Don't Be a Victim of Cybercrooks

Well, here it is: 2019. The holiday season is over, and the season for preparing tax returns is about to begin. But unfortunately, it is also the season for scammers who are out to steal your identity, swindle you out of your money and even file tax returns in your name. All of this can make you poorer, ruin your credit rating, cause financial havoc, and cost you hours upon hours of time trying to straighten out the messes caused by cybercrooks.

Article Highlights:

• What They Are After 
• Email Attachments or Links 
• Emails from the IRS 
• Detecting Phony Email Addresses 
• Embedded Hyperlinks 
• Security Software 
• Strong Passwords 
• IRS Phone Calls 
• Educate the Elderly 
• Too Good to Be True 

Well, here it is: 2019. The holiday season is over, and the season for preparing tax returns is about to begin. But unfortunately, it is also the season for scammers who are out to steal your identity, swindle you out of your money and even file tax returns in your name. All of this can make you poorer, ruin your credit rating, cause financial havoc, and cost you hours upon hours of time trying to straighten out the messes caused by cybercrooks.

The best way to prevent your ID from being stolen, your computer from being hacked, or yourself from being tricked by some clever schemer is not to take their bait. These schemers will target you in a number of ways, including through email, regular mail and phone. Each one will try to scare you, appeal to your greedy side or trick you into allowing access to your electronic devices.

The most common way for cybercriminals to steal money, bank account information, passwords, credit cards and Social Security numbers is to simply ask for them in an unsuspecting way.

Here are a few steps you can take to protect against phishing and other email scams:

• Be vigilant and skeptical. Never open a link or attachment from an unknown or suspicious source. Even if the email is from a known source, the recipient should approach it with caution. Cybercrooks are good at acting like trusted businesses, friends, family and even the IRS.
  
• Emails and other electronic contact from the IRS. If you should receive an email claiming to be from the IRS or directing you to an IRS web site, you should know that the IRS never initiates contact via email. This includes asking for information via text messages and social media channels. The first thing you should do is contact this office. But above all, DO NOT reply to the message, open any attachments (which may contain malicious code that will infect your computer), or click on any links in a suspicious email or phishing website and enter your confidential information. The IRS never asks for detailed personal and financial information like PINs, passwords, or similar secret access information for credit cards, banks, or other financial accounts.
  
  The address of the official IRS website is www.irs.gov. Do not be misled by sites claiming to be the IRS but ending in .com, .net, .org, or anything other than .gov. If you discover a website that claims to be the IRS but you suspect it is bogus, do not provide any personal information on the site.
  
• Double check the email address. Thieves may have compromised a friend’s email address. They might also be spoofing the address with a slight change in text, such as by using narne@example.com instead of name@example.com. Merely changing the “m” to an “r” and “n” can trick people.
  
• Remember that the IRS doesn't initiate spontaneous contact with taxpayers by phone or email to ask for personal or financial information. The IRS does not call taxpayers with aggressive threats of lawsuits or arrests. It is a common tactic for criminals to call, acting as an IRS agent to try collecting a tax bill and threatening to arrest you or have your home seized for payment. These same individuals will sometimes ask you to make payments using a gift card, which the IRS would never do.
  
• Don’t click on hyperlinks in suspicious emails. It is common practice for cyber crooks to send out emails asking you to click on an embedded link to update your password or other sensitive information. Legitimate firms would not do that, so be safe and ignore and then delete the email. If the email is from a business or person you deal with and you are concerned, contact the business directly, either through its main webpage or by phone. Also remember that no legitimate business or organization will ask for sensitive financial information by email. Another trick cybercrooks employ is to hack into a friend’s emails and then send you messages asking you to click on an embedded link in the email, which can end up installing malware on your computer.
  
• Use security software to protect against malware and viruses found in phishing emails. Some security software can help identify suspicious websites that are used by cybercriminals as well as detect malware on your computer.
  
• Use strong passwords to protect online accounts. Experts recommend the use of a passphrase, instead of a password, with a minimum of 10 digits, including letters, numbers, and special characters. But don’t use a family name or birth date, as cybercriminals may already have that information and will try it.
  
