The vast amount of information shared online during tax season makes it a haven for identity thieves, and they’re doing everything they can to take advantage of the opportunity! Here are several ways that identity thieves are targeting you, common signs of ID theft and steps to take if you become a victim.
How Identity Thieves Target You
Impersonating the IRS. Thieves calling you and claiming to be the IRS will try and intimidate you into making an immediate payment using a gift card or wire service. Remember, the IRS will physically mail you a letter as a means of first contact. And the IRS will never call you to demand an immediate payment.
Filing a fraudulent tax return. Identity thieves often try to file a tax return using your Social Security number before you do. So consider filing your tax return as quickly as you can to beat identity thieves at their own game.
Phishing schemes. Be on the lookout for unsolicited emails, texts and social media posts that prompt you to share personal and financial information. These messages could also contain viruses, spyware or other malware that could infect your electronic devices.
Common signs of ID theft
Here are some of the common signs of identity theft according to the IRS:
In early 2023, you receive a refund before filing your 2022 tax return.
You receive a tax transcript you didn’t request from the IRS.
A notice that someone created an IRS online account without your consent.
You find out that more than one tax return was filed using your Social Security number.
You receive tax documents from an employer you do not know.
Other signs of identity theft include:
Unexplained withdrawals on bank statements.
Mysterious credit card charges.
Your credit report shows accounts you didn’t open.
You are billed for services you didn’t use or receive calls about phantom debts.
What you can do
If you discover that you’re a victim of identity theft, consider taking the following action:
Notify creditors and banks. Most credit card companies offer protections to cardholders affected by ID theft. You can generally avoid liability for unauthorized charges exceeding $50. But if your ATM or debit card is stolen, report the theft immediately to avoid dire consequences.
Place a fraud alert on your credit report. To avoid long-lasting impact, contact any one of the three major credit reporting agencies—Equifax, Experian or TransUnion—to request a fraud alert. This alert covers all three of your credit files.
Report the theft to the Federal Trade Commission (FTC). Visit identitytheft.gov or call 877-438-4338. The FTC will provide a recovery plan and offer updates if you set up an account on the website.
Please call if you suspect any tax-related identity theft. If any of the previously mentioned signs of tax-related identity theft have happened to you, please call to schedule an appointment to discuss next steps.
A big jump in cost-of-living calculations means a big jump in how much you can contribute to retirement accounts in 2023! Now is the time to plan your retirement contributions to take full advantage of this tax benefit. Here are annual contribution limits for several of the more popular retirement plans:
Plan
2023
2022
Change
SIMPLE IRA
Annual Contribution 50 or over catch-up
$15,500 Add $3,500
$14,000 Add $3,000
+ $1,500 + $500
401(k), 403(b), 457 and SARSEP
Annual Contribution 50 or over catch-up
$22,500 Add $7,500
$20,500 Add $6,500
+ $2,000 + $1,000
Traditional IRA
Annual Contribution 50 or over catch-up
$6,500 Add $1,000
$6,000 Add $1,000
+ $500 No Change
AGI Deduction Phaseouts:
Single; Head of Household Joint nonparticipating spouse Joint participating spouse Married Filing Separately (any spouse participating)
Single; Head of Household Married Filing Jointly Married Filing Separately
138,000 – 153,000 218,000 – 228,000 0 – 10,000
129,000 – 144,000 204,000 – 206,000 0 – 10,000
+ $9,000 + $14,000 No Change
Rollover to Roth Eligibility
Joint, Single, or Head of Household Married Filing Separately
No AGI Limit Allowed / No AGI Limit
No AGI Limit Allowed / No AGI Limit
No AGI Limit Allowed / No AGI Limit
What you can do
Look for your retirement savings plan from the table and note the annual savings limit of the plan. If you are 50 years or older, add the catch-up amount to your potential savings total.
Then make adjustments to your employer-provided retirement savings plan as soon as possible in 2023 to adjust your contribution amount.
Double check to ensure you are taking full advantage of any employee matching contributions into your account.
Use this time to review and re-balance your investment choices as appropriate for your situation.
Set up new accounts for a spouse and/or dependents. Enable them to take advantage of the higher limits, too.
Consider IRAs. Many employees maintain employer-provided plans without realizing they could also establish a traditional or Roth IRA. Use this time to review your situation and see if these additional accounts might benefit you or someone else in your family.
Review contributions to other tax-advantaged plans, including flexible spending accounts (FSAs) and health savings accounts (HSAs).
The best way to take advantage of increases in annual contribution limits is to start early in the year. The sooner, the better.
The beginning of a new year brings the need to recap the previous one for Uncle Sam. Here are some tips and a checklist to help get you organized.
Look for your tax forms. Forms W-2, 1099, and 1098 will start hitting your inbox or mailbox in the next couple of weeks. If you have not already done so, review last year’s records and create a checklist of the forms to make sure you get them all.
