The purpose of life insurance is to provide a source of income, in case of your death, for your children, dependents, or other beneficiaries. (Life insurance can also serve certain estate planning purposes, which we won't go into here.)

Whether you need to buy life insurance depends on whether anyone is depending on your income. If you have a spouse, child, parent, or some other individual who depends on your income, you probably need life insurance.

Life insurance protects your family in the event of death. Most people do not have the right amount of insurance. It is important to determine the amount that suits your needs. There are two basic types, term and permanent.

Term insurance is simply insurance you pay for coverage for a specified period of time. If you die within this period, your beneficiary receives the insurance benefit. Term policy premiums usually increase with age.

Permanent insurance, such as universal life, variable life and whole life insurance, contains a cash value account or an investment element to the insurance.

A Few Basic Rules of Thumb

The younger your children, the more insurance you need. If both spouses earn income, then both spouses should be insured, with insurance amounts proportionate to salary amounts.

Tip: If the family cannot afford to insure both wage earners, the primary wage earner should be insured first, and the secondary wage earner should be insured later on. A less expensive term policy might be used to fill an insurance gap.

If one spouse does not work outside the home, insurance should be purchased to cover the absence of the services being provided by that spouse (child care, housekeeping, bookkeeping). However, if funds are limited, insurance on the non-wage earner should be secondary to insurance on the life of the wage earner.

If your spouse could live comfortably without your income, then you will still need life insurance, but you will need less than someone who has dependents.

Tip: At a minimum, you will want to provide for burial expenses and paying off your debts.

If your spouse would undergo financial hardship without your income, or if you do not have adequate savings, you may need to purchase more insurance. The amount will depend on your salary level and that of your spouse, on the amount of savings you have, and on the amount of debt you both have.

The foregoing is provided by the Bosma Group which specializes in serving small and medium sized businesses.  The Bosma Group was founded with the vision of allowing emerging businesses access to same world-class expertise formerly only available to Fortune 1000 companies.

College tuition and fees are costly and on the rise. But even with 4-year private schools running on average $36,000 per year, the cost is well worth it. According to the US Census Bureau, individuals with a bachelor's degree earn more than double those with just a high school diploma.

How much to save depends on how much you think your child's education will cost. The best way is to start saving before they are born. The sooner you begin, the less money you will have to put away each year.

Example: Suppose you have one child, age six months, and you estimate that you'll need $120,000 to finance his college education 18 years from now. If you start putting away money immediately, you'll need to save $3,500 per year for 18 years (assuming an after-tax return of 7%). On the other hand, if you put off saving until the child is six years old, you'll have to save almost double that amount every year for twelve years.

Another advantage of starting early is that you'll have more flexibility when it comes to the type of investment you can use. You'll be able to put at least part of your money in equities, which, although riskier in the short run, are better able to outpace inflation than other investments in the long run.

Financial Calculator: College Savings Planner
Use this calculator to help develop and fine-tune your child's college education savings plan.

How Much Will a College Education Cost?

Based on the survey completed for the 2009 Trends in College Pricing, the average cost for tuition, fees, and room and board for 2009-2010 was:

$15,200 per year for 4-year public (in state) colleges and universities.
This is an increase of 6.3% from 2008-2009 findings.

$35,600 per year for 4-year private colleges and universities.
This is an increase of 4.4% from 2008-2009 findings.

It should be noted that on average, full-time students receive $14,400 of financial aid per year in the form of grants and tax benefits for private 4-year institutions, $5,400/yr for public 4-year institutions, and $3,000/yr for public 2-year institutions.

Section 529 Qualified Tuition Plans

Many parents are looking at ways to save for college. Section 529 plans, also known as Qualified Tuition Programs (QTP), are a popular college savings vehicle for parents.

Every state now has a program allowing persons to prepay for future higher education, with tax relief. There are two basic plan types, with many variations:

The Prepaid Education Arrangement. You essentially buy future education at today's costs, by buying education credits or certificates. This is the older type of program, and it tends to limit the student's choice of schools within the state.

Education Savings Accounts. You contribute to an account earmarked for future higher education.

Tip: When approaching state programs, one must distinguish between what the federal tax law allows and what an individual state's program may impose.

You may open a Section 529 plan in any state. But when buying prepaid tuition credits (less popular than savings accounts), you often need to apply the credits to a specific college or group of colleges.

