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Be Wary of These Small Business Tax Audit Triggers

June 21, 2019

These small business tax audit triggers can start an audit quicker than striking a match.

Higher than normal meal expenses and claiming your car as 100% business use are big indicators to the IRS that something’s amiss.

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

Running a small business is hard enough without taxes complicating everything. Even if you do your best to file accurately and on time, there’s still a chance you could face an audit. And IRS audits for small business owners are no joke. You can’t stop an audit once it has started and the audit penalties can be brutal. So, what can you do? If you learn about the following small business tax audit triggers, your chances of avoiding them in the future should be much higher.

Here are some common small business tax audit triggers:

Filing late

Believe it or not, the IRS notices when you file late, especially if you continue to file late annually. And with those late tax returns, they’re more likely to turn a more inquisitive eye to what you’re reporting and why.

The fix here is simple: file on time. We know it’s not always that easy. But timely filing can help keep you out of the IRS’s crosshairs, assuming nothing else catches their eye on your return.

Overdoing it with deductions

We know how important deductions are to a small business owner. And there’s nothing wrong with claiming certain deductions, like the new 20% pass-through deduction. The problem instead lies with trying to claim every deduction that might work for you. Higher than normal meal expenses and claiming your car as 100% business use are big indicators to the IRS that something’s amiss.

And don’t get too comfortable with the simplified method that was announced in 2013 when it comes to the home office deduction. The filing method may be easier, but the requirements are still very complex.

The part of your house that can be claimed must be solely dedicated to your business. This means that if you use some square footage of your home office for personal reasons, the whole room won’t qualify, just the part used for business. When the requirements for a deduction are this complex, trust that the IRS is keeping a serious eye on anyone who claims it.

There are two things to keep in mind when claiming deductions:

  1. You’ll want to be consistent year-over-year with your deductions.

Keep in mind the IRS’s “ordinary and necessary” rule when it comes to deductions. If the expense can be considered both ordinary and necessary to your business and to others in your line of business, you should be able to defend claiming it as a deduction. Those expenses shouldn’t change drastically from year to year.

  1. You don’t want to claim deductions that are out of proportion with your taxable income.

The IRS has their ways of determining how many deductions are too many for individuals in varying income brackets. If you’re claiming deductions that are way too high for your business’s income range, the IRS may come sniffing around. Stay prepared by keeping detailed records of any deductions that look uneven.

Reporting consistent business losses

Have you reported net losses over the past few years? According to the IRS (and most small business owners), the purpose of a business is to earn money. When the IRS notices a business not earning money year after year, they’ll perk up.

If your business is a startup and it takes a loss in its first year, your chance of being audited is lower. And if you earn a profit from your business for three of every five years, you’re likely in the clear.

However, if you only earn a profit from two of five years in business, the IRS may audit you. They’ll want to find out if your business is actually a business or just a hobby.

This trigger is a particularly vital one if you have a sole proprietorship, as it can make your audit risk skyrocket. Sole proprietorships are particularly susceptible to mixing personal and business expenses.

Having large cash transactions

Let’s face the fact: Cash is harder to track than credit card transactions and checks. Businesses that deal in large cash transactions are often at risk in the IRS’s eyes of underreporting and therefore not paying enough taxes.

Maintain good records of your cash transactions to ensure you can show your own detailed tracking of cash coming through your business. You’ll also want to file Form 8300 if your business accepts any cash payments over $10,000. At the end of the day, documentation makes a huge difference when you find yourself amid a tax audit.

Rounding numbers and messy math

We know you learned in school to round up when calculating final numbers. But that’s not the best route to take when filling out your tax forms.

You don’t want to report your income as $85,000 if you made $85,025.63 that year. Perfect numbers can stand out to an auditor. Of course, if you made $85,000 perfectly, report that exact number. Be sure you have the records to prove it down to the cent.

Also, if what you report on your return doesn’t align with your business records, don’t assume the IRS won’t notice. The IRS is as serious about math as your eighth-grade algebra teacher, so they will double check the calculations on your returns. And if something doesn’t line up, they’ll be sure to track down the cause.

The best way to avoid a small business tax audit:

Knowing these major audit red flags will help you avoid them in the future. Keeping detailed and extensive records of your expenses and transactions can also be a lifesaver.

However, sometimes it’s the least common audit trigger that can catch you in an audit trap. If you want to avoid a small business tax audit, seek out a trusted tax professional.

Tax pros like ours are well-versed in tax law and know what serious small business tax audit triggers to avoid. They have experience in filing small business taxes to maximize your deductions and minimize your chances of a tax audit.

If something does happen and you find yourself with an audit notice, we’ve got your back. Our tax experts have experience in tax audit help and dealing with small business tax issues. We make sure you’re never alone in dealing with the IRS.

Owe the IRS and Can’t Pay? Why You Need Tax Relief Help

May 9, 2019

Struggling with your IRS bill? Tax relief help might be just what you need.

The sooner you tackle your tax debt, the better. Tax relief help can help you get the best possible outcome.

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

By now, your taxes have hopefully been filed. You may have come out of 2018 without owing the IRS (or even getting a refund). However, there’s a big chance you instead found yourself with a tax bill you aren’t able to pay. If that’s the case, don’t be too hard on yourself. Many people found themselves in this position due to a withholding mistake (thanks, recent tax reform!) Getting bogged down in frustration and fear of an unmanageable tax bill won’t help now. Instead, read on to determine if tax relief help is your best bet to focus on a brighter tax future.

You don’t have the money to settle your bill and can’t see how you ever will.

You’re feeling hopeless. Maybe your current balance with the IRS is more money than you’ve ever seen in your bank account at any given time. Or perhaps you just mortgaged a house or leased a car, and you’re concerned about what this tax bill could mean for you. Whatever financial pickle you find yourself in, the fact remains: there’s no way you can just make one easy payment to clear up this tax debt.

Tax relief help experts like ours have been around the IRS block and have seen all sorts of financial situations. They’ll take the time to learn everything important about your unique circumstance. Then, they will be able to walk you through your options to find a route out of tax debt that works for you.

You don’t know how to deal with the IRS.

Imagine the headache you’d have if you went to make that dreaded IRS call. You immediately face droning hold music. With every staticky chord, your anticipation gets worse and worse. Even if you get a pleasant IRS rep, you’re still ultimately getting ready to have a conversation with someone whose main goal is to get what you owe the government.

Okay, we’re sorry we asked you to imagine that. Instead, just imagine the headache you wouldn’t have if you had a professional working with the IRS on your behalf.

Experience is key when it comes to IRS dealings and we’ve got plenty of it. Our team has a collective 250 years of experience in tax relief help. We know what questions the IRS will ask before they ask them. And we can help minimize long delays caused by submitting unnecessary information or payment requests that we know they won’t accept. Working with the IRS is our specialty, so it doesn’t have to be yours! 

