Fraudsters Stealing Some TurboTax Refunds After Customers Filed

MARCH 25, 2015

In a tax season plagued with identify theft and tax fraud, a new method of online criminal activity has been identified, according to Intuit’s statements to The Washington Post.

Typically, fraudsters file a tax return in their victims’ names to collect the refund. In February, a rash of taxpayers reported logging into TurboTax to discover their state return already processed, leading Intuit to temporarily halt TurboTax e-filing. Earlier this month, Intuit CEO Brad Smith joined other tax software leaders in a sit-down with the Internal Revenue Service to address the growing problem.

In this rarer form of theft, tax refunds are stolen after the return is filed by the taxpayer and accepted by the IRS, with fraudsters then changing the bank account information to divert those funds.

According to Intuit, between 24 and 40 taxpayers have been affected and about 24 of them used TurboTax. All of those customers had elected to have their filing fees taken from their refunds in a refund transfer.

After filing fees are withdrawn, refunds are transmitted to taxpayers with a deposit by Tax Products Group, owned Green Dot Corporation, a bank that works with tax-preparation firms. In these newly reported instances, taxpayers’ personal information is obtained so the refunds can be sent to another bank account.

This season’s fraudulent activity was not limited to taxpayers using TurboTax, and Intuit has since beefed up the product’s security. Intuit offered to front tax refunds for customers affected by the latest incident, Intuit spokesperson Julie Miller told The Washington Post. In a company statement, Tax Products Group also said it has improved security measures.

Asked for further comment, Miller said Intuit had no statement beyond what she told The Washington Post.

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Millennials Most Likely to File Taxes Early

LOS ANGELES (MARCH 24, 2015)

The Millennial generation is the most diligent when it comes to filing their taxes early, according to a new survey.

Ninety percent of Millennials filed at least one month ahead of the tax deadline, compared to an average of 77 percent for all other age groups, according to a poll of 500 U.S. adults by the consumer insights firm Instantly.

The survey also found that 33 percent of Millennials plan to save their federal and state tax refunds, compared to only 18 percent of non-Millennials, who are more likely to use their refunds to pay down debt and bills.

The study also found that 17 percent of Millennials feel a sense of civic pride when filing their taxes, while the majority of non-Millennials feel that taxes are just something they have to do.

“Media buzz around tax season tends to focus on last-minute filers, but the study found that most people file early, with Millennials leading the charge,” said Instantly chief marketing officer Andy Jolls in a statement.

Instantly also found that more than 82 percent of Americans said they have filed their taxes a month ahead of deadline, while only 4 percent of U.S. adults reported they will wait until April 15 to file their taxes

The survey also revealed that nearly 50 percent of Americans use online tax programs over other filing methods, citing ease of use as the main reason. Twenty percent of respondents said they use a tax preparation service such as H&R Block, while 18 percent still file themselves on paper, and 14 percent rely on an accountant.

In addition, 75 percent of those polled expect to receive less than the average national tax refund of $3,120, or to owe money. Despite the tools and increased convenience available today, there is still plenty of hesitation around filing.

The survey found that 79 percent of respondents were apprehensive about the outcome of filing their taxes. Concerns about filing incorrectly and not getting all the money back that they deserve topped their fears. The biggest usage of tax refund money is paying down bills and debts for 36 percent of Americans.

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IRS Sending Letters to Verify Taxpayer Identities

WASHINGTON, D.C. (MARCH 20, 2015)

The Internal Revenue Service is sending letters to verify the identity of taxpayers as part of its effort this tax season to combat the growing problem of identity theft.

The IRS said taxpayers should use a special Identity Verification Service website,idverify.irs.gov, which will provide the fastest, easiest way to complete the task.

In the letter, known as Letter 5071C, the IRS asks taxpayers to verify their identity in order to complete processing of their return if the taxpayer did file it or reject the return if the taxpayer did not file it.

The IRS emphasized that it does not request such information via email, nor will the IRS call a taxpayer directly to ask this information without you receiving a letter first. The letter number can be found in the upper corner of the page.

