Category Archives: General Topics

IRS Offers 10 Tax Tips

WHO WANTS A FREE TAX TIP?

If you haven’t filed yet, the IRS has these 10 tax-time tips to help you. The April 18 deadline to file your federal tax return is less than two weeks away. Don’t wait until the last minute.

1.Gather your records. Make sure you have all your tax records. This includes receipts, canceled checks and other records that support income, deductions or tax credits that you claim. If you purchased health insurance through the Marketplace, you will need the information in Form 1095-A to file.

2.Report all your income. You will need to report your income from all of your Forms W-2, Wage and Tax Statements, Forms 1099 and any other income – even if you don’t receive a statement – when you file your tax return.

3.Try IRS Free File. Free File is available only on IRS.gov. If you made $62,000 or less, you can use free name-brand tax software to file your federal tax return. If you earned more, you can use Free File Fillable Forms, an electronic version of IRS paper forms. If you need more time to file, you can also use IRS Free File to get an automatic six-month extension to file your taxes. Remember, an extension to file your tax return is not an extension to pay taxes you owe, which are due April 18.

4.Try IRS e-file. Electronic filing is the best way to file a tax return. It’s accurate, safe and easy. If you owe taxes, you have the option to e-file early and pay by April 18 to avoid penalties and interest.

5.Use Direct Deposit. The fastest and safest way to get your refund is to combine e-file with direct deposit. The IRS issues more than nine out of 10 refunds in less than 21 days.

6.Visit IRS.gov. IRS.gov is a great place to get what you need to file your tax return. Click on the “Filing” icon for links to filing tips, answers to frequently asked questions and IRS forms and publications. Get them all at any time. The IRS Services Guide outlines the many ways to get help on IRS.gov.

7.Use IRS online tools. The IRS has many online tools on IRS.gov to help you file. For instance, the Interactive Tax Assistant tool provides answers to many of your tax questions. The tool gives the same answers that an IRS representative would give over the phone. If you want to find a tax preparer with the qualifications and credentials that you prefer, use the IRS Directory of Federal Tax Return Preparers. IRS tools are free and easy to use. They are also available 24/7.

8.Weigh your filing options. You have different options for filing your tax return. You can prepare it yourself or go to a tax preparer. You may be eligible for free help at a Volunteer Income Tax Assistance or Tax Counseling for the Elderly site.

9.Check out number 17. IRS Publication 17, Your Federal Income Tax, is a complete tax resource that you can read on IRS.gov. It’s also available as an eBook. It can help you with many tax questions, such as whether you need to file a tax return, or how to choose your filing status.

10.Review your return. Mistakes slow down your tax refund. If you file a paper return, be sure to check all Social Security numbers. That’s one of the most common errors. Remember that IRS e-file is the most accurate way to file.

Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on IRS.gov.

Why the IRS Won’t Tell Fraud Victims What Identity Thieves Stole

The IRS, TurboTax and A Taxpayer’s Identity Theft

A taxpayers’s identity theft is a worst case scenario for any taxpayer, and especially when the IRS won’t tell fraud victims what identity thieves stole. Tim Loo learned early this year that his name and Social Security number had made their way onto a fraudulent tax return, and immediately wondered whether the identity thief might also have his bank-account details or his kids’ Social Security numbers.To survey the extent of the damage, Loo asked the Internal Revenue Service for a copy of the bogus return. It refused. TurboTax, whose tax-filing software the criminals had used, told him they couldn’t share the fake return with him either, for “privacy reasons.”

The Boston-based physician wondered: Whose privacy? Continue reading →

Reminders For This Tax Season

Have you set up your appointment to have taxes done?

The following are large items that are already set in law that you can count on (literally and figuratively) for this tax season. Don’t forget about income limitations and phase outs.

Child Credits.

For each qualifying child under age 17 knocks up to $1,000 from your tax bill.

College Education.

Two big credits are available. The American Opportunity Credit can reduce your tax bill by up to $2,500 per eligible student or up to $2,000 through the Lifetime Learning Credit.

0% Capital Gains Rate.

This capital gains rate is available to all taxpayers in the 10% and 15% tax brackets. Married taxpayers qualify for the 0% rate if their taxable income is $73,800 or less, for single taxpayers $36,900 or less, and head of household is $49,400. To see the 2015 Tax Brackets.

