Friday, March 21, 2014
More than 27 million taxpayers already have filed their taxes for 2013 from home computers, a process known as e-filing. As of this week, that's up 6 percent from 2012.
But the convenience of electronic filing also allows cybercriminals to file fraudulent tax returns—undetected—to the tune of $3.6 billion for tax year 2011, according to the most recent review by the Treasury Inspector General for Tax Administration.
Here's how to protect yourself when electronically filing taxes, according tocybersecurity experts CNBC interviewed.
A key strategy for fraudsters is to contact individuals via email, and to pretend to be the Internal Revenue Service, said Roel Schouwenberg, principal security researcher at Kaspersky Lab, which provides Internet security products and services. This is known as phishing. Unsuspecting users then click on links that allow malware to be downloaded on to computers.
Mustafa Rassiwala, a cybersecurity expert, said the suspicious emails can appear like legitimate requests for information.
Beyond diving into suspicious-looking emails, there are additional steps you can take to protect personal information and prevent fraud.
For example, taxpayers should use a different password for tax filing than passwords to access other online accounts, Rassiwala said.
Don't file your taxes at public places including Starbucks. While many cafes offer free Wi-Fi, the connection could be intercepted by cybercriminals, according to Rassiwala. Instead, only file taxes from your home network, said Kaspersky Lab's Schouwenberg.
Fraudulent e-filing is part of a broader problem of identity theft, which is growing. According to the Identity Theft Resource Center, more than 624 million records of personal information have been stolen since it began keeping track in 2005. This includes recent, high-profile breaches at Target, Sony and Living Social, an online deal site. Cybercriminals collect personal information—Social Security numbers, addresses and dates of birth—to file fraudulent tax returns.
E-filing taxes isn't all bad news. Unlike traditional paper filing, cyberthieves can leave behind digital clues for investigators when filing online. Digital records, for example, can telegraph Internet Protocol, or IP, addresses associated with computers and other devices.
Wednesday, March 19, 2014
“For instance, a senior lecturer in OOU pays more tax than a professor at the Federal University of Agriculture, Abeokuta (FUNNAB).”
Lecturers at the Olabisi Onabanjo University, OOU, Ago-Iwoye, Ogun State, on Monday staged a peaceful protest alleging arbitrary tax policy and irregular payment of salaries since 2011.
The lecturers were seen carrying placards with various inscriptions chanting solidarity songs.
Addressing journalists after the demonstration, Deji Agboola, the Chairman of the Academic Staff Union of Universities, ASUU, OOU branch, decried what he described as haphazard payment of the salaries of his members in the past three years.
He said that the irregular payment had made it difficult for the lecturers to plan and meet some financial obligations such as payment of rents and their children’s school fees.
“The astronomic and arbitrary tax policy to which our members are subjected has further pauperised them.
“For instance, a senior lecturer in OOU pays more tax than a professor at the Federal University of Agriculture, Abeokuta (FUNNAB).
“The deductions have failed to take cognisance of the Consolidated Peculiar University Academic Allowance (CONPUA),’’ he said.
Mr. Agboola alleged that the situation had persisted since 2011 in spite of several letters of appeal to State Internal Revenue Service and the, OOU management.
The Chairman noted that such situation was capable of exposing his members to the temptation of unethical practises.
He therefore appealed to Governor Ibikunle Amosun, to intervene in the matter urgently to save his members from their plight.
Mr. Agboola, however, directed his members to boycott classes as from March 18 until their requests were addressed.
The union also used the occasion to sensitise the students on their action and presented a letter of grievances to the Vice Chancellor, Saburi Adesanya, for onward transmission to the governor.
Tuesday, March 18, 2014
President Obama's new proposed budget is out, and it includes a call to eliminate what's known as the carried interest provisions of the tax code. But what is carried interest, and why should ordinary investors care about it?
In the following video, Dan Caplinger, The Motley Fool's director of investment planning, looks at carried interest and its impact on taxes. Dan notes that carried interest is a way that many investment managers get paid, by taking a share of profits from the investments they make. With the rise of private-equity firms Blackstone Group (NYSE: BX ) , Apollo Global Management (NYSE: APO ) , KKR (NYSE: KKR ) , and Carlyle Group (NASDAQ: CG ) , carried interest has gotten a lot of attention because it enables managers to pay lower long-term capital gains rates on what many would see as compensation for their management services. But proponents argue that carried-interest treatment is fair because the managers' investment is at risk. Dan concludes that big fights about the provision have occurred in the past, and they're likely to repeat themselves this time around as well.
