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The Biggest Withholding Tax Mistake You Could Make This Year

February 7, 2019

Crumpled Paper from Withholding Tax Mistake

If you're one of the 30 million people who didn't withhold enough taxes in 2018, you may have a not-so-pleasant surprise this tax season.

Check for these five qualities to make sure your tax pro is qualified and the best for you.

It’s a mistake that 21 percent of taxpayers could have made this year. Thanks to the Tax Cuts and Jobs Act that was signed into law in Dec. 2017, some people may owe more to the IRS this year than ever before depending on their tax bracket and filing situation. Why? They may have made a major tax withholding mistake.

While the Treasury Department and the IRS updated their withholding tables to offer a guideline to how much income taxes need to be deducted from your paycheck, some people did not change their tax withholding amounts accordingly. And if you’re one of these people, you’ll have an unfortunate surprise ahead of you come filing time.

Here’s what you need to know about withholding tax:

What is it?

Withholding tax is when your employer takes taxes directly out of your paychecks to send to the IRS and any state tax authorities for you. Employers do this in an attempt to leave you even with any tax collectors by the end of the year. If more tax is withheld than necessary, you’ll end up with a tax refund when you file your taxes.

When it comes to refunds, giving the government what is essentially an interest-free loan isn’t ideal. Still, it’s better than what happens if not enough tax is withheld.

What happens if I didn’t withhold enough taxes?

If you’re part of the 30 million people who didn’t withhold enough taxes in 2018, you may be in for a not-so-pleasant surprise when you go to file. If you didn’t withhold enough taxes, you’ll end up owing a big tax debt when you file your taxes (and potentially getting slammed with an underpayment penalty).

Tax bill too big for you to pay immediately? Don’t worry – there’s always options available to you. You can work with a tax professional to figure out a way to pay that will work for your unique situation.

Is there anything I can do to fix it now?

Unfortunately, you can’t change your withholdings for 2018 now that the year is over and done.

However, this is the perfect opportunity for you to update your withholdings for 2019. Since the withholding table has no foreseeable updates in the near future, you should make time with your tax preparer to review your withholdings.  You can also use the IRS’s handy withholding calculator to check your tax withholding. If you need to make changes, update your W-4 form and give this updated version to your employer.

Performing a paycheck checkup now will help you ensure you’re paying the right amount in taxes throughout the year. Take some time to check your tax withholdings now to ensure you’re not left with a hefty tax bill (or an unnecessarily hefty tax refund) come filing time in 2020. If you need help figuring it out, give us a call. Our tax prep experts are always here to help you file timely tax returns to optimize tax breaks and avoid mistakes the first time.

5 Tax Tips to Get You Through the IRS Shutdown and Its Wake

January 24, 2019

Coins and government shutdown written: IRS Shutdown

The government may be able to shut down, but you can’t shut down taxes or tax debt.

Check for these five qualities to make sure your tax pro is qualified and the best for you.

“But if the government is shut down, can’t I just wait to file my taxes or pay back my tax debt?” This is one of the most dangerous thoughts you can have during the shutdown. The IRS shutdown mode should not keep you from dealing with your taxes or tax debt. The government may be able to shut down, but you can’t shut down taxes or tax debt.  With tax season beginning next week, we’ve put together a simple guide to help you prepare to deal with your taxes and tax debt during and after the IRS shutdown.

Here are some tips to help you make your way through this IRS shutdown and the aftermath:

1. Gather all your tax forms.

Make sure all your tax forms arrive on time. If they don’t, make sure you check your records to ensure you didn’t receive any missing forms earlier than expected.

If you still cannot find some of your necessary forms, be sure to reach out ASAP to the responsible party. The IRS may not be available by phone due to the shutdown. So, you will want to put extra effort into contacting the issuer of the form you need. If you’re missing a W2 form, be sure to contact the responsible employer before considering reaching out to the IRS. You’ll want to make sure you have all the tax forms needed before you file, otherwise you could be at risk for an audit.

2. File as soon as you can.

Once you have all your tax forms, don’t hesitate to start filing. The deadline to submit personal tax returns for most of the nation is April 15, 2019. The only exceptions to this deadline are for  Maine and Massachusetts residents, who have until April 16 to file, and District of Columbia residents, who have until April 17.