Tax Free Gains on Home Sales.

Married couples can exclude up to $500,000 from their gain from their income from the sale of their home, for single taxpayers the maximum exclusion is $250,000. Ownership and occupancy rules apply.

Energy Saving Credits.

You can claim a credit for up to 30% of the cost of buying and installing solar panels, solar water heaters, geothermal heat pumps and small wind energy systems.

Franchise Tax Board Warns Public of Scams

10.22.2013

Sacramento – The Franchise Tax Board (FTB) today warned taxpayers of theft ploys involving scammers attempting to use FTB’s likeness for their personal gain.

“If you receive a questionable solicitation, contact FTB immediately and talk to a live agent to review your account,” said State Controller and FTB Chair John Chiang. “Taxpayers should protect their personal information and treat any unsolicited phone calls or emails with caution.”

Police have recently reported that scammers are contacting elderly people in Beverly Hills and informing them they received a red light traffic ticket last February that has been referred to FTB for collections. The scammer instructs the victim to load money on a prepaid debit card and send it to a bogus address. The scammer refers victims to an actual FTB phone number for reference.

Other scams claiming to represent FTB attempt to lure people into revealing personal and financial information, such as Social Security, bank account, or credit card numbers. This type of scam is referred to as “phishing” and is a technique aimed at getting personal information for the purpose of identity theft. Scams of this nature often involve an email that masquerades as offering to check the status of your state income tax refund.

FTB takes the safety and security of taxpayer information very seriously. If anyone receives a questionable contact from FTB, they should keep the following in mind:

FTB can only process payments through its online Web Pay services or by mail through personal check, money order, cashier’s check, or Western Union Quick Collect payments. FTB does not have the ability to process funds from third-party issued debit cards or prepaid credit cards.
FTB warns taxpayers against providing personal information over the telephone or by email to those who cannot verify they are FTB employees.
While FTB calls people who owe taxes, FTB will never ask taxpayers for PIN numbers, passwords, or similar access information for credit cards, bank accounts, or other financial accounts.

Taxpayers who receive a questionable contact should call FTB at 800.852.5711.

FTB’s Information Privacy policy is available online at ftb.ca.gov.

For more information on other taxes and fees in California, visit taxes.ca.gov.

ACA & The Individual Shared Responsibility Payment

**Did you hear about The Individual Shared Responsibility?**

Beginning in 2014, the individual shared responsibility provision of the Affordable Care Act requires each individual to:

Maintain a minimum level of health care coverage – known as minimum essential coverage, or
Qualify for an exemption, or
Make an individual shared responsibility payment when filing their federal income tax returns.

Minimum essential coverage generally includes government-sponsored programs, employer-provided health coverage, and coverage purchased in the individual market, including the Health Insurance Marketplace. Most people already have health insurance coverage that qualifies as minimum essential coverage, and therefore will not need to make a payment if they maintain their qualified coverage. However, for each month that you or a member of your family is without minimum essential coverage and does not qualify for an exemption, you will need to make an individual shared responsibility payment.

If you and your dependents had minimum essential coverage for each month of 2014, you will check a box indicating that when you file your 2014 federal income tax return. If you qualify for an exemption, you will attach a form to your tax return to claim that exemption. If you are required to make the individual shared responsibility payment, you will calculate your payment and make the payment with your return.

If you choose to make an individual shared responsibility payment instead of maintaining minimum essential coverage, this means you will not have health insurance coverage to help pay for medical expenses.

In general, the individual shared responsibility payment for 2014 is the greater of:

One percent of your household income above the income filing threshold for your tax filing status, or
A flat dollar amount of $95 per adult and $47.50 per child (under age 18) in your family, but no more than $285 per family.

The individual shared responsibility payment is also capped at the cost of the national average premium for bronze level health plans available through the Marketplace that would cover everyone in your family who does not have minimum essential coverage and does not qualify for an exemption – for example, $12,240 for a family of five. However this maximum fee will only impact the small number of high-income taxpayers who choose to go without health insurance. The payment amount is based on each individual’s personal circumstances, and information about figuring the payment can be found on our ‘Calculating the Payment’ page on IRS.gov/aca.

