2019 Income Tax Best Practices Guide - A guide for preparing 2019 Colorado Income Tax Returns - Colorado.gov

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2019 Income Tax Best Practices Guide - A guide for preparing 2019 Colorado Income Tax Returns - Colorado.gov
2019 Income Tax
Best Practices Guide

A guide for preparing 2019
Colorado Income Tax Returns
2019 Income Tax Best Practices Guide - A guide for preparing 2019 Colorado Income Tax Returns - Colorado.gov
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                                                                                                               Best Practices: A guide for CPAs

                                                                                                               T
                                                                                                                         he Colorado Department of Revenue is dedicated to
                                                                                                                         providing quality service in fulfillment of our fiduciary and
                                                                                                                         statutory responsibilities, while instilling public confidence
                                                                                                                         through professional employees. Our efforts focus on
                                                                                                             being proactive and responsive to taxpayers and tax professionals by
                                                                                                             providing outstanding customer service, education and information. The
                                                                                                             information in this guide is for use in preparing 2019 Colorado income tax
                                                                                                             returns, with the tips organized in the general order of the filing process.
State of Colorado Photo

A resident herd of elk wade                                                                                    All forms, guidance publications and webpages can be found at
through a creek at Rocky                                                                                       Colorado.gov/Tax, the official Taxation Division website.
Mountain National Park. Elk
populations in the park have
rebounded since the early 1900s.

                                                                                                                                                                      TAXATION
  TABLE OF CONTENTS                                                                                                                                                    LEADERSHIP
   3. What are Best Practices?
   4. New Credits and Subtractions
   5. New Tax Legislation                     GET IN TOUCH                                                                                                                Brendon Reese,
                                                                                                                                                                      Senior Director, Taxation
   6. Consumer Use Tax Updates for 2018
   7. Filing Relief for Natural Disasters      Customer Service Representatives are available                                                                          Matthew Samuelson
                                            8 a.m. to 4:30 p.m., Monday through Friday at                                                                            Deputy Director, Taxation
   8. Revenue Online
   10. Mailing Instructions                 303-238-SERV (7378).
                                                                                                                                                                             Eric Myers,
   11. After you File                                 OTHER CONTACT PHONE NUMBERS                                                                                    Director, Taxpayer Services
   12. Fraud Detection and Prevention       • EFT/Electronic Payment        appropriate number above.
                                                                                                                                                                               Division
   14. Checkoff Colorado                    Help: 303-205-8333              Give the agent the number                                                                  Christopher Muntean
   15. Tax Professional Resources           • Collections: 303-205-8291     that you would like to call.                                                              Director, Tax Auditing &
   16. Important Due Dates                  • Discovery: 303-205-8292       The agent will stay on the                                                                      Compliance
                                            • Field Audit: 303-355-0400     line to relay the information/
                                            • Report Tax Evasion, Fraud     conversation to you.                                                                              Josh Pens
                                            or Scams: 303-205-8262          TTY Telephone Users: 1-800-                                                             Director, Tax Policy Analysis
                                            • Hearing or Speech             659-2656
                                            Impaired: Relay Colorado        Voice Telephone Users:                                                                        Debbie Van Wyke
2 • Best Practices Guide                    To use this service, dial the   1-800-659-3656                                                                             Director, Tax Conferee
2019 Income Tax Best Practices Guide - A guide for preparing 2019 Colorado Income Tax Returns - Colorado.gov
MOST FREQUENT FILING
                             ERRORS AND TIPS TO
                                                      AVOID THEM

                                           BUSINESS PERSONAL
                                          PROPERTY CREDIT FOR
                                      INDIVIDUAL BUSINESS OWNERS

