Posts Tagged ‘Income tax’

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Anti-Fraud Efforts by The IRS…

In Accounting & Finances,Business,Taxes on December 15, 2015 by Sufen Wang Tagged: , , , , ,

IRS Keeps on Truckin’ in Anti-Fraud Efforts with a W-2 Verification Code Test Drive

ID theft

Tis the Seasons!  Year end 2015 W-2s will be mailing out by January 31, 2016 and the IRS continues to wage war against identity thieves and other tax fraudsters via a Form W-2-Wage and Tax Statement-verification code pilot program. The program will test whether adding an authentication code on W-2 copies provided to employees will be “useful in evaluating the integrity of the W-2 data that taxpayers submit when they e-file their 1040s,” explained Scott Mezistrano of the IRS, during a payroll industry conference. Note the mention only of e-file: the code won’t be tried out on W-2s filed with paper Forms 1040, keeping in line with the IRS’s slow-but-sure transition to cyberspace.

Algorithm2The W-2 code dry run for tax year 2015 will be limited to a few, hand-picked payroll service providers (PSP), who will in turn hand pick some employer clients, whose employees will in turn receive W-2s with the brand spankin’ new codes on Copies B and C of the Form. Each code will be 16 characters long, like this – xxxx-xxxx-xxxx-xxxx – and will be generated by each PSP using a special IRS-provided algorithm. The kicker is that the algorithm will use certain data points from the W-2 to generate the code. So after the employee enters their unique code on their e-filed tax form, the IRS can check to make sure it matches the data on the Form W-2.

Form W2Since this is just a W-2 verification pilot program, no employee will get penalized if they forget to include their code or they submit the wrong one when they e-file. Their returns will be processed per the usual, along with their refunds. And while the trial will be limited in scope, don’t be surprised if you get a substitute Form W-2 with a verification code on it. While you aren’t obligated to partake in entering the code, your participation could end up helping other honest taxpayers down the road. If the process is successful, by as early as 2017 all Form W-2s could be updated to include a verification code box.

StolenIdentityConsidering the less-than-stellar quality of the IRS’s identity theft victim customer service, let’s hope the W-2 anti-fraud program does work out. All an identity thief really needs is your name, date of birth, Social Security Number, and no conscience whatsoever. Using your personal info, the criminal will file a tax return using fake W-2 information to try to get themselves – not you – as big of a refund as possible. If the trial is a home run, the W-2 verification program would make the lives of these low-lives a lot harder because they would need to enter the magic code that matches the W-2 data.

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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Another One Bites the Dust:

In Accounting & Finances,Business,Taxes on December 3, 2013 by Sufen Wang Tagged: , , , , , ,

taxesNo More Walk-In Free Tax Prep at IRS Field Offices

Help is no longer around the corner. The IRS is shutting the door on walk-in tax preparation assistance at its field offices in 2014. With only 60,000 returns prepared last year, and the budget not lookin’ too good, the IRS decided the free help would have to go.

MH900056119Unfortunately that means the elderly, disabled, and low-income taxpayers who the assistance was available to now also have to go spend money on tax preparation. IRS National Taxpayer Advocate Nina Olson called out the IRS on this change. “I seem to think that preparing taxes for our citizens is a core tax administration duty, and I don’t know of any [developed] country that is not doing it except the Internal Revenue Service of the United States.”


irs-tax-preparersThat’s a good point. But on the other hand, the U.S. has a voluntary compliance system, whereas in some countries, the government prepares the return and it’s nearly impossible to contest. And those affected by the service shut-down do still have a resource for free tax preparation: their local Volunteer Income Tax Assistance programs run by the IRS. While TIGTA reports that VITA-prepared tax returns are often chock-full of errors, at least this option is available if needed.

TaxBlocksCalculator_43_0Of course the best solution is to have a paid tax preparer complete the return. That’s their job, after all, and they’ll make sure things go off without a hitch. Tax preparation is going to be a little rougher this time around for elderly, disabled, and low-income taxpayers, but it won’t be impossible. If you know somebody in need who also needs help filing their taxes, take a few minutes to give them the rundown on the cut walk-in service and their current tax preparation options.

