Identity Theft, Tax Fraud and ID Protection PINs
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By: Steven Brewer, CPA
We hear every day that another cyberattack has exposed thousands of pieces of personal data. Just recently, it has come to light that millions of us have had our personal data, including social security numbers, exposed by a cyberattack on National Public Data.
Identity theft takes many different forms. One of the most troubling is when someone uses your personal data to file a tax return. They will file false information using your name and social security number to obtain credits and refunds that are sent to them. There is a way for you to prevent this from happening.
The Internal Revenue Service instituted a program for Identity Protection PINs. These are a series of six-digit numbers assigned to you each year. Each year, you will receive a new PIN so you must give this to your preparer to be able to file your return. You must include this PIN when you e-file your tax return to identify that YOU are filing the return. If a return is filed without the PIN, then the return is rejected.
When you set up the PIN program with the IRS, you also will set up an online account with the IRS. That account will allow you to see your records with the IRS, what has been filed, what the results are, etc. This is very helpful if you ever have a question about what the IRS has. It also will help your tax preparer. When you have an online account, the tax preparer can send you a Power of Attorney form to the account for you to e-sign. The Power of Attorney form is needed for the tax preparer to receive information from the IRS on you if there is ever a problem that you ask the preparer to help you with.
To obtain information on the Identity Theft PIN, go wot https://www.irs.gov/identity-theft-fraud-scams/get-an-identity-protection-pin. Only you can obtain the PIN. No preparer or other third party can do this so if someone is telling you they can get one for “turn and run the other direction”.
You do have the option to opt out of the program unless you are a confirmed victim of identity theft. If so, you cannot opt out.
So, for your piece of mind and to stop the “bad guys” from getting into your taxes, get your PIN today.
Recently I came across a professional article about an old subject. Proper documentation. It was just a good reminder of a basic requirement for claiming deductions and expenses for returns. First off, the burden of proof for all deductions and expenses falls on the taxpayer. It is not the IRS job to disprove any deductions and expenses claimed, initially. Once the taxpayer submits proper documentation or evidence for a deduction/expense, then it becomes the IRS’s responsibility to disprove it. When providing proof of documentation, it must be organized such that one can know that it is the related deduction/expense. A tax court case in 2024 involved the taxpayer’s providing photocopies of bills, receipts and handwritten notes, as a group, along with a spreadsheet for one group of the expenses claiming they represented the deductions/expenses on his return. The copies were not grouped by the deductions/expenses or totaled to show the amount claimed. The court called it “the Shoebox Method”. For those of you too young to know what this is, us, old timers, use to see clients bring in a shoebox full of paid bills/receipts in a shoebox and give it to us to process. For some we call it the dashboard method because all the receipts are kept on the dashboard of the taxpayer’s truck until needed. The spreadsheet itself was brought into question as it contained in its listing transactions that no documentation could be found on. Also, transactions were doubled from the original receipt and the credit card receipt. After that, individual transactions were questioned when it appeared that no clients/customers were involved in the meetings. So, the spreadsheet was not credible. So, to summarize, when you want to claim a deduction or expense then you must have a document that supports the claim and then those related documents must be grouped together and totaled to properly substantiate the claim.
TRYING TO SAVE MONEY WHEN CHOOSING A CPA COULD BE THE WORST DECISION YOU’VE EVER MADE! The new year is here and now is the time when most, especially if they are business owners, start getting serious about closing out last year and getting ready for meetings with their CPA. It’s also a good reason to ask yourself- did I hire this person to do my taxes because they were cheap or because they were good? There are two things in life you don’t want to scrimp on when hiring a professional; one is your doctor and the other is your CPA and when choosing any professional there are usually three considerations: Good Fast Cheap But here’s the catch: You can usually only have two.
Like your physical health, the stakes are too high to cut corners or gamble when it comes to your business health Choose wrong and simple financial errors could lead to missed opportunities, tax penalties, or cash flow crises that could derail your business. So, this year, ask yourself the following questions. What’s the long-term cost of going fast and cheap and getting this wrong? Am I focused on quick and easy fixes over long term, sustainable solutions? In selecting a CPA partner, how much value do I place on accuracy and expertise? Is it enough to invest in it?
If you are building something for you and your families future, consider hiring a CPA that will take care of your business now while preparing you for the future. Have a tax or financial planning question? Contact Steven Brewer & Company at (812)-883-6938 or go to https://www.stevenbrewercpa.com/
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Recently I came across a professional article about an old subject. Proper documentation. It was just a good reminder of a basic requirement for claiming deductions and expenses for returns. First off, the burden of proof for all deductions and expenses falls on the taxpayer. It is not the IRS job to disprove any deductions and expenses claimed, initially. Once the taxpayer submits proper documentation or evidence for a deduction/expense, then it becomes the IRS’s responsibility to disprove it. When providing proof of documentation, it must be organized such that one can know that it is the related deduction/expense. A tax court case in 2024 involved the taxpayer’s providing photocopies of bills, receipts and handwritten notes, as a group, along with a spreadsheet for one group of the expenses claiming they represented the deductions/expenses on his return. The copies were not grouped by the deductions/expenses or totaled to show the amount claimed. The court called it “the Shoebox Method”. For those of you too young to know what this is, us, old timers, use to see clients bring in a shoebox full of paid bills/receipts in a shoebox and give it to us to process. For some we call it the dashboard method because all the receipts are kept on the dashboard of the taxpayer’s truck until needed. The spreadsheet itself was brought into question as it contained in its listing transactions that no documentation could be found on. Also, transactions were doubled from the original receipt and the credit card receipt. After that, individual transactions were questioned when it appeared that no clients/customers were involved in the meetings. So, the spreadsheet was not credible. So, to summarize, when you want to claim a deduction or expense then you must have a document that supports the claim and then those related documents must be grouped together and totaled to properly substantiate the claim.
TRYING TO SAVE MONEY WHEN CHOOSING A CPA COULD BE THE WORST DECISION YOU’VE EVER MADE! The new year is here and now is the time when most, especially if they are business owners, start getting serious about closing out last year and getting ready for meetings with their CPA. It’s also a good reason to ask yourself- did I hire this person to do my taxes because they were cheap or because they were good? There are two things in life you don’t want to scrimp on when hiring a professional; one is your doctor and the other is your CPA and when choosing any professional there are usually three considerations: Good Fast Cheap But here’s the catch: You can usually only have two.
Like your physical health, the stakes are too high to cut corners or gamble when it comes to your business health Choose wrong and simple financial errors could lead to missed opportunities, tax penalties, or cash flow crises that could derail your business. So, this year, ask yourself the following questions. What’s the long-term cost of going fast and cheap and getting this wrong? Am I focused on quick and easy fixes over long term, sustainable solutions? In selecting a CPA partner, how much value do I place on accuracy and expertise? Is it enough to invest in it?
If you are building something for you and your families future, consider hiring a CPA that will take care of your business now while preparing you for the future. Have a tax or financial planning question? Contact Steven Brewer & Company at (812)-883-6938 or go to https://www.stevenbrewercpa.com/