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Monday, March 17, 2014
Kenya: Kenya Revenue Authority (KRA) shut the door on manual filing of tax returns on March 1 with the adoption of a new electronic tax management system.
Dubbed i-Tax, the system replaces the old legacy platform and makes it easier for taxpayers to access various services such as updating registration details, filing tax returns and making payments and enquiries about the status of their tax ledgers — from the comfort of their homes and offices.
i-Tax also provides an integrated view of a taxpayer including updated information such as county, employer, mobile phone contact, unique e-mail address and tax agent — crucial information that was not previously captured by the old system.
Understandably, the system upgrade is part of what KRA needs to increase efficiency, ensure better compliance with tax laws and end the winding queues that snake around tax payment centres every mid-month.
With a little modification, the i-Tax system would ably handle essential services including issuance of tax clearance certificates and driving licences.
It is with these expectations that the announcement of a system upgrade late last month was greeted. To the taxpayer, the new system means less man-hours spent on queuing to file tax returns and that one can retrieve their tax records at the click of a button.
However, the collapse of the system hours after the switch-on and inordinately long downtimes have cut short taxpayer celebrations. Several functions including application for PIN numbers, VAT, PAYE and withholding tax returns have either stalled, or are taking extraordinarily long to complete.
What ought to have been a seamless transition from manual to electronic filing has since turned into grief — with taxpayers making endless trips to KRA offices for inquiries on how to use the new system.
More surprising is the fact that some employees did not appear to know what was happening — they had neither news of the system nor did they understand the cause of frequent downtimes.
The situation made for an uncomfortable conversation between anxious taxpayers keen to beat the March 20 deadline and a bewildered staff not knowing what to say or how to help.
A few home truths would suffice here: The success of any tax system is how easy it is to comply with its regulations. Beyond making tax administration relatively easy, an effective tax system plays an even bigger role defining a country’s business environment.
No doubt KRA is working to ensure the system stabilises because it is a laudable effort at reducing waste in Government in line with the Government’s new agenda.
This being the case, there should be some recourse for taxpayers who fail to submit their returns on time.
President Obama's budget proposal for the federal government's 2015 fiscal year is more than 1,500 pages long, with $3.9 trillion in spending proposals. But even though most political experts have already declared the Obama budget dead on arrival, the initiatives that the president chose to stress in his budget still carry valuable insight into what the administration will see as its priorities for the rest of this election year. Smart taxpayers will want to use that insight to predict coming tax changes that could get through Congress and past the president's desk. Let's take a look at some of the major tax provisions of the Obama budget and how they would affect you.
Raising tax revenue
The Obama budget includes several provisions that would increase taxes dramatically on upper-income earners. The largest is a proposal to put a 28% limit on the value of itemized deductions and certain items that are excluded from taxable income, including contributions to traditional IRA, 401(k), and other qualified retirement plan accounts. Although those in the 28% tax bracket and below would still get the full value of such tax breaks, those in the 33%, 35%, and 39.6% brackets would see the value of their deductions drop substantially. The White House Budget Office projects that such a move could raise $600 billion over the next 10 years.
Other tax-raising items include the implementation of what has become known as the "Buffett Rule," which would ensure that those making $1 million or more pay an effective tax rate of at least 30%, regardless of deductions other than charitable contributions. The impact of the provision is relatively small, with estimates of about $53 billion in revenue over the next decade, but the tax is squarely targeted at the highest levels of income.
Also, the president would limit the maximum balance in tax-favored retirement accounts so as to prevent wealthy individuals from establishing tax-deferred assets above certain levels. The exact limits are determined by complex actuarial calculations geared toward establishing the maximum annuity allowed under pension law, but according to estimates from the Tax Policy Center, the limits last year for a 62-year-old would have been $3.4 million, but a 40-year-old's limit would have been only $1 million.
The budget also aims to cut certain loopholes. Private-equity firms Carlyle Group, Apollo Global Management and Blackstone Group won't like provisions ending the tax preference for carried interest. Even though Carlyle, Apollo, and Blackstone won't necessarily see their corporate profits affected, the ripple effect could have negative effects in the industry and have implications for compensation costs and other expenses. In addition, S corporation shareholders and other professional services firms will no longer be able to shelter income from payroll taxes by splitting it into salary versus business profits.
