In Accounting & Finances, Business, Taxes on May 11, 2012 by Sufen Wang Tagged: Forbes, Internal Revenue Service, irs, Notice, Tax, tax return, Telephone number, TurboTax
It Shouldn’t Be…
You head out to your mailbox expecting to find this week’s issue of Forbes. Instead, you open the mailbox and see a notice from the IRS sitting on top. Don’t assume it’s going to be a hassle – most of these letters can be handled without having to call or visit an IRS office.The notice might order you to pay up, but often it will simply notify you of account changes. Whatever the problem, the letter will provide specific instructions about what you need to do.
Please read carefully. If you received a correction notice, compare it with the information on your tax return. If everything looks A-okay, there’s no need to reply – unless the notice tells you otherwise. If the correction looks incorrect, you’ll need to let the IRS know with a written explanation.
Just because you don’t need to contact the IRS, doesn’t mean you can’t. If you have a question, just call the telephone number in the upper right corner of the notice. Have your tax return handy when you call.
See, you’ll be relaxing and reading your magazine in no time – until the next IRS notice arrives in the mail.
On the Money,
Sufen Wang
Wang Solutions
In Accounting & Finances, Business, Human Resources, Taxes on April 23, 2012 by Sufen Wang Tagged: accounting, Audit, Credit card, Internal Revenue Service, irs, Tax, tax return, United States
You’re Not Done Yet!
Now that you’ve filed your tax returns, you might be tempted to push your tax documents out of sight, out of mind. That’s not a good idea. Keeping good records after you filed is a good idea, just in case the IRS selects your returns for an audit.
In general, any documents relating to your federal tax returns should be saved for at least three years. This includes bills, credit card receipts, invoices, and any other records that support deductions or credits you claim on your return.
Don’t pull out the shredder for your whole filing cabinet just yet. To be on the safe side, you should keep any and all real estate refinancing loan docs, exchange calculation, escrow closing statements, inheritance or funds gifted to children, trust-related issues, stocks and bond trades, etc. for more than 3 years. Let’s try 5 to 7 years.
Finally, any and all payroll related records should be kept for about 10 years. Yes, you read that right: one whole decade. A few years ago I encountered a case where the State of California Employment Office (EDD) could not reconcile data on an employee, dating back to 1999 and decided to seek out my assistance via an audit. Fortunately, I was able to complete the audit, clean as a whistle, because I had all of the original records on the subject employee.
That just goes to show that employers should make room for keeping records. If you want to save space, go digital and scan all of the employees’ records – but always ensure that their signatures are clear and legible in the scanned images. However you do it, save your records now so you can save yourself some trouble in the future.
On the Record,
Sufen Wang
Wang Solutions
In Accounting & Finances, Business, Taxes on April 16, 2012 by Sufen Wang Tagged: Computer file, Credit card, Filename extension, Internal Revenue Service, irs, Overtime (sports), Tax, tax return
Can’t Pay? It’s Okay! Don’t Delay, File Your Returns Today
Tax returns will be due in less than 48 hours. Don’t have a panic attack if you can’t pay all the taxes you owe when you file. There are always solutions to problems….. But File, File, File – on time. It’s better to file right now and pay as much as you can, than to not file at all. If you don’t, you’ll be looking at a late filing penalty, in addition to a late payment penalty, and accrued interest charges. Or make sure you file an extension by April 17 with some estimated tax along with it.
This extension will give you an extra 6 months, until October 15. But remember this extension will only give you extra time, but not to reduce your tax liabilities. Interest and penalty will continue to accrue during this 6 months extended period on your tax responsibilities. Folks, DO NOT wait until October 15 to seek another extension, because there is NO extension on your extension…
Business Extension Form 7004.
Personal Extension Form 4868.
If you are not able to pay your taxes right now, still file your returns on time, and then request for an installment payment agreement from the IRS (for a fee, of course). You can also use this option when your bill arrives from the IRS. Remember the IRS also accept credit cards… In any case, File, File, File…
On the Money
Sufen Wang
Wang Solutions
In Accounting & Finances, Business, Taxes on April 11, 2012 by Sufen Wang Tagged: Alien (law), Filing Status (federal income tax), Head of Household, Internal Revenue Service, Itemized deduction, Marriage, Standard deduction, Tax
Find Your Perfect MatchTo itemize or not to itemize? That is the question with personal tax returns due April 17. When choosing between a standard or itemized deduction, you’ll want to pick the method that gives you the lower taxes.
To do this, first figure out the amount of your standard deduction. It’s based on your filing status and can change each year from inflation adjustments. For 2011, the amounts are:
Single: $5,800
Married Filing Jointly: $11,600
Head of Household: $8,500
Married Filing Separately: $5,800
Qualifying Widow(er): $11,600
These numbers are higher for taxpayers who are blind and/or 65 or older. If the total amount you spent on qualifying expenses is more than your standard deduction, you can usually benefit by itemizing.
