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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.
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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!

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Deadline to File for Taxpayers Abroad Rapidly Approaches

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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.

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How to Identify IRS Scammers

Here’s what you should know in order to avoid falling for the fake trap set by potential scammers who claim they are from the Internal Revenue Service (IRS):

  • When requesting information, the IRS would never initiate contact with taxpayers by email, text messages or social media channels.
  • Enforcement action is not used as a threat by the IRS; this includes lawsuits or imprisonment.
  • The IRS does not aggressively approach the conversation on the phone, whereas scammers are typically persistent and malicious regarding your IRS tax problems.
  • Scammers demand payment via debit or wire transfer, but the IRS would mail a bill to notify taxpayers who owe taxes.
  • The IRS will not bring in local police, immigration officers or other law-enforcement to have you arrested.
  • In the event of an IRS visit, two forms of identification must be provided by the representative to prove their credentials.
  • Payments must only be sent to United States Treasury.

Make a constant effort to protect yourself by protecting your data. It is also important to know that your rights are as follows, detailed by the IRS here.

  • Be Informed
  • Quality Service
  • Pay No More than the Correct Amount of Tax
  • Challenge the IRS’s Position and Be Heard
  • Appeal an IRS Decision in an Independent Forum
  • Finality
  • Privacy
  • Confidentiality
  • Retain Representation
  • Fair and Just Tax System

We urge you to be on the lookout and address confusions with IRS officials, as always the Tax Defense Partners is here to help!

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IRS Working Hard To Detect Fraudulent Tax Returns

According to a new report from the Treasury Inspector General for Tax Administration (TIGTA), the IRS has improved their investigation methods in detecting identity theft related fraudulent tax returns. Yet, the IRS needs to be more factual with their identity theft estimates.

To determine the efficiency of the IRS when it comes to detecting and preventing identity theft, tax problems, and how they collaborate with other agencies and tax industry partners to coordinate information, the TIGTA performed an audit.

Through this report, they found that 568,329 undetected fraudulent tax returns were filed with refunds. These refunds totaled more than $1.6 billion for tax year 2013, which was a drop of more than $523 million from the previous year.

To reduce the fraudulent activities, the TIGTA believes the new January 31st deadline for employers to file their W-2 forms with Social Security Administration will be helpful. This allows IRS to utilize the Form W-2 for comparison to the tax return sooner for potential identity theft.

Here are six recommendations that the TIGTA provided from investigating the audit, sourced from Accounting Web:

• Include all accelerated W-2s to compare with tax returns for possible identity theft;
• Identify and evaluate potential fraud in tax returns by creating a principle;
• Use state lead data to help evaluate tax returns;
• Use tax return data to find the refund amount associated with electronically filed tax returns that were rejected when computing revenues;
• Review revenues to ensure that duplicate tax returns are deleted; and
• Tax returns with mismatched income because of duplicated income documents should not be considered for potential identity theft.

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Is The IRS Calling, Or Is It A New Scamming Approach?

As the tax season is approaching, so are an increasing number of IRS scams. According to WBIW – a radio station broadcast, the Washington County Sheriff’s Department is reporting a significantly higher number of scams with newer techniques and advanced technology. The scammers are using threats and fake caller IDs to mislead people.

Sheriff Roger Newlon states, “One of the more common scams involve callers, who threaten to arrest or prosecute if money is not immediately paid.” In other cases, scammers might attempt to use technology to mask a caller ID to make it seem like the call is coming from the IRS. The majority of these calls come from overseas phone services.

There are a variety of ways to avoid being scammed. Scammers may use cunning means to deceit you, however, their approach does not reciprocate to actual IRS demands. Therefore, it can be an obvious catch if you observe the following signs:

The IRS will Never:

  • Call to demand immediate payments for back taxes.
  • Call about taxes owed without first having MAILED you a tax bill
  • Deny you an opportunity to question or appeal their claim for IRS tax relief.
  • Require you to use a specific payment method for paying your taxes such as iTunes cards, Greendot Pre-paid cards or wire services such as Western Union or MoneyGram.
  • Threaten to bring in the local police or other law enforcement groups to have you arrested for not paying.
  • Ask for your banking information over the telephone.
  • Send you an email.

Once you are aware of these signs and you encounter one of these attempts, it is important to immediately hang up and contact the IRS at (800)829-1040. You can also report the incident to your local law enforcement agency, as well as file a complaint with the Federal Trade Commission. This will assist in the goal to eliminate these scammers.

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Owe The IRS? You Could Lose Your Passport.

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Are you finally cashing in your vacation time to take a Euro trip? Well, if your travel plans include a passport and an airplane, then you need to be mindful about a new law that could prevent you from enjoying your time off from work, according to Forbes.

The FAST Act (Fixing America’s Surface Transportation) was implemented as a law on December 4, 2015. The purpose of the FAST Act was to create funding for highways, roads and other means of transportation. In this act, a new clause is implemented that allows the State Department to seize passports of “seriously delinquent” taxpayers. Because the IRS does not have the authority to seize passports, they must advise with the State Department about the taxpayers who have not paid their dues. Previously, the State Department had the authority to seize passports, but they did not have the authority to gain access to taxpayer information because of the breach of privacy laws.

The IRS has found a loophole to stop taxpayers from enjoying leisure time if they owe money to the government. Therefore, now the State Department has the ability to refuse to issue or renew passports for anyone who owes the government over $50,000, which includes any interest and penalties. Along with the State Department, the Secretary of the State is also allowed to invalidate a passport that has been already issued to a delinquent taxpayer. The amount for a “seriously delinquent” tax debt may change each year due to cost of living and inflation, however there are some exceptions to this law.

