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Archive for the ‘Tax Tips’ Category

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:

https://www.irs.gov/pub/irs-pdf/p5307.pdf

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:

https://www.irs.gov/compliance/appeals/penalty-appeal-online-self-help-tool-start

Please consult your tax advisor on all the above information.

How to Get a Copy of Your Tax Return Transcript

Thursday, August 23rd, 2018

We get many requests from clients to get additional copies of their tax returns, but what if you do not have an accountant that you can call to get a copy? You may have done the return yourself and then your computer crashed, leaving you without a copy. The bad news is you may have lost your computer…but the good news is you can still get a copy of your tax return transcript!

On the IRS website you can register to get your transcript online in order to view, print, or download the transcript. You can also request the transcript by mail as well. The following link allows you to choose which method you would like to use:

https://www.irs.gov/individuals/get-transcript

You can also call 800-908-9946 if you would like the transcript by mail (delivery time ranges from 5 to 10 calendar days).

The third method you can use is by mailing or faxing Form 4506-T:

https://www.irs.gov/pub/irs-pdf/f4506t.pdf

Please consult your tax advisor on all the above issues.

Taxpayers Should Check Their Payroll Withholdings ASAP

Thursday, August 16th, 2018

Taxpayers should review their paychecks as soon as possible. The Tax Cuts and Jobs Act has implemented changes that will impact their 2018 tax returns. So basically taxpayers cannot assume that their returns are going to shape up the same way they have prior years. The sooner the better when it comes to checking the withholdings on paychecks to determine if additional taxes need to be withheld.

The IRS has a “Withholding Calculator” on their website to assist taxpayers in determining if they need to make any changes. The calculator allows the taxpayer to enter their expected 2018 figures to determine if their withholdings are correct. The calculator can be found at the following address:

https://www.irs.gov/individuals/irs-withholding-calculator

Depending on the complexity of each personal situation, taxpayers may benefit from getting tax planning assistance from their accountant in order to make 2018 projections. If the withholdings are low for the year the accountant can then make a ballpark projection of what will be owed at the end of the year and have the taxpayer send in estimated tax payments to make up what is needed.

Please consult your tax advisor on all the above information.

IRS Dirty Dozen Tax Scams

Thursday, August 9th, 2018

The IRS recently published their list of their top 12 scams. They also stress the fact that even though tax season is over, that doesn’t mean the scams stop, they happen all year round. Below is the list of this year’s top 12:

1) Phishing – This is when a scammer sends you a fake email or a link for a fake website in order to steal your personal information.

2) Phone Scams – When a scammer calls you claiming to be an IRS agent claiming you owe them money.

3) Identity Theft – Various tactics to try to steal your identity. As an example the scammer will get your information then file a fake tax return before you do and collect the refunds.

4) Return Preparer Fraud – As an example a dishonest preparer will inflate your tax refund before your return is efiled and keep the difference between your actual refund and the inflated amount reported to the IRS.

5) Fake Charities – Always do your research before donating to a charity to make sure it is a real one.

6) Inflated Refund Claims – Taxpayers should watch out for any preparer that promises you inflated tax refunds.

7) Excessive Claims for Business Credits – Taxpayers should make sure to properly claim the fuel tax credit.

8) Falsely Padding Deductions on Returns – Taxpayers should not inflate deductions on their returns.

9) Falsifying Income to Claim Credits – An example of this is making up income that doesn’t exist in order to qualify for the Earned Income Tax Credit.

10) Frivolous Tax Arguments – When taxpayers create a frivolous reason as to why they feel they do not have to pay taxes.

11) Abusive Tax Shelters – Taxpayers who use abusive tax structures to avoid paying taxes.

12) Offshore Tax Avoidance – When a person tries to hide money and income offshore.

Please consult your tax advisor on all the above information.

A Reminder to Watch out for IRS Scams

Thursday, July 5th, 2018

As the summer continues on so do the fake calls from scammers demanding money for various things such as back taxes you owe. We are getting reports from clients stating they are getting multiple calls per day from scammers demanding money. The threats range from automated calls to a live person telling you there’s a case against you and the police are coming to arrest you. We want to remind everyone to NEVER GIVE OUT PERSONAL INFORMATION to any of these unsolicited phone calls from scammers or give them any money.

