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It’s Good to be Afraid of Tax ‘Ghosts’

The Internal Revenue Service is reminding taxpayers to avoid unethical “ghost” tax return preparers. What is a “ghost” preparer? Well, it may be more than you are aware.

Be wary of unscrupulous tax preparers

If your preparer fills out your return and then will not sign it they are a ghost preparer. Unscrupulous ghost preparers will print the return and tell the taxpayer to sign and mail it to the IRS. For e-filed returns, the ghost will prepare but refuse to digitally sign as the paid preparer.

By law, anyone who is paid to prepare or assists in preparing federal tax returns must have a valid Preparer Tax Identification Number, or PTIN. Paid preparers must sign and include their PTIN on the return. Not signing a return is a red flag that the paid preparer may be looking to make a fast buck by promising a big refund or charging fees based on the size of the refund.

Ghost tax return preparers may also:

  • Require payment in cash only and not provide a receipt.
  • Invent income to qualify their clients for tax credits.
  • Claim fake deductions to boost the size of the refund.
  • Direct refunds into their bank account, not the taxpayer’s account.

No matter who prepares the return, the IRS urges taxpayers to review it carefully and ask questions about anything not clear before signing. Taxpayers should verify both their routing and bank account number on the completed tax return for any direct deposit refund. And taxpayers should watch out for ghost preparers inserting their bank account information onto the returns.

Click here for tips on what to look for when choosing a tax preparer.

Taxpayers should watch out for gift card scam

Gift Card Scam

Taxpayers should always be on the lookout for scams. Thieves want to trick people in order to steal their personal information, scam them out of money, or talk them into engaging in questionable behavior with their taxes. Scam attempts can peak during tax season, but taxpayers need to remain vigilant all year.

Gift card scams are on the rise. In fact, there are many reports of taxpayers being asked to pay a fake tax bill through the purchase of gift cards.

Here’s how one scenario usually happens:

  • Someone posing as an IRS agent calls the taxpayer and informs them their identity has been stolen.
  • The fake agent says the taxpayer’s identify was used to open fake bank accounts.
  • The caller tells the taxpayer to buy gift cards from various stores and await further instructions.
  • The scammer then contacts the taxpayer again telling them to provide the gift cards’ access numbers.
     

Here’s how people can know if it is really the IRS calling. 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.
  • Demand that taxpayers pay taxes without the opportunity to question or appeal the amount they owe. All taxpayers should be aware of their rights.
  • Threaten to bring in local police, immigration officers or other law-enforcement to have the taxpayer arrested for not paying.
  • Revoke the taxpayer’s driver’s license, business licenses, or immigration status.

People who believe they’ve been targeted by a scammer should:

  • Contact the Treasury Inspector General for Tax Administration to report a phone scam. Use their IRS Impersonation Scam Reporting web page. They can also call 800-366-4484.
  • Report phone scams to the Federal Trade Commission. Use the FTC Complaint Assistant on FTC.gov. They should add “IRS Telephone Scam” in the notes.
  • Report an unsolicited email claiming to be from the IRS, or an IRS-related component like the Electronic Federal Tax Payment System, to the IRS at phishing@irs.gov. The sender can add “IRS Phone Scam” to the subject line.

IRS reminds those with foreign assets about U.S. tax obligations

IRS reminds those with foreign assets about U.S. tax obligations

The Internal Revenue Service today reminded U.S. citizens and resident aliens, including those with dual citizenship, to check if they have a U.S. tax liability and a filing requirement. At the same time, the agency advised anyone with a foreign bank or financial account to remember the upcoming deadline that applies to reports for these accounts, often referred to as FBARs.

Here is a rundown of key points to keep in mind:

Deadline for reporting foreign accounts

The deadline for filing the annual Report of Foreign Bank and Financial Accounts (FBAR) is the same as for a federal income tax return. This means that the 2017 FBAR, Form 114, must be filed electronically with the Financial Crimes Enforcement Network (FinCEN) by April 17, 2018. FinCEN grants filers missing the April 17 deadline an automatic extension until Oct. 15, 2018, to file the FBAR. Specific extension requests are not required. In the past, the FBAR deadline was June 30 and no extensions were available.

In general, the filing requirement applies to anyone who had an interest in, or signature or other authority, over foreign financial accounts whose aggregate value exceeded $10,000 at any time during 2017. Because of this threshold, the IRS encourages taxpayers with foreign assets, even relatively small ones, to check if this filing requirement applies to them. The form is only available through the BSA E-Filing System website.

Reminder: IRS to end Offshore Voluntary Disclosure Program

The Offshore Voluntary Disclosure Program will close on Sept. 28, 2018. Taxpayers with undisclosed foreign financial assets still have time to use OVDP before the deadline. For further details about the OVDP, see the OVDP FAQs.