Example of Payment Calculation

Eduardo and Julia are married and have two children under age 18. No family member has minimum essential coverage for any month during 2014, and no family member qualifies for an exemption. For 2014, their household income is $70,000 and their tax return filing threshold amount is $20,300.

Using the household income formula: Subtract the tax return filing threshold amount for 2014 from the 2014 household income, then multiply the answer by one percent (0.01).
$70,000 – $20,300 = $49,700
One percent of $49,700 equals $497.00.
Using the flat dollar amount formula: Add $95 per adult for Eduardo and Julia to $47.50 per child – for their two children.
$95.00 + $95.00 + $47.50 + $47.50 = $285.00

Eduardo and Julia’s shared responsibility payment for the year for 2014 is $497. That’s because the household income formula amount of $497 is greater than flat dollar formula amount of $285, and it is less than the $9,792 annual national average premium for bronze level coverage for a family of four in 2014. More examples can be found on IRS.gov/aca.

More Information

Find out more about the tax-related provisions of the health care law at IRS.gov/aca.

Find out more about the health care law at HealthCare.gov.

Source: IRS- HCTT-2014-18

Free Seminar for San Diego Restaurant Owners

Tips and Techniques to Improve Your Restaurant and Increase Your Profits

This event is presented by the U.S. Small Business Administration, the City Heights Business Association and other Business Associations in the Area.

WHEN: Thursday, November 13th—7:30 a.m. to 10:30 a.m.
WHERE: 4305 University Avenue, 6th Floor Conference Room, San Diego, CA 92105

You’ll Learn:
* How to Improve Your Operating Efficiency
* How to Control Costs
* How to Increase Profits
* How to Best Market Your Restaurant

To view announcement as web page:
http://content.govdelivery.com/accounts/USSBA/bulletins/d4d0c5

Presenters:

Sigmund Penn is a recognized expert in the food service industry and has helped over 120 restaurant chains and many individual-owned establishments improve the quality of their food and beverage services and update marketing techniques to fill their business with customers and increase their profits.Cyndi Darlington, of Darlington Marketing will provide you with great tips on cost effectively marketing your restaurant. Her company specializes in restaurant and hospitality industries.

Register Online at: http://events.sba.gov
Contact: Rosa Rodarte, 619-727-4877

Is the IRS having an accuracy problem?

Yellow CAUTION sign According to Accounting Today the answer is yes. In their article “An IRS Error in Your Favor; businesses need help in fixing agency mistakes”, the IRS may be suffering from an accuracy problem.

But before I go any further, I’d like you to keep these numbers in mind that I’ll explain further down: 20, 10, 4, 6 = $81,578

What Accounting Today is alluding to is that because of the level of complexity of what the IRS is supposed to “check for”, and the sheer volume of returns processed, is exactly what sets the ball in motion for the IRS to make an error. They are examining returns for tax obligations and requirements, meeting the IRS rules concerning tax deductions, exceptions, return due dates, estimated installment amounts, and employment tax liability due dates, etc.. “There is a very real possibility that the IRS has miscalculated, resulting in many taxpayers unknowingly walking away from overpayments.” They also point out that start-ups and young companies “are at particular risk for error” because navigating can be especially challenging and they often fail to discover IRS errors or make their own mistakes. But the bad news doesn’t end there.

It isn’t just the IRS that has an accuracy problem. It’s tax preparers too. Seasonal front-window tax preparation services can be risky. A large segment of my business comes from child care providers. I specialize in their tax preparation. Just how well versed is a “seasonal tax preparer” to know their specific business, deductions and exceptions that need to be included for child care providers? I’ll wager not too many.

But remember the numbers I mentioned above… 20, 10, 4, 6 = $81,578? And what do they mean?

20 = The last 20 new clients that came into my office.
10 = Of the 20, 10 were Childcare Professionals.
4 = Of the 20, 4 were people who owned real estate rentals.
6 = Miscellaneous

$81,578 = Overpaid tax thru incorrect tax preparation.

The 20 returns were all incorrect preparation. Of the 20 only one was ‘self-prepared’. The others had used either a wholesale / front-window service or someone who claimed to know how to accurately prepare taxes. This is a much bigger problem than the IRS not calculating penalties correctly.