You want to keep the tax relief damage to a minimum.

The worst part about tax debt isn’t the notices that the IRS will send you nonstop or even the anger you might feel for being in this situation. There are far more serious consequences ahead. From levies against your property or wages to penalties and interest that bury you in even more debt, the IRS can be unrelenting when it comes to trying to recoup what they’re due. And trust us, they can take things up a notch if they feel like you’re not paying attention.

The good news is that the sooner you tackle your tax debt, the better. By seeking tax relief help, you’ll ensure that there is a tax pro with experience and passion dedicated to working with the IRS to get you the best possible outcome.

If any of the above applies to you, tax relief help may be right for you – but be wary.

Tax relief help can really change your life. However, you’ll want to be careful. There are tax relief companies out there that will scam you out of your money and leave you in a worse situation.

Make sure any tax debt relief company you decide to work with is transparent. They should be open about their pricing and what you can expect from them. Most honest tax debt relief companies will offer a free consultation to gain a better understanding of your current situation before discussing what relief options are available to you. They won’t promise you solutions like tax debt forgiveness without knowing the full picture. Feel free to ask about their experience and expertise to ensure you’re getting seasoned professionals on your side.

We’ve helped resolve about 17 billion dollars in tax debt in the decade we’ve been in business. Our tax experts have a wide range of professional accreditations and are always ready to provide you with top-rated tax relief help. Contact us for your free initial consultation to take that first step towards freedom from tax debt.

What If You Forgot to File Taxes on Time?

April 18, 2019

Did you "otter-ly" forget to file your taxes before the deadline?

The sooner you file, the sooner you get your refund. And if you owe the IRS money, the sooner you file, the lower your tax bill.

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

Tax Day 2019 has come and gone. The deadline for filing your taxes was this past Monday, April 15 (unless you are a resident of Maine or Massachusetts, in which case your deadline was this past Wednesday, April 17). If you forgot to file or request an extension in time, you’re now officially late in filing your 2018 taxes. But what does that even mean? What happens if you forgot to file taxes on time? We’ll walk you through the consequences of not filing on time and what you can do about it.

If you forgot to file, you could face the pesky failure-to-file penalty.

The IRS may assess the failure-to-file penalty to any taxpayer who does not file by the deadline and who has an outstanding tax balance. The failure-to-file penalty is 5 percent of your unpaid taxes for each month your tax return is late (up to 25 percent). You’ll also get plenty of reminders from the IRS to file your taxes.

Think you can avoid this penalty by filing today? Unfortunately, it starts accruing the day after the deadline.

If you owe taxes, the IRS could hit you with extra penalties, interest, and worse.

Forgot to file taxes and have an outstanding tax bill? If you didn’t pay the IRS the full amount of taxes owed, you could be facing a failure-to-pay penalty. If you’ve got the failure-to-file and the failure-to-pay penalties running at the same time, they’ll cap at 5 percent of your unpaid taxes per month.

As far as penalties go though, this year you could be in luck. More people than ever are expected to have underpaid the IRS, thanks to the reform affecting 2018 taxes. To help combat this issue, the IRS has expanded their relief from their underpayment penalties.

If this isn’t your first year forgetting to file your taxes, your consequences could be a lot more severe. In addition to even more penalties, you could face wage garnishment and other levies. The IRS could even take you to court. Now luckily, the IRS won’t take those drastic actions without warning, but it’s still important to remember how serious the IRS can be.

Owe more than you can pay? There are always options like a payment plan or an offer in compromise that you could qualify for.

Say goodbye to your refund until you file.

Got money waiting for you in the form of a tax refund? The good news is that you won’t face the failure-to-file penalty.

The bad news: Unless you file your taxes within three years of the corresponding tax filing deadline, you can kiss that cash good-bye. In 2013, taxpayers who didn’t file left $1 billion in unclaimed federal income tax refunds on the table. And that’s generally cash that people worked hard for but ended up overpaying the government with.

If your choice is filing ASAP or losing money, you’ll want to choose filing every time.

The IRS will consider reasonable causes for not filing by the deadline.

If you’ve got a good reason for not filing your taxes on time, the IRS might hear you out. They must determine whether your reason for not filing on time is sound and established (with proper documentation) before waiving or reducing any penalties. These reasons include:

  • Death, serious illness, incapacitation or other absence of the taxpayer or an immediate family member.
  • Fire, natural disasters, casualty, or other similar disturbances.
  • Inability to get important tax records.
  • Other reason that shows you genuinely attempted to meet your tax obligations but could not.

Reasonable causes if you forgot to file taxes

Note that not having enough money to pay isn’t a listed reason for not filing or paying on time. The only exception here is if the reason you don’t have the money to pay is similar to the ones above.

Even if you have a good reason, the IRS typically doesn’t waive any accrued interest on your balance. If the IRS charged interest on a penalty that they are reducing or removing due to reasonable cause, they can reduce or remove that specific interest.

So, what should you do if you forgot to file taxes?

Easy – you should file those taxes ASAP. The sooner you file, the sooner you get your refund. And if you owe the IRS money, the sooner you file, the lower your tax bill.

When paying right away isn’t an option, tax pros can help negotiate with the IRS on your behalf. Our tax professionals are always available to ensure your unfiled taxes are handled quickly and accurately. Tax Defense Network by MoneySolver has been helping individuals and businesses deal with tax issues with the IRS for over a decade, and there’s little we haven’t been able to help with. If your situation is fixable without our services, we’ll let you know that up front, too. Start with a free consultation today. 

How Do I File a Tax Extension Before the Deadline?

April 11, 2019

Meeting the tax deadline can be doggone hard. That's why tax extensions exist. Learn how to file a tax extension today.

Don’t let the confusing tax law changes cause you to incur a penalty. The best way to get some extra time is by filing an extension.

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

It’s not just you; it really does feel like the first few months of 2019 have flown by. We’re finding it hard to believe the federal tax deadline is next week! If you’re in the same boat and don’t know how you’re going to get your taxes filed in time, there’s no need to stress. A simple tax extension can give you the time you need. And rest assured, lots of people will need one this year. In fact, a record 14.6 million requests for filing extensions are expected this tax season. So, if you’re not sure how to file a tax extension, here’s our guide to getting that extension submitted on time.

When Is the Tax Deadline Again?

Unless you live in Maine or Massachusetts, you have until April 15, 2019, to file your federal tax returns. If you are a resident of Maine or Massachusetts, you’ve got until April 17 to file thanks to two legal holidays.

The 2019 Tax Deadline is April 15 for most taxpayers. Wondering, "How do I file a tax extension?" We can help.