The IRS noted it will continue to use tools besides voluntary disclosure to combat offshore tax avoidance, including taxpayer education, whistleblower leads, civil examination and criminal prosecution. The IRS continues to use streamlined filing compliance procedures that will remain in place and be available to eligible taxpayers. But, as with OVDP, the IRS said it may end the streamlined filing compliance procedures at some point. Full details of the OVDP and the streamlined filing compliance procedures are available at Options Available for U.S. Taxpayers with Undisclosed Foreign Financial Assets.

Most people abroad need to file

An income tax filing requirement generally applies even if a taxpayer qualifies for tax benefits, such as the Foreign Earned Income exclusion or the Foreign Tax credit, which substantially reduce or eliminate U.S. tax liability. These tax benefits are only available if an eligible taxpayer files a U.S. income tax return.

A special extended filing and payment deadline applies to U.S. citizens and resident aliens who live and work abroad. For U.S. citizens and resident aliens whose tax home and abode are outside the United States and Puerto Rico, the income tax filing and payment deadline is June 15, 2018. The same applies for those serving in the military outside the U.S. and Puerto Rico.

Interest, currently at the rate of five percent per year, compounded daily, will apply to any payment received after the regular April 17 deadline. See U.S. Citizens and Resident Aliens Abroad for details.

Nonresident aliens who received income from U.S. sources in 2017 also must determine whether they have a U.S. tax obligation. The filing deadline for nonresident aliens is April 17. See Taxation of Nonresident Aliens on IRS.gov.

Special income tax return reporting for foreign accounts and assets

Federal law requires U.S. citizens and resident aliens to report any worldwide income, including income from foreign trusts and foreign bank and securities accounts. In most cases, affected taxpayers need to complete and attach Schedule B to their tax return. Part III of Schedule B asks about the existence of foreign accounts, such as bank and securities accounts, and usually requires U.S. citizens to report the country in which each account is located.

In addition, certain taxpayers may also have to complete and attach to their return Form 8938, Statement of Foreign Financial Assets. Generally, U.S. citizens, resident aliens and certain nonresident aliens must report specified foreign financial assets on this form if the aggregate value of those assets exceeds certain thresholds. See the instructions for this form for details.

Specified domestic entity reporting

For tax year 2017, certain domestic corporations, partnerships and trusts that are considered formed for the purpose of holding (directly or indirectly) specified foreign financial assets must file Form 8938 if the total value of those assets exceeds $50,000 on the last day of the tax year or $75,000 at any time during the tax year.

For more information on domestic corporations, partnerships and trusts that are specified domestic entities and must file Form 8938, as well as the types of specified foreign financial assets that must be reported, see Do I need to file Form 8938, “Statement of Specified Foreign Financial Assets”? and Form 8938 instructions.

Report in U.S. dollars

Any income received or deductible expenses paid in foreign currency must be reported on a U.S. tax return in U.S. dollars. Likewise, any tax payments must be made in U.S. dollars.

Both FinCen Form 114 and IRS Form 8938 require the use of a Dec. 31 exchange rate for all transactions, regardless of the actual exchange rate on the date of the transaction. Generally, the IRS accepts any posted exchange rate that is used consistently. For more information on exchange rates, see Foreign Currency and Currency Exchange Rates.

Expatriate reporting

Taxpayers who relinquished their U.S. citizenship or ceased to be lawful permanent residents of the United States during 2017 must file a dual-status alien return, attaching Form 8854, Initial and Annual Expatriation Statement. A copy of the Form 8854 must also be filed with Internal Revenue Service, Philadelphia, PA 19255-0049, by the due date of the tax return (including extensions). See the instructions for this form and Notice 2009-85, Guidance for Expatriates Under Section 877A, for further details.

Choose Free File or e-file

U.S. citizens and resident aliens living abroad can use IRS Free File to prepare and electronically file their returns for free. This means both U.S. citizens and resident aliens living abroad with adjusted gross incomes (AGI) of $66,000 or less can use brand-name software to prepare their returns and then e-file them for free. A limited number of companies provide software that can accommodate foreign addresses.

A second option, Free File Fillable Forms, the electronic version of IRS paper forms, has no income limit and is best suited to people who are comfortable preparing their own tax return. Both the e-file and Free File electronic filing options are available until Oct. 15, 2018, for anyone filing a 2017 return. Check out the e-file link on IRS.gov for details on the various electronic filing options. Free File is not available to nonresident aliens required to file a Form 1040NR.

More information available

Any U.S. taxpayer here or abroad with tax questions can refer to the International Taxpayers page and use the online IRS Tax Map and the International Tax Topic Index to get answers. These online tools group IRS forms, publications and web pages by subject and provide users with a single-entry point to find tax information.

Taxpayers who are looking for return preparers abroad should visit the Directory of Federal Tax Return Preparers with Credentials and Select Qualifications.

To help avoid delays with tax refunds, taxpayers living abroad should visit Helpful Tips for Effectively Receiving a Tax Refund for Taxpayers Living Abroad on IRS.gov.

More information on the tax rules that apply to U.S. citizens and resident aliens living abroad can be found in Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad, available on IRS.gov.

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