• Use multi-factor authentication when offered. Two-factor authentication means that in addition to entering a username and password, the user must enter a security code. This code is usually sent as a text to the user’s mobile phone. Even if a thief manages to steal usernames and passwords, it’s unlikely the crook would also have a victim’s phone.
  
• Communication from the IRS. If you receive a phone call, fax, or letter from an individual claiming to be from the IRS, you should immediately contact this office before providing any information. You should do this whether you suspect the contact is legitimate or not. You can also contact the IRS at 1-800-829-1040 to determine if the IRS has a legitimate need to contact you.
  
• Educate the elderly. The elderly are frequent victims of scammers. If you have elderly family members or friends, take the time to sit down with them and educate them about scammers, email phishing and the like.
  
• Too good to be true. One of the tactics used by scammers is fooling you into thinking that you won a foreign lottery or have received a foreign inheritance and that you need to send money before the funds can be transferred. Remember the old adage: “If it is too good to be true, it probably isn’t true.”
  
• Report phishing scams. Should you receive a suspicious email, you can help the government fight the cybercrooks by forwarding it to phishing@irs.gov. 

Our modern means of communication have provided opportunities for cybercrooks to scam you, which is a growing problem. You have to be vigilant and always keep your guard up. Don’t take their bait.

Always contact this office if you receive any communications from the IRS or state tax authorities. Be extra cautious with emails, phone calls, or mail. If you have questions related to phishing or ID theft, please call.

Big Tax Changes for Divorce Decrees after 2018

Welcome to 2019 and a delayed provision of the tax reform, also known as the Tax Cuts and Jobs Act (TCJA). For divorce agreements entered into after December 31, 2018, or pre-existing agreements that are modified after that date to expressly provide that alimony received is not included in the recipient’s income, alimony will no longer be deductible by the payer and won’t be income to the recipient.

Article Highlights:

• Pre-2019 Alimony 
• Post-2018 Alimony 
• Definition of Alimony 
• Alimony and IRA Contributions 
• State Treatment of Alimony

Welcome to 2019 and a delayed provision of the tax reform, also known as the Tax Cuts and Jobs Act (TCJA). For divorce agreements entered into after December 31, 2018, or pre-existing agreements that are modified after that date to expressly provide that alimony received is not included in the recipient’s income, alimony will no longer be deductible by the payer and won’t be income to the recipient.

This is in stark contrast to the treatment of alimony payments under decrees entered into and finalized before the end of 2018, for which alimony will continue to be deductible by the payer and income to the recipient.

Having the alimony treated one way for one segment of the population and the exact opposite for another group of individuals seems unfair and may ultimately make its way into the court system. But in the meantime, parties to a divorce action need to be aware of the change and compensate for it in their divorce negotiations, for a decree entered into after 2018.

This is not the first time Congress has tinkered with alimony. Way back in the mid-1980s, the definition of alimony was altered to prevent property settlements and child support from being deducted as alimony. Under the definition of alimony since then, payments:

(1) Must be in cash, paid to the spouse, the ex-spouse, or a third party on behalf of a spouse or ex-spouse, and the payments must be made after the divorce decree. If made under a separation agreement, the payment must be made after execution of that agreement.

(2) Must be required by a decree or instrument incident to divorce, a written separation agreement, or a support decree that does not designate payments as non-deductible by the payer or excludable by the payee. Voluntary payments to an ex-spouse do not count as alimony payments.

(3) Cannot be designated as child support. Child support is not alimony.

(4) Are valid alimony only if the taxpayers live apart after the decree. Spouses who share the same household can’t qualify for alimony deductions. This is true even if the spouses live separately within a dwelling unit.

(5) Must end on the death of the payee (recipient) spouse. If the divorce decree is silent, courts will generally consider state law, and where state law is vague, judges may make their own decision based on the facts and circumstances of the case.