If you do think you’ll need an extension past these deadlines, you can seek one from the IRS or state taxing authority. Just keep in mind that an extension is an extension to file, not to pay. So if you owe, you must pay on time. You’ll want to keep a copy of your extension too as proof that you filed one.

Also, you should consider e-filing this year. The IRS has strongly encouraged taxpayers to file their returns electronically in order to minimize errors and receive faster refunds. 

3. Check online before you call.

The average wait time for the IRS between April 2016 and April 2017 was about 70 minutes. Even with the IRS bringing back 36,000 furloughed workers to work without pay, there’s no telling how long wait times will be now during and after the government shutdown. If you do call, you’ll need to maintain plenty of patience.

And if you were thinking of going to a walk-in taxpayer assistance center (TAC) or sending the IRS something via mail, you’ll be out of luck. The TACs are closed during the IRS shutdown and the IRS has said they will be responding to mail “to only a very limited degree during this lapse period.” Your best bet will be to use the IRS’s online resources to address any questions you have.

4. Get ready for the rigor of audits and collections once the shutdown ends.

During the IRS shutdown, they won’t be conducting audits or actively engaging in collection activity. You’ll still get automated initial contact letters about audits and any automated collection activity will continue. Just because they won’t be auditing or partaking in collection activities doesn’t mean you should put your feet up and relax.

In fact, this is the perfect time for you to prepare yourself and your paperwork for the inevitable. The government can’t stay shut down forever. And once the IRS is up and running again, they’ll be starting up those audit and collection processes in full force. You don’t want to be caught unprepared for something like that. Make sure you find tax audit help as needed and start looking into ways to stop those collection activities.

5. Don’t wait to take action on outstanding tax debt.

A government shutdown may seem like the perfect time to avoid your tax debt. It gives you so many excuses not to resolve your IRS bill: it’s hard to reach the IRS, they won’t be pursuing you actively, you may not be getting paid if you’re a furloughed government worker or third-party government contractor, etc.

Don’t let any of these excuses stop you from taking that first step towards freedom from tax debt. Instead, take this moment to confront your tax debt and explore ways to find relief. Our tax professionals can walk you through ways to get tax relief help during a free consultation. And if you’re struggling with tax debt, why not enter our #PayMyTaxes Contest for your chance to win up to $50,000 towards your IRS bill? Click here to apply to the #PayMyTaxes Contest.

At the end of the day, this IRS shutdown has come at an unfortunate time, coinciding with the first tax season that includes all the tax reform changes that came with the Tax Cuts and Jobs Act. If you need any help figuring out your taxes or finding back taxes help, our team is always here to help. 

Infographic explaining five tips to get you through the IRS shutdown and its wake

4 Practical (and Freeing) Ways to Celebrate Tax Day

April 12, 2018

Celebrate Tax Day blog

Your bank statement will typically reflect your #taxrefund cash within 21 days of filing.

Check for these five qualities to make sure your tax pro is qualified and the best for you.

Tax Day isn’t anyone’s favorite holiday. Whether you own a corporation or started your first part-time job last year, the April deadline is stressful for the entire U.S. population. But if you’ve filed your taxes on time this spring (by April 17), it’s time to celebrate. Here’s how you can kick back and relax at the end of this tax season:

1) Put your tax documents in hibernation: Time for those W-2s and receipts to catch some Zzzs in a secure place. Don’t throw them away, though: you may need to reference them if the IRS alerts you of mistakes that need to be corrected on your tax return, or if the IRS audits you.

2) Thank your tax preparer: Give a shout-out to anyone who helped you file this tax season, including CPAs or even your spouse. This is their busiest season, after all. Tax professionals can help beyond the preparation by reviewing amended returns, protecting against audits, and addressing back taxes.

3) Look for your tax refund to hit your bank account: Expecting a federal tax refund? The average federal tax refund is $2,895, which could mean it’s time to get those new shoes you’ve been eyeing. Your bank statement will show the extra cash typically within 21 days of your filing date. You can check with the IRS “Where’s My Refund?” tool for more information on your expected refund.

4) Have a glass of wine: Sit back and relax – you’ve earned it. #Cheers

Not celebrating this Tax Day because of owed back taxes? Tax Defense Network can help find the best solution for your situation and negotiate with the IRS on your behalf. It’s easy and free to get started. Call to speak with a tax analyst for your no-cost, no-commitment consultation today at 877-588-1098.

