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Protecting Yourself from Tax Fraud

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We all know tax season is stressful, and January through April is the time to really buckle down, get tax forms in order, and try to get the best return possible. While help from tax preparers, online tax software, and the IRS is helpful during this time, there is the ever-looming threat of
identity theft while filing!

I discussed this topic briefly in my last blog post regarding data security, but I really want to make you aware of the different options that are readily available should you find out that someone has used your Social Security Number (SSN). With so much fraudulent activity happening during tax season—especially because many people turn to filing electronically—the
IRS itself is cracking down.

Tax fraud happens when someone uses a Social Security Number (SSN) that doesn’t belong to them, and they claim a refund. If this happens to you, and you realize you’re unable to file because a refund has been claimed using your SSN, the IRS is there to help.

First and foremost, if you choose to file electronically, you are required to submit a driver’s license number or an identification card number. This is required by the IRS in an effort to eliminate tax fraud.

Another way the IRS is clamping down on tax fraud is by encouraging tax preparers to encrypt data, so cybertheft is limited. The IRS even suggest that encryption should be made standard protocol for data security purposes. Data encryption, essentially, is translating data into a special format or code, so only people with access or a “key” are able to read the sensitive information.

“Protect Your Clients; Protect Yourself: Tax Security 101 is a awareness campaign spearheaded by the IRS. Tax tips and advice for individuals, businesses, and preparers is made easily accessible through this campaign. According to the IRS website, This campaign follows recommendations made by the Electronic Tax Administration Advisory (ETAAC), which noted
“Tax professionals ‘are at an increased risk’ of security vulnerability.

Full access to this campaign’s information, as well as a variety of other ways to avoid and take action against tax fraud, can be found at here.

—Jake

A Reason to Like Your Loans

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If you’re in the process of repaying student loans, trust that we feel your pain. They’re expensive, they’re tiresome, and they’re another bill in your pile of many.

Oftentimes, student loan debt is a heavy burden to bear. But, did you know that if you make less than $80,000 a year ($165,000 if filing jointly), you may qualify for a deduction on the interest you’ve paid toward student loans?

If you’re in the process of paying back student loans on a degree, certificate, or educational credential which you’ve received during your time taking credits at least part-time, you may qualify for this special tax deduction.

Again, not the entirety of your student loan repayment qualifies for a deduction. Rather, the portion of your payment that covers interest on your loans, if it is above $600, qualifies. This deduction can reduce your taxable income by up to $2,500.

Anyone that has paid more than $600 in interest in 2018 should receive a Form 1098-E (student loan interest tax form) from each of their lenders. If you think you have paid over $600 to interest on your loans and have not received a 1098-E by the end of January, contact your lender.

In order to claim this deduction, you must be legally obligated to pay the loan. If a parent claims you as a dependent and you both are obligated to pay back the loan, the deduction is allowable to whomever actually makes the payments monthly. Consult your parents if you are unsure about whether or not they claim you on their taxes.

If you are unsure whether or not you qualify for this student loan tax deduction overall, the IRS has a helpful tool for you: Click here, take the survey, and see if you qualify.

—Jake