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4 Tips for Avoiding Identity Theft During Tax Season

Protect Your IdentityTax season isn’t just the money-making season for accountants and tax experts, it’s also when identity thieves cash in. According to MSN Money, the IRS has stopped nearly 15 million tax returns suspected of being fraudulent since 2011. But the government’s efforts to catch tax fraud aren’t foolproof: Over that same time span, Americans have suffered $3.5 billion in losses due to tax fraud. Tax scams are a pretty common means of trying to dupe consumers into handing over their personal information, so much so that the IRS releases an annual “Dirty Dozen” list of the top tax fraud methods. Consumers need to be vigilant of these efforts and protect themselves from common fraud attempts. Here are four tips to keep your personal information secure. Follow these tax time tips from PennySaverUSA.com to keep your identity from being stolen.

File Your Tax Return Early

According to USA Today, tax experts recommend filing your tax return early just as a matter of avoiding increased fraud risks. The earlier taxes are filed, the less prepared or capable scammers will be to take advantage of you. Since many scammers will try to file a fake return ahead of you in order to receive the fraudulent return funds, early returns reduce the likelihood of this happening. The IRS receives your legitimate return first, making fraudulent returns sent in later very easy for the agency to identify. Search listings on PennySaverUSA.com to find a tax center near you.

Prepare and File Taxes Over Secure, Private Wi-Fi

Thanks to online tax preparation tools, many individuals are now able to complete even complex tax returns on their own. This saves them money while putting the quality of their return in their own hands. But how you prepare and file these returns makes a big difference in how exposed you might be to tax fraud. According to USA Today, public Wi-Fi networks can make it easy for scammers to steal your personal financial information. When preparing and filing taxes, make sure you use a secure, private Wi-Fi network that cannot be accessed by strangers.

Use Identity Theft and Credit Monitoring Services

Taking the necessary precautions will drastically reduce your risk of being victimized by tax fraud, but even a careful approach can’t guarantee you won’t be targeted by scammers. In some cases, it could be months before you are made aware of the fraud that has occurred to you. By then, the damage has already been done.

To make sure you are notified of any fraudulent activity attached to your name, it’s wise to invest in a credit monitoring or identity theft monitoring service. Companies like Lifelock specialize in providing comprehensive monitoring services to stop identity theft before it strikes. And if you are victimized, these services will let you know right away, minimizing the damage and helping you respond proactively.

Never Sign a Blank Return

If you choose to have your taxes completed by a tax preparer, one key tip: Never sign a blank return. If you do this, you basically hand over to the tax preparer the ability to do whatever they’d like with your return, including sending it to another address, falsifying documents or other attempts to commit fraud. Wait until the return is completely finished and put your name to paper only when it’s ready to be delivered to the IRS.

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Don’t Blow Your Tax Refund – Do One of These Smarter Things Instead

Smart Ways to Spend Your Tax RefundEverybody loves getting a tax refund. But before you go out and spend the whole thing, stop to consider some other, wiser things you could do with it. The suggestions below from PennySaver USA may not be as exciting as getting the latest tech gadget or some brand new clothes, but they will pay dividends for years to come.

Pay Down Debt

Large balances and high interest rates cost you big bucks and may end up damaging your credit. Use your refund to pay down your debt, especially if you are having problems making payments on time. You could save hundreds to thousands in interest and improve your ability to get good loan rates in the future.

Save It

Deposit your refund in a an income-bearing account, such as a money market account or a certificate of deposit, or buy savings bonds with it. A couple of years of saving your income tax refunds this way will create a solid nest egg. If you’ve nothing saved for retirement, this is the perfect opportunity to open an IRA.

Invest in Home Improvements

A mortgage is the biggest investment many people will make. Use your income tax refund to make improvements that will protect or increase the value of your home. It’s a better alternative than borrowing to make improvements or letting the value of your property slip. Energy-efficient upgrades improve your home’s value and save you money over time by reducing heating and cooling costs. Search the home improvement classified ad listings on PennySaverUSA.com.

Use It for Education

Consider using your refund to finance tuition for a certification or professional conference that will improve your employment skills and career opportunities, which in turn increases your earning potential. Or if you have a child or grandchild, consider depositing it in an education fund. Some states offer taxpayer credit for contributing to a 529 plan that helps someone go to college.

