What To Do If You Receive A Notice From The IRS

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First of all don’t panic. The IRS sends millions of notices to taxpayers each and every year. In our practice many of our clients receive letters from time to time. It’s normal, it’s the IRS’ way of asking for more information or clarification on something, usually related to your tax return.If you happen to receive one of these letters here is what you should do:

  • Let you’re us know or whomever prepared your taxes - We will probably be able to give you a better explanation of what the IRS is looking for. Remember it doesn’t mean your tax return is wrong (most times it’s not) but they are just looking for some additional information.
     
  • Don’t Ignore the Notice – Amazingly some people think that if they ignore it their problem will go away. This doesn’t happen. And the IRS does not just forget about you. It might take them a while to reach out again but they will. If you ignore a notice or letter you risk having to pay additional risk and penalties. Most letters are quick and easy to respond to. It’s important to take care of these things right away.
     
  • No need to Visit the IRS – Most notices can be handled very easily without the need to call or visit an IRS office. There will be a phone number on your letter (upper right corner) that you can call if necessary but if you haven’t ever called the IRS, I don’t recommend it. It’s time consuming and can be frustrating. Try to handle it by following the instructions in the letter. If you do need to call have your notice and a copy of your tax return handy.
     
  • Follow the Instructions – There are usually specific things that you need to do that are outlined in the letter. Make sure you understand what they are asking for so that you can comply. If you don’t understand just ask. There is usually a number you can call on the letter or reach out to a Professional Tax Preparer.
     
  • Focus on the Issue at Hand – Each IRS notice focuses on one specific issue about your tax return in question. Just focus on what they are asking for and provide them with only the information they are looking for. Do not send any additional documents, explanations, or other information, only what they are asking for. More is not better in this case.
     
  • Correction Notices – A correction notice is a specific letter that is also one of the most common. It states that the IRS corrected something on your tax return. Usually no action is needed if you agree with the changes. It could be something as simple as a math error. When you receive this type of notice review the change and compare it to your tax return to make sure it makes sense. If you agree with the change no action is needed (unless they require a payment because of the change). If you do not agree you need to respond to the IRS right away. Write a letter that explains why you don’t agree. Include information and/or documentation that supports your stance. Include the bottom part of the letter (it should tear off cleanly) when you mail to the address shown on the lower left side of the letter. Give the IRS at least 30 days to respond to you.
     
  • Premium Tax Credit Letter – Another common letter is one that asks you to verify your premium tax credit. Most of the time they are just asking for a 1095-A which is a health insurance marketplace statement. Again, follow the instructions on the letter as best you can to ensure you receive your refund/credit as soon as possible.
     
  • Keep the Letter/Notice – I always recommend you keep a copy of the letter for your tax records. If you write a letter keep a copy of the correspondence too. You probably won’t need it but it’s a good idea to have on hand just in case.
     
  • Scams! – Sadly, there are a lot of scams that either through phone, email, or letter that try to seem like official IRS notices. They are looking to steal your identity or money. Know that the IRS never initiates contact with taxpayers by email, text, or social media. When in doubt ask before sending personal information and especially when sending payment information.

TAX CHANGES TO MAKE AFTER YOU SAY "I DO"

Include these Tax To-Do Items on Your Summer Wedding Checklist

tax-change-for-newlyweds

Wedding planning is a stressful endeavor but very important to make sure your big day goes off without a hitch. So focus on each other and enjoying the moment. But after the things calm down you need to do a little tax planning to make sure your tax preparation goes off without a hitch too. Here are a few steps to make your tax day (and your future financial tranquility) a success.