What Happens If I Don’t File a Tax Extension?

If you don’t file your tax return by the due date (or by the extended due date if you had an approved extension), you face the wrath of the IRS in the form of the failure-to-file penalty. This is a five percent per month penalty on any unpaid tax balance you have. This penalty is charged each month (or even part of a month) that the return is late, for up to five months. Even if you file your return less than 30 days late, the failure-to-file penalty will apply for the whole month.

Didn’t file your extension on time and owe taxes? You can also receive a failure-to-pay penalty along with your failure-to-file penalty. If you have both these penalties running simultaneously, the IRS limits their combination to 5 percent overall. But let’s be honest: no one wants two IRS penalties at the same time.  

Some people are afraid to file an extension because they think it could trigger an audit. However, the IRS encourages taxpayers to file for an extension if needed to help reduce tax-filing errors.

OK, but How Do I File a Tax Extension?

You can file for a six-month tax extension using Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. The IRS will review and hopefully approve your extension. Once you’ve gotten that approval, you’ll have until Oct. 15, 2019, to file your federal tax return.

You can either fill this form out and mail it to the IRS or you can submit it using a Free File software company. Some of these companies will also help you estimate what you’ll owe the IRS, so you can pay on time.

Whichever way you choose to submit Form 4868, make sure you do so by the due date of your return.

Remember: An extension to file is not an extension to pay.

Just because you have an extension on filing your taxes doesn’t mean you’ll have an extension on paying any taxes you owe this year.

What does this mean for you? If you don’t pay the taxes you owe by the April deadline, you stand to face the interest charged on any unpaid tax balance. The IRS might also hit you with an underpayment penalty or a failure-to-pay penalty on any overdue taxes. However, some taxpayers may have a break from these penalties because of the recent tax reform. The Treasury Department has stated that they will allow taxpayers who paid at least 80 percent of their tax bill during the year to avoid paying penalties. 

Also, if you’ve gotten an extension and you pay at least 80 percent of your actual tax liability by the actual April tax deadline, you can avoid a failure-to-pay penalty. How? You’ll need to make sure you pay the remaining balance by your extended due date of Oct. 15.

Even if you do owe, filing your extension will at least help you dodge a failure-to-file penalty. And since the failure-to-file penalty is usually higher than the failure-to-pay penalty, you’ll be dodging a much more financially-burdening bullet.

Will I Still Get My Tax Refund?

Unfortunately, no tax return = no refund. You won’t get your refund until you file your return. The IRS must process your return before determining if you’re due a refund.

Don’t let the confusing tax law changes cause you to incur a failure-to-file penalty. Especially if you’re a business owner, you’ll want to make sure you’re taking the time to make the most of your taxes. The best way to get some extra time is by filing an extension today.

Need help filing your return and maximizing your deductions? Our tax professionals are ready to help.

Five Signs That You Need Back Taxes Help Now

March 25, 2019

Five Signs That You Need Back Taxes Help: Red flag waving

What red flags indicate that you’ve hit the point where expert help in filing your back taxes is your best option?

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

Back taxes are a slippery slope. They can come about when you don’t pay enough on your taxes, when you fail to report all your income, or when you don’t file a tax return at all. No matter how unintentional, that first step down that back taxes path can seriously cost you. And it can be frightening to try and figure out how deep you’ve gotten once you’ve fallen. So how do you know when you need to reach out for back taxes help? What red flags indicate that you’ve hit the point where expert help in filing your back taxes is your best option?

If any of the following signs ring true for you, you may need professional back taxes help.

1. IRS notices have piled up in your mailbox.

If you have a stack of notices from the IRS about your back taxes, chances are it is time to do something about it. Instead of throwing the next CP14 notice on top of the rest (or worse, tossing it in the trash), reach out for help to put a stop to the endless stream of IRS letters.

2. The IRS has sent debt collectors after you.

While the IRS will stick to sending you notices in the mail, they can assign your case to a private debt collection agency. They will let you know if they do this. However, once it’s done, collectors will bombard you with phone calls and messages about your outstanding debt with the IRS. And as we all know, collections agents can be relentless.

3. Your passport is in jeopardy.

Believe it or not, delinquent tax debt can cause the IRS to deny, limit, or even revoke your passport. Say sayonara to all your travel plans until you’ve worked out a solution to your back tax issue. Once you’ve paid back your debt or made plans to pay back your debt, the IRS can reinstate your passport but it may not be overnight.

4. You lose your refund, your property, or part of your paycheck.

Refusing to pay your back taxes can result in a tax levy, which means that the government could take your property to satisfy your outstanding debt. They can also take your tax refund and even levy your wages in an attempt to regain what is due to them. While the IRS will send you notices in the mail beforehand, a levy can still shake you to your core. That’s why it might be best to consult a professional to help you fix your back tax issue. Keep your property where it belongs – in your hands.

5. The sum of what you owe (plus any penalties) is much higher than you can afford.

If you’ve got back taxes but you can afford your total balance, your best bet is to bite the bullet and make that tax payment. However, this isn’t often the case. Sometimes your overall balance due to the IRS (including any pesky penalties) is much more than you have available in your bank account. In that case, it’s in your best interest to seek out a tax pro who can help you resolve your back tax issue with a solution like debt forgiveness or a payment plan.

Do You Need Back Taxes Help?

If you recognize any of these signs in your life, it may be time to reach out for back tax help. The longer you wait, the worse it can get. Give our tax experts a call today to take the first step towards freedom from back taxes.

How Tax Audit Help Could Save You from an IRS Headache

February 26, 2019

Relieve that headache with tax audit help

Even with a completely clean return, there's always a possibility that you could face an audit.

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

It’s happened. You open your mailbox and there it is – the dreaded letter from the IRS stating that they’ve selected your tax return for “examination.” The IRS letter contains detailed instructions, but it doesn’t come with a translator. Before you get too worried about your tax audit fate, take a few deep breaths. We’ve got you covered. Here’s everything you need to know about audits and how tax audit help could help you through this distressing experience.

What does an audit include?

When the IRS audits you, they’re saying that they want to examine your return more closely. They’re looking to ensure all the information you provided is correct. There are three different audit types to look out for:

  • Correspondence audits: Audits conducted mainly by mail.
  • Office/desk audits: In-person audits at an IRS office.
  • Field audits: In-person audits that are either at your home or business.

The majority of IRS audits for fiscal year 2017 were correspondence audits at 70.8 percent of all audits.

IRS audit types

What triggers an audit?

Audits are typically triggered when something on your return is abnormal or “off” to the IRS. This can be as simple as making a typo or error, earning more money than you have in previous years, or forgetting to report cryptocurrency. But the cause can also be more complicated, like a self-employment tax issue.