Start a Business

If you’ve always dreamed of opening your own business, now may be the time. Apply your refund to startup costs. If you need additional funds, apply for a loan through the Small Business Administration. Or, if you receive regular income from a structured settlement, sell your future payments for a lump sum of cash now.

Get Insurance

If there is some type of insurance you want or need but haven’t been able to afford, use your income tax refund to get it. Life insurance, flood insurance and renter’s insurance protect your family and property and provide peace of mind. If you spend it on expensive shoes or a down payment on a new car, you’ll get some enjoyment, but insurance will protect you and your assets.

Book Your Vacation

Use your refund to book your summer vacation. Buy airline tickets and make hotel reservations now, and then bank the rest for spending money. If you already have a vacation fund, add your refund to it, so you can spend time on a tropical beach without going into debt. Start your search now and browse through vacation rentals on PennySaverUSA.com!

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Save Money Monday: Discounted tax services

This is Part IV of PennySaverUSA’s tax tips series

Getting your taxes done does not have to cost a fortune. There are many inexpensive options available.

In this tax tips edition of our Save Money Monday blog, we will help you find the most cost-effective way of completing your taxes.

For those of you who would prefer to do your own taxes, there are a variety of discounted online tax services to choose from.

Turbo Tax

Turbo Tax is one of the leading providers of tax services software, and they offer a “Federal free edition” that enables you to use their easy-to-use software at no cost to fill out a 1040EZ form. To get more information on whether you qualify for the 1040EZ form click here.

If you have a more complicated tax return, Turbo Tax has a sale going on right now for $20 off their Deluxe edition (NOW: $29.99, WAS: $49.99) that includes free expert tax advice. They also have state tax software on sale.

H&R Block

H&R Block provides another excellent alternative for doing your taxes affordably using online software. With this outstanding offer, you can get their Deluxe edition for only $38.21, a 15 percent discount from the regular price.

Similar to Turbo Tax, H&R Block also offers free software to use for simple returns and has state tax software for sale.

CompleteTax

A third possibility for online discounted tax services is Complete Tax. They have a 28% off sale for their Deluxe edition, which is priced at $25.46 after the discount. Like Turbo Tax and H&R Block, they too offer free software to fill out simple federal returns and state software.

The site Tax-Compare has a great breakdown and each software to help you determine which one fits your needs the best.

PennySaverUSA

The best way to save time and money on your tax services is to find a local tax professional that is offering a discount. PennySaverUSA.com contains coupons for tons of local tax professionals.

Whichever route you choose, just remember that affordable tax services are available.

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Tax Tips: Deciding how many exemptions to take

This is Part III of PennySaverUSA’s tax tips series

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The tax process begins when you decide how many exemptions to take.

The final step of the tax process is actually filing your taxes. The process begins when you are first hired at your job and decide how many exemptions you would like to claim.

There are two types of exemptions you can take:

  1. Personal Exemptions
  2. Dependency Exemptions

A personal exemption is the amount you can deduct from your taxable income.

The exemption for a single person is $3,700. If you are married, you can claim your spouse as a second exemption also worth $3,700 for a total of $7,400.

A dependency exemption is the amount you can deduct from your taxable income for each dependent you have. According to the IRS web site, the term dependent means a qualifying child (defined here) or a qualifying relative (defined here).

The complete rules for claiming a dependent can be found here on the IRS web site.

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Tracy Academia from Academia Tax Service did a great job of explaining exemptions to PennySaverUSA.com in a phone interview.

“When you claim 0 exemptions, the government is going to take a higher amount of taxes from your paycheck. If you take more exemptions, they’ll take out less from your paycheck,” said Academia. “So if you need a little extra money each paycheck, you should claim your exemption(s), but if you are doing fine and are comfortable (financially), you (could) put 0 exemptions and you get more at the end of the year.”

For more information about tax exemptions, please contact Tracy at (951) 485-5536 or scan PennySaverUSA.com to find local tax services in your area.

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Tax tips: Understanding the different 1040 forms

This is Part II of PennySaverUSA’s tax tips series

In this tax tips blog post we are going over the differences between all of the 1040 tax forms.

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PennySaverUSA's tax tips are here to help make tax time fun!

Just about everyone has to complete at least one 1040 tax form, and some people have to fill out several, depending on their situation. For complete details please visit the IRS web site or contact a tax accountant.