  1. Name Change – When filing your tax return the names and social security numbers must match the social security records otherwise your tax return could get rejected. To make this change you need to report it to the social security administration by filing Form SS-5 Application for a Social Security Card. The best way to get this form is to download it from SSA.Gov. You can also call 800-772-1213 and order the form. The third option is to get it from a local social security administration office.
  2. Withholding Change – After getting married your tax situation changes which means you might want to change your tax withholdings on your paycheck. To do this you have to fill out and provide your employer with a new Form W-4 Employee’s Withholding Certificate. The withholding rates for married people is lower than that of single people so some couples find that they do not have enough tax withheld at the married rate. You can check out this IRS Withholding Calculator to help you figure out how much to withhold and how to complete your new W-4.
  3. Circumstances Change – Now that Obama care is the law of the land you need to report your familial changes to your health insurance marketplace if you are receiving a premium tax credit advanced payment. You also need to report your change in income. By doing this it will help you avoid surprises on your tax return like a smaller refund or owing more than you were expecting.
  4. Address Change – Tell the IRS if you move. You need to file Form 8822 with the IRS. You also need to notify the US Postal Service online at USPS.com. You should consider using mail forwarding to avoid lost tax documents.
  5. Filing Status Change – If you are married on or before December 31st of any given year you should now consider using married filing jointly tax status. This is usually a more beneficial way to file your taxes but depending on your circumstances you should also consider calculating taxes separately to make sure you are paying the least amount of tax. Ask your tax professional for more information about this.

If you need help making any of these changes or want someone to take care of your taxes for you this year please don’t hesitate to contact us today!

IRS QUICK TIP - 401K PLANS

A 401(k) plan, also called a deferred compensation plan allows you to have your contribute part of your wages to the plan on a pretax basis. These wages called elective contributions are not subject to income tax at the time they are deferred from your paycheck. This means they are not included on your W2 as taxable wages and therefore not reported on your 1040/tax return. They are, however, included as wages subject to withholding for social security and Medicare taxes. Also, your employer has to report these contributions as wages for federal unemployemnet tax purposes.

The IRS only allows you to contribute so much to a 401(k) plan. For 2015 it is $17,500 and generally increases to account for inflation. The IRS set’s this amount each year. You can find your contributions for the year listed as an informational item on your W-2 on line 12. Employers can take a look at Publication 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans), for more info about setting up and maintaining retirement plans for employees, including 401(k) plans.

Distributions from a 401(k) plan can qualify for either a lump-sum distribution or a rollover as long as they meet the requirements. More information can be found on Lump-Sum distributions can be found here – How to take a lump-sum distribution from a 401(k). (ADD LINK) And more info on Rollovers can be found here – How to Rollover your $ from a 401(k) Plan.

Some 401(k) plans allow employees to make a “hardship withdrawal” for a few different reasons but need to be considered “immediate and heavy financial needs.” And hardship distributions from a 401(k) plan are limited to the amount of the employees' elective contributions only. This does not include any income earned on the deferred amounts. Hardship distributions are not treated as eligible rollover distributions which means they will still be subject to tax but not the penalty. Some examples of hardships include:

  • Totally disabled.
  • Debt for medical expenses exceeds 7.5% of your AGI (adjusted gross income).
  • Required by court order to give the money to your divorced spouse, a child, or a dependent.
  • Separated from service (through permanent layoff, termination, quitting or taking early retirement) in the year you turn 55, or later.
  • Separated from service and you have set-up a payment schedule to withdraw money in substantially equal amounts over the course of your life expectancy. (Once you begin taking this kind of distribution you are required to continue for five years or until you reach age 59 1/2, whichever is longer.) This is called a 72-T distribution.

Typically distributions must be taken after you are age 59 and a half. If they are taken before this age (without a hardship exemption) you will have to pay 10% penalty on the distributions. Distributions received before age 59½ are subject to a 10% additional tax unless an exception applies. 

DEFINITIVE GUIDE TO EARNINGS AND TAXES FOR CLERGY

So you are a member of the clergy, either licensed, commissioned, or ordained minister, which means you have a special tax situation but are not sure how it works. Well then this guide is for you. We are going to lay out everything you need to know about your taxes and how to properly prepare your taxes.

First of all you need to be a common law employee of the church, denomination, sect, or organization that employs you to provide ministerial services. There are a few exceptions for traveling evangelists who are self-employed or independent contractors. So if that’s you then let’s continue. All of your earnings which includes wages, offerings, and fees for services like marriages, baptisms, funerals, etc. are subject to income tax. This is regardless of whether you earn this as an employee or contractor. But, the treatment of the expenses related to performing these services is different depending on whether or not it is self-employment income. Staying with me so far? Ok let’s continue.

taxes-for-clergy

Regarding social security and Medicare tax, the services you perform in duty of your ministry are considered self-employment earnings and are subject (generally) to self-employment tax.