Other audit causes include:

  • Failing to report taxable income
  • Having three consecutive years of business losses if you’re self-employed
    • This isn’t likely for corporations, but it’s still possible.
  • Using round numbers on your return
  • Deducting 100 percent of a business car

The most interesting audit cause? The IRS selects a very small amount of returns for audit at random as part of the National Research Program they conduct. That’s why most tax preparers cannot offer you an entirely “audit-free” return. Even with a completely clean return, there’s always a possibility that you could face an audit.

What can come from an audit?

There are three ways to conclude an audit:

  1. Accepted – the IRS proposes changes that you understand and accept.
  2. Disagreed – the IRS proposes changes that you understand but don’t agree with completely.
  3. No change – no changes come from your audit.

Sometimes the changes that the IRS proposes will include an increase in your tax bill. However, it’s not always the case that you’ll owe money after an audit brings about changes. In almost 34,000 instances out of the total 1.1 million tax returns audited in 2016, taxpayers received additional refunds totaling more than $60 billion.

No matter what conclusion comes from your audit, the biggest key is to watch out for deadlines. The IRS gives you a specific amount of time to respond and if you don’t respond, they will still post the changes.

Why turn to professional tax audit help?

There’s nothing that says you can’t take on an audit on your own, especially if it’s a correspondence audit. With these types of audits, you can usually complete them by sending the IRS whatever they’ve asked for. But if they aren’t satisfied with what you’ve sent or if you don’t have what they want, it could benefit you to seek out professional tax audit help.

You have certain taxpayer rights, which extend to the right to retain representation. This means that you have the right to have an authorized representative of your choosing to represent you with the IRS. Dealing with the IRS is far from your favorite activity. Luckily, tax audit reps like ours have experience in dealing with the IRS. Experienced pros know the right questions to ask. They can even translate confusing IRS terminology into phrases normal people can understand. With tax audit help and representation, you will rarely have to talk to the IRS. We’ll handle all the legwork for you and spare you the droning IRS on-hold music.

Is tax audit help expensive?

You may think you’re saving money by skimping on tax audit representation. But it can be even more financially damaging to receive a hefty IRS bill for tax deficiencies and penalties you may not fully understand. A representative who is well versed in tax code should be able to keep you from paying more than is necessary.

So give us a call today. You’ll have a free consultation with one of our experienced tax audit pros to get to the root of your audit issue. We’re always transparent about what to expect when it comes to our process and pricing.

What to Do If You Didn’t Get Your W-2

February 22, 2019

Didn't Get W-2? Here's What to Do

Receiving your W-2 in the mail can be a heads-up for many people that tax season is in full swing.

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

Receiving your W-2 in the mail can be a heads-up for many people that tax season is in full swing. Because you need your W-2 in order to file your taxes every year, it’s a great nudge to get you started on your tax prep checklist. At the end of each tax year, your employer is required to issue your Form W-2, Wage and Tax Statement, which details how much you made and how much income, social security, and Medicare tax were withheld from your pay. By now, your employer should have issued you your W-2, as the deadline for issuing forms to employees was Jan. 31. But what if you didn’t get your W-2?

If you didn’t get your W-2, take the following steps to ensure you receive it in time to file your taxes.

1. Contact your employer.

If you haven’t already, reach out to your employer or former employer and ask them to send your W-2. This should be the fastest way to get your W-2 form. Verify your contact information with them as well to make sure they sent your W-2 to the correct address.

Did your former employer go out of business or move since your employment with them? Still make an effort to reach out. Google is definitely your friend in this situation. Search for your employer online to see if you can find any breadcrumbs to follow and track them down. You can also attempt to send them a note via mail to their previous address, as there may be a forwarding notice with the post office.

2. Call the IRS hotline.

Still no W-2? Then, call the IRS hotline at 800-829-1040. Make sure you are ready to give the following information:

  • Your name, SSN, address and phone number.
  • Employer’s name, address and phone number.
  • Employment dates.
  • An estimation of your wages and federal income tax withheld. You can base this off of your last pay stub.

The IRS will contact your employer for you after this call. They’ll send them a Form 4598, Form W-2, 1098 or 1099 Not Received, Incorrect, or Lost. You should receive a copy of the Form 4598 as well, along with a Form 4852, Substitute for Form W–2.

3. Use Form 4852 in place of your W-2.

If your employer still has not issued a W-2 by April 15, file your taxes using Form 4852 in place of your W-2. It is important not to file Form 4852 too early because you could be charged penalties for “improper use.”

Always be sure to file your taxes on time, even if you use Form 4852. If you do not think you will be able to make the April 15 deadline, file for an extension using Form 4868, Application for Automatic Extension of Time to File on or before April 18. Filing late can cause you to incur some serious tax penalties.

4. If you get your W-2 after you’ve filed, amend ASAP.

Picture this: you didn’t get your W-2 in time so you went ahead and filed your taxes with Form 4852. The next day, you open your mailbox to find your missing W-2. Cue the eye rolling.

If you get your W-2 form after you’ve filed your return and the information is different from what you reported, you’ll need to amend your return. Luckily, amending isn’t too difficult. You’ll just need to file Form 1040X, Amended Individual Income Tax Return.

If you find yourself confused at any stage of filing this tax season, check out what our seasoned team of tax experts can do for you!

The Tax Prep Checklist You’ve Been Waiting for

February 14, 2019

Getting Ready for Tax Season: Tax Prep Checklist

Kick procrastination to the curb by using your own tax prep checklist.

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

Preparing your 2018 tax return never seems like an easy feat. It often feels easier to just put off your tax preparation. And sure, procrastination can keep a tax headache at bay for a little while. But you’re still better off taking care of your taxes sooner rather than later. In the face of a recent government shutdown and newly applicable tax reform, being prepared with a handy tax prep checklist has never been more important.

Why should I use a tax prep checklist?

Even if you’re having a professional tax preparer complete your tax return, a tax prep checklist can definitely come in handy. Using a checklist will help ensure you have all the information and documents needed to file.

You’ll need to gather forms and documents that fall into the following categories:

  • Personal information
  • General income
  • State & local taxes or sales tax
  • Homeowner/Renter information
  • Medical expense & health insurance
  • Education expenses
  • Childcare expenses
  • Retirement expenses
  • Charitable donations
  • Alimony paid
  • Federally declared disaster
  • Tax preparation

Aside from helping you organize your documents and forms, tax prep checklists will also help get you in the right frame of mind to start filing. Kick procrastination to the curb by using your own tax prep checklist.

Click here or on the image below to view and download our Individual Tax Prep Checklist.

Individual Tax Prep Checklist

How should I use this tax prep checklist?

Move down the list slowly, finding documents you need and storing them safely in a folder meant for your 2018 tax documents. Keep in mind that you may not need every form and document listed on the checklist. Feel free to mark off any of these unnecessary items for you so you can focus on the forms you do need.