Collect your tax documents using this checklist. Using a tax organizer or last year’s tax return, sort your tax records to match the items on your tax return. Here is a list of the more common tax records:
Informational tax forms (W-2s, 1099s, 1098s, 1095-A) that disclose wages, interest income, dividends and capital gain/loss activity
Other forms that disclose possible income (jury duty, unemployment, IRA distributions and similar items)
Business K-1 forms
Social Security statements
Mortgage interest statements
Tuition paid statements
Property tax statements
Mileage log(s) for business, moving, medical and charitable driving
Medical, dental and vision expenses
Business expenses
Records of any asset purchases and sales, including cryptocurrency
Health insurance records (including Medicare and Medicaid)
Charitable receipts and documentation
Bank and investment statements
Credit card statements
Records of any out of state purchases that may require use tax
Casualty and theft loss documentation (federally declared disasters only)
Moving expenses (military only)
If you aren’t sure whether something is important for tax purposes, retain the documentation. It is better to save unnecessary documentation than to later wish you had the document to support your deduction.
Clean up your auto log. You should have the necessary logs to support your qualified business miles, moving miles, medical miles and charitable miles driven by you. Gather the logs and make a quick review to ensure they are up to date and totaled.
Coordinate your deductions. If you and someone else share a dependent, confirm you are both on the same page as to who will claim the dependent. This is true for single taxpayers, divorced taxpayers, taxpayers with elderly parents/grandparents, and parents with older children.
With proper organization, your tax filing experience can be timely and uneventful.
Here are several strategies to consider to shrink your tax bill in 2023.
Consider life events. Consider whether any of the following key events may take place in 2023, as they may have potential tax implications:
Purchasing or selling a home
Refinancing or adding a new mortgage
Getting married or divorced
Incurring large medical expenses
Changing jobs
Welcoming a baby
Manage your retirement. One of the best ways to reduce your taxable income is to use tax beneficial retirement programs. Now is a good time to review your retirement account funding. Here are the contribution limits for 2023:
401(k): $22,500 ($30,000, Age 50+)
IRA: $6,500 ($7,500, Age 50+)
SIMPLE IRA: $15,500 ($19,000, Age 50+)
Defined Benefit Plan: $66,000
Look into credits. There are a variety of tax credits available to most taxpayers. Take a look at those you currently use and determine whether you qualify for them again next year. Here are some worth reviewing:
Child Tax Credit
Earned Income Tax Credit
Premium Tax Credit
Adoption Credit
Elderly and Disabled Credit
Educational Credits (Lifetime Learning Credit and American Opportunity Tax Credit)
Assess your income. Forecast how your 2023 income will compare to your 2022 income, then review your most recent tax return and find your effective tax rate by dividing your total tax by your gross income. Then apply that rate to your new income. This will give you a rough estimate of next year’s tax obligation.
To avoid getting stuck with an unexpected tax bill, consider scheduling several tax planning sessions throughout the year. Remember, some tax saving ideas may require funding on your part. It is best to identify them now so you can save the cash necessary to take advantage of them throughout 2023.
Many people dream of making more money, but cutting expenses can have the same effect. Identify unnecessary expenses with these six money-saving ideas and help free up some cash:
Eliminate late fees. Most late fees are the result of being too busy, traveling or simply forgetting. Fortunately, late fees are almost entirely avoidable if you have a plan. A lot of people only think of credit card late fees, but they can also show up in many places including utility bills, subscriptions and registration fees. Take a look at your bills and identify the kinds of charges you’re getting. Scheduling automatic payments should help you avoid late fees going forward. And if you get one, call and try to get it canceled. It just might work!
Cancel unnecessary subscriptions. Subscriptions are popping up everywhere. They include everything from weekly shaving products to video and music streaming services. With so many options, it’s easy to double up on services or forget to cancel one that you were planning to use for just a short time. Review all your monthly subscriptions and cancel the ones that are no longer providing value.
Minimize interest expense. Paying for day-to-day expenses with a credit card to rack up points to use for airfare or other perks is a great cash management tool, but the interest that builds up if you don’t pay it off every month negates the perks and creates an extra expense. If you find yourself in a situation with multiple credit card balances, consider a consolidation loan with a lower interest rate.
Be selective with protection plans. With virtually every purchase, the store or website offers to sell you insurance in the form of a protection plan. And for good reason — they’re profitable to them and not you! Insurance should be reserved for things you can’t live without like your health and your home. Pass on the protection plan for your toaster.
Review your deductibles. A deductible is a set amount you pay before your insurance kicks in to cover the cost of a claim. The higher the deductible, the lower your monthly premium. If you have enough in savings to cover a higher deductible when disaster strikes, raising the deductible may save you some money on a month-to-month basis.
Try a little DIY. If you own a house, you know it’s just a matter of time before something breaks or stops working. When this happens, don’t instantly reach for the phone to call a repairman. Repair videos are in endless supply online. An easy fix will often do the job. Simple fixes can lead to big savings, especially since repair services charge minimums and fuel surcharges.
While some ideas take a little more analysis to understand the true benefits, many are just the result of paying attention. Taking a proactive approach can provide a big boost to your budget.