Search PennySaverUSA.com online classifieds to find the most trusted local tax services in your area at great prices.

Below is a brief explanation of what each 1040 form is and for whom it applies.

Form 1040 EZ: According to tax professional Ken Wells from Ken Wells Tax Service & Bookkeeping, this form is “a simplified version that is primarily for people with one or two W2s. (It applies most) for students or single people with moderate incomes.” Please visit Ken Wells’ web site or call 888-556-4590 begin_of_the_skype_highlighting 888-556-4590 end_of_the_skype_highlighting to get more information and set up an appointment.

Not everyone is eligible to fill out this form. Here is a list of the key requirements (for the full list of requirements, please visit the IRS web site):

  • Must be single or married filing jointly
  • You can’t claim dependents
  • You must be under the age of 65
  • Your income is less than $100,000
  • You do not claim student loan interest deduction
  • You are not claiming an educational or health coverage tax credit

Form 1040A: The next easiest income tax form to fill out. It is less restrictive than the form 1040EZ. The key for this form is that you are not allowed to itemize your deductions and you must have made less than $100,000 in taxable income. Please visit the IRS web site for more information.

Form 1040-ES: This is an estimated tax form for 2012. It’s only applicable to people who think they will owe at least $1,000 in tax for this year (which would be paid next year). If you don’t think you will owe over $1,000 when you file next year’s taxes, then you can ignore this form.TurboTax - Choose Easy

Form 1040 Schedule A: If you plan on using itemized deductions, instead of the standard deduction, then this form is a must (check here to learn more about the difference between a standard and itemized deduction). As Wells says, however, using itemized deductions “is more complicated.” He cites home mortgage interest and charitable donations as an example of itemized deductions or “write-offs”. For more information, please call him at 888-556-4590 begin_of_the_skype_highlighting 888-556-4590 end_of_the_skype_highlighting to set up an appointment or visit the IRS web site.

Form 1040 Schedule B: Unless you had significant interest income or have a financial account in a foreign country, this form is unlikely to apply for you.

Form 1040 Schedule C: This form primarily applies to small businesses and independent contractors. If you don’t fall into one of those categories, you can skip this one.

Form 1040 Schedule D: New for this year, Form 8949 replaces what was before Schedule D-1. Schedule D and Form 8949 pertain mostly to capital gains and losses. Don’t worry about this form unless you made or lost money last year from a sale of assets such as stocks or property.

Form 1040 Schedule SE: Only applies to those who were self-employed.

Form 1040X: You can ignore this form unless you have to make an amendment to your taxes or want to correct a mistake you made when you filled out an earlier tax form.

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Tax tips: The difference between standard and itemized deductions

Tax time is here and PennySaverUSA is proud to present a new blog series dedicated to providing tax tips to help you embrace Uncle Sam, instead of viewing him as the boogeyman.

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Don't let Uncle Sam bring you down. Get tax tips from PennySaverUSA.com

Kicking off the series is this blog post about the differences between federal standard and itemized deductions. Understanding the distinction between the two is the foundation for everything else.

  • Standard deduction — The given dollar amount from the federal government that you can deduct from your taxable income.
  • Itemized deductions — Deductions you claim based on things like mortgage interest, charitable donations, career expenses and much more. Visit the IRS web site for more details.

When you choose to take the standard deduction, it makes your tax filing a lot simpler and enables you to use either the Form 1040 EZ or the Form 1040A, which are both much easier to complete.

The amount of your standard deduction varies depending on your income and can be calculated in about five minutes on the IRS web site.

Once you determine what your standard deduction would be, it is then time to count the value of your itemized deductions.

If you choose to itemize your deductions, it is advised that you find a local tax professional to assist you with your taxes.

Two important notes:

  1. You cannot claim both the standard deduction AND the itemized deductions. You must pick one or the other.
  2. If you choose the itemized deductions, you should keep receipts for every item you decided to deduct, just in case you were to get audited.

Should your itemized deductions add up to more than the standard deduction, it makes sense to forgo the standard deduction and used the itemized deductions.

As a very general reference point (for detailed explanations based on your own unique situation please visit the IRS web site and see a certified tax professional), here are some pointers to help you decide if you should take the standard or itemized deductions:

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