Archive for the ‘Taxes’ Category

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Check Your Check…

In Accounting & Finances,Business,Taxes on September 17, 2018 by Sufen Wang

Check Your Check: Avoid Tax Filing Surprises by Reviewing Your Withholding Now

Some surprises are great, like when a shirt rings up below the ticket price, or when your cat sneaks onto the sofa and purrs against your cheek.  Other surprises – not so great, like when your cat leaves you a mangled “gift” on the doorstep, or you get an unexpected tax bill or penalty when you file your 2018 income tax return.

While there’s no sure way to encourage good surprises in life, you can definitely avoid some bad ones. For example, if you’re a taxpayer with high income, a complex return, or someone who gets wages and also pays quarterly estimated taxes for self-employment, it’s a very very good idea check your withholding numbers NOW, in late-summer 2018, to avoid an unforeseen bill when you go to file in 2019.

This is especially important because “The Tax Cuts and Jobs Act” passed back in December of 2017 made some pretty big changes to the tax laws. A few of these include:

• Increasing the standard deduction (For 2018, it almost doubled to $24,000 for joint filers and $12,000 for single filers).
• Removing personal exemptions
• Limiting/discontinuing some deductions. For example—A $10,000 cap on deductions for state and local property, sales and income taxes;
• Changing tax rates and tax brackets

All in all, many taxpayers who itemized in days of yore might find out they’ll pay less tax in 2018 by taking the standard deduction. The key phrase here is “might find out” – it will literally pay off to know your numbers now to avert major complications when you file next year. Just give your paycheck a quick checkup to verify your withholding is in good health. For this DIY review, you’ll need just three things:

• The IRS’s Withholding Calculator
• Your completed 2017 tax return for estimates
• Your most recent paystub

Following the calculator’s guidelines, check that you’re having the right amount of tax taken out of your pay. If your withholding is wonky, you should look into adjusting it ASAP by submitting a new Form W-4 to your employer. The longer you wait, the fewer pay periods you’ll have to withhold the correct amount, which means you’ll shell out a bigger chunk of change on each remaining paycheck. And if your withholding isn’t enough and you don’t make any adjustments this year, you’ll end up shelling out an even bigger chunk of change come tax return filing time.

Even if your withholding looks A-OK today, a change in your personal circumstances could shake things up before the year ends. For example, if you get a raise (yay you!) you should re-check your withholding. And if you do end up adjusting your withholding in mid-2018, you’re gonna’ wanna’ check it again come New Year’s, to make sure it’s still hunky dory for the full-year of 2019.

The IRS’s Withholding Calculator works fine for folks with simpler tax situations, but those of you out there with more elaborate stuff going on will want to take things to the next level with IRS Publication 505, Tax Withholding and Estimated Tax. For example, if you get non-wage income, such as capital gains, Pub. 505 will be your go-to info source. While it’s not as easy-breezy as the calculator, you do get worksheets and examples to help guide you through the maze of complex withholding.

Of course, while the Withholding Calculator and Publication 505 are helpful, but they can’t answer all of your tax-planning questions. If you need specific advice about the new tax laws and how they’ll affect your personal situation, get in contact with your friendly neighborhood tax professional. In the meantime, you can read more about withholding at http://www.irs.gov/withholding, and also get a head-start on prepping for next year’s taxes with IRS.gov/getready.

Remember, it pays off to expect the unexpected, especially with the ripple effects of new tax legislation likely to cause big waves in the filing season.

Sufen Wang, M.S. Accountancy
http://www.sufenwang.com
Wang Solutions, Long Beach, CA (562) 856-0793
Editor: Hannah Huff, M.F.A. Creative Writing: Poetry, (626) 806-5805

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IRS Levy…Need More Time?!