                              This credit is only available if business personal                                                    intention to change your
                           property tax was paid to a Colorado county in 2019                                                       state of legal residence
                           and the business had business personal property val-       In order to reacquire residency in         5. Preparation of a new
                           ued at $18,000 or less. Submit a copy of the asses-                                                      last will and testament
                                                                                   Colorado, you need not be physi-
                           sor’s statement with your return. See the Business
                                                                                                                                    reflecting your state of
                                                                                   cally present in Colorado, but you               legal residence
                           personal property credit calculation worksheet in       must intend to both make Colora-                                                      SPECIAL INSTRUCTIONS
                           the DR 0104 booklet.                                    do your permanent home and to              If you qualify for this subtraction,      FOR BANKRUPTCY ESTATES
                                                                                   abandon your previous state of legal    enter the amount of compensation
                                     REACQUISITION OF COLORADO                     residence.                              received for active duty military            For bankruptcy estates with a
                                    RESIDENCY DURING ACTIVE DUTY                      In order to claim this subtrac-      service on line 16 and submit all         Colorado filing requirement, com-
                                                                                   tion, a service member must in-         required evidence of residency with       plete the DR 0105 and provide
                                    MILITARY SERVICE SUBTRACTION
                                                                                   clude with his or her return:           your return.                              supporting documentation for the
                              This subtraction is only allowed to active duty                                                                                        estate only. DO NOT complete,
                                                                                     • A completed DR 0104AD
                           military service members. In order to qualify for the     • A military form showing               OTHER SUBTRACTIONS FROM                 submit, or attach the Colorado form
                           subtraction the service member must meet all of the         Colorado as his or her                 FEDERAL TAXABLE INCOME                 DR 0104 for individuals as part of
                           following criteria:                                         home of record                                                                the Colorado filing for a bankruptcy
                                                                                     • Evidence of acquiring resi-            Don’t include amounts earned           estate. For Colorado returns, the
                             • Have Colorado as his or her home of record              dency in another state              outside Colorado, net operating           DR 0105 is NOT used as a transmit-
                             • After enlisting in the military, have ac-             • Evidence of reacquiring                                                       tal for the debtor’s form DR 0104.
                                                                                       residency in Colorado               losses, K-1 adjustments, military
                               quired legal residency in a state other than                                                income, wage adjustments or               The filing of the bankruptcy estate’s
                               Colorado                                                during the tax year
                                                                                                                           donations made to the Military            tax return does not relieve debtors
                             • On or after Jan. 1, 2016, have reacquired
                                                                                     Evidence of acquiring                 Family Relief Fund on this line.          from the requirement to file indi-
                               Colorado residency
                                                                                     residency in another state            Include a clear explanation of            vidual income tax return for Colora-
                                                                                     and reacquiring residency in          the subtraction being claimed on          do income on the form DR 0104.
                              A military service member who meets these re-          Colorado must come in one of
                           quirements can claim a subtraction for any compen-                                              your return. For information, see
                                                                                     the following forms:
                           sation included in his or her federal taxable income                                            Colorado.gov/Tax/Income-Tax-
                           that he or she received for active duty service after        1. Voter registration              Subtractions.
                           reacquiring Colorado residency.                              2. Records reflecting the
                              In order to have acquired residency in another               purchase of residential            VOLUNTARY CONTRIBUTIONS
                           state, you must have:                                           property or an
                                                                                           unimproved residential
                                                                                           lot                                Be sure to include a Volun-
                             • Been physically present in that state                    3. Motor vehicle titling and       tary Contributions Schedule, DR
                             • Intended to make that state your perma-                     registration                    0104CH with your return. The
                               nent home                                                4. Notification to your
                             • Intended to abandon your previous state of                                                  voluntary contributions cannot be
                                                                                           prior state of legal            amended.
                               legal residence                                             residence of your

4 • Best Practices Guide                                                                                                                                                         Best Practices Guide • 5
2019 Income Tax Best Practices Guide - A guide for preparing 2019 Colorado Income Tax Returns - Colorado.gov
CREDITS & EDITS
               CLARIFYING & MODIFYING CREDITS
      MODIFIED OR CLARIFIED CREDITS                     • Requires the owner of property who is granting
                                                          a conservation easement to execute a disclo-
   The Health Care Preceptors credit was modi-            sure form
fied with the following changes:                        • Modifies provisions governing when a conserva-
   • Clarifies the definition of “preceptorship”          tion easement may be extinguished
      to specify that the period of time for which      • Prohibits a conservation easement for which a
      the period of personalized instruction,             state income tax credit has been allowed from
      training, and supervision must be provided          being released, terminated, extinguished, or
      to be eligible to claim the tax credit is not       abandoned by merger, which occurs when the
      less than 4 working weeks or 20 business            same entity holds both the easement and the
      days per calendar year                              land subject to the easement
   • Extends the existing sunset date under             • Increases the total amount that may be
      which the tax credit would expire to tax            claimed as an income tax credit for an indi-
      years commencing prior to January 1, 2023           vidual donation of a conservation easement,
                                                          but limits the amount that may be claimed per
   The credit for Retrofitting a Home (HB19-              year
1135) clarifies that the income tax credit for          • Makes a $250,000 appropriation to the Colo-
retrofitting a residence is available for changes         rado ownership, management, and protection
made to a residence that benefit a qualified              (COMaP) service which maintains a database
individual or the qualified individual’s dependent.       and corresponding map of conservation ease-
The credit is available for tax years 2019 through        ments and other protected lands in Colorado.
2023 and the amount is equal to the cost of the
retrofit or $5,000, whichever is less. The Division
of Housing in the Department of Local Affairs is
responsible for certifying that the taxpayer meets    NEW LEGISLATION
the requirements for the income tax credit.
                                                         Here is a list of the bills that passed during the      CONSUMER USE TAX 2019 UPDATES
                                                      2019 legislative session. Visit Leg.Colorado.gov/
   The Conservation Easement Tax Credit also
was extended until July 1, 2026 with the follow-      Bills to learn more.                                        WHO MUST PAY CONSUMER USE TAX?
ing modifications:
   • Eliminates a requirement that the board of                          INCOME TAX                              Taxpayers owe use tax when they store, use
      real estate appraisers establish education                                                              or consume a taxable item in Colorado for which
      and experience requirements for conserva-         HB19-1013: Child Care Expenses Tax                    they did not pay sales tax. This most commonly                    HOW TO CALCULATE
      tion easement appraisers                        Credit Low-Income Families                              occurs when a purchase is made from an out-                       CONSUMER USE TAX
   • Relocates and modifies certain provisions          HB19-1088: Modify Income Tax Credit                   of-state seller either over the internet, through
      governing the creation and valuation of         Health Care Preceptors                                  catalog sales, or by a Colorado resident travel-       Colorado use tax is calculated at 2.9%. Some
      conservation easements                            HB19-1135: Clarify Income Tax Credit for              ing in another state.                               cities, counties and special districts in Colorado
   • Allows the division of conservation to use                                                                                                                   also impose a use tax. The Department collects
                                                        Retrofitting a Home
      an alternative method to value a conserva-                                                                 If the taxable property is stored, used or       use tax for certain special districts, but does
      tion easement                                     HB19-1228: Increase Tax Credit                        consumed by someone other than the buyer, the
                                                        Modifications                                                                                             not collect use tax for any city or county. Please
   • Modifies provisions governing a conserva-                                                                individual or business that stores, uses or con-    contact them directly concerning their tax
      tion easement working group convened to           HB19-1264: Conservation Easement Tax                  sumes the taxable item will owe the tax.            rates, exemptions, fees and procedures.
      address specified issues relating to claiming   Credit Modifications
      a state income tax credit for the donation        SB19-029: Income Tax Residency
      of a conservation easement                        Presumption for Military
 6 • Best Practices Guide                                                                                                                                                                     Best Practices Guide • 7
2019 Income Tax Best Practices Guide - A guide for preparing 2019 Colorado Income Tax Returns - Colorado.gov
HOW TO REPORT                     “Consumer Use Tax” under Se-
                           AND PAY CONSUMER USE TAX               lect a Return Type to File. When
                                FOR INDIVIDUALS                   filing in Revenue Online, the
                                                                  system will calculate the state
                                                                  use tax due. In some cases, the
                              Consumer use tax for individ-
                                                                  system may be able to calculate
                           uals is due by the April income
                                                                  Department-collected city and
                           tax return deadline. Individuals
                                                                  county rates. Taxpayers can dou-
                           can report and pay consumer
                           use tax in one of two ways,            ble check the applicable rates in
                           either of which can be filed           the DR 1002 publication.
                           electronically at Colorado.gov/
                           RevenueOnline:                           SALES & USE TAX CHANGES

