retirement plan, IRA, or other benefit, use the plan's official beneficiary form rather than depending on an indirect method, such as a will or divorce decree. It's important to keep your beneficiary designations up to date. Whether it is because of divorce or some other life-changing event, beneficiary designations made years ago can easily become outdated. One final thought regarding beneficiary designations: While you're verifying that all of your beneficiary designations are current, make sure you've also designated secondary beneficiaries where appropriate. This is especially important with assets such as IRAs, where naming both a primary and secondary beneficiary can potentially allow payouts from the account to be stretched out over a longer period and maximize the time available for the tax deferral benefits to accrue. Courtesy of: Howard J Schneider, Certified Public Accountant

6 166 W. University Parkway; Suite B Jackson, TN Sipes & Seaton provides a wide range of services to Jackson, TN and the West Tennessee area. Such services include: Tax planning and preparation Monthly Bookkeeping Business Software Consulting Business Appraisal Payroll Service Litigation Support Arbitration Sipes & Seaton did a great job taking care of my LLC. The transition couldn't have been easier!" Stephanie Riley, Small Business Owner