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Archive for the ‘Tax Tips’ Category

Being Prepared for a Natural Disaster

Wednesday, September 23rd, 2020

It is always good to be as prepared as possible if encounter a natural disaster. The IRS suggests that taxpayers should take the following precautions in case a natural disaster does occur:

• You should have an emergency plan in place and review it every year.
• Create electronic copies of your important documents such as tax returns, insurance policies, and bank statements. You can save them to a USB flash drive or in the cloud.
• You should document all your valuables by videotaping or taking photographs. This will help you with your insurance claims process if your valuables get ruined during a natural disaster. You should do a room by room documentation of all your valuables.
• You may be eligible for tax relief due to the disaster, please check with your tax advisor to see if you qualify.
• You can always contact the IRS if you have certain questions pertaining to a natural disaster at 866-562-5227. The IRS has specialists trained to handle disaster issues.

Please consult your tax advisor on all the above information.

Signs of Tax Related Identity Theft

Wednesday, September 2nd, 2020

A typical scam we see regarding tax returns are when a scammer has your personal information and uses it to file a fraudulent tax return where the refunds from the return are directed to the scammer. So then you go to file your actual return and you can’t because the IRS has it in their system that your return has already been filed. One way to stay on top of this is to recognize the signs of this tax scam in case you are a victim, you can take action on it as soon as possible. The IRS recently released their typical signs of a tax return scam:

• You get a letter from the IRS inquiring about a suspicious tax return that you did not file.
• You can’t e-file your tax return because of a duplicate Social Security number.
• You get a tax transcript in the mail that you did not request.
• You get an IRS notice that an online account has been created in your name.
• You get an IRS notice that your existing online account has been accessed or disabled when you took no action.
• You get an IRS notice that you owe additional tax or refund offset, or that you have had collection actions taken against you for a year you did not file a tax return.
• IRS records indicate you received wages or other income from an employer you didn’t work for.

You should contact the IRS immediately if you think you are the victim of identity theft at 1-800-829-1040.

Please consult your tax advisor on all the above information.

Some People may still be Eligible for Economic Impact Payment

Tuesday, September 1st, 2020

The IRS has stated that many people who don’t normally file tax returns remain eligible for an Economic Impact Payment of $1,200 or more. They are referencing people who do not file a tax return because they are not required to. Below is a link to a short video that the IRS put out to give directions to people who haven’t filed a tax return to claim their Economic Impact Payment:

Please consult your tax advisor on all the above issues.

Did you Receive a Notice from the IRS stating you still owed Money for your 2019 Tax Return?

Wednesday, August 26th, 2020

We have heard from a number of clients recently who stated they received a notice from the IRS stating they still owed taxes pertaining to their 2019 tax returns even though they had already made the payments. The notice also adds on interest and penalties to the amount of tax they claim you still owe.

The IRS has an estimated 12 million items of mail that they haven’t opened yet due to delays from Covid-19. Many of these pieces of unopened mail may contain payments from taxpayers that were made months ago. But once you filed your tax return which showed you owing money the IRS computer shows it as never paid because your payment was never opened, even though you may have sent it on time.

So the IRS has suspended sending out these notices while they continue to process their unopened mail. The IRS has said that if your check has not been cashed yet to not cancel it and make sure you have the funds to cover it for once they do cash it. They also said they would waive bad-check penalties on dishonored checks that it had received between March 1 and July 15, 2020.

Please consult your tax advisor if you do receive a notice from the IRS, before you pay anything, to see if the above pertains to it and if you actually owe the amount or not.

What to do if you Receive a Notice From the IRS

Monday, August 24th, 2020

IRS notices are pretty common so there is no need to panic if you do receive one in the mail but they do need to be addressed. If you ignore the notice additional notices will follow and penalties/interest could be accruing as time passes.

The first thing you should do is send a copy of the notice over to your tax advisor to find out exactly why you received the notice, you should not just pay the notice right away without finding out the issue first. There are times when the IRS is not correct. A couple common situations that trigger a notice are if you forgot to report dividend income or stock sales on your tax return. The IRS will send you a notice stating that dividends from Company XYZ were not reported on your return and they will give you a figure of the additional tax you owe as a result of this dividend income being added to your return.

A common notice that we often see is a taxpayer forgot to report stock sales on their return. This is a situation where the amount the IRS states you owe is most likely not correct. If you sold $10,000 worth of stock and forgot to report it, the IRS will send you a notice stating you owe taxes on the full sale amount. What the IRS doesn’t do is factor in what you originally bought the stock for. So in this situation you will need to amend your tax return to show not only the sale of 10K but also what you bought it for. So if you bought the stock for $9,000, then you only on taxes on the gain, which in this case is only $1,000. So by amending your return you are not paying taxes on the full $10,000, you are only paying the taxes on the gain of $1,000. So in this situation it is very important to check with your tax advisor and to not just paying the notice without investigating first. Another reason to investigate the notice is to make sure it is real and not a scam.

Please consult your tax advisor on all the above information.

Popular Scams to Look Out For Part 2

Wednesday, August 19th, 2020

Below are additional scams that IRS has warned to look out for:

• Scammers target individuals with limited English proficiency – scammers will make threats such as deportation and jail as a scare tactic.

• Dishonest tax preparers – you should always do your due diligence when choosing your tax preparer to make sure the person has a good reputation.

• Offer in compromise companies – taxpayers need to be care of these types of companies. These companies promote settling your tax debt for pennies on the dollar and then end up charging the taxpayer high fees by applying for programs that the person will never qualify for.

