The Internal Revenue Service (IRS) reminds parents to urge their children and teens to protect personal and financial information. The IRS Security Summit offers tips to parents during National Cybersecurity Month.

With the proliferation of smartphones, tablets, notebooks and computers along with online education for young students during COVID-19, many youths are now at risk. Children use computers and smartphones at home for school, online shopping and social media. Because many young individuals do not understand cybersecurity risks, they may share personal information that will unknowingly be used by scammers and fraudsters.

The Security Summit highlights five tips for online security. Parents should share these concepts with youth and teens and urge them to protect personal data.

1. Recognize and Avoid Scams — Each year, there are billions of phishing emails, phone calls and texts from thieves. Many of the identity thieves claim to be from the IRS, police, DMV or other organizations. Individuals should not click on links or download attachments in emails if they do not know the identity of the sender. The downloaded attachment will install malware on your computer and may give the thief access to your personal data.
2. Security is Important — Parents should caution children and teens to be careful not to reveal their personal information. They should not disclose birth dates, home addresses, age or financial information. Young individuals should be cautioned to protect Social Security numbers and bank or savings account information.
3. Public Wi-Fi Networks — Many coffee shops, restaurants or malls offer a free Wi-Fi connection. However, there is no certainty that this connection is secure. Many cybercriminals monitor the information on these public Wi-Fi networks. Youth and teens should be cautioned not to send emails and personal information over public Wi-Fi networks. They also may consider using a virtual public network (VPN) in order to connect with public Wi-Fi.
4. Security Software with Firewall and Anti-Virus Protection — All computers should have security software with automatic updates. Most antivirus software will be updated on a daily basis. If a file is sensitive, it can be encrypted or protected through passwords. The best solution is to avoid placing sensitive data in the public arena. Social media sites and email are potentially accessible to large numbers of bad actors.
5. Passwords — Youth and teens should be encouraged to use strong passwords. A strong password includes a variation of upper and lowercase letters, numbers and special characters. The password should not include information that is easily connected with the young individual, such as his or her name, address, or city.

Editor's Note: Students routinely use online platforms as part of their education. As a result, there is widespread use of electronic devices by individuals in grade school, middle school and high school. Parents should educate students about the importance of cybersecurity.

National Tax Security Awareness Week

The Internal Revenue Service (IRS) and its Security Summit partners have designated December 2 through 6 as National Tax Security Awareness Week.

The Security Summit includes the IRS, state tax administrators, representatives of tax software companies, CPAs and other tax preparers. The Security Summit warns tax professionals that the holiday season encourages fraudsters and other identity thieves. There is a "heightened risk of identity theft as criminals ramp up efforts to trick people into sharing sensitive personal information."

The holiday season is a prime time for fraudsters to steal information from tax professionals. This information can be used in January 2025 to file false tax returns and claim fraudulent refunds.

IRS Commissioner Danny Werfel stated, "We are entering into a critical period where taxpayers need to be extra careful protecting their valuable information. Scams and schemes are quickly evolving. Extra caution by people during the holiday season and the upcoming filing season will be essential to avoid being a victim."

During National Tax Security Awareness Week, there will be regular press releases and Tax Tips on how tax professionals can protect clients. The releases will highlight strategies for protecting clients on X, Facebook, Instagram and YouTube. There will be multiple educational materials, including both e-posters and IRS publications. The information-sharing sessions will be conducted by IRS Stakeholder Liaisons.

The IRS reports there has been a significant increase in fraudster activities on social media. The inaccurate tax advice on social media will mislead many taxpayers. The Security Summit partners have created a Coalition Against Scam and Scheme Threats (CASST) to address the problem.

Sharonne Bonardi is Executive Director of the Federation of Tax Administrators. She cautions, "State tax agencies are deeply committed to proactive fraud detection and prevention, and ensuring taxpayers and the revenue system are protected is a top priority for us and our Security Summit Partners."

The IRS is joining the financial services industry in a similar effort to build departments capable of identifying theft scams. The Identity Theft Information Sharing and Analysis Center (ISAC) is a joint development of the IRS and Security Summit. It uses artificial intelligence (AI) and machine learning to spot emerging scams.

Julie Magee, an original participant in the Security Summit and Tax Policy Lead for Cash App Taxes, noted, "But the threat of tax-related identity theft remains, including the increasing presence of tax scams circulating on social media that pose a threat not just during tax season, but during the holidays and throughout the year.”

Each day of the National Tax Security Awareness Week will have a specific focus.