If you need any help with filing your taxes, our team of tax experts is always available to help!

The Biggest Withholding Tax Mistake You Could Make This Year

February 4, 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.

Your Questions About the 20% Pass-Through Deduction Answered

January 25, 2019

The new 20% pass-through deduction is doggone confusing.

Even if your business is a pass-through organization, it doesn't mean you'll qualify for the 20% pass-through deduction.

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

If you’re a business owner, you’ve probably heard the buzz about the 20% pass-through deduction, also known as the qualified business income (QBI) deduction. Everyone discussing this deduction has proclaimed it to be a great perk for business owners. Still, it’s been hard to figure out how to claim it.

The IRS released some guidance on the QBI deduction on Jan. 19, 2019 in the form of 274 pages of final regulations. Sounds like it should have cleared things up, right? Actually, it only clarified that this is one of the most complicated changes that came with the recent tax reform. Let’s shed light on the basics of this intricate deduction by responding to some questions we’ve heard a lot since it was signed into law.

Answers to those burning questions about the 20% pass-through deduction:

What is the QBI deduction?

The QBI or 20% pass-through deduction refers to an individual provision (officially named Section 199A) in the Tax Cuts and Jobs Act. The provision is only effective for tax years after Dec. 31, 2017, and before Jan. 1, 2026.

Section 199A allows owners of pass-through entities to deduct 20 percent of the business income that is passed onto their individual return.

Why was it included in the tax reform?

The pass-through deduction was included to offer a tax benefit to businesses that help grow the U.S. economy. This tax break, however, is meant for a specific subset of business owners.

Who is eligible for the 20% pass-through deduction?

Pass-through organizations are eligible for the deduction. These organizations tend to “pass” the business’s profits “through” to owners or shareholders. The owners of pass-through organizations pay tax through individual rather than corporate returns. It’s estimated that about 95% of businesses fall into this category.

These are all pass-through organizations that could be eligible for the deduction:

  • Sole proprietorships
  • Partnerships
  • Limited liability companies
  • S corporations

But there is a catch. Even if your business is a pass-through organization, it doesn’t mean you’ll qualify for the 20% pass-through deduction. There are some key limitations to this deduction that we’ll discuss in a moment.

What is a specified service trade or business (SSTB) and how does it apply to the deduction?

A specified service trade or business (SSTB) is defined in the legislative text of IRC Section 199A as:

“Any trade or business involving the performance of services in the fields of health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, brokerage services, or any trade or business where the principal asset of such trade or business is the reputation or skill of 1 or more of its employees [or] any trade or business which involves the performance of service that consist of investing and investment management, trading, or dealing in securities.”

Any business that fits that definition only qualifies for the deduction if the owner’s taxable income is less than certain threshold amounts. Here’s a handy visual breakdown of the trades and business fields that fall into the category of SSTBs:

Specified Service Trades or Businesses (SSTBs) that don't qualify for the 20% pass-through deduction

How do I calculate how much I could save with the 20% pass-through deduction?

Unfortunately, it’s not as simple as just multiplying your pass-through income by 20 percent. Even most tax professionals have to run complicated calculations through advanced tax programs. The best way to really find out how much you can save is to find a tax professional who is experienced in running these calculations.

Can I split my company into different entities to lower my tax bill?

No. Originally, some tax professionals believed that they could split firms into different entities to avoid limits on the new tax break (also known as “crack and pack”). However, the IRS swiftly blocked this tactical move.

What is the best business structure for me and will it qualify me for the 20% pass-through deduction?

This is a near-impossible question to answer without knowing the specifics of your business and income. The pass-through deduction will inevitably help some business owners. Meanwhile, others may benefit more by maintaining a C-corporation structure.

Your best bet is to find a qualified tax professional who can evaluate your business and then give you personalized guidance on business structure and the best tax breaks available to you.

If I do qualify for the QBI deduction, what are the limitations?

Here are the main limitations of the 20% pass-through deduction:

  • The deduction cannot exceed 20 percent of your taxable income in excess of capital gains.
  • You cannot deduct more than the lesser of QBI or the greater of:
    • 50 percent of your allocable share of the wages paid by the business with respect to QBI, or
    • 25 percent of your allocable share of wages plus 2.5 percent of the unadjusted basis of qualified property owned by the business.
    • This limitation begins getting phased in at taxable incomes of $157,500 for single taxpayers and $315,000 for married taxpayers filing jointly.
  • As mentioned before, the deduction is temporary and may not exist past 2026.
  • The complicated nature of the 20% pass-through deduction makes it difficult to navigate for the average taxpayer.

If I don’t qualify for the deduction, are there other ways I can save on my taxes?

Don’t worry. The QBI deduction is not the only way to save on your business taxes. The tax reform also brought along a lower tax rate for C-corporations and repealed the corporate alternative minimum tax.

In sum, the 20% pass-through deduction could bring you a great tax break. But it’s also a complex and headache-inducing change. The good news is that there are tax experts like ours ready to help you decipher what Section 199A means for you and your business taxes.

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

January 24, 2019

Government and 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 Ways the #PayMyTaxes Contest Could Change Your Life

January 21, 2019

#PayMyTaxes Contest: Sweet freedom

If you were to win up to $50,000 in tax debt off your back, you'd be able to take much more than just a huge sigh of relief. 

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

We couldn’t be more excited to finally announce our first-ever #PayMyTaxes Contest. MoneySolver’s #PayMyTaxes Contest gives entrants a life-changing opportunity to have up to $50,000 in tax debt paid off. Yep, you read that right. $50,000! We’ve even been interviewed by News4Jax about this awesome opportunity.

Here are four ways that the MoneySolver #PayMyTaxes Contest could help you change your life:

1. Winning the #PayMyTaxes Contest = reduced stress and space to finally breathe.

Studies have shown that people who struggle to pay off their debts are more than twice as likely to experience depression and anxiety.  But what if that struggle was lifted off your back?

If you were to win up to $50,000 in tax debt off your back, you’d be able to take much more than just a huge sigh of relief. The winner of the #PayMyTaxes Contest will be able to brush that tax debt stress off and bask in some serious relaxation.

2. Higher likelihood of avoiding unpaid tax debt risks, like wage garnishment and liens.

No one wants to face collection activities. But if the amount you owe decreases (or disappears), it’ll be easier for you to avoid the consequences of unpaid tax debt.

Of course, if you still have some tax debt left over after that $50,000 is paid off, you’ll still have to pay the IRS the remaining amount to avoid collections. However, you’ll be a little closer to freedom from tax debt!