The IRS just sent out a reminder that they do not do the following actions:

* Call to demand immediate payment using a specific payment method, such as a prepaid debit card, wire transfer, or gift card.
* Demand taxpayers pay taxes without being able to appeal or question the decision.
* Threaten to have you arrested for not paying.
* Threaten to revoke your drivers license, business license, or immigration status.

Please consult your tax advisor on all the above information.

Tax Benefits for Armed Forces Members

Thursday, May 31st, 2018

Members of the military and their families may qualify for certain tax breaks. The special rules may lower the tax that is owed or give them more time to file and pay their taxes. The following are some highlights of the potential special tax benefits for military members:

• Combat Pay Exclusion – If a person serves in a combat zone then part or all of their combat pay is tax-free. This also applies to if a person is working in an area outside a combat zone as long as the Department of Defense certifies that the area is directly supporting military operations in a combat zone. There are limits to this exclusion for commissioned officers.

• Tax Return Extensions – Some members of the military can postpone most tax deadlines. The following is an IRS link with FAQ’s regarding this topic:

https://www.irs.gov/newsroom/extension-of-deadlines-combat-zone-service

• Earned Income Tax Credit – If a person in a combat zone is receiving nontaxable pay, they may choose to include it in their taxable income to increase their Earned Income Tax Credit.

• Signing Joint Returns – If military service prevents both spouses from signing a return then one spouse may be able to sign for the other.

Please consult your tax advisor on all the above information.

Due Dates for Tax Returns with Fiscal Year Ends

Thursday, March 1st, 2018

• S Corporations (Form 1120S) & Partnerships (Form 1065) – These returns are due the 15th day of the third month after the end of their tax year.

• C Corporations (1120) – These returns will be due the 15th date of the fourth month after the end of the tax year.

• Employee Benefit Plan (Form 5500 Series) – these returns are due the last day of the seventh month after the plan year ends.

Please consult your tax advisor on all the above information.

Due Dates of 2017 Tax Returns Going on Extension

Monday, February 26th, 2018

One thing may lead to another and you may not be able to file your tax return on time. The good news is that returns can go on extension. Below is an outline of the key due dates if you extend any of your returns:
Form Extended Due Dates

Extended Partnerships – Form 1065 September 17th, 2018
Extended S Corporations – Form 1120S September 17th, 2018
Extended Trusts & Estates – Form 1041 October 1st, 2018
Extended Individuals – Form 1040 October 15th, 2018
Extended C Corporations – Form 1120 October 15th, 2018
Extended Tax Exempt Org – Form 990 Series November 15th, 2018
Extended Employee Benefit Plan – Form 5500 Series November 15th 2018

Please keep in mind the above dates are for returns with the calendar year of 2017. Please consult your tax advisor on all the above issues.

Important Due Dates for the 2018 Filing Season (For Tax Year 2017)

Friday, February 16th, 2018

With the 2018 tax season now in full swing it is important to note the due dates of all the returns, especially since there have been a couple changes to these dates in the past couple of years. These dates are for the calendar year 2017 that are due in 2018:

Form Due Dates

Form W-2 ( mail or electronic) January 31st, 2018
Partnerships – Form 1065 March 15th, 2018
S Corporations – Form 1120S March 15th, 2018
Individuals – Form 1040 April 17th, 2018
Trusts & Estates – Form 1041 April 17th, 2018
C Corporations – Form 1120 April 17th, 2018
Tax Exempt Org – Form 990 Series May 15th, 2018
Employee Benefit Plan – Form 5500 Series July 31st, 2018

Please consult your tax advisor on all the above issues.

Beware of Receiving Fake Tax Refunds

Wednesday, February 14th, 2018

The IRS just issued another warning on a new scam that appears to be the main one the fraudsters are gravitating towards this tax season. The number of people affected by this scam has gone from a couple hundred to several thousand in just a couple days. After the scammers steal your information and data they will then file a fraudulent tax return on your behalf. From there they will use your real bank account number to have the refund deposited into. The next step is for the fraudsters to get you to give them the refund money. The IRS states that there are a couple different versions of the scam to get the money from you.

The first version of the scam is that a criminal will pose as a debt collection agency official that was hired by the IRS to collect the refund that was deposited in your account in error. They will then request that you forward the money to their collection agency.

A second version of the scam is that you will receive an automated call claiming to be from the IRS. The call will include various threats, such as criminal fraud charges if you do not return the money. The recording will give you a case number to call in order to return the refund.

If you receive an erroneous refund you should call the IRS directly to take the next steps, 800-829-1040.

Please consult your tax advisor on all the above issues.