However, not everybody gets to choose between itemized and standard deduction. Are you a nonresident alien, dual-status alien, or an individual who files returns for periods of less than 12 months due to a change in accounting periods? If you answered yes to any of the above, you are not eligible for the standard deduction.
Those in the “Married Filing Separately” category have some extra rules when it comes to deductions. If one spouse itemizes deductions, the other spouse must also itemize to claim their allowable deductions. Better dust off those communication skills and make sure you and your spouse are on the same page, that is “standard or itemized?” Hit that “refresh” button and make sure both of your tax returns are in sync….
Now that you’ve decided on standard or itemize, the next item on your list should be to finish your taxes…
On the Money,
Sufen Wang
Wang Solutions
In Accounting & Finances, Culture, Education, Family, Taxes on March 30, 2012 by Sufen Wang Tagged: Adjusted gross income, Adoption, Brangelina, Internal Revenue Service, irs, Money, Patient Protection and Affordable Care Act, Tax
Now with an Added Bonus from the IRS
Have you read the tabloids lately? Brangelina is having another baby! No, not adoption this time, but for those adoptive parents out there who need extra money, here are some IRS tips on taxes and credits.
With adoption, comes responsibility – and lots of bills. Luckily, if you paid expenses to adopt an eligible child in 2011, you have even more to be excited about than just a new member of your household. Say hello to an expanded adoption credit. The Affordable Care Act increased the credit to a maximum $13,360 and made it refundable. In other words, you can get the adoption credit as a tax refund even after your tax liability has been reduced to zero.
Of course, there’s always fine print when money is at stake. While you may consider the Chihuahua you rescued from the animal shelter to be your baby, the IRS defines an eligible child as “under 18 years old, or physically or mentally incapable of caring for himself or herself.” And those expenses don’t refer to the big screen TV you bought on the way to the courthouse. They mean adoption fees, court costs, attorney fees – basically all the “reasonable and necessary expenses” directly related to the legal adoption. One more qualification: if you are rich like (Brangelina), then you are out of luck. Anybody with a modified AGI of $225,210 or higher cannot receive the credit.
Unfortunately, getting the credit requires actual paperwork. Yes, you read that right. You must file a paper tax return, Form 8839, Qualified Adoption Expenses, and attach documents supporting the adoption. No, a hand-written note on a piece of binder paper doesn’t count as a supporting document. The IRS wants you to include stuff like a final adoption decree or a placement agreement from an authorized agency. All of this doesn’t mean you can’t use IRS Free File or other software to prepare your returns first. However, you must eventually print your returns and mail them if you want the IRS to show you the money.
So, for those of you with a big heart and an ache to have children running around the house, adopt away! Hope this article helps the road to adoption a little easier….
On the Money,
Sufen Wang
Wang Solutions
In Accounting & Finances, Business, Taxes on March 23, 2012 by Sufen Wang Tagged: Air Force, Earned Income Tax Credit, Form 4868, Income tax, Internal Revenue Service, IRS Volunteer Income Tax Assistance Program, Tax, Tax preparation
Military personnel tax themselves to help their country, so their country is helping them with free tax return preparation assistance. The Volunteer Income Tax Assistance program provides low-to-moderate-income soldiers and their spouses with free tax advice, tax preparation, and return filing. And our troops don’t have to travel far for this help: VITA sites are located everywhere, from libraries to shopping malls. This means less time fighting numbers and traffic, and more precious time with their families.
The Armed Forces Tax Council is the name to know for military-related tax problems. It doesn’t matter if you’re a soldier on land, sea, or in the sky: the AFTC directs military tax programs worldwide and has program coordinators for the Marine Corps, Air Force, Army, Navy and Coast Guard. With VITA, they provide volunteers who are ready to help you solve common tax issues and also answer any military-specific tax questions you may have. These are the people to ask about combat zone tax benefits or Earned Income Tax Credit guidelines. Just head to a military-based VITA site with all of your relevant identification and financial information.
Things can get a little hectic while protecting the country and filing taxes might be the last thing on your mind. There are filing extensions that the military personnel need to be aware of and take an advantage of. Check out the Extension of Deadlines section of the Armed Forces Tax Guide, Publication 3, along with the extension Form 4868; these documents will provide some breathing room for our military families. The IRS is doing what it can to make taxes as painless as possible for our troops.
On the Money,
Sufen Wang
Wang Solutions
In Accounting & Finances, Business, Taxes on March 18, 2012 by Sufen Wang Tagged: Internal Revenue Service, irs, IRS e-file, Nina Olson, Tax, tax refund, Tax return (United States), United States
IRS Practitioner Phone Line Wait Time: First Sign of Services Decline?