3. Lowered tax burden, which lessens your financial load.

Paying off your tax debt in full can be nearly impossible for some people. But the winner of the #PayMyTaxes Contest will suddenly find themselves free from up to $50,000 in tax debt.

That’s a lot of money that you’ll no longer have to pay, which means a much lighter financial load for you in the long run.

4. Lessened financial load = more freedom.

No more worrying about how your tax debt might affect your spouse or what happens with your tax debt when you die. With less of a financial burden on your shoulders, you’ll be able to explore the things you love and stop worrying about your tax debt.

#PayMyTaxes Contest: What is $50,000 in tax debt equivalent to?

Instead of having to pay $50,000 towards your IRS tax debt, you’ll be able to use that money to live your life. The cash that you would’ve used to pay the IRS could go towards something much more meaningful to you. And honestly, if given the choice, wouldn’t you rather spend $50,000 on yourself than on your tax debt?

So, what are you waiting for? With the chance to win $50,000 towards your tax debt and change your life, send in your application for the #PayMyTaxes Contest before the deadline of May 31, 2019. We’ll be notifying the lucky winner on or around July 4, 2019.

Click here or click through the image below to learn more and apply.#PayMyTaxes Contest Entry Page

 

How Virtual Money Can Cause Real Tax Damage: What to Know About Bitcoin Taxes

October 10, 2018

What You Need to Know About Bitcoin Taxes

Only 802 tax returns of the 132 million tax returns filed electronically in 2016 reported cryptocurrency. Have you reported your bitcoins?

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

Bitcoins: they’re so hot right now. You’ve heard all about this type of cryptocurrency (or virtual money) investment. People are raving about how much Bitcoin value has grown since its start. They can’t stop talking about how this interesting cryptocurrency phenomenon could be changing our economic landscape. Amidst all the sensationalized information about Bitcoin, there’s one thing that has gone unspoken for too long: Bitcoin taxes. Here’s what you need to know about these wild digital coins and what implications they could have for your taxes.

What is a bitcoin?

Bitcoins are a virtual currency, which means there are no physical bitcoins. You can use bitcoins to pay for goods or services or to hold as an investment. Bitcoins operate on a peer-to-peer exchange system. This involves using computers to track and log details of every transaction. Like any cryptocurrency, bitcoins are not issued or backed by any banks or governments, so transactions allow users to remain anonymous. Even though it’s not legal tender per se, Bitcoin has seen huge surges of popularity and sparked the creation of other forms of cryptocurrency.

How much is a bitcoin worth?

When bitcoins first came out in 2009, they were worth next to nothing. The first price increase happened in 2010 when bitcoins jumped from $0.0008 to $0.08 for a single bitcoin. Since then, its price and trading history have been very volatile. Most recently, it has seen a high of $17,900 per bitcoin in Dec. 2017, which was followed by a quick, dramatic decrease to $5,900 in Feb. 2018. Upon publishing this blog post, bitcoins are at about $6,500. The current price can be found here.

So why does the IRS care about bitcoins?

Bitcoin’s burst in popularity has lead to an explosion of billions of dollars in wealth. And the federal government is concerned that they’re not getting their cut. So in 2014 after a huge Bitcoin value hike, the IRS announced that they view bitcoins as property, which means that any tax rules that apply to property transactions also apply to transactions involving Bitcoins.

Interestingly enough, only 802 tax returns of the 132 million filed electronically in 2016 reported cryptocurrency income. So there are many people dabbling in bitcoin who are not reporting these transactions to the IRS. The federal government is not pleased and is determined to regain any Bitcoin taxes.

Why should I care about Bitcoin taxes?

In 2017, the IRS went after Coinbase, Inc., a large “digital wallet” company that allows users to buy, sell, and transfer Bitcoin. The court ruled that the IRS could gather data on all 14,355 Coinbase, Inc. customers. Since only 802 electronically filed tax returns in 2016 reported cryptocurrency, the majority of those 14,355 customers didn’t report their bitcoins. With this data in hand, the IRS will be following up with any Coinbase customers.

What could happen if I haven’t paid taxes on my bitcoins?

If you were a Coinbase customer and you haven’t paid taxes on your bitcoins, you should expect a letter in the mail from the IRS (if you haven’t gotten one already). This letter could be a notice of deficiency, to inform you that you haven’t paid enough on your taxes because of your bitcoins.

The IRS wants what they’re due. Besides looking to regain any Bitcoin taxes, they are also trying to find intent to prove tax evasion in people who didn’t report their bitcoins. And if they find you guilty of tax evasion, you could end up in jail. And while Bitcoin may be trendy right now, prison stripes are never cool. So make sure you pay back the IRS what they’re owed and continue to correctly report your bitcoins and other cryptocurrencies.

The moral of the Bitcoin taxes story

Just because your money is virtual doesn’t mean it’s free from taxes – or from the eyes of the IRS. The federal government wants more compliance but may run into issues taxing all bitcoin gains since lots of trading is done on overseas exchanges. Still, reporting on your cryptocurrency isn’t optional. There may not be the same regulation around reporting on bitcoins as there is around reporting stock sales, but it’s still the same concept. It’s still income and as such, the IRS needs to know about it.

If Bitcoin taxes have you scratching your head, you can always consult a tax professional who has experience with cryptocurrency to help you figure out the next steps.

Will the Ominous New Tax Bill Make You Owe the IRS Next Year?

September 14, 2018

Will the Ominous New Tax Bill Make You Owe the IRS Next Year

The longer you wait to make these adjustments, the more likely it is that you'll owe next year.

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

With the biggest tax changes in over 30 years, the Tax Cuts and Jobs Act of 2017 (TCJA) brings a terrifying prospect for millions of Americas. The Government Accountability Office (GAO) recently issued a report warning that this new tax bill will make millions of taxpayers owe on their 2018 tax returns. Many of these taxpayers have never owed before, so it’s bound to be an unpleasant surprise.

Under the TCJA, many taxpayers will either under-withhold on their paychecks or underpay on their estimated tax payments. Across the country, CPAs are working hard to make sure that their clients will not owe on their tax returns next year. But the truth is, most employees currently lack correct withholding or have assumed that the W-4 they filed 5 years ago is still correct.

So, if you haven’t updated your W4 or reviewed your withholding, you may have an unwanted tax surprise coming in the new year.

What has the new tax bill changed?

The new tax bill has changed quite a bit since going into effect on Jan. 1, 2018. It has:

  • Increased the standard deduction
  • Removed personal exemptions
  • Increased the child tax credit
  • Limited or discontinued certain deductions
  • Changed the tax rates and brackets
  • Introduced a new 20 percent deduction for qualified business income
  • Reduced the corporate tax rate from 35 to 21 percent
  • Increased the interest rate on underpayment of taxes from 3 to 5 percent

And with all these changes, you need to know where you stand before it’s too late to make changes.