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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The Good Side of Taxes:

In Accounting & Finances,Business,Taxes on September 11, 2013 by Sufen Wang Tagged: , , , , , , ,

MH900407228Become a Tax Volunteer for VITA and TCE

Got some free time on your hands? Turn it into time well spent by becoming a tax volunteer for Volunteer Income Tax Assistance (VITA) or Tax Counseling for the Elderly (TCE). These community-based programs provide free tax return preparation for people who need tax help but can’t afford it, such as seniors and people with disabilities.

No experience in preparing taxes – no problem. As a volunteer, you’ll get special training and can choose to work in a variety of roles. For example, if you’re bilingual (or beyond!) you could be a big help to people who don’t speak English.

MH900295311If you’re a veteran – and even if you’re not a veteran – being a VITA or TCE volunteer is one way you can help out military personnel and their families. They’re already occupied with risking their lives for the country, so let’s give them a hand with their tax preparation, okay?

In other words, it’s basically a win-win situation all around. Not only will you assist others, you’ll also learn a thing or two about taxes in the process. Yup, this is your chance to learn all the insider tips about deductions and credits like the Earned Income Tax Credit, Child Tax Credit, and Credit for the Elderly. How could you say no?

MH900200391Here’s another reason why you shouldn’t decline. Volunteer hours are flexible and minimal – about three to five hours per week. That’s like only thirty minutes a day! If only work could be so short and sweet…

Volunteering doesn’t sound too bad, does it? And getting there should be a breeze. Volunteer sites are located in neighborhood centers, libraries, schools, shopping malls, and other convenient locations all over the U.S. Think about it: you could take a nice walk to the site, help out some folks with their taxes for an hour, and then head home for dinner glowing from knowing you did your good deed for the day.

And you’ll be making history. As a VITA or TCE volunteer, you’ll become part of a program that’s helped people file tax returns at no charge for more than forty years. “It’s people helping people.”

MH900056116Ready to sign-up? Volunteer programs are open from mid-January through the tax filing deadline (April 15, 2014). Right now you should head over to IRS.gov and type “tax volunteer” in the search box for more info. The final step is to submit Form 14310, VITA/TCE Volunteer Sign Up, by email through the IRS website. Then you’ll be on your way to making the world a better place.

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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Get Credit Where Credit is Due:

In Accounting & Finances,Business,Taxes on April 25, 2013 by Sufen Wang Tagged: , , , , , , ,

MH900039005Five Tax Credits to Reduce Your Taxes

Now that the tax deadline, April 15, had passed, and tax extension had filed; let us start working on your returns, shall we?!

Give yourself credit for all your hard work in 2012 – tax credit that is…. A tax credit reduces the amount of tax you mu pay, which is always a good thing!  A refundable tax credit is doubly god because it reduces the amount you must pay and it could also result in a refund. So, before handing in your tax return just yet – do your homework and see if you are missing out on some extra credit.

If you worked, but didn’t earn a lot of money last year – less than $50,270 – the Earned Income Tax Credit may be your perfect match. Eligibility is based on earnings, filing status, and eligible children. The EITC Assistant Tool does the math for you to see if you make the grade and approximately how much credit you’ll receive. The more kids you have, the better: the maximum you can get is $5,891 if you’re a worker with three or more children.

MH900446562Speaking of children, everyone knows it’s a full-time job raising kids. One of the perks, other than the joy of seeing them grow up, is a little thing called the Child Tax Credit. This credit can reduce your income tax by up to $1,000 for each qualifying child under age 17 that you claim on your return.

MH900198327And even when the kids leave the nest for college, you can still get credit for your parenting skills with the American Opportunity Tax Credit. This applies to the first four years of post-secondary education with the maximum credit at $2,500 per eligible student and 40% of the credit (up to $1,000) being refundable. This should offset some of the pain of paying full tuition for that out-of-state private university that your son or daughter just has to go to because it has the best sports teams.

Or maybe you’re stuck between a rock and a hard place: you have somebody who depends on you, like a disabled spouse, dependent, or qualifying child under age 13, but you need to work to support them. If you paid for their care so that you could work or look for employment in the meantime, the Child and Dependent Care Credit could cover up to 35% of those care-taking expenses.

MH900200427Finally, this one is dedicated to those individuals out there who think ahead. The Retirement Savings Contributions Credit, a.k.a. the Saver’s Credit, helps low-to-moderate income workers save for retirement. To qualify, you must contribute to an IRA or a retirement plan at work and your income must be below a certain limit. And the credit is in addition to any other tax savings that apply to retirement plans. Now let the credits roll! 

