Tuesday, January 17, 2017

How To Choose A Tax Professional Wisely - Part 1

The best time to choose a professional to prepare your taxes is as early as possible. This way, a taxpayer can spend time with preparers and consider potential options. Making the choice at that time will allow for wise tax planning to begin. Choosing a preparer later in tax season (the closer it gets to mid-April) may be difficult, because that is their busiest time. No matter when the choice is made there are a number of factors to keep in mind, this post will be the first in a series that will highlight a few.

Choose a preparer who is honest. This is an essential quality. Taxpayers are sharing their most vital personal information with this person, they need to be someone who can be trusted. Especially since the taxpayer is always responsible for what is on the Return, no matter who prepared it.

Choose a preparer who asks for records. A qualified professional will ask to see financial records and receipts in order to prepare a Tax Return. Anything less would not meet IRS standards. Following these tips would seem to lower stress when picking an advisor in the area of taxes and finance. What do you think?

Friday, January 13, 2017

How Gambling and Taxes Work Together

All income is taxable. This includes gambling in its many different forms. No matter if its wagers in a card game, winnings from a slot machine, or results from increasingly popular fantasy sports leagues, gambling winnings will be taxed. Here are some guidelines to help in this area of finance.

All gambling winnings must be reported. The casino or business that is paying sends in their own copy of the necessary form, so the IRS will be expecting the taxpayer to do the same and declare it on their Tax Return. The taxpayer will then have the ability to deduct any gambling losses for the year too, up to the amount of income that gambling provided. This would be possible if the taxpayer kept receipts, statements, or logs that detailed wins and losses. It would seem to be a wise investment to have a tax preparer to make sure that these prizes are reported properly, and avoid losing any to penalties or fines. What do you think?

Monday, January 9, 2017

What Traps and Pitfalls to Avoid

Everyone wants their tax refund as soon as possible. Unfortunately this can lead unsuspecting Taxpayers to be taken advantage of. These cases will lead to some or all of their money being taken, and in some situations, they can even land in jail. Let’s take a closer look at some common pitches that are offered and the potential consequences.

The “Instant” Refund. The idea here is to give the Taxpayer access to their refund, before it comes from the IRS. This is actually a short-term loan being provided by the Tax Professional. There are many fees applied to loans like this, which means that they have a very high interest rate. So hundreds of dollars from your actual refund will pay for this loan. Make sure to read all the details in the small print.

The “zero wages” tax bill. The idea here is to send false information to the IRS hoping that it will be accepted or missed entirely. Some might suggest moving money to an offshore bank account. Others may urge a Taxpayer to move money to a tax-exempt organization that allows them to keep control of their funds. These are two ways some have tried to avoid paying taxes. All they lead to is a mountain of paperwork, fines, penalties, and prison. Above all, the Taxpayer is always held responsible. Stay informed about how your Tax Professional is working for you.

Friday, January 6, 2017

Everyone Takes Their Fair Share

        Many dream of one day finding treasure. For a couple in Northern California, that dream turned into a reality when they found over 1,000 gold coins from the 1800’s in their backyard. They literally came across buried treasure! This was an amazing situation when it occurred a few years ago. Let’s take a closer look at how this would make a surprising financial impact.

          The gold in the coins was valued at $2 Million. However, since the coins were in good condition, which is rare considering their age, the whole collection was valued at $10 Million! At this point reality takes over from fantasy. Federal law states that taxes on lost or abandoned property must be paid as income in the first year a person takes possession of it. No one came forward to challenge their claim. The U.S. Mint investigated and determined the collection was not stolen from them. This couple would have to pay taxes on $10 Million of new income on their very next Tax Return. What does that really mean?

          Most likely, they would be put in the highest Federal Tax rate, paying 39.6%. They would also be paying 13.3% of tax in California. That can be used to lower the Federal Tax amount, but it still means that this couple will only keep about $5.3 Million, at most. In situations like this, everybody wins and takes their fair share.

Tuesday, January 3, 2017

How to Start Planning for 2017

Everyone wants to have a good idea on how to plan for the future. That is especially true in the area of finance, and taxes play a huge role in that planning. Long before most people start to file Tax Returns, the next year’s Tax Brackets are released. So 2017’s Tax Brackets are now available. They would apply to Tax Returns to be filed in 2018.
          Tax Brackets are only a guide, a starting point, based on what a person’s Taxable Income might be. They really only give part of the picture of what the Tax Return will actually look like. This information, along with advice from a qualified Tax Professional, will help make the Tax Process much easier to deal with.

Saturday, January 30, 2016

Why Choose a Tax Professional?

   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

A Helping Hand for Employers

  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?