The circumstances of your personal situation are what determine if you are considered an employee or self-employed in the eyes of the IRS. In general, you are considered and employee if you’re church where you perform your services has the legal right to control both what you do and how you do it (even if you have a lot of discretion around your actions). If the church pays you a salary that is a good indication you are an employee and your salary is considered wages for income tax purposes. Alternatively, amounts received directly from members of the congregation are likely subject to self-employment tax.

How to Report your Income and Expenses

If you itemize your deductions you most likely can deduct certain expenses related to your services. This is done on Form 1040, Schedule A, if you are an employee, but are subject to the 2% of your AGI (adjusted gross income) limitation. This might also require you to fill out Form 2106, Employee Business Expenses. If the income and expenses are related to your self-employment status you need to use Form 1040, Schedule C, Profit or Loss From Business, or Form 1040, Schedule C-EZ, Net Profit From Business, to report both your earnings and expenses that relate to the income.

Your Home

As a member of the clergy you might be able to exclude the fair rental value of your home from income or a housing allowance provided as part of your compensation package (as an employee). This includes a parsonage and utilities for the home. However the amount that you exclude cannot be more than reasonable compensation for your ministry services. If you receive a housing allowance you may be able to exclude the allowance to the extent it is use to pay the expenses of a home. These expenses can be repairs, rent, mortgage interest, utilities, and other expenses to upkeep and maintain the home. If you own your home you can claim deduction for mortgage interest and property taxes just like other taxpayers using Schedule A. If you’re housing allowance exceeds either reasonable compensation, the fair rental value of the home, or your actual expenses you have to include the excess in income

If you own your home, you may still claim deductions for mortgage interest and real property taxes. If your housing allowance exceeds the lesser of your reasonable compensation, the fair rental value of the home, or your actual expenses, you must include the amount of the excess in income. Also, your employing organization/church must officially state that the allowance is actually a housing allowance before paying it to you. And even though the housing allowance is excludable you still have to include the amount for self-employment income purposes.

Ok not back to social security and Medicare taxes. An ordained, licensed or commissioned minister (IRS Terms) performing ministerial services is considered to be self-employed. This means that your salary on Form W-2, the net profit on Schedule C or C-EZ, and your housing allowance less your employee business expenses are all subject to self-employment tax on Form 1040, Schedule SE. However, you can request an exemption from this self-employment tax for your ministerial earnings. If you are opposed to certain public insurance (like social security and Medicare) for religious reasons. It can’t be for economic reasons. This also means that you won’t have access to social security and Medicare down the road so be careful if you want to be exempt.

There you have it. I know this stuff can get a little complicated so if you need a little more help with your personal tax situation feel free to reach out – contact us.

How Do I Avoid Paying Tax On My Vacation Rental?

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Vacation/Second Home Rental: How do I report it and how do I avoid paying tax?

So you’ve got this great idea of having someone else pay for your vacation/second home by renting it out. Well, it’s not a bad idea but make sure you understand the tax consequences and use this tip on how to avoid paying some of the tax generated from receiving income on your property.

In general if are receiving income from renting out a “dwelling unit” like a house or apartment you can deduct certain expenses? Some common expenses include:

  •          Mortgage interest,
  •          Real estate taxes,
  •          Utilities
  •          Casualty losses
  •          Maintenance
  •          Insurance, and
  •          Depreciation

All of these things reduce the amount of rental income that is subject to tax. Just like a profit and loss for any business your revenue less expenses equals your net income. You are essentially running a mini small business. You generally report the income and expenses on your form 1040 using Schedule E (Supplemental Income and Loss). If you are only trying to rent for a profit and do not use it as a personal residence at any point during the year and your rental expenses are more than your rental income you will show a loss on your tax return. This loss might be limited by what the IRS call’s “At-Rick” or “Passive Activity Loss Rules.” For more info on limits of your losses check here Publication 925, Passive Activities and At-Risk Rules.