The IRS has been dealing with an increasing wave of tax scams this year in which fraudsters have been leaving messages on taxpayers’ phones claiming to be  from the IRS demanding payment, and have been sending phishing emails to taxpayers purporting to come from the IRS ( see Senate Probes Rise in Tax Scams). On Thursday, IRS Commissioner John Koskinen met with leaders of several of the major tax software companies, tax preparation chains, state tax commissioners and other officials to coordinate an approach for dealing with identity theft (see IRS Meets with Tax Community to Address Identity Theft). Koskinen noted that the IRS is sending out more letters to taxpayers this year asking for additional verification when it suspects a filing may be fraudulent.

The letter gives taxpayers two options to contact the IRS and confirm whether or not they filed the return. Taxpayers can use the idverify.irs.gov site or call a toll-free number on the letter. Because of the high-volume on the toll-free numbers, the IRS noted that the IRS-sponsored website, idverify.irs.gov, is the safest, fastest option for taxpayers with web access. Only those taxpayers receiving Letter 5071C should access idverify.irs.gov.

The website will ask a series of questions that only the real taxpayer can answer. Taxpayers should have available their prior year tax return and their current year tax return, if they filed one, including supporting documents, such as Forms W-2 and 1099 and Schedules A and C.

Once the identity is verified, the taxpayers can confirm whether or not they filed the return in question. If they did not file the return, the IRS can take steps at that time to assist them. If they did file the return, it will take approximately six weeks to process it and issue a refund.

Taxpayers also can access idverify.irs.gov through www.IRS.gov by going to the Understanding Your 5071C Letter or the Understanding Your IRS Notice or Letter page. The tool is also available in Spanish. Taxpayers should always be aware of tax scams, efforts to solicit personally identifiable information and IRS impersonations. However, idverify.irs.gov is a secure, IRS-supported site that allows taxpayers to verify their identities quickly and safely.

The IRS noted that IRS.gov is the official IRS website, and taxpayers should always look for a URL ending with “.gov” – not “.com,” “.org,” “.net,” or other nongovernmental URLs.

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Congress Mulls Repeal of Estate Tax

WASHINGTON, D.C. (MARCH 18, 2015)

A House subcommittee held a hearing Wednesday on the estate tax after one of its members introduced legislation to repeal it.

Rep. Kevin Brady, R-Texas, introduced the Death Tax Repeal Act of 2015 last month. The bill would amend the Tax Code to repeal both the estate tax and the Generation-Skipping Transfer Tax. Proponents of the bill argue that the estate tax hurts small businesses, family farmers and ranchers who want to pass on their businesses to the next generation. Opponents pointed out that the estate tax affects relatively few families, especially after the exemption amount was raised to $5 million in 2010.

“The story is the same in all of our districts—family business owners and farmers work hard for their entire lives with the goal of passing on the fruits of their labor, but face the sometimes insurmountable hurdle of the death tax,” said House Ways and Means Select Revenue Measures Subcommittee Chairman Dave Reichert, R-Wash., in his opening statement at Wednesday’s hearing. “And in addition to the actual tax liability the death tax imposes, merely planning for it—regardless of whether these businesspeople and farmers end up owing it—is yet another challenge that we will hear discussed today. In fact, as I am sure many of my colleagues have, I consistently hear from local businesses about how this unnecessary tax threatens the livelihoods of families.”

Under current law, the estate tax takes a 40 percent cut from a taxable estate when a person passes away. Republican proponents of the repeal pointed to a report from Congress’s Joint Economic Committee that found family businesses and farms are far more likely than other estates to face a tax bill bigger than their liquid assets and that the tax generates a “negligible amount of revenue.”

Rep. Richard Neal, D-Mass., the ranking Democrat on the subcommittee, pointed to other studies that showed the estate tax affected few small businesses and family farms.

