Protecting Yourself from Tax Identity Theft and Navigating Investment Taxes

In this week's episode of Dollars & Sense, key strategies for protecting yourself from tax identity theft and tips for navigating investment taxes were discussed. 
Tax Identity Theft Prevention 

• Understanding Tax Identity Theft: A fraudster uses personal information to file a fake tax return and claim a refund. 

• Get an IP PIN: Apply for a six-digit Identity Protection Personal Identification Number (IP PIN) from the IRS to prevent fraud. 

• Prove Your Identity: Use ID.me to verify identity - submit name, address, and driver's license photo. 

• Stay Updated: Once you have an IP PIN, it is automatically renewed annually in your online IRS account. 

Investment Tax Management 

• Capital Gains Tax: Lower tax rates apply if assets are held for over a year before selling. 

• Dividend Tax: Qualified dividends receive lower tax rates if stocks are held for specified periods. 

• Retirement Account Withdrawals: Withdrawals before age 59½ incur additional tax penalties unless exceptions are claimed. 

• Home Sale Tax: Exclude up to $250,000 for singles and $500,000 for couples from capital gains if lived in the home as primary residence for at least 24 months within a 60-month period. 

• Timing Matters: Understanding timing rules is crucial for minimizing taxes on various investments.