If you use your rental property as a personal residence at some point during the year other limitations will apply to the amount of expenses that you can deduct. You are considered to use a property as a personal residence if during any tax year you use it for the greater of 14 days or 10% of the total days you rent it to others (at a fair rental price – discounted rents for friends and family don’t count.).

You might have two personal residences during any given tax year. For example if you live in your primary residence 8 months, this residence is considered a personal residence. Then if you live in a condo down south for the other 3 months of the year, your condo is also considered a personal residence. For tax purposes a day of personal use at any property is defined as any day that it is used by:

  •    You or any other person who has an ownership interest in it
  •    A member of your family or family of any other person with an ownership interest in    it, unless the family member uses it as his or her main home and pays a fair rental        price
  •    Anyone under an agreement that lets you use some other dwelling unit
  •    Anyone at less than fair rental price

If this is the case (used for both rental and personal purposes) you need to divide your total expense between the rental use and the personal use based on the number of days for each purpose. For example if you have $10,000 of expenses and you rent it out for half of the year you only get to deduct $5,000. You will not be able to deduct your rental expenses in excess of the gross rental income limitation which is your gross rental income less the rental portion of mortgage interest, real estate taxes, casualty losses, and rental expenses like realtor’s fees and advertising costs. However, you may be able to carry forward some of these rental expenses to the next year. (Subject to gross income limitation for that year). If you itemize your deductions on From 1040 Schedule A you might still be able to deduct your personal portion of your mortgage interest, real estate taxes, and casualty losses. However you cannot choose to add more to your schedule A then the percentage personal use would allow.

There is a special rule where you can avoid paying tax on your rental income if you rent it for fewer than 15 days. If this is the case you do not have to report any of the rental income on your tax return (but you also can’t deduct any expenses). Therefore, if you can find a short-term rental income you can effectively receive the rent tax free. That’s about as good as it gets when the IRS is involved.

How to get Tax Help in Minnesota - Who to call

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Taxpayer Help in Minnesota

We know how frustrating taxes can be. That’s why we are here to help. But if you want to take your issue right to the IRS, how do you go about doing that? Well, did you know the IRS actually offers face-to-face tax help right here in the great state of Minnesota? They actually have offices all over the country but we live in Minnesota so today we are helping out of fellow resident. Make sure you check the Services Provided to make sure they can do what you are looking

Bloomington

1550 American Blvd. East
Suite 700
Bloomington, MN 55425
Monday -Friday - 8:30 a.m.- 4:30 p.m.
(651) 312-8082 

Services Provided

Duluth

515 W. First St.
Duluth, MN 55802 
Monday-Friday - 8:30 a.m.- 4:30 p.m.
(Closed for lunch 11:30 a.m.-12:30 p.m.)
(218) 626-1624 

By Appointment

Services Provided

Mankato

1921 Excel Dr.
Mankato, MN 56001
Monday-Friday - 8:30 a.m.- 4:30 p.m.
(Closed for lunch 11:30 a.m.-12:30 p.m.)
(507) 625-4977

Services Provided

Minneapolis

250 Marquette Ave.
Minneapolis, MN 55401 
Monday-Friday - 8:30 a.m.- 4:30 p.m.
(651) 312-8082

Services Provided

Rochester

310 South Broadway
Rochester, MN 55904
Monday-Friday - 9:00 a.m.- 4:30 p.m.
(Closed for lunch 11:30 a.m.-12:30 p.m.)
(507) 281-3044 

Services Provided

St. Cloud 

1010 W. Saint Germain St.
St. Cloud, MN 56301
Monday-Friday - 8:30 a.m.- 4:30 p.m.
(Closed for lunch 11:30 a.m.-12:30 p.m.)
(320) 251-9261

St. Paul 

430 North Wabasha St.
St. Paul, MN 55101
Monday-Friday - 8:30 a.m.- 4:30 p.m.
(651) 312-8082 

Services Provided

Before dropping in to chat with the IRS you might want to see if you can solve your problem online. Through the IRS website (IRS.gov) you can do the following:

• Set up a payment plan.
• Get a transcript of your tax return.
• Make a payment.
• Check on your refund.

