Try To Keep Calm, You Got a Letter from the IRS

I can't speak for everyone, but If I received a letter from any federal enforcement agency my heart would plunge, my stomach turn, and I may even say a little prayer. Now  If the IRS sent a thick letter addressed to me, oh my, I think my heart would stop all together.

The IRS jailed/fined high profiled individuals such as Wesley Snipes, Lauren Hill, Martha Stewart, and Nicholas Cage for tax evasion.  Why should I be CALM. These SUCKERS DON'T PLAY. NO way would I be CALM!  I don't think calm is a normal reaction even for the most modest taxpayer.

So what should you do if the IRS sends you a correspondents? Well, I'll give you my two cents on this topic. 

Disclaimer:  Every tax situation is unique, Use this list as a general guide.  You should seek additional guidance from a qualified, competent, professional who is familiar with your case for specific advice.

Here's my top 5 Do's if the IRS writes you.

1. Calm down (after panicking) and read the letter. See why they are writing you. It may be to inform you that you've been under paid and extra money is coming your way (positive thinking). It does happen, but rarely. Check to make sure the letter is from the IRS and not a any other agencies or hackers fishing for your information.

2.  Re-read the letter. Try to discern what the IRS is instructing you to do. It may not be clear the first time you read the letter cause your heart is still racing. Often time, the IRS will make a recommendation and ask you if you agree or not. Or they may request additional information to support something to claim on your tax return.  You will be given a specific time frame to respond typically 30 days. IGNORING THE LETTER WILL NOT MAKE IT GO AWAY.

3. Get help. Contact the person who completed your return to inform them of the letter. They may be able to help gather supporting information. If you completed your return yourself, you should  still reach out for help. A second opinion may be helpful if your situation is complicated.

4. Visit the IRS.GOV website to review the Publication on the topic you are being requested to answer. For example, if the IRS inform you that you incorrectly claimed an education credit. There is a an entire Publication dedicated to this topic. You may find that you are justified to use the credit. Cite your findings in your response letter. Also, the IRS website is a great place to get additional information on tax payers rights and access to a tax payer advocate. All free.

5. Respond! If the letter suggest that you should respond by a certain time frame, you ABSOLUTELY should RESPOND. If you are unclear what you to write in your response, call them and ask.  Even if the IRS is correct in their adjustment of your taxes, you should respond and let them know that you are in agreement with the changes.  Add in your letter what you intend to do to correct the return in question.  If you don't feel comfortable calling, give your tax preparer

 permission to call on your behalf.  Last resort, ask for more time to response.

Bonus: DO NOT IGNORE THE LETTER.  It will only cause you undue grief in the long run. Not all of us are like Martha Stewart and can survive jail.

What happens during the Midnight Hour

As we approach the last few days of tax season things are sure to get hectic. No one is perfect (except for Jesus of course) and mistakes happen. The IRS realizes that during the midnight hours people will rush to submit their tax returns and consequently may make an error. I know from experience that nothing good happens during the midnight hour (at least nothing you would want to share with your parents). As a result of an influx of incorrect tax returns the IRS published a report highlighting the common mistakes made by tax payers. To avoid disappointments, delays, auditing, and errors I will gladly share this list with you.






1. Wrong names. Basically, don’t enter your name the way you spell it. You’re not Plies but Algernod Lanier Washington or Drake but Aubrey Drake Graham. Point is enter your name as it appears on your Social Security Card. Your refund maybe accepted with incorrect name but it will be delayed.

2. Wrong or missing Social Security numbers. Be sure you enter all SSNs on your tax return exactly as they are on the Social Security cards. If you don’t have a social security number….. well that’s a whole different conversation.

3. Filing status errors. Some people use the wrong filing status, such as Head of Household instead of Single. Silly rabbit, tricks are for kids. The IRS will catch you. If your goal is to increase your refund, there are other without using head of household. By using this information and not have the support necessary it will GREATLY impact your refund.

4. Math mistakes. Double-check your math. For example, be careful when you add or subtract or figure items on a form or worksheet. Don’t use tax preparers who cannot calculate simple math.

5. Errors in figuring credits or deductions. Not all credits apply to you. It doesn’t make sense to apply for a 65 year old blind credit when your only 23 and healthy. Don’t jinx yourself.