New W-2 Phishing Scam

Wednesday, February 7th, 2018

There is a newer, highly successfully, W-2 phishing scam that has been going around. The IRS urges employers to educate their payroll personnel about this scam because it ended up fooling thousands of employees and hundreds of businesses last year. The general goal of the scam is to trick payroll personnel, or people with access to the payroll records, into giving out the personal information of the employees of the organization. The IRS reported that the scam affected all types of organizations including public schools, hospitals, universities, charities, and tribal governments.

The fraudsters will find out who the executives are in the organization then send an email to the payroll personnel requesting copies of all the employees W-2’s, the emails appear to be coming from the executives in the company. The W-2 contains the information criminals need in order to file a fraudulent tax return or sell the information on the dark web. Also be aware that the fraudster may start the conversation out with some light banter before they get into asking for the sensitive information of the employees.

Businesses that receive this type of email but don’t fall victim to it should report it to phishing@irs.gov. If your business does become a victim and W-2’s were sent out, you should email dataloss@irs.gov.

Please consult your tax advisor on all the above issues.

New 2018 Tax Scam – A Must Read!

Friday, February 2nd, 2018

With the new filing season just underway the tax scammers have been active in figuring out new ways to steal from taxpayers. The new scam they have come up with still involves stealing your personal information but what they are doing with it is a little bit different this year.

The scammers will still file a fake return using your personal information but this time they will use your real bank account number and have the refund go into your bank account instead of going into an account setup by the scammers. You will then receive a call from a man or woman claiming to be from a debt collection agency telling you that you received the deposit in error and need to forward the money to that person (aka the scammer).

The IRS warns that this is the first of many new schemes that will come about this year so you really have to be aware when it comes to safeguarding your personal information.

Please consult your tax advisor on all the above issues.

New Tax Scam Targeting Hotmail Users

Tuesday, January 16th, 2018

The IRS has issued a warning to taxpayers that there is a new scam targeting Hotmail users. The scam is an attempt to steal financial and personal information. Per the IRS, the email subject line reads:

“Internal Revenue Service Email No. XXXX/ We’re processing your request soon/ TXXXXXX-XXXXXXXX

The email will lead the taxpayer to a fake Microsoft page where it will ask you for your personal information.

If you receive an unsolicited email claiming to be from the IRS you should forward it to phishing@irs.gov and then delete the email.

Please consult your tax advisor on all of the above issues.

2018 Standard Mileage Rates

Friday, January 5th, 2018

The 2018 standard mileage rates have been issued by the IRS. As of January 1, 2018, the standard mileage rates for the use of cars, vans, pickups, or panel trucks are the following:

• 54.5 cents for every mile of business travel driven.
• 18 cents per mile driven for moving or medical purposes.
• 14 cents per mile driven in service of charitable organizations.

Please consult your tax advisor on all the above issues.

Do You Need to Issue 1099-Misc Forms to Contractors Paid Via Credit Card or PayPal?

Wednesday, January 3rd, 2018

We often get the question from clients on whether or not they need to issue a Form-1099 Misc to independent subcontractors if they pay them using a credit card or PayPal.

The answer is that you do not.

This applies even if you paid the contractor over $600, which is the normal threshold for being required to issue a Form 1099-Misc to someone. The reason you do not need to issue a Form 1099-Misc to any contractors you paid via credit card or PayPal is because the payment companies are responsible for reporting the totals. So for example the credit card company will issue the subcontractor a Form 1099-K for the payments which takes care of the reporting requirements.

Please consult your tax advisor on all the above issues.

Year End Prepayments for 2017

Thursday, December 28th, 2017

With the new tax laws on the table for 2018 we have been getting many questions on what to prepay before the end of the year. The first item would be your state estimated tax payments. If you are planning on making a 4th quarter 2017 MA estimated tax payment, it should be made before the end of 2017 so you can deduct it in 2017, you may lose the deduction in 2018. The other topic of discussion has been should you prepay your real estate taxes by the end of 2017 so you do not lose the deduction in 2018. The IRS Advisory recently released an issue where they state:

“The IRS has received a number of questions from the tax community concerning the deductibility of prepaid real property taxes. In general, whether a taxpayer is allowed a deduction for the prepayment of state or local real property taxes in 2017 depends on whether the taxpayer makes the payment in 2017 and the real property taxes are assessed prior to 2018. A prepayment of anticipated real property taxes that have not been assessed prior to 2018 are not deductible in 2017. State or local law determines whether and when a property tax is assessed, which is generally when the taxpayer becomes liable for the property tax imposed.” – IRS Advisory Issue 12-27-17

Another payment you should consider is charity donations, those should be made before the end of 2017 as well.