6 Things to Get Done Before Tax Day

April 4, 2018

Tax Day in cereal

April 17 is Tax Day - what does it take to get Tax Day right?

Check for these five qualities to make sure your tax pro is qualified and the best for you.

If you haven’t figured it out from every U.S. adult sweating profusely over their W-2s, receipts, and calculators, April 17 is Tax Day this year. But what does it take to get Tax Day right?

Here are six things to do before the April 17 deadline rolls around:

  1. File your taxes: Tax Day is all about – you guessed it – having your taxes filed to the IRS and your state. Ensure you’ve received all paperwork needed to complete tax returns, including W-2s from employers, social security information, and more. Enlist the help of a tax preparer to make sure you’re in compliance with IRS and state requirements.
  2. Fund your IRA or Roth IRA: You still have time to contribute to your retirement accounts for deduction write-offs – woohoo! After the April tax deadline, you won’t be able to take advantage of this benefit for the 2017 tax year.
  3. Businesses: File your Q1 estimated taxes for 2018: April’s Tax Day is a double whammy for business owners as Q1 estimated tax payments and individual tax returns are due. You don’t want to start off the year on the wrong foot with the IRS – they’ll remember your compliance if you ever need future tax debt resolution.
  4. File for an extension if you need it: No way you’re getting your tax forms submitted by Tax Day? You can apply for a filing extension that will give you two extra months to get things taken care of. If you don’t file for a needed extension, you’ll be on the hook for Failure to File penalty plus interest. And remember: There is no such thing as an extension on paying tax debt.
  5. Request an IRS payment plan if you can’t pay: Financial hardship may prevent you from affording tax payments this year. If this is the case, request an IRS payment plan to get the ball rolling and avoid things from getting worse. If no effort is made on your part to resolve the problem, the IRS will begin to charge penalties and interest on the amount owed, even if there are no collection actions like liens and levies.
  6. Get help from a tax professional: Make a sincere effort to get tax debt resolution and the IRS will cut you some slack. Get help from a tax relief company like Tax Defense Network who can work with the IRS on your behalf, helping you learn your options for getting taxes back on track.

So, are you ready for Tax Day?

Call Tax Defense Network for a free consultation on filing returns, resolving tax issues, or handling business taxes at 877-588-1098.

 

When Itemizing Tax Deductions, Hold the SALT

March 27, 2018

Spilled Salt

The new SALT itemization cap is meant to encourage taxpayers to take the standardized deduction starting 2019.

Check for these five qualities to make sure your tax pro is qualified and the best for you.

No matter where you live in the U.S., you have to pay taxes (sorry). But the type and amount you pay do depend on where you live. Now, taxpayers in high-cost areas who’ve enjoyed cushy itemized deductions for state and local taxes (SALT) may not catch a break anymore.

To itemize or not to itemize? It depends.

Taxpayers have two options for tax deductions: itemize or take the standard set by the IRS. This year’s tax season has no restriction on the total amount of SALT deductions you can have, but that will all change starting next year. The Tax Cuts and Jobs Act (TCJA) will cap taxpayer’s combined state property, income, and sales tax to the following deduction limits:

  • Single filers: $10,000
  • Married filing jointly: $10,000
  • Married filing separately: $5,000

The high-income household shift to standardized deductions

A third of filers pick itemizing over standard deductions, according to the IRS. And of those itemizers, 95 percent choose to deduct their SALT. Most of the SALT-deducting taxpayers live in high-cost states such as New York, California, Oregon, and New Jersey, where property taxes alone can easily exceed the $10,000 threshold. So why the cap?

The SALT itemization cap is meant to encourage taxpayers to use the standard deduction, which sits at:

  • Single filers: $12,000
  • Head of household: $18,000
  • Married filing jointly: $24,000

 

SALT deduction comparison chart

This is meant to simplify tax preparation as people opt to take the standard. But residents of costly states knew this would be bad for their wallets, and some tried to pre-pay 2018 property taxes before 2017 came to a close. Unfortunately, it doesn’t work that way, and the IRS already added a rule against prepayment.

When it comes down to it, it won’t be worth itemizing your SALT deductions next year unless you’re able to diversify them. Ask your tax preparer if taking the standard is in your best interest and how you can prepare to handle additional tax reform changes.