• Fake payments and repayment demands – the scammer will get the taxpayers personal information and filing a fake tax return but will have the refund direct deposited into the taxpayers actual bank account. Then the scammer will call the taxpayer posing as an IRS agent and tell the person the refund was a mistake and they need the money back. Then the scammer will ask you to repay it back in gift cards (which is a huge red flag in itself, the IRS will never ask for gift cards as payment).

• Payroll scams – Scammers will try to obtain copies of W-2’s that your company filed, in the past they have targeted people working in the Human Resources department to try to trick them into sending out the W-2’s.

• Ransomware – This is malicious software the scammer tries to trick you into downloading. You should never click on links from any unsolicited emails.

Please consult your tax advisor on all the above issues.

Popular Scams to Look Out For Part 1

Wednesday, August 12th, 2020

The IRS released their list of Dirty Dozen tax scams that taxpayers should be aware of. They list some of the top scams as the following:

• Phishing – fake emails and websites designed to steal your personal information. The IRS will never initiate contact via email regarding a tax bill, refund, or Economic Impact Payment.
• Fake Charities – Be aware of these when a natural disaster hits or other situations such as COVID-19.
• Threatening Impersonator Phone Calls – The IRS will never threaten arrest, deportation, or license revocation if you don’t pay a fake tax bill.
• Social Media Scams – Scammers can get information about you via social media and use it against you such as impersonating your family member, friend, or co-worker.
• Economic Impact Payment or Refund Theft – Scammers try to steal your identity to have your Economic Impact Payment of your tax refund diverted into their bank account. This is a good reason to file your tax return as soon as you can so you the scammers do not have the opportunity to file a false tax return using your information.
• Senior Fraud – Seniors have often been a popular target for scammers in an attempt to take advantage of them.

Please consult your tax advisor on all the above information.

Tip Income Needs to be Reported on your Individual Tax Return

Monday, August 10th, 2020

If you work a job where you make tips as part of your income, these tips do need to be reported as part of your gross income on your tax return. Tips that are taxable can be:

• Tips added using credit cards
• Tips directly from customers
• Tips from a tip splitting arrangement with other employees

Tips that many people do not know count as taxable income are non-cash tips. For example if you are given tickets to an event by a customer as a tip, this amount needs to be included as taxable income.

Employees should keep a daily tip record to keep track of their tips during the year. The IRS also offers a tool to assist you in reporting your tip income:

Please consult your tax advisor on all the above information.

CARES Act is Providing Tax Relief for Some Retirement Distributions

Wednesday, August 5th, 2020

Under the CARES Act, eligible individuals may be able to withdraw up to $100,000 from IRA’s and workplace retirement plans before December 31st, 2020 if your plan allows this. You need to check with your plan administrator before taking any money out to make sure your distribution qualifies for the CARES Act tax relief.

Per the IRS, these coronavirus-related withdrawals:

• May be included in taxable income either over a three-year period (one-third each year) or in the year taken, at the individual’s option.
• Are not subject to the 10% additional tax on early distributions that would otherwise apply to most withdrawals before age 59½,
• Are not subject to mandatory tax withholding, and
• May be repaid to an IRA or workplace retirement plan within three years.

There is also a possibility that you could take out a loan from your retirement plan, per the IRS:

Individuals eligible to take coronavirus-related withdrawals may also, until Sept. 22, 2020, be able to borrow as much as $100,000 (up from $50,000) from a workplace retirement plan, if their plan allows. Loans are not available from an IRA.

For eligible individuals, plan administrators can suspend, for up to one year, plan loan repayments due on or after March 27, 2020, and before Jan. 1, 2021. A suspended loan is subject to interest during the suspension period, and the term of the loan may be extended to account for the suspension period.

Taxpayers should check with their plan administrator to see if their plan offers these expanded loan options and for more details about these options.

Not everyone can take advantage of these retirement distributions, you need to meet certain requirements to qualify. The requirements, per the IRS, are the following:

To be eligible for COVID-19 relief, coronavirus-related withdrawals or loans can only be made to an individual if:

• The individual is diagnosed with the virus SARS-CoV-2 or with coronavirus disease 2019 (collectively, COVID-19) by a test approved by the Centers for Disease Control and Prevention (including a test authorized under the Federal Food, Drug, and Cosmetics Act);
• The individual’s spouse or dependent is diagnosed with COVID-19 by such a test; or
• The individual experiences adverse financial consequences as a result of:
o The individual being quarantined, being furloughed or laid off, having work hours reduced, being unable to work due to lack of childcare, having a reduction in pay (or self-employment income), or having a job offer rescinded or start date for a job delayed, due to COVID-19;
o The individual’s spouse or a member of the individual’s household (that is, someone who shares the individual’s principal residence) being quarantined, being furloughed or laid off, having work hours reduced, being unable to work due to lack of childcare, having a reduction in pay (or self-employment income), or having a job offer rescinded or start date for a job delayed, due to COVID-19; or
o Closing or reducing hours of a business owned or operated by the individual, the individual’s spouse, or a member of the individual’s household, due to COVID-19.

You should contact both your tax advisor and your plan administrator before you take any distributions to make sure you qualify for this tax relief.

Educators that Qualify for a $250 Tax Deduction

Tuesday, August 4th, 2020

If you are an eligible educator you can deduct up to $250 of unreimbursed trade or business expenses. The taxpayer must be a kindergarten through grade 12 teacher, instructor, counselor, principal or aide. They also must work at least 900 hours a school year.

Some examples of expenses that educators can deduct are:
• Books
• Professional development course fees
• Supplies
• Equipment/materials used in the classroom
• Computer equipment

If your spouse is an eligible educator and you file a joint tax return, each educator can deduct $250 each, for a total of $500. Also remember to keep all your receipts to you can support your deductions.

