Tax Preparation

Crooks have been using stolen Social Security numbers to try to get information that could be used to steal tax refunds, the Internal Revenue Service said.

Most of the automated attacks were aimed at generating E-file PINs, the IRS said. The PINs would then be used to generate phony returns or to waylay refunds.

The Social Security numbers were used in abot 464,000 automated attacks, of which about 101,000 successfully generated a PIN, the IRS said.

The agency, which is no stranger to hacking, said that no personal taxpayer information was disclosed in this incident and said that affected taxpayers would be notified by mail.

You may have mail

Consumers should note that the official notification will come via the U.S. Postal Service. Scam artists will soon be out in force, sending emails and calling taxpayers claiming to be the IRS. 

Last May, the IRS admitted that hackers had stolen the personal data of as many as 334,000 taxpayers after initially saying only 100,000 had been affected.

Senate Finance Committee Chairman Orrin Hatch (R-Utah) says he will question IRS Commissioner John Koskinen about the attack at a hearing today, the Wall Street Journal reported.

“While it appears that the IRS was able to successfully block this attempted breach this time around, it’s past time we fundamentally rethink our approach in authenticating taxpayers and processing tax returns,” Mr. Hatch said, according to the Journal.

It is the season -- tax season, that is. You are probably looking around your house thinking, "Hmmm what else can I deduct?"

Well, that furry friend of yours might be worth more than you think. Many people ask if they can deduct their pet. The short answer is no, but there are some exceptions. Don't just take our word for it, though. Talk to an accountant before trying to claim any of the deductions mentioned below.

Did you move?

Moving always gives you something to deduct. Typically, though. the move must be for work. The new job has to be at least 50 miles from the old one and you might be able to deduct the cost of moving your pets. A special form is needed.

Do you have a service dog?

If your dog is sick the medical expenses aren't deductible. But if you need a dog because of an illness or disability of your own, the expenses of keeping that animal can become legitimate medical expenses.

All of the costs of vet care, grooming and any other expense that animal needs to help you assistance could qualify.

Therapy animals also fall under this category, as long as you have a medical diagnosis. There are some exceptions though. There is a special threshold for deducting medical expenses -- 10 percent of adjusted gross income for those under age 65 -- before you can deduct guide-animal costs.

Is your dog a guard dog?

A guard dog is not one that just watches for the mailman. It has to be one that is protecting a business property. There are certain breeds that qualify. Although Chihuahuas bark a lot, I doubt the IRS would be too receptive.

Pet rescues or an animal shelter.

Most animal shelters are nonprofits, so if you decide to be a foster parent, you might be able to write off some expenses as a charitable donation. This includes food, supplies and any vet bills. You may also be able to get some mileage expenses.

The key is to keep good records of going back and forth to do work at the shelter or the IRS may challenge your claim. They may challenge your claim regardless so record-keeping is just a good habit to develop.

Is your pet your profession?

Do you show horses or dogs for a living? Are you an animal trainer? Do you breed cats? All of these are legitimate occupations. You might be able to count some or all of your pet expenses against the income they generate.

Be careful because there is a difference between a hobby and a business. Hobby losses are deductible only if you have gains and the hobby has to be a miscellaneous deduction, which can limit the amount you can actually claim. But you may be able to deduct all of your expenses for a business, even if it results in a net loss.

Every situation is different and you definitely want to talk to an accountant before you do this to avoid problems down the road.

When you're ready to fill your federal income tax return for 2015, you have plenty of options – some of them you pay for, but some are free.

The Internal Revenue Service (IRS) encourages electronic filing and offers several resources to help.

You may be eligible for free help preparing your tax return from Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs listed here.

Volunteer assistance available

The VITA program offers free tax help to people who meet income requirements – generally $54,000 or less, persons with disabilities, the elderly, and limited English speaking taxpayers who need assistance in preparing their own tax returns. The volunteers are certified by the IRS and provide free basic income tax return preparation with electronic filing.

The TCE program provides free tax help for all taxpayers, focusing on those who are 60 years of age and older. It specializes in dealing with questions about pensions and retirement-related issues unique to seniors. The volunteers are IRS-certified and are often retired people associated with non-profit organizations that receive grants from the IRS.

The IRS also provides help for low-income taxpayers who have tax issues with the agency and can't afford representation. This program is called the Low Income Taxpayer Clinic (LITC) and you can find details about it here.

Hiring a tax professional

If you are hiring a tax professional to help you with your return, the IRS reminds you that people offering these services have different levels of skills, education, and expertise. Something else to remember – not all tax professionals have the standing to represent taxpayers before the IRS, like in the event of an audit. Check out credentials, qualifications, and services before selecting someone to do your taxes.

The IRS provides a searchable feature on its website to help you find a tax professional in your area.

If you are preparing your own return and earned less than $62,000, the IRS offers Free File software. If you make above $62,000, you can use Free File fillable forms. The forms will do the math for you, but the IRS says you need to pretty much know how to fill out a tax form, since the program provides only basic assistance.

However you plan to do your taxes, the IRS says filing electronically and having your refund direct-deposited will make the process go much faster than filing a paper form and requesting a check.

If you bought a home in the first part of 2010, you may be eligible for a hefty tax credit that should not be overlooked when you prepare your 2010 tax return.

The original homebuyers' tax credit, which expired in 2009, covered only first-time buyers. When the law was extended, it was expanded to include not just first-time buyers, but also long-time residents who buy a new principal residence.

If you fall into that category, you may be eligible for a credit of 10 percent of the purchase price up to a maximum credit of $6,500. A long-time resident is an individual who, with his or her spouse if married, has owned and used the same home as a principal residence for any period of five consecutive years during the 8-year period ending on the date of purchase of the new principal residence for which the credit is being claimed.

Income Limitation

The full credit will be available to taxpayers with a modified adjusted gross income (MAGI) up to $125,000, or $225,000 for joint filers. MAGI is your adjusted gross income plus the total of certain foreign earned income.

Those with MAGI between $125,000 and $145,000, or $225,000 and $245,000 for joint filers, are eligible for a reduced credit. Those with higher incomes do not qualify.

No credit is available if the purchase price of a home is more than $800,000; and a purchaser must be at least 18 years of age on the date of purchase. To claim the tax credit, the taxpayer must used Form 5405.

Taxpayers who bought homes in 2009 or 2010 and sold them within a 36 month period that begins on the purchase date, must repay the credit. They also must repay the credit if they convert the home to a business or rental property or the lender forecloses on the home.

The taxpayer repays the credit by including the amount of the credit as additional tax on the tax return for the year in which the repayment event occurs.

However, taxpayers do not have to repay all or a portion of the credit under the following circumstances:

• Taxpayers sell the home to someone who is not related to them, the repayment in the year of sale is limited to the amount of gain on the sale;

• If the home is destroyed, condemned, or disposed of under threat of condemnation and the taxpayer acquires a new principal residence within 2 years of the event, the taxpayer does not have to repay the credit; and

• If, as part of a divorce settlement, the home is transferred to a spouse or former spouse, the spouse who receives the home is responsible for repaying the credit if required.