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Archive for the ‘Tax Tips’ Category

Who Qualifies for the Employee Business Deduction

Wednesday, January 13th, 2021

Unlike in years past, taxpayers can no longer claim unreimbursed employee expenses as a miscellaneous deduction on their Schedule A unless certain qualifications are met. If you are a qualified employee or an eligible educator expenses can be deducted as an adjustment to income on Form 2106. A qualified employee is one of the following:

• Armed Forces Reservists
• Qualified performing artists
• Fee-basis state or local government officials
• Employees with impairment-related work expenses

A qualified expense is:
• Paid or billed during the tax year
• For carrying on a trade or business of being an employee, and
• Ordinary and necessary

Publication 529 gives a more in depth look at what is and isn’t deductible:
https://www.irs.gov/pub/irs-pdf/p529.pdf

Please consult your tax advisor on all the above information.

2020 Standard Mileage Rates

Thursday, January 7th, 2021

As we get closer to the end of 2020 you may want to know how much you can deduct for your business mileage for this year. The 2020 standard mileage rates are the following:

• 57.5 cents per mile driven for business use, down one half of a cent from the rate for 2019,
• 17 cents per mile driven for medical or moving purposes, down three cents from the rate for 2019, and
• 14 cents per mile driven in service of charitable organizations.

It is important to note that under the Tax Cuts and Jobs Act, taxpayers cannot claim a miscellaneous itemized deduction for unreimbursed employee travel expenses. Taxpayers also cannot claim a deduction for moving expenses, except members of the Armed Forces on active duty moving under orders to a permanent change of station.

Please consult your tax advisor on all the above information.

2021 Standard Mileage Rates

Monday, December 28th, 2020

The IRS recently released the information on how much you can deduct for mileage for 2021. The mileage rates apply to operating an automobile for business, charity, medical or moving purposes.

Starting on Jan. 1, 2021, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

• 56 cents per mile driven for business use, down 1.5 cents from the rate for 2020,
• 16 cents per mile driven for medical or moving purposes for qualified active duty members of the Armed Forces, down 1 cent from the rate for 2020, and
• 14 cents per mile driven in service of charitable organizations, the rate is set by statute and remains unchanged from 2020.

Please consult your tax advisor on all the above information.

Recovery Rebate Credit

Wednesday, December 23rd, 2020

Taxpayers may be able to receive a Recovery Rebate Credit when they file their 2020 taxes if they were eligible for the Economic Impact Payment and didn’t receive it or didn’t receive the full amount they were entitled to. You may be eligible to receive the Recovery Rebate Credit if meet the eligibility requirements and one of following applies:

– You didn’t receive an Economic Impact Payment in 2020.
– You are single and your payment was less than $1,200.
– You are married, filed jointly for 2018 or 2019 and your payment was less than $2,400.
– You didn’t receive $500 for each qualifying child.

You want to make sure to save your Notice 1444 that you received in the mail because you will need this to determine if you are eligible for the Recovery Rebate Credit when you file your 2020 tax return. The IRS gives a further explanation on their website:

https://www.irs.gov/coronavirus/economic-impact-payments

please consult your tax advisor on all the above information.

New Notice for your 2020 Tax Return Regarding Economic Impact Payments

Monday, December 21st, 2020

If you received an Economic Impact Payment in 2020 you will receive a Notice 1444 which states the amount of the payment you received. You want to save this notice to refer to it once you go to file your 2020 tax return. This notice specifically provides information about the amount of the payment, how the payment was made, and how to report any payment that wasn’t received.

Saving this notice is also important because when you file your tax return you may be eligible for a Recovery Rebate Credit. People who didn’t receive an Economic Impact Payment in 2020 may qualify for the Recovery Rebate Credit.

This form should be kept with all your 2020 tax documents and submitted to your tax preparer when you go to file your 2020 tax return.

Please consult your tax advisor on all the above information.

Covid Text Message Scam

Wednesday, December 9th, 2020

The IRS has issued a warning for yet another new scam going around, this one involves text messages. The endgame for the scammers in this new scam is to ultimately get your bank account information and they are using the $1,200 Economic Impact Payment to facilitate this scam.

The scammers will send you a text message that says you “have received a direct deposit of $1,200 from COVID-19 TREAS FUND. Further action is required to accept this payment…Continue here to accept this payment”. The text will then provide a link that sends you to a phishing website where the scammer tries to get you to enter your personal and bank information so they can steal it. The fake website does look like a real IRS website. DO NOT CLICK ON THE LINK OR ENTER ANY OF YOUR PERSONAL INFORMATION.

