theft

Protecting Yourself from Identity Theft

theft

The Internal Revenue Service is just as frustrated with attempts at identity theft as taxpayers are. They’ve joined forces with the states and tax industry to verify the identity of taxpayers and the validity of tax returns through the “Taxes. Security. Together.” campaign. This is one of many ways to protect yourself against fraud.

 

The IRS hopes to raise awareness and heighten security when it comes to personal information. Steer clear of identity theft with these tips:

  1. Protect your records by using anti-spam/virus software and changing passwords. Also, avoid carrying your Social Security card and store your tax records in a safe place – you don’t want either of these things lying around.
  2. Learn how to recognize real communication from the IRS. Ignore fake threats of a lawsuit, arrest or demands for immediate payment. You should report suspicious activity to the IRS if you suspect tax fraud.
  3. According to the IRS, victims of identity theft can still file with the below options …
    • File a tax return by paper and pay any taxes owed.
    • File an IRS Form 14039, Identity Theft Affidavit. Print the form and mail or fax it according to the instructions. Include it with the paper tax return and/or attach a police report describing the theft if available.
    • File a report with the Federal Trade Commission using the FTC Complaint Assistant.
    • Contact Social Security Administration at www.ssa.gov and type in “identity theft” in the search box.
    • Contact financial institutions to report the alleged identity theft.   
    • Contact one of the three credit bureaus so they can place a fraud alert or credit freeze on the affected account.
    • Check with the applicable state tax agency to see if there are additional steps to take at the state level.
  4. Taxpayers will receive a letter asking for verification in case of suspicious activity and if they are a confirmed theft victim, they will get a unique six-digit IP PIN number that is used to e-file their tax return.

 

For further assistance, follow this guide. We also encourage taxpayers to contact tax professionals for help moving forward!

vehicle

Filing Vehicle Charges on Your Taxes

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Writing off your vehicle on your taxes might sounds simple, but like anything else regarding the IRS, there are specifics that must be addressed. If done accurately, itemizing your vehicle expenses can result in a portion of a lease payment being used as a business expense.

A portion of costs spent on vehicles that are used for business can be counted when determining tax deductions. You’re allowed to deduct the standard mileage rate or use the actual expenses incurred during the business use of the vehicle.

To calculate costs, you can use the standard mileage rate for a year (for 2016 business driving is 54 cents per mile) but you would not deduct your actual car expenses that year. Depreciation, lease payments, maintenance and repairs, gas, oil, insurance, or vehicle registration fees cannot be deducted either.

Under the actual expense method, you deduct the actual costs you incur each year to operate your car, plus depreciation (according to a tax code schedule). Your deductible costs include gas and oil, repairs and maintenance, license fees, insurance, tolls, and even car washing.

If you plan to take a vehicle deduction, it is essential to keep a detailed log of your business miles and other expenses if you want to write them off.

abatement

Requesting Penalty Abatement

abatementAre your penalties for failing to file a tax return, not paying on time, and/or to depositing taxes when due piling up? Read on to learn how you can reduce or completely eliminate those costs.

If such penalties exist on your file, the Internal Revenue Service (IRS) will have already sent you a notice to inform you of said charges. First, determine whether or not that information is correct and pertains to you. Issues can be addressed by calling the toll-free number listed on the notice, otherwise we recommend reviewing information with tax professionals to determine the best approach.

 

According to the IRS, you may qualify for abatement if you fall in either of the below categories:

  • You didn’t previously have to file a return or you have no penalties for the three tax years prior to the tax year in which you received a penalty.
  • You filed all currently required returns or filed an extension of time to file.
  • You have paid, or arranged to pay, any tax due.

Individuals are allowed to dispute interest and penalties as long as they have a reasonable cause, administrative waivers or found a mistake by the IRS.

When looking to remove penalties, you can do so through the First Time Penalty Abatement (FTA) program which is best if you have a good track record and plan to remain in compliance in the future.  

