Filing Early Can Help Protect Your Personal Information

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It's as simple as having someone get a hold of your social security number and personal information, and before you even know it, a tax return under your name and identity has been filed. Identity theft at tax time is a growing problem, and it’s been estimated that more than $5.2 billion of U.S. taxpayer money may have been paid out in tax refunds to identity thieves who filed some 1.5 million fake returns in 2011, and scammers are likely to steal $21 billion more over the next five years. Unfortunately, in many cases, the victim is unaware that this has happened until their tax return is filed, only to find that a return has already been submitted in their name with fake information.

What can you do to help protect yourself at tax time? First and foremost – file early. Most identity thieves file early, before the legitimate tax return has been filed, preventing it from being questioned. The return is then paid out, and the actual taxpayer is left to clean up the mess once they have filed. Affected taxpayers must go through a longer, more complicated process, starting with a requirement to file an authentic paper return, which takes longer to process. They must then wait an additional amount of time while the IRS investigates the identity of the taxpayer and confirms what has happened. Additional steps will also be necessary in future years using a new IRS issued Individual Protection Personal Identification Number (IPPIN) Personal Identification Number that will have to be included on future tax returns. So, the earlier you file, the better your chance of avoiding this situation.  

Other safety measures to take include:

E-filing, or electronically file, your tax return. By e-filing, only you and your tax preparer will be handling your documents. The less people handling your information, the lower your chances are of having your personal information compromised.

Next, keep important documents, such as copies of tax returns, credit card statements, cancelled checks, paystubs and similar data in a secure location like a locked file cabinet, or scan the information into a secure computer or web-based document storage program. Jackson Hewitt’s MyTaxManager is an example of a secure way to store your tax documents.

Be sure to destroy documents older than four years. DO NOT simply throw them away—shred them. 

Be cautious and vigilant when it comes to providing any personal information, such as your social security number, bank or credit account numbers over the phone or via e-mail, and avoid carrying your social security card in your wallet. Be aware that the IRS never communicates via e-mail. If you get an e-mail inquiry from someone claiming to be from the IRS, or if you get a phone call asking for you to e-mail personal information, do not provide these details without verifying the legitimacy of the request first. 

Decline using your social security number as an identifying number on accounts. Very few organizations may legally require you to use your social security number. 

If you suspect your identity has been stolen, contact the IRS right away. A resource can be found at IRS Identity Theft Hotline. The IRS has listed ways taxpayers can help protect themselves, as well as steps to take if they think someone may have accessed their personal information.

The bottom line: Prevention and protection up front will save you a great deal of trouble and time later should your personal information be compromised. 

 

Tips on Surviving Black Friday

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You may still be full from Thanksgiving, but it’s time to go shopping! You’ve been good all year with your budget. You’ve saved receipts, you’ve kept records that will help you come tax time, and you’ve even managed to put some money away. So, here are some tips to not spend too much, or lose your mind this Black Friday.
 
- Set a budget! This is probably the best thing you can do for yourself, aside from sticking to the budget you set. Know how much you have to spend before you look at what you need to get.
 
- Make sure you know where you’re going to go to get the best deals. Browse the Internet, mailers, coupons, and TV offers. You might want to also know the return and exchange polices and gift card rules.
 
- Once you know where you’re going and what you want—stick to that list! There’s going to be some great deals, so it’s easy to leave the store with more than you went for. Stay focused, and you’ll save yourself money and a headache in the long run. (But if you can’t hold back, knowing those return policies comes in handy!)
 
- Keep all receipts in case you need to exchange or return an item.  If the item has been purchased for a charitable organization such as, Toys for Tots or a local “Angel Tree” you can claim a charitable contribution for the cost of the item.
 
- If you are working with one of your local charitable organizations to take underprivileged families shopping or even doing the shopping for the organization, remember to keep track of the miles you drive to do the shopping and drop off the items.  You can deduct 14 cents per mile as a charitable contribution.
 
- Giving to the local Salvation Army or other organizations outside of your favorite store?  Write a check so the donation is tax deductible.  Don’t forget to ask the “bell-ringer” for a receipt.  Most organizations are glad to provide you with the receipt so your donations are tax deductible.
 
Once you are done for the day, sit back and enjoy that sandwich made with leftover turkey and your favorite libation.  You earned it!

Jackson Hewitt On the Streets!

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What happens when Jackson Hewitt's Chief Tax Officer Mark Steber hits the streets to see what people's thoughts are on taxes? Five entertaining and informative videos! The "Jackson Hewitt on the Street" series launched this week. Check out the first one - Tax Refund Joy - where taxpayers share their thoughts on taxes and what they would do with a big refund this year.

