The Tax Factor was created to educate individuals and small-business owners about taxes. Let’s face it, nothing in life is guaranteed except death and taxes. Okay, maybe that sounded pretty depressing but the goal of this blog is to help you find the information to learn how to make taxes work for you. Taxes can be extremely complicated but knowing about deductions and credits can save you thousands of dollars per year.
The IRS has launched a new Affordable Care Act Tax Provisions website at IRS.gov/aca to educate individuals and businesses on how the health care law may affect them. The new home page has three sections, which explain the tax benefits and responsibilities for individuals and families, employers, and other organizations, with links and information for each group. The site provides information about tax provisions that are in effect now and those that will go into effect in 2014 and beyond.
Topics include premium tax credits for individuals, new benefits and responsibilities for employers, and tax provisions for insurers, tax-exempt organizations and certain other business types.
Visitors to the new site will find information about the law and its provisions, legal guidance, the latest news, frequently asked questions and links to additional resources.
Several other federal agencies have a role in implementing the health care law, including the Department of Health and Human Services, which has primary responsibility. To help locate additional online resources from the Department of Health and Human Services, the Department of Labor and the Small Business Administration, the IRS has issued a new Web-based flyer - Healthcare Law Online Resources (Publication 5093).
Visit IRS.gov/aca for more information regarding the tax provisions of the Affordable Care Act.
Going to college can be a stressful time for students and parents. The IRS offers these tips about education tax benefits that can help offset some college costs and maybe relieve some of that stress.
• American Opportunity Tax Credit. This credit can be up to $2,500 per eligible student. The AOTC is available for the first four years of post secondary education. Forty percent of the credit is refundable. That means that you may be able to receive up to $1,000 of the credit as a refund, even if you don’t owe any taxes. Qualified expenses include tuition and fees, course related books, supplies and equipment. A recent law extended the AOTC through the end of Dec. 2017.
• Lifetime Learning Credit. With the LLC, you may be able to claim up to $2,000 for qualified education expenses on your federal tax return. There is no limit on the number of years you can claim this credit for an eligible student.
You can claim only one type of education credit per student on your federal tax return each year. If you pay college expenses for more than one student in the same year, you can claim credits on a per-student, per-year basis. For example, you can claim the AOTC for one student and the LLC for the other student.
You can use the IRS’s Interactive Tax Assistant tool to help determine if you’re eligible for these credits. The tool is available at IRS.gov.
• Student loan interest deduction. Other than home mortgage interest, you generally can’t deduct the interest you pay. However, you may be able to deduct interest you pay on a qualified student loan. The deduction can reduce your taxable income by up to $2,500. You don’t need to itemize deductions to claim it.
These education benefits are subject to income limitations and may be reduced or eliminated depending on your income.
For more information, visit the Tax Benefits for Education Information Center at IRS.gov. Also, check Publication 970, Tax Benefits for Education. The booklet’s also available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
"Behind every successful man stands a woman and the IRS. One takes the credit, and the other takes the cash."
For the most part, I have no problems with the IRS. I have to protect my clients against the IRS so I consider the IRS my fierce rival. For me to say that I like the IRS would be similar to Tom Brady saying that he likes Peyton Manning during the fourth quarter of the Super Bowl. I respect the IRS but I come to win when I'm dealing with them. I don't hate the IRS but I hate some things about dealing with them. Here are some things that drive me crazy about dealing with the IRS:
Not being able to communicate with the IRS via email is insane! Faxing, mailing and calling is so the 80s. The IRS has to find a way to act like it is the year 2013. A lot of time spent on my IRS cases could have been reduced in half, if I was able to email correspondences.
Calling the IRS toll-free number is like being stuck in rush hour traffic in CHINA! There has been times that I waited over an hour to get an operator. Don't even try to call the IRS in March or April. One time, I called the IRS and went to lunch. I was still on hold when I came back from lunch.
Waiting for tax-exemption status approval is longer than a full season of professional baseball. I have completed many tax-exemption applications (Form 1023). The average completion time is around six months. It only takes me about a week to complete the application. However, the IRS is so understaffed that it takes forever for them to review your application. During the waiting period, I have to calm my clients down at least four times.
Dealing with a overworked IRS employee is like dealing with an ex-girlfriend who hates you for no reason. Some IRS agents are just plain old nasty. It is not my fault that Congress didn't approve the IRS budget so stop being mad at me for your workload!
Despite this list, I have learned that you should always treat the IRS with respect. Even if the IRS agent is Satan himself, you must treat them with respect. Don't get respect confused with fear. If you are "on-point" with your case, you have nothing to fear.
The New Inductee to the Tax Preparers' Hall of Shame goes to a..........FAMILY!!!!
YES, A FAMILY!!!!
In Brownsville, Texas, Judy Lynn McCune, Loretta Ann McCune and Rania Ann Sanchez have been sent to prison for conspiring to defraud the federal government by preparing federal returns and cashing refund checks in the name of deceased individuals. The three women entered guilty pleas in April.