Unlike certain other tax-favored higher education programs, such as the Hope and lifetime learning tax credits, federal tax law doesn't limit the benefit only to tuition. Room, board, lab fees, books, and supplies can be purchased with funds from your 529 Savings Account. (Individual state programs could be narrower.)

The key parties to the program are the Designated Beneficiary, the student-to-be, and the Account Owner, who is entitled to choose and change the beneficiary and who is normally the principal contributor to the program.

There are no income limits on who may be an account owner. There's only one designated beneficiary per account. Thus, a parent with three college-bound children might set up three accounts. (Some state programs don't allow the same person to be both beneficiary and account owner.)

Contributions must be in cash, and they must not total more than reasonably needed for higher education (as determined initially by the state). Neither account owner nor beneficiary may direct investments, but the state may allow the owner to select a type of investment fund (e.g., fixed income securities), and to change the investment annually, and when the beneficiary is changed. The account owner decides who gets the funds (can pick and change the beneficiary) and is legally allowed to withdraw funds at any time, subject to tax and penalties (discussed later).

Funds in the account not yet distributed at the account owner's death pass as part of the probate estate under state law - though this is not the result for federal estate tax purposes (see below).

What's New?

529 plan distributions are tax-free as long as they are used to pay qualified higher education expenses for a designated beneficiary. Qualified expenses include tuition, required fees, books, supplies, equipment, and special needs services. For someone who is at least a half-time student, room and board also qualify. For 2009 and 2010, the American Recovery and Reinvestment Act (ARRA) added expenses for computer technology and equipment or Internet access and related services to be used by the student while enrolled at an eligible educational institution. Software designed for sports, games, or hobbies does not qualify, unless it is predominantly educational in nature. In general, expenses for computer technology are not qualified expenses for the American opportunity credit, Hope credit, lifetime learning credit, or tuition and fees deduction.

Federal Tax Rules Relating to 529 College Savings Plans

Income Tax. Contributions made by the account owner or other contributor are not deductible for federal income tax purposes. Earnings on contributions grow tax-free while in the program.

Distributions from the fund are tax-free to the extent used for qualified higher education expenses. Distributions used otherwise are taxable to the extent of the portion that represents earnings.

A Section 529 distribution can be tax-free even though the student is claiming a Hope or lifetime learning credit, or tax-free treatment for a Section 530 Coverdell distribution, if the programs aren't covering the same specific expenses.

Distribution for a purpose other than qualified education is taxed to the one receiving the distribution. In addition, a 10% penalty must be imposed on the taxable portion of the distribution, comparable to the 10% penalty in Section 530 Coverdell plans.

The account owner may change beneficiary designation from one to another in the same family. Funds in the account roll over tax-free for the benefit of the new beneficiary.

Gift Tax. For gift tax purposes, contributions are treated as completed gifts even though the account owner has the right to withdraw them - thus they qualify for the up-to-$13,000 annual gift tax exclusion. One contributing more than $13,000 may elect to treat the gift as made in equal installments over that year and the following 4 years, so that up to $65,000 can be given tax-free in the first year.

A rollover from one beneficiary to another in a younger generation is treated as a gift from the first beneficiary, an odd result for an act the "giver" may have had nothing to do with.

Estate Tax. Funds in the account at the designated beneficiary's death are included in the beneficiary's estate - another odd result, since those funds may not be available to pay the tax. Funds in the account at the account owner's death are not included in the owner's estate, except for a portion thereof where the gift tax exclusion installment election is made for gifts over $13,000. For example, if the account owner made the election for a gift of $65,000 in 2010, a part of that gift is included in the estate if he or she dies within 5 years.

Tip: A Section 529 program can be an especially attractive estate-planning move for grandparents. There are no income limits, and the account owner giving up to $65,000 avoids gift tax and estate tax by living 5 years after the gift, yet has the power to change the beneficiary.

State Tax. State tax rules are all over the map. Some reflect the federal rules, some quite different rules. For specifics of each state's program, see http://www.collegesavings.org.

Professional Guidance

Considering the wide differences among state plans, the federal and state tax issues, and the dollar amounts at stake, please call us before getting started with a 529 plan.

The foregoing is provided by the Bosma Group which specializes in serving small and medium sized businesses.  The Bosma Group was founded with the vision of allowing emerging businesses access to same world-class expertise formerly only available to Fortune 1000 companies.

The credit applies to energy-related improvements, such as adding insulation, energy-efficient exterior windows, and energy-efficient heating and air-conditioning systems.