                             • With the Consumer Use                 June 1, 2019, HB19-1240 went
                               Tax Reporting Schedule             into effect and the collection
                               (DR 0104US) as an attach-          of sales and use tax was signifi-
                               ment to their Colorado in-         cantly altered in the state of
                               dividual income tax return         Colorado. Out-of-state retailers
                               (DR 0104), or
                                                                  that sell more than $100,000
                             • With the Consumer Use
                               Tax Return (DR 0252)               worth of taxable goods or ser-
                                                                  vices into the state of Colorado
                              The schedule or return must         are now required to collect and
                           include tax for any tangible           remit sales tax to the state of
                           property the individual stored,        Colorado.
                           used or consumed during the
                           income tax year and for which             This means use tax will be
                           sales or use tax was not previ-        less common and will usually
                           ously paid.                            only apply when dealing with
                                                                  small businesses that fall under
                              If an individual files his or her   the $100,000 threshold. Further-
                           income tax return under exten-         more, effective October 1, 2019
                           sion, penalty and interest will        Marketplace Facilitators are
                           be due for any consumer use tax        required to collect and remit
                           not paid prior to the April in-        sales tax for all the sellers who
                           come tax deadline.                     utilize their platforms. Further
                                                                  reducing the likliehood of need-
                             Taxpayers may use the De-            ing to pay consumer use tax for
                           partment’s free e-file service,        the individual filer. For more
                           Revenue Online, to file and pay        information, visit Colorado.gov/
                           their consumer use tax. They           tax/marketplaces.
                           do not need to log in to file a
                           return. Choose “File a Return”
                           under Quick Links. Then click
8 • Best Practices Guide                                                      Best Practices Guide • 9
2019 Income Tax Best Practices Guide - A guide for preparing 2019 Colorado Income Tax Returns - Colorado.gov
REVENUE ONLINE
                                                                           SERVICES YOU CAN
                                                                     COMPLETE WITHOUT LOGGING
                                                                     INTO YOUR CLIENT’S ACCOUNT