In Accounting & Finances,Business,Taxes on September 10, 2018 by Sufen Wang

Clock Ticking on Challenging an IRS Levy? Now More Time is On Your Side

Taxpayers may be singing a new tune this year along the lines of “I fought the law and the law…didn’t win because I now have more time to challenge a levy!” It doesn’t have quite the ring of the original song, but it does bode well for individuals and businesses who think they’ve been hit with a wrongful IRS levy or seizure. Based on new legislation, the time limit to file an admin claim/bring civil action jumped from 9 months to 2 years, granting extra time to either procrastinate or make your case known.

A CRASH course in levies: if you have an outstanding tax debt, it doesn’t just slink away. The IRS can place a levy, which makes it perfectly legal for your property to be seized and sold to satisfy your debt, never to be seen by you again. Yes, your car, your house, and your boat are up-for-grabs, along with wages, and moolah in the bank and other financial accounts.

But wait, there’s a twist! Even if the IRS already sold your levied property, you can get it back – and that’s the scenario where the extended 2-year period comes into play. If – and only if – your property was already hocked, you get 24 whole months from the levy date to file an administrative claim to get your stuff back. The IRS points out that, “Usually, wrongful levy claims involve situations where an individual or business believes that either the property belongs to them, or they have a superior claim to the property that the IRS is not recognizing.”

But wait, there’s another twist! If you do make an administrative claim within the extended 2-year period, you score another extension. Depending on which is shorter, the 2-year period for bringing suit is extended for either:

  • 12 months from the date you filed the claim; OR
  • 6 months from the date the IRS disallowed the claim.

All this only applies to levies made before, on, or after 12/22/17, as long as the previous 9-month period hasn’t expired. Remember that if the IRS still has the property it levied, there’s no time limit for filing that claim – through the motto “sooner is better than later” is always apt.

But wait, there’s one more twist that could spare you the trouble of the prior twists. Anyone who gets the IRS bill, “Final Notice of Intent to Levy and Notice of Your Right to A Hearing,” should immediately get in touch with the IRS. Even at this ultra-super-late-final-notice-why-did-you-wait-so-long-stage, you still might be able to make arrangements to pay your tax liability, instead of having the IRS go to town with a levy.

There are lots of opportunities to clear your tax debt before the IRS comes a-knockin’ for your property. However, if it gets to the point where they’ve already confiscated your belongings, at least now you have a little extra time to get your stuff together to submit that administrative wrongful levy claim to get your stuff back.

Sufen Wang, M.S. Accountancy
www.sufenwang.com
Wang Solutions, Long Beach, CA (562) 856-0793

Editor: Hannah Huff, M.F.A. Creative Writing: Poetry, (626) 806-5805

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Virtual Currency & The S Corporations

In Accounting & Finances,Business,Taxes on August 20, 2018 by Sufen Wang

IRS Planning to Lay Down the Law on Virtual Currency and S Corporations

It looks like the IRS is going to have a busy year, with several new compliance campaigns on the horizon.

First up is in the swampy realm of virtual currencies. Although Bitcoin is the most famous, there are more than 1,500 digital monies floating around out there on the internet, and more are rearing their head each day. So, it was only a matter of time before the IRS upped the ante to make sure taxpayers using cryptocurrencies are doing their digital deals on the up and up.

The IRS didn’t spill too many beans about what they’ll be on the lookout for, other than that “the compliance activities will follow the general tax principles applicable to all transactions in property, as outlined in Notice 2014-21.” In plain English, if a transaction involves a taxable event and tax liabilities should have been reported, the IRS is going to make darn sure that tax liabilities were properly reported.

 

The tax agency plans to attack the cyber money issue from multiple angles, with treatments such as outreach and examinations. But when dealing with currency with names like “Ethereum,” “Ripple,” and “Stellar” (yes, these are all real), it seems like anything could happen. The IRS urged taxpayers to correct their returns as soon as is feasible, which should grease the wheels for a smoother compliance process all around.