Please consult your tax advisor on all the above information.

Signs of Small Business Identity Theft

Wednesday, December 20th, 2017

The IRS recently issued a warning that small business identity theft has become a big business and the fraudsters methods of stealing your information have become more sophisticated. They now know the tax codes and filing practices, two tools to aid them in stealing your information. The IRS warns of five signs that you may have been a victim of identity theft:

• The IRS rejects an e-filed return saying it already has one with that identification number.
• The IRS rejects an extension to file request saying it already has a return with that identification number.
• The filer receives an unexpected tax transcript.
• The Filer receives an IRS notice that doesn’t relate to anything they submitted.
• The filer doesn’t receive expected or routine mailings from the IRS.

The filer should contact the IRS if they experience any of the above issues.

Please consult your tax advisor on all the above issues.

What to Do When You Receive a Letter From the IRS

Thursday, December 14th, 2017

The IRS sends out millions of these letters every year so they are somewhat common, so the taxpayer shouldn’t immediately panic if they receive one of these letters. An example of why you would receive a letter is if you inadvertently forgot to include your dividend income on your tax return. The letter will essentially alert you of this mistake and let you know the additional money that is now due. The IRS suggests a few hints in handling these notices:

• Read the letter carefully because most of these letters deal with a specific issue and will include instructions on how to resolve it.
• Compare the notice to your return to make sure the change the IRS is proposing is correct.
• Respond to the notice in a timely manner. The IRS will give you a date you need to respond by. You should write a letter to the IRS to the address listed at the bottom of the letter if you disagree.
• Keep copies of the letter and whatever you send to the IRS.

It is very important to research the claim the IRS is making to double check they are correct. A perfect example is with stock sales. If you sold $20,000 worth of stocks and forgot to report it, the IRS will often send a letter stating you owe taxes on the full $20,000 sale, they don’t take into account what you originally paid for the stocks. So if you paid $18,000 for them then your gain is only $2,000, not the full $20,000 the IRS is billing you for. In this case you would amend your return to report the $20,000 of sales and the $18,000 of cost which will result in you owing taxes on the $2,000 gain.

Please consult your tax advisor on all the above information.

The 2017 Tax Year End of Dec. 31 is Fast Approaching

Tuesday, December 12th, 2017

For most taxpayers, December 31st is the last day to make moves that will affect their 2017 tax returns. A perfect example is making a charity donation before the year end to benefit from this tax deduction if you qualify for it via a Schedule A. Donations will include credit card charges made before the end of the year and checks (as long as they are mailed by the last day of the year).

Most workplace retirement account contributions should be made by December 31st but taxpayers can make 2017 IRA contributions until April 18th, 2018.

We also want to stress not counting on getting your refunds by a certain date, such as holding off on a large equipment purchase until you physically receive the money. Some refunds will be held until at least mid-February, those include returns being filed where the Earned Income Tax Credit or the Additional Child Tax Credit are being claimed.

Please consult your tax advisor on all the above information.

Year End Withholding Check-up

Thursday, November 30th, 2017

It is always a good idea to take a look at the amount of taxes being withheld from your paychecks each week. It is important that you have the correct amount of taxes withheld each week to avoid additional taxes owed with your tax return when you file it.

If you had too much tax withheld from your paychecks, you end up paying too much in taxes through those paychecks for the year. You should consult with your tax advisor about possibly changing your withholdings and getting less taxes withheld during the year, this will put more money into your pocket during the year instead of waiting to receive it via a large tax refund.

If you owe money with your tax return, then the opposite is true, you are not having enough taxes withheld from your paychecks. In this case you may want to adjust your tax withholdings and have more withheld from each check instead of having to pay a large tax bill with your tax return, which may include penalties and interest added on top of the amount you owe.

Please consult your tax advisor on all the above information.

W-2/1099 Deadline for Employers

Monday, November 27th, 2017

The deadline for employers and other businesses to file their 2017 wage statements (Form W-2 & W-3) and independent contractor forms (Forms 1099-Misc) with the government is January 31st, 2018.

This deadline makes it easier for the IRS to prevent fraud by verifying the correct income than an individual reports on his/her tax return. Failure to file these forms correctly and on time could result in a penalty to the employer.