                                                                     • File an Individual Income Tax Return
                                                                  (2009 to present)
                                                                     • File a Consumer Use Tax Return
                                                                     • File Special Event Sales Tax Returns
                                                                     • File a Property Tax Rent/Heat
                                                                  Rebate (PTC) application
                                                                     • Check refund or Property Tax/Rent/
                                                                  Heat (PTC) Rebate Status
                                                                     • Make a payment for 21 tax
                                                                  types immediately (by credit card
                                                                  or e-check) for Cigarette, Consumer
                                                                  Use, Corporate Income Tax, County
                                                                  Lodging, Fiduciary Income Tax, IFTA,
                                                                  Individual Income Tax, Liquor Excise,
7 Things About Revenue Online                                     Local Marketing, Partnership Income
                                                                  Tax, Prepaid Wireless, PTC, Public
                                                                  Utilities Commission, Retail Marijuana
                                                                  Excise and Sales, Retailer’s Use, Sales,
   1. You will need to set up an account in Revenue Online,       Special Event (Sales Tax), Special Event
      even if you have already filed a return in the past.                                                                    THIRD-PARTY ACCESS                         single account.
                                                                  (License), Tobacco Products, Winery
   2. When making a payment, you need to choose the filing        Shipper Excise                                                                                         The Department encourages e-filed returns
      period end date for the payment, not the date you are                                                         You may access your client’s tax information
                                                                     • Respond to an inquiry letter                                                                   because the Third Party Access designation
      making the payment. The filing period date is the last                                                     on Revenue Online by utilizing the “Grant Third
                                                                     • Provide a validation key                                                                       is included in the electronic return and
      day of the filing period, such as 12/31/2019 for a 2019                                                    Party Access” feature. For security reasons,
                                                                     • File a protest                                                                                 Department staff can see the name and phone
      tax return.                                                                                                individuals are limited to one Revenue Online
                                                                     • Request a letter ID                                                                            number of the Third Party Designee on the
   3. You must put in the correct tax type for the payment                                                       account, because of this, tax professionals
                                                                     • Submit an e-filer attachment (DR                                                               e-filed returns.
      you are making. If you do not, it will show the Depart-                                                    should not create an account for themselves
                                                                  1778)                                          under a client’s Social Security number (SSN)
      ment you are making a payment for another tax type.            • Submit Wage Withholding Annual                                                                    On paper returns, staff do not data enter
   4. To protect taxpayer security, sessions are timed out                                                       or Colorado Account Number (CAN). Doing
                                                                  Reconciliation                                                                                      any of the Third Party Designee information as
      due to inactivity. Taxpayers should have all necessary                                                     this prevents the taxpayer from being able to
                                                                     • Submit a power of attorney (POA)                                                               they do the return lines. Designee information
      documents for filing their return prepared prior to fil-                                                   create his/her own Revenue Online account in
                                                                  (DR 0145)                                                                                           from a paper return is not available to see
      ing in Revenue Online.                                                                                     the future. It
                                                                     • View local Sales Tax rates (View                                     In order to get third     until the paper return is imaged and attached
   5. New Colorado Residents who have not filed an individ-                                                      also creates
                                                                  sales tax rates by specific city or county.)                           party  access from your      to the taxpayer account, which could take a
      ual tax return with the Department of Revenue will not                                                     extra work
                                                                     • View business location rates [View                              client, you and your client    minimum of two weeks, depending on the time
      be eligible to use Revenue Online for individual income                                                    for the tax
                                                                  sales tax rates applicable to your specific                             must have a Revenue         of the year. During that time, it is possible the
      services.                                                                                                  professional
                                                                  business location(s).]                                               Online  account. Your client   taxpayer may receive correspondence from
   6. Many of our online services exist at the account-level.                                                    because you
                                                                     • View Sales Tax rate charts (View                                  will need to know your       the Department. If the Third Party Designee
      If you click on the hyperlink for one of your accounts in                                                  would have
                                                                  amount of tax calculated by purchase                                  Revenue   Online Login ID.    contacts the Department about the letter,
      Revenue Online, you will be brought to a similar screen                                                    to create
                                                                  amounts from $.01 through $100.)                                                                    Department staff may not yet have access
      with details on that account and a broader list of ser-                                                    a separate
                                                                     • Find Local Taxes by address (Search                                                            to the paper return image. In the case of a
      vices available.                                                                                           Revenue Online account for all of your clients.
                                                                  local sales tax rates by a specific                                                                 paper return, customer service representatives
   7. Changes are coming. We have heard your suggestions                                                         If your clients grant you third party access, you
                                                                  address.)                                                                                           may ask for a fax copy of the return with
      and we are making improvements in 2020.                                                                    will be able to access their accounts from your
                                                                     • Verify if a sales tax license or                                                               the designee information before providing
                                                                                                                 own,
                                                                  exempt certificate is valid                                                                         information to the tax professional.
 10 • Best Practices Guide                                                                                                                                                                         Best Practices Guide • 11
2019 Income Tax Best Practices Guide - A guide for preparing 2019 Colorado Income Tax Returns - Colorado.gov
3rd PARTY ACCESS                                                                                                                  ACCEPTED TAX SOFTWARE