Virtual currency fans won’t be the only taxpayers facing increased scrutiny from the IRS – the tax agency will also be cracking down on S corporations. Only S corps who have been abusing any of the following three rules about pass-through entities need to start gnawing their nails, but it’s a good idea for any such businesses to make sure their tax paperwork is in order.

Specifically, the IRS is going to be laying down the law:

  • If an S corporation doesn’t inform a shareholder about the gain on the distribution of appreciated property.
  • If an S corporation doesn’t determine that a distribution (property or cash) is properly taxable as a dividend.
  • If a shareholder doesn’t report non-dividend distributions in excess of their stock basis that are subject to taxation.

The IRS’ campaign announcements are first and foremost warnings for taxpayers who have been engaging in specific activities to be prepared, and they’re designed to encourage compliance. So S Corporations/shareholders and taxpayers using virtual currency – if you think you may be guilty of any of the above mistakes, now’s your chance to do something – before the big bad wolf comes knocking at your door.

Sufen Wang, M.S. Accountancy
www.sufenwang.com
Wang Solutions, Long Beach, CA (562) 856-0793

Editor: Hannah Huff, M.F.A. Creative Writing: Poetry, (626) 806-5805

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Taxes & 7-Eleven…

In Accounting & Finances,Business,Taxes on April 8, 2018 by Sufen Wang

Oh Thank Heaven! You Can Pay Income Taxes with Cash at…7-Eleven?

That’s right, you can now visit your local 7-Eleven to buy a nice cold soda, a bag of chips, a lottery ticket…and pay your income taxes. This year, the IRS and the convenience store chain will be making things more convenient for anyone who owes taxes and doesn’t have a bank account, checks, or a credit card.

In the past, any folks who wanted to pay their taxes with cold hard cash needed to travel to an IRS Taxpayer Assistance Center. However, these offices can be few and far between. Now people can quite literally go just around the corner to any 7-Eleven and pay their income taxes with cash. Just remember that a 7-Eleven probably isn’t the safest place to wave around a big wad of money, so stay smart and watchful.

The option is made possible via a partnership between the IRS and ACI Worldwide’s OfficialPayments.com and the PayNearMe Company. Since most 7-Elevens are open all day every day and more than 7,000 stores are participating across the country, paying with cash is almost as easy as paying online. It does take about 5 – 7 business days to process though  — anyone trying to pay by the April 16 filing deadline will be out of luck.

Also, before taxpayers grab their greenbacks and hurry out the door, they must go online to start the payment process. Head over to the IRS.gov payments page, look for the “other ways you can pay” section, select the cash payment option, and read the instructions. You can pay up to $1,000 each time, with a $3.99 charge for each transaction. Just remember to bring extra dough with you for the donuts and coffee.

 

P.Ssss… Here a preview on what you need to do to pay your taxes by cash… 

 

 

Step 1

Visit the Official Payments site and follow the instructions to make a cash payment with PayNearMe.

Step 2

You’ll receive an email from Official Payments confirming your information. The IRS will then verify your information. This process may take two to three days.

Step 3

After the IRS verifies your information, PayNearMe will then send you an email with a link to your payment code and instructions. Either print the payment code at home or send it to your smartphone.

Final step

Go to the retail store listed in the PayNearMe email and ask the clerk to scan or enter your payment code. You will receive a receipt from the store after they accept your cash. This receipt is confirmation of your payment and should be kept for your records. It usually takes two business days for your payment to post to your account.

Really?!  Just write a check and be done with it!

 

 

 

Sufen Wang, M.S. Accountancy
www.sufenwang.com
Wang Solutions, Long Beach, CA (562) 856-0793

Editor: Hannah Huff, M.F.A. Creative Writing: Poetry, (626) 806-5805

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Tax Reform! Now What?!

In Accounting & Finances,Business,Taxes on April 8, 2018 by Sufen Wang

The Tax Reform Bill Passed – Now What Happens at the IRS?