Note: A similar credit was available for 2007, but it was not available in 2008. Homeowners should be aware that the standards in the new law are higher than the standards for the credit that was available in 2007 for products that qualify as "energy efficient." The IRS has issued guidance that allows manufacturers to certify that their products meet these new standards.

Homeowners may continue to rely on manufacturers' certifications that were provided under the old guidance. For exterior windows and skylights, homeowners may continue to rely on Energy Star labels in determining whether items qualify for the credit.

Further, the Residential Energy Efficient Property Credit is a nonrefundable energy tax credit that helps individual taxpayers pay for qualified residential alternative energy equipment, such as solar hot water heaters, geothermal heat pumps, and wind turbines. The new law removes some of the previously imposed maximum amounts and allows for a credit equal to 30% of the cost of qualified property.

We're happy to help you sort out the tax credits available for your home improvements this summer. Just give us a call or send us an email.

The foregoing is provided by the Bosma Group which specializes in serving small and medium sized businesses.  The Bosma Group was founded with the vision of allowing emerging businesses access to same world-class expertise formerly only available to Fortune 1000 companies.

You have two filing status options: married filing jointly, or married filing separately.

Married Filing Jointly

You can choose married filing jointly as your filing status if you are married and both you and your spouse agree to file a joint return. On a joint return, you report your combined income and deduct your combined allowable expenses. You can file a joint return even if one of you had no income or deductions.

According to the IRS, if you and your spouse decide to file a joint return, your tax may be lower than your combined tax for the other filing statuses. Also, your standard deduction (if you do not itemize deductions) may be higher, and you may qualify for tax benefits that do not apply to other filing statuses.

We recommend that if you and your spouse each have income, you figure your tax both on a joint return and on separate returns (using the filing status of married filing separately). You can choose the method that gives you the lower combined tax.

Joint Responsibility. Both of you may be held responsible, jointly and individually, for the tax and any interest or penalty due on your joint return. One spouse may be held responsible for all the tax due even if all the income was earned by the other spouse.

Married Filing Separately

You can choose married filing separately as your filing status if you are married. This filing status may benefit you if you want to be responsible only for your own tax or if it results in less tax than filing a joint return.

We Can Help

Give us a call if you're unsure of which status to file under.

The foregoing is provided by the Bosma Group which specializes in serving small and medium sized businesses.  The Bosma Group was founded with the vision of allowing emerging businesses access to same world-class expertise formerly only available to Fortune 1000 companies.

The tax code provides a variety of tax incentives for families who are saving for, or already paying, higher education costs or are repaying student loans.

You may be able to claim a credit for the qualified tuition and related expenses of the students in your family who are enrolled in eligible educational institutions. The types of credits available are the Lifetime Learning Credit and the American Opportunity Tax Credit.

Different rules apply to each credit. If you claim an American Opportunity Credit for a particular student, none of that student's expenses for that year may be applied toward the Lifetime Learning Credit.

You may be able to claim a tuition deduction of up to $4,000 of qualified education expenses paid during the year for yourself, your spouse, or your dependent. You cannot claim this deduction if your filing status is married filing separately or if another person can claim an exemption for you as a dependent on his or her tax return. The qualified expenses must be for higher education.

You may be able to deduct interest you pay on a qualified student loan. And, if your student loan is canceled, you may not have to include any amount in income. The deduction is claimed as an adjustment to income so you do not need to itemize your deductions on Schedule A Form 1040.

The foregoing is provided by the Bosma Group which specializes in serving small and medium sized businesses.  The Bosma Group was founded with the vision of allowing emerging businesses access to same world-class expertise formerly only available to Fortune 1000 companies.

Definition of a Hobby vs Business

First, the IRS defines a hobby as an activity that is not pursued for profit. A business, on the other hand, is an activity carried on with the reasonable expectation of earning a profit.

The tax considerations are different for each activity so it is important for taxpayers to properly determine whether an activity is engaged in for profit as a business, or is engaged in as a hobby.

Simply stated, you must report and pay tax on income from almost all sources, including hobbies. It is in the handling of expenses and losses that the two activities differ.

Note: Internal Revenue Code Section 183 (Activities Not Engaged in for Profit) limits deductions that can be claimed when an activity is not engaged in for profit. IRC 183 is sometimes referred to as the "hobby loss rule."

Is your hobby really an activity engaged in for profit?