 Instructions for clients to grant third party access of their Revenue Online account to             The Department maintains a list of Accepted Software for individual income tax. The list shows
 their tax professional:                                                                          supported tax credits and limitations by software name. As software is approved, through the third
 1. Log in to your account at Colorado.gov/RevenueOnline and click on “View My                    week of January, the list will be updated. See the Income Tax, Individual File webpage.
 2. Profile” in upper right corner of the screen. Click on “Grant Third Party Access” in the “I
     Want To” section.                                                                               Taxpayers and tax practitioners are strongly encouraged to file all tax returns either through your
 3. Click on “Next” on the bottom right of your screen.                                           tax software or Revenue Online, Colorado.gov/RevenueOnline. If you need to file a paper return,
 4. Complete Step 1 and click the “Submit” button.                                                you must list the name and the Social Security number (SSN) of the primary taxpayer on the top of
 5. Verify third party access was granted:                                                        every page of the return where indicated. Some software products allow the submission of Colorado
        a) Account Owner/Taxpayer: The third party account will populate on the “Additional       individual estimated payments using form DR 0104EP and extension payments using form DR 0158-I.
 Logons” page, which you can see by clicking on “View My Profile” on the Home page. Then click    For estimated payments, up to four payments can be scheduled at once, but the last payment must
 on “Manage additional logons.”
        b) Third Party/Tax Professional: All the accounts are listed on the homepage of your      be scheduled by the January estimated payment due date. Your software provider can tell you if they
 account. The owner’s account will populate in this account list.                                 support estimated payments and extension payments for Colorado.
12 • Best Practices Guide                                                                                                                                                         Best Practices Guide • 13
2019 Income Tax Best Practices Guide - A guide for preparing 2019 Colorado Income Tax Returns - Colorado.gov
TABOR YEAR                      MAILING INSTRUCTIONS
    The FY 2018-2019 TABOR
refund will be distributed
                                   Please note all income tax forms and supporting schedules for each client must be submitted and
in two parts. The first
part of the refund will go       mailed together. Failure to return all applicable schedules and supporting documentation results in
toward reimbursing local         processing delays or denied credits and refunds.
governments for their
senior and disabled veteran
property tax exemptions. For                         IF YOU ARE SUBMITTING THE FORM WITH PAYMENT:
more information on the local                                 Colorado Department of Revenue
property tax exemptions for
seniors and disabled veterans
                                                                   Denver, CO 80261-0006
visit the Colorado General
Assembly website, Leg.                            IF YOU ARE SUBMITTING THE FORM WITHOUT PAYMENT:
Colorado.gov.                                                Colorado Department of Revenue
                                                                  Denver, CO 80261-0005
   The second part is a
temporary income tax rate
reduction of 0.13% for the
2019 tax year. The temporary
income tax rate reduction
will lower the state income
tax rate from 4.63% to 4.50%.
There are no special steps
required to get this income
tax rate reduction. Taxpayers
will automatically receive
this reduction when they
file their 2019 income tax
returns. For more information
got to colorado.gov/tax/
TABOR.

   The 2019 TABOR refund
will be different from 2015,
when there was a sales tax
refund. This year, the TABOR
income tax rate reduction
will result in either a larger
refund, if the taxpayer
over withheld in 2019, or a
smaller bill, if the taxpayer
did not withhold enough/
make enough estimated
tax payments. The refund
amount will be different for
each taxpayer, based on their
unique income tax situation.