(6) Cannot be contingent on the status of a child. That is, any amount that is discontinued when a child reaches 18, moves away, etc., is not alimony.

Taxable alimony payments under pre-2019 decrees and agreements are treated as earned income for IRA contribution purposes, allowing the spouse receiving the alimony to make IRA contributions based upon the alimony. The ability to make IRA contributions under pre-2019 decrees and agreements remains unchanged. However, for alimony received as a result of a post-2018 decree or agreement, the alimony can no longer be used as a basis for making an IRA contribution.

To summarize:

Pre-2019 Decrees – For decrees entered into before 2019 and unmodified after 2018:

• Alimony continues to be deductible by the payer spouse/ex-spouse. 
• Alimony is includable in the income of the recipient spouse/ex-spouse. 
• The recipient spouse/ex-spouse can make IRA contributions based upon the alimony received. 

Post-2018 Decrees– For decrees entered into after 2018 (and pre-2019 decrees that are modified and include the TCJA alimony rules): Alimony is not deductible by the payer-spouse/ex-spouse.

• Alimony is not includable in the income of the recipient spouse/ex-spouse. 
• The recipient spouse/ex-spouse cannot make IRA contributions based upon the alimony received. 

One additional complication is if state tax treatment is different than that at the federal level. Some states, such as California, have not conformed to the TCJA; as a result, the state treatment of alimony paid under both pre-2019 and post-2018 decrees in these states will continue to follow pre-2019 law, with alimony payments continuing to be deductible and alimony received being taxable.

Reasons Why Your Small Business Needs an Employee Identification Number

Entrepreneurs often shrug off the idea of obtaining an employer identification number, or EIN, believing that their business doesn’t need one. That may not be the best plan.

Entrepreneurs often shrug off the idea of obtaining an employer identification number, or EIN, believing that their small business really doesn’t need one. Though there are some cases where a solo business can get away with merely utilizing the business owner’s Social Security Number, doing so is not necessarily the best idea, even if you don’t have plans to hire employees in the future. In almost all instances, having an EIN is a good idea. It provides many benefits that go beyond facilitating the payment of employees.

Using an EIN Instead of Your Social Security Number Protects Your Personal Information

One of the top benefits offered by an Employee Identification Number is that it can help protect your personal identity. Though you still need to protect your EIN and shouldn’t share it without being certain of how it will be applied, using it for your business means that your personal information will have less exposure. Government forms and documents require an identifier, and the EIN (which is issued by the IRS) can be used on all of these instead of the Social Security Number. Though you can still suffer significant damage if your EIN is stolen, the information that is limited to your business is less sensitive than the information that is connected with your Social Security Number. Both require vigilant protection.

If You’re Going to Incorporate, You Need an EIN

Immediately incorporating your business makes it into a separate entity, and as such, it needs its own form of identification, especially if you’re going to have employees. Even if you’re considering yourself an employee, you will need to pay yourself a salary, and that means that you will need to collect payroll tax and take other steps that keep you in step with the IRS requirements. This is true whether your entity is established as a corporation, an LLC, and especially as a partnership, as you can’t use two Social Security numbers for filing financial papers.

The EIN Has Multiple Applications

Having an Employer Identification Number has long-term benefits that go far beyond its initial issuance. In addition to facilitating payroll, it can also be used to apply for all types of credit accounts and bank accounts needed by entities including general partnerships, LLCs, S corporations and sole proprietorships. You’ll need to have that number available for filing to change your business’ entity, for filing your tax returns every year, for setting up financial instruments such as profit-sharing plans, pensions, and retirement plans, and more.

Every business is different, and though we encourage all business owners to give serious consideration to obtaining an Employer Identification Number, we know that it may not apply to your situation.

Most refunds sent in less than 21 days; EITC/ACTC refunds starting Feb. 27

IRS Giving a Break to Some Taxpayers Who Under-prepaid Their 2018 Taxes

Taxpayers are required to pre-pay their taxes for any tax year through payroll withholding, estimated tax payments or a combination of the two. Employees and retirees generally accomplish this through withholding, and self-employed individuals and those with investment income by paying quarterly estimated payments.

