From the IRS: Review Your Taxes This Summer to Prevent a Surprise Next Spring

Review Your Taxes This Summer to Prevent a Surprise Next Spring

Each year, many people get a larger refund than they expected. Some find they owe a lot more tax than they thought they would. If this happened to you, review your situation to prevent another tax surprise. Did you marry? Have a child? Have a change in income? Some life events can have a major effect on your taxes. You can bring the tax you pay closer to the amount you owe. Here are some key IRS tips to help you come up with a plan of action:

• New Job. When you start a new job, you must fill out a Form W-4, Employee’s Withholding Allowance Certificate and give it to your employer. Your employer will use the form to figure the amount of federal income tax to withhold from your pay. Use the IRS Withholding Calculator on to help you fill out the form. This tool is easy to use and it’s available 24/7.

• Estimated Tax. If you earn income that is not subject to withholding you may need to pay estimated tax. This may include income such as self-employment, interest, dividends or rent. If you expect to owe a thousand dollars or more in tax, and meet other conditions, you may need to pay this tax. You normally pay it four times a year. Use the worksheet in Form 1040-ES, Estimated Tax for Individuals, to figure the tax.

• Life Events. Check to see if you need to change your Form W-4 or change the amount of estimated tax you pay when certain life events take place. A change in your marital status, the birth of a child or buying a new home can change the amount of taxes you owe. In most cases, you can submit a new Form W–4 to your employer anytime.

• Changes in Circumstances. If you are receiving advance payments of the premium tax credit, it is important that you report changes in circumstances, such as changes in your income or family size, to your Health Insurance Marketplace. You should also notify the Marketplace when you move out of the area covered by your current Marketplace plan. Advance payments of the premium tax credit help you pay for the insurance you buy through the Health Insurance Marketplace. Reporting changes will help you get the proper type and amount of financial assistance so you can avoid getting too much or too little in advance.

For more see Publication 505, Tax Withholding and Estimated Tax. You can get it on at any time.
Additional IRS Resources:

• Publication 5152: Report changes to the Marketplace as they happen – English | Spanish
• IRS Withholding Calculator

IRS YouTube Videos:
• IRS Withholding Calculator – English | Spanish | ASL
• Premium Tax Credit: Changes in Circumstances – English | Spanish | ASL

IRS Podcasts:
• IRS Withholding Calculator – English | Spanish
• Premium Tax Credit Changes in Circumstances – English | Spanish


How to Find Unclaimed Money from the Government

How to Find Unclaimed Money from the Government
If the government owes a person money and that person does not collect it, the money is considered unclaimed money. This may also happen with pensions, credit unions, banks and other companies. While there are legitimate sources of unclaimed money for some people, it is also important to be aware of scams relating to unclaimed funds. Many people pretend to be from the government or other companies claiming a person is owed money but must pay a fee to collect it. A government agency will never call about unclaimed money or ask for a fee to recover it. Every consumer should know how to look for unclaimed money and how to avoid scams.

Where To Find Unclaimed Money Online
There is no central site where all types of unclaimed funds are listed. To find different types of unclaimed money, a person must visit several sites. A name, social security number or state of residence may be required for the search.

State Funds
Start by using a search engine to find state listings of unclaimed funds. Tax refunds and other tax money that is unclaimed can be found by contacting the IRS.

Federal Funds
The United States Treasury Department, and the FDIC are some good places to start when searching for federal funds. Most of these sites have search features where people can find their unclaimed money by entering a state of residence, a first name and a last name.

Pensions And Retirement
For any retirement accounts or pensions from companies that went out of business, try to find unclaimed funds by searching the company’s name and “unclaimed funds.” These may also be listed in other places. For help locating such funds, discuss concerns with an agent.

Banking And Investments
In some cases, banks fail and owe people money for their accounts. Some people forget they have accounts with these banks. Try searching the FDIC first for any funds from failed financial institutions. This is also the best place to start when searching for funds from a credit union. For any funds from SEC claims, try searching the Securities and Exchange Commission site first. There are typically lists that specify when one party owes another money. People who have mutilated coins and bills can exchange them with the Treasury Department under the damaged money provision.

For people who had mortgages insured by FHA, there may be refunds owed from the Department of Housing and Urban Development. This agency is commonly referred to as HUD.

Savings Bonds
A useful site for finding savings bonds that are no longer accruing interest is Treasury Hunt. If a bond was issued during 1974 or later and has matured, it should appear on this site. There are also resources for calculating the value of a savings bond and replacing stolen or lost paper bonds.

For any foreign claims, the Bureau of Fiscal Service provides a search tool to locate these funds. To learn more, discuss concerns with an agent.