Also please keep in mind that an extension of time to file Forms W-2 & W-3 are not automatic, you need to file a Form 8809 to request the extension:

https://www.irs.gov/pub/irs-pdf/f8809.pdf

Please consult your tax advisor on all the above information.

Both Taxpayers Have Rights on Joint Returns

Monday, November 20th, 2017

From time to time we see situations on tax returns where one spouse had certain tax factors that the other spouse did not know about until their return was filed. An example of this is one spouse having unreported income that the other spouse didn’t know about which caused a large tax liability. Both taxpayers have rights on a joint return, this is known as innocent spouse relief. Per the IRS, taxpayers have the right to:

• File a separate return even if they’re married.
• Review the entire tax return before signing a joint return.
• Review supporting documents for a joint return.
• Refuse to sign a joint return.
• Request more time to file their tax return.
• Get copies of prior tax returns from the IRS.
• See independent legal advice.

Please consult your tax advisor on all the above information.

Some Tax Refunds will be Delayed in 2018

Thursday, November 16th, 2017

As a result of the December 2015 law the IRS will have to delay refunds on certain tax returns. If you are claiming the Earned Income Tax Credit or the Additional Child Tax Credit then the IRS cannot issue a refund to you until mid-February at the earliest. The IRS has to hold your entire refund and not just the amounts attributed to those two credits. This law allows the IRS additional time to help prevent and detect fraud.

Please consult your tax advisor on all the above information.

Last Minute 2017 Tax Ideas

Tuesday, November 14th, 2017

With the 2017 tax year coming to a close, you want to make sure you take advantage of any last minute deductions that you want to get onto your 2017 tax return. A couple items to think about are:

• Charity donations – If you itemize your deductions on a Schedule A and are eligible to deduct your charity donations you need to make the donation by the end of 2017.
• IRA distributions – taxpayers over age 70 ½ should receive payments from their individual retirement accounts and workplace retirement plans by the end of 2017. A special rule allows those who reached 70 ½ in 2017 to wait until April 1, 2018 to receive their distributions.
• IRA contributions – Taxpayers generally must make workplace retirement account contributions by the end of the year but you can make 2017 IRA contributions until April 17, 2018.

Please consult your tax advisor on all the above issues.

2016 E-File Will Be Closing Down Soon

Monday, November 6th, 2017

The E-Filing system will be shutting down on Saturday November 18th, 2017 for all remaining 2016 tax returns that have not been filed yet. This means you can only efile your return up to November 18th, any returns filed after this date will have to be paper filed and cannot be filed electronically.

Please consult your tax advisor on all the above information.

2018 IRA Contribution Limits

Tuesday, October 31st, 2017

The contribution limits for traditional and Roth IRA plans will stay the same as the 2017 rates which are the following:

• $5,500 for individuals under 50 years old.
• $6,500 for individuals 50 years old and over.

The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $18,000 to $18,500.

Please consult your tax advisor on all the above issues.

2018 Gift Tax Limit

Friday, October 27th, 2017

As of 2017, the amount you can give as a gift without tax implications is $14,000. This means you can give a gift to another individual without having to file a gift tax return if the amount is not more than $14,000. If the gift is above $14,000 then the person giving the gift needs to file a gift tax return to report it.

Starting in 2018, the annual exclusion for gifts has increased to $15,000, up $1,000 from 2017.

Please consult your tax advisor on the above issue.

IRS Warns About Unsolicited Phone Calls

Monday, October 16th, 2017

Taxpayers should be alert if they receive a phone call from someone claiming to be from the IRS, this is most likely a scam. The scammers attempt to get you to pay them for back taxes that do not really exist. They will also try to gain access to personal information such as bank accounts. The scammer will claim you have a refund and your bank information is needed to transfer the refund over to you.

Per the IRS, the IRS will never do the following:

• Call to demand immediate payment.
• Call someone if they owe taxes without first sending a bill in the mail.
• Demand tax payment without allowing the taxpayer to appeal or question the tax.
• Demand payments in certain forms such as a prepaid debit card.
• Ask for credit or debit cards numbers over the phone.
• Threaten to have the police arrest you.
• Threaten to sue you.

Please consult your tax advisor on all the above information.

Tax Benefits For Educators

Tuesday, October 3rd, 2017

Educators get a tax deduction for qualified expenses related to their profession. These costs include items such as training, travel, and classroom supplies. There are two ways an educator can claim this deduction, the first is on the first page of the Form 1040 where up to $250 can be deducted. The second is claiming the expenses as a miscellaneous deduction on Schedule A if you itemize your deductions.

