IRS LAUNCHES MORE RIGOROUS E-AUTHENTICATION PROCESS AND GET TRANSCRIPT ONLINE

How to Use Get Transcript Online:  English

WASHINGTON — With the assistance of top digital experts at U.S. Digital Service and other security authorities, the Internal Revenue Service today launched a more rigorous e-authentication process for taxpayers that will significantly increase protection against identity thieves impersonating taxpayers to access tax return information through the IRS Get Transcript online service.  This enhanced authentication process will also provide a foundation for additional IRS self-help services in the future.

After being disabled last spring, Get Transcript Online is now available for all users to access a copy of their tax transcripts and similar documents that summarize important tax return information. Today’s formal relaunch of Get Transcript Online addresses increased cybersecurity threats by using a new, more secure access framework. This framework enables the IRS to require a two-step authentication process for all online tools and applications that require a high level of assurance.

“The IRS is committed to the protection of taxpayer information and the security of our systems,” said IRS Commissioner John Koskinen. “Criminals are becoming increasingly sophisticated and continue to gather vast amounts of personal information as the result of data breaches at sources outside the IRS. In the face of that threat, we must provide the strongest possible authentication processes, while trying to enhance the ability of taxpayers to legitimately access their data and use IRS services online. We recognize that enhanced security will increase the challenge for taxpayers accessing our on-line services.”

While some taxpayers may now find it more difficult to authenticate their identities with this strengthened process, the IRS is committed to making sure everyone accessing the 
site will be able to do so in a safe and secure way. The IRS continues to support multiple options for those taxpayers who may be unable to access online features or who prefer to obtain information in more traditional ways. These options currently include ordering transcripts online or by phone for receipt by mail, which typically are delivered to the address of record within five to 10 days. The IRS continues to look for ways to expand options for all taxpayers.

“The incident with Get Transcript Online illustrates a wider truth about identity theft in general, which is that there are no perfect systems,” Koskinen said. “No one, either in the public or private sector, can give an absolute guarantee that a system will never be compromised. For that reason, we continue our comprehensive efforts to update the security of our systems, protect taxpayers and their data and investigate crimes related to stolen identity refund fraud.”

Tax transcripts are summaries of tax returns. Transcripts often are used for non-tax purposes, such as income validation for mortgages or student loans. Taxpayers also can use transcripts to obtain their prior-year adjusted gross income (AGI), which they need in order to e-file their tax returns.

Starting last year, the IRS began working with U.S. Digital Service to create a new e-authentication platform for Get Transcript and other IRS.gov tools. U.S. Digital Service is a branch under the Office of Management and Budget (OMB) that brings some of the private sector’s best tech experts into government to resolve complex issues facing federal agencies. The new secure access process meets the security standards set by the National Institute of Standards and Technology (NIST) and the OMB.

To access the new Get Transcript Online feature, taxpayers must have an email address, a text-enabled mobile phone and specific financial account information, such as a credit card number or certain loan numbers. Taxpayers who registered using the older process will need to re-register and strengthen their authentication in order to access the tool.

As part of the new multi-factor process, the IRS will send verification, activation or security codes via email and text. The IRS warns taxpayers that it will not initiate contact via text or email asking for log-in information or personal data. The IRS texts and emails will only contain one-time codes.  See Fact Sheet 2016-20 for details on what you need to successfully access Get Transcript Online.

New features also allow taxpayers to see the date and time the Get Transcript Online page was last accessed. Returning users must always receive and enter a text code prior to being able to obtain access.

The IRS maintains a multi-pronged, strategic approach to combating identity theft and assisting taxpayers who become victims. Last year, the IRS, state tax agencies and the tax industry joined forces for a Security Summit Initiative that identified and enacted new security safeguards for taxpayers in 2016.  The Security Summit partners are currently exploring additional safeguards for 2017. 

If you have any questions regarding accounting, domestic taxation, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS

IT'S THE LAW

April 18 has come and gone and another year of tax forms and shoeboxes full of receipts is behind us. But what should be done with those documents after your check or refund request is in the mail?

Federal law requires you to maintain copies of your tax returns and supporting documents for three years. This is called the "three-year law" and leads many people to believe they're safe provided they retain their documents for this period of time.

However, if the IRS believes you have significantly underreported your income (by 25 percent or more), it may go back six years in an audit. If there is any indication of fraud, or you do not file a return, no period of limitation exists.To be safe, use the following guidelines.

