Thieves Are Out NOW! Tips to protect your tax information

Hackers and data thieves target personally identifiable information or (PII). They also know their best score can be had by filing information using your tax ID and stealing your withholdings before you are the wiser. But by working together, we can mutually reduce the risk of this happening to you. Here are some tips:

Awareness is key

Your number one defense to becoming a victim is to be aware. So whenever you open an email, read a text, answer a phone, or go to a website, keep your awareness switch on high. This is especially true in this age of AI. Fake emails look more real than ever. Voice replication can duplicate a voice and texts come from valid looking vendors.

No personal data over open lines

DO NOT send any tax records attached to an email. Only use safe, encrypted paths to do so or simply drop off the material in person. Copies of 1099s and W-2s are needed, but only if they are sent securely.

Three safeguards: Physical, Technical, Administrative

Your security can be broken down into these three categories:

Physical: Keep your data physically safe. Be sure your records are in locked places and your digital data on your computer is password protected AND encrypted. Destroy old documents, shred the paper ones, and keep backups of your data.

Technical: Keep your software up to date, including antivirus software and computer/phone operating systems. Use secure passwords and turn on multifactor authentication whenever possible.

Administrative: Keep yourself up-to-date on the newest threats. When you receive breach notices, take security action. And monitor your accounts, especially financial ones.

Use the IRS identity protection program

If you have any concerns whatsoever, understand the IRS has an identity protection program that requires providing a unique ID when filing your tax return. The ID is required if you have had your tax information stolen, but its participation is otherwise voluntary. If you are in the program, understand your tax return CANNOT be filed without this security code.

Final Tips

• Never give private information when the initial contact comes from another source. Independently verify the source AND only use a separate, known way to communicate.

• Don't send PII over open lines

• Never use public Wi-Fi

• Check statements at least monthly

• Stay on top of the news and keep updated about breach notices

• Be alert for any 1099s or other tax forms you receive that do not make sense

If you are the least bit suspicious about a tax-related call or contact, reach out immediately. Help is but a call away.

Tax Season is Scam Season

As a reminder, tax season is also tax scam season for savvy criminals. As you prepare to file your tax return, here are some things to know to reduce your risk of having your valuable personal information stolen. These tips are provided by the IRS and other experts.

• Scam sources are typically over the phone, email and even in person!

• The IRS DOES NOT initiate contact by email or request personal or financial information in this format.

• The IRS typically initiates contact via mail.

• On rare occasion the IRS will call. When this happens, get the IRS agent’s name and badge number. Then hang up and call the IRS independently (not the phone number they give you). Better still, call your tax professional!

• Email phishing. If you receive a suspicious email DO NOT OPEN IT or any links. Do not reply or open attachments. Report it to phishing@irs.gov.

• Phone scams. Do not give personal information to unsolicited phone calls from the IRS. Even if it looks legitimate. Scammers are getting good at spoofing legitimate phone numbers on your caller id. Report the caller ID and call back number to the IRS using phishing@irs.gov. Put IRS phone scam in the subject line.

• Payment. Only pay the US Treasury directly. DO NOT pay anyone else, even if they threaten you. No one is allowed to collect money directly from you.

Finally, the IRS and Federal Trade Commission have tons of material regarding these thieves and their techniques. Become familiar with them and reach out for help, as a tax professional may be able to help read through the scam.

Keeping Tax Records

Income Tax returns and supporting documents – Keep at least four years and preferably six if space is not critical. Once this period has elapsed, the documents can be discarded, but the returns themselves, should be retained indefinitely.

Residential property records – All escrow statements (purchase and sale) plus receipts for improvements should be kept for at least four years after property is sold. Refinance papers should also be retained. Taxable gain on home sales is now cost basis plus $250,000 single or $500,000 married.

Purchase receipts for stocks, bonds, mutual funds – These should also be kept for at least 4 years after the asset is sold. This would include records of stock dividends, splits and reinvested dividends and mutual fund dividends and capital gains. Year end statements.

Depreciation records – For any rental real estate or depreciable business property you own, keep records of the property’s cost, date acquired, and the schedule of depreciation claimed in previous years. This record should be kept until four years after the disposition of the property.

Retirement plan contributions – Records of nondeductible IRA deposits, employer-plan stock purchases, rollovers, conversions to Roth IRAs and Keogh plan deposits should be kept until four years after the plan assets have been terminated or 100% withdrawn.

Personal records – Important papers such as estate and gift tax returns, divorce and property settlement agreements, deeds, title insurance policies, and all trust documents should be kept in a permanent file, or perhaps a safe deposit box.

Miscellaneous papers – All other documents to include bank statements, canceled checks, credit card statements, deposit slips, charitable contribution receipts, and medical bills can be discarded after four years.

IF IN DOUBT--KEEP IT!

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

Seven Ways We Can Make Your Tax Life Easier

1. Lower your taxes

2. Save you time in the preparation process

3. Represent you in an audit if needed

4. Find all the deductions legally available to you

5. Answer all your personalized tax questions

6. Explain pros and cons of owning assets to reduce your taxes (e.g., homes, 401(k), IRA)

7. Provide year-round accessibility to your tax preparer

IRS Notice CP-14

Even though most Californians have until October 16, 2023 to pay their taxes, if they already filed their tax return and owe tax, they may receive an IRS Notice CP-14. On June 7th, the IRS issued the following statement:

"The IRS reassures California taxpayers that they continue to have an automatic extension until later this year to file and pay their taxes for those covered by disaster declarations in the state. The current mailings being received by some taxpayers, the IRS Notice CP-14, are for taxpayers who have a balance due, and they are sent out as a legal requirement. While the notice received by taxpayers says they need to pay in 21 days, most California taxpayers have until later this year to pay under the disaster declaration. These letters include a special insert that notes the payment date listed in the letter does not apply to those covered by a disaster declaration, and the disaster dates remain in effect.

The IRS apologizes to taxpayers and tax professionals for any confusion as we continue to review the situation. Taxpayers receiving these letters do not need to call the IRS or their tax professional."

If you received one of these notices, please do not take any action. All of our California clients are covered by the disaster declaration. You will not accrue interest or penalties. We don't know yet if the IRS will automatically waive those fees or if you will have to request abatement. We will send additional instructions when we know more.

Our advice: Plan to pay your taxes a little ahead of October 16th. This way you are sure the payments have cleared before the extended deadline. Only pay the original balance due as shown on your tax return.

If you're unsure whether your IRS notice is related to this issue, please forward our office a copy. You can email it to rodrigo@petixbotte.com or upload it to your Smart Vault folder.