From the IRS: Don’t Fall for New Tax Scam Tricks by IRS Posers

Don’t Fall for New Tax Scam Tricks by IRS Posers

Though the tax season is over, tax scammers work year-round. The IRS advises you to stay alert to protect yourself against new ways criminals pose as the IRS to trick you out of your money or personal information. These scams first tried to sting older Americans, newly arrived immigrants and those who speak English as a second language. The crooks have expanded their net, and now try to swindle virtually anyone. Here are several tips from the IRS to help you avoid being a victim of these scams:

• Scams use scare tactics. These aggressive and sophisticated scams try to scare people into making a false tax payment that ends up with the criminal. Many phone scams use threats to try to intimidate you so you will pay them your money. They often threaten arrest or deportation, or that they will revoke your license if you don’t pay. They may also leave “urgent” callback requests, sometimes through “robo-calls,” via phone or email. The emails will often contain a fake IRS document with a phone number or an email address for you to reply.

• Scams use caller ID spoofing. Scammers often alter caller ID to make it look like the IRS or another agency is calling. The callers use IRS titles and fake badge numbers to appear legit. They may use online resources to get your name, address and other details about your life to make the call sound official.

• Scams use phishing email and regular mail. Scammers copy official IRS letterhead to use in email or regular mail they send to victims. In another new variation, schemers provide an actual IRS address where they tell the victim to mail a receipt for the payment they make. All in an attempt to make the scheme look official.

• Scams cost victims over $20 million. The Treasury Inspector General for Tax Administration, or TIGTA, has received reports of about 600,000 contacts since October 2013. TIGTA is also aware of nearly 4,000 victims who have collectively reported over $20 million in financial losses as a result of tax scams.
The real IRS will not:

• Call you to demand immediate payment. The IRS will not call you if you owe taxes without first sending you a bill in the mail.

• Demand that you pay taxes and not allow you to question or appeal the amount that you owe.

• Require that you pay your taxes a certain way. For instance, require that you pay with a prepaid debit card.

• Ask for credit or debit card numbers over the phone.

• Threaten to bring in police or other agencies to arrest you for not paying.

If you don’t owe taxes or have no reason to think that you do:

• Do not provide any information to the caller. Hang up immediately.

• Contact the Treasury Inspector General for Tax Administration. Use TIGTA’s “IRS Impersonation Scam Reporting” web page to report the incident.

• You should also report it to the Federal Trade Commission. Use the “FTC Complaint Assistant” on Please add “IRS Telephone Scam” in the notes.

If you know you owe, or think you may owe taxes:
• Call the IRS at 800-829-1040. IRS workers can help you if you do owe taxes.

Stay alert to scams that use the IRS as a lure. For more, visit “Tax Scams and Consumer Alerts” on

IRS YouTube Videos:
• Tax Scams – English | Spanish | ASL

IRS Podcasts:
• Tax Scams – English | Spanish

2015 Medicare Trustees Report

On July 22 the 2015 Medicare Trustees report was released. As in previous years, the report separated out the financial projections for the hospital insurance (HI) program (Medicare Part A) and the Supplementary Medical Insurance (SMI) program (Medicare Part B and Prescription Drug Coverage). Financing for the two programs is very different and affects people in different ways.

As you know, Part A is free to people who qualify for Social Security benefits. The HI fund is financed by Medicare taxes—the 1.45% that comes out of employees’ paychecks, the matching 1.45% that employers pay, and the additional .9% paid on wages over $250,000 for couples or $200,000 for single individuals. These payroll taxes go into the HI trust fund, out of which are paid Medicare Part A expenses. According to the latest trustees report, the HI fund is expected to exhaust in 2030, the same date projected by trustees last year. After the HI fund is exhausted, tax revenues are projected to cover 86 percent of costs in 2030, decreasing to 79 percent in 2039 and then increasing to about 84 percent by the end of the projection period. The Trustees recommend that Congress and the President work together “with a sense of urgency” to address the depletion of the HI trust fund.

Parts B and D are financed in part by monthly premiums paid by Medicare beneficiaries and in part by general revenues of the U.S. Treasury. Premiums cover about 25% and general revenues cover about 75% of the costs. Theoretically, these costs will always be covered because the revenue sources (premiums and income taxes) can always be raised. And this is where high-income people will be hit the hardest. As Part B and Part D costs rise, the income-related monthly adjustment will increase. To make matters worse, individuals with MAGI over $85,000 and couples with MAGI over $170,000 are not subject to the hold-harmless provision that could kick in this year.

Under the hold-harmless provision, Social Security checks cannot go down if the Part B premium rises by more than the Social Security cost-of-living adjustment. It affects people whose Medicare premiums are deducted from their Social Security checks and who are not subject to the IRMAA. If the Social Security COLA is 0% in 2016, which is likely, the monthly Part B premium will remain at $104.90 for 70% of beneficiaries. Then it will fall to higher-income beneficiaries to make up the difference.