If you are not sure whether you are running a business or simply enjoying a hobby, here are some of the factors you should consider:

• Does the time and effort put into the activity indicate an intention to make a profit?
• Do you depend on income from the activity?
• If there are losses, are they due to circumstances beyond your control or did they occur in the start-up phase of the business?
• Have you changed methods of operation to improve profitability?
• Do you have the knowledge needed to carry on the activity as a successful business?
• Have you made a profit in similar activities in the past?
• Does the activity make a profit in some years?
• Do you expect to make a profit in the future from the appreciation of assets used in the activity?

An activity is presumed for profit if it makes a profit in at least three of the last five tax years, including the current year (or at least two of the last seven years for activities that consist primarily of breeding, showing, training or racing horses).

The IRS says that it looks at all facts when determining whether a hobby is for pleasure or business. The profit test is the primary test. If you can show that the activity earned income in three out of the last five years, it is for profit. If the activity does not meet the profit test, the IRS will take an individualized look at the facts of your activity using the list of questions above to make the determination business or hobby. It should be noted that this list is not all inclusive.

Business Activity: If the activity is determined to be a business, you can deduct ordinary and necessary expenses for the operation of the business on a Schedule C or C-EZ on your Form 1040 without considerations for percentage limitations. An ordinary expense is an expense that is common and accepted in your trade or business. A necessary expense is one that is appropriate for your business.

Hobby: If an activity is a hobby, not for profit, losses from that activity may not be used to offset other income. You can only deduct expenses up to the amount of income earned from the hobby. These expenses, with other miscellaneous expenses, are itemized on Schedule A and must also meet the 2 percent limitation of your adjusted gross income in order to be deducted.

What are allowable hobby deductions under IRC 183?

If your activity is not carried on for profit, allowable deductions cannot exceed the gross receipts for the activity.

• Deductions for hobby activities are claimed as itemized deductions on Schedule A, Form 1040. These deductions must be taken in the following order and only to the extent stated in each of three categories:
• Deductions that a taxpayer may claim for certain personal expenses, such as home mortgage interest and taxes, may be taken in full.
• Deductions that don't result in an adjustment to the basis of property, such as advertising, insurance premiums and wages, may be taken next, to the extent gross income for the activity is more than the deductions from the first category.
• Deductions that reduce the basis of property, such as depreciation and amortization, are taken last, but only to the extent gross income for the activity is more than the deductions taken in the first two categories.

If your hobby is regularly generating income, it could make tax sense for you to consider whether it is a business or not. You may be able to save on taxes.

The foregoing is provided by the Bosma Group which specializes in serving small and medium sized businesses. The Bosma Group was founded with the vision of allowing emerging businesses access to same world-class expertise formerly only available to Fortune 1000 companies.

• Deduct the actual business-related costs of gas, oil, lubrication, repairs, tires, supplies, parking, tolls, drivers' salaries, and depreciation.


• Use the standard mileage deduction and simply multiply 55.0 cents for 2009 travel. (2008's rate was 50.5 cents for first six months and 58.5 cents for the last six months of 2008) by the number of business miles traveled during the year. Your actual parking fees and tolls are separately deductible under this method.

Which method is better?

For some taxpayers, the standard mileage rate produces a larger deduction. Others fare better tax-wise by deducting actual expenses.

Tip: The actual method allows you to claim accelerated depreciation on your car, subject to limits and restrictions not discussed here.

The standard mileage amount includes an allowance for depreciation. Opting for the standard mileage method allows you to by-pass the limits and restrictions and is simpler, but often less advantageous in dollar terms.

Caution: The standard rate may understate your costs, especially if you use the car 100% for business, or close to that percentage.

Caution: Once you choose the standard mileage rate, you cannot later use accelerated depreciation if you opt for the actual cost method in a later year. You may then use only straight line.

Generally, the standard mileage method benefits taxpayers who have less expensive cars or who travel a large number of business miles.

How To Make the Most of Your Auto Deductions

Keep careful records of your travel expenses. We won't be able to determine which of the two options is better for you if you don't know the number of miles driven and the total amount you spent on the car.

Furthermore, the tax law requires that you keep travel expense records and that you give information on your return showing business versus personal use. If you use the actual cost method, you must keep receipts.

Tip: Consider using a separate credit card for business, to simplify your record-keeping.

Tip: You can also deduct the interest you pay to finance a business-use car, if you're self-employed.

