Anthony Sykes & Company

In previous posts we have discussed steps to take when making a wise decision when it comes to choosing a tax professional. Our last post discussed why it’s important to look now and a couple of things to consider if that is what you need to do. We will now consider two major red flags that might come up in that search. Look out for “ghost” preparers. A ghost preparer is a paid tax preparer who will not sign the tax return after it is completed. They will insist that the taxpayer sign it and file it themselves. This is against the law. While the taxpayer is responsible for everything in the tax return, if someone is paid to prepare it, they must sign their name. When a person hides their actions in this way it is often a sign that fraud is being committed. If they based their fees on a percentage of the refund or promised to get a bigger refund than anyone else, this is another sign of potential fraud. A valid ID for tax preparers. Every paid preparer needs to have a valid Prepar...

             Now is the time to make an appointment with your tax professional. It’s early in the tax season, so filing will usually be less stressful. That is especially true if you are returning to your regular tax professional. What if you are looking for someone new? Then starting early is absolutely essential. There should be a bond of trust between a taxpayer and their tax professional. This is needed because that person is entrusted with sensitive and personal information of their clients. In reality trust and respect are earned over time. How can someone choose the right tax professional for themselves right now?           There are many tips that can help in the search for a new tax professional. Making price the most important factor is not always best. If you pick a tax professional because they are the least expensive, remember that you often get what you pay for. Make sure to pick a preparer who is available th...

            Over the past year, the Internal Revenue Service ( IRS ) has used funding from the Inflation Reduction Act on audit activities for those who earn more than $1 million and have more than $250,000 in tax debt. In that time, the IRS collected $1 billion from the group that met these criteria. The increase in funding will allow for other goals to be reached as well.           More staff has been added and technology is being updated to provide better service to all taxpayers in the coming years. The IRS will now expand its enforcement activity to include complex partnerships, large corporations, and high-income high wealth individuals who do not file tax returns. In recent years the IRS was not consistent with enforcing tax rules in this area and had fallen behind in the ways some had gotten around their tax responsibilities. These new initiatives look to bridge that gap. If you are in need of t...

            When it comes to paying a tax debt, dealing with the Internal Revenue Service ( IRS ) can be challenging. There are programs that are available to help in these situations. One of them is called Offer in Compromise. It allows a taxpayer to pay less than the full amount they owe when considering factors like ability to pay and income. However, an application to this program is not a guarantee of acceptance.           If the Offer in Compromise is rejected, it can be appealed. For that to be successful it must take place within 30 days of the rejection. The appeal must also be specific. There must be documentation to support each area of disagreement with the IRS . In a situation like this, it may be wise to consult a qualified tax professional .

             The Internal Revenue Service ( IRS ) continues to focus on applying the tax laws with accuracy and fairness. With that in mind, they have announced that they are restarting a program that focuses on individuals who did not file returns from 2017 to 2021 and had at least $400,000 in income. They have identified at least 125,000 cases of people who are not in compliance.           The non-filer letters will be going out every week to start the process of filing returns, collecting taxes, interest, and penalties. The basis of these letters comes from information through Forms W2, 1099 and others. Those who receive letters of this nature need to take quick action. The enforcement actions in this program are stronger than usual. That makes it critical that those who receive these letters go to a qualified tax professional . The IRS can be made aware of qualifying deductions and credits that can ch...

            The pandemic caused a great disruption to many institutions, and the Internal Revenue Service ( IRS ) was not exempt from this. In fact, their mail services were paused for a time and many who had tax balances did not receive a notice for the tax years 2020 and 2021. When tax balances are not paid promptly, penalties and interest will compound the amount. How will the IRS rectify this problem?           At the end of 2023, it was announced that the IRS had created a program to provide relief for those who were not given a written notice that they had a tax balance. They will automatically waive penalties on taxed amounts of $100,000 or less. Those who have already paid may be eligible for a credit on other tax years or a refund of the tax penalty. Those with more than $100,000 in taxes assessed are not automatically enrolled, but they can apply for relief.    ...

            With the start of the new school year upon us, educators will want their students to have a complete classroom available to them. That might mean having some out-of-pocket expenses that are not reimbursed. If that’s the case, any principal, counselor, aide, or teacher who works at a K-12 school for at least 900 hours in a year can claim the Educator Expense Deduction . The current limit is $300, but that can be adjusted in the future based on inflation.           The qualifying costs can be related to books, supplies, and other materials used in the classroom. Equipment, including computer equipment and software can qualify. COVID-19 protective items used in the classroom would also apply. This can be claimed even if you use the standard deduction on your tax return. As a reminder, it is always best practice, especially when claiming a deduction, to keep good records which would include receip...