Please consult your tax advisor on all the above information.

Common Signs of an IRS Scam

Wednesday, July 29th, 2020

There are a variety of different IRS scams that it is difficult to pin point every single one of them and go into the details of each. The best way to avoid any of these scams is arming yourself with the knowledge of what the real IRS will and won’t do. If you know the basics of how the IRS works it will help you better identify a scam.

The IRS will start by mailing a bill to your home if you do owe unpaid taxes. But if you receive a bill do not automatically assume it is real. The scammers recently caught onto this and have been mailing fake bills to people stating they owe back taxes. In any situation, if you have doubts whether something from the IRS is legit or not, you can call the IRS directly to find out. The number for the IRS is 800-829-1040. If you are in doubt, you shouldn’t call the number on the notice because if it is a fake notice then the number will just call the scammers instead of the real IRS.

The IRS will not leave pre-recorded messages on your phone. They will not threaten to immediately bring in the local police, have someone deported, or revoke driver’s licenses. They will also never demand payment using a specific payment method such as a prepaid debit card, gift card, or wire transfer. The IRS will also give taxpayers the opportunity to ask questions or appeal taxes due.

If you received a scam phone call you can report it to and give the IRS the callback number of the scammer, putting “IRS Phone Scam” as the subject line.

Please consult your tax advisor on all the above issues.

How to Check Your Refund Status

Tuesday, July 28th, 2020

We often get calls from clients asking the status of their refunds and the good news is that IRS has a tool on their website that allows you to get up to date information on the status of their tax return filing, it is the “Where’s My Refund” link:

To check the status of your return you will need the following:
• Your social security number
• Your tax filing status
• The exact amount of your refund from your tax return

If you mailed in a paper return (instead of e-filing) the IRS is experiencing delays so the processing of your return may take longer than their normal 4-6 weeks.

Please consult your tax advisor on all the above information.

Did you Miss the 7/15 Tax Filing Deadline?

Wednesday, July 22nd, 2020

Even though the tax deadline has passed, there are people who have not filed their 2019 tax returns yet. If you are due a refund with your 2019 tax return then there is no penalty for filing your return late. But if you owe with your return penalties and interest will begin to accrue on any remaining unpaid tax due.

If you didn’t file your return and you owe taxes you should file as soon as possible and also pay in what you can with your return if you cannot pay the full amount due. Paying in what you can is better than not paying anything in at all. It is also beneficial to file as soon as possible because the late-filing penalty and late-payment penalty on unpaid taxes does add up fast.

If you are charged a penalty you may be able to get the penalty waived if you call the IRS using the number listed on your notice and explain why you filed late. If you have a history of filing and paying on time you may qualify for administrative penalty relief (usually if you filed and paid on time for the past 3 years and meet other requirements). The IRS gives further clarification on the waiving of this penalty:

Please consult your tax advisor on all the above information.

IRS Video to Avoid an Economic Impact Payment Scam

Thursday, July 16th, 2020

The IRS is reminding people not to fall for scams related to the Economic Impact Payment. Many scammers are targeting the vulnerable population who do not know how they are going to receive their payments. If you have any questions about your payment, you should get your answers directly from the IRS:

The IRS has also created a short video which gives a quick overview on what to look for regarding these scams:

Please consult your tax advisor on all the above information.

Keep Your Economic Impact Payment Notice with your Tax Records

Wednesday, July 8th, 2020

If you received an Economic Impact Payment then you would have received Notice 1444, which provides you all the information of the payment you received. The IRS usually mails these within 15 days after your payment goes out. If you think your payment amount is wrong, you may be eligible for additional tax credits when you file your 2020 tax return. You can refer to Notice 1444 when completing your 2020 tax return. If you have your taxes professional prepared you can give this notice to your accountant with all your other 2020 tax documents.

The IRS also wants to remind people that you should keep all your past tax returns for at least three years.

Please consult your tax advisor on all the above information.

How to Return an Economic Impact Payment

Wednesday, June 24th, 2020

Some people may have received an Economic Impact Payment and are unsure if they should have, such as receiving a payment for a deceased individual. You would essentially need to return the payment to the IRS address that is based on the state you live in, which is indicated in the IRS Economic Impact Payment information center ( see question 65):

If you are returning a paper check that was not cashed or deposited you should write “void” in the endorsement section on the back of the check and mail it to the appropriate address. Do not staple, bend, or paper clip the check and also include a brief explanation as to why you are returning the check.

When returning a direct deposit or a paper check that was cashed/deposited, you should mail a personal check, money order, etc to the appropriate IRS address. The check/money order should be made out to the “U.S. Treasury” and write 2020 EIP and the taxpayers ID# or social security number on the check. Also include an explanation as to why you are returning it.

A payment to someone who died before receiving the money should be returned to the IRS. Return the entire payment unless it was a joint filer and the spouse is still living. In a case like this you should send back half of the payment but not more than $1,200.

Please consult your tax advisor on all the above issues.

An Extension to File is not an Extension to Pay Your Taxes

Tuesday, June 23rd, 2020

As the 2019 personal tax deadline of July 15th approaches, we just want to remind everyone that filing for an extension means that you now have until October 15th to file your tax return, but your taxes still need to all be paid in by July 15th. An extension to file is not an extension to pay.

The IRS has also stated that they resumed processing paper returns. So if you mailed your return into the IRS instead of doing an efile, you most likely experienced a lengthy delay and most likely haven’t gotten your refund yet. But the good news is the IRS is back to processing them. The IRS also states that if you already sent in your paper copy and it hasn’t been processed yet, do not send in another one and to wait for the first one you sent in to be processed.

Please consult your tax advisor on all the above issues.