Need more tax help? Call us for a free, confidential consultation today at 877-588-1098.  

Top 5 Reasons Not to Procrastinate Filing Your Taxes (Part II)

March 16, 2018

Don't Procrastinate on Taxes

Filing your taxes early means an earlier refund and less risk.

Check for these five qualities to make sure your tax pro is qualified and the best for you.

Tax season is (quickly) coming to a close – have you filed yet?

Taxpayers have until April 17, 2018 to file their tax return, but waiting until the last minute can make post-deadline season a nightmare. Even when complying with tax laws, having less time to prepare and file the return can create serious beef with the IRS. Here are five reasons to file your taxes sooner than later this season:

  1. Prevent ID theft: Identity theft is real, and the IRS can’t shield every taxpayer from falling prey. Once a fraudulent tax return in your name reaches the IRS, they may accept it. To minimize the risk of a criminal taking your identity and money, file your return as early in the season as possible. The IRS won’t accept any other return filed in your name by scammers.
  2. Get an early tax refund: The IRS issued more than $426 billion in refunds for the 2016 fiscal year – and in this case, the early bird gets the worm. The sooner you file, the sooner you get your refund money and can spend it. Hello, new shoes.
  3. Avoid IRS penalties: If you file your tax return a few days before the April deadline, your yearly tax duty isn’t necessarily over. The IRS may send you a notice that you owe more than you paid, usually due to mistakes on your tax forms. If you have to file an amended return and miss the filing deadline, the IRS begins to charge penalties and interest on the taxes due. And learning you owe more – and then even more – is no fun.
  4. Make fewer mistakes: With adequate time to prepare and review your tax return, you minimize the chance of errors (and penalties). If you’re filing in a rush, you could miss a credit or deduction that could save you hundreds in taxes. Simple errors can also lead to an audit.
  5. Have more time for expert help: The longer you wait, the narrower your filing options become. Many of the CPAs in your area may be already booked, leaving you with fewer choices. And doing it alone can sometimes seem impossible.

Avoid the stress of late filing by working with a tax professional you trust, as soon as you can. The team at Tax Defense Network can file even the most complicated of returns, getting you the help you need in a timely manner.

Top 5 Reasons Not to Procrastinate Filing Your Taxes

February 25, 2016

Taxpayers have until April 18, 2016 to file their tax return, but delaying the process can create problems. Even when complying with tax laws, having less time to prepare and file the return can create issues with the IRS. Here are five reasons why you should not procrastinate in filing your return:

1. Tax Identity Theft

According to a report by the Government Accountability Office, the IRS estimated that it prevented $24.2 billion in fraudulent identity theft refunds in 2013. However, the tax agency paid out $5.8 billion in what was later determined to be fraudulent refunds.

Identity theft is real and the IRS cannot shield every taxpayer from falling prey. Once a fraudulent tax return reaches the IRS, there is a chance that it will be accepted. Therefore, to minimize the risk, taxpayers should file their returns as early in the season as possible. After your return has reached the IRS, they will not accept any other return filed in your name by scammers.

2. Early Tax Refund

Almost 75% of Americans receive a tax refund each year. By filing your return early, you can receive your refund sooner. The sooner you receive it, the earlier you can invest or spend your money.

3. Owing More Than You Paid

If you file your tax return a few days before April 18, you may believe that your yearly tax duty is over. There is always a chance, though, that you will receive an IRS notice informing you that you owe more than you paid.

Filing in haste can cause mistakes that can only be corrected by filing an amended return. If you miss the filing deadline, the IRS begins to charge penalties and interest on the taxes due.

4. Sufficient Time, Less Mistakes

With adequate time to prepare and review your tax return, you minimize the chance for errors. If you’re filing in a rush, you could miss a credit or deduction that could save you hundreds in taxes. Simple errors can also lead to an audit.

5. Availability of Return Preparers

The longer you wait, the narrower your filing options become. Many of the CPAs in your area may be already booked, leaving you with fewer choices. There may be long lines forming the closer the filing deadline gets.

To help avoid refund fraud, mistakes on your return, and unnecessary stress, it is preferable to file weeks before the filing deadline. Procrastination where taxes are concerned can cause both stress and loss of money.

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