          The Employee Retention Credit ( ERC ) is a tax credit for employers who kept paying employees while closed by government order or had a great decrease in income due to COVID-19. This is a credit that can only be claimed by certain businesses and organizations that had employees during specific time periods. With this set of criteria, the ERC is continuing to be the subject of a growing advertising campaign. Wild claims are being made about who can qualify for it.           The eligibility requirements should be considered closely. One sign of a scam is stating that the application process is easy, or that someone can find out if they are eligible for it in minutes. The ERC is noted for being a very complex credit. Scammers are trying to use this situation to steal personal information or run away with large upfront fees for work that will never take place. Dishonest promoters try to lure in victims ...

               On July 24, 2023, the Internal Revenue Service ( IRS ) stated that it was ending the general practice of making unannounced in-person visits to taxpayers. The IRS is working on a new strategic plan in line with the passage of the Inflation Reduction Act last year. It is believed that this change will increase safety for revenue officers and taxpayers. There were tens of thousands of these types of visits each year. The goal was to help resolve delinquent tax matters.           In place of the visits, the IRS will send appointment letters and schedule meetings to deal with the tax problems. There will still be certain situations when unannounced visits will take place. This will be related to serving a summons or subpoenas and enforcement activity like seizure of property. If you want help in resolving a pressing tax issue, visit our website at help4yourtaxproblems.com .

              Until recently the Internal Revenue Service ( IRS ) had been encouraging many taxpayers to hold off on filing their tax returns. This is not because of a technical flaw, but there was a question that needed to be answered. Would state tax payments over the past year be taxable at the federal level? California is one of 21 states to provide such payments.           After discussion, it was determined that these payments would not need to be reported as income, and therefore not taxable. They will be viewed as payments for general welfare and disaster relief. This was a complex situation that had many questions for the IRS . One determining factor is that since the federal pandemic disaster declaration is ending in May 2023, there is no need to make an issue of these payments made in 2022. With that issue settled, please be sure to gather your important documents and prepare to file your t...

                 With the Internal Revenue Service ( IRS ) ready to accept tax returns, you may be wondering how to take advantage of an early start date. The best thing to do is use your time wisely. How can you do that?  The first thing you should do is to gather all of your necessary information. This is the time of year that tax information is arriving, so keep it organized and make copies to give to your Qualified Tax Professional . The earlier you start this process, the easier it will be. As a bonus, you will be less likely to be in a rush and have missing details that will prevent you from filing your tax return. If you are choosing a new Qualified Tax Professional , make appointments early to meet them and discuss your needs. The longer you wait, the less availability they will have. The best way to prepare for tax season is to gather your information and get your questions answered early.

                 The tax season for this year has been established. As announced by the Internal Revenue Service ( IRS ), the first day tax returns will be accepted is January 23 . The deadline to file is April 18 . After reflecting on the past 3 years, the IRS has taken steps to make improvements in the service it provides to taxpayers.           As part of the Inflation Reduction Act passed in August 2022, the IRS has hired 5,000 new employees. They will answer phone inquiries and provide in-person assistance. The date of January 23 was chosen to allow for training and needed updates to the software so IRS systems will work smoothly. Tuesday, April 18, 2023 will be the tax filing deadline in observance of Emancipation Day in the District of Columbia. Since there is more help available this year than in previous years, our next post will discuss how to best use our time in preparation f...

                 When being employed by a family member, things can get complicated. That is especially true when it comes to tax responsibilities. Often, it depends on the relationship and the type of business. For example, a spouse is considered an employee if the first spouse makes the management decisions. Then their income is subject to income tax withholding, Social Security, and Medicare taxes.           When children are employed by their parents in a Sole Proprietorship or partnership, the wages are always subject to income tax withholding. However, only after the children turn 18 does Medicare and Social Security come into play. This changes when the business is a corporation or an estate. At that point, all wages are subject to withholding, Medicare, and Social Security. It does not matter how old the child is. If you are planning on starting a business and employing family member...