Signing a bill into law with a fancy pen is the easy part. The hard part is what follows: implementing that law efficiently and effectively. Such is the reality of the tax reform bill signed into law on Dec. 22 by President Trump.

As the agency clearly most impacted by the tax reform bill, the Internal Revenue Service will need more than a few upgrades to carry out the changes. This means things like new and improved computer systems, along with training for an expanded IRS workforce so that the agency can provide proper guidance to both tax professionals and taxpayers. Moreover, since support for the tax reform bill was garnered based on certain results claimed by its politician proponents, the agency needs to be able to enforce the law to make those claims come true.

Unfortunately, that’s not likely to happen if the IRS doesn’t receive additional funding. A former IRS commissioner, Lawrence B. Gibbs, explained that the agency won’t be able to “mount a sufficient compliance effort to make sure folks obey their tax obligations under this new law” unless the agency gets more funding. As we’ve seen in the past, the IRS’s service quality ebbs and flows with its available budget.

The problem is that Republicans in Congress have a history of voting to slash the IRS budget, and things don’t look like they’re going to be changing. While talk of the IRS’s fresh new needs has begun to crop up, the word from the House and Senate Appropriations Committees isn’t promising: they’ve proposed a IRS budget in FY 2018 of $120 million less than the FY 2016 funding level. And with those changes from the tax reform law waiting in the wings without any confirmed funding increases, things aren’t looking very bright for the IRS, taxpayers, and tax preparers.

 

Sufen Wang, M.S.Accountancy
Wang Solutions, Long Beach, CA (562) 856-0793
Editor: Hannah Huff, M.F.A. Creative Writing: Poetry, (626) 806-5805

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Business Interruption & Comm’l Damages

In Accounting & Finances,Business,Insurance & Liability,Taxes on November 8, 2017 by Sufen Wang

How to Assess Business Interruption, Commercial Damages

Unfortunately, with all the flooding and fires raging across the country these past few months, there are business losses that need to be assessed, argued and settled. But how?

Let’s take a closer look at a little something called business interruption insurance. Investopedia defines this as “a form of insurance coverage that replaces business income lost as a result of an event that interrupts the operations of the business, such as fire or a natural disaster. Business interruption insurance is not sold as a separate policy, but is either added to a property/casualty policy or included in a comprehensive package policy.

That second part is important. Since it’s not a standalone policy that business owners have to beat around the bush to buy, businesses affected by the fires and floods likely already have this handy dandy coverage. While standard business insurance has things covered in terms of physical losses and damage – e.g. computers and office furniture destroyed in a fire – business interruption insurance is a safeguard against the losses that arise when a business can’t run due to this destruction.

The insurance covers lots of things that crop up when manmade or natural disasters interrupt an enterprise, including lost revenue, rent and other fixed expenses, and temporary location operating expenses. Nevertheless, there’s always some kind of fine print, so here are a few key things to keep in mind when it comes to business interruption claims:

  • The insurance contract ultimately has the last word, so any loss estimate needs to fall under the contract’s umbrella. For example, the policy may specify that losses will only be covered for a specific period, and so anything outside that time-frame is a no-go.
  • That being said, the time element wording in most policies is intentionally unclear, with the loss period often being defined as starting from the occurrence of the loss and continuing until the damaged property is replaced.
  • Don’t put the cart before the horse; that is, before the business interruption claim can be filed, the business property damage claim needs to be filed. Remember, the interruption of business is a consequence of damage to the physical property, so if there’s no claim of damage, a claim of the business being interrupted holds no weight.
  • That being said, some business interruption policies have an add-on provision that lets the business claim an interruption in operations if damage to their supplier causes a hiccup in product delivery.

Business interruption coverage claims usually take into account three categories of loss, which are then added together for a nice neat sum of the loss:

  • Actual losses (projected revenue for the loss period less saved expenses)
  • Continuing and non-continuing expenses (e.g. the business wants to continue to pay employees even while closed so that there’s staff available when the doors finally open again).
  • Expedited and extra expenses (i.e. the business wants to get back on its feet as soon as possible, but this expedited opening will likely incur extra costs, such as ordering supplies by air rather than the usual truck delivery.)