To be eligible to deduct these expenses, the taxpayer must be a kindergarten through grade 12 teacher, instructor, counselor, principal or aide for at least 900 hours a school year that provides elementary or secondary education as determined under state law (per the IRS).

Please consult your tax advisor on all the above issues.

Tax Tips For Divorced Individuals

Tuesday, September 26th, 2017

Individuals who recently got divorced or who are getting divorced need to consider not only the legal effects of the divorce but also the tax effects. The divorce may or may not impact your personal situation. Below are a couple key points to look out for regarding your taxes and a divorce:

• Child support payments are not deductible if you are paying them and on the other side, the payments are not taxable income if you are receiving them.
• Alimony payments under a divorce or separation decree can be deducted.
• If you receive alimony payments those payments need to be claimed as income by the recipient.
• Remember to report any name changes to the Social Security Administration (SSA.gov).

Please consult your tax advisor on all the above information.

Job Search Expenses May be Tax Deductible

Tuesday, September 19th, 2017

Taxpayer’s who are looking for a new job, but in the same line of work, may be able to deduct the costs of the search. In order for you to be able to deduct these expenses you need to itemized your deductions on a Schedule A. These expenses are considered “miscellaneous deductions” which means you can claim the amount of total expenses that’s more than 2 percent of your adjusted gross income.

Some job search expenses include:
• Resume Costs.
• Travel Expenses – includes transportation, meals, and lodging.
• Job Placement Agency.

Expenses cannot be deducted if they meet the following:
• Looking for a job in a new occupation.
• Looking for a job for the first time.
• If there was a substantial break between the ending of their last job and looking for a new one.

Please consult your tax advisor on all the above issues.

The IRS is Urging Taxpayers to be Prepared for a Natural Disaster

Friday, September 15th, 2017

In the wake of the recent hurricanes, the IRS is urging taxpayers to be prepared for any natural disasters when it comes to their financial records.

• Create electronic copies of important documents – this could include tax returns, insurance policies, and bank statements. You can store them in a waterproof container.
• Document Valuables in your home – photograph or videotape your valuables for potential insurance claims.
• Review emergency plans on an annual basis.

If you do experience a federally declared disaster in your area, you can reach out to the IRS at 866-562-5227 to speak with an IRS specialist that is trained in this area to help you.

Please consult your tax advisor on all the above information.

2017 Standard Mileage Rates

Friday, September 8th, 2017

The standard mileage rates for the use of a car for business purposes (also includes vans, panel trucks, or pickups) are as follows:

• 53.5 cents per mile for business miles driven (was 54 cents in 2016)
• 17 cents per mile driven for medical or moving purposes (was 19 cents in 2016)
• 14 cents per mile driven for charity organization purposes

Please consult your tax advisor on all the above information.

Beware of IRS/FBI Themed Ransomware Scam

Thursday, August 31st, 2017

The IRS recently issued a warning to be aware of yet another new phishing scheme to try to con people out of money. This one involves a scam email that uses the emblems of both the FBI and IRS. The email will attempt to get you to click on a link to download a fake FBI questionnaire but what you will actually be downloading is a malware called ransomware. This ransomware will prevent you from accessing data stored on your device until you pay money to the scammers.

Always remember that if you have a tax issue the first contact from the IRS WILL NOT be via an email. Please consult your tax advisor on all the above issues.

Miscellaneous Tax Deductions

Monday, July 24th, 2017

Miscellaneous deductions are basically deductions that do not fit in a certain tax category so there is a spot on the Schedule A where you deduct them. There is a certain catch to deducting these expenses though, the first one being the fact that you need to itemize your deductions on a Schedule A. The second catch is that you can only deduct these expenses if the sum of the expenses exceed 2% of the taxpayers adjust gross income (AGI). For example if your AGI is $25,000 then you need to come up with more than $500 in expenses (25,000x.02 = 500).
Some miscellaneous expenses included:

• Job tools.
• Unreimbursed employee expenses.
• Union dues.
• Job search costs for a new job in the same line of work.
• Tax prep fees.
• Travel and transportation related to your work.

Please consult your tax advisor on all the above information.