“Congress has recognized the plight of these businesses and enacted numerous provisions to help our nation’s farmers and small businesses, whether through generous expensing rules or accelerated and bonus depreciation—both of which I have supported,” he said in his opening statement. “This is in addition to raising the thresholds on the estate and gift tax. We have gone from a $1 million dollar exemption with a top rate of 55 percent to a $5 million dollar exemption—indexed for inflation—with a top rate of 40 percent. While our nation’s farmers and small businesses have legitimate concerns about the estate tax, it is my hope that they are not being used to end the estate tax for our nation’s wealthiest.”

He pointed to a study by the Tax Policy Center that found only 20 small business and farm estates nationwide owed any estate tax in 2013. The Tax Policy Center study estimated that those 20 estates owed just 4.9 percent of their value in tax, on average. Congress’s Joint Committee on Taxation also found that in 2013, there were 2.6 million deaths in the United States, and 4,700 estate tax returns reporting some tax liability were filed.

“This means 99.85 percent of all estates owe no estate tax at all,” said Neal. “By comparison, in the mid-1970s, taxable estate tax returns exceeded 6 percent of all deaths.”

Brandon Whitt, a seventh-generation farmer from Murfeesboro, Tenn., testified before the subcommittee on behalf of the American Farm Bureau Federation. He told lawmakers that he farms with his wife and father-in-law in a suburbanized area just outside Nashville.

“When my wife’s grandmother passed in 1988, my father-in law, who had farmed the land his entire life, was faced with a huge estate tax,” he said.

The value of the farm had doubled over the previous 10 years, and his father-in-law ended up having to sell 120 acres of land to pay estate taxes.

“This may not sound like much of a sacrifice since it left him with 483 acres to farm, but it completely changed the farm business,” said Whitt. “The land was lost to development and having houses so close to our fields made it impossible for us to continue raising cattle. Fast forward to today: we still farm that same land. Only now it is easily valued at $25,000 per acre.”

He hopes that his children will be the eighth generation to farm the land. “My father-in-law John is now 72 years old,” said Whitt. “As we look to the future, we can’t help but worry about what will happen when he passes away. We have spent countless hours talking with financial advisors, accountants and attorneys trying to put together a plan that will allow Batey Farms to remain a viable business. We know that we will face an estate tax when my father-in-law dies and we are planning now to try to avoid having to sell more acres to pay the tax. I can’t help but think about what our farm might be like if we could have invested all that time and energy into our business.”

Bobby McKnight, a seventh-generation cattleman from Fort Davis, Texas, testified on behalf of the American Cattlemen’s Beef Association about his family-owned small business. “Sometimes I need up to seven employees to help me run my operation efficiently,” he said. “Over the years I have invested a lot of time, resources and sweat equity in developing my employees. We work alongside each other taking care of the livestock and hoping for a good year where we will all reap the benefits of hard work. When times have been lean I have had to make sacrifices to keep my business above water and to keep my employees on the ranch. I make it a priority to put our people first because I don’t want to let them go. But sometimes you run out of places to cut and you have to make the uncomfortable decision to cut seasoned employees. That is what happened to my family during hard times brought on by the estate tax. At one time I had to cut my staff by 65 percent. I had to let go of seasoned employees that had families of their own and they were forced to find work elsewhere. The skill set needed to work cattle is a special skill set that takes years to learn, and I would give anything to have that skilled labor back working for me once more.”

Karen Madonia, CFO at Illco Inc., a Chicago-area distributor of heating, ventilation, air-conditioning and refrigeration equipment, parts and supplies, testified on behalf of Heating, Air-Conditioning and Refrigerator Distributors International. Her father purchased the business back in 1973.

“I personally find it fundamentally wrong to place a tax on death,” she said. “If a person accumulates wealth through hard work, and if that person pays his fair share of taxes on income as it is earned, I do not understand how the government can justify taking a significant portion of what he has left simply because he opted to save and re-invest rather than consume. The United States has already benefited from that person’s success because he has employed people who pay taxes, bought buildings on which he has paid property taxes and bought inventory and supplies from other companies, which can then afford to employ more people who pay taxes. He has created opportunity for the community as a whole while creating prosperity for himself. We all benefit when a small businessperson succeeds. To me, and probably to a large portion of the generation behind me, the estate tax serves as a tremendous entrepreneurial disincentive.”