We have dealt with the IRS many times so if you are feeling frustrated after talking with an IRS agent (trust me, it can be a frustrating process) the let us know. We might be able to solve your problem quicker and easier.

Schedule an Appointment to talk with us today.

FINALLY, A SHORT GUIDE ON HOW TO (PROPERLY) TAKE THE MILEAGE DEDUCTION....

Ok, I'm going to clear up a couple things on one of the most often misunderstood tax deductions of them all...mileage.

This robot isn't worried about the mileage deduction because he works with PJF Tax

First off I am specifically referring to business mileage as this is the most often used type of mileage deduction (there is also charitable and medical).

There are three types of mileage, Business, Commuting, and Personal. You can ONLY deduct business mileage. Business mileage is any mileage after you get to your main place of work. This means your drive to the office and your drive back to the office are NOT considered business mileage but commuting mileage and therefore are not deductible.

Let's go through an example to clarify. 

Joe works at the local bank. He drives from his home to the bank which is 5 miles away (commuting). Joe has a client that he is meeting at the client's office. He drives 6 miles to get there (business). He has the meeting, it goes well, and he drives back to the bank, another six miles (business). After work he drives back home, another 5 miles (commuting). After he get home he goes to the grocery store for a gallon of milk. The store is 3 miles away (personal). In total Joe drove 25 miles. Of that only 10 is deductible but all of it has to be tracked. He needs to take notes on his business mileage to prove that it was business related. He should keep the addresses, name of the client, and the time/day he visited the client.  

Other fun things to consider:

- If you have a home office you can usually take a lot more business mileage because you are generally always driving to a client location. Keep in mind your home office must be your MAIN place of business and not a secondary office.

- Travel between your home and a temporary work location is deductible

- Working during your commute (work phone calls for example) or placing advertising on your car does not make commuting mileage deductible.

- You can only ever take mileage or actual auto expense (gas and repairs), never both.

- There are apps, like mileage bug, which will help you track your mileage. Remember you NEED to have support for any deduction you are taking, including mileage. A mileage log is a good way to do so.

Here is our mileage tax organizer that we use for clients to help track mileage.

2014 Mileage and Auto Expense Worksheet

Do you need some more help with tracking your mileage properly? Contact us or schedule an appointment to have your taxes prepared today!

Your Rights as a Tax Payer - Stay Informed

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Did you know there is actually a tax payer bill of rights?

That’s right! Every taxpayer has a set of rights when dealing with the IRS. And you as a Tax Paying citizen need to know them. To help you in this endeavor I've listed them here for your reference with links to the IRS website with the full descriptions of each. Note: We didn’t make these up, the Internal Revenue Service adopted them in 2014.

The Right to Be Informed

You have the right to know what to do to comply with taxes. You have the right to clear explanations of the tax laws and IRS procedures. This relates to all tax forms, instructions, publications, notices, correspondence, and all other IRS documentation. This also includes the right to be informed of IRS decisions about your tax accounts and receive information about the outcomes in a clear and understandable way.

More Information

The Right to Quality Service

You have the right to prompt, courteous, and professional assistance in all your dealings with the Internal Revenue Service. This include being spoken to in a language you can easily understand (this includes all IRS communication. You also have the right to speak to a supervisor if you feel like you’ve received inadequate service.

More Information

The Right to Pay Only the Correct Amount of Tax

You have the right to only pay the amount of tax you legally owe which includes interest and penalties. This includes the right to have the IRS apply all tax payments properly.

More Information

The Right to Challenge IRS on any Position and Be Heard

You have the right to object to any IRS actions and provide more documentation in response to it. This includes the right to expect that the IRS will consider your timely objections and additional documentation promptly and fairly. You can also receive a response if the IRS does not agree.

More Information

The Right to Appeal any IRS Decision

You have the right to a fair and impartial administrative appeal of most IRS decisions. This includes penalties and the right to receive a written response regarding the appeal decision. You also, in general, have the right toe take your case to court.

More Information

The Right to Finality

You have the right to know the maximum amount of time you have to challenge the Internal Revenue Service’s position as well as the maximum amount of time the IRS has to audit a tax year and/or collect a tax debt. This includes the right to know when the IRS has finished the audit.