 

There are three other options as well:

  • Calling the IRS
  • Writing a letter
  • Submitting Form 843

In either case, you must be prepared to provide requested information and additional proof of your compliance. We understand that facing tax problems alone is overwhelming … consider contacting Tax Defense Partners to get some help!

home office

How to Deduct Home Office Expenses

home officeWhen it comes to deducting expenses for small business owners who work from home, the Internal Revenue Service (IRS) has two methods for Home Office Deduction: regular and simplified.

According to the regular method, you would have to calculate the usage of your home for business as well as personal obligations. The IRS states that “Direct business expenses are fully deductible and the percentage of the home floor space used for business is assignable to indirect total expenses.”

Self-employed taxpayers must file Form 1040, Schedule C, Profit or Loss From Business (Sole Proprietorship), and compute this deduction on Form 8829, Expenses for Business Use of Your Home.

If you’re looking to reduce the paperwork and burden of keeping records, the simplified method is your ideal option. The IRS allows a prescribed rate of $5 a square foot for business use of the home with a maximum allowable deduction available based on up to 300 square feet.

This would require taxpayers to complete a worksheet in which the results would then be included on the tax return.

The necessary forms within the simplified method are below:

Research shows that in the past, approximately 26 million Americans have home offices, but only 3.4 million taxpayers claim home-office deductions. While the area you are claiming must be used exclusively and regularly for conducting business, it can be worth the extra effort in figuring out exact costs.

Don’t miss this deduction opportunity in fear of facing a tax audit. After all, Tax Defense Partners are here to help! Call us today to determine whether or not you qualify for the Home Office Deduction.

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IRS Office Offers Virtual Appeal Option

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Many Americans are going through the Internal Revenue Service (IRS) Appeals process. Often times the Appeals offices are located far from the Taxpayer’s home. So, the IRS has an option to conduct the conference by telephone. But, this is not the ideal option for those that prefer face-to-face interaction and want to be humanized by the IRS, when possible. There is now a solution for those that cannot travel long distances to the IRS office, but wish to have the face-to-face impact.

The IRS is offering a new virtual service technology, which will allow you to resolve your tax disputes via video conference. Not only is this convenient for Taxpayers, but also with hundreds of thousands of taxpayers attempting to meet with an Appeals Officer, this speeds up the process and makes it more efficient for all parties involved (as long as they have internet access). Since this would be a web-based model, there is potential for screen-sharing which adds access and convenience to its list of pros.

As IRS Chief, Appeals Donna Hansberry stated,  “In the future, the technology may give taxpayers greater options in engaging with Appeals and could allow us the flexibility to serve taxpayers virtually from any location using mobile devices or computers.”

The IRS started the pilot program on Aug. 1, 2017, with hopes that it enables taxpayers to exercise their right to appeal an IRS decision and get adequate service throughout the process. All while preserving one of the fundamental rights of the Taxpayer, which is that the appeal officer must be objective and offer an impartial view of the dispute in an effort to come to a fair resolution.

For a complete list of the Taxpayer Bill of Rights, see Publication 1, Your Rights as a Taxpayer, available on IRS.gov.

Chair Desktop Businessman Business Desk Computer

How Small Business Owners Can Prepare For Tax Season

Chair Desktop Businessman Business Desk Computer

As Founder and CEO of your business, you have enough to worry about when trying to make sure all day-to-day tasks are taken care of, but you must also think ahead. Don’t feel sideswiped by tax season … We have a few tips to keep you organized until it’s time to file your business taxes.