The following instructions are directly from the IRS if you receive this text:

Anyone who receives this scam text should take a screenshot and include the screenshot in an email to phishing@irs.gov with the following information:

• Date/time/time zone that they received the text message
• The phone number that received the text message

The IRS doesn’t send unsolicited texts or emails. The agency will never demand immediate payment using a gift card, prepaid debit card or wire transfer or threaten to have a taxpayer arrested.

Please consult your tax advisor on all the above information.

2020 Standard Deduction Amounts

Monday, December 7th, 2020

Standard deductions usually increase every year due to inflation. Below are the updated tax year 2020 standard deduction amounts:

• Married filing jointly: $24,800 — up $400 from 2019 tax returns
• Married filing separately: $12,400 — up $200 from 2019 tax returns
• Head of household: $18,650 — up $300 from 2019 tax returns
• Single: $12,400 — up $200 from 2019 tax returns

Please consult your tax advisor on all the above issues.

IRS is Making it Easier for Installment Agreements

Wednesday, December 2nd, 2020

Due to Covid-19, the IRS has recently made changes to help ease the burden to taxpayers who owe money. The IRS is trying to give more options to people to make their payments. The IRS is expanding their payment plan options and added new tools to assist taxpayers:

• If you qualify for a short term payment plan you now have 180 days to resolve the tax liability instead of 120 days.

• The IRS is offering flexibility for taxpayers who are currently unable to meet their obligations with their Offer in Compromise.

• The IRS will automatically add certain new tax balances to existing Installment Agreements, for individual and out of business taxpayers. This taxpayer-friendly approach will occur instead of defaulting the agreement, which can complicate matters for those trying to pay their taxes.

• Certain qualified taxpayers who owe less than $250,000 may setup an installment agreement without providing proof, such as a financial statement, that their proposed monthly payments are sufficient enough.

• Some people who only owe a 2019 tax and its under $250,000 may qualify to setup an installment agreement without a notice of federal tax lien filed by the IRS.

• Qualified taxpayers with existing Direct Debit Installment Agreements may now be able to use the Online Payment Agreement system to propose lower monthly payment amounts and change their payment due dates.

Please consult your tax advisor on all the above issues.

A Key Form Change to be on the Lookout for

Wednesday, November 25th, 2020

We want everyone to be aware of a key change to one of the tax forms that you are accustomed to seeing in years past. The form you want to be on the lookout for is the Form 1099-Misc which is the form that you receive if you performed certain service and received payment from a business. So when you start receiving your tax forms for 2020 instead of a Form 1099-Misc you may now receive Form 1099-NEC, Non-Employee Compensation. This new form just isolates the money you received for certain services from businesses where as in years past the 1099 would include other items such as rents received, royalties, and fishing boat proceeds.

Below is a list of payments where you would still receive the Form 1099-Misc instead of the Form 1099-NEC:

• At least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest.

• At least $600 in the following:
 Rents.
 Prizes and awards.
 Other income payments.
 Generally, cash from a notional principal contract to an individual, a partnership or an estate.
 Any fishing boat proceeds.
 Medical and health care payments.
 Crop insurance proceeds.
 Payments to an attorney.
 Section 409A deferrals.
 Nonqualified deferred compensation.

Below is an example of the new 2020 Form 1099-NEC:

Please consult your tax advisor on all the above information.

Some College Students may qualify for an Economic Impact Payment

Wednesday, November 18th, 2020

If you are a self-supporting college student who doesn’t file a tax return you made be eligible to receive an economic impact payment. It is important to note that the deadline to file using the non-filers tool is 3:00 PM on Saturday November 21st. The tool to register online can be found at the following link:

https://www.irs.gov/coronavirus/non-filers-enter-payment-info-here

A self-supporting student who registers and qualifies will receive a $1,200 payment if they are single and $2,400 if married and file a joint return (as long as the student or their spouse cannot be claimed as a dependent). The student may also get an additional $500 for each qualifying child.

Only self-supporting students who are not required to file a tax return should register using the non-filers tool. If the student is a dependent on their parents tax return or a dependent on someone else’s tax return then they do not qualify for this payment.

The IRS also has a tool where you can track the status of your payment starting two weeks after they register:

https://www.irs.gov/coronavirus/get-my-payment

If you miss the November 21 deadline and qualified for a payment you will have to wait until next year to claim the Recovery Rebate Credit when you file your 2020 tax return.