Judy received a sentence of 57 months, Loretta Ann 20 months and Sanchez 24 months in prison. Restitution of $223,098 was also ordered paid to the IRS, and the women will be required to serve three years of supervised release following completion of their prison terms.
McCune admitted that she recruited members of her family, including her mother, Loretta Ann McCune, and her sister, Sanchez, into the scheme.
The story gets real crazy. Read more about this story by visiting to www.accountingtoday.com.
Well, I wouldn't want to attend the next McCune family reunion. This should be a lesson to not let bad relatives bring you down. Just because they are family, doesn't make them right! Keep it clean folks!
It’s a good idea to have all your tax documents together before preparing your 2012 tax return. You will need your W-2, Wage and Tax Statement, which employers should send by the end of January. Give it two weeks to arrive by mail.
If you have not received your W-2, follow these three steps:
1. Contact your employer first. Ask your employer – or former employer – to send your W-2 if it has not already been sent. Make sure your employer has your correct address.
2. Contact the IRS. After February 14, you may call the IRS at 800-829-1040 if you have not yet received your W-2. Be prepared to provide your name, address, Social Security number and phone number. You should also have the following information when you call:
• Your employer’s name, address and phone number;
• Your employment dates; and
• An estimate of your wages and federal income tax withheld in 2012, based upon your final pay stub or leave-and-earnings statement, if available.
3. File your return on time. You should still file your tax return on or before April 15, 2013, even if you have not yet received your W-2. File Form 4852, Substitute for Form W-2, Wage and Tax Statement, in place of the W-2. Use the form to estimate your income and withholding taxes as accurately as possible. The IRS may delay processing your return while it verifies your information.
If you need more time to file you can get a six-month extension of time. File Form 4868, Application for Automatic Extension of Time to File US Individual Income Tax Return. If you are requesting an extension, you must file this form on or before April 15, 2013.
If you receive the missing W-2 after filing your tax return and the information on the W-2 is different from what you reported using Form 4852, then you must correct your tax return. File Form 1040X, Amended U.S. Individual Income Tax Return to amend your tax return.
Forms and instructions are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
IRS Tax Tip 2013-09
While each individual tax return is unique, there are some tax rules that affect every person who files a federal income tax return. These rules involve dependents and exemptions. The IRS has six important facts about dependents and exemptions that will help you file your 2012 tax return.
1. Exemptions reduce taxable income. There are two types of exemptions: personal exemptions and exemptions for dependents. You can deduct $3,800 for each exemption you claim on your 2012 tax return.
2. Personal exemptions. You usually may claim one exemption for yourself on your tax return. You also can claim one for your spouse if you are married and file a joint return. If you and your spouse file separate returns, you may claim the exemption for your spouse only if he or she had no gross income, is not filing a joint return and was not the dependent of another taxpayer.
3. Exemptions for dependents. Generally, you can claim an exemption for each of your dependents. A dependent is either your qualifying child or qualifying relative. If you are married, you may not claim your spouse as your dependent. You must list the Social Security Number of each dependent you claim on your return. See Publication 501, Exemptions, Standard Deduction, and Filing Information, for information about dependents who do not have Social Security numbers.
4. Some people do not qualify as dependents. While there are some exceptions, you generally may not claim a married person as a dependent if they file a joint return with their spouse.
5. Dependents may have to file. If you can claim someone else as your dependent on your tax return, that person may still be required to file his or her own tax return. Whether they must file a return depends on several factors, including the amount of their gross income (both earned and unearned income), their marital status and any special taxes they owe.
6. Dependents can’t claim a personal exemption. If you can claim another person as a dependent on your tax return, that person may not claim a personal exemption on his or her own tax return. This is true even if you do not actually claim that person as your dependent on your tax return. The fact that you could claim that person disqualifies them from claiming a personal exemption.
Remember that a person must meet several tests in order for you to claim them as your dependent. See Publication 501 for the tests you will use to determine if you can claim a person as your dependent.
You can view or download Publication 501 at IRS.gov or order it by calling 800-TAX-FORM (800-829-3676). You can also use the Interactive Tax Assistant at IRS.gov to find out if a person qualifies as your dependent. The ITA is a helpful tool that can answer many of your tax law questions.
Yep, it's tax season. I will posting IRS tips all tax season.
Here is a word from the Goodfellas at the IRS:
IRS Tax Tip 2013-08
When you’re looking for tax information, you want to find it as quickly and easily as possible. That’s why the IRS redesigned its website. It’s now even more user friendly. Here are the top 10 reasons to visit IRS.gov:
1. Get 24/7 Access. Whether you do your taxes during the day or burn the midnight oil, IRS.gov has the tax forms and answers you need when you need them. It's accessible all day, every day. The Interactive Tax Assistant is a helpful tool that will answer many of your tax law questions. Several tax forms, publications and information are also available in Spanish.
