Anthony Sykes & Company

  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 ar...

   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 followe...

    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....

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 c...

    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 ...

    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 d...

    As is true of life in general, the world of accounting and taxes is constantly changing, and we need to adjust in order to keep up our awareness and understanding.  These changes mean that from one year to the next, while our business or financial situation may not change, the consequences for us may be very different.  However, that's not always a bad thing.  For example, if starting in tax year 2014 you employed 25 or fewer full-time employees, you may be eligible for the Small Business Health Care Tax Credit.     To qualify for the credit, a small business must buy coverage through the shop (Small Business Health Options) Marketplace, pay at least half of their employees' premiums, and pay an average wage of less than $50,000 per year.  For 2014 the tax credit for a small business increases to as much as 50% of the premiums paid by employers.  For tax years 2010-2013 the maximum was only 35%.  Th...

    Contrary to the popular saying, crime never pays.  The activities it requires of those who choose that lifestyle may promise rich rewards, but will only result in real pain and destruction, from which recovery is very difficult.  Let's consider the recent example of a Northern California man who made that decision and the consequences he is facing.     Steven Jay Carlton was the Executive Director of the Peninsula Symphony Association, which is based in Los Altos.  During his time in this position, he filed false tax returns from 2010-2012 to underreport his earnings and hide money he embezzled from the organization.  These actions led to at least $220,000 being stolen.  Carlton resigned his position in 2013 when the missing funds were noticed.  One year later he pleaded "No Contest"  to six Felonies including Grand Theft (1), Identity Theft (1), Embezzlement (1), and Forgery (3).  In December 2014, he w...

   People in all walks of life enjoy hobbies.  Sometimes, these activities outside of the normal day-to-day routine, can produce an income.  In these situations the income must be reported on your tax return, but not in the same way as a business.  Here are some tips to keep in mind if this is your situation.     First of all, please note that a business and hobby are never the same thing.  The goal of a business is to have an income and make a profit.  A hobby is done for fun and relaxation, and under certain circumstances can create income.  Before you start a business or hobby you should consider your situation to determine which category you fall into.  If a hobby is still the best choice, keep in mind there are allowable hobby deductions.  In this case, deductions on your tax return would need to be itemized.  These would be the types of expenses that are commonly accepted, or helpful and approp...

IRS announced that it is teaming up the tax preparation and software companies , payroll and tax financial processors, and state tax administrators to combat identity theft refund fraud.  Is this good or bad for us tax preparers and our clients?  First let me say that I get four or five new tax related identity theft cases a year.  I know the misery and frustration it causes my clients and I would like nothing better than to see all this put to an end along with the dishonest tax preparers who do this.  The way it will work is that taxpayer authentication process will be shared and looked at more closely by IRS and the tax software provider.  IRS will look at the Internet Protocol number and "addresses" to see if there is anything improper or repetitive (if you buy a personal tax software program and use it 200 times that might be improper or repetitive).  The entire tax industry will share analytical information about their filings with IRS an...