Please consult your tax advisor on all the above information

Tax Year 2020 Charity Deduction Change

Thursday, November 12th, 2020

Typically taxpayers can only deduct charity donations if they itemize their deductions on a Schedule A. Due to the tax law changes from a few years ago, many people do not qualify to itemize their deductions and instead take the standard deduction. By taking the standard deduction, you do not get to deduct your charity donations. The IRS has changed that to encourage people to donate money to charity.

So on your 2020 tax return, you can now deduct up to $300 of charity donations if you do not itemize your deductions on a Schedule A. If you do itemize your deductions then you are not subject to the $300 limitation.

If you do not itemize, any donations above the $300 cannot be carried forward to future years.

Please consult your tax advisor on all the above issues.

How long does the IRS have to Collect Back Taxes from you?

Tuesday, November 10th, 2020

People often wonder a couple different questions when it comes to the IRS collecting back taxes from you. How long does the IRS have to assess additional taxes owed? And how long does the IRS have to collect that money from you?

The IRS generally has three years from the date you file a tax return to assess additional taxes for that particular tax year. There are some exceptions to this three year rule. If you fail to file a return or file a fraudulent return the IRS has an unlimited amount of time to assess additional taxes for that year.

After the IRS assesses you with additional tax, they have 10 years from the assessment date to collect it from you. The 10 year period can only be extended for people who have entered into installment agreements or the IRS obtains court judgements.

But the 10 year period can be suspended under a couple different circumstances. This happens when the IRS cannot collect money due to the taxpayer’s bankruptcy or there’s an ongoing collection due process proceeding involving the taxpayer.

Please consult your tax advisor on all the above information.

IRS Discovered a new Text Scam

Wednesday, November 4th, 2020

The IRS wants to remind people that scammers have been relentless when it comes to using the Economic Impact as a cover to steal your personal information including bank account numbers. The IRS will never text you to get your bank account information. The scam text reads as follows:

“You have received a direct deposit of $1,200 from COVID-19 TREAS FUND. Further action is required to accept this payment into your account. Continue here to accept this payment …”

The text then includes a link to click on that takes you to a fake IRS website where they direct you to enter your bank account information to receive the payment. Then once you enter your information the scammer now has all your bank information.

Per the IRS, People who receive this text scam should take a screen shot of the text message that they received and then include the screenshot in an email to phishing@irs.gov with the following information:

• Date/Time/Timezone that they received the text message
• The number that appeared on their Caller ID
• The number that received the text message

As a reminder for any type of potential scam, never give out your personal information to any form of unsolicited contact. If you need information regarding the IRS, you should go directly to their site IRS.gov and not click on any links from an unsolicited text or email.

Please consult your tax advisor on all the above information.

Watch out for Scams After Disasters

Wednesday, November 4th, 2020

The IRS is warning people to watch out for scams following any type of disaster, this is prime time for scammers to take advantage of individuals who want to help the victims of these disasters financially. The scam usually comes up after a hurricane, wildfire, or any other type of disaster. Scammers know that charity donations will often pickup after a disaster so that is what they try to take advantage of.

The scam will start some type of unsolicited communication such as email, text, a call, social media, etc. Then the scammers use the following tricks to try to get money or personal information out of you:

• Scammers will pretend to be from a legit charity in order to steal your money or information.
• Scammers will setup fake websites that look legit to get your money.
• Scammers will even pretend to be from the IRS and tell you they can help you get additional tax refunds if you work with them and make donations.
The IRS has a few tips with regards to disasters and fake charities:
• You can call the IRS directly at 866-562-5227 to speak with a specialist if you are a victim of a disaster.
• Taxpayers can visit the following IRS website to assist them in finding a real charity to donation to:

https://www.irs.gov/charities-non-profits/tax-exempt-organization-search

• Always contribute money that has a trail such as a check or a credit card.

Always remember that if you get an unsolicited request for your personal information it is most likely a scam so always be aware.

Please consult your tax advisor on all the above information.

Unemployment Compensation is Taxable

Wednesday, October 28th, 2020

With many Americans on unemployment as a result of Covid-19, the IRS wants to remind taxpayers that unemployment compensation is taxable so people should plan on that tax liability being on their 2020 tax returns. It is always a good idea to have taxes withheld from each payment so that you won’t get surprised with a big tax bill when you go to file your 2020 return. Taxable benefits include any of the special unemployment compensation authorized under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, enacted this spring.