Do Economic Impact Payments Belong to the Recipient or their Nursing Home?

Wednesday, June 17th, 2020

The answer to this question is that the Economic Impact Payments belong to the recipient, not nursing homes or care facilities. The IRS is concerned that people and businesses are taking advantage of the vulnerable population that received the Economic Impact Payments.

The IRS states that “payments are intended for the recipients even if a nursing home or other facility receives the person’s payment, either directly or indirectly by direct deposit or check. These payments do not count as a resource for purposes of determining eligibility for Medicaid and other federal programs for a period of 12 months from receipt. They also do not count as income in determining eligibility for these programs.” The Economic Impact Payments do not count as resources that have to be turned over by the recipient to the nursing home. The payment is considered an advance refund for 2020 taxes, so it is considered a tax refund and not income.

The Social Security Administration has posted a FAQ section where you can find further information:

Please consult your tax advisor on all the above issues.

Scams Related to Covid-19

Wednesday, June 10th, 2020

The criminals have been hard at working trying to steal from people during this pandemic. The IRS has released a list of what they have seen so far:

• Economic Impact payments being stolen or the taxpayers information being stolen from a scam related to these payments.
• Fake at home test kits, fake cures/vaccines, pills, and unproven Covid-19 treatments are being sold to people.
• Persons claim to have a large amount of medical supplies for sale and go as far as to setup fake shops, websites, social media accounts, and emails but never deliver the products after they get paid.
• Fake charities are being setup to solicit donations.
• Criminals are setting up fake companies and offering early opportunities to invest in that company because they are claiming to be developing a vaccine.
• Scammers are trying to steal your information via texts, emails, letters, and links.

Coronavirus related scams can be reported on the following link:

Please consult your tax advisor on all the above information.

Some People Need to Register for the Economic Impact Payment

Thursday, June 4th, 2020

The IRS is reminding people that you may qualify for an Economic Impact Payment even if you are not required to file a tax return. Since the IRS does not have your current information you need to register with the IRS by October 15th, 2020. You can register online at the following website:

The IRS states that if you are eligible for a payment and register by October 15th, you will receive your payment by the end of the year. Also keep in mind this registration is only for people who are not required to file a tax return because their income is below the filing threshholds.

Please consult with your tax advisor on all the above information.

Many People Will Not Receive Their Economic Impact Payment by Check

Wednesday, May 27th, 2020

The IRS just recently announced that close to four million people will receive their Economic Impact Payment by a prepaid debit card instead of receiving a check. These cards will arrive in a plain envelope from Money Network Cardholder Services. The front of the card will have the Visa name on it and the back will have MetaBank. Information will also be provided to let you know the card is your Economic Impact Payment.

The IRS states those who receive the prepaid card can do any of the following without any fees:
• Make purchases online and at any retail location where Visa is accepted.
• Get cash from in-network ATM’s.
• Transfer funds to their personal bank account.
• Check their card balance online, by mobile app, or by phone.

The card will come with instructions on how to activate it.

As always, you should be aware of any potential scams related to this prepaid card. We haven’t heard of anything yet but the scammers are probably already hard at work coming up with a plan to steal your information. A typical way they would do it is to contact you and tell you they need your social security number and/or bank account information in order for you to receive your prepaid card. So like always, never give out your personal information to any unsolicited forms of contact.

Please consult your tax advisor on all the above information.

Why Are Some Economic Impact Payments Different than Expected?

Wednesday, May 20th, 2020

As people have been receiving their Economic Impact Payments, some have received different amounts from what they were expecting.

Eligible individuals receive a payment of $1,200, married persons filing a joint return receive $2,400, and eligible individuals receive an additional $500 for each qualifying child. The requirements for an eligible child can be found on the IRS website:

If you qualify for a payment, the payment is automatic if you filed a 2018 or 2019 tax return. They are also automatic for people who don’t file a return but receive:

• Social Security retirement, survivor or disability benefits.
• Railroad retirement benefits.
• Veterans affairs benefits.
• Supplemental security income.

Some common reasons why a payment may be different than anticipated include:

• The IRS is going off your 2018 return because your 2019 return hasn’t been filed or processed yet.
• Your child is not under the age of 17 so you do not receive the additional $500. The IRS determines a child’s age by how old they are at the end of the tax year for the return they are using. So if the IRS is using your 2018 return to determine your payment amount, your child’s age at 12/31/18 is what the IRS will use.
• Your payment was offset by past due child support.

The IRS has created a quick reference chart if you want to research your payment amount further:

Please consult your tax advisor on all the above issues.

Economic Impact Payments Quick Facts

Wednesday, May 13th, 2020

The IRS recently released some information regarding the Economic Impact Payments:

• The payment is not taxable income.

• The money received will not affect income when determining federal government assistance and benefit programs.

• You can use the following link to check the status of your payment (keep in mind we have heard from numerous clients that this IRS tool is not always functioning properly and they are getting error messages):

• If you have a new bank account from what the IRS has on file, you cannot update your account with the IRS using this tool. The payment will get issued to your old account, the bank will reject the deposit, then the IRS will mail you a check.

• If you do not file a tax return, you can enter your information on the following site so the IRS can determine if you qualify for a payment:

Please consult your tax advisor on all the above information.

A quick guide on how much the Economic Stimulus Payments will be

Tuesday, April 14th, 2020

The IRS recently released the following information:

Here’s how much the payments will be:
• Eligible individuals will receive up to $1,200.
• Eligible married couples will receive up to $2,400.
• Eligible individuals will receive up to $500 for each qualifying child.

