Category Archives: Tax Tips

ALERT: New Phishing Scam

The Internal Revenue Service is alerting  the public to a fake insurance tax form scam that is being used to access annuity and life insurance accounts.  Cybercriminals currently are combining several tactics to create a complex scheme through which both tax professionals and taxpayers have been victimized.
There may be variations but here’s how one scam works: The cybercriminal, impersonating a legitimate cloud-based storage provider, entices a tax professional with a phishing email. The tax professional, thinking they are interacting with the legitimate cloud-based storage provider, provides their email credentials including username and password.  With access to the tax professional’s account, the cybercriminal steals client email addresses. The cybercriminal then impersonates the tax professional and sends emails to their clients, attaching a fake IRS insurance form and requesting that the form be completed and returned. The cybercriminal receives replies by fax and/or by an email very
similar to the tax professional’s email, using a different email service provider or a slight variation to the tax pro’s address.
The subject line varies but may be “urgent information” or a similar request. The awkwardly worded text of the email states:
Dear Life Insurance Policy Owner,
Kindly fill the form attached for your Life insurance or  Annuity  contract details and fax back to us for processing in  order to avoid multiple tax bill.
The cybercriminal, using data from the completed form, impersonates the client and contacts the individual’s insurance company. The cybercriminal then attempts to obtain a loan or make a withdrawal from those accounts.
The IRS reminds tax professionals to be aware of phishing emails, free offers and other common tricks by scammers. Those tax professionals who have data breaches should contact the IRS immediately through their Stakeholder Liaison.  Individuals who receive the insurance tax form scam email should forward it to and then delete it. Individuals who completed and returned the fake tax form should contact their insurance carrier for assistance.

When The IRS Comes Knocking At Your Door


The IRS initiates most contacts through regular mail delivered by the United States Postal Service. However there are special circumstances in which the IRS will call or come to a home or business. Even then, taxpayers will generally first receive several letters from the IRS in the mail.

Note that the IRS does not call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card, or wire transfer. Generally, the IRS will first mail a bill to any taxpayer who owes taxes. Tax payments should be made payable to the “United States Treasury.” Specific guidelines on how to make a tax payment are also listed at

The IRS also does not demand that the individual pay taxes without the opportunity to question or appeal the amount the IRS says is owed. The IRS should also advise the taxpayer of his or her rights. The IRS will never threaten to bring in local police, immigration officers, or other law enforcement to have the individual arrested for not paying. The IRS also cannot revoke an individual’s driver’s license, business licenses, or immigration status. Threats like these are common tactics scam artists use to trick victims into buying into their schemes.

If an IRS representative does visit a taxpayer, he or she will always provide two forms of official credentials called a pocket commission and a HSPD-12 card. HSPD-12 is a government-wide standard for secure and reliable forms of identification for federal employees and contractors. A taxpayer has the right to see these credentials when an IRS employee visits a taxpayer in person.

Visits typically fall into three categories:

  • IRS revenue officers will sometimes make unannounced visits to a taxpayer’s home or place of business to discuss taxes owed or tax returns due. Revenue officers are IRS civil enforcement employees whose role involves education, investigation, and when necessary, appropriate enforcement.
  • IRS revenue agents will sometimes visit a taxpayer who is being audited. That taxpayer would have first been notified by mail about the audit and set an agreed-upon appointment time with the revenue agent. Also, after mailing an initial appointment letter to a taxpayer, an auditor may call to confirm and discuss items pertaining to the scheduled audit appointment.
  • IRS criminal investigators may visit a taxpayer’s home or place of business unannounced while conducting an investigation. However, these are federal law enforcement agents, and they will not demand any sort of payment. Criminal investigators also carry law enforcement credentials, including a badge.

Private debt collection

IRS collection employees may call or come to a home or business unannounced to collect a tax debt. They will not demand that the taxpayer make an immediate payment to a source other than the “United States Treasury.” The IRS can also assign certain cases to private debt collectors but only after giving the taxpayer and his or her representative written notice. Private collection agencies will not ask for payment on a prepaid debit card or gift card. Taxpayers can learn about the IRS payment options on Payment by check should be payable to the “United States Treasury” and sent directly to the IRS, not the private collection agency.

The IRS has created a special new page on to help taxpayers determine if a person visiting their home or place of business claiming to be from the IRS is legitimate or an imposter. With continuing phone scams and in-person scams taking place across the country, the IRS reminds taxpayers that IRS employees do make official, sometimes unannounced, visits to taxpayers as part of their routine casework. Taxpayers should keep in mind the reasons these visits occur and understand how to verify if it is the IRS knocking at their door.


Why Am I Paying an Additional Medicare Tax?


Some taxpayers may be required to pay an Additional Medicare Tax if their income is over a certain limit. The IRS would like people to know more about this tax.