14 • Best Practices Guide                                                                                     Best Practices Guide • 15
2019 Income Tax Best Practices Guide - A guide for preparing 2019 Colorado Income Tax Returns - Colorado.gov
paper form DR 0104X.                  business days because the data      back often to verify where your
                                                                                                                                           is transmitted directly into the    client’s return/refund may be in
                                                                                                        When changing the                  Department’s tax accounting         our process.
                                                                                                     Colorado return because               system, which makes processing
                                                                                                     the IRS made changes to the           go much faster than with pa-           The Department routinely
                                                                                                     federal return, you must file         per returns. Paper filers have a    takes precautionary measures to
                                                                                                     form DR 0104X within 30 days          longer wait depending on when       ensure taxpayer refunds are not
                                                                                                     of being notified by the IRS.         they file.                          diverted to identity thieves. As
                                                                                                     When the IRS makes changes                                                tax refund fraud persists as a na-
                                                                                                     to federal taxable income,                   REFUND STATUS                tional issue, the Department will
                                                                                                     the Colorado return MUST be                                               continue to look at tax returns
                                                                                                     amended, even if there is no                                              for signs of refund fraud.
                                                                                                                                              You or your client can view
                                                                                                     net change to the Colorado            their status of a refund by using
                                                                                                     tax liability.                                                                The Department conducts
                                                                                                                                           Revenue Online. The informa-
                                                                                                                                                                               reviews of income tax refunds be-
                                                                                                                                           tion in Revenue Online is the
                                                                                                                                                                               cause it is operating in the public
                                                                                                      WHAT TO EXPECT BASED                 same information that is avail-
                                                                                                                                                                               trust with revenue dollars collect-
                                                                                                     ON WHEN A RETURN IS FILED             able to our Call Center Repre-
                                                                                                                                                                               ed and refunded. Our objective
                                                                                                                                           sentatives.
                                                                                                                                                                               is to protect taxpayer informa-
                                                                                                        Filing state tax returns elec-
                                                                                                                                                                               tion, as well as state revenue,
                                                                                                     tronically or earlier in the year       • Visit Colorado.gov/Reve-
                                                                                                                                                                               and ensure taxpayers receive the
                                                                                                     may result in receiving refunds           nueOnline and choose the
                                                                                                                                               option “Where is my Re-         Colorado state income tax refund
                                                                                                     faster as long as the return is                                           to which they are entitled.
                                                                                                                                               fund/Rebate” under Quick
                                                                                                     correct and complete. “Correct
                                                                                                                                               Links.
                                                                                                     and complete” means the re-             • Enter the Social Securi-           This review may result in
                                                                                                     turn does not have any missing            ty number (SSN) and the         correspondence from the De-
 AFTER YOU FILE                                                                                      information or documentation,             refund amount claimed on        partment, a refund requested as
                                                                                                     and it does not fall into the risk        the income tax return. If       direct deposit being converted
      AMENDED RETURNS                                                 specific (for example, use a   profile for a fraudulent filing. If       you do not know the re-
                                                                                                                                                                               to a paper check, or other ac-
                                                                      2014 form DR 0104X for an      the return falls into that profile,       fund amount claimed, you
                                       NEW: Amended individual                                                                                                                 tions. The Department’s goal is
                                   income tax returns (DR             amended 2014 return).                                                    may use either a Letter ID
   Amended returns replace                                                                           it may take up to two months                                              to issue refunds as quickly and
                                   0104X) for tax years 2018                                                                                   number from a recent in-
the original tax return. Send                                                                        to review and verify informa-                                             efficiently as possible; howev-
                                   and forward may be filed              Individual income tax                                                 come tax correspondence
all supporting documents with                                                                        tion and then communicate
                                   using MeF through any              returns from 2009 and                                                    from the Department or          er, there is the possibility that
the amended return and ALL
                                   software providers who             forward may be amended         and exchange information with             you may request a Letter        delays will occur.
the schedules, even if it has
already been sent.                 begin supporting it. The           electronically through         taxpayers who are expecting a             ID to be sent to the mail-
                                   Department recommends              Revenue Online. You may        refund.                                   ing address on file.               The Department continues
   The DR 0104X and schedules      filing returns electronically in   amend online even if the                                                                                 to ask for your patience and
must be completed and              order to reduce the likelihood     original return was filed on      How soon can taxpayers                After a taxpayer’s return is     understanding as it takes steps
submitted together, whether        of errors or processing delays.    paper. Revenue Online has      receive their refund depends          processed, the Department will      to safeguard taxpayers’ refunds
this is done in Revenue Online                                        all the information from the
                                 processing.                                                         on how and when they file their       provide them with an updated        and the integrity of Colorado’s
or on paper. If a paper DR                                            original return; there is no
                                   Make sure you use the              need to re-enter everything.   return. Electronic filers whose       status as their refund moves        finances. For more informa-
0104X is filed, do not re-
submit the original Colorado     appropriate DR 0104X version         If you do not have access      returns are “correct and com-         through our system. It may          tion, visit Colorado.gov/tax/
Form 104. This will only         for the year you are amending        to the internet and cannot     plete” can expect their refunds       take a few days for an updated      tax-fraud-prevention.
complicate and delay return      because the DR 0104X is year         amend online, you may file a   in about seven to fourteen            status to appear. Please check
16 • Best Practices Guide                                                                                                                                                                Best Practices Guide • 17
2019 Income Tax Best Practices Guide - A guide for preparing 2019 Colorado Income Tax Returns - Colorado.gov
Voluntary Contributions
   You can donate to a qualified    4. If you cannot find the            the beginning of any entry
organization with your Colorado        charity you are looking           in the fields. Your search
income tax return by entering          for, the Advanced Search          may not produce any
their ID on the Voluntary Contri-      may help. Click Advanced          results.
butions Schedule (DR 0104CH) of        Search under the “Search”     •   Search results are listed
your Colorado Individual Income        button. Enter specified in-       up to 10 registration IDs
Tax Return. There are two ways         formation to narrow down          for on each page.
to look up the information you         the search results.           •   Using the page numbers at
will need to enter on your DR       5. Once you find the charity         the bottom of the page,        STOPPING FRAUD
0104CH form: the Charity Look-         you wish to donate to,            navigate to a different
up Tool and the List of Qualified      enter their 11-digit Regis-       page.
Non-Profits/Charities.                 tration Number on the DR      •   Download Records button
                                                                                                          Thousands of taxpayers have lost personal                       TARGETING TAX PROS
                                                                                                       information and millions of dollars to tax scams.
                                       0104CH. If using a printed        located at the top of the
                                                                                                       Criminals use the regular mail, telephone or email       The IRS and Security Summit partners warn tax
  HOW TO USE THE TOOL                  form, enter the 11-digit          screen on the right side is   to set up individuals, businesses, payroll and tax    practitioners to beware of phishing emails posing
  1. Go to Colorado.gov/Tax/           Registration Number and           able to export your search    professionals. The Colorado Department of Revenue     as state accounting and professional associations
     CO-Non-Profit-Number              the charity’s name as it          criteria results.             shares the following messages on behalf of the IRS.   that are trying to trick them into disclosing their
  2. Enter the full or part of         appears in the Charity        •   In Advanced Search,           The Colorado Department of Revenue partners with      email usernames and passwords.
     the charity’s name in the         Lookup Tool in the boxes          Name, Activity, City, Coun-   the IRS, other state revenue departments and tax         Only a few days into last year’s filing season,
     Search Box. It is not case-       under line 19.                    ty, State and Zip code can    professionals to combat refund fraud.                 the IRS has identified a new scam that began with
     sensitive.                                                          be searched alone or to-                                                            cybercriminals stealing data from several tax
  3. Enter the Tax Year you are     TIPS FOR SEARCHING                   gether in any combination                                                           practitioners’ computers and filing fraudulent tax
     filing for.                    • Do not leave a space at                                                                                                returns.