Taxpayers will receive a reduced payment if their adjusted gross income is between:
• $75,000 and $99,000 if their filing status was single or married filing separately
• $112,500 and $136,500 for head of household
• $150,000 and $198,000 if their filing status was married filing jointly

In order to be eligible you must not be dependent on another tax return and you need to have a social security number.

If a person qualifies, they will automatically receive the payment if they filed a 2019 or 2018 tax return.

Payments will also be automatic for people who receive Social Security retirement, disability (SSDI), or survivor benefits or Railroad Retirement benefits who don’t normally file a tax return. Non-filers who have qualifying children may be able to get an additional $500 per child, they will need to enter some information at the following site:

Please consult your tax advisor on all the above information.

Coronavirus (COVID-19) Scam Alert

Friday, April 10th, 2020

The scammers are back, but have they ever really left?!?! The IRS recently issued a warning to watch out for scams related to the Coronavirus. There have been a surge of calls and fishing emails attempting to steal taxpayers information which will lead to identity theft and tax related fraud. The scam centers around the economic impact payment and tax refunds.

The scammers are calling, emailing, texting, setting up fake websites, and even reaching out on social media to try and trick people into giving them their personal and banking information. The scammers are either promising you will get your refunds faster or this is the required information in order for you to receive your economic impact payment.


The scammers have even been sending out fake checks with instructions to call them back to verify your information so they can steal it or to have you logon to one of their fake websites in hopes that they trick you into entering your personal information.

To distribute the money to taxpayers the IRS has different methods. They will do a deposit into your account if they have your direct deposit bank information if you previously provided one. In Mid-April, if you filed a previous return but didn’t do direct deposit, the IRS is creating a portal where you can enter your bank information to receive the payment by direct deposit. This portal will be on, you should go directly to this website and not click on an unsolicited email that claims it will take you to this portal. The other method is that the IRS will mail out checks if they do not have your bank information.

If you receive a scam request in any format you should forward it to:

Please consult your tax advisor on all the above information.

Four Common Tax Errors for Small Business Owners

Monday, February 10th, 2020

The IRS has outlined four common mistakes that small business owners will make regarding their tax returns. Below are four issues outlined directly from the IRS that taxpayers should pay special attention to:

Underpaying estimated taxes

Business owners should generally make estimated tax payments if they expect to owe tax of $1,000 or more when their return is filed. If they don’t pay enough tax through withholding and estimated tax payments, they may be charged a penalty.

Depositing employment taxes

Business owners with employees are expected to deposit taxes they withhold, plus the employer’s share of those taxes, through electronic fund transfers. If those taxes are not deposited correctly and on time, the business owner may be charged a penalty.

Filing late

Just like individual returns, business tax returns must be filed in a timely manner. To avoid late filing penalties, taxpayers should be aware of all tax requirements for their type of business the filing deadlines.

Not separating business and personal expenses

It can be tempting to use one credit card for all expenses especially if the business is a sole proprietorship. Doing so can make it very hard to tell legitimate business expenses from personal ones. This could cause errors when claiming deductions and become a problem if the taxpayer or their business is ever audited.

Please consult your tax advisor on all the above issues.

Due Date for Filing W-2’s and 1099 Misc Forms

Tuesday, January 21st, 2020

As a reminder, employers are required to file their copies of Form W-2’s and Form W-3 with the Social Security Administration by January 31st. Form 1099-Misc’s to report non-employee compensation to independent contractors, which needs to be filed with the IRS, are also due on this same date.

Also keep in mind that automatic extensions of time to file the W-2’s are not available, extensions are granted for very specific reasons only. You will need to fill out a form 8809 in order to apply for an extension:

Please consult your tax advisor on all the above issues.

Tips for Amending a Tax Return

Monday, December 2nd, 2019

Situations may arise where you may need to amend one of your previously filed returns. Below are a few tips from the IRS to help with the amendment process:

• Complete paper Form 1040-X, Amended U.S. Individual Income Tax Return. This form needs to be a paper file and cannot be efiled.
• Mail the Form 1040-X to the address listed in the instructions. If you are amending in response to an IRS notice, you should mail it to the IRS address indicated on the notice.
• Attach copies of any forms or schedules affected by the change.
• A separate 1040-X needs to be filed for each year.
• If you are expecting a refund you should wait until your original return is processed before filing an amended return.
• If you owe additional taxes with your amended return you should pay the amount due asap since interest and penalties will be accruing.
• File Form 1040-X to claim a refund within three years from the date they timely filed their original tax return or within two years from the date the person pays the tax – usually April 15 – whichever is later.
• Amended returns can take up to 16 weeks to process. You can check the status of your amended return at:

Please consult your tax advisor on all the above issues.

2019 Standard Mileage Rates

Friday, November 22nd, 2019

The standard mileage rates for the use of a car (vans, pickups or panel trucks) for 2019 are the following:

* 58 cents per mile for business miles driven, up from 54.5 cents for 2018
* 20 cents per mile driven for medical or moving purposes, up from 18 cents for 2018
*14 cents per mile driven in service of charitable organizations, unchanged from 2018

Please consult your tax advisor on all the above information.

Education Tax Credits

Wednesday, November 20th, 2019

There are two tax credits available to help taxpayers with the costs of higher education, The American opportunity tax credit and the lifetime learning credit. If you qualify for either of these credits it could help reduce your tax liability. You must have received a Form 1098-T from an eligible education institution in order to have a chance to qualify for one of these credits.

The American opportunity tax credit is:
• Worth a maximum of $2,500 per eligible student.
• Only for the first four years at an eligible college or vocational school.
• For students pursuing a degree or other recognized education credential.
• Partially refundable. This means if the credit brings the amount of tax owed to zero, 40 percent of any remaining amount of the credit, up to $1,000, is refundable.