Note: Self-employeds and employees who use their cars for business can deduct auto expenses if they either (1) don't get reimbursed, or (2) are reimbursed under an employer's "non-accountable" reimbursement plan. In the case of employees, expenses are deductible to the extent that auto expenses (together with other "miscellaneous itemized deductions") exceed 2% of adjusted gross income.

The foregoing is provided by the Bosma Group which specializes in serving small and medium sized businesses.  The Bosma Group was founded with the vision of allowing emerging businesses access to same world-class expertise formerly only available to Fortune 1000 companies.

Social networking has euthanized the basic fundamentals of writing. On Twitter, for instance, a skeletal 140 allowed characters barely permits the stringing together of sentence fragments. The use of a full subject, conjunction, and predicate is truly a luxury with the countdown of remaining available characters ticking away in the corner of the white box. The dreaded negative number on this countdown alerts the loquacious tweeter that unless they find a way to downsize, their hundreds of followers will be left to wonder: “What IS Happening with Mary?” This is truly the heyday of the ampersand.

Strunk and White, the godfathers of grammatical elements and writing style for generations of wordsmiths must be spinning in their graves as they contemplate this abbreviation and bastardization of the English language that is constantly occurring in the little white “what you are you thinking now?” status update windows on sites like Twitter, MySpace and Facebook.

Or are they?

I’ll admit that when I first plugged into these sites, much like Neo was plugged into the Matrix, I immediately started whining piously about their lack of literary integrity. But just like the majority of the pods powering the Matrix I found it easier to stay plugged in once I was curled up comfortably in the fetal position. Now, a few years and thousands of tweets later I’ve started to change my position on the subject of literary style in social networking. Before you start screaming oxymoron consider the writing fundamentals often present within the status updates of social networking.

Strunk and White offered the following suggestions for developing writing style. Since the English students of today likely wouldn’t know the names Strunk and White unless they were trending on twitter, here is a summary of those style fundamentals in relation to social networking.

1. Write in a way that comes naturally

Based on the fiery facebook status update and tweet fights that frequently break out, it seems authenticity rules and posers are quickly spotted and ignored.

2. Work from a suitable design

In the case of status updates, that design is simple – find a way to get to your point quickly or don’t bother making it at all.

3. Write with nouns and verbs

This is the essence of a good status update – Person X is watching politician Y tell lies and half-truths.

4. Do not overwrite

This is hardly possible on twitter and especially on facebook. After enough paragraph-long, rambling status updates, friends and followers start mysteriously disappearing. This is short attention span theater. This kind of puts War & Peace and The Fountainhead in perspective, doesn’t it? Remember when people still regularly read more than a few sentences without changing the channel in their brains?

5. Use orthodox spelling

Now there’s a fundamental that social networking fails miserably at simply because of a dramatic lack of space. Go on one of these sites for just a few minutes and you’ll find yourself instantly immersed in “u” vs. “you”.

6. Make sure the reader knows who is speaking.

The internet has done this effectively by auto-filling the user’s name into each and every status update. This of course, makes 99.9999% of every status update completely grammatically incorrect (Mary Smith Good night everybody!).

7. Avoid fancy words

This is a Strunk and White rule that most social networkers are in no danger at all of breaking.

8. Do not take shortcuts at the cost of clarity

What’re u tlking ‘bout @marysmith? Lmao

Of course the piece of writing advice from Strunk and White that may be social networking’s best defense in a literary court of law is this: “Omit needless words!”

*  *  *  *  *

Keeping full and accurate homeowner records is vital for determining not only your home deductions but also the basis or adjusted basis of your home. These records include your purchase contract and settlement papers if you bought the property or other objective evidence if you acquired it by gift, inheritance, or similar means.

You should also keep any receipts, canceled checks, and similar evidence for improvements or other additions to the basis. Here are some examples:

• Putting an addition on your home
• Replacing an entire roof
• Paving your driveway
• Installing central air conditioning
• Rewiring your home
• Assessments for local improvements
• Amounts spent to restore damaged property

In addition, you should keep track of any decreases to the basis. Here's some examples:

• Insurance or other reimbursement for casualty losses
• Deductible casualty loss not covered by insurance
• Payment received for easement or right-of-way granted
• Value of subsidy for energy conservation measure excluded from income
• Depreciation deduction if home is used for business or rental purposes

How you keep records is up to you, but they must be clear and accurate and must be available to the IRS. And you must keep these records for as long as they are important for the federal tax law.

