IRS Steps in Against Identity Theft

By: Heather R Cunningham

Over the past several years, tax-related identify and refund fraud has become much more prevalent.  Identity thieves file tax returns using stolen social security numbers and claim false refunds.  They often file electronically and early in the year before the IRS is able to verify the information being submitted, and before the real taxpayers have a chance to file their returns.  Then, when the individual whose social security number has been falsely used attempts to file, their return is rejected because the IRS only allows one return to be filed per social security number.  Once this happens, the taxpayer is forced to file their return on paper, completing additional forms and procedures with the IRS to verify their identity, which delays the processing of their return and receipt of any refund.

The IRS is developing techniques to combat this tax-related fraud.  One way is by using a pilot program that began during 2015.  As part of this program, the IRS has started working with several large payroll companies to develop methods to help verify W-2 information.  The IRS developed a program which generates unique codes for the payroll companies to report on the W-2’s they prepare.  This unique code will then be entered into tax software when the individuals prepare their tax returns.  In order for that return to be accepted by the IRS the codes on the w-2 must match what was generated in the IRS’s system.  Since identity thieves will not have access to the w-2 codes when filing their false returns, the codes won’t match, the return will be rejected.

During the first year of implementation, the program was used for 1.5 – 2 million W-2’s.  The IRS plans to have it expanded to anywhere between 24 and 50 million W-2’s for the 2016 tax year.

As we all know of someone who has been the victim of some form of identity theft, it is good to see the government taking steps to prevent it.

If you have questions or concerns, contact us or call us at 216.524.8900

Savings Options for Special Needs Individuals

by: Jillian Strunk

About 15% of children in the United States have developmental disabilities, including Down syndrome, cerebral palsy, intellectual disabilities, among others. With the great advancement in medical care, these individuals now have the chance to live long and full lives. This creates the need to provide financial support for their future as independent individuals for a much longer period of time. Luckily, there is a growing list of options to save for special needs individuals without disqualifying them from their disability benefits.


529 – ABLE Savings Accounts

In December of 2014, the Achieving a Better Life Experience Act (ABLE) was passed. ABLE allows families and individuals with disabilities to maintain investment accounts for qualified disability expenses tax-free without losing eligibility for public benefit programs. They are similar to 529 College Savings Accounts and 401(k) retirement accounts. The money deposited into the account is invested in different options allowing the growth of savings for long-term care. The money can be withdrawn at any time and is not taxed so long as the funds are used for approved expenses, including basic living expenses like rent and utilities, employment expenses like job-training, and wellness expenses like health insurance premiums and adaptive equipment. In Ohio, the first state to enact ABLE, these savings accounts are called STABLE accounts. There are a few minor fees for account maintenance and an initial deposit of $50 is required, but enrollment is online and very user-friendly.


Nonprofit Pooled Income Special Needs Trust

Managed by nonprofit organizations, these trusts receive funds from many individuals and pool them together for investment. This pooled fund is managed by a trust adviser who makes decisions on the investments. Each individual investor is treated exactly the same. This means that when a trade is made, it is made for everyone in the pool, not just one individual. The larger amounts created by the pooled funds increase the potential for growth. Using distributions from the trust, the special needs individual can increase their quality of life without interfering with their eligibility for government benefits. The individual can use money from the trust account for services that are not paid for by insurance or government benefits, but which provide benefits to the disabled individual such as telephone service, cable tv, vacations, and adaptive equipment.  Be sure to check the rules of the specific trust before entering, as some have rules on the frequency of distributions and what happens to the remaining funds after death.


OBRA Trust

Named for the Omnibus Budget Reconciliation Act of 1993, OBRA trusts are first-person trusts. This means that the assets funding the trust come from, and belong to, the disabled individuals themselves, often from a legal settlement or an inheritance.  OBRA Trusts are not included as assets when determining public benefit eligibility.  Funds within an OBRA trust can be used for anything public benefits don’t cover.  These trusts have more regulations, but are beneficial if the disabled individual is expecting a sudden windfall of cash.  Upon the death of the individual, the remaining funds are used to reimburse the government for previously received Medicaid benefits.


Third-party Special Needs Trust

The most common type of trust used to benefit people with special needs, in a Third-Party Special Needs Trust a donor, such as a parent or grandparent, can set up a trust with the disabled individual as the beneficiary.  This allows individuals to give money to their disabled loved ones without impacting their eligibility for benefits.  A benefit to a third-party special needs trust is that distributions are not limited to a specific list of supplemental needs.   Another benefit to this type of trust is that the funds never belong to the beneficiary, meaning upon death, unlike first-party and pooled trusts, the government is not entitled to reimbursement for previously paid benefits.   The remaining assets in the trust can pass to other beneficiaries at the donors’ discretion.


