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National Tax Security Awareness Week No. 1: Online Security – Seven Steps for Safety

During the online holiday shopping season, the IRS, state tax agencies and the tax industry remind people to be vigilant with their personal information. While shopping for gifts, criminals are shopping for credit card numbers, financial account information, Social Security numbers and other sensitive data that could help them file a fraudulent tax return.

Anyone who has an online presence should take a few simple steps that could go a long way to protecting their identity and personal information.

The Internal Revenue Service, state tax agencies and the tax community, partners in the Security Summit, are marking “National Tax Security Awareness Week”, Nov. 27-Dec. 1, with a series of reminders to taxpayers and tax professionals. In part one, the topic is online security.

Cybercriminals seek to turn stolen data into quick cash, either by draining financial accounts, charging credit cards, creating new credit accounts or even using stolen identities to file a fraudulent tax return for a refund.

Here are seven steps to help with online safety and protecting tax returns and refunds in 2018:

  • Shop at familiar online retailers. Generally, sites using the “s” designation in “https” at the start of the URL are secure. Look for the “lock” icon in the browser’s URL bar. But remember, even bad actors may obtain a security certificate so the “s” may not vouch for the site’s legitimacy.
  • Avoid unprotected Wi-Fi. Beware purchases at unfamiliar sites or clicks on links from pop-up ads. Unprotected public Wi-Fi hotspots also may allow thieves to view transactions. Do not engage in online financial transactions if using unprotected public Wi-Fi.
  • Learn to recognize and avoid phishing emails that pose as a trusted source such as those from financial institutions or the IRS. These emails may suggest a password is expiring or an account update is needed. The criminal’s goal is to entice users to open a link or attachment. The link may take users to a fake website that will steal usernames and passwords. An attachment may download malware that tracks keystrokes.
  • Keep a clean machine. This applies to all devices – computers, phones and tablets. Use security software to protect against malware that may steal data and viruses that may damage files. Set it to update automatically so that it always has the latest security defenses. Make sure firewalls and browser defenses are always active. Avoid “free” security scans or pop-up advertisements for security software.
  • Use passwords that are strong, long and unique. Experts suggest a minimum of 10 characters but longer is better. Avoid using a specific word; longer phrases are better. Use a combination of letters, numbers and special characters. Use a different password for each account. Use a password manager, if necessary.
  • Use multi-factor authentication. Some financial institutions, email providers and social media sites allow users to set accounts for multi-factor authentication, meaning users may need a security code, usually sent as a text to a mobile phone, in addition to usernames and passwords. For added protection, some financial institutions also will send email or text alerts when there is a withdrawal or change to the account. Generally, users can check account profiles at these locations to see what added protections may be available.
  • Encrypt and password-protect sensitive data. If keeping financial records, tax returns or any personally identifiable information on computers, this data should be encrypted and protected by a strong password. Also, back-up important data to an external source such as an external hard drive. And, when disposing of computers, mobile phones or tablets, make sure to wipe the hard drive of all information before trashing.

There are also a few additional steps people can take a few times a year to make sure they have not become an identity theft victim.

Receive a free credit report from each of the three major credit bureaus once a year. Check it to make sure there are no unfamiliar credit changes. Create a “My Social Security” account online with the Social Security Administration. There users can see how much income is attributed to their SSN. This can help determine if someone else is using the SSN for employment purposes.

The IRS, state tax agencies and the tax industry are committed to working together to fight against tax-related identity theft and to protect taxpayers. But the Security Summit needs help. People can take steps to protect themselves online. Visit the “Taxes. Security. Together.” awareness campaign or review IRS Publication 4524, Security Awareness for Taxpayers, to see what can be done.

Source: https://www.irs.gov/newsroom/national-tax-security-awareness-week-no-1-online-security-seven-steps-for-safety

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Five Things to Remember about Hobby Income and Expenses

From scrapbooking to glass blowing, many Americans enjoy hobbies that are also a source of income. A taxpayer must report income on their tax return even if it is made from a hobby.

However, the rules for how to report the income and expenses depend on whether the activity is a hobby or a business. There are special rules and limits for deductions taxpayers can claim for hobbies. Here are five things to consider:

  • Determine if the activity is a business or a hobby. If someone has a business, they operate the business to make a profit. In contrast, people engage in a hobby for sport or recreation, not to make a profit. Taxpayers should consider nine factors when determining whether their activity is a business or a hobby, and base their determination on all the facts and circumstances of their activity. For more about ‘not-for-profit’ rules, see Publication 535, Business Expenses.
  • Allowable hobby deductions. Taxpayers can usually deduct ordinary and necessary hobby expenses within certain limits:
    • Ordinary expense is common and accepted for the activity.
    • Necessary expense is appropriate for the activity.
  • Limits on hobby expenses. Taxpayers can generally only deduct hobby expenses up to the amount of hobby income. If hobby expenses are more than its income, taxpayers have a loss from the activity. However, a hobby loss can’t be deducted from other income.
  • How to deduct hobby expenses. Taxpayers must itemize deductions on their tax return to deduct hobby expenses. Expenses may fall into three types of deductions, and special rules apply to each type. See Publication 535 for the rules about how to claim them on Schedule A, Itemized Deductions.
  • Use IRS Free File. Hobby rules can be complex, and IRS Free File can make filing a tax return easier.

Source: https://www.irs.gov/newsroom/five-things-to-remember-about-hobby-income-and-expenses

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