Keep records that support an item of income or a deduction appearing on a return until the period of limitations for the return runs out. (A period of limitations is the limited period of time after which no legal action can be brought.)

For assessment of tax, this is generally three years from the date you filed the return. For filing a claim for credit or refund, this is generally three years from the date you filed the original return or two years from the date you paid the tax, whichever is later. Returns filed before the due date are treated as filed on the due date.

You may need to keep records relating to the basis of property (discussed earlier) longer than the period of limitations.

Note: Technically, basis is needed to determine gain on home sale (loss is not deductible). That need has diminished for most homeowners now that gain up to $250,000 ($500,000 in some sales by married couples) is tax-exempt.

Basis is still important, however, in figuring casualty loss, on conversion of the home to business use, or where there's a gift of the home (in this case, important to the donee).

Keep those records as long as they are important in figuring the basis of the property. Generally, this means for as long as you own the property and, after you dispose of it, for the period of limitations that applies to you.

Tip: If you have any questions as to what items are to be considered in determining basis, please give us a call.

The foregoing is provided by the Bosma Group which specializes in serving small and medium sized businesses.  The Bosma Group was founded with the vision of allowing emerging businesses access to same world-class expertise formerly only available to Fortune 1000 companies.

Consumers should protect themselves against online identity theft and other scams that increase during and linger after the filing season. Such scams may appropriate the name, logo or other appurtenances of the IRS or U.S. Department of the Treasury to mislead taxpayers into believing that the scam is legitimate.

Scams involving the impersonation of the IRS usually take the form of e-mails, tweets or other online messages to consumers. Scammers may also use phones and faxes to reach intended victims. Some scammers set up phony Web sites.

The IRS and E-mail

Generally, the IRS does not send unsolicited e-mails to taxpayers. Further, the IRS does not discuss tax account information with taxpayers via e-mail or use e-mail to solicit sensitive financial and personal information from taxpayers. The IRS does not request financial account security information, such as PIN numbers, from taxpayers.

Object of Scams

Most scams impersonating the IRS are identity theft schemes. In this type of scam, the scammer poses as a legitimate institution to trick consumers into revealing personal and financial information - such as passwords and Social Security, PIN, bank account and credit card numbers - that can be used to gain access to and steal their bank, credit card or other financial accounts. Attempted identity theft scams that take place via e-mail are known as phishing. Other scams may try to persuade a victim to advance sums of money in the hope of realizing a larger gain. These are known as advance fee scams.

How an Identity Theft Scam Works

Most of the scams that impersonate the IRS are identity theft scams. Typically, a consumer will receive an e-mail that claims to come from the IRS or Treasury Department. The message will contain an enticing or intimidating subject line, such as tax refund, inherited funds or IRS notice. Usually, the message will state that the recipient needs to provide the IRS with information to obtain the refund or avoid some penalty. The message will instruct the consumer to open an attachment or click on a link in the e-mail. This may lead to an official-looking form to be filled out online or send the taxpayer to a seemingly genuine but bogus IRS Web site. The look-alike site will then contain a phony but genuine-looking online form or interactive application that requires the personal and financial information the scammer can use to commit identity theft.

Alternatively, the clicked link may secretly download malware to the consumer's computer. Malware is malicious code that can take over the computer's hard drive, giving the scammer remote access to the computer, or it could look for passwords and other information and send them to the scammer.

Phony Web or Commercial Sites

In many IRS-impersonation scams, the scammer sends the consumer to a phony Web site that mimics the appearance of the genuine IRS Web site, IRS.gov. This allows the scammer to steer victims to phony interactive forms or applications that appear genuine but require the targeted victim to enter personal and financial information that will be used to commit identity theft.

The official Web site for the Internal Revenue Service is IRS.gov, and all IRS.gov Web page addresses begin with http://www.irs.gov/.

In addition to Web sites established by scammers, there are commercial Internet sites that often resemble the authentic IRS site or contain some form of the IRS name in the address but end with a .com, .net, .org or other designation instead of .gov. These sites have no connection to the IRS. Consumers may unknowingly visit these sites when searching the Internet to retrieve tax forms, publications and other information from the IRS.

Frequent or Recent Scams

There are a number of scams that impersonate the IRS. Some of them appear with great frequency, particularly during and right after filing season, and recur annually. Others are new.