Summertime Scams

Thursday, July 20th, 2017

The IRS is warning people to still be watching out for scams even though it is the summertime. Scammers do not take this season off even though it is not tax season. This is actually a good time for the scammers to target taxpayers because this is around the time the IRS would start sending out notices for any discrepancies from your previously filed return(s). Below are some highlighted scams currently making their way to taxpayers:

• EFTPS Scam – the scammer claims you owe back taxes and paying them with a prepaid debit card will link to your EFTPS account (EFTPS is the system to pay the IRS tax payments electronically).
• Robo-calls – the message warns that if you do not call them back a warrant will be issued for your arrest.
• Private Debt Collection – the scammers are claiming to be from private collection firms in order to get you to pay them.

Always remember the IRS will not call to demand immediate payment using a specific payment method such as a credit card or a prepaid debit card, threaten to have you arrested, or ask for credit or debit card numbers over the phone.

Please consult your tax advisor on all the above information.

New Twist to an Old IRS Phone Scam

Thursday, June 22nd, 2017

The IRS issued another warning about the phone scam that is still going around, the scammers have updated their call tactics in an attempt to fool the person receiving the call. The scammers are still demanding an immediate tax payment (which doesn’t really exist) using a prepaid debit card but they are saying it is now linked to the Electronic Federal Tax Payment System (EFTPS). EFTPS is the system that taxpayers use to make electronic tax payments to the IRS. EFTPS does not require you to use a prepaid debit card.

The scammers are also claiming that you were sent two IRS certified letters that were returned to them as undeliverable to try to fool you. They have not changed their threats though, they still claim you will be arrested if you don’t pay them. They also warn you not to call your accountant, attorney or local IRS office until after the payment is made.

So basically it appears the scammers have done their homework and are learning the IRS lingo and collection steps. They know the IRS will always send a letter before calling so they claim that the letters have already been sent but don’t let this line fool you, stay aware of the scam.

If you receive one of these calls from someone claiming to be from the IRS and threatening to arrest you, you should make sure not to give them any information and hang up immediately. You should then contact the Treasury Inspector at 800-366-4484.

Please contact your tax advisor on all the above information.

I am on Extension, When do I Need to Pay my Taxes Owed?

Thursday, June 1st, 2017

The answer to that question is as soon as possible. An extension is an extension of time to file, not an extension to pay. So if there is any amount due with your tax return once it is completed, you should pay it as soon as you can because penalties and interest accrue.

Also something to keep in mind is that if you cannot resolve any issue you have with the IRS over the phone, you can request a face to face meeting. You need to call the IRS Taxpayer Assistance Center(TAC) to schedule an appointment. You can do this by calling 844-545-5640 or you can use the following IRS link to help find the closest IRS TAC, check the days/hours of operation, and a list of services they provide.

https://www.irs.gov/help-resources/contact-your-local-irs-office

Please contact your tax advisor on all the above information.

Are You Running a Business or is it a Hobby?

Thursday, May 11th, 2017

Many people often do activities where they end up making some income from it, such as making jewelry, painting pictures, selling baked goods, etc, but the real question is, is it a business or a hobby? The main reason the IRS is concerned about a hobby versus a business is because you cannot deduct losses if the IRS deems the activity a hobby. A business can write off deductions and take a loss whereas the hobby can only write off expenses up to the profit amount, the deductions cannot exceed the income.

The main feature of a business is that it makes a profit. Hobbies are for recreation and do not turn a profit. Taxpayers can usually deduct ordinary and necessary hobby expenses up to their hobby income. That is because hobby losses cannot be deducted from other income. You also must itemize deductions on a Schedule A in order to deduct the hobby expenses.

The general rule of thumb is that if you have not turned a profit in at least three of the prior five years then the IRS views your business as a hobby.

Please consult your tax advisor on all the above information.

Easy Ways to get Your Prior Year Tax Return

Wednesday, March 1st, 2017

If you have misplaced your prior year tax return there is no reason to worry, there are a couple simple ways you can get the transcript of your tax return from the IRS:

• Order it online: https://www.irs.gov/individuals/get-transcript
• Order it by phone: 800-908-9946
• Order it by mail: Complete Form 4506-T:

https://www.irs.gov/pub/irs-pdf/f4506t.pdf

If you need an actual copy of your return you need to complete and mail Form 4506, the fee is $50 for the copy:

https://www.irs.gov/pub/irs-pdf/f4506.pdf

Please consult your tax advisor on all the above information.