In some cases, a business may decide to hire a financial expert to calculate the losses relating to an interruption event in conjunction with the claim filed with the insurance company. This expert will take a long, hard look at things like the business’ income for the past several years, loss statements, and checking statements to carefully estimate losses due to the hitch in the operations. In addition to these more concrete numbers, they’ll also consider factors like the economic climate in the damaged business’ market during the loss period.

While juggling all of these figures, the expert will be taking pains to avoid double counting, just like in any other loss analysis. Double counting is a miscalculation where a business’ inventory gets “sold” twice. Since the business’ property/content coverage will most likely pay for the value of the lost inventory, any lost profits calculated from a business interruption should take into consideration this assumed payment for lost inventory.

As mentioned above, the expert will be looking at three categories of losses – actual lost profits, ongoing non-saved expenses, and extra & expedited expenses incurred from reopening – which they’ll total to get a nice neat sum of the loss. As such, a business interruption loss estimate conducted by a financial expert allows all of the business’ losses to be carefully considered. This is important because at the end of the day, the businesses damaged by these disasters are just looking to get back on the road to success.

Oh…one last word…insurance companies will send a year-end 1099-MISC Income on all non-property damages related reimbursement as income to the businesses.  So, beware of all labor-cost reimbursement from your Business Interruptions Claim, they are taxable as income to the business.

 

 

Sufen Wang, M.S.Accountancy
Wang Solutions, Long Beach, CA (562) 856-0793
Editor: Hannah Huff, M.F.A. Creative Writing: Poetry, (626) 806-5805

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IRS Collection Debt Program

In Accounting & Finances,Business,Taxes on September 11, 2017 by Sufen Wang

IRS Rolls Out Debt Collection Program

Folks out there who think nothing bad happens when they don’t pay their taxes are in for a rude awakening. The IRS is rolling out a debt collection program that involves sending over individual tax debts to four private debt collection agencies. That’s right, the IRS is calling in backup, and it plans to ramp up the collection program into higher gear over the next two years, according to IRS Collection Policy Director Kristen E. Bailey.

The agency is starting off with individual tax debt cases that are 2 – 4 years late and that have an average liability of less than $50,000. In contrast to audits, where the IRS seems to spring more often for the big fish, this time it seems like even the little guys can expect phone calls from collectors sometime soon – at reasonable hours, of course. In fact, it’s probably more important than ever to know what private debt collectors can and can’t do, in case you’ve got some past due tax bills sitting on your desk.  For example, private collectors don’t have enforcement powers, so they can’t issue liens.

So far since April, the IRS has assigned about 400 cases across the board to these four collectors. In 2018, the agency has plans to pass along double-whammy cases where an individual taxpayer not only owes taxes, but also has a minimum of one unfiled return. Then in 2019 things will get even more serious with the agency handing over business cases to the private collectors.

Bailey did clear up what effect the new tax debt collection program will have on Americans currently living abroad: zilch. The four companies participating in the program are restricted to operating in the U.S. states and territories, so anyone who’s enjoying mimosas in another country can sleep peacefully knowing they won’t be badgered by collectors. However, this only works if the IRS has the overseas taxpayer’s most current foreign address.

The bottom line is that, although many of us have tried, ignoring a bill doesn’t make it magically go away. In fact, it usually comes back with a vengeance: interest, late fees, hassle, headaches, and more. If you can’t pay your taxes on time, don’t just sweep the problem under the rug. Instead, find out what your options are before it gets sent to collections – and the IRS’s taxpayer advocate service is a great place to start.

Sufen Wang, M.S.Accountancy
Wang Solutions, Long Beach, CA (562) 856-0793
Editor: Hannah Huff, M.F.A. Creative Writing: Poetry, (626) 806-5805