More Information

The Right to Privacy

You have the right to expect that IRS inquiries, examinations, and/or enforcement actions will comply with the law and not be any more intrusive than necessary. This means respecting all your due process rights, which includes search and seizure. Where applicable they will have to provide a collection due process hearing.

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The Right to Confidentiality

You have the right to have your information not be disclosed by the IRS unless authorized by you or by the law. You also have the right to expect that action against other who wrongfully disclose your tax return information including employees and tax return preparers.

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The Right to Retain Representation

You have the right to retain a representative of your choice to represent you in your dealings with the IRS. You can also seek assistance from a low income taxpayer clinic if you can’t afford a representative.

More Information

The Right to a Fair and Just Tax System

You have the right to a tax system that will consider the facts and circumstances that could affect your underlying liabilities, ability to pay, and/or ability to provide timely information. You also have the right to have help from the "Taxpayer Advocate Service" if you are experiencing financial difficulty or if the IRS has not resolved your tax issues properly and timely through normal channels.

More Information

Death and Taxes – How to deal with Deceased Taxpayer (Decedents)

When someone passes away the last thing you want to be thinking about is taxes. But the IRS can be cold-blooded and ruthless – when they want their money they are going to get it. So it may be your responsibility to file a final tax return for the decedent. Below is some help to make this process a little easier.

First off, a personal representative of the deceased’s estate, generally called the executor or administrator, is in charge of the decedent’s property. This person has the responsibility of filing the final income tax return of the decedent called an estate tax return when it’s due (Most years on April 15th). For additional info on the responsibilities of a personal representative can be found in the IRS guide Survivors, Executors, and Administrators Publication 559.

deceased-taxpayer

As odd as it sounds, the filing requirements for the deceased are the same as they are for the non-deceased (If that makes sense). Think of it this way, if the person were still alive would they need to file a tax return? If the answer is yes then the personal representative will have to file a tax return for them.

The final tax return should show only the items of income the decedent actually received and that were credited to his or her account during the year or that were made available to them without restriction prior to death. As well the final return can claim deductions for expenses the decedent paid before death. This all assumes the taxpayer/decedent used the cash basis method of accounting which is also the most common. If you are not sure, odds are the taxpayer was on the cash basis, although I cannot guarantee it. If you know they were not using the cash basis then you need to use that method when filing the final return.

When filling out the tax return write the word “DECEASED,” on the top of the tax return along with the decedent’s name and date of death. If filing a joint return, write the name and address of the decedent and the surviving spouse in the name and address fields. If not filing jointly write the decedent’s name in the name field and the personal representative’s name in the address field. If the deceased taxpayer is due a refund you might have to file an additional Form 1310 with the tax return - If you are a surviving spouse filing a joint return or a court-appointed personal representative filing an original return for the decedent you do not have to file a Form 1310. Court certified representatives must attach a copy of the court documents stating the appointment to the tax return.

As for signing the actual return, an appointed personal representative must sign and if it’s a joint tax return, the surviving spouse must also sign.

If you are the surviving spouse and there is no appointed personal representative, you need to sign the tax return and write “Filing as surviving spouse” in the signature area.  Surviving Spouses can file a final joint return in the tax year in which the death occurred.

If there is not an appointed personal representative and no surviving spouse the person in charge of the decedent’s property must file and sign the tax return as a “personal representative.”

You can use this handy link to find out if you even have to file the deceased’s tax return Do I Need to File a Tax Return?

FAKE CHARITIES ON TOP OF IRS "DIRTY DOZEN" TAX SCAMS FOR 2015

Tax Preparation Services in Plymouth MN

The IRS just came out with a warning for charitable minded tax payers. There has been an uptick in groups masquerading as a charity. It actually makes their Dirty Dozen Tax Scams List of 2015. A list, compiled annually, showing the most common scams that taxpayers may encounter. These scams always seem to pick up during filing season. 

IRS Commissioner John Koskinen advises taxpayers to maintain vigilance when donating money. "When making a donation, taxpayers should take a few extra minutes to ensure their hard-earned money goes to legitimate and currently eligible charities RS.gov has the tools taxpayers need to check out the status of charitable organizations."