Planning for the future of your special needs child can seem like a daunting task. These 4 options, among others, are available to assist in securing your child’s future without disrupting government benefits. Most trust accounts require the filing of federal Form 1041 and STABLE accounts require Form 1099-QA and Form 5498-QA to be include with the federal Form 1040. If you need help filing these form for your special needs child, call Hobe and Lucas for guidance! (216)524-8900

Mid-Year Tax Planning

by: Kassie Armstrong

Summer is here and you’re most likely thinking about upcoming vacations, weddings, and pool parties! What you’re probably not thinking about is taxes–but maybe you should be. Here are a few things that you can do now that will help ease the burden of dealing with taxes at year end:

Adjust your withholding
If you’re getting married, divorced, or having a baby this year, all these life changes can affect your taxes. Changing your W-2 withholding or exemptions is fairly simple, just stop by human resources or your payroll department and submit a new W-4. Many employers allow you to do this online as well.

Evaluate estimated taxes
Since the year is almost half over already you should have a good idea of what your total income will be for the year. If you think your income will change significantly from prior year, you should adjust your estimated tax to prevent a big over payment or underpayment and penalties at tax time.

Get organized
Set up a tax folder and start gathering all your relevant tax documents in one place so you won’t have to hunt for them later. Keep charitable contribution receipts, unreimbursed medical expenses, business expenses, and other pertinent tax information. This will assist you in filling out that tax organizer at the beginning of next year.

Hire a tax professional
Summer is typically a little slower than during the busy filing season and tax professionals are more willing to take on new clients and spend some time on tax planning strategies.

Feeling overwhelmed or don’t have the time to take a quick peek? Give us a call at 216.524.8900 or fill out our contact form. One of our tax experts can get you organized and put a plan together to make sure you’re not scrambling at the end of the year! Now Better than Ever

HL-15a-vector Alt Legacy (for Tracy)-01Researching financial information may not be the most exciting thing you do in a given day, but we believe it should at least be intuitive. That’s why we are pleased to announce the launch of a fully refreshed, cleanly designed—configured for ease-of-use and expanded financial education. We have made it simpler for you to navigate resources, find the expertise you need and connect with knowledgeable professionals.

At Hobe & Lucas, we have always prided ourselves on delivering personal attention and responsive communication. To do this effectively, we recognize the need to make it easier to research the services we offer, the industries we serve and the tools we have developed. For this reason, changes include:

  • Improved, condensed navigation
  • Brand new sections – Hobe Alerts, Official Blog and Testimonial pages
  • Responsive design for a seamless mobile browsing experience
  • Refreshed, detailed descriptions of specialized offerings
  • Updated tools and calculators

We know that a revised website is only as good as its users deem it. That said, we want to hear what you think of the new layout and content. When you have a moment, please take our brief survey to help us continue improving your user experience.

Know someone who would benefit from periodic expert insights? Refer them to join our eNews distribution list today.

Financial Records Retention: What Should You Keep?

Records Retention Schedule 2015Maintaining accurate financial records is often a daunting task, yet it is extremely important. Every business or individual should have a good records retention policy. Our clients often ask us:

What documents must you keep?
How long do you keep these documents?
How do the rules differ between IRS, federal and state?
What documents do you NOT need?

We've organized this into an easy to read PDF titled 2015 Hobe Record Retention Schedule.

To download the PDF, please enter your name and email address below:

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Here are a few suggestions:

General Rules of Thumb
Businesses and individuals should retain copies of filed tax returns indefinitely. These should be kept in a safe place.  If you prefer to keep your records electronically we can provide you with a secured pdf copy.  However, you should be sure to backup your computer records effectively if you choose to keep only electronic records.

What about Non-Tax Related Business Records?
Certain business documentation should be kept indefinitely.  This includes:

  • Articles of Incorporation
  • Legal communications
  • Patents, copyrights, trademarks
  • Audited financial statements and CPA audit reports
  • General ledgers and year-end trial balances

Aside from supportive tax records, other documents such as accounts payable/receivable ledgers, inventory reports, bank statements and reconciliations, invoices and expense reports should be retained for a minimum of 7 years.

What does this mean for Ohio?
Ohio's statute of limitations is 4 years, meaning they are permitted to examine your Ohio income tax returns for one year longer than the IRS.  We recommend that our Ohio business and individual clients retain all documentation for 4 years in the event of exam.  Many states have statutes that differ from the IRS regulations.  Be sure to  check the rules in your specific state before disposing of any records.

Final Thoughts
There are no rules from the IRS when it comes to how you maintain your records, only that you be able to deliver documents promptly should they ever ask.  It is extremely helpful to maintain an efficient record-keeping system, whether you prefer to keep hard copies or electronic records.  Please consult your legal team or advisors for the record retention adoption policy that best suits your organization.

It is important, once you have made the decision to dispose of documentation, that you shred it thoroughly before throwing it away.  These documents contain a great deal of personal information that you don't want to fall into the wrong hands.

Should you make the decision to keep your records in an entirely electronic format, be sure an adequate and secure backup system is in place to avoid a catastrophic loss of important information should there be equipment failure.

Remember, we're here to be your financial and tax partner all year round, not just during tax season!  If you would like to discuss your individual or business situation, please give us a call at 216.524.8900.