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Active Tax Scams, Cuba Rules Relaxed, Trade Act Tax Provisions

Saul Brenner, CPA, J.D., LL.M. 03.24.2016 | eVisor

The Tax Scamming Season is On - What to Watch For

While tax scammers are active throughout the year, they are at their most aggressive during tax season.  To alert taxpayers to be vigilant, the IRS releases a list of the worst tax scams of the year.  Here are some of the most prominent:

Identity Theft: This scam leads all others in frequency and involves the theft of your Social Security number in order to file a tax return and claim a fraudulent refund. To combat identity theft, the IRS participated in a Security Summit initiative in conjunction with states and tax preparers and shared information on schemes that have been detected.  Unknown to most taxpayers, there are 20 data elements used to verify tax return information. Despite these safety measures, the IRS urges taxpayers to protect their own information to avoid data breaches that leave them open to identity theft.

Phone Scamming:  In this approach, criminals impersonating the IRS call taxpayers and threaten arrest, deportation, or license revocation unless an immediate payment is made.  To appear official, the scammers may use IRS titles and phony badges and refer to personal information about the intended victim that they stole from other sources.  The IRS notes that it will never call to demand immediate payment; call about taxes owed without first having mailed a bill; require the use of a specific payment method, such as a prepaid debit card or wire transfer; ask for credit or debit card numbers over the phone; or threaten to bring in local police or other law enforcement to arrest a taxpayer for non-payment.

Phishing: A ploy to trick you into betraying your own security, phishing typically involves getting unsolicited emails seeking financial or personal information. If you suspect that you have received such an email, send it to As a reminder, the IRS does not initiate contact with taxpayers by email, texting, or any other social media. Scam emails can also infect a computer with malware and allow criminals to access sensitive files and even track keyboard strokes to obtain login information.

Some indicators of phishing:

  • The email is addressed to you, but sent to many people.  Check the 'To:' and 'cc:' fields.
  • The introduction is too informal or odd. (e. g., Hello + your last name!)
  • You find poor/extra spacing and formatting.
  • The company name or bank may be familiar, but you do not do business with it.
  • You can identify spelling errors, bad punctuation, and mistakes in grammar.
  • The web address (URL) is fake.  Most web browsers will allow you to hover your mouse on the link to see if the address matches the link that was typed in the message. Be careful not to click on the URL.

Questions? Contact your Berdon advisor or Saul Brenner, CPA, J.D., LL.M.  

IRS Loosens Restrictions on Cuba

As diplomatic relations with Cuba continue to open, the IRS has issued a revenue ruling removing some restrictions on income earned in the island nation1.

Previously, restrictions denied a foreign tax credit for income taxes paid to Cuba and disallowed deferral on income earned in Cuba through a controlled foreign corporation. The revenue ruling removes these restrictions.

Generally, U.S. taxpayers are allowed to claim a foreign tax credit for income, war profits, and excess profits taxes paid or accrued, or deemed paid or accrued, to any foreign nation or United States possession. But the foreign tax credit is subject to various limitations and restrictions in the case of income and taxes attributable to certain countries. Cuba is no longer one of those countries. 

The IRS has yet to issue a revenue ruling on the foreign earned income exclusion, which would apply to U.S. persons working in Cuba.

1 Revenue Ruling 2016-08 (Doc 2016-4376)

Questions? Contact your Berdon advisor or Saul Brenner, CPA, J.D., LL.M.  

Trade Act Includes Tax Provisions

The Trade Facilitation and Trade Enforcement Act of 2015 (Trade Act), signed in 2016 by President Obama, includes several tax-related provisions.

The Trade Act increases the penalty for failure to file a tax return on time.  Before the Act, the minimum penalty was the lesser of $135 or 100% of the tax actually owed. The minimum penalty only applies if a return is filed more than 60 days after the due date for the return - taking extensions into account.   The Act increases the $135 amount to $205 and applies to returns that are required to be filed in calendar year 2016 or later years. 

Previous legislation prevented state and local governments from imposing taxes on internet access or from imposing multiple or discriminatory taxes on electronic commerce.  This moratorium expired on October 1, 2015, and the Trade Act permanently extends that moratorium.  However, certain states that are currently imposing a tax on internet access are permitted to continue until June 30, 2020.

Questions? Contact your Berdon advisor