               For those who requested an extension to file their 2021 tax return, the deadline is Monday, October 17 . The Franchise Tax Board ( FTB ) follows the lead of the Internal Revenue Service ( IRS ) in this area. The time to file is now. However, there is no need to wait until the last minute of the last day. If you are ready before October 17, get your return filed then. When you have your information, there is no need to wait. If something unexpectedly comes up, and you file after the deadline, there will be a late filing penalty.           In some cases, there are some who are given extra time. Members of the military serving in a combat zone have extra time. They usually have up to 6 months after they leave the combat zone to file. Taxpayers who live in a declared disaster area will have extra time. In these situations, the filing date can continue to change, so those affected need ...

                 October is National Cybersecurity Awareness month. But we don’t want to wait for a particular time to check how secure our systems and our habits are. That gives the criminals more opportunities.           The scams are constantly changing, and that is especially true in our industry. It is very common for a criminal to send a phishing email or a text message to try and trick someone into giving up their personal information. They could send it to a taxpayer pretending to be the Internal Revenue Service ( IRS ), or to a Tax Professional pretending to be a potential client. Don’t click on strange links or download files from people you do not know! It could allow malware to be downloaded and from there passwords are stolen and computer networks are compromised. They might even hold the data for ransom.           There are steps w...

             Taxpayers and Tax Professionals alike must continue to be vigilant against security threats. This is a year-round concern. Criminals involved in identity theft will always be one step ahead and willing to try new tactics, but they usually involve similar methods. Being familiar with these methods goes a long way to keep you and your information safe.           They will attempt to phish the information they want through emails or text messages. The goal is to get you to give up passwords, bank account numbers, credit card numbers, and Social Security numbers. This is accomplished in two ways. The first is making you feel that the message is coming from someone or some entity that you trust. The second is that a false sense of urgency is created to make a person open a link or attachment, or in some other way give up their sensitive information.       ...

             Phone scams are nothing new and we have all experienced a variation of this at some point. The idea is that there is a prerecorded message, or even an actual person calling, who pretends to be someone they are not. Criminals can use apps to fake their Caller ID number to make it seem like they are calling from the actual institution.           In this case they impersonate someone from the Internal Revenue Service ( IRS ). The messages are urgent and threatening in tone. They claim that law enforcement agencies will soon act unless the taxpayer follows their instructions. This is not how the IRS , or its collection agencies operate.           They will never demand immediate payment. Especially with methods like wire transfer, gift cards, or prepaid debit cards. They will never threaten to use law enforcement to arrest you for lack of tax p...

              If you have not filed your 2021 tax return yet, you do not need to wait until October and the extension filing deadline. However, if you are having some difficulties, it might be the time to hire a tax professional. There are different types of preparers, and your needs will determine who you hire.           There are some basic points to keep in mind. Ask about fees . Make sure you have a clear understanding about the fees you will be charged. Avoid preparers who promise to get greater refunds than competitors, or who base their fee on how much of a tax refund you get. This is an incentive for fraud. E-file . Make sure that your tax professional will use e-file to file your tax return with the Internal Revenue Service ( IRS ). It is much more efficient than using the mail.           Understand the preparer’s credentials . Enrolled Agents, Certif...

           Even with a large backlog, the Internal Revenue Service ( IRS ) still sends out letters and notices to Taxpayers at all times of the year. They could be for several reasons including, the tax return being changed by the IRS , the taxpayer being due a larger or smaller refund, a question about the tax return, or even the need to verify an identity.           There can be an increase in mail sent out in the weeks after Tax Season has finished. If you receive mail from the IRS , please remember some simple things. Do not ignore it . Reading the letter will explain the reason for the contact and what, if anything, should be done. Do not panic. The IRS normally contacts people by mail. The letter or notice will explain what is needed. Read carefully and completely. Everything you need to know is usually in the letter. If a response is needed, the date required will be there. You can always ask your Qua...

               Criminals are especially active during this time of year. Their goal is to steal personal information, such as Social Security numbers, and file fraudulent tax returns. The Internal Revenue Service ( IRS ) scans tax returns for fraud, and when they find something, it is set aside for further review. The next steps are critical.           If the IRS determines there is fraud, they will send a letter to the taxpayer. Nothing will be processed until there is a response. The letter will notify them of potential identity theft and give specific instructions that must be followed. They might be online, over the phone, or even need to take place in person. Do not ignore these letters. Your Qualified Tax Professional can help guide you through the process.