Business Records To Keep...	Personal Records To Keep...
1 Year	1 Year
3 Years	3 Years
6 Years	6 Years
Forever	Forever
Special Circumstances

 Business Documents To Keep For One Year

Correspondence with Customers and Vendors

Duplicate Deposit Slips

Purchase Orders (other than Purchasing Department copy)

Receiving Sheets

Requisitions

Stenographer's Notebooks

Stockroom Withdrawal Forms

 Business Documents To Keep For Three Years

Employee Personnel Records (after termination)

Employment Applications

Expired Insurance Policies

General Correspondence

Internal Audit Reports

Internal Reports

Petty Cash Vouchers

Physical Inventory Tags

Savings Bond Registration Records of Employees

Time Cards For Hourly Employees

 Business Documents To Keep For Six Years

Accident Reports, Claims

Accounts Payable Ledgers and Schedules

Accounts Receivable Ledgers and Schedules

Bank Statements and Reconciliations

Cancelled Checks

Cancelled Stock and Bond Certificates

Employment Tax Records

Expense Analysis and Expense Distribution Schedules

Expired Contracts, Leases

Expired Option Records

Inventories of Products, Materials, Supplies

Invoices to Customers

Notes Receivable Ledgers, Schedules

Payroll Records and Summaries, including payment to pensioners

Plant Cost Ledgers

Purchasing Department Copies of Purchase Orders

Sales Records

Subsidiary Ledgers

Time Books

Travel and Entertainment Records

Vouchers for Payments to Vendors, Employees, etc.

Voucher Register, Schedules

 Business Records To Keep Forever

While federal guidelines do not require you to keep tax Records "forever," in many cases there will be other reasons you'll want to retain these documents indefinitely.

Audit Reports from CPAs/Accountants

Cancelled Checks for Important Payments (especially tax payments)

Cash Books, Charts of Accounts

Contracts, Leases Currently in Effect

Corporate Documents (incorporation, charter, by-laws, etc.)

Documents substantiating fixed asset additions

Deeds

Depreciation Schedules

Financial Statements (Year End)

General and Private Ledgers, Year End Trial Balances

Insurance Records, Current Accident Reports, Claims, Policies

Investment Trade Confirmations

IRS Revenue Agent Reports

Journals

Legal Records, Correspondence and Other Important Matters

Minutes Books of Directors and Stockholders

Mortgages, Bills of Sale

Property Appraisals by Outside Appraisers

Property Records

Retirement and Pension Records

Tax Returns and Worksheets

Trademark and Patent Registrations

 Personal Documents To Keep For One Year

While it's important to keep year-end mutual fund and IRA contribution statements forever, you don't have to save monthly and quarterly statements once the year-end statement has arrived.

 Personal Documents To Keep For Three Years

Credit Card Statements

Medical Bills (in case of insurance disputes)

Utility Records

Expired Insurance Policies

 Personal Documents To Keep For Six Years

Supporting Documents For Tax Returns

Accident Reports and Claims

Medical Bills (if tax-related)

Sales Receipts

Wage Garnishments

Other Tax-Related Bills

 Personal Records To Keep Forever

CPA Audit Reports

Legal Records

Important Correspondence

Income Tax Returns

Income Tax Payment Checks

Property Records / Improvement Receipts (or six years after property sold)

Investment Trade Confirmations

Retirement and Pension Records (Forms 5448, 1099-R and 8606 until all distributions are made from your IRA or other qualified plan)

 Special Circumstances

Car Records (keep until the car is sold)

Credit Card Receipts (keep until verified on your statement)

Insurance Policies (keep for the life of the policy)

Mortgages / Deeds / Leases (keep 6 years beyond the agreement)

Pay Stubs (keep until reconciled with your W-2)

Sales Receipts (keep for life of the warranty)

Stock and Bond Records (keep for 6 years beyond selling)

Warranties and Instructions (keep for the life of the product)

Other Bills (keep until payment is verified on the next bill)

Depreciation Schedules and Other Capital Asset Records (keep for 3 years after the tax life of the asset)

 

If you have any questions regarding accounting, domestic taxation, international taxation, IRS representation, U.S. tax implications of Real Estate transactions or financial Statements, please give us a call at 305-274-5811.