Obtaining an Employer Identification Number (EIN) for a New Business

Thursday, February 23rd, 2017

If you recently started a new business one of the first things you need to do in terms of taxes is to obtain an Employer Identification Number (EIN) from the IRS. The EIN number is also known as the Federal Tax Identification Number , it is a nine digit number assigned to you by the IRS. This number is given to businesses for the purpose of identification in the United States. You apply for this number online at the IRS website:

https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online

Please consult a tax advisor on all the above issues.

Getting a Transcript of your Tax Return

Friday, February 17th, 2017

It is very common for a person to need a copy of their tax return but just can’t seem to find their last years copy. The first step you should try is contacting the tax preparer from the prior year to see if a copy is available for you. If that does not work you can always request a transcript of your return from the IRS. The transcript basically outlines what your return looked like so it will have all the numbers you need. The best way to get this transcript is to visit the IRS website to request a copy:

https://www.irs.gov/individuals/get-transcript

You can choose to get your transcript by mail or online. To get the transcript online you will need your personal information handy such as your social security number, date of birth, filing status, etc.

Please consult your tax advisor on all the above information.

Avoid Overstating Business Deductions

Friday, February 10th, 2017

The IRS annually releases a “Dirty Dozen” list of possible tax scams currently going on. One they recently just highlighted was overstating business deductions for the purpose of decreasing the amount of tax due. You want to avoid doing this because of the simple fact that is illegal. There are also penalties associated with this fraud:

• 20% of the disallowed amount for filing an erroneous claim for a refund or credit.
• $5,000 if the IRS determines a taxpayer has filed a “frivolous tax return.” (the return clearly shows the tax reported is substantially incorrect).
• Along with the full amount of tax owed, a taxpayer could be assessed a penalty of 75% of the amount owed if fraud is deemed on the return.
• Criminal prosecution and brought to trial is also a possibility with a fraudulent return.

Please be sure to keep accurate records, programs such as Quickbooks or excel are great tools to keep track of your expenses.

Please consult your tax advisor on all the above information.

What to do if you Receive a Scam Call

Tuesday, February 7th, 2017

The IRS telephone scam is still very active, the thieves are still attempting to steal your money this way. They will call you claiming you owe back taxes to the IRS and threaten you will be arrested if you do not pay them. The first action you should take is to hang up the phone and NEVER give any information to them, especially nothing personal such as socials or credit card numbers.

You should then contact the Treasury Inspector General for Tax Administration via their website:

https://www.treasury.gov/tigta/contact_report_scam.shtml

The next step is to report the incident to the Federal Trade Commission at:

https://www.ftccomplaintassistant.gov/GettingStarted?NextQID=216&Selected=t%20-%20crnt#crnt

You should add “IRS Telephone Scam” to the comment of your report.

Please contact your tax advisor on all the above information.

2017 Student Loan Interest Deduction

Thursday, February 2nd, 2017

The student loan interest deduction has not changed for 2017, the maximum deduction for interest paid is $2,500.

Unfortunately there are phase outs for this deduction based on your income level. The phase outs begin if you have modified adjusted gross income in excess of $65,000 ($135,000 for joint filers). If your modified adjusted gross income is $80,000 or more ($165,000 for joint filers) then you do not get any deduction.

Please consult your tax advisor on all the above information.

2017 Education Credits

Wednesday, February 1st, 2017

Hope Scholarship Credit

This is an education tax benefit that allows a credit if you paid qualified tuition and related expenses for the first four years of postsecondary education.
The maximum credit for 2017 is $2,500.

Lifetime Learning Credit

You may be able to claim a lifetime learning credit of up to $2,000 for qualified education expenses paid for all eligible students. Unlike the Hope Credit which limits you to four years, there is no limit on the number of years you can claim the Lifetime Learning Credit. This credit applies to postsecondary classes, you do not need to be working towards a degree. The credit is 20% of your expenses up to $10,000. There are limitations on this credit so you should consult with your tax advisor.

Please consult your tax advisor on both credits to make sure you qualify to receive one or both of them.

2017 Kiddie Tax

Monday, January 30th, 2017

Kiddie tax is a term that applies to the unearned income of children, such as interest and/or dividend income as an example. The kiddie tax will apply to children under the age of 19 and college students under the age of 24. All of the child’s unearned income in excess of $2,100 is taxed at the parent’s tax rate. The purpose of the kiddie tax is to discourage parents from shifting investments to their child’s name in order to reduce their own taxes.

Please consult your tax advisor on all the above issues.