Article Highlights:

• Tax Reform 
• Prepayments 
• W-4 
• Safe Harbor Payments 
• Penalty Waivers & Exceptions 
• Mitigating the Penalty 

Taxpayers are required to pre-pay their taxes for any tax year through payroll withholding, estimated tax payments or a combination of the two. Employees and retirees generally accomplish this through withholding, and self-employed individuals and those with investment income by paying quarterly estimated payments.

The late-2017 passage of tax reform that became effective for 2018 and its radical changes added considerable confusion for taxpayers trying to determine how much they should prepay for 2018. This confusion was made worse because the existing W-4 that employees complete and that their employers use to determine the correct withholding was designed for prior law and does not work well with the new tax law. As a result, there has been ongoing concern by the IRS that many taxpayers will end up owing tax this year when they file their 2018 returns, even though they got a tax reduction due to the tax reform changes, simply because their pre-payments through withholding and estimated tax payments were not enough.

For most of 2018, the IRS was issuing alerts that taxpayers may be under-withheld because of tax reform and the fact the W-4 could no longer be relied upon to produce a correct withholding amount.

Taxpayers whose pre-payments are less than certain safe harbor amounts are penalized. Those safe harbors are:

• 90% of the current year’s tax liability or 
• 100% of the prior year’s tax liability (110% where the prior year AGI is over $150,000 ($75,000 if married and filing separate returns). 

Recently several members of Congress have called upon the IRS to waive underpayment penalties for 2018. On January 16, 2019, although not waiving the penalties entirely, the IRS did change the current year safe harbor from 90% of the 2018 tax liability to 85%, providing a break for some taxpayers.

Even if you don’t meet one of the safe-harbor exceptions, a waiver of the penalty for 2018 may apply if you:

• Retired (after reaching age 62) or became disabled in 2017 or 2018. 
• You did not make payments because of one of the following situations and it would be inequitable to impose the penalty:
  a. Casualty
  b. Disaster, or
  c. Other unusual circumstance. 

There are two other exceptions to the penalty for 2018:

• If the total tax shown on your 2018 return minus the tax that was withheld is less than $1,000, you will not owe a penalty.
  
• If you had no tax liability in 2017, were a U.S. citizen or resident alien for all of 2017, and your 2017 return was for a full 12 months (or would have been had you been required to file), you won’t be charged an under-prepayment penalty. 

In addition, where your tax liability and /or tax pre-payments were uneven, the penalty amount may be mitigated by figuring it on a quarterly basis.

A Must Read Special Edition- Government Shutdown and Congress Pay

Galloway Tax Express Petition Challenge--
Time to make a change!

Galloway Tax Express (GTE) challenges other Tax Preparation Companies and taxpayers to sign the petition to stop Congress pay.

As a tax preparation company, it's our duty to inform taxpayers of the unknown. Did you know that Congress still get paid--by us (the taxpayers) when there is a government shutdown, while they say taxpayers cannot receive their tax refund--money you have paid the government out of your paycheck?

GTE has signed the petition to stop their pay. Have you stopped to think whether congressmen get paid when the government is shut down? Well, they do. What does this mean? Again, when there is a government shutdown, Congress still get paid--by us (the taxpayers), while taxpayers receive nothing. Now that you know, did you ask yourself why should they be the only government agency to receive pay when the government is shut down? It is GTE's busy to inform you as a taxpayer that you have the right to petition payroll payments to congressmen while there is a government shutdown.

GTE exists to educate taxpayers in understanding they have rights also, and what congress decisions mean to taxpayers. So, with that being said, you will NOT receive your tax refund until they reopen. As of 7:00pm, January 6, Congress has not come to an agreement to reopen the government. Until they reopen no one will receive a tax refund when you send in your tax return, it will be processed but no refund will be issued until the government reopens. Furthermore, they will accept your tax owed payment if you owe taxes from 2017. You figure! Sign the petition! GTE did. Will you?

Click here to read and sign the petition!