By Thomas Van Blunk

In a world where we use technology every day from posting on social media to paying bills and taxes, it is more important than ever to be prepared in the event you or someone you know get their tax identity stolen. Tax identity theft happens when a person steals your social security number to file a tax return claiming a fraudulent refund. Most people do not even realize that their tax identity was stolen until they are notified by the IRS of an issue with their return. 

In addition to filing fraudulent tax returns, you may be a victim of tax identity theft if someone uses your Social Security number for employment purposes or if you been assigned an Employer Identification Number (EIN) that you didn’t request. 

According to the IRS here are some signs that your tax identity has been stolen (IRS, 2024):

• The IRS sends you a letter inquiring about an apparent suspicious tax return that you did not file.
• You can’t file your tax return because of a duplicate Social Security number.
• You did not request the tax transcript that you receive in the mail.
• You receive notification from the IRS that an online account was created in your name.
• You receive a notice from the IRS that your current online account has been accessed or disabled.
• You receive a notification from the IRS stating that you owe additional tax or refund offset, or you have collection actions pending against you for a year in which you did not submit a tax return.
• The IRS states their records show you received other wages or income from an employer you have never worked for.
• You have been assigned an Employer Identification Number that you did not request.

If you receive any of the notices stated above, it is urgent that you respond immediately. You can respond by calling the number provided to get assistance. Experts highly recommended that you report tax identity theft by visiting IdentityTheft.gov. From there they will start the process of creating an IRS identity affidavit. They also will create an FTC identity theft report and a personal recovery plan with streamlined checklists and sample letters to guide you through the recovery process. 

If you suspect tax identity theft, the IRS recommends to still pay your taxes and file a return. In cases where you tried filing your tax return electronically but it was rejected because of a duplicate filing under your Social Security number, you should fill out  Form 14039, Identity Theft Affidavit, attach it to a paper version of your tax return, and mail it to the IRS office based upon the state you reside. You also have the option to submit the form online and send your paper tax return separately. If after reaching out to the IRS, you were not able to get the help you needed, contact 800-908-4490 for specialized assistance.

There are some things you can do to prevent yourself becoming a victim of tax identity theft. One thing you can do is when creating passwords for websites that contain sensitive tax information instead of doing a simple password like “yourname123” you should use a phrase like “Myfavoritefoodtoeatisblank12?”. Stronger passwords make it more challenging for thieves to steal information. Also having security software that scans for potential malware and viruses that can harm your computer. It is also important to remain vigilant for any emails or scams that are looking to steal your tax identity. Do not click on suspicious links that are texted or emailed to you as they are more than likely trying to steal your tax identity. It is strongly suggested that you use encryption software when sending sensitive tax information in case someone tries to hack into your email. Finally, the IRS strongly recommends that you take advantage of two-factor authorization, when it is offered, because it offers an extra layer of security for your accounts that contain sensitive tax information.

Getting your tax identity stolen is a scary situation that can turn your life upside down if you are not prepared. Hopefully now you feel prepared if tax identity theft happens to you and now have new ways to protect yourself from tax identity theft.

This information has been prepared for informational purposes only, and is not intended to provide, and should not be relied upon for tax, legal, or accounting advice. If you have any questions regarding tax identity theft, please do not hesitate to contact us at Lear & Pannepacker.

By Jaclyn Martello

As the summer season commences and the popularity of online vacation rental platforms continues to grow, it is important to be aware of tax laws regarding short-term rentals to reduce tax liability on any resulting income.

Possible Deductions for a Short-Term Rental

Rental income, typically reported on a Schedule E, may be minimized through the deduction of expenses related to the property, such as mortgage interest, real estate taxes, repairs, insurance, depreciation, and casualty losses. The portion of other property expenses that are directly related to the rental, such as utilities, upkeeping, etc., may also be included as expenses through Schedule E. 

Limitation of Rental Deductions Due to Personal Use of Property 

Rental expenses are limited if the rental property is also used for personal purposes for more than the greater of 14 days or 10% of total days rented during the year. In this case, the property is considered a home and personal/rental expenses are divided based on days of personal use and days of rental use. They are then split, respectively, between Schedule A and Schedule E.

Dividing Personal and Rental Usage of Expenses 

• Rental and personal use, but not considered a home: When dividing expenses, any day that is rented is considered a day of rental use (even if used for personal purposes within that day) and any day that the unit is available for rent, but rent is not collected for, is a day of personal use. 
• For a home: When dividing expenses, any day that is used for personal purposes (even if that day is rented) is considered a day of personal use. 

The personal use of expenses are not deductible as rental expenses. Total property expenses are divided by the days of rental use to determine the portion that should be allocated to the Schedule E – for rental income deductions and likewise for the days of personal use to be reported on the Schedule A – for personal itemized deductions. 

Keep in mind, if the property is used for both rental and personal purposes, the rental expenses cannot exceed rental income, per the gross rental income limitation. However, some of these expenses may be carried forward to the next year per the yearly limitations. If a property is not used for personal purposes and AGI is less than $150,000, losses up to $25,000 may be deducted. 

Minimal Rental Use Special Exemption 

If the property is used as a primary residence and rented for less than 15 days, neither rental income nor expenses should be reported. 

1099-K & Third-Party Transactions 

Online rental marketplaces such as Air BnB, VRBO, and others will typically issue a 1099-K if gross income exceeds $5,000 for the year 2024. This form will report the total payments received and help to determine the total income from such sources.

This information has been prepared for informational purposes only, and is not intended to provide, and should not be relied upon for tax, legal, or accounting advice. If you have any questions regarding vacation homes or short-term rentals, please do not hesitate to contact us at Lear & Pannepacker.

By Thomas Van Blunk

In March 2019, Governor Phil Murphy signed the New Jersey Secure Choice Act (P.L. 2019 c. 56). This act created the Secure Choice Savings Program, a state-backed retirement plan created to help employees who work for private companies save for the future. The program is run by the Secure Choice Savings Board. The name of the program is RetireReady NJ. 

The program becomes active to NJ businesses and its citizens on June 30, 2024.

It is also very important to note that if you are a New Jersey employer that currently does not offer any type of retirement program, has been in business for the last two years, and has more than 25 employees, it is mandatory to sign up for this program under the New Jersey Secure Choice Act (P.L. 2019 c. 56).

Here are the deadlines for signing up for the RetireReady NJ:

• For those employers who have 40 or more employees, the implementation deadline is September 15, 2024. Should you fail to register before June 15, 2025, you may be subject to penalties in accordance with the statute.
• For those employers who have 25-39 employees, the implementation deadline is November 15, 2024. Should you fail to register before August 15, 2025, you may be subject to penalties in accordance with the statute.

It is important to note that if you wish to open your own qualified retirement program, you will be required to notify the Secure Choice Savings Board. Some examples that will meet the obligation include:

• A defined benefit plan;
• A 401(k) or 403(b) plan;
• A Simplified Employee Pension (SEP) plan; and
• A Savings Incentive Match Plan for Employees (SIMPLE) plan.

At Lear & Pannepacker, we understand the complexities and challenges that come with financial & retirement planning. That’s why our skilled professionals are committed to delivering top-notch services and exceeding your expectations. Take the first step towards financial success by contacting us today to learn more about how we can assist you.