Employers Beware: Identity Theft and W-2 Scam Alert

The 2019 tax season is quickly approaching and with it an increase in identity theft and W-2 scams. Small business identity theft is big business for identity thieves. Just like individuals, businesses may have their identities stolen, and their sensitive information used to open credit card accounts or used to file fraudulent tax returns for bogus tax refunds.

Furthermore, employers also hold sensitive tax data on employees, such as Form W-2 data, which also is highly valued by identity thieves and often used to file fake tax returns. Therefore, it is important for small businesses to take some important steps to protect themselves and their employees.

Stolen Employer Identification Numbers (EINs) have long been used by identity thieves to create fake Forms W-2 that they would file with fraudulent individual tax returns. Fraudsters also use EINs to open new lines of credit or obtain credit cards and are now using company names and EINs to file fraudulent returns.

The fraudulent filings apply to partnerships as well as estate and trust forms and the IRS has identified an increase in the number of fraudulent Forms 1120, 1120S, and 1041 as well as Schedules K-1.

Signs of Potential Identity Theft

Businesses, partnerships, and estate and trust filers should contact the IRS if they experience any of the following:

  • Extension to file requests are rejected because a return with the Employer Identification Number or Social Security Number is already on file.
  • An e-filed return is rejected because a duplicate EIN/SSN is already on file with the IRS.
  • An unexpected receipt of a tax transcript or IRS notice that doesn’t correspond to anything submitted by the filer.
  • Failure to receive expected and routine correspondence from the IRS because the thief has changed the address.

Be on Guard against W-2 Scams

Both public and private sector employers are targets for these W-2 scams, which in recent years have become one of the more dangerous email scams for tax administration. These emails appear to be from an executive or organization leader to a payroll or human resources employee. It may start with a simple, “Hey, you in today?” and, by the end of the exchange, all of an organization’s Forms W-2 for their employees may be in the hands of cybercriminals—putting workers at risk for tax-related identity theft.

Because payroll officials believe they are corresponding with an executive, it may take weeks for someone to realize a data theft has occurred. Generally, the criminals are trying to quickly take advantage of their theft, sometimes filing fraudulent tax returns within a day or two.

This scam is such a threat to taxpayers that the IRS has established a special reporting process.

Reporting Fraud Schemes:

1. Email dataloss@irs.gov to notify the IRS of a W-2 data loss and provide contact information. In the subject line, type “W2 Data Loss” so that the email can be routed properly. Do not attach any employee personally identifiable information data.

2. Email the Federation of Tax Administrators at StateAlert@taxadmin.org to get information on how to report victim information to the states.

3. Businesses/payroll service providers should file a complaint with the FBI’s Internet Crime Complaint Center (IC3.gov). Businesses/payroll service providers may be asked to file a report with their local law enforcement agency.

4. Notify employees so they may take steps to protect themselves from identity theft. The Federal Trade Commission’s www.identitytheft.gov provides guidance on general steps employees should take.

5. Forward the scam email to phishing@irs.gov.

Steps Employers can take to Protect Sensitive Information

Employers are urged to put steps and protocols in place for the sharing of sensitive employee information such as Forms W-2. One example would be to have two people review any distribution of sensitive W-2 data or wire transfers. Another example would be to require a verbal confirmation before emailing W-2 data. Employers also are urged to educate their payroll or human resources departments about these scams.

Don’t hesitate to contact the office if you believe you were a victim of identity theft or any other tax scam.

2018 Holiday Decorating Contest

As in past years, Wheeler employees showed their holiday spirit with a cubicle/office decorating contest. While everyone did a wonderful job and had the office looking very festive, Stephen Pesantes’ cube took 1st prize and really stood out with his custom Disney wreath, miniature snowy town display, and carboard cutout of a very spirited “most interesting man in the world” wearing a Santa hat. Congratulations also go to 2nd place winner Yesica Morales who didn’t disappoint with her winter wonderland theme! We had a lot of fun decorating and hope to keep this fun tradition going for years to come!

In Lieu of Holiday Cards

This year, in keeping with tradition, Wheeler matched charitable donations made by members of the firm in lieu of holiday cards to clients and partners. Many deserving organizations received contributions, including Second Harvest Food Bank, The David Andrew “Pooh” Maddan Foundation, and Dr’s Without Borders. We are thankful that with the help of our generous staff we can continue this proud tradition.

Employee Spotlight – Lyric Kadir

Congratulations to our Q3 Employee of the Quarter Lyric Kadir! Lyric has been with Wheeler since 2015 when she started as an intern; in three years with the firm, she has become an integral part of the Wheeler team with her attention to detail and commitment to staying focused and completing client projects timely, even with a busy and demanding work load. Her positive attitude and willingness to help wherever she is needed, makes her a joy to work with. We are proud to recognize her hard work and growth in her position here at Wheeler.

Decades Theme Day Winner

For the month of November, Wheeler Events Committee selected decades as our firm’s theme day. Staff and partners were invited to dress in an outfit that represented their favorite decade. We had some very creative outfits, but could only have one winner. This month’s theme day winner is Stephen Pesantes, Administrative Assistant, for is rad representation of the 80’s. Congratulations,, Stephen!

 

 

Year-End Tax Planning for Individuals

Once again, tax planning for the year ahead presents a number of challenges, this year, primarily due to tax laws changes brought about the passage of the Tax Cuts and Jobs Act of 2018. These changes include the nearly doubling of the standard deduction, elimination of personal exemptions, and numerous itemized deductions reduced or eliminated. Let’s take a closer look.

