Watch out for tax scams
As tax season ramps up, taxpayers should be on the lookout for common scams that tend to peak this time of year. The IRS annually publishes its Dirty Dozen list of the worst tax-related scams. Two examples from the 2021 list include:
- Unemployment fraud, in which scammers file fraudulent claims for unemployment compensation using stolen personal information. Watch out for a Form 1099-G reporting unemployment compensation you didn’t receive.
- Phishing, in which scammers use fake emails, text messages, websites or social media platforms to steal your personal information. These communications are cleverly disguised to look like they’re from the IRS or other legitimate sources, but the IRS never initiates contact with taxpayers in this way. Beware of communications making threats and those promising a big refund or a missing stimulus payment.
There are many other tax scams to look out for. If you’re uncertain whether a tax-related communication is legitimate, consult your tax advisor.
ABLE accounts can help disabled family members
If you want to provide financial assistance to a disabled family member, consider an Achieving a Better Life Experience (ABLE) account. These tax-advantaged savings accounts are designed for people who became blind or disabled before age 26 and are eligible for Supplemental Security Income (SSI) or Social Security Disability Insurance (SSDI).
Contributions, up to the annual gift tax exclusion of $16,000 per year, aren’t tax deductible. However, the funds grow tax-free and earnings may be withdrawn free of federal income tax if used to pay qualified expenses, including health care, education, housing, transportation, employment training and assistive technology expenses. Note also that in certain circumstances the beneficiary will be permitted to make contributions beyond the amount of any gift made to the account.
An ABLE account doesn’t affect the beneficiary’s Medicaid eligibility. But account balances over $100,000 count toward the $2,000 SSI individual resource limit.
MTC updates guidance on internet activities
If your business has an internet presence, be sure to review the Multistate Tax Commission’s updated guidance on the Interstate Income Act. It generally prohibits states from imposing tax on income derived from interstate commerce if business activities in the state are limited to solicitation of orders sent outside the state for approval and filled from a point outside the state.
The new guidance, among other things, lists several internet activities that aren’t protected by the act (and therefore may trigger income tax liability). Examples include regularly providing post-sales assistance via electronic chat or email, soliciting and receiving online credit card applications, and inviting website visitors to apply for non-sales positions via a web-based platform.
© 2021