Who will be most affected by these changes?

If you fall into one or more of the following categories, you’ll want to make sure you get a paycheck checkup:

  • Are a two-income family
  • Work two or more jobs at the same time
  • Only work for part of the year
  • Have children and claim credits such as child tax credit
  • Have older dependents, including children who are 17 or older
  • Have changed personal circumstances (e.g., got married, moved, etc.)
  • Itemized deductions on your 2017 return
  • Received large tax refunds or had large tax bills for 2017
  • Earn high incomes and have a complex tax return

If any of these categories above apply to you, you’ll want to take immediate action to ensure you’re not negatively affected by the new tax bill.

And if you own a business, you’ll want to have an expert review your business structure to ensure you are enjoying the new positive, business-specific changes from the tax reform.

What can I do to make sure I don’t owe?

Don’t wait! You’ll want to make sure you get a paycheck checkup, especially if you fall into any of the categories above. You still have time to adjust your withholdings or increase your estimated tax payments to make sure you’re covered in 2019.

The longer you wait to make these adjustments, the more likely it is that you’ll owe next year. If you owe this year, you may owe even more than you ever have before, especially with the increased interest rate on underpayment of taxes. So, contact a tax professional today to avoid any unpleasant surprises from the new tax bill come filing time.

Gambling Taxes: Report Your Winnings with Form W-2G

August 21, 2018

Reporting Your Winnings Form W-2G

Gambling taxes can be a little confusing, so let's clear some things up. 

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

Lucky you! Maybe you won rolling dice, playing cards or betting on ponies. No matter how you won, you definitely had some cash flow coming in from gambling this year. There’s just one catch: Gambling income (including winnings in a jackpot, race, raffle, or contest) is considered taxable income and must be reported on your tax return. Did you win a car or another noncash prize? Then the fair market value will be taken into account for purposes of reporting and withholding. Gambling taxes can be a little confusing, so let’s clear some things up.

What is Form W-2G and how do I get it?

If a large amount is won in gambling, the organization that is paying the winnings sends Form W-2G, Certain Gambling Winnings, to the winner. This form reports the amount of your winnings to you and the IRS. The payer must send Form W-2G only if the winner receives:

  • $1,200 or more in gambling winnings from bingo or slot machines
  • $1,500 or more in proceeds (the amount of winnings minus the amount of the wager) from keno
  • More than $5,000 in winnings (reduced by the wager or buy-in) from a poker tournament
  • $600 or more in gambling winnings (except winnings from bingo, keno, slot machines, and poker tournaments) and the payout is at least 300 times the amount of the wager, or
  • Any other gambling winnings subject to federal income tax withholding

You’ll also receive a Form W-2G if the payer withholds federal income tax from your winnings.

When the winnings are shared by more than one person, or when the person receiving gambling winnings is not the actual winner, Form 5754, Statement by Person(s) Receiving Gambling Winnings, is used instead of Form W-2G. Typically, the person receiving the winnings must furnish all the information that Form 5754 requires. You won’t send Form 5754 to the IRS. You’ll keep a copy for your records and return the form to the payer for preparation of Form W-2G for each person listed as winners.

Deducting gambling losses

Gambling losses can be deducted by itemizing your losses on line 28 of Schedule A, Form 1040. Just remember, you cannot deduct more than your winnings.

To find out how to claim your gambling winnings or deduct your gambling losses, you may use this 10 minute IRS interview. When using this resource, you will need:

  • The amount of your gambling winnings and losses
  • Your filing status
  • Any information provided to you on Form W-2G

Recordkeeping for gambling taxes

If you receive Form W-2G, pay gambling taxes on your winnings, or deduct your losses, it is important to keep an accurate record of the precise amounts involved. In order to verify the amounts, you will need to keep the receipts, tickets, statements, etc. of each win and loss. It is also helpful to keep a journal or record of your activity. Overall, you want to be able to show your winnings separately from your losses.

Still baffled by gambling taxes? A tax professional can help you figure out the best way to optimize your tax savings when reporting your winnings and filing your taxes.

FBAR versus FATCA Form 8938: Reporting Overseas Assets

July 16, 2018

FBAR versus FATCA Form 8938 Reporting Overseas Assets

Having assets in a foreign bank account may sound very mysterious and exotic. However, it can lead to lots of confusion.

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

Having assets in a foreign bank account may sound very mysterious and exotic. However, it can lead to lots of confusion practically when it comes to reporting overseas assets to the IRS.

There are many similarities between the Foreign Bank and Financial Accounts Report (FBAR) and IRS Form 8938 (required under the Foreign Account Tax Compliance Act, or FATCA), which has caused even more confusion among taxpayers. There is certain information that you must report on both FBAR and Form 8938. But Form 8938 requires information that isn’t included in an FBAR, like details on other foreign financial assets and income.

Do you have a financial account at a foreign branch of a U.S. financial institution? If so, you do not need to file FATCA Form 8938, but you do need to file an FBAR. If an FFI (Foreign Financial Institution) holds the account, then you need to file both Form 8938 and an FBAR.

Who Needs to File When Reporting Overseas Assets

Resident aliens of U.S. territories and U.S. territory entities must file FBAR, but not Form 8938. Filing Form 8938 is mandatory for those U.S citizens, resident aliens, and certain non-resident aliens that have an interest in certain foreign financial assets and meet the reporting threshold set by the IRS.

Filing Threshold

The filing threshold for FBAR is $10,000. If the value of your assets during a calendar year reaches $10,000 at any time, you will need to file an FBAR when reporting overseas assets.

Form 8938 has a different filing threshold. The amount of foreign assets for a tax year must be $50,000 on the last day of the tax year or reach $75,000 at any time during the tax year. These thresholds are for those filing separately. Married filing jointly and individuals living abroad have a higher filing threshold.

What You Must Report

For FBAR, you need to report if you have sufficient interest in a financial entity and/or have the authority to control the assets. You’ll need to report the maximum value of financial accounts maintained by a financial institution that is located overseas.

For FATCA Form 8938, you must report if you have any income, gains, losses, deductions, credits, gross proceeds, or distributions from holding or disposing of the account or assets that need to be reported on your tax return. You’ll need to report the maximum value of certain specified foreign financial assets. These include financial accounts in FIIs and certain other foreign non-account investment assets.

How to Report

You can file FBAR electronically using the BSA E-Filing System. It’s important to know that you never file an FBAR with a tax return. On the other hand, you always file Form 8938 with your income tax return.

If you have any questions about reporting overseas assets, contact us and one of our tax professionals can help you ensure a correct and compliant filing.

IRS Letter 5071C: Preventing Identity Loss One Verification at a Time

March 24, 2018

IRS Letter 5071C: Preventing Identity Loss One Verification at a Time

What does IRS Letter 5071C mean?

