EITC: Do you qualify?

Happy Earned Income Tax Credit Day!

The EITC is a very helpful way for low-moderate income working Americans to get extra money on their taxes. EITC is a financial boost for working people in a recovering economy. Unfortunately, not all Americans who qualify take advantage, but it’s getting better — last year four of five eligible people claimed and got their EITC!

The IRS says: You earned it. Now file, claim it and get it. It’s easier than ever to find out whether you qualify.

Low-income consumers can also take advantage of the IRS FreeFile service to avoid the high costs of tax preparation software or the risk of using a fly-by-night tax preparer.

Are the IRS’s aggressive tactics hurting taxpayers? Internal report says yes

National Taxpayer Advocate Nina E. Olson released her annual report to Congress today, urging the Internal Revenue Service to reconsider its policy on penalizing struggling taxpayers with tax liens and identifying the need for tax reform as “the number one priority in tax administration.”

A tax lien is a claim the government files against a taxpayer’s property as collateral for money owed. A lien helps ensure that the government has priority over other creditors. Even if the taxpayer has no current assets, a lien still gives the government a claim on future assets.

According to the in-house report, the problem is that the IRS’s aggressive use of liens is hurting taxpayers by pushing them further into debt, damaging their credit, and harming their employment and property rental opportunities.

Olson takes issue with the fact that — despite the global economic recession, high unemployment and a real estate crisis — the IRS has not changed its policy on regularly imposing liens on delinquent taxpayers.

By making it harder for taxpayers to get back on their feet, the IRS might actually be shooting itself in the foot, ultimately reducing long-term tax collections, according to the new report.

The IRS filed 1.1 million tax liens in 2010 fiscal year, compared to the 522,887 it filed in 2005. Though lien filings have soared over the past 11 years, revenue brought in through the IRS collection program “has remained flat,” Olson wrote.

Breastfeeding denied coverage by IRS

By Sally Greenberg, NCL Executive Director

Since our founding in 1899, the National Consumers League has worked hard to advocate for the better health of women and children. Florence Kelley, the League’s first leader, grew up in a family in which five of her mother’s eight children died from infection or disease. Babies during that time – the period right after the Civil War – were relatively safe while breastfeeding. Once weaned, they were exposed to illness from unsanitary food, water, and milk. Today, though we pasteurize milk and have access to safe drinking water, breastfeeding remains the best option for babies and their mothers, at least for the first 6 months of a child’s life.

That is why NCL was disturbed to read about an Internal Revenue Service decision that denies nursing mothers the ability to use their tax-sheltered health care accounts to pay for breast pumps and other breastfeeding supplies. NCL has written to the IRS to ask that the agency reverse its decision.

According to IRS Publication 502, reimbursable items include those that aid in the “prevention of disease.” The IRS apparently has determined that breast-feeding does not help in the prevention of disease. NCL could not disagree more. Medical evidence that far more widespread breastfeeding would not only “prevent disease” in the United States, but would save our health care system billions of dollars is overwhelming.

Consider the following evidence about the myriad health benefits to both breastfeeding mother and child:

• According to a Harvard study published in April of this year, if 90 percent of American families would comply with medical recommendations to breastfeed exclusively for 6 months, the United States would save $13 billion per year and prevent an excess 911 deaths, nearly all of which would be among infants ($10.5 billion and 741 deaths at 80 percent compliance).

• The risk of infant death due to Sudden Infant Death Syndrome (SIDS) is lowered, and respiratory infections such as pneumonia, and necrotizing enterocolitis is nearly eliminated if mothers breastfeed their infants until at least six months after birth.

• The U.S. Department of Health and Human Services has found that breastfed infants have a lower risk of contracting ear infections, stomach viruses, atopic dermatitis, type 1 and 2 diabetes, childhood leukemia, and other health problems.

• Mothers also benefit from breastfeeding because of lower risk of contracting type 2 diabetes, breast cancer, ovarian cancer, and postpartum depression (PPD).

• Breastfed infants typically need fewer sick care visits; Congress recently acknowledged the importance of breastfeeding in landmark health care reform legislation by requiring that workplaces provide women with a private place to nurse or use a breast pump.

As Dr. Robert W. Block, president-elect of the American Academy of Pediatrics (AAP) noted in the New York Times this week, “The old adage that breast-feeding is a child’s first immunization really is true … So we need to do everything we can to remove the barriers that make it difficult.”

We agree with Dr. Block. And NCL reached out to our friends at AAP to share our letter and join forces with those who work to protect and improve the health of babies.