General Tax Planning

General tax planning strategies for individuals this year include postponing income and accelerating deductions, as well as careful consideration of timing related investments, charitable gifts, and retirement planning. For example, taxpayers might consider using one or more of the following:Continue reading

Year-End Tax Planning for Businesses

There are a number of end of year tax planning strategies that businesses can use to reduce their tax burden for 2018. Here are a few of them:

Deferring Income

Businesses using the cash method of accounting can defer income into 2019 by delaying end-of-year invoices, so payment is not received until 2019. Businesses using the accrual method can defer income by postponing delivery of goods or services until January 2019.

Purchase New Business Equipment

Section 179 Expensing. Business should take advantage of Section 179 expensing this year for a couple of reasons. First, is that in 2018 businesses can elect to expense (deduct immediately) the entire cost of most new equipment up to a maximum of $1 million for the first $2.5 million of property placed in service by December 31, 2018. Keep in mind that the Section 179 deduction cannot exceed net taxable business income. The deduction is phased out dollar for dollar on amounts exceeding the $2.5 million threshold and eliminated above amounts exceeding $3.5 million.

Caution: The new law removes computer or peripheral equipment from the definition of listed property. This change applies to property placed in service after December 31, 2017.

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Understanding the Gift Tax

If you gave money or property to someone as a gift, you might owe federal gift tax. Many gifts are not subject to the gift tax, but there are exceptions. Here are eight tips you can use to figure out whether your gift is taxable.
1. Most gifts are not subject to the gift tax. For example, there is usually no tax if you make a gift to your spouse or to a charity. If you make a gift to someone else, the gift tax usually does not apply until the value of the gifts you give that person exceeds the annual exclusion for the year. For 2018 the annual exclusion is $15,000 (up from $14,000 in 2017).
2. Gift tax returns do not need to be filed unless you give someone, other than your spouse, money or property worth more than the annual exclusion for that year.
3. Generally, the person who receives your gift will not have to pay any federal gift tax because of it. Also, that person will not have to pay income tax on the value of the gift received.
4. Making a gift does not ordinarily affect your federal income tax. You cannot deduct the value of gifts you make (other than deductible charitable contributions).
5. The general rule is that any gift is a taxable gift. However, there are many exceptions to this rule. The following gifts are not taxable gifts:
  •  Gifts that are do not exceed the annual exclusion for the calendar year,
  • Tuition or medical expenses you pay directly to a medical or educational institution for someone,
  • Gifts to your spouse,
  • Gifts to a political organization for its use, and
  • Gifts to charities.

6. You and your spouse can make a gift up to $30,000 to a third party without making a taxable gift. The gift can be considered as made one-half by you and one-half by your spouse. If you split a gift you made, you must file a gift tax return to show that you and your spouse agree to use gift splitting. You must file a Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, even if half of the split gift is less than the annual exclusion.

7. You must file a gift tax return on Form 709 if any of the following apply:
  • You gave gifts to at least one person (other than your spouse) that are more than the annual exclusion for the year.
  • You and your spouse are splitting a gift.
  • You gave someone (other than your spouse) a gift of a future interest that he or she cannot actually possess, enjoy, or receive income from until some time in the future.
  • You gave your spouse an interest in property that will terminate due to a future event.
8. You do not have to file a gift tax return to report gifts to political organizations and gifts made by paying someone’s tuition or medical expenses.
Questions about the gift tax? Don’t hesitate to call.

Business Expense Deductions for Meals, Entertainment

As the end of year approaches, taxpayers should be reminded that business expense deduction for meals and entertainment have changed due to tax law changes in the Tax Cuts and Jobs Act (TCJA). Until proposed regulations clarifying when business meal expenses are deductible and what constitutes entertainment are in effect, taxpayers should rely on transitional guidance that was recently issued by the IRS.
Prior to 2018, a business could deduct up to 50 percent of entertainment expenses directly related to the active conduct of a trade or business or, if incurred immediately before or after a bona fide business discussion, associated with the active conduct of a trade or business. However, the 2017 TCJA eliminated the deduction for any expenses related to activities generally considered entertainment, amusement or recreation.
Taxpayers may continue to deduct 50 percent of the cost of business meals if the taxpayer (or an employee of the taxpayer) is present and the food or beverages are not considered lavish or extravagant. The meals may be provided to a current or potential business customer, client, consultant or similar business contact.
Please note that food and beverages that are provided during entertainment events will not be considered entertainment if purchased separately from the event.

Tax Considerations when Hiring Household Help

If you employ someone to work for you around your house, it is important to consider the tax implications of this type of arrangement. While many people disregard the need to pay taxes on household employees, they do so at the risk of paying stiff tax penalties down the road.

Who Is a Household Employee?

If a worker is your employee, it does not matter whether the work is full-time or part-time or that you hired the worker through an agency or from a list provided by an agency or association. It also does not matter whether you pay the worker on an hourly, daily or weekly basis or by the job.

If the worker controls how the work is done, the worker is not your employee but is self-employed. A self-employed worker usually provides his or her own tools and offers services to the general public in an independent business.

Also, if an agency provides the worker and controls what work is done and how it is done, the worker is not your employee.

Example: You pay Jane to babysit your child and do light housework four days a week in your home. Jane follows your specific instructions about household and childcare duties. You provide the household equipment and supplies that Jane needs to do her work. Jane is your household employee.

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