  1. Prioritize: Think about all the tasks you have to accomplish in a day and be sure tax prep is on the list quite often. This will help you keep track of paperwork and spendings that will come in handy as you start to do your taxes.
  2.  Travel: If you’re traveling for work, the expenses may be deductible. Click here for more on what you can and can’t deduct when traveling for business and/or pleasure.
  3. Pay and file on time: The IRS is big on deadlines. While you may have an extension for filing, you must pay your dues by the initial due date. Stay on top of it to avoid adding penalties and interest charges. The Business Tax deadline is a few short weeks away. Are you ready to file? If your answer is no, then it may be time to contact a tax professional.
  4. Be proactive: If you’re just starting a business, you’ll want a system for saving and reporting spendings. Which means you’ll need safekeeping of receipts, even for basic supplies, as things can start to add up really quickly, but can be deducted as business costs later.

Contact Tax Defense Partners today to review and improve your tax situation!

wage garnishment

Dealing With Wage Garnishment

wage garnishment

Garnishment is defined as a legal procedure by which a creditor can collect what a debtor owes. It is usually the result of a court order which initiates the process of deducting money from an employee’s monetary compensation – including salary and wages.

Wage garnishment is typically the last resort in collecting debt as it seen as a more drastic measure. It is said that federal law only allows state and federal government agencies (not individual or private creditors) to take your tax refund as payment toward a debt. However, once you deposit the refund into your bank account, these rules no longer apply – it just depends on the laws of your state.

Federal income tax refunds are the most common federal payments which is why government agencies are more likely to garnish them. This is allowed by the Treasury Offset Program (TOP) which is administered by the United States Department of Treasury’s Financial Management Service (FMS).

The outstanding taxes you owe to the Internal Revenue Service (IRS) must be paid before making your tax refunds become available for garnishment by other government agencies because the IRS will pay itself first.

Plan to avoid garnishment, if possible, because it will end up costing less if you come to an agreement with the IRS. You are in danger of having wages garnished if the IRS demanded payment for a tax liability, but you failed to respond. You will then a receive a notice 30 days prior to garnishment informing you of their actions.

Need help resolving a wage garnishment issue with the IRS? Contact Tax Defense Partners today! Our tax professionals can help delay or stop the process entirely.

summer-tax-tips

Tax Tips to Get You Through the Summer

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The weather is getting warmer, days longer and vacation costs are adding up which means summer is here! While it’s a great time to relax, taxpayers should also make sure they have their expenses under control and take a moment to get organized, in order to avoid tax problems. We’ve listed some common tax problems you could potentially face this summer and provided our tips on how to best handle the situation and avoid issues with the Internal Revenue Service (IRS).

 

  • Obtain proper work status
    Unless you are self-employed, you don’t want to be classified as an independent contractor. In this case, workers are responsible for paying income taxes (and Social Security/Medicare) since taxes are not withheld from the worker’s wages. Completing a W-4 upon employment at a new company will avoid the headache next April when it comes to tax preparation season.

 

  • Make a donation
    Summer is a great time to clean out unnecessary clutter. Instead of throwing out clothes, shoes or other gently used items, you should gift them to someone in need. Whether it is monetary or itemized, you can donate to a qualified charity or non-profit organization. With proof of donation, you’ll be able to deduct those charitable contributions from your taxes.

 

  • Claim your childcare costs
    The schedule for working parents might be the same in the summer, but your kids likely have a few months off – which requires child care and other unexpected costs. A great option is to sign them up for a day camp as it can benefit your taxes later on since the cost may count as an expense towards the Child and Dependent Care Credit.

 

  • Deduct job-related moving expenses
    If your job requires you to relocate or you are completely switching employers/office, then you can deduct the costs once you’ve completed distance and time tests. This is a great way to get a tax break without itemizing deductions.

 

  • Update name and address
    Do so with Social Security Administration to avoid delays. This one is mostly for the newlyweds who plan to get married this summer, but aren’t yet thinking about tax time. Tying the knot will also change your filing status and withholdings so be sure to have the most up-to-date information on file.

 

  • Report seasonal damage
    If property has been damaged due to storms, fires or other disasters, the reduction in value of your damaged property can be deducted on your tax return as a casualty loss.