The lifetime learning credit is:
• Worth a maximum benefit of $2,000 per year no matter how many students are in your family.
• Available for all years of postsecondary education and for courses to acquire or improve job skills.
• Available for an unlimited number of years.

Your income level could reduce or eliminate any education credits so you want to check with your tax advisor if you will be eligible for a credit or not.

New IRS Scam Letter

Wednesday, November 13th, 2019

The scammers are getting better! By now many people are aware of the fact that the IRS doesn’t usually call you with threats and their first method of contact is a letter so that is exactly what the scammers are now doing. This is an example of a scam IRS letter and it is pretty close to what the real ones look like so be careful. You can always call the IRS directly at 800-829-1040 to verify if a letter is real or not.

IRS Stresses Natural Disaster Preparation

Monday, November 4th, 2019

The presence of Hurricane Dorian has the IRS encouraging individuals to make the necessary preparations for not only themselves but also making sure to secure their essential documents so they are not permanently lost. The IRS offers a few different hints to help taxpayers prepare:

• Secure key documents and make copies – this includes any important document such as birth certificates, deeds, titles, tax returns, insurance policies, etc. Duplicates can be made and stored away from the disaster area and electronic copies can also be made.
• Document valuables and equipment – taking photographs and videos will help support insurance claims after the disaster strikes.
• Employers should check fiduciary bonds.
• Rebuilding documents – the IRS has a reconstructing records webpage to assist taxpayers with this:

• Taxpayers can call the IRS help line at 866-562-5227 if they need to speak with a specialist trained to handle disaster related issues.

Please consult your tax advisor on all the above information.

Tax Information When Selling Your Home

Friday, November 1st, 2019

If you sell your primary residence you may qualify to exclude all or part of any gains from your income. In the year you sell your home, you may need to report the gain or loss on the Schedule D of your tax return. If you received a Form 1099-S then the sale needs to be reported on your tax return even if there is no gain. To be on the safe side you can report the sale even if you didn’t receive a 1099-S and you had no gain.

The main question is will you pay taxes on your gains or not?

In order to qualify for the exclusion, you need to meet the ownership and use test. The rule is that during a five-year period on the date of the sale, the homeowner must have owned the home and lived in it as their main home for at least two years. If you meet this requirement, you may be able exclude up to $250,000 of the gain from your income. If you file a joint return with your spouse you may qualify for an exclusion of $500,000. Also please keep in mind that if you have a loss as a result of selling your primary residence, you cannot deduct the losses.

Please consult your tax advisor on all the above issues and to see if you qualify for this exclusion.

Tax Deduction for Teachers

Tuesday, October 29th, 2019

Eligible educators may be able to deduct a portion of their out of pocket expenses on their tax returns. Teachers who work in schools may deduct up to $250 of unreimbursed expenses. If your spouse is also an eligible teacher, then you both can deduct up to $250 each. The educators that qualify for this deduction are:

• Teach any grade from kindergarten through 12th grade.
• Are a teacher, instructor, counselor, principle or aide.
• Work at least 900 hours during the school year.
• Work in a school that provides elementary or secondary education.

Expenses you can deduct range from training courses, books, supplies, computers, and athletic supplies for health and physical education.

Please consult your tax advisor on the above issue.

New Social Security Number Scam

Thursday, October 24th, 2019

The scammers are at it again, it appears they never take a break! The scammers are now threatening to suspend or cancel your social security number if you do not pay them the fake overdue taxes they claim you owe. They will often leave you a robocall voicemail and hope they scare you enough to where you call them back.

If you receive a call like this the first thing you do is hang up and also make sure never to give out any sensitive personal information to an unsolicited caller. As a rule of thumb, the IRS will never:

• Call to demand a specific payment using methods such as prepaid debit cards, gift cards, or wire transfers.
• Threaten to have you arrested immediately.
• Demand taxes be paid without giving the taxpayer an opportunity to question or appeal the amount owed.

Please consult your tax advisor on the above information.

IRS Warns of a New Property Lien Scam

Friday, September 27th, 2019

The IRS recently issued a warning to taxpayers about a new scam they learned about, this new one involves fake property liens. The scammers are sending out fake tax bills from fictional government agencies stating you need to pay them or they will put on lien on your property. The IRS highlighted the main points of this scam to be aware of:

• The taxpayer initially receives a letter in the mail with an IRS lien or levy threat.
• The scammers claim the taxpayer owes bogus overdue taxes.
• The agency the scammer claims to be from sounds legit, but it is not. One title the scammers like to use is “Bureau of Tax Enforcement”.
• The scammers reference the IRS in their letter to further try to confuse the taxpayer into thinking the letter is legit.

If you have any doubt whether a letter you received is real or not, the best option is to contact the IRS directly at 800-829-1040. The letter will most likely have a number on it that will direct you right to the scammers if you call it, so the best course of action is to call the IRS directly to find out if the letter is real.

Please consult your tax advisor on the above issue.

Can you Still Deduct Car Expenses on your Tax Returns?

Wednesday, August 21st, 2019

Many taxpayers have claimed this deduction in the past but with the new tax laws, there is a chance you may no longer be able to deduct them anymore.

You can still deduct your auto expenses if you if you own a business or are self-employed and use your car for work related tasks.

If you are an employee of a company you can no longer deduct your work mileage on your tax return, even if you do not get reimbursed by your employer. Prior to 2018, employees were able to deduct their auto expenses if they filed a Schedule A as a miscellaneous itemized deduction.

If you are an Armed Forces Reservist, fee-basis state or local government official, or a qualified performing artist, you can still deduct unreimbursed travel expenses.

Please consult your tax advisor on all the above information.