According to Table V.E2 on page 203 of the report, the Trustees project the Part B base premium to rise to $159.30 in 2016, from $104.90 in 2015. But if there is no Social Security COLA, 70% of beneficiaries would continue to pay $104.90. This would cause the IRMAA to rise as follows:

MAGI Single MAGI Joint 2016 (projected) 2015

Under $85,000 Under $170,000 $159.30* $104.90

$85,001-$107,000 $170,001-$214,000 $223.00 $146.90

$107,001-$160,000 $214,001-$320,000 $318.60 $209.80

$160,001-$214,000 $320,001-$428,000 $414.20 $272.20

Over $214,000 over $428,000 $509.80 $335.70

Source: Table V.E3. on page 204 of the report.

* If not subject to the hold-harmless provision. People not subject to the hold-harmless provision might include those whose Medicare premiums are not deducted from their Social Security checks or who enroll in Part B after 2015.

Actual premiums will be announced sometime in October. But it can’t hurt to start preparing your clients for substantially higher Medicare premiums in 2016 so they can incorporate them into their retirement spending plans. At some point the longer-term threat of substantially higher income taxes to restore solvency to the HI fund will also need to be taken into account.

From the IRS: Tax Tips for Starting a Business

Tax Tips for Starting a Business

When you start a business, a key to your success is to know your tax obligations. You may not only need to know about income tax rules, but also about payroll tax rules. Here are five IRS tax tips that can help you get your business off to a good start.

1. Business Structure. An early choice you need to make is to decide on the type of structure for your business. The most common types are sole proprietor, partnership and corporation. The type of business you choose will determine which tax forms you will file.

2. Business Taxes. There are four general types of business taxes. They are income tax, self-employment tax, employment tax and excise tax. In most cases, the types of tax your business pays depends on the type of business structure you set up. You may need to make estimated tax payments. If you do, use IRS Direct Pay to pay them. It’s the fast, easy and secure way to pay from your checking or savings account.

3. Employer Identification Number. You may need to get an EIN for federal tax purposes. Search “do you need an EIN” on to find out if you need this number. If you do need one, you can
apply for it online.

4. Accounting Method. An accounting method is a set of rules that you use to determine when to report income and expenses. You must use a consistent method. The two that are most common are the cash and accrual methods. Under the cash method, you normally report income and deduct expenses in the year that you receive or pay them. Under the accrual method, you generally report income and deduct expenses in the year that you earn or incur them. This is true even if you get the income or pay the expense in a later year.

5. Employee Health Care. The Small Business Health Care Tax Credit helps small businesses and tax-exempt organizations pay for health care coverage they offer their employees. A small employer is eligible for the credit if it has fewer than 25 employees who work full-time, or a combination of full-time and part-time. The maximum credit is 50 percent of premiums paid for small business employers and 35 percent of premiums paid for small tax-exempt employers, such as charities.
The employer shared responsibility provisions of the Affordable Care Act affect employers employing at least a certain number of employees (generally 50 full-time employees or a combination of full-time and part-time employees). These employers’ are called applicable large employers. ALEs must either offer minimum essential coverage that is “affordable” and that provides “minimum value” to their full-time employees (and their dependents), or potentially make an employer shared responsibility payment to the IRS. The vast majority of employers will fall below the ALE threshold number of employees and, therefore, will not be subject to the employer shared responsibility provisions.

Employers also have information reporting responsibilities regarding minimum essential coverage they offer or provide to their fulltime employees. Employers must send reports to employees and to the IRS on new forms the IRS created for this purpose.

Get all the tax basics of starting a business on at the Small Business and Self-Employed Tax Center.

Additional IRS Resources:
• IRS Tax Calendar for Businesses and Self-Employed
• Publication 505, Tax Withholding and Estimated Tax
• Publication 334, Tax Guide for Small Business
• Publication 225, Farmers Tax guide
• Publication 535, Business Expenses
• Publication 587, Business Use of Your Home
• Publication 510, Excise Taxes
• Publication 538, Accounting Periods and Methods

IRS YouTube Videos:
• Small Business Health Care Tax Credit – English | Spanish | ASL
• IRS Online Tax Calendar – English | Spanish | ASL
• Simplified Home Office Deduction – English | Spanish | ASL

IRS Podcasts:
• Small Business Health Care Tax Credit – English | Spanish
• IRS Online Tax Calendar – English | Spanish
• Simplified Home Office Deduction – English | Spanish

Cutting through the B.S. about Social Security

Cutting through the B.S. about Social Security

Watching the news, listening to the radio or politicians, or reading the newspaper, you’ve probably come across story after story on the health of Social Security. And, depending on the actuarial assumptions used and the political slant, Social Security has been described as everything from a program in need of some adjustments to one in crisis requiring immediate, drastic reform.