18 • Best Practices Guide                                                                                                                                                                Best Practices Guide • 19
the software automatical-      a ransom to restore access. It      or network. Be wary of granting
                                                                                                                ly.                            can be included in a software or    unknown callers access to your
                                                                                                              • Use the security options       document download. But it can       computer. Additionally, ensure
                                                                                                                that come with your tax
                                                                                                                preparation software.          also be embedded in videos and      your real tech support team
                                                                                                              • Send suspicious tax-re-        images.                             members end their sessions
                                                                                                                lated phishing emails to                                           when they remote into your
                                                                                                                phishing@irs.gov.
                                                                                                                                                                                   computer, so that access point is
                                                                                                                                                    WHAT ARE REMOTE                not left open to hackers.
                                                                                                              WHAT IS SPEAR PHISHING?
                                                                                                                                                    ACCESS TAKEOVERS?
                                                                                                                                                                                           WHAT ARE
                                                                                                               Spear Phishing is a common         A remote access takeover is         ACCOUNT TAKEOVERS?
                                                                                                            email scam. Criminals, posing as   when a hacker uses a network or
                                                                                                            a trusted source, send an offi-    computer vulnerability to ac-          A hacker gains access to
                                                                                                            cial looking email that asks the   cess devices on the network. It     your account and then takes it
                                                                                                            receiver to open an attachment     differs from ransomware in that     over. These can originate from
                                                                                                            or disclose personally identifi-   you may still be able to use your   phishing attempts. But they can
                                                                                                            able information.                  computer while the hacker has       also stem from vulnerabilities
                                                                                                                                               access.                             in your computer, your network
                                                                                                              WHAT IS RANSOMWARE?                                                  or the account itself. Be sure
                                                                                                                                                  Recently, this has been cou-     to keep your network security
                                                                                                               Ransomware is a computer vi-    pled with a phone scam where        settings up-to-date, regularly
                                                                                                            rus, worm or other malware that    the caller claims to be from tech   update your software, and log
                                                                                                            locks the user out of their com-   support and asks you to allow       out of accounts when not in
                                                                                                            puter or network, then demands     them access to your computer        use.

   In a new twist, the fraudu-       steal client data.                      a pasword phrase. Use
lent returns in a few cases used        Thieves know it is more diffi-       different passwords for
the taxpayers’ real bank ac-         cult to identify and halt fraud-        each account. Use a mix
                                                                             of letters, numbers and
counts for the deposit. A per-       ulent tax returns when they             special characters.
son posing as a debt collection      are using real client data such     •   Never assume that a
agency official then contacted       as income, dependents, cred-            seemingly familiar email
                                                                             address is a valid send-
the taxpayers to say a refund        its and deductions. Generally,          er. Ensure that the email
was deposited in error and           criminals find alternative ways         address exactly matches
asked the taxpayers to forward       to get the fraudulent refunds           prior correspondence.
the money to the fake collec-        delivered to themselves rather      •   If an email contains a link,
                                                                             hover your cursor over
tion agency.                         than the real taxpayers.                the link to see the web
                                                                             address (URL) destination.
    This scheme is likely just the       CYBER SECURITY TIPS                 If it’s not a URL you recog-
first of many that will be iden-                                             nize or if it’s an abbrevi-
                                                                             ated URL, don’t open it.
tified this year as the IRS, state      Tax professionals are urged      •   Consider a verbal
tax agencies and tax industry        to seek cybersecurity experts to        confirmation by phone
continue to fight back against                                               if you receive an email
                                     help better secure their data.          from a new client sending
tax-related identity thieves.
                                                                             you tax information or
Because the federal, state and         Here are some basic steps:            a client requesting last-
local authorities have made in-        • Educate all employees               minute changes to their
roads combating identity theft,           about phishing in gener-           refund destination.
cybercriminals have evolved               al and spear phishing in       •   Use security software to
                                          particular.                        help defend against mal-
their tactics to focus on tax          • Use strong, unique pass-            ware, viruses and known
professionals where they can              words. Better yet, use             phishing sites and update
20 • Best Practices Guide                                                                                                                                                                    Best Practices Guide • 21
WHAT IS THE W-2 SCAM?                HOW CAN I PROTECT
                                      MY E-SERVICES ACCOUNTS
   W-2 scams are sent commonly               AND EFINS?
via email to payroll, financial or
human resource employees by             Cybercriminals send spear
cybercriminals. They impersonate     phishing emails to trick tax
an executive email address claim-    preparers into releasing user-
ing to be from the company. The      name and password credentials
email will request W-2 informa-      for e-Services accounts. Once
tion.                                thieves have this information,
                                     they can log into these accounts
How the scam works:                  and steal the Electronic Filing
                                     Identification Number (EFIN) to
  • These emails appear to be        file fraudulent tax returns.
    from an executive or orga-
    nization leader to a payroll
    or human resources em-             • Keep accounts up-to-
    ployee.                              date.
  • The message usually starts         • Check on the EFIN’s
    with a simple greeting,              status to ensure it is not
    like: “Hey, you in today?”           being used by others.
  • By the end of the email            • Compare your records
    exchange, all of an organi-          with the number of re-
    zation’s Forms W-2 for their         turns the IRS received
    employees may be in the              through your e-Services
    hands of cybercriminals.             account.
  • Because payroll officials be-      • Recognize and avoid
    lieve they are correspond-           phishing scams that claim
    ing with an executive, it            to be from the IRS or
    may take weeks for some-             e-Services.
    one to realize a data theft
    has occurred.
  • Generally, the criminals
    are trying to quickly take
    advantage of their theft,
    sometimes filing fraudulent
    tax returns within a day or
    two.