Are You Due a Refund but Haven’t Filed Your Return Yet?

Wednesday, August 14th, 2019

We see from time to time where a taxpayer has not filed their tax returns for the past few years. Our clients will sometime say to us “Well, it is okay because I am due refunds”. This is true where if you are due a refund there is no penalty for filing a late return but what some don’t realize is that there is a time limit on claiming those refunds.

A return needs to be filed within three years in order to get the refund. So if you plan on claiming those refunds you need to make sure the 3 year time limit doesn’t expire before you file those returns.

Please consult your tax advisor on all the above information.

Is Your Self Employed Activity a Hobby or a Business?

Wednesday, July 31st, 2019

Many people often have hobbies where they make some additional income, an example would be an artist who wants to deduct expenses. Both hobby income and business income need to be reported on your tax return but the big difference between the two is whether you can deduct the expenses or not which is why the classification is important.

If the activity is deemed a business then the expenses can get written off on a Schedule C and could possibly produce a loss. If the activity is a hobby then the expenses are a miscellaneous itemized deduction which can no longer be deducted on your return so you gain no benefit from them.

The IRS deems a business one that has the primary purpose of producing income or profit and is engaged with continuity and regularity. Another rule of thumb the IRS uses is that an activity for profit should make a profit in at least three out of the last five years. So if you are claiming losses every year the IRS could deem your activity a hobby. The IRS lists a guideline of nine different factors that can help guide you on the determination of whether you have a business or a hobby:

Please consult your tax advisor on all the above information.

Important Read if you Received an IRS Letter About Stock Sales

Wednesday, June 19th, 2019

Some taxpayers may receive an IRS during the summer stating that information that was reported to them does not match what your tax return says. An example would be if you received interest income and forgot to include it on your tax return, the IRS would send you a letter that it was missing and you owe additional taxes. One common letter they often send to taxpayers is a letter stating that stock sales were not included on your return.

This notice you need to pay special attention to because the amount the IRS says you owe them is not often correct, it is overstated by a considerable amount. For example if you sold $50,000 worth of stocks and forgot to include them on your return the IRS will send you a letter stating you owe taxes on the full amount of the sale, which in this case is $50,000. But this is often incorrect, the IRS does not take into account what you originally paid for the stocks when you first bought them. So if you paid $49,000 for them and sold them for $50,000, you only owe tax on the $1,000 gain, not the entire $50,000 sale like the IRS states in their letter.

So if you do receive one of these letters make sure to double check their figures for the sales and then check your brokerage statement to get the correct cost. You will most likely need to amend your tax return to report the sales and also the cost. If you had a gain on your sales you will owe additional taxes but it should be considerably less than what the IRS states in their letter since they don’t factor in the cost. Also please keep in mind that you will probably have to amend your state return as well as your federal.

Please consult your tax advisor on all the above information.

Now is a Good Time to Check your 2019 Payroll Withholdings

Tuesday, June 18th, 2019

With the almost half over, now is the perfect time to check in on your tax withholdings from your paychecks. The IRS has a tool on their website that will ask you a series of questions to basically put together a ballpark of what your tax return could look for 2019 and let you know if you are having too much withheld from your paychecks or too little. The withholding calculator can be found using the following link:

You should have a copy of your 2018 tax return and your last paycheck stub available when you start to use the calculator.

Please consult your tax advisor on all the above information.

IRS to End Faxing and Third-Party Mailing of Tax Transcripts

Wednesday, June 12th, 2019

Starting on June 28th 2019 the IRS will stop faxing tax transcripts (which are a mirror image of your tax return) to both taxpayers and third parties (such as your accountant). The IRS is doing this to try to prevent tax fraud. Scammers will get a hold of your transcript from prior years then use it to create a fake tax return in order to steal the refund. There are still a few simple ways to obtain your tax transcript:

1) Get your transcript online or by mail:
2) Call 800-908-9946
3) Submit Form 4506-T or 4506T-EZ to have a transcript mailed.

Please consult your tax advisor on all the above information.

New MA Paid Family and Medical Leave Act

Thursday, May 23rd, 2019

Starting July 1st, 2019 employers need to start planning for the new Family and Medical Leave Act, which will be an additional payroll tax. This act allows paid leave for up to 26 weeks for eligible individuals for situations such as a child birth, a serious health condition, or to care for a spouse, child, or parent with a serious health condition. Employers will be responsible for withholding and remitting the tax to the state of Massachusetts. Below are some key highlights of the new tax:

* Every single employee on a W-2 is subject to the new tax (including owners that are on a W-2).

* If 1099-Misc contractors make up over 50% of your workforce, they are subject to the new tax as well.

* The tax works similar to social security, wages are subject to tax up to $132,900. Once wages go above this limit, the tax is not owed for this particular employee who reached the max.

* The tax gets paid after each quarter on Masstaxconnect after the quarter ends. The first payment is due on October 31, 2019 for the 3rd quarter of 2019.

* If you already provide paid leave benefits to your workforce, you can apply for an exemption if your plan is equal to or better than the new FMLA plan offered by Massachusetts which is up to 26 weeks paid leave per year.

* By June 30th, you need to post the following poster on your premises:

* By June 30th you will need to have each employee and/or subcontractor sign the acknowledgement form. (please keep in mind that subcontractors are only subject to this tax if 50% or more of your workforce is made up of subcontractors). This form can be found on the following webpage:

* The tax is equal to .63% of the gross wages or other payments to all covered individuals in your workforce.

* If your workforce is under 25 covered individuals, as an employer you do not have to pay an employer’s portion of the tax but you still need to withhold the tax from your employees and remit it to MA.

* If your workforce is 25 or more covered individuals, you as an employer need to pay a tax along with your employees.

