Saturday, January 30, 2016
This may seem like self promotion but in light of what has happened and what is about to happen with IRS lets take a closer look. The IRS, like many government agencies, has to meet many challenges in order to accomplish its stated mission. Such as having their budget reduced year after year but having to be responsible for the enforcement of the Affordable Care Act. These problems seem to become increasingly more difficult. For example, a year ago they had to deal with many tax laws extended right before expiration, and $100+ million dollars in tax fraud.
These tax cuts are of special interest because they limit the amount of taxpayer support that the IRS can offer. These circumstances will continue into this tax season. IRS personnel will continue to be asked to meet many challenges, while reducing the amount of assistance being given to Taxpayers seeking any help. Having a Tax Professional on your side would certainly be a great help in dealing with an agency that is stretched so thin and whose job is to assess and collect taxes. What do you think?
Saturday, December 26, 2015
Did you know that 2/3 of all federal taxes collected, come from payroll? These are the federal income, Social Security, and Medicare taxes, which by law, are withheld from every employees pay. Regularly during the year, these taxes and what the employer adds, are sent into the government. However, the IRS has noticed a disturbing trend and they are giving a helping hand to reverse this trend.
An increasing number of employers are taking these funds set aside for the government, and keeping them for other uses. Doing so always leads to instant tax penalties along with interest. In the past these deposits were not closely monitored, so when the IRS would notice an employer was behind and contacted them about it, they were already in a terrible situation.
The new program started to help avoid these pitfalls is call the Early Interaction Initiative. It will actively watch patterns and deposits, highlighting payments that are late or reduced. Those who stand out will receive letters, calls, and possibly visits from the IRS reminding them of their responsibilities and offering help before their situation becomes hopeless. This program is trying to keep businesses from going bankrupt from not paying taxes. Do you think it will work?
Monday, October 26, 2015
Mistakes are part of life. If there was a mistake that involves a tax return, there is always the option to file an amended return to make corrections. We will look at some situations where an amended return would be needed.
If a taxpayer needed to adjust important facts like their number of dependents, total income, or filing status, then an amended tax return would be necessary. This would also be appropriate if they wanted to claim tax deductions or credits they qualify for, but did not claim at first. In a situation where a taxpayer owes more than expected, an amended return should be filed as soon as possible. Doing so will limit interest and penalty charges. A very important note is that you must file an amended within 3 years of the date the original tax return was filed. There are many reasons that an amended tax return might be needed for a taxpayer, and certain steps that need to be followed in order to set matters right. In this time of uncertainty, you may want to get professional help. What do you think?
Monday, October 12, 2015
The decision to get married has many consequences that result from it. A part that needs to be considered is how the taxes of the couples will be affected moving forward. This has always been an important factor. The Supreme Court ruled that same-sex marriages are legal which means that they may have a tax "penalty" or "bonus" when they file their taxes just like other married couples.
There is no tax law that gives financial punishments or rewards for choosing to get married. However, the couple's newly combined income may create a result that needs to be carefully considered. For example, if one of the spouses has a larger income than the other, they may not be taxed at a higher rate when filing a joint tax return. This might put them in an situation where they can save money by filing together. However, the opposite might be true if they have incomes that are about equal and they file jointly. These are circumstances unique to each couple. Taxpayers at this special time may need guidance to make wise choices for their family. What do you think?
Saturday, September 12, 2015
Our yearly tax returns can be the key to opening doors to new sources of financial support. In connection with the last blog, we are discussing Tax Credits related to forms of higher education, like colleges, universities, and technical or trade schools. We will now focus on the Lifetime Learning Credit and its requirements.
There is no class time requirement for the credit. The student could attend classes on a less than full-time basis and still qualify. However, the classes must be part of a Bachelor's or Master's degree program or related to maintaining or improving job skills. Only tuition and fees directly related to enrolling or attending these classes are qualifying expenses. The lifetime Learning Credit is unique in that it is not refundable. It provides no benefit for those who owe no tax. The maximum credit is $2000 per Tax Return, no matter the number of students. Income limits play a large role in this tax credit as well. The Adjusted Gross Income needed in order to begin to qualify must be below $65,000 for single filers and $130,000 for married joint filers. Full credit is only available for single taxpayers whose income is less than $55,000 or married couples making under $110,000.
Those who qualify for these credits we have discussed can benefit from them all year by having a smaller amount of tax withheld from their paychecks. Other education assistance to consider includes: Scholarships and Grants. If used to pay for tuition, enrollment fees, books and course materials, that money is normally tax free. Interest from student loans can be deducted up to $2,500 per year. There are many options available to support individuals and families who plan on continuing their formal education. What do you think?
Tuesday, September 1, 2015
There is a source of support that is available to the lessen the cost of higher education for taxpayers. Your 2014 (this year) and 2015 (next year) tax return will determine if you qualify for college tax credits. The sooner it is filed, the faster it can be claimed. This is true for students filing on their own, parents claiming degree-seeking children as dependents, or even the spouse of a student. In our blog for this week and next, we will examine the qualifications of the 2 major education Tax Credits and what they mean. This week we will look at the American Opportunity Tax Credit.
This Tax Credit offers a maximum yearly amount of $2,500 per student. More than one student can be claimed on a tax return for this credit. Its goal is to help pay for qualified education expenses, such as, school tuition and other related fees. Room and board is not covered. One benefit of the American Opportunity Tax Credit is that up to 40% of it is refundable. This means that individuals who owe no taxes can receive up to $1,000 for each student. Now this credit is only available for 4 years per student. It's only an option if the student has not finished the first 4 years of higher education before the end of the tax year.
Your income plays a large part in qualifying for this credit. A single person with an adjusted gross income of less than $80,000 will receive the full credit. The credit is reduced as the adjusted gross income increases to $90,000 after that it disappears. The limits are doubled for married couples filing a joint return. There is another education Tax Credit, and most often, taxpayers will qualify for both but can only choose one. In our next, blog we will examine the details of the other. The government is trying to support the efforts of those who are seeking to continue their formal education past high school. What do you think of this support?
Saturday, August 22, 2015
In this continuing series, we have examined how the landscape of taxes and accounting has changed from one year to the next. Small businesses have the ability to claim a greater tax credit and expense related to employee insurance premiums. The qualifications are clear, and the rewards are tangible. However, as of 2014, everyone needs to have their own health insurance. For those who must provide their own coverage, their most recent tax return is absolutely necessary.
One must file a tax return in order to qualify for mandatory health care coverage. Some people received an extension for their 2014 Tax Return and can legally file by October 15. In these cases, the 2013 Tax Return was used as the basis to determine health care payments and possible credits. Those in this situation must file their 2014 Tax Return ASAP. This is true if income remains the same, or has changed. Marketplaces will determine eligibility for cost reductions and assistance in paying premiums for 2016, before this year is over. Filing now will lower the chance of having some sort of interruption in receiving help with insurance payments.
If there is no 2014 Return filed in time, all assistance with health care payments will stop and the full cost for premiums and covered services will be paid by the individual. In addition, the IRS may determine that one now must pay back the health care credit and payment assistance they had received before. This is also true if the income being reported is much higher from year 2013 to 2014. It would seem to be wise to file your 2014 Tax Return as soon as possible, so that such an important matter as health care coverage can be taken care of. What do you think?