• Refund Scam: This is the most frequent IRS-impersonation scam seen by the IRS. In this phishing scam, a bogus e-mail claiming to come from the IRS tells the consumer that he or she is eligible to receive a tax refund for a specified amount. It may use the phrase "last annual calculations of your fiscal activity." To claim the tax refund, the consumer must open an attachment or click on a link contained in the e-mail to access and complete a claim form. The form requires the entry of personal and financial information. Several variations on the refund scam have claimed to come from the Exempt Organizations area of the IRS or the name and signature of a genuine or made-up IRS executive. In reality, taxpayers do not complete a special form to obtain their federal tax refund; refunds are triggered by the tax return they submitted to the IRS.
• Lottery winnings or cash consignment: These advance fee scam e-mails claim to come from the Treasury Department to notify recipients that they'll receive millions of dollars in recovered funds or lottery winnings or cash consignment if they provide certain personal information, including phone numbers, via return e-mail. The e-mail may be just the first step in a multi-step scheme, in which the victim is later contacted by telephone or further e-mail and instructed to deposit taxes on the funds or winnings before they can receive any of it. Alternatively, they may be sent a phony check of the funds or winnings and told to deposit it but pay 10 percent in taxes or fees. Thinking that the check must have cleared the bank and is genuine, some people comply. However, the scammers, not the Treasury Department, will get the taxes or fees. In reality, the Treasury Department does not become involved in notification of inheritances or lottery or other winnings.
• Beneficial Owner Form: This fax-based phishing scam, which generally targets foreign nationals, recurs periodically. It's based on a genuine IRS form, the W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding. The scammer, though, invents his or her own number and name for the form. The scammer modifies the form to request passport numbers, information that is often used for account security purposes (such as mother's maiden name) and similar detailed personal and financial information, and states that the recipient may have to pay additional tax if he or she fails to immediately fax back the completed form. In reality, the real W-8BEN is completed by banks, not individuals.

Other Known Scams

The contents of other IRS-impersonation scams vary but may claim that the recipient will be paid for participating in an online survey or is under investigation or audit. Some scam e-mails have referenced Recovery-related tax provisions, such as Making Work Pay, or solicited for charitable donations to victims of natural disasters. Taxpayers should beware of an e-mail scam that references underreported income and the recipient's "tax statement", since clicking on a link or opening an attachment is known to download malware onto the recipient's computer.

How to Spot a Scam

Many e-mail scams are fairly sophisticated and hard to detect. However, there are signs to watch for, such as an e-mail that:

• Requests detailed or an unusual amount of personal and/or financial information, such as name, SSN, bank or credit card account numbers or security-related information, such as mother's maiden name, either in the e-mail itself or on another site to which a link in the e-mail sends the recipient.
• Dangles bait to get the recipient to respond to the e-mail, such as mentioning a tax refund or offering to pay the recipient to participate in an IRS survey.
• Threatens a consequence for not responding to the e-mail, such as additional taxes or blocking access to the recipient's funds.
• Gets the Internal Revenue Service or other federal agency names wrong.
• Uses incorrect grammar or odd phrasing (many of the e-mail scams originate overseas and are written by non-native English speakers).
• Uses a really long address in any link contained in the e-mail message or one that does not start with the actual IRS Web site address (http://www.irs.gov). The actual link's address, or url, is revealed by moving the mouse over the link included in the text of the e-mail.

What to Do

Taxpayers who receive a suspicious e-mail claiming to come from the IRS should take the following steps:

•   Avoid opening any attachments to the e-mail, in case they contain malicious code that will infect your computer.
• Avoid clicking on any links, for the same reason. Alternatively, the links may connect to a phony IRS Web site that appears authentic and then prompts for personal identifiers, bank or credit card account numbers or PINs.
• Visit the IRS Web site, www.irs.gov, to use the "Where's My Refund?" interactive tool to determine if they are really getting a refund, rather than responding to the e-mail message.
• Forward the suspicious e-mail or url address to the IRS mailbox phishing@irs.gov, then delete the e-mail from their inbox.
• Consumers who believe they are or may be victims of identity theft or other scams may visit the U.S. Federal Trade Commission's Web site for identity theft, www.OnGuardOnline.gov, for guidance in what to do. The IRS is one of the sponsors of this site.

More information on IRS-impersonation scams, identity theft and suspicious e-mail is available on IRS.gov.

The foregoing is provided by the Bosma Group which specializes in serving small and medium sized businesses.  The Bosma Group was founded with the vision of allowing emerging businesses access to same world-class expertise formerly only available to Fortune 1000 companies.