Finally, the budget would raise estate taxes back to their levels from several years ago. The rate on taxable estate would rise to 45%, and the exemption amount would drop from its current $5.34 million to $3.5 million. Continue reading…
Sunday, March 16, 2014
With stock markets getting off to a shaky start in January following impressive equity returns last year, will investors approach the 2013/14 ISA season with greater caution?
Or will they opt instead for trying emerging markets or a possible fixed income turnaround?
Despite a confident outlook for markets and investors’ growing risk appetite in 2013, net retail ISA sales for the previous tax year actually fell to £1.1 billion compared to £2.3 billion in tax year 2011/12, according to Investment Management Association figures.
The outlook for 2014, by contrast, appears less optimistic as recent volatility in emerging markets coupled with the removal of quantitative easing (QE) and softer economic data in the USA has seen equities start the year on a less firm footing.
The MSCI World Index has so far returned -1.4 per cent in 2014 compared to 15.49 per cent for the same period last year and the current backdrop is seeing some advisers adopt a more cautious approach to this ISA season.
Bestinvest managing director Jason Hollands said: “This season is very different to last year when we had a very clear and quite bullish view on equities.
“You saw fantastic returns on developed equity markets, supercharged with the tailwinds from QE.”
Other advisers are adopting a more optimistic view, looking beyond any short-term volatility to argue that equities can continue to deliver over the long-term.
Investors could risk missing out on another good year for equities by not participating in the current ISA season, according to Skerritts Financial Advisers’ head of investment Andrew Merricks.
But whatever your view, utilising your tax efficient allowances can be crucial in the search for decent returns.
Saturday, March 15, 2014
Mark Abuh described the use of tax consultants as an ‘aberration’.
A tax expert, Mark Abuh, on Friday, said that the use of consultants by different tiers of the Nigerian government to collect taxes and levies was illegal.
The federal government, several states, and local governments engage consultants for tax collection.
Mr. Abuh, who is the Tax Adviser to Growth and Empowerment in States (GEM3), a Department for International Development (DFID) sponsored programme, made the disclosure in an interview with the News Agency of Nigeria in Abuja.
He said that the use of consultants in tax collection had become a trend, but described it as an “aberration”, which was being done at the detriment of appropriate government officials.
He added that “Decree 21 of 1998 prohibits the use of consultants for assessing and collecting taxes and levies by any tier of government.’’
Mr. Abuh also said that the use of consultants by some state and local governments was one of the factors that led to multiple taxation of citizens and organisations.
“Section 1(1) states that notwithstanding anything contained in the Constitution of the Federal Republic of Nigeria 1979, as amended, or in any other enactment or law, no person, other than the appropriate tax authority, shall assess or collect tax or levy.
He stressed that “nobody, other than appropriate government agency and officials, shall on behalf of government, collect tax or levy as listed in the Schedule to this decree.
“Sub-section 2 states that no person, including a tax authority, shall mount a road block in any part of the federation for the purpose of collecting any tax or levy.’’
The tax expert pointed out that the Tax Act provides that the Board of Internal Revenue in a state could delegate some of its non-core functions to tax consultants “but not for the assessment and actual collection.
“The core functions of assessment, collection and enforcement of tax are functions you cannot delegate to consultants but many state governments have gone outside the law to do so.
“Revenue consultants are multi-disciplinary professionals with expertise and resources in revenue generation, financial, taxation, management and advisory services.’’
Abuh said that consultants had often used means other than what the law prescribed to collect taxes and levies in local government areas.
He observed that many state governments spent between 10 per cent and 50 per cent of their revenue on consultants and failed to improve the capacity of their revenue staff.
“Currently, the Personal Income Tax (Amendment) Act specifies that every Board of Internal Revenue is entitled to about five per cent of all collections to run its own activities but the states prefer to spend more on consultants,’’ he added.
Monday, March 10, 2014
About three-quarters of individual taxpayers received refunds last year, according to Internal Revenue Service www.irs.gov/uac/Newsroom/Filing-Season-Statistics-May-10,-2013 statistics. However, many people find that they do owe taxes when April 15 comes around. If you fall into that group, the Connecticut Society of CPAs offers these recommendations on the best way to settle your bill.
Don’t rush to charge it
It’s always best to use available cash for your tax bill. It may seem convenient to use a credit card, but remember that you will be charged interest if you don’t pay off your balance immediately, which will just add another cost to covering your taxes. If you find yourself owing taxes every year, your CPA can help you adjust your withholding, if necessary.
Do pay what you can
If you don’t have the money to pay your bill, contact the IRS to let them know your situation and send in as much as you can by the deadline. As discussed below, the IRS will often work with taxpayers who are having financial troubles to help them reconcile their tax debt.