  • Tax Rate. The Additional Medicare Tax rate is 0.9 percent.
  • Income Subject to Tax. The tax applies to the amount of wages, self-employment income and railroad retirement (RRTA) compensation that is more than a threshold amount. For more information, go to Questions and Answers for the Additional Medicare Tax.
  • Threshold Amount. Filing status determines the threshold amount. For those who are married and file a joint return, they must combine the wages, compensation or self-employment income of their spouse with their own. The combined total income determines if it is over the threshold for this tax. The threshold amounts are
Filing Status Threshold Amount
Married filing jointly $250,000
Married filing separately $125,000
Single $200,000
Head of household $200,000
Qualifying widow(er) with dependent child $200,000
  • Withholding / Estimated Tax. Employers must withhold this tax from wages or compensation when they pay employees more than $200,000 in a calendar year. Self-employed taxpayers should include it for estimated tax liability purposes.
  • Underpayment of Estimated Tax. People who had too little tax withheld or did not pay enough estimated tax may owe an estimated tax penalty. IRS Publication 505, Tax Withholding and Estimated Tax, provides rules and details on estimated taxes.

People who owe this tax should file Form 8959, with their tax return. People should also report any Additional Medicare Tax withheld by their employer or employers on Form 8959.

If you need further assistance, contact Steve Siesser at


Tax Tips for Divorced Parents


Questions frequently arise in the case of divorced parents regarding who can claim certain tax benefits related to their children.  Generally, only one person may claim all the child-related tax benefits for a child, including the dependency exemption, the child tax credit, the dependent care credit, the exclusion for dependent care benefits and head of household filing status.

The exception is the special rule for divorced or separated parents or parents who live apart for the last 6 months of the calendar year. Under this special rule, the noncustodial parent may claim the dependency exemption for a child if the custodial parent releases the exemption. Also, the noncustodial parent may claim the child tax credit if the other requirements for the child tax credit are met.

Conversely, only the custodial parent may claim the dependent care credit.  Usually, only the custodial parent may claim the Earned Income Tax Credit (EITC), because the child must meet the residency test for qualifying child, that is, the child must live with the parent for more than six months of the year except for temporary absences.

Generally, custody is determined by the number of nights the child slept in the home of the parent or the parent had responsibility for the child for the night. Consult Publication 501, Exemptions, Standard Deduction, and Filing Information for more details and exceptions such as temporary absences.

Here are the rules for divorced parents as stated in Publication 596:

A child will be treated as the qualifying child of his or her noncustodial parent (for purposes of claiming an exemption and the child tax credit, but not for the EITC) if all of the following apply:

The parents:

  • Are divorced or legally separated under a decree of divorce or separate maintenance,
  • Are separated under a written separation agreement, or
  • Lived apart at all times during the last 6 months of the year, whether or not they are or were married.
  • The child received over half of his or her support for the year from the parents.
  • The child is in the custody of one or both parents for more than half of the year.
  • Either of the following statements is true.

For all divorces final after December 31, 2008, the IRS is no longer accepting a copy of a divorce decree to show who has the right to claim the dependency exemption. You must file Form 8332 or a substantially similar statement with the return or, if you file electronically, with Form 8453.  The custodial parent signs Form 8332 or a substantially similar statement that he or she will not claim the child as a dependent for the year, and the noncustodial parent attaches the form or statement to his or her return.

If the divorce decree was dated before January 1, 2009,  the IRS may accept certain pages of the divorce decree as a substitute for a Form 8332, if  the decree unconditionally provides that the noncustodial parent may take the exemption for a child, the custodial parent signs the decree, and  the decree otherwise conforms to the substance of Form 8332.

A married taxpayer can be considered unmarried and file as Head of Household if all the following tests are met:

  • Must file a separate return.
  • Must have provided more than fifty percent of the cost of maintaining a home.
  • Must not live in the same home as the spouse at any time during the last six months of the year.
  • The home was the main home of a qualifying child for more than half the year.
  • Must be able to claim an exemption for the child.  However, the taxpayer may meet this test if they are not claiming the exemption for the child because they released the exemption to the other parent under the special rule for divorced or separated parents discussed above.

If you have any questions regarding the correct tax treatment of child related tax benefits, contact Steve Siesser at for immediate assistance.


Congress Authorizes Tax Refunds For Combat-Injured Veterans


The Combat-Injured Veterans Tax Fairness Act of 2016 was signed into law on December 16, 2016. The law directs the Department of Defense to refund money that was improperly withheld for tax purposes from severance payments for veterans separated from the Armed Forces because of combat-related injuries. Under IRC section 112, gross income does not include compensation received for active service in a combat zone.

According to the bill’s sponsor, veterans who suffered combat-related injuries and who separated from the military were not supposed to be taxed on the one-time lump sum disability severance payments they received. Unfortunately, since 1991 taxes were nonetheless withheld from qualifying veterans due to the limitations of the Department of Defense’s automated payment system. Some veterans were unaware that their benefits were improperly reduced as a result of tax withholding and the statute of limitations has long since expired for those years.

The new law corrects this problem by directing the Department of Defense to identify veterans who have been separated from service for combat-related injuries and received a severance payment. The law instructs the Department of Defense to determine how much the combat-wounded veterans are owed and to provide the veteran instructions for filing amended tax returns to recover the amounts improperly withheld for tax purposes.

The law extends the limitation on time for filing a claim for a credit or refund under IRC section 6511(a) to enable veterans to be restored of funds previously withheld from their severances. The statute of limitations is extended one year after the Department of Defense provides the affected service members notice of the amount improperly withheld from their severance payments.