The withholding of taxes from your unemployment benefits is taxable and law allows a flat 10% to be withheld. You want to fill out the following form to have the taxes withheld:

https://www.irs.gov/pub/irs-pdf/fw4v.pdf

If you would like to get a ballpark snapshot if you are having enough taxes withheld the IRS recommends using their withholding calculator:

https://www.irs.gov/individuals/tax-withholding-estimator

So if you did receive unemployment benefits in 2020 be on the lookout for Form 1099-G in January 2020, this will show how much you received and what figures need to be reported on your tax return.

Please consult your tax advisor on all the above issues.

Tips for Amending a Tax Return

Monday, October 26th, 2020

The IRS will often correct certain types errors on tax returns but there are situations where you may need to file an amended return. The good news is that amended returns (starting with tax year 2019) can now be efiled whereas prior you had to mail in a paper copy. Below are a few tips to assist you with amended returns:

• The IRS says not to amend for math errors or missing forms. The IRS may correct math errors and accept the return even if forms are missing. If they need any further information they will contact you.
• If you are due a refund from your return that you originally filed, you should wait for that refund before you file Form 1040-X to amend your return.
• You must file Form 1040-X to amend your tax return. 2019 Amended tax returns can now be efiled, any years prior to 2019 still need to be a paper return and cannot be efiled. If you are filing an amended tax return due to a response from an IRS letter you received, you should mail your 1040-X to the address listed on the letter. If not you can use the general instructions to get the correct mailing address:

https://www.irs.gov/instructions/i1040x

• Some examples of why taxpayers need to amend their returns are to correct filing status, claim additional income, deductions amounts are different, or credits need to be adjusted. Also keep in mind that changes to your federal return may also change your state tax return, so the state return may need to be amended as well.
• If you owe additional taxes due to you amended return you should pay that as soon as possible.
• File within three-year time limit. Taxpayers generally have three years from the date they filed their original tax return to file Form 1040-X to claim a refund. They can file it within two years of the date they paid the tax, if that date is later.
• You can track your amended return status online:

https://www.irs.gov/filing/wheres-my-amended-return

Please consult your tax advisor on all the above information.

Tax Tips for Newly Married Couples

Wednesday, October 21st, 2020

First off we would like to say congrats on your new marriage!!! Along with your new marriage there could be potential changes to your tax situation. We would like to highlight a few changes once you get married:

• Name and Address Changes – If you change your name after you get married it is important to make sure you report your name change to the Social Security Administration. We have had situations where we efile a tax return but it gets rejected because the name on the tax return does not match the taxpayer’s legal name. This delays your refund because your return cannot be efiled again until you correct the name change. For your address change, you should fill out Form 8822 and send it to the IRS:

https://www.irs.gov/pub/irs-pdf/f8822.pdf

• Tax Withholdings – Couples should review their tax withholdings once they get married. As an example if both spouses work you may be moved into a higher tax bracket so you may need to increase your withholdings. You should complete a new Form W-4 and give it to your employer within 10 days of your marriage.

• Filing Status – You should review which filing status will be more beneficial for your situation, married filing joint or married filing separate. Usually married filing joint is the best option but not always. Our firm can always calculate a joint versus separate comparison if requested.

• Scams – Always be on the lookout for any potential scams and know that the IRS does not contact you by phone, text, email, or social media to start. The first contact is via the mail. But be careful, the scammers have caught onto this and have been sending out fake letters that appear to be from the IRS.

Please consult your tax advisor on all the above issues.

Options if you need Copies of Prior Year’s Tax Returns

Tuesday, October 20th, 2020

Taxpayers often need copies of their prior year returns for various reasons, one reason would be that you are applying for a loan. If you do not have a copy of your return there are a few different options that you have to get one:

• Ask your tax preparer – if you have your taxes professionally prepared the firm should have copies of your prior year’s returns.
• Ask your software provider for a copy.
• Get a transcript of your return from the IRS – you have a few different options to obtain this from the IRS:

1) Online: https://www.irs.gov/individuals/get-transcript
2) By phone: 800-908-9946
3) By mail, you can fill out Form 4506-T or Form 4506T-EZ:

https://www.irs.gov/pub/irs-pdf/f4506t.pdf
https://www.irs.gov/pub/irs-pdf/f4506tez.pdf

If you would like an actual copy of your tax return from the IRS, you can mail in Form 4506 but there is a $50 fee per copy. The IRS has available the current year and the six years prior.