Don’t fail to file
If you do, it could be costly. The IRS will usually charge you a penalty of 5% of your unpaid taxes for every month you are late in filing a return, up to 25% of your total unpaid taxes. So, if you owe $1,000 in taxes, you could end up paying as much as $250 in fees if your return is late. If you file a return but can’t pay your taxes, you will usually be charged a much lower amount — ? of 1% of your unpaid taxes — for each month you’re late, up to 25 percent of your unpaid taxes, so it’s best to file even if you’ll come up short on paying your entire tax debt. (You will also be charged interest on the outstanding amount.) The penalties may be waived if you can demonstrate reasonable cause for the failure to file.
Do remember the Fresh Start program
The IRS Fresh Start program offers a number of options for taxpayers who are struggling to meet their tax obligations. It is possible, for example, to request an installment agreement in which you pay your tax bill in monthly direct debit payments over up to 6 years. If you believe you will be unable to pay your entire outstanding tax bill, another possibility is the IRS Offer-in-Compromise program, in which a taxpayer and the IRS agree to settle the tax bill for an amount that is less than what’s owed. The IRS generally will consider a settlement offer if it believes the taxpayer won’t be able to pay off the amount in a lump sum or in a payment plan. The taxpayer’s income and assets are among the issues the IRS examines in considering a settlement.
Do consider an extension if necessary
If you simply need more time to file your return, you can ask the IRS for an extension of your deadline. Remember, though, that you will still have to pay at least 90% of your tax bill by the original due date or face a penalty, so you will have to estimate what you owe and submit payment on time.
Turn to your CPA
If you’re not sure you’ll be able to file on time, or pay your taxes due, be sure to contact your local CPA. He or she can help you resolve any related issues and get your tax situation back on track. And remember to call on your CPA throughout the year to discuss all your financial questions or concerns. Find a Connecticut CPA online at www.ctcpas.org/FindACPA.
Sunday, March 9, 2014
If you find yourself out of work, taxes may be the last thing you want to think about, but it’s important to continue your tax and other financial planning, even when you’re unemployed. The Connecticut Society of CPAs offers practical tips that will help you address tax concerns during your job hunt.
Tip 1: Your Unemployment income Is taxable
Did you know that unemployment benefits are subject to both federal and, depending on where you live, state taxes? That’s an important fact to keep in mind so that you stay within your budget and aren’t surprised by a larger-than-expected tax bill in April. You must report and pay taxes on any kind of unemployment income, including both state and federally funded benefits. If you request it, the federal government will withhold 10 percent of your unemployment income toward your taxes. This is worth considering, since it will help prevent you from spending money that should be set aside for taxes. It will also allow you to avoid the paperwork involved in determining and paying quarterly estimated taxes on your unemployment income.
Tip 2: Don’t forget to file a tax return
Filing your tax return may seem unnecessary if you aren’t earning income, but it’s still likely required, depending on your gross income, filing status, and age. Keep in mind that any severance benefit or vacation or sick pay you received when you were laid off will be included in your taxable income. On the upside, if you worked for part of the year and had taxes withheld or paid estimated taxes while employed, you may actually be due a refund due to your subsequent drop in income.
Tip 3: You may be eligible for tax benefits and credits
A lower income may help you qualify for a variety of programs, including the federal Earned Income Tax Credit (and similar state and local credits available in 22 states, the District of Columbia, New York City, and Montgomery County, Maryland), which can lower your taxes or even provide a refund, depending on your income level and the number of children you have. Other credits that may reduce your federal tax outlay include the Child Tax Credit and the Child and Dependent Care Credit. Your CPA can offer advice on the tax and other benefits that can improve your financial outlook while you’re looking for work.
Tip 4: Keep receipts for costs related to your job search
Travel expenses for a job interview, the costs of résumé preparation and mailing and outplacement agency fees are just some of the expenses you may be able to deduct. Moving expenses may also qualify if your move is closely related to the start of your work and you meet the distance and time requirements.
Tip 5: Learn about self-employment taxation
There’s good and bad tax news for people who begin consulting or set up their own business when they find themselves out of work. You should be able to deduct many of the ordinary and necessary expenses related to starting up and running a new business, including costs associated with a home office or the business use of your car. But, since you won’t have an employer withholding taxes for you, you will have to make quarterly estimated tax payments on your self-employment income. That will include paying the full cost of self-employment taxes as well as income taxes.