As practitioners, one of the first *benefits* we bring a client is in examining and scrubbing their previous returns. Depending on the history, it can be one to three years. It can be more if history warrants it. If there has been an error – we will find it.

Today you cannot be too careful. You are in a need to know capacity – and you need to have trust in the person who is doing your taxes. Always err on the side of caution. There is no way a wholesale /front window tax preparation service and its preparers that operate “seasonally” is going to be available if you get a letter from the IRS. Why risk it?

When we meet with a prospective client, what I want them to know is that 85% of our clients are from referrals. Of those 85% – more than 50% are “lifetime clients” (meaning more than 15-20 years) and now we have THEIR children and relatives as clients; generational referred clients.

End Point: Keep that in mind when selecting someone who is going to prepare your taxes. You want consistency, trustworthiness, experience and knowledge – and someone you can reach if you are contacted by the IRS. You want an Enrolled Agent.

Source: http://www.accountingtoday.com/ato_issues/28_10/An-IRS-error-in-your-favor-72213-1.html

First Time Home Buyers Can Use Their IRA – penalty-free!

iStock_000011965294Large Anyone that qualifies as a “First Time Home Buyer” can take up to $10,000 out of their IRA penalty free for certain purchase costs. BUT did you know it doesn’t have to be for your home purchase? Call for more information at (619) 589-8680 or use our contact form.

Hobby Tax Trap or For Profit Business?

What would happen if the IRS re-classified your business as a hobby?

It can happen. The IRS defines a hobby as a revenue-generating activity that lacks a profit motive. But what does that mean to you?

Most start-ups and small businesses have good years and not-so-good years. There are those that will say that if your business continually functions in the red, maybe you really need to rethink your business strategy. The IRS, on the other hand, will be looking at whether your business is really a for-profit business or is actually a hobby and the deductions or losses you have taken. “The IRS will generally assume an activity is a business if it generates a profit 3 of 5 consecutive years…“.¹ If the business has a loss for 3 of 5 consecutive years, the IRS will take a closer look at what they consider the “facts and circumstances” to evaluate whether the activity is actually a hobby or qualifies as a for-profit business.

Why is this important? Because if the IRS determines that your business doesn’t have a solid profit motive, they will re-classify your business as a hobby, then your past returns will be reviewed and deductions will be re-evaluated. If they feel your *activity* is actually a hobby, they will add back the losses claimed by you that will result in back-taxes, penalties and interest.

So here are a few tips that you should consider in support of your for-profit business in the event you are ever reviewed by the IRS. You want to be able to substantiate your business, and therefore entitled to any business losses you have claimed. These practices include being properly licensed, have separate bank accounts and credit cards, payment of business taxes, good accounting and record keeping, appropriate insurance, a separate business phone line, log or business journal of time devoted to the business and documented actions taken to help make the activity profitable.²

¹ Brett Hersh, http://www.hbsbusiness.com
² Ibid.

Need help? We do more than just tax preparation at US-TaxLaws. We are your best source for professional tax preparation and/or financial consulting services that include:

Personal Tax Preparation   Business Tax Preparation   Partnership Tax Preparation
Corporate Tax Preparation  Incorporation-Choice of Entity   Business Support Services
Corporate Compliance   Audit Representation  Retirement Tax Planning   Wills & Trusts, Estate Planning   Bookkeeping   Payroll

FTB Top 500 State Income Tax Delinquents

275 individuals and 72 businesses owe CA more than $161M

04.10.2014

Sacramento –The Franchise Tax Board (FTB) today updated its Top 500 Delinquent Taxpayers list with 275 individuals and 72 businesses comprising the new list. Combined they owe the state more than $161 million.

In October, FTB sent letters to 500 taxpayers who potentially could appear on the list if they failed to resolve their tax liabilities. 153 taxpayers resolved their accounts prior to the list’s publication. More than $316 million has been collected from the top debtors program since its October 2007 inception.