Back in November, the IRS predicted that reducing its budget would mean trouble for taxpayers and practitioners down the road. Well, now we’re down the road and it looks like the IRS was right. (Ref: Blog: IRS Budget Cut)
From January 1 to March 1, IRS’s practitioner priority telephone line serviced only 69.9 percent of calls and the average wait time was 26 minutes. IRS Taxpayer Advocate Nina Olson advised callers to “bring your knitting to the phone.” She explained that “There is simply too much work and not enough employees to do the work.” Many practitioners have already noticed an overall increase in tax return processing time and the issuance of tax refunds.
If problems like this are occurring with only a 0.2% reduction in funding from 2010 to 2011, then just imagine how long the wait time will be when the 2.5% cut in 2012 comes into full effect. On the bright side, at least a lot of sweaters will get knitted.
On the Money,
Sufen Wang
Wang Solutions
In Accounting & Finances, Business, Culture, Taxes on March 8, 2012 by Sufen Wang Tagged: Barter, business, Internal Revenue Service, irs, IRS tax forms, Partnership, Small business, Tax
“I will gladly pay you Tuesday for a hamburger today!”
That classic Wimpy phrase was not just about hamburgers, it’s about bartering – one of the oldest business transactions in human history. Well, in Wimpy’s case, it was probably more like an “I.O.U.” than an actual bartering exchanging hands. Yes, before coins and dollars were invented, folks survived by trading stuff. Bartering is back in full swing now that the country is going through some hard times, so it’s time to dust off your haggling skills.
The official definition of bartering is “the trading of one product or service for another.” If you offer your friend three cookies in exchange for a sandwich, you have just bartered. Of course, it gets more complicated than this in the business world, and small business owners can save a lot of money by bartering for the products and services they need.
In general, bartering involves no exchange of cash, but that doesn’t mean you’re off the hook with the IRS. The fair market value of property or services received through barter is taxable income. Since it takes two to barter, both parties must report this income for the year in which the transaction is performed. How you report your transactions depends on which form of bartering takes place. In most cases, you’ll use Form 1040, Schedule C Profit or Loss from Business, or other business returns such as Form 1065 for Partnerships, Form 1120 for Corporations, or Form 1120-S for Small Business Corporations.
You might still imagine bartering to be like a crowded swap meet, with people yelling and pushing you. Actually, the internet has allowed bartering to get a lot fancier than that and now there are even things like organized barter exchanges. A barter exchange organizes a marketplace where members buy and sell products and services among themselves. If you choose to use such a marketplace, every year you’ll have to fill out Form 1099-B, Proceeds from Broker and Barter Exchange Transactions.
You, yourself, might find that you really like bartering – if you start to do it a lot, congratulations, you may have started what the IRS calls a “barter business.” Once you’re established enough, you can even deduct business expenses. Or you might have a regular business and are simply using barter transactions to help your sales; then you’ll have to include those sales in your business income.
If you really want to be a savvy barterer, here’s a tip: never barter outside of your industry. When you mix two different types of businesses, one party of the bartering partners will always feel short-changed. That’s why a uniform currency was invented in the first place. So, stick with the same business if you want to barter – otherwise, just pay for each other’s services and be done with it!
The IRS provides a Bartering Tax Center for all of your bartering needs. And no, you don’t need to trade anything to read it!
On the Money,
Sufen Wang
Wang Solutions
In Accounting & Finances, Business, Taxes on March 2, 2012 by Sufen Wang Tagged: Dirty Dozen, Identity theft, Internal Revenue Service, irs, IRS tax forms, Social Security number, Tax, United States
Another Dirty Dozen: The Top 12 Tax Scams of 2012
As long as there are taxes, there are going to be scams. A lot of money gets moved around in April and a lot of people want to get their hands on it – illegally. If you’re one of those people, you’ll probably be in jail sometime soon. Luckily, the IRS’ “Dirty Dozen” – the list ranking scams taxpayers are most likely to get sucked into – is back. Let’s see how things have changed since we brought you the “Dirty Dozen” last year.
The new leader of the IRS’ “Dirty Dozen” is Identity Theft. This is a growing problem in which somebody uses a real taxpayer’s personal information to file a return and then receives the refund. If that sounds like a good idea to you, just know that the IRS is cracking down on this particular scam with law-enforcement. There’s even a special web page to help taxpayers spot when somebody is pretending to be them. So how do you know if your name is being used elsewhere? If you get an IRS notice telling you that you filed more than one return, you could be a victim of identity theft.
Close behind is Phishing. This does not have to do with going out on a boat and catching things in the water. This is actually when a scammer uses a fake website or email to steal your personal information – which they can then use for the big bad identity theft. Always check that you’re on the real IRS site (the address should contain irs.gov) and since the IRS doesn’t send out any e-mails, don’t open anything that is supposedly from the agency or the Electronic Federal Tax Payment System (EFTPS). Oh, and don’t post your social security number on the “IRS” Facebook page.
