IDENTITY THEFT

The IRS has reported that each year, the number of reported cases of identity theft seems to grow.  Identity thieves will often steal someone’s name and social security number and use the information to file fraudulent tax returns for refunds.  When the victim of the theft attempts to e-file their tax return, it gets rejected by the IRS because their social security number has appeared on a tax return that has already been filed.

 

            ACTIONS TO TAKE:

  1. Call the IRS identity theft hotline at 1-800-908-4490
  2. Obtain and fill out IRS FORM 14039 and mail it into the IRS as soon as possible
  3. Follow the IRS’ instructions for filing your rejected tax return in paper form

 

TAXABLE AND NON-TAXABLE INCOME

Most types of income are taxable but some are not.  Income could be money, property, or services that you receive.  Below are some examples of non-taxable income:

  1. Child supports payments
  2. Gifts, bequests and inheritances
  3. Welfare benefits
  4. Damage awards (compensatory) for physical injury or illness
  5. Cash rebates from a dealer or manufacturer for items that you purchase
  6. Loans and loan repayments

 

Some Types of income are NOT taxable under certain conditions, such as:

  1. Life insurance proceeds paid to you as the beneficiary of a decedent’s life insurance policy.  However, if you cash in your own life insurance policy, any amount that exceeds the cost of the policy IS taxable.
  2. Income from a qualified scholarship is normally NOT taxable.  Amounts you use for certain costs such as tuition and required books are NOT taxable.  However, amounts used for room and board ARE taxable

 

If you received a refund, credit or offset of state or local income taxes, you may be required to report that amount for the year in which you received it.  If you do not receive a Form 1099-G, check with the government agency that made the payments to you.  You may be able to retrieve the form on-line, report any taxable refund that you received even if you did not receive Form 1099-G. 

 

DEPENDENT TAX RULES

  1. CLAIMING CHILDREN-A parent is allowed to claim each child for whom they provide more than one-half their support.  The child normally must be under age 19 at the end of the tax year or must have been under the age 24 at the end of the tax year, while being a full time student for at least 5 months of the tax year.

 

***CAUTION: If your dependent child worked and received a Form W-2 and will file a tax return, assuming that you provided more than one-half of their support, it will most likely be to your advantage to claim a dependent exemption for that child, as opposed to them claiming their own.  In such situations, sometimes a working student will quickly file for their own tax return on-line and incorrectly claim themselves before the parent has a chance to file their own return.***

 

PLEASE CHECK BACK OFTEN FOR ADDITIONAL TIMELY TAX INFORMATION.