 

Source: Thomson Reuters

FRIVOLOUS TAX CLAIMS CAN RESULT IN A PENALTY OF $5,000

WASHINGTON — The Internal Revenue Service warns that taxpayers should watch for improper claims for business credits, which is on the “Dirty Dozen” list of tax scams for the 2016 filing season.

"The IRS is committed to stopping the improper use of business credits and catching the promoters of erroneous claims," said IRS Commissioner John Koskinen.

Compiled annually, the “Dirty Dozen” lists a variety of common scams that taxpayers may encounter any time but many of these schemes peak during filing season as people prepare their returns or hire people to help with their taxes.

Fuel Tax Credit Scams

Fraud involving the fuel tax credit is considered a frivolous tax claim and can result in a penalty of $5,000. Furthermore, illegal scams can lead to significant penalties and interest and possible criminal prosecution. IRS Criminal Investigation works closely with the Department of Justice (DOJ) to shutdown scams and prosecute the criminals behind them.

The fuel tax credit is generally limited to off-highway business use or use in farming.  Consequently, the credit is not available to most taxpayers. Still, the IRS routinely finds unscrupulous preparers who have enticed sizable groups of taxpayers to erroneously claim the credit to inflate their refunds.

The federal government taxes gasoline, diesel fuel, kerosene, alternative fuels and certain other types of fuel. Certain commercial uses of these fuels are nontaxable. Individuals and businesses that purchase fuel for one of those purposes can claim a tax credit by filing Form 4136, Credit for Federal Tax Paid on Fuels.

The tax is on fuels used to power vehicles and equipment on roads and highways. Taxes paid for fuel to power vehicles and equipment used off-road may qualify for the tax credit and may include farm equipment, certain boats, trains and airplanes.

Improper claims for the fuel tax credit generally come in two forms. An individual or business may make an erroneous claim on their otherwise legitimate tax return. Or an identity thief may claim the credit in a broader fraudulent scheme.

The IRS has taken a number of steps to improve compliance processes involving fuel tax credits.

IRS compliance filters are preventing a significant number of questionable fuel tax credit claims from being processed.  For example, new identity theft screening filters have also improved the IRS’s ability to identify questionable fuel tax credit claims during return processing.

The IRS has taken additional steps to identify returns for review that claim fuel tax credits, including broadening the identification criteria to ensure a more comprehensive compliance approach in selecting questionable tax returns.

Research Credit Scams

The research credit is an important feature in the tax code to foster research and experimentation by the private sector.

The IRS does see a significant amount of misuse of the research credit each year. Improper claims for the research credit generally involve failures to participate in or substantiate qualified research activities and/or satisfy the requirements related to qualified research expenses.

Qualified research activities do not include activities where there is no uncertainty about the taxpayer’s method or capability to achieve a desired result or the appropriate design of the end result or do not include activities where it has not been shown that substantially all of the activities at issue were elements of a process of experimentation used to resolve uncertainty.

The IRS also sees improper expenses contained in some claims for the research credit. Certain activities, such as research after commercial production, adaptation of an existing business component, foreign research, and funded research are specifically excluded from the research credit, although the IRS is aware that such activities have been included in claims for the research credit.

In addition, qualified research expenses include only in-house research expenses and contract research. Qualified research expenses do not include expenses where it has not been shown that there is a nexus between the claimed expenses and qualified research activity.

Section 41 of the Internal Revenue Code provides a credit for increasing research activities, commonly known as the "research credit." Congress enacted the research credit in 1981 to provide an incentive for American industry to invest in research and experimentation. Since its enactment, the research credit has been extended 16 times, until it became permanent in December 2015 for amounts paid after Dec. 31, 2014.

Taxpayers who qualify for the credit may claim up to 20 percent of qualified expenses above a base amount by completing and attaching Form 6765, Credit for Increasing Research Activities, to their tax return.

To claim a research credit, taxpayers must evaluate and appropriately document their research activities over a period of time to establish the amount of qualified research expenses paid for each qualified research activity. While taxpayers may estimate some research expenses, taxpayers must have factual basis for the assumptions used to create the estimates. Unsupported claims for the research credit may subject taxpayers to penalties. Taxpayers should carefully review reports or studies prepared by third parties to ensure they accurately reflect the taxpayer’s activities. Third parties who are involved in the preparation of improper claims or research credit studies also may be subject to penalties.

If you have any questions regarding accounting, domestic taxation, international taxation, IRS representation, U.S. tax implications of Real Estate  transactions or financial statements, please give us a call at 305-274-5811.

Source: IRS