Remember that post a few weeks ago about finding the right preparer? It was supposed to help you avoid becoming a victim of scam number three, Return Preparer Fraud. These corrupt preparers will do anything, from stealing part of your return, to charging you outrageous fees. Make sure your preparer includes his/her signature and PTIN on your return, and walk away if they tell you to include false information.
You really can’t get away from Hiding Income Offshore. The number one scam on last year’s “Dirty Dozen” list, evading taxes by storing your assets out of the United States, continues to be a huge problem. That’s not to say that you can’t keep stuff overseas – you just have to tell the IRS about it. If you’ve had a change of heart and want to stop being a scammer, the Offshore Voluntary Disclosure Program is still going on.
The above are the most prevalent issues, but there’s still a lot of scamming going on at the bottom of the list. Don’t pay attention to people offering advice – for a fee – about how to get “Free Money” from the IRS & Tax Scams Involving Social Security. You’ll be paying money for a claim that is eventually going to get rejected by the IRS. And don’t think you can get away with penning in False/Inflated Income and Expenses on your tax return. Although it might seem easy to claim income or expenses you didn’t really pay, so that you can receive refunds like the EITC, you’ll face interest and penalties when you do get caught.
The same goes for False Form 1099 Refund Claims. Filing a fake information return to verify a fake refund claim will result in real problems for you. And don’t listen to Frivolous Arguments about why you don’t need to pay taxes. Pay first, and then if you have a problem, bring it up in court later. You also need to pay the correct amount that you owe, so don’t Falsely Claim Zero Wages.
Perhaps the dirtiest scam on the Dirty Dozen is Abuse of Charitable Organizations and Deductions. Yes, people will do things like “improperly shield income or assets from taxation” and “maintain control over donated assets.” Charities are for you to help other people – not yourself. The penultimate scam, Disguised Corporate Ownership, is when the true ownership of a business is obscured. Last but not least is Misuse of Trusts. Promoters will convince taxpayers to transfer their assets into trusts, promising less income subject to taxation or reduced estate taxes. In reality, this is just a fancy way of avoiding tax liability.
The IRS is watching you.
On the Money,
Sufen Wang
Wang Solutions
In Accounting & Finances, Business, Taxes on February 23, 2012 by Sufen Wang Tagged: First-Time Homebuyer Credit, First-Time Homebuyer Credit Account, Internal Revenue Service, irs, IRS Form 5405, IRS tax forms, Social Security number, Tax
The IRS is reminding individuals who received the First Time Homebuyer Credit not to wait for a repayment reminder in the mail. All account information has officially gone digital. Recipients of this credit must now go online to check their total credit and repayment amounts.
How do you know if you should log on to the First Time Homebuyer Credit Account Look-Up page? Well, you must have received a First Time Homebuyer Credit! The credit was introduced in 2008 at a maximum $7,500 – with the footnote that all of the money had to be paid back over 15 years. However, 2010 first time buyers got an even better deal: their credit doesn’t need to be repaid unless the house is sold within three years.
If the credit applies to you, you’ll want to log on for tax reference purposes. Make sure you have your current information ready, including your SSN, date of birth, and street address. The IRS site is secure and encrypted, so you don’t have to worry about your info ending up in the wrong hands. Once you’re in, you’ll be able to see your original credit amount, what you’ve paid back so far, what you still owe, and the amount of each annual repayment.
Now for the hard part. To actually repay your First Time Homebuyer Credit, just add the amount that you are told to repay to the other taxes that you owe on your return. Then use line 59b on Form 1040 to report repayment of the credit. You only need to attach Form 5405, First Time Homebuyer Credit and Repayment of the Credit, if you are repaying because the house is no longer your main home. You can access the First-Time Homebuyer Credit Account Look-Up tool all day, everyday, so there’s no excuse for not knowing how much you owe!
Summary of the First-Time Homebuyer Credit by Year
2008: up to $7,500, the credit is paid back over 15 years.
Jan – Nov 2009: up to $8,000, the credit does not need to be paid back.
Dec 2009 – April 2010: up to $8,000 for first-time buyers, the credit does not need to be paid back.
Nov 7, 2009 – April 2010: up to $6,500 for “long-term residents” buying a new home, the credit does not need to be paid back.
On the Money,
Sufen Wang
Wang Solutions
It Shouldn’t Be…
Please read carefully. If you received a correction notice, compare it with the information on your tax return. If everything looks A-okay, there’s no need to reply – unless the notice tells you otherwise. If the correction looks incorrect, you’ll need to let the IRS know with a written explanation.
On the Money,
Wang Solutions 