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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Taxable or Nontaxable?

In Accounting & Finances,Business,Education,Family,Taxes on March 11, 2013 by Sufen Wang Tagged: , , , , , , ,

MH900442285Question Needs to be Answered: Income Tax Basics

You know (hopefully) that federal income tax returns are due April 15. But do you really know what income is – let alone if it’s taxable or non-taxable? Here’s income by the numbers to help you do the math correctly on your returns.

Income can include money, property, or services that you receive. All income is taxable unless the law specifically excludes it – and those “tips” you pocketed are not excluded. You should notice that income doesn’t just mean money: non-cash income received through bartering is as taxable as wages, and both parties must report the fair market value of goods/services received as income on their tax returns. 

MH900361224Although most income is taxable, there are exceptions to this rule. Gifts, bequests, and inheritances are usually nontaxable, so don’t worry about that luxury car given to you for your birthday. If you buy something and get a cash rebate from the dealer/manufacturer, that rebate is also not taxable. Welfare benefits, child support payments, and reimbursements for qualified adoption expenses are all not taxable. Finally, if you collected damage awards for a physical injury or sickness, those are yours to keep, tax-free – nobody wants to kick you while you’re down.

TMH900234599hings get a little tricky with income that’s not taxable except under certain conditions. For example, life insurance proceeds paid to you because of an insured person’s death are usually not taxable. However, if you redeem a life insurance policy for cash, any amount more than the cost of the policy is taxable. Similarly, any scholarship income used for certain costs like tuition and required course books is not taxable, but amounts used for room and board are taxable. And classifying your frat house as  “textbook” college living won’t work.

Don’t forget to report any taxable refund, credit, or offset of state or local income taxes you received, even if you weren’t mailed Form 1099-G. You’ll have to contact the government agency that issued the payment to obtain that form. And don’t miss out on IRS Publication 525, Taxable and Nontaxable Income – it explains everything you ever wanted to know about income.

Wang Solutions, Sufen Wang, M.S. Accountancy, (562) 856-0793

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Free Tax Support for Our Troops….

In Accounting & Finances,Business,Taxes on March 23, 2012 by Sufen Wang Tagged: , , , , , , ,

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
 

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What You Have to Lose with the Capital Gains Tax

In Accounting & Finances,Business,Taxes on February 10, 2012 by Sufen Wang Tagged: , , , , , , ,

Capital Gains Tax this, Capital Gains Tax that… 
 
We have been hearing this phrase a lot in the presidential debates. But what are those politicians actually arguing about? Don’t shake your head and say “Just another tax I have to pay.” Understanding how the Capital Gains Tax works and what’s at stake will benefit you and your finances in the long run.
 
That nice fridge you just bought from Best Buy is no ordinary refrigerator: it’s also something called a capital asset. The same term applies to your car, your house – even your secret Disney figurine collection. The IRS sums it up pretty well with the explanation that “almost everything you own and use for personal or investment purposes is a capital asset.”
 
Don’t panic yet hoarders. You can own as much stuff as you want without paying a cent of Capital Gains Tax on it. The problem starts when you sell any of that stuff and make more dough than you originally paid for it. For example, you might have purchased a rare book at a garage sale for $5 and you end up selling it for $6,000. Nice job on your $5,995 profit, but the IRS is going to want a piece of the pie too.
 
How much the IRS gets from you depends, in part, upon how long it takes you to sell the asset. A short-term gain is when you sell something for a profit less than a year after its original purchase. Therefore, a long-term gain is when you keep something for at least a year before you sell it. And then, for those people who are really patient, the super-long-term gain is when an asset is held for over five years after the original purchase. 
 
You’re currently better off making long-term investments. For short-term investments, you get charged at the same rate as your income tax – so those in the highest income category get hit hard if they take the fast lane. However, everyone pays a flat rate of 15% for long-term capital gains (except individuals in the 15% income tax range and below, who are now paying 0%). The rates also vary depending on the nature of the asset. Sorry, but everyone is stuck at a 28% long-term rate for collectibles, so you might want to save those figurines for your kids. You can’t avoid paying taxes when you profit from your assets, but the rates aren’t set in stone, so pay attention to what politicians are proposing.
 
 
On the Money,
Sufen Wang
Wang Solutions
 
 
 

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