   22 • Best Practices Guide                     Best Practices Guide • 23
WALK-IN ASSISTANCE

                                                                            Forms, information and in-person assistance are available
                                                                            8 a.m. to 4:30 p.m., Monday through Friday. Visit Colorado.
                                                                               gov/Tax/locations-service-centers for updates on dates of
                                                                                 operation before planning a visit.
                                                                                       Colorado Springs — 2447 North Union Blvd.
                                                                                         Denver — 1375 Sherman St.
                                                                                            Fort Collins — 3030 S. College Ave.
                                                                                              Grand Junction — 222 S. 6th St., Room 208
                                                                                                 Pueblo — 827 W. 4th St., Suite A

                                                                                                     Note: All payments must be paid by
                                                                                                     check or money order. If a taxpayer
                                                                                                       wishes to pay by cash, they may
                                                                                                         do so at 1881 Pierce St. in Lake-
                                                                                                             wood. However, taxpayer
                                                                                                                assistance is not available
                                                                                                                   at the Pierce location.
TAX PRO
  RESOURCES
 TAX PRACTITIONERS’
      HELPLINE
     The Department has a Tax
 Practitioners’ Helpline, which
 is reserved for tax professionals.
 This line receives priority attention.
 Tax Examiners are available 8 a.m. to
 4:30 p.m., Monday through Friday, except
 state holidays. After hours, tax professionals
 may leave a message. Calls are returned the
 next business day.
     Email DOR_TaxInfoEmail@state.co.us to request
 the phone number. Please do not provide this tele-
 phone number to your clients. This line is a service for tax
 professionals only.
                             ONLINE

   •   Website: Colorado.gov/Tax
   •   Revenue Online: Colorado.gov/RevenueOnline
   •   Revenue Online Assistance Videos: Youtube.com/corevenueonline
   •   Guidance Publications: Colorado.gov/Tax/fyi-publication-categories
   •   Training & Education: Colorado.gov/Tax/Education
   •   Email Subscription Sign Up: Colorado.gov/Tax/EmailSignUp

24 • Best Practices Guide                                                                                            Best Practices Guide • 25
BUSINESS TAX CLASSES
                                                                                                                                                                          SCHEDULING
                                                                                                          This free class is for Colorado businesses and business tax
                                                                                                       professionals. It covers information on sales tax, special tax,
                                                                                                       special events, consumer use tax, wage withholding, licens-
                                                                                                                                                                                     DIRECT DEBIT
                                                                                                       ing and filing tax returns. Registration must be completed
                                                                                                       prior to the scheduled class date. Visit Colorado.gov/Tax/         PAYMENTS TIPS
                                                                                                       business-tax-class to enroll online.
    IMPORTANT DUE DATES                                                                                   This class is offered monthly at the following service cen-
                                                                                                       ters:
                                                                                                                                                                         Do not close or change the bank
                                                                                                                                                                         account until the payment is
  If a due date falls on a weekend or holiday,                     INCOME TAX                             • Colorado Springs — 2447 N. Union Blvd.                       withdrawn from the account
                                                                                                          • Denver — 1375 Sherman St.                                    requested on the Direct Debit.
the due date is the next business day.                         EXTENSION DUE DATE
                                                                                                          • Fort Collins — 3030 S. College Ave.
                                                                                                          • Grand Junction — 222 S. 6th St., Room 208                    Keep enough funds in the bank
               ESTIMATED PAYMENTS                                       Oct. 15                                                                                          account to cover the authorized
                                                                                                          • Pueblo — 827 W. 4th St., Suite A                             amount until the payment is
                 April 15 (1st Quarter)                      ANNUAL RECONCILIATION                                                                                       withdrawn.
                 June 15 (2nd Quarter)
                                                                                                                                                                         Verify the amount and the dates the
                 Sept. 15 (3rd Quarter)                                 Jan. 31                                                                                          payments will be debited directly.
                 Jan. 15 (4th Quarter)
                                                                     CREDITS                                                                                             Do not make duplicate payments in
             INCOME TAX RETURN                                                                                                                                           place of the direct debit payments
      AND RETURN OR EXTENSION PAYMENT                                                                                                                                    -- extra payments will not cancel or
                                                     For credits in which the availability is depen-                                                                     alter the scheduled transaction.
                                                   dent upon statutory thresholds, please visit the
                            April 15             reports and notifications section at Colorado.gov/                                                                      The authorized amount will be
                                                 tax/income-tax-credits for additional information.                                                                      withdrawn regardless of the actual
                                                                                                                                                                         amount due on the tax account.
                                                                                                                                                                         The payment will not be withdrawn
26 • Best Practices Guide                                                                                                                                                until the return Best
                                                                                                                                                                                          posts  with the
                                                                                                                                                                                               Practices Guide • 27
                                                                                                                                                                         state.
Always
                                            Help.

 28 • Best Practices Guide
2 0 1 9 B e s t P r a c t i c e s G u i d e • D e p a r t m e n t o f R e v e n u e Ta x a t i o n
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