Please consult your tax advisor on all the above information.

Economic Impact Payment Deadline has been Extended

Wednesday, October 7th, 2020

The IRS has extended the due date to file for an Economic Impact Payment to November 21, 2020, this gives people an additional five weeks beyond the original deadline.

The IRS is urging people who do not file a tax return to register as quickly as possible to see if they are eligible for a payment:

https://www.irs.gov/coronavirus/non-filers-enter-payment-info-here

The above tool will not be available after the deadline date of November 21st, 2020.

Please keep in mind that this extension is for the Economic Impact Payment only. People who filed for an extension to file their 2019 tax return still have an October 15th, 2020 deadline to get that filed.

Please consult your tax advisor on all the above information.

2019 Tax Returns on Extension are Due Soon.

Monday, October 5th, 2020

The deadline for 2019 tax returns that are on extension is fast approaching. The deadline date to file your 2019 tax return is October 15th, 2020. The IRS urges taxpayers to efile and enter direct deposit information in order to get their refunds faster.

Most tax returns are due on October 15th but some have more time to file. Those that have more time are:

• Members of the military and others serving in a combat zone. They typically have 180 days after they leave the combat zone to file returns and pay any taxes due.

• Taxpayers in federally declared disaster areas who already had valid extensions. For details, see the disaster relief page on IRS.gov.

Please consult your tax advisor on all the information above.

Status of your Economic Impact Payment & Payment Deadlines

Wednesday, September 30th, 2020

Per the IRS: “Federal benefit recipients who don’t normally have a filing requirement but do have qualifying children must register by Wednesday, Sept. 30 to receive a $500 catch-up payment per child. Other non-filers have until Thursday, Oct. 15 to register for their Economic Impact Payment.”

The last day to apply for an Economic Impact Payment this year is October 15th, 2020. If you do miss any of the above deadlines then you will need to wait until next year then claim the payment as a credit on your 2020 tax return.

Eligible Individuals can visit the following site to find out more information about the status of their Economic Impact Payment:

https://www.irs.gov/coronavirus/get-my-payment

The tool on this site will show if your payment has been issued and whether it was direct deposited or mailed. There are also certain situations where the site will allow you to give the IRS your bank account information in order to get your payment via direct deposit. The IRS also wants to remind people that the site is updated once per day so there is no need to check it multiple times each day.

The tool will ask you a series of questions to confirm your identity and if your answers do not match the IRS you will get locked out of the site for 24 hours.

Another common issue for this site is that some people will get the message “Payment status not available”, which means the IRS can’t determine your eligibility at the current time. This may occur because of a few different reasons:
• A 2018 or 2019 return may not be on file with the IRS.
• The individual could be claimed as a dependent on someone else’s return.
• If you filed your 2019 tax return the IRS just may not have processed it yet. (The IRS will issue the payment, if you are eligible, after your 2019 return gets processed).

Please consult your tax advisor on all the above information.

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:

https://www.youtube.com/watch?v=s0eKEWlcNp8&feature=youtu.be

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:

https://www.irs.gov/help/ita/is-my-tip-income-taxable

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 phishing@irs.gov 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:

https://www.irs.gov/refunds

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:

https://www.irs.gov/businesses/small-businesses-self-employed/penalty-relief-due-to-first-time-penalty-abatement-or-other-administrative-waiver

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:

www.irs.gov/eipfaq

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

https://www.youtube.com/watch?v=pEAMB_sYezs

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):

https://www.irs.gov/coronavirus/economic-impact-payment-information-center#more

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:

https://www.ssa.gov/coronavirus/#reppayee

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:

https://www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form

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:

https://www.irs.gov/coronavirus/non-filers-enter-payment-info-here#_blank

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:

https://www.irs.gov/newsroom/economic-impact-payments-qualifying-child-requirements

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:

https://www.irs.gov/pub/irs-utl/how_do_I_calculate_my_eip.pdf

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):

https://www.irs.gov/coronavirus/get-my-payment

• 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:

https://www.irs.gov/coronavirus/economic-impact-payments

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:

https://www.irs.gov/coronavirus/non-filers-enter-payment-info-here

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.

As a reminder, NEVER GIVE OUT ANY PERSONAL INFORMATION TO ANY UNSOLICITED FORMS OF COMMUNICATION.

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 IRS.gov, 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:

phishing@irs.gov

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:

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

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:

https://www.irs.gov/filing/wheres-my-amended-return

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.