Ray Madoff, a professor at Boston College Law School, argued that Congress should not be hasty in repealing the estate tax. “As an introductory matter, it is important to keep in mind that, in one form or another, the estate tax has been with us since this country’s earliest days,” he said. “The first estate tax was enacted in 1797, long before the income tax. Our modern estate tax was enacted in 1916, a mere three years after the enactment of the income tax. Any tax that has stood the test of time for so long should not be repealed without due attention to the role that it plays in our society, and the negative repercussions that could result from its repeal.”

He noted that the estate tax promotes fairness in the tax system and provides an important source of revenue for the government. According to the most recent estimates the estate tax will generate about $294 billion over the next 10 years.

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Senators Hatch and Wyden Revive Tax Reform Effort

WASHINGTON, D.C. (MARCH 11, 2015)

The leaders of the Senate Finance Committee, chairman Orrin Hatch, R-Utah, and ranking Democrat Ron Wyden, D-Ore., have revived a bipartisan effort to solicit ideas from interested members of the public and other stakeholders on how best to overhaul the tax code to make it simpler, fairer and more efficient.

The goal, they said, is to provide additional input, data, and information to the committee’s bipartisan tax working groups, which are currently analyzing the existing tax laws and examining policy trade-offs and reform options within each group’s area.

In the previous Congress, former House Ways and Committee chairman Dave Camp, R-Mich., and former Senate Finance Committee chairman Max Baucus, D-Mont., teamed up on a similar effort. They held numerous hearings and met with groups across the country, while also soliciting ideas from the public through Twitter and a Web site, and drafted numerous papers. But the initiative did not lead to the passage of the kind of comprehensive tax reform legislation they had envisioned.

Hatch and Wyden hope their effort will be more successful, although next year’s elections are likely to increase the hurdles for passing a tax reform bill. They have been holding a series of hearings on tax reform, including one on Tuesday on tax simplification in which they heard testimony from a CPA, Carol Markman, a tax director at EP Caine & Associates CPA LLC in Westbury, N.Y., along with other experts.

“By opening up our bipartisan working groups to public input, we hope to gain a greater understanding of how tax policy affects individuals, businesses, and civic groups across our nation,” Hatch and Wyden said in a joint statement. “In doing so, we will also equip our working groups with valuable input, and we hope these suggestions will help guide the groups through the arduous task of putting forth substantive ideas to reform the tax code in each of their areas.”

Individuals, businesses, organizations and advocacy groups interested in submitting comments can send an email to the bipartisan group or groups listed below that relates to their area of interest. They can also send submissions to each group of jurisdictions if an interest area covers more than one group:

Individual Income Tax – Individual@finance.senate.gov
Business Income Tax – Business@finance.senate.gov
Savings & Investment – Savings@finance.senate.gov
International Tax – International@finance.senate.gov
Community Development & Infrastructure – CommunityDevelopment@finance.senate.gov

The Finance Committee leaders also provided some additional submission requirements:

•    All submissions should be submitted as a pdf attachment. The attachment should be saved using the name of the organization or individual submitting the recommendations.

•    Parties should list the name of the tax working group they wish to contact in the subject line of the email.

•    Include contact name, organization (if the submission is being submitted on behalf of a group), phone number and email address in the body of the email.

•    Submissions will be accepted through April 15, 2015, and made public at a later date.

•    If the above directions are not followed, the Senate Finance Committee said it would reserve the right to not include the submission.

•    If technical problems are encountered, parties can contact the committee at (202) 224-4515.

Each of the five bipartisan working groups is currently working to produce findings on current tax policies and legislative recommendations within its area, with the goal of completing their recommendations by the end of May. Submissions will be reviewed by the working groups and ideas can be incorporated into the each working group’s final recommendations. The five working groups’ recommendations will be delivered to chairman Hatch and ranking member Wyden, and will be considered in developing bipartisan tax reform legislation.

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