I found the tools Mr. Koskinen was referencing here

Illegal scams carry harsh penalties, interest, and possibly jail time. The IRS teams up with the department of justice to shut down these scams and prosecute the criminals running them.

TIPS WHEN MAKING CHARITABLE CONTRIBUTIONS.

  1. Watch for Charities that have similar sounding names to large national organizations. For example Instead of Salvation Army maybe its Salvation Navy....Or American Cancer Society instead is American Cancer Club. Either way stay cognizant, even though you think you have heard of them before make sure its the legitimate organization.

  2. Don't Give our your personal information - especially financial information like social security numbers, passwords, etc. When making donations you might have to provide some info but think about what they are asking for and why they would need it. Note it is common to use a credit card to make a donation so you just have to be even more certain when making a charitable contribution this way.

  3. Don't give cash. Both for security reasons and because you need to keep records of your donations for tax purposes, cash is not a good way to donate. Use check, credit card, or some other way that provides documentation.

Along the same lines fake charities tend to pop up right after natural disasters and other tragedies. Scam artists create fictitious charities or just impersonate well known charities to get money and information from well intentioned taxpayers. These people will call and email people in an affected area, even stooping so low as to call on victims of the disaster. Fake charity websites also tend to start up during these times as well.

Remain cognizant and perform some due diligence before giving away your hard-earned money.

IRS Quick Tip: Power of Attorney as it Relates to Taxes

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When it comes to taxes you always have the right to represent yourself before the IRS or you can give someone authorization to represent you. If you want to have someone else represent you, this person must be authorized by the IRS to do so. This need to be either a CPA, Attorney, or enrolled agent. You will also need to fill out, sign, and submit a power of attorney (POA) form to authorization the person to represent you. The documents is Form 2848 and can be found on the IRS website here. To determine where to file this form you should look here under the “Where to File” section  in this document. For those of you who live in Minnesota, like us, the address is 1973 N. Rulon White Blvd. MS 6737, Ogden, UT 84404.

When you sign this form it allows the individual(s) named to represent you before the IRS and receive tax information for either a specific tax matter or specific tax year specified in the form.

Joint filers must submit separate power of attorney forms. If you just want the person to receive your tax information but not have representation powers you can do that too. Refer to this IRS topic for more details. Topic 312

I didn’t file my Tax Return – Am I going to jail?

Tax Preparation Jail Picture

What really happens if you don’t file your tax returns?

If you haven’t filed your federal and state income tax return for this year or previous you could be in big trouble. Don’t mess with the IRS. But you’re in luck, here is what you need to do to get back in the IRS’ good graces.

Step one FILE YOUR FLIPPIN’ TAXES!

There’s all sorts of tools and resources available on our website but also on the IRS.gov. They have an Interactive Tax Assistant (ITA), FAQs and Tax Trails.

But Tax Man, I’m not sure if I even need to file my taxes. Ok, well then you had better go here and figure that out firsts. Visit Do I Need to File a Tax Return or check out Pub 17, it’s not a hip new beer joint, it’s a document called Your Federal Income Tax for Individuals. Read it if you’re still not sure.

But Tax Man, what if I can’t pay the tax I owe. Ok, so if you are required to file a return, but you can’t pay the full amount of tax due, the IRS might allow you to get on a payment plan. For more info on your payment options, refer to this handy IRS guide.

If you don’t file it will cost you.

If your return was not filed by the due date (including extensions of time to file), you may be subject to the failure to file penalty (unless you have reasonable cause for your failure to file timely). If you did not pay your tax in full by the original due date of the return (regardless of extensions of time to file), you may also be subject to the failure to pay penalty (again unless you have reasonable cause for your failure to pay timely). Additionally, you could also be charged interest on the taxes you haven’t paid by the due date, even if you filed an extension. Remember an extension is only an extension to file not to pay. And finally to add insult to injury, interest is also charged on the penalties.