6. Wrong bank account numbers. Double check, double check, then double check again. IF the bank account you select does not have your name on the account, the bank will reject your refund and the IRS will mail you a paper check. It will take up to 6 weeks to get the check..

7.  Electronic filing PIN errors. If the IRS sent you a letter indicating you should get a ID Protection Pin and you did not, your refund will be accepted but delayed to the max!!! Also if you are filing your return using a tax software you may need to go to the IRS website to get your last year pin.

No children to claim?

Greetings,

Many of my clients ask me what credits are available to help boost their refund If they do not have any children to claim?

My short response... A LOT! Seriously there are many credits out there for individuals with out any children. I get excited when I hear this question because I get a chance to show off what I know. Below I've summarized a few credits that popped up in my mind. Hope this helps. Of course, you're welcome to contact me for a free consultation.

To start out let me define TAX CREDIT. Basically a TAX CREDIT  IS A DOLLAR FOR DOLLAR REDUCTION OF YOUR TAX LIABILITY. This is what DIRECTLY increase your refund.

SHORT LIST OF CREDITS:

• Earned Income Credit
• Education Credit
• Tuition and Fees
• Student Loan Interest
• Tax credit for the elderly or the disabled
• Foreign tax credit
• Tax credit for IRA and retirement plan contributions (the retirement savings contribution, or “savers” credit)
• Health insurance premium assistance credit (not available prior to 2014)
• Tax credits for certain qualified fuel cell and plug-in electric drive motor vehicles
• Tax credit for purchasing qualified energy-efficient property (e.g., solar water heater)
• Adoption Credit

DESCRIPTIVE LIST: (Shout to www.IRS.GOV for free information)

 

Earned Income Tax Credit

The amount of the credit depends on your income and the number of qualifying children you have. For people with wages, salaries, tips, self-employment income and other earnings, the EITC gives up to:

·        $6,143 to households with three or more children

·        $5,460 to households with two or more children

·        $3,305 to households with one child

·        $496 to households with no children (only if you were between ages 25 and 64 in 2014)

 

Tuition and fees TAX deductions:

·        This deduction can reduce the amount of your income subject to tax by $4,000 or less.

·        You may be able to deduct qualified education expenses for yourself, your spouse or a dependent.

·        The education expenses must be for higher education (after high school). They include tuition and other required fees and expenses (activity fees, books, supplies, equipment). You can’t include personal expenses such as room and board.

Education Credits:

1. American Opportunity Credit

·        You can receive a credit of up to $2,500 per student.

·        It can only be used for the first four years of post-secondary education (after high school) for an undergraduate degree or other recognized education credential.

·        Up to $1,000 of the credit is refundable, so you can receive it even if you don’t owe taxes.

2. Lifetime Learning Credit

·        You can receive a credit of up to $2,000 per student.

·        It can be used for all years of post-secondary education (after high school) and for classes to improve job skills (non-degree programs are included).

·        The maximum credit is limited to the amount of tax you owe on your return.

 

Student  Loan interest deduction

If you paid interest on a student loan and your income qualifies, you may be able to reduce the amount of your income subject to tax by up to $2,500.

Savers Tax Credit

The SAVERS CREDIT formerly the Retirement Savings Contributions Credit, is for eligible contributions to retirement plans such as qualified investment retirement accounts, 401(k)s and certain other retirement plans. Taxpayers with the least income qualify for the greatest credit -- up to $1,000 for those filing as single, or $2,000 if filing jointly.

Should I just DO IT MYSELF

Question of the week: Do your own taxes or use a professional?

Short politically correct answer: Sure, why not do it yourself if you can. But I wouldn't (read more)....

I often watch YouTube videos of new hair styles that I want to try. I watch the same video clip at least 50 times in hopes of imitating the technique used. The girl in the video always make things look so easy; 1.2.3 and done! When I go and try it myself, for some reason odd reason it never turns out the way i saw it in the video. It may be just my luck. I believe the same concept applies to taxes. You may have watch a preparer complete your return several times; it looks simple. It's only data entry. Right?

Well, to help you evaluate if and when you need to use a tax professional, I'm going to highlight the Pros and the Cons of doing it yourself. I want to stress the list below is not comprehensive. If you have a complicated tax return or is remotely interested in MAXIMIZING YOUR REFUND, then

USE A PROFESSIONAL (PERIOD) .