Obviously, the underlying assumptions used can affect one’s perception of the solvency of Social Security, but it’s clear some action needs to be taken. However, even experts disagree on the best remedy. So let’s take a look at what we do know.

Facts and Figures

According to the Social Security Administration (SSA), over 63 million Americans currently collect some sort of Social Security retirement, disability or death benefit. Social Security is a pay-as-you-go system, with today’s workers paying the benefits for today’s retirees. (Source: Fast Facts & Figures About Social Security, 2014)

Will Social Security run out or money?
Even those on opposite sides of the political spectrum can agree that demographic factors are exacerbating Social Security’s problems–namely, life expectancy is increasing and the birth rate is decreasing. This means that over time, fewer workers will have to support more retirees.
According to the SSA, Social Security is already paying out more money than it takes in. However, by drawing on the Social Security trust fund, the SSA estimates that Social Security should be able to pay 100% of scheduled benefits until 2033. Once the trust fund reserves are depleted, payroll tax revenue alone should still be sufficient to pay about 77% of scheduled benefits. This means that 20 years from now, if no changes are made, beneficiaries may receive a benefit that is about 23% less than expected. (Source: 2014 OASDI Trustees Report)

How do we fix Social Security?

While no one can say for sure what will happen (and the political process is sure to be contentious), here are some solutions that have been proposed to help keep Social Security solvent for many years to come:
• Allow individuals to invest some of their current Social Security taxes in “personal retirement accounts”
• Raise the current payroll tax
• Raise the current ceiling on wages currently subject to the payroll tax
• Raise the retirement age beyond age 67
• Reduce future benefits, especially for wealthy retirees
• Change the benefit formula that is used to calculate benefits
• Change how the annual cost-of-living adjustment for benefits is calculated

Kicking the can down the street

Members of Congress and the President still support efforts to reform Social Security, but progress on the issue has been slow. However, the SSA continues to urge all parties to address the issue sooner rather than later, to allow for a gradual phasing in of any necessary changes.
Although debate will continue on this polarizing topic, there are no easy answers, and the final outcome for this decades-old program is still uncertain.

What should I be doing?

The financial outlook for Social Security depends on a number of demographic and economic assumptions that can change over time, so any action that might be taken and who might be affected are still unclear. But no matter what the future holds for Social Security, your financial future is still in your hands. Focus on spending less than you earn, do not carry credit card balances, and save as much for retirement as possible.

From the IRS: If You Get an IRS Notice, Here’s What to Do

If You Get an IRS Notice, Here’s What to Do

Each year the IRS mails millions of notices and letters to taxpayers. If you receive a notice from the IRS, here is what you should do:

• Don’t Ignore It. You can respond to most IRS notices quickly and easily. It is important that you reply right away.

• Focus on the Issue. IRS notices usually deal with a specific issue about your tax return or tax account. Understanding the reason for your notice is important before you can comply.

• Follow Instructions. Read the notice carefully. It will tell you if you need to take any action to resolve the matter. You should follow the instructions.

• Correction Notice. If it says that the IRS corrected your tax return, you should review the information provided and compare it to your tax return.

If you agree, you don’t need to reply unless a payment is due.

If you don’t agree, it’s important that you respond to the IRS. Write a letter that explains why you don’t agree. Make sure to include information and any documents you want the IRS to consider. Include the bottom tear-off portion of the notice with your letter. Mail your reply to the IRS at the address shown in the lower left part of the notice. Allow at least 30 days for a response from the IRS.

• Premium Tax Credit. The IRS may send you a letter asking you to clarify or verify your premium tax credit information. The letter may ask for a copy of your Form 1095-A, Health Insurance Marketplace Statement. You should follow the instructions on the letter that you receive. This will help the IRS verify information and issue the appropriate refund.

• No Need to Visit IRS. You can handle most notices without calling or visiting the IRS. If you do have questions, call the phone number in the upper right corner of the notice. You should have a copy of your tax return and the notice with you when you call.

• Keep the Notice. Keep a copy of the notice you get from the IRS with your tax records.

• Watch Out for Scams. Don’t fall for phone and phishing email scams that use the IRS as a lure. The IRS first contacts people about unpaid taxes by mail – not by phone. The IRS does not initiate contact with taxpayers by email, text or social media.

Additional IRS Resources:
• Tax Topic 651 – Notices – What to Do
• Tax Topic 653 – IRS Notices and Bills, Penalties and Interest Charges
• Understanding Your CP2000 Notice