There’s some good news. If you don’t owe any tax and are instead due a refund there is no penalty for failure to file. But, don’t wait. If you delay in filing your return and claiming your refund, you are at risk of losing your refund altogether. The original return which claims a refund must be filed within 3 years of the due date in order for a refund to be allowed (in most instances). After the three-year window closes, the refund statute prevents the issuance of a refund check and the application of any credits, which includes overpayments of estimated taxes and/or extra withholding taxes. However, the IRS plays by different rules. The statute of limitations for the IRS to assess and collect any outstanding balances does not start until a return has been filed. If you file your return the statute of limitations starts and is ten years. Another reason to get that return filed ASAP.

Finally, if you need help actually preparing and filing the return that’s what we do here at PTF Tax – Help people file and prepare their tax returns. Contact us or schedule a meeting today to see how we can help.

MISSING W2? NO PROBLEM. HERE'S WHAT YOU NEED TO DO.

help with lost tax documents

You should have received your W-2 Tax Forms (the ones that show your earnings and tax withholdings) by the end of January. You will need one of these for each job that you worked at during the year (unless you were a contractor in which case you will receive a 1099). These will be necessary to file your taxes. If you haven't received all your W-2's by the end of January I would suggest giving it a little more time to account for mailing time or your employer may have just been late in filing. But if you haven't received these forms by the middle of February it's probably about time to start looking into it. Here's what you need to do:

  1. Contact your Employer - This should always be your first step and will probably be much easier then calling the IRS. Ask your employer's HR department for a copy or if it's a small business you might have to talk directly to the owner. While your at it you should check to make sure they have the correct address. This is the most common reason tax forms are never received.
  2. If, for whatever reason, you can't get a copy from your employer you can call the IRS. Their phone number is 800-829-1040. The IRS will then send a letter to your employer requesting the information. Make sure you have the following info before calling:
    1. Name, Address, Social Security Number, and Phone Number
    2. Employer's Name, Address, and Phone Number
    3. The Dates you worked for the employer
    4. An Estimate of the wages and federal income tax withheld during the year. Note: If you have pay stubs they should show the year-to-date amounts which will be very close to what would show up on your W2.

FILE YOUR TAX RETURN ON TIME

Your tax return is due on April 15th even if you have not received your W2. You can extend your return by filing Form 4868 which will give you until October 15th but remember this is only an extension to file not to pay any tax that you might owe. If you still don't have your W2 but are ready to file you can use a Substitute W2 Form 4852.  Estimate your wages and tax withholdings as best you can. The IRS will take more time to verify 

FILE AN AMENDMENT TO MAKE CORRECTIONS LATER

If you file your tax return with estimates and receive your W-2 later you are required to amend your tax return if the information is different. You can do this by filing form 1040X. This is not as hard as it sounds - you just show the differences from one return to the next and then calculate the tax effect of the changes. 

MISSING HEALTH INSURANCE FORM?

Since we are on the topic of missing tax forms, if you purchased health insurance off the exchanges you should be getting a form 1095-A. This is new this year which is why I'm reminding you. This form is also required to fill out an accurate tax return and could be beneficial if you are eligible for a tax credit.  If you didn't receive this form you should contact your marketplace.  For those of you in the great state of Minnesota you'll want to contact MNSure

UPDATE UPDATES...GOTTA LOVE THOSE TAX UPDATES

They Happen Every Year...

Tax Updates 2015

2015 QUALIFIED PLAN LIMITS
THE PLAN LIMITS FOR 2015 HAVE BEEN ANNOUNCED!

  • Annual Compensation Limit

    • Increases from $260,000 to $265,000

  • Salary Deferral Limit for 401(k) and 403(b) Plans

    • Increases from $17,500 to $18,000

  • Catch-up Contribution Limit for 401(k) and 403(b) Plans

    • Increases from $5,500 to $6,000

  • Annual Additions Limit for Defined Contribution Plans

    • Increases from $52,000 to $53,000

  • Annual Additions Limit for Defined Benefit Plans

    • Remains Unchanged at $210,000

  • Social Security Wage Base

    • Increases from $117,000 to $118,500


Testing Limits

  • Highly Compensated Employee

    • Annual Income Limit Increases from $115,000 to $120,000

  • Key Employee Based on Officer Status

    • Remains Unchanged at $170,000