Consequences of not hiring a tax professional:

1. Miss out on credits/deductions: many people do not claim certain credits they are eligible for because they fear the IRS will audit their return. That is why tax offices can almost guarantee you a refund if you allow them to review your past tax returns that you've completed.

2. Miss out on the benefits of itemizing: many people don't itemize because they don't know what is appropriate to claim. When they do itemize, they are not certain on what to enter to get the full benefit of the credits or how to re-define expenses to their advantages. For example, mortgage related expenses, lost from a theft can be claimed, car registration, gambling lossess, medical expense charitable contribution, tithes, all can be itemize. And there's many more.

3. Extra eyes prevent mistakes:  

4. Tax Preparer is responsible for what is entered in your return, so they are your advocate if the IRS perform an audit.

5. Waste time looking over tax documents that are confusing. The IRS estimated the average taxpayer who file their own tax return spends about 23 hours trying to figure it out. Seriously this year is not the year to get it wrong. There has been many changes due to laws that took effect under President Obama. Unfortunately, it will cost you more if you make a mistake this year.  

Pros of filing yourself:

1. Save $100-200 in preparation fees. (note tax preparation fees are deductible in your return)

2. Keep your personal information private

3. Your life situation is simple. Example: 1 job, no kids, no house, no investments, no major events occurred.

4. understand tax laws and changes in the tax codes

5. Convenience of doing it from home.

 

Can you claim your bae as a dependent for taxes?

We all know if you don't have kids to claim for tax season, then most likely you ain't getting back a huge refund from Uncle Sam. Well that may true, but you can still claim head of household filing status with a qualifying relative. Many people don't know this fact plus they are not sure how to enter a qualifying relative in the tax software's as to not trigger an audit.  It's a common mistake, that the IRS will not automatically tell you about. They do their jobs to take your money, and you should do yours to get theirs!

To help clarify the difference with qualifying child and qualifying relative, I've indicated below who can be claim and under what circumstances. I've also included a link to the IRS website where you can play with the app to see if that person you've been supporting can be claimed. Hope this helps. Call me if you have more questions: 407.716.8518.
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 Criteria for who qualifies as a "child." Here are the highlights [source: IRS]:

• Relationship: A "child" can either be a biological child of the taxpayer, a stepchild, an adopted or foster child, or even a sibling or stepsibling of the child. Descendants of any of these folks are also OK.
• Residence: The child must live with the taxpayer for more than half of the tax year.
• Age: The child must be under 19 on Dec. 31 of the tax year, or under 24 if a full-time student.
• Support: The taxpayer must provide more than half of the child's financial support for the year.

Dependents who are not children are called qualifying relatives. Here are the criteria [IRS]:

• Relationship: Parents, great aunts, cousins, step-brothers all qualify -- in fact, you don't have to be related to the person at all, provided they meet the other requirements.
• Residence: An actual relative does not have to live with the taxpayer, but nonrelatives like roommates or friends have to live with the taxpayer full-time.
• Age: A qualifying relative can be any age.
• Support: The taxpayer needs to provide more than half of the dependent's financial support during the tax year and the dependent's gross income must be less than the personal exemption of $3,950 in 2014
  
  . Also, the dependent cannot take the personal exemption on his or her tax return at the same time

Be gentle, it's my first time ;)

Hi,

Welcome to my blog spot, Beyond TAX Season. To start off, i want to warn you this is my first time blogging. So please be gentle with me. With that being said, the purpose of this blog is share educational information regarding taxes, personal finances, budgeting, and business tax planning. I am not a guru; but I have educated myself regarding certain topics. In addition, I'm great at researching.  I plan  to share credible data I find on my quest regarding the above topics.

My hope is share information that is usefull to your success. I welcome a productive conversation about money.  So please provide feedback regarding any topics I post. I don't plan to write novels here but bullet points and sometimes videos.

Lastly, I do want to disclose that I own a tax preparation business called, Courageous Tax Services. I've been helping clients for over 7 years. My ultimate goal is to EMPOWER CLIENTS TO VISION AND PURSUIT FINANCIAL GOALS BEYOND THE TAX SEASON. This platform is another way  for me to empower my clients with education.

Well that's all for now folks. Thank you for reading my first post.