 

  • Update your records
    Now that we are over halfway through the year, you’ll want to make sure your information is up to date and accurate. Compile all files and paperwork and organize the receipts you’ve been holding on to. All of this will help make the process easier in the coming months.

 

  • Talk to a tax professional
    Before you know it, it’ll be spring again and all you’ll be thinking about is taxes! Don’t let the stress prevent you from enjoying everything the summer has to offer. Call Tax Defense Partners to get help with any and all of your tax dilemmas.
irs-building

Handling a Letter or Notice from the IRS

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The Internal Revenue Service (IRS) offers some great advice on handling a letter or notice from them. The main takeaway is that whether or not you agree with the contents of the letter, you should stay calm and respond in a timely fashion.

If you are unsure about where you stand as far as owing money to the IRS, you may want to visit IRS.gov to view your account information. Notices regarding tax returns or tax accounts will include detailed information on how to proceed and appropriately resolve the issue.

Official letters from the IRS include exact instructions for solving the tax problems that they are reaching out to inform you about. This is done to avoid calls or trips to the IRS office. More information is available online to simplify the process.

The first contact from the IRS will come in the mail, not via social media or text message. They have a specific collection process that they follow, so if the letter from the IRS is asking for immediate payment via credit or debit card – that is a red flag and can be considered a scam.

The IRS states that “Sometimes a notice may ask for more information about a specific issue or item on a tax return.” In such cases, you should respond as soon as possible to avoid penalty charges or additional interest can incur.

It helps to have copies of any documentation that you send to and receive from the IRS.

We understand that any communication with the IRS can be overwhelming if you don’t know what to say or do. Contact a tax professional from our team at Tax Defense Partners for further assistance!

taxseason

Deadline to File for Taxpayers Abroad Rapidly Approaches

taxseason

If you live or work abroad, today (June 15) is the last day to file your federal income tax return for 2016. This includes those with dual citizenship. You can digitally request an extension if you can’t meet the deadline. The extension is granted to those who attach a statement explaining why they should be qualified – typically for those living or serving on the military outside the United States.

 

Do you need to file?

Filing obligations are linked to personal income such as wages, salary, commissions, tips, consultancy fees, pension fund, alimony, U.S. or foreign social security, interest, dividends, capital gains, rental property, farm income, royalties, inheritance or payment in kind in the US or abroad.

What are your options?

According to Publication 54 of the IRS, you don’t have to file on paper. “Electronic filing” is the fastest, easiest, and most convenient way to file your income tax return electronically.

Do so by using your personal computer, with the help of a volunteer or contact a tax professional who can do it for you. This would offer an accurate, safe, and fast alternative to filing on paper. IRS computers quickly and automatically check for errors or other missing information.

You can reduce your US tax by a substantial amount through two methods: “Foreign Earned Income Exclusion” or “Foreign Tax Credit.” None of them excuse you from filing if your income was above the filing threshold.

What information do you need?

The requirements for determining who must pay estimated tax are the same for a U.S. citizen or resident abroad as for a taxpayer in the United States. For current instructions on making estimated tax payments, see Form 1040-ES.

If you had a tax liability for 2016, you may have to pay estimated tax for 2017. Generally, you must make estimated tax payments for 2017 if you expect to owe at least $1,000 in tax for 2017 after subtracting your withholding and credits and you expect your withholding and credits to be less than the smaller of: 1. 90% of the tax to be shown on your 2017 tax return, or 2. 100% of the tax shown on your 2016 tax return. (The return must cover all 12 months.)

If less than two-thirds of your gross income for 2016 and 2017 is from farming or fishing and your adjusted gross income for 2016 is more than $150,000 ($75,000 if you are married and file separately), substitute 110% for 100% in (2). See Pub. 505 for more information.

Now what?

It’s not too late to figure it out – make sure to request an extension, even if you just need more time to do research. Make sure your numbers are in order and all information is accurate prior to filing.

If you need help choosing a software provider, go here.