If you have settled an Installment Agreement or an Offer in Compromise, then this newly implemented law will not affect you. You are also in the safe zone if you are scheduled for a Collection Due Process hearing that has to do with a levy or an innocent spouse claim, where the tax debt has been suspended. Unfortunately, there is no grace period for the State Department to revoke an existing passport if you are a delinquent taxpayer. The IRS does however notify you when they list you as a “delinquent taxpayer” to the State Department. They then give you 90 days after seizing your passport to either make the payment, resolve any errors that were made or enter yourself into a payment plan.

It does not stop there! If you’re a taxpayer who is stuck in this situation and say to themselves, “Okay, I just won’t travel out of the country! Walla! Problem solved!” You are wrong! There is another law implemented called the REAL ID Act that prohibits federal agencies from accepting driver licenses or identification cards from taxpayers who have a debt travelling domestically. Well, this puts you in a sticky situation! Now you can’t even travel in state! This Act was implemented to encourage taxpayers to settle their debt before enjoying a vacation. After all, if you can pay for a vacation, then you should be able to pay your debts!

As of January 22, 2018 taxpayers who have a debt and are traveling with an identification card or drivers license must have another form of identification, usually a passport, which is acceptable for TSA (Transportation Security Administration). The only exception is if the state has extended the right to the traveler, otherwise all other travelers must have alternative proof of identification. In the upcoming years, the rules will be reinforced strictly and proficiently. In October 1, 2020 every traveler will need a REAL-ID compliant license to travel domestically. Alterative forms of identification such as passport will also be acceptable.

Why let the government dictate when or if you can take a trip, or enjoy time off with your loved ones. Filing your taxes accurately and on time is crucial for your credit, your freedom and your sanity. Go on that Euro trip and travel the world because you only have one life and you shouldn’t let the government prevent you from creating unforgettable memories.

taxpayers

You May Qualify For Earned Income Tax Credit

Earning 53k or less? If you are, you may be eligible to qualify for Earned Income Tax Credit (EITC). EITC is an income tax credit for rural taxpayers, who are living paycheck to paycheck. Since it’s a refundable credit, there are certain criteria you must meet before you can apply. If you do qualify and claim it, you are capable of paying less on federal tax, paying no tax or receiving a large tax refund. EITC refunds can be as large as about $6,000 or as small as $500 depending on your qualifications, family size, and children’s qualifications. The following is some basic information about how you know if you are qualified for EITC.

How do I know if I am qualified for EITC?

  • You have earned income and adjusted gross income within certain limits; AND
  • You meet certain basic rules; AND
  • You either: meet the rules for those without a qualifying child; OR
  • Have a child that meets ALL the qualifying child rules for you, or your spouse if you file a joint return.

Some of the Basic Rules

  • You or your child must have a social security number
  • Must file either one of these: married filing jointly, head of household, qualifying widow or widower, or single.
  • Your tax year investment income needs to be $3,400 or less for the year.
  • Must not file Form 2555 (see IRS website for more information about the form)
  • You must earn an income that is greater than $1
  • Both your earned income and adjusted income needs to be under a certain amount (see IRS website for more details)

Contact Tax Defense Partners today for additional details.

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2017 Tax Filing Season Has Officially Opened

The IRS is successfully beginning to accept 2016 income tax returns with over 153 million returns estimated to be filed. You have until April 18,2017 to file your taxes before you have the IRS knocking on your door, unless you have already filed for an extension. The deadline to file your taxes for those who have been granted an extension is October 16, 2017. The IRS has extended its due date to file your taxes because the usual April 15 deadline is on a Saturday, which would be beneficial because it would give taxpayers until the following Monday, but April 17th, is a holiday. Last year, about 111 million dollars in refunds was issued to taxpayers, but the IRS expects more than about 70% of taxpayers to receive their refund in 2017.

If you experience a refund delay

Refunds are normally issued in less than 21 days, however a new law passed that now requires the IRS to withhold tax refunds for taxpayers who claimed Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) until February 15,2017. Even if some of the portion of the refund is not a part of EITC or ACTC, the IRS must hold the entire refund. This gives the IRS time to process the paperwork and detect and prevent fraud.

Let Tax Defense Partners file your tax returns

The IRS and State Taxing Agencies will not allow any Taxpayer to establish a formal agreement until all their returns are filed.  Unless you file your 2016 Tax Return on time, you may be jeopardizing your current or future agreement.  Don’t let the IRS get the upper hand.

If you secure Tax Defense Partners as your tax preparer right away you will get first pick on your tax preparation appointment day and time. Our expert tax preparation team will make sure you get every credit and deduction you deserve. Call us today to get started.

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Obama’s New Executive Order Will Turn New U.S. Presidents Into Taxpayers

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Obama’s recently signed Executive Order now requires that the President of the United States be a federal taxpayer. According to Andy Borowitz from NewYorker.com, President Obama exclaimed that “Since the President has such a large say in how federal taxes are spent, it only makes sense that he or she contribute to those taxes too.”

Moreover, President Obama reiterated that people should not look too much into the timing of this Executive Order being signed, saying that “it just seemed like the right thing to do”. Andy Borowitz declares that the signing of this executive order was met with opposition by Republicans on Capitol Hill. Paul Ryan, one of the more prominent opponents to the Executive order, claimed that “This is nothing less than an attack on the American Dream of paying no taxes”.

Accordingly, this didn’t phase the President, as he is getting another Executive Order ready that would require all cabinet members to have held at least a summer job relevant to their posts, Borowitz states.