NCL strongly believes we need to encourage, not discourage, barriers to widespread breastfeeding. As in Florence Kelley’s day and ours, breast-fed babies get the best of all protections. Unfortunately, the IRS determination NOT to allow parents to use their tax-sheltered flex accounts to cover the cost of breast pumps has the impact of further discouraging women from breastfeeding and directly undermines what is by every measure a critical practice for improved public health. We believe the cost of breast pumps should and must be covered cost in these flex plans. We hope that NCL’s voice, along with the voices of AAP and so many others, will help to press the IRS Commissioner to reverse his decision.

Turn the Tables on Scammers this April Fool’s Day

By John Breyault

The first day of April often brings with it a raft of pranks, jokes, and other silliness. Unfortunately, scammers consider every day to be April Fool’s Day – and the joke’s on unwary consumers.

This year, we urge consumers to turn the tables on scam artists and get educated about new scams. Scammers frequently tailor their scam’s pitches to an approaching holiday or significant event. For example, every year around the December holidays, we see an increase in charity scams. Similarly, we expect an upswing in reports to NCL’s Fraud Center about scams related to Tax Day as we approach April 15.

Tax Day scams come in many forms, so consumers should be sure to be on the lookout for them. Some of the more common variants include:

• Phishing Scams – The victim receives an email, fax or phone call, purportedly from the Internal Revenue Service (IRS) or state taxation authority, asking for personal information necessary to process a refund. Consumers who fall victims lose their personal information, which the scammer can use to commit identity theft or drain a bank account (if a bank account number is provided to the scammer). The reality is that the IRS and state taxation authorities will never contact filers in this way to obtain additional information. Consumers should avoid giving any personal information out when they receive such calls and do not click on links in such emails, even if they have an IRS logo (phishers are experts at making “official-looking” emails). For more information on IRS phishing scams, visit the agency’s official site.
• Home-Based Business Tax Schemes – Promoters of home-based business opportunities (many of which are just masked pyramid schemes) sometimes claim that such businesses can be used to avoid paying taxes by listing most, if not all, personal expenses as tax-deductible business expenses. Consumers falling victim to such schemes could be liable for back-taxes owed, IRS penalties, and even imprisonment. Click here for more information.
• Abusive Return Preparers – Tax season is a stressful time for many consumers. Difficult-to-understand forms, complicated calculations, and the ever-looming April 15th deadline lead millions of consumers to use tax preparers, most of which are reputable businesses. Unfortunately, abusive return preparers can hit unsuspecting consumers with a double-whammy. First, these scammers often charge outrageous fees and skim profits off the top of consumers’ refunds. Second, such returns often incur the wrath of the IRS. Since the consumer is ultimately responsible for his or her own return, they could be liable for IRS penalties. Click here for tips from the IRS for choosing a reputable tax preparer, and always check out the business with your local Better Business Bureau.
• Refund Anticipation Loans – While not technically a scam, refund anticipation loans (known as RAL’s in industry jargon and often advertised as “rapid refund” loans) are used to get cash to consumers in as little as 24-48 hours after a return is filed. What is generally not well disclosed to consumers is that such “refunds” are actually loans from the tax preparer, often with hefty fees and even heftier interest rates (over 700% in some cases!). And, for consumers whose tax refunds are unexpectedly withheld from the government, they are still obligated to repay the loan, at the exorbitant interest rate. Such loans are often targeted at low-income and immigrant communities, preying on unfamiliarity with the tax system. For more information on RAL’s, click here.

Consumers who believe that they’ve been the victim of tax scams can file a complaint with NCL’s Fraud Center by using our online complaint form. These complaints are shared with more than 90 federal, state and local law enforcement and consumer protection agencies in the U.S. and Canada.

Check’s in the Mail, Scam’s in the Email

News worth celebrating: the Economic Stimulus Payments are in the process of being distributed – four whole days early!

The checks are being mailed to more than 130 million taxpayers as part of the Economic Stimulus Act of 2008, an effort by President Bush to boost the economy.

Here’s the bad news: unfortunately, scammers are already trying to capitalize on the checks. NCL’s Fraud Center has already received such complaints from consumers. For a sample tax scam email that claims to be from the government, click on the image.

So, while we’re all thinking of things to do with our checks: pay the bills, put it in the bank, splurge on a new outfit, buy something special for the kids, be aware of con artists’ ploys.

Remember, to be suspicious of:

• any emails or calls received from someone claiming to be from the IRS or any other government agency.
• con artists claiming to be government representatives calling to initiate payment transfer of impending government tax “rebates”.

Have you received any of these types of fraudulent pitches? Report them here!