2. Use Free File. Anyone can prepare and e-file their taxes for free with IRS Free File. Offered exclusively at IRS.gov, Free File’s brand name software or fillable forms do the work for you. If you made $57,000 or less, you qualify to use free tax software. If your income is more than $57,000 or you feel comfortable preparing your own tax return, use Free File Fillable Forms. This option provides the electronic versions of IRS paper forms.
3. Try IRS e-file. Whether you do your own taxes or hire a preparer, IRS e-file is the safest, easiest and most popular way to file a complete and accurate tax return. Since 1990, taxpayers have e-filed more than one billion returns. If you owe taxes, e-file gives you options to file early and pay by the tax deadline. If you are due a refund, you should receive it in less than 21 days.
4. Check Your Refund Status. You can track your refund using the enhanced “Where’s My Refund?” tool. It’s quick, easy and secure and has a new look this year. You can start checking on the status of your refund within 24 hours after the IRS has received your e-filed return. You can check your refund status four weeks after you mail a paper return. The tool includes a tracker that displays the progress of your return in three stages while it is processed. Once IRS approves your refund, “Where’s My Refund?” will give a date to expect your refund.
5. Make Payments Electronically. E-payment options are a convenient, safe and secure way to pay taxes. You can authorize an electronic funds withdrawal, use a credit or debit card or enroll in the U.S. Treasury’s Electronic Federal Tax Payment System.
6. Use the EITC Assistant. The Earned Income Tax Credit is a tax credit for working people who earned less than $50,270 in 2012. The credit can be worth as much as $5,891. Check your eligibility using the EITC Assistant tool. You may be among the millions of eligible workers who get the EITC this year.
7. Get Tax Forms and Publications. You can view and download tax forms and publications any time. It’s the easiest way to get IRS forms and publications.
8. Figure the Right Withholding. The IRS Withholding Calculator will help to ensure you don’t have too much or too little income tax withheld from your pay.
9. Request a Payment Agreement. Paying all your taxes on time avoids penalties and interest. However, if you cannot pay your taxes in full you may be eligible to use the Online Payment Agreement Application to request an installment agreement.
10. Get the Latest Tax Law Changes. Learn about tax law changes that may affect your tax return. Special sections of the website highlight changes that affect individual and business taxpayers.
The address of the official IRS website is www.irs.gov. Don’t be misled by sites that claim to be the IRS but end in .com, .net, .org. Some thieves use phony websites to gain your personal and financial information. They then use this information to commit identity theft or steal your money.
Expenses of traveling away fro
“home” overnight for job-related reasons are deductible. Your “home” is
generally considered to be the entire city or general area where your principal
place of employment is located. Out-of-town expenses include transportation,
meals, lodging, tips, and miscellaneous items like laundry, valet, etc.
Document your away-from-home
expenses by nothing the date, destination, and business purpose of your trip.
In addition, keep a detailed record of your expenses-lodging, public
transportation, meals, etc. Always list meals and lodging separately in your
record. Receipts must be retained for each lodging expense. However if any
other business expense is less than $75, a receipt is not necessary if you
record all the information in a timely diary. Keep track of the full amount of
meal and entertainment expenses even though only a portion of the amount may be
deductible.
B)OFFICE EXPENSES:
Use this section to record miscellaneous
expenses of supplies and services you are responsible for when you are on the
road. For example, you may be required to fax or mail an important document
back to your home office; such expensive is deductible if it is not reimbursed
by your employer.
C)SUPPLIES:
Generally to be deductible, items
must be ordinary and necessary to your job. If you are an employee, only
amounts not reimbursable by your employer are deductible. Record separately
from other supplies, items costing over $100 and having a useful life of more
than one year. These items must be recovered differently on you tax return than
recurring everyday business expenses like maps, etc.
If you are required to wear a
uniform, the cost and upkeep may be deductible. IRS rules specify that expense
for work clothing and its maintenance is deductible if: (1) the uniforms are
required by your employer (if you are an employee); and (2) the clothes are not
adaptable to ordinary street wear.
D)COMMUNICATION EQUIPMENT:
Since special rules apply to
deductions for cellular and similar items (called “listed property” in the tax
rules), it is important to track their business and personal use carefully.
Such property potentially qualifies for larger current deductions when it’s
used more than 50% for business. Keep your bills for cellular phone use and
mark all business calls.
E)FEES & DUES:
Union or other professional dues
are deductible. Amounts paid to a union which are mean to go toward defraying
your personal expenses are not deductible. However, any part of union payments
which go into a strike fund is deductible.
G)MISCELLANEOUS EXPENSES:
Use this section to record
expenses that don’t easily fit to other categories. For example, if you look
for a job in the same line of work, you may deduct the expenses. Such expenses
could include mileage to interviews, resume preparation, etc.