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

What if someone tries to submit a tax return in your name? Identity thieves often steal personal information from taxpayers in order to file fraudulent tax returns and pocket their refunds. But wait! Does the IRS do anything to keep these identity thieves from making off with your hard-earned refund? You can rest assured that the IRS has processes in place for identity theft. They use their handy Letter 5071C to obtain information from taxpayers to verify their identities. This additional information is meant to help the IRS prevent fraudulent tax returns from sneaking through their system.

What does Letter 5071C say?

Letter 5071C informs you that the IRS has received a tax return with your name and/or social security number. It also lets you know that they need to verify the identity of the recipient of the notice.

How do I respond to Letter 5071C?

You have two options to respond:

  1. You can verify your identity using the IRS Identity Verification Service
  2. Alternatively, you can call the IRS on the toll-free Identity Verification number in the upper corner of your letter

When using either of these two contact methods, you should have a copy of your last filed tax return and your current year’s tax return, along with other documents that verify your identity. Until your identity is verified, the IRS will not complete the processing of your return.

If you filed the return and there was no identity theft, the IRS should process the return in approximately six weeks. If you did not file the return, then you must contact the IRS immediately using either of the two methods shared above.

Will the IRS contact me outside of Letter 5071C to verify my identity?

The IRS will not ask you to confirm your identity via email or phone. Fraudsters use a number of tactics to deceive taxpayers, including sending out fake emails, letters or making phone calls. You should only respond to Letter 5017C to verify your identity and only use the two methods given above to provide information to the IRS.

Tools like our TaxSafe plan can also help ensure that your identity is protected no matter what.

 

Rip-off Tax Preparers & How to Spot Them

March 16, 2018

Rip-off Tax Preparers & How to Spot Them

Taxpayers are not always aware of the red flags they should look for when getting a professional to prepare their tax returns.

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

When you take your taxes to a professional, you’re expecting to gain the peace of mind that comes with correctly prepared taxes. However, while you think you are doing the right thing, you may find out months later there were too many deductions claimed or the numbers didn’t fully add up on your return. This is what we call an unfortunate encounter with rip-off tax preparers.

Rip-off Tax Preparers: Who Are They?

During the peak of tax season, you can’t avoid seeing them. The young kids dressed as Lady Liberty or Uncle Sam are stationed in front of every shopping mall, holding signs coaxing taxpayers to come in and have their taxes prepared. Many of these establishments are legitimate and established, but some have just set up shop with only one goal: to get you the biggest refund possible by any means necessary.

Getting a big return is great, right? Not necessarily. The way these shops rake in money is by charging you a percentage of your refund. So the bigger the refund, the more they can charge you. There are plenty of these rip-off tax preparers around, all promising large refunds while preparing clients’ taxes fraudulently.

A former detective in Fort Pierce, Fla., along with his wife and business partner, prepared taxes for their community at their Premium Financial Services business for years until they were indicted on charges of tax fraud. The trio claimed false tax deductions on their clients’ returns in order to intentionally rip-off the United States government for upwards of $500,000. Furthermore, clients were faced with a tax debt because of the rip-off.

A man from Jacksonville, Fla., is now serving prison time for a First-time Homebuyers credit rip-off he pulled for clients who had not bought a home, and/or had no plans to buy a home. He also claimed fraudulent business and work expenses, resulting in $216,000 in tax credits claimed over the course of two years. Of course, he charged his clients a $1,000 tax preparation fee, but many were glad to pay it because of the large returns they were receiving.

Rip-off Red Flags

Taxpayers are not always aware of the red flags they should look for when getting a professional to prepare their tax returns. We have identified five main things to consider when having your taxes prepared:

1. Check to see how long your tax preparer has been in business.

Fly-by-night shops and those set up seemingly overnight are the usual suspects.

2. Check all credentials of the professional preparing your taxes.

They should be proud to show you their degrees or certificates. If not, run.

3. Check to make sure the professional has signed your return.

If they do not want to attach their name to your taxes, then you shouldn’t either. Remember, once you sign the return, any resulting liabilities are your responsibility.

4. Never sign a blank return.

5. Beware of tax preparers whose fee is a percentage of your refund.

They have more motivation to prepare your taxes with erroneous claims.

If you are a victim of a tax preparer rip-off, we can help. At MoneySolver, our goal is to help taxpayers resolve their IRS debt quickly and affordably.

4 Questions to Ask When Filing a Paper Tax Return

February 11, 2018

4 Questions to Ask When Filing a Paper Tax Return

If you are more comfortable filing a paper tax return, review the following IRS online services.

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

File the Old School Way with a Paper Tax Return

Love the feeling of pen on paper? You’re not alone. A large number of taxpayers still prefer to file a paper tax return, even though the IRS prefers e-filing. For those who are not computer savvy, paper filing is preferable to electronic filing. If you are more comfortable filing a paper tax return, reviewing the following IRS online services may simplify the seemingly complex process of preparing and filing your return.

1. “Do I need to file a tax return?”

If you are unsure of whether or not you’re required to file, you may use the ‘Do I Need to File a Tax Return?’ tool on the IRS’s website to determine the criteria. You will need your filing status, federal income tax withheld, and basic information to help you determine your gross income.

2. “What is my filing status?”

Your filing status can affect your standard deduction, eligibility for certain credits, tax liability and filing requirements. If you are eligible to use more than one filing status, you may determine the one that saves you the most in taxes using the IRS service, ‘What Is My Filing Status?’.

When you use this service, you will need your marital status, and the percentage of the costs that your household members paid towards keeping up a home. If your spouse is deceased, you also need your spouse’s year of death.

3. “Where can I download tax forms?”

To obtain tax forms, including Form 1040, Form W-9, Form W-4, Form 9465, Form 8962, Form 941, and Form 1040-EZ, you can use the IRS Forms and Publications page. Tax forms and publications for individuals and businesses are available for download and print. The IRS also provides prior year forms, instructions, and publications for download and print.

If you do not find a tax form that you need in order to file, you may request the form(s) by U.S. mail. You may order up to 100 different products and up to 100 copies of each form you order.

4. “Where can I file a paper tax form?”

Depending upon the tax form you are filing and your state, the mailing address changes. If you are filing Forms 1040, 1040A, 1040EZ, 1040ES, 1040V, amended returns, and extensions (also addresses for taxpayers in foreign countries, U.S. possessions, or with other international filing characteristics), you can use this IRS page to find out the address to which to send the paper return.

You may check the status of your refund on the IRS service ‘Where My Refund?’ four weeks after you mail your paper return.

If you need any help while filing your paper tax return, contact a tax professional who can help you file a timely and compliant tax return.

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