Please consult your payroll company and/or tax advisor on the above situation.

How to Obtain Your Prior Year Tax Records

Saturday, February 16th, 2019

Taxpayers often need their prior year tax return information for a number of different reasons but may experience a little trouble trying to get it. A great way to obtain this information is to request a transcript from the IRS, a transcript is a record of what was filed on the tax return. Taxpayers should always keep a copy of their tax returns as soon as they complete them but if for some reason you were unable to, getting a transcript is the next best thing.

The best way to obtain a copy of your transcript is to obtain it online from the IRS. The link to do this is the following:

There is also an option within the above link to obtain your transcript by regular mail as well. A third option you can use is to call the IRS directly at 800-908-9946.

Please consult your tax advisor on all the above information.

IRS Tools to Check Status of Refunds

Saturday, February 9th, 2019

As a reminder, the IRS has a link on their website where taxpayers can check the status of their refund. This allows the taxpayer to follow where their refunds are at anytime. The three pieces of information that taxpayers will need in order to get the refund status update are:

• Their filing status
• Their social security number
• The exact whole dollar amount of their refund

The “Where’s My Refund?” link is:

Taxpayers can start checking their refund status 24 hours after efiling their returns or four weeks after a paper file (the status updates on the IRS website once per day).

Taxpayers can also check the status of their amended returns at the following link:

Please consult your tax advisor on all the above information.

IRS Announces Tesla Plug-In Electric Vehicle Credit is Now Reduced

Friday, January 4th, 2019

The IRS recently announced that Tesla has sold more than 200,000 vehicles that are eligible for the plug-in electric drive motor vehicle credit. What does this mean? This essentially means that the amount of the available tax credit is going to be reduced for vehicles being purchased Jan 1, 2019 or after.

If you purchased your qualifying vehicle before Jan 1, 2019, you may receive a credit up to $7,500. For vehicles purchased between Jan 1, 2019 – June 30, 2019, the credit has been reduced to $3,750. Then starting July 1, 2019, the credit will be dropped to $1,875 for the rest of 2019. After Dec 31, 2019, there will be no credit at all for the purchase of the Tesla vehicle.

Please consult your tax advisor before purchasing to make sure you are eligible for the tax credit.

Changes to the Entertainment & Meals Deductions for 2018

Thursday, November 29th, 2018

The new tax law eliminates the deduction for expenses related to entertainment, amusement, or recreation. These entertainment expenses were previously 50% deductible but as of 2018 they are not deductible. This means that if you bring a client to a sporting event, you cannot deduct any of the costs associated with the event such as the cost of the tickets, transportation, parking, etc. Meals, on the other hand, are still 50% deductible.

Taxpayers can still deduct 50% of the costs of a meal as long as the purpose of the dinner was for business reasons, basically meaning business must be discussed during the meal. The 50% deductible meals include meals with clients, employees/coworkers, and meals while traveling.

Please consult your tax advisor on all the above issues.

“Tax Transcript” Email Scam

Tuesday, November 20th, 2018

The scammers are back at it again, they seem to never take any days off. This time they are impersonating the IRS and are claiming to be sending you your tax transcript in order to trick you into opening documents that contain malware. The scammers are pretending to be from “IRS Online” and have been using the title “Tax Account Transcript” (or something close to this title) to try to get taxpayers to open the email.

As a reminder, the IRS WILL NEVER send unsolicited emails to the public and would never email documents containing your personal information. If you should receive the email the IRS urges taxpayers not to open the email or the attachment.

Please consult your tax advisor on all the above information.

The New Tax Laws and Your Tax Return

Friday, November 2nd, 2018

The IRS is urging taxpayers to review the new tax laws prior to filing their 2018 in order to avoid any unexpected surprises. The IRS has created Publication 5307, which is a great guide to help taxpayers get ready for the new changes for 2018. The guide breaks down the information in basic terms so it is easier to follow and understand. It goes over certain topics such as:

• The child tax credit increasing.
• Suspension of personal exemptions.
• The standard deduction increasing.
• A new credit for other dependents.
• Certain deductions being eliminated.
• Updating your withholdings from your paychecks.
• Paying estimated taxes.

Every taxpayer should be prepared for these changes. The link to the publication is:

Please consult your tax advisor on all the above information.

Tips to Get Penalty Relief From the IRS

Thursday, September 6th, 2018

It is pretty common for a taxpayer to receive a letter in the mail from the IRS stating they are being charged penalties/interest if they underpaid their taxes during any given year. This may occur because the taxpayer may not have had enough taxes withheld from their weekly paychecks or if the person is self-employed, estimated taxes may not have been paid during the year. For example if you owe $10,000 when you file your tax return, the IRS will send you a follow up letter charging you additional penalties/interest on top of the $10,000 because you didn’t pay what was due during the year. Penalties arise from instances such as failing to file a return or failing to pay your taxes due on time. The IRS does offer possible penalty relief for certain circumstances.

• Reasonable Cause – If the taxpayer can show they tried to meet their obligations but could not do so for a legitimate reason, such as a natural disaster or a death in the immediate family, the IRS may consider penalty relief.

• Administrative Waiver and First Time Penalty Abatement – To qualify for this you didn’t previously have to file a return or had penalties for the three tax years prior to the tax year in which the IRS assessed a penalty, filed all returns/extensions on time, or paid/arranged to pay any tax due.

• Statutory Exception – Taxpayers who received incorrect written advice from the IRS may qualify for this type of relief.

The IRS does offer a “Penalty Appeal -Online Self-Help Tool” if you’re your request for penalty relief was denied. This can be found at the following link:

Please consult your tax advisor on all the above information.