1. Cyber Monday — The focus of Cyber Monday is to raise awareness of both phishing and smishing scams. Taxpayers are urged to shop only on sites with "https:" as that is indication that the site has a security certificate. Individuals should avoid unsecured public Wi-Fi and have strong passwords with updated security on all computers, tablets and mobile phones.
2. Tuesday: Social Media — There are many popular scams this year on social media. Taxpayers on social media are urged to take a nonexistent "Self Employment Tax Credit," claim a fake household employee that justifies a refund of employment taxes, claim the Fuel Tax Credit improperly (which applies only to off-highway vehicles) or inflate income and withholding to claim a larger refund.
3. Wednesday: IP PIN and IRS Online Account — Taxpayers are urged to obtain an Identity Protection Personal Identification Number (IP PIN). This six-digit number is known only to the taxpayer and the IRS. Over 10 million taxpayers now have an IP PIN. It can be created through an IRS online account. They are valid for one year and taxpayers must acquire a new IP PIN annually. They may share their IP PIN only with a trusted tax advisor.
4. Thursday: Update of Digital Security — Taxpayers should ward off attacks by identity thieves with specific strategies. All computers, notebooks and phones should have updated security software. The use of strong passwords with multi-factor authentication is advised.
5. Friday: Tax Pros — Identity thieves are thrilled to attack tax professionals. The servers of tax professionals include an extensive database with riches for the fraudster. This database makes the tax professional a tempting target. Each tax professional may review the Security Summit release of the Written Information Security Plan (WISP). The WISP is a requirement of federal law and can be scaled to a large or small tax practice.

House Bill — Revoke Exempt Status if Linked to Terrorism

The House passed legislation on November 21, 2024, that would empower the Internal Revenue Service (IRS) to revoke the tax-exempt status of a nonprofit if it is found to be providing support for terrorist groups. The legislation also grants relief to any hostage held by a terrorist group. He or she may postpone tax deadlines and qualify for a waiver of late fees.

House Ways and Means Committee member, Claudia Tenney (R-NY), introduced the bill. She stated, "I am pleased this legislation passed the House, ensuring that Americans who have endured the horrors of being held hostage can return home without facing punitive tax penalties while also strengthening our stance against terrorism."

The bill includes a controversial provision that allows Treasury to revoke the tax-exempt status of organizations that are deemed to have provided material support to a designated terrorist group.

The Senate passed a more limited bill that focused only on tax relief for the hostages. However, the House combined two bills and now the legislation moves back to the Senate.

Independent Sector, a coalition of nonprofit organizations, published a statement that expressed concern about the legislation. The statement noted, "We strongly support stopping bad actors from using nonprofit organizations to fund terrorism. However, the current language of this bill introduces redundancies, creates confusion, and grants expansive new executive powers that risk abuse and undermine constitutional due process protections."

National Council of Nonprofits spokesperson, David L. Thompson, also criticized the legislation. He noted that nonprofits would potentially be treated without the due process accorded to other organizations.

Another perspective was offered by House Ways and Means Committee member, Jimmy Panetta (D-CA). He sent a letter to constituents in which he claimed the bill had "numerous safeguards for due process" and would help the government block U.S. nonprofit support for terrorism. Panetta wrote, "The bill allows those same organizations to appeal such a decision with the full and transparent opportunity to demonstrate that they are not providing such support."

The bill attempts to create multiple safeguards. Treasury must allow a 90-day period to cure any improper actions. The nonprofit may make a "reasonable effort" to stop the support of the terrorist organization and there also is an appeal process through the IRS Independent Office of Appeals. Panetta also pointed out that the Ways and Means Committee voted unanimously to support the bill on September 11, 2024.

An opposing opinion was offered by Rep. Mark Takano (D-CA). He noted, "What it does is grant sweeping draconian powers to the executive branch to essentially shut down any nonprofit." Rep. Judy Chu (D-CA) noted that the goal was worthy, but expressed concern that the appeals process would not be a fair proceeding because both the revocation and the appeals process were under the control of the Department of Treasury.

Editor's Note: This is clearly a difficult issue. There is general agreement that the purpose of the bill is good. However, to determine which organizations are supporting terrorists, rather than providing aid to individuals in war-torn areas, is problematic. The concern of some Members of Congress is that the power could be used in a manner that harms legitimate nonprofits.

Applicable Federal Rate of 5.0% for December: Rev. Rul. 2024-26; 2024-49 IRB 1 (15 November 2024)

The IRS has announced the Applicable Federal Rate (AFR) for December of 2024. The AFR under Sec. 7520 for the month of December is 5.0%. The rates for November of 4.4% or October of 4.4% also may be used. The highest AFR is beneficial for charitable deductions of remainder interests. The lowest AFR is best for lead trusts and life estate reserved agreements. With a gift annuity, if the annuitant desires greater tax-free payments the lowest AFR is preferable. During 2025, pooled income funds in existence less than three tax years must use a 4.0% deemed rate of return. Charitable gift receipts should state, “No goods or services were provided in exchange for this gift and the nonprofit has exclusive legal control over the gift property.”