Holiday Giving May Lead to Savings at Tax Time

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Can you believe next week is Thanksgiving already? We're officially in the holiday season. On average, almost one quarter of charitable donations occur during the holiday season (also known as year-end giving).  While taxes may not be what taxpayers are thinking of when they are writing out a check to the American Red Cross, for example, the ability to receive a deduction on taxable income for their generosity is a unique privilege to American taxpayers. 

However, not all charitable contributions are equal under the tax code. To be tax deductible, charitable donations must be made to a qualified organization, and for the purpose of taxes, there is a big difference between giving money, goods and time.To get you started, here are four things all American taxpayers should know about claiming charitable contributions on an income tax return:
 

What the IRS considers a charitable contribution
 – A charitable contribution is tax deductible if the donation or gift is made to a qualified organization. Taxpayers can visit www.irs.gov to view a list of qualified organizations. To be deductible, the donation must be voluntary and made without receiving anything of equal value in return. Charitable contributions can include money or property given to a qualified organization as well as certain out-of-pocket expenses accrued when serving as a volunteer.

Tax deductible contributions do not include the cost of raffle, bingo or lottery tickets, the value of donated time or services or the value of donated blood, even if given to a qualified organization.

What documents are required to deduct a charitable contribution 
– Taxpayers are required to keep records and receipts for all charitable contributions regardless of the amount or value. A bank record or a receipt from the organization is required for all cash contributions, and a separate, written acknowledgement from the qualified organization is also required to claim the deduction for any single cash or property contribution of $250 or more.

When charitable contributions can be deducted
 – Charitable contributions can generally only be deducted for the income year in which they are made. Contributions sent by mail are considered made on the date they are postmarked. Some contributions that are not able to be deducted in the current tax year (because of adjusted gross income limits) may be carried over to future years.

How to deduct noncash charitable contributions
 – Clothing, toys, furniture or other household items donated to a qualified organization allow taxpayers to deduct the fair market value of the donated items. To qualify for the deduction, all items must be donated in good condition. The IRS does not provide a guide to determine fair market value; instead, taxpayers must survey thrift and consignment stores for similar items to provide an indication of fair market value. IRS Publication 561, Determining the Value of Donated Property, provides general IRS guidelines on noncash donations.

Generally, the deduction for property contributed is equal to the fair market value of the property at the time of the contribution. However, different rules may apply if the value of the property has increased or for vehicle donations.

As history has shown us, people rarely donate money, goods, property or time purely for tax deduction purposes.  They donate because it is the right thing to do, it helps people who need it and also because it feels good to help others.

The IRS and the tax code look very favorably on those who donate to charitable organizations among other places.  So while you are donating to much needed charities, be sure to observe the charitable donation tax rules, largely record keeping, and maximize that tax deduction and do something nice for yourself – like getting a bigger tax refund for your good deed efforts.

Information for Hurricane Sandy Victims

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Hurricane Sandy devastated significant portions of the East Coast, causing unprecedented damage to homes and businesses. As people assess their losses and start to rebuild, taxpayers should look at some key considerations and new IRS rules and changes that may help them during this difficult time: 

Taxpayers in the federally declared disaster areas in New York, New Jersey, and Connecticut have the option to file a casualty loss claim on their 2011 tax return or file the claim with their 2012 tax return.  If they choose to file now, they can amend their 2011 return or file the claim on their original return if they haven’t filed yet. 

For those in need of a place to stay, the IRS and Treasury have expanded the availability of housing for victims of Hurricane Sandy.  

The IRS has also postponed various tax filing and payment deadlines that occurred starting in late October;  see www.irs.gov for detailed list of extended deadlines. 

All affected taxpayers will need to determine the fair market value of their loss. Don’t forget to include personal items, like clothing and furnishings, as well as household goods.  

Taxpayers throughout the country who are donating to the various qualified charitable organizations through check, credit card, grocery store donations, text messaging, and online donations can deduct their donations. Make sure to get a receipt and keep bills, receipts, and cancelled checks to support the deduction. To ensure the donations are to a qualified organization, check the IRS list of approved charities. 

Taxpayers whose documents were lost and destroyed can check out the Jackson Hewitt Disaster Toolkit, How to Replace Lost Identification and Documents for guidance on what to do now.

For more information on what to do in case of a disaster, or how to prepare for a disaster, check out the Jackson Hewitt Disaster Recovery Tax Guide.