September: Date to remember; Taxes and the Health Insurance Exchange; Another identity theft scam

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Tax Snacks: Bite-size tax news and information on the fly

Date to remember:

October 15:

Extended individual tax returns (Forms 1040) are due.

Extended benefit plan tax returns (Forms 5500) are due.

Tax Refunds May Be At Risk for Thousands of Participants in the New Health Insurance Exchanges

Many Americans are beneficiaries of subsidies that reduce the cost of health insurance that they have purchased through the new health insurance exchanges created by the Patient Protection and Affordable Care Act (“Obamacare”). The insurance is linked to income taxes in a number of ways, including oversight by the IRS, subsidies that are based on income, and use of the self-reporting “honor system” whereby taxpayer/participants report their own information. Unfortunately, not everyone is accurate or honest. The administration released a notice this month (via the Centers for Medicare & Medicaid Services website) indicating that as of May 30, around 1.2 million households had “matching issues,” or apparent disparities between income that they reported and income that the government suspected they had earned. (The subsidies increase as income decreases, and if income is high enough, subsidies are not provided.) Although it is not clear whether the 837,000 who finally responded between May 30 and September 15 were able to substantiate their income or not, as of September 15, around 363,000 remaining individuals had not responded to requests for substantiation, and are at risk of losing their taxpayer-funded subsidies. More information can be found in the press release here.

Yet Another Identity Theft Scam

The new Foreign Account Tax Compliance Act (FATCA) brought with it a significant amount of paperwork related to its compliance, which we briefly explained here. Unfortunately, scamsters have begun taking advantage of the participating banks’ unfamiliarity with the program, and have successfully convinced bank personnel to part with private information of US citizens by posing as representatives of the IRS. While most of our newsletter readers are not administrators of foreign banks, you should be aware that there is another source of potential data breach. Foreign banks may not have some of the security protocol that U.S. banks do, so there may be some potential vulnerability there. As always, please be reminded that the IRS never communicates initially by e-mail, and they never demand that information be provided by phone or e-mail. More information can be found here.

Disclaimer of Liability: This publication is intended to provide general information to our clients and friends. It does not constitute accounting, tax, or legal advice; nor is it intended to convey a thorough treatment of the subject matter.

IRS CIRCULAR 230 DISCLOSURE:
Pursuant to requirements imposed by the Internal Revenue Service, any tax advice contained in this communication (including any attachment) is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code or promoting, marketing or recommending to another person any tax-related matter. Please contact us if you wish to have formal written advice on this matter.