Being on the Top 500 Delinquent Taxpayer list carries added provisions, including:

Suspension of state-issued licenses including driver’s licenses and occupational or professional licenses.
Publishing professional license information.
Prohibiting state agencies from entering into contracts with listed debtors.
Returning noncompliant taxpayers to the list.
Publishing the names and titles of corporate officers of listed corporations.

FTB removes a taxpayer from the list once the tax is paid or the taxpayer agrees to make payments under an approved installment agreement or offer in compromise. Tax liabilities under appeal, in litigation, or in bankruptcy proceedings are not included on the list.

Individuals on the list can contact FTB at 888.426.8555 to resolve their accounts. Business taxpayers can call 888.426.8751.

The Top 500 list is published twice a year in April and October.

FTB administers two of California’s major tax programs: Personal Income Tax and the Corporation Tax. FTB also administers other non tax programs and delinquent debt collection functions, including delinquent vehicle registration debt collections on behalf of the Department of Motor Vehicles, and court–ordered debt. Annually, FTB’s tax programs collect more than 65 percent of the state’s general fund.

The Board of Equalization has a similar list of the state’s top sales and use tax delinquencies, which they update quarterly.

https://www.ftb.ca.gov/aboutFTB/press/2014/Release_14.shtml

Parents of Young Kids: Test Your Financial Reflexes

Even today, Kiplinger’s 2009 quiz is still valuable for parents of young children. They cover allowances to gifts and they offer the best way to handle real-life experiences. Start raising your own money-smart kid.

How long should I keep records, and other business files

How Long Do You Really Need to Keep Your Financial Documents?

Files and a messy desk Now that April 15 has come and gone, everyone is writing about tax information, records to keep, and records you can discard. For some it’s just personal tax records. For others, it’s personal and business documents. However, before you go out and purchase electronic media to store records and receipts, please read our March 26 blog, Keeping Business Records. Continue reading →

Use of Electronic Media for Saving Tax & Business Records

Considering the use of Electronic Media for Saving Tax & Business Records?

Whether you are starting a new business – or have an established business – you might be looking at how to improve your record keeping practices.

If you have considered the use of electronic media for saving tax & business records you will also want to be sure you are in compliance with the IRS rules and regulations for electronic storage systems. Continue reading →

Statewide Median Income Up In 2012 in California

Statewide Median Income Up In 2012

California’s median income for all 2012 individual tax returns was $35,910, an increase of 3.5 percent over 2011’s median income amount. For joint returns, the statewide median income was $70,938, an increase of 4.1 percent over 2011.

“Median income” represents the income reported by a typical California individual or couple and the point where one half of the tax returns median income is above and one half is below the midpoint of the range of values.

California taxpayers filed nearly 16 million 2012 state income tax returns, reporting almost $1.5 trillion of adjusted gross income. This figure is an increase of 27.7 percent from the tax year 2011’s figure of $1.1 trillion. Adjusted gross income is a tax term that means the total income increased or reduced by specific adjustments, before taking the standard or itemized deduction.

Over the past 40 years, the Bay Area counties of Marin, San Mateo, and Santa Clara have consistently reported the highest median incomes. Marin County still has the highest median income for joint tax returns, reporting $127,471, an increase of 6.1 percent over 2011.

Top 10 Counties Reporting Highest Joint Tax Return Median Income

Rank	County	Median Income (Joint Returns)
1	Marin	$127,471
2	San Mateo	$109,827
3	Santa Clara	$109, 309
4	Alameda	$93,557
5	Contra Costa	$93,367
6	San Francisco	$87,446
7	Placer	$83,869
8	El Dorado	$82,706
9	Orange	$78,108
10	Ventura	$77,340

Los Angeles County taxpayers filed more than a quarter (26.6 percent) of all 2012 income tax returns in California. Los Angeles County reported median incomes of $31,144 for all individual tax returns, and $60,939 for joint tax returns, ranking 36 and 25 respectively.

The largest percentage gain in median income for all counties was 6.0 percent, reported in Contra Costa County. For joint-filed tax returns, the largest increase was in San Francisco County with a 7.7 percent increase.

Source: https://www.ftb.ca.gov/professionals/taxnews/2014/March/Article_5.shtml

International Business Times : Best & Worst States for Taxes

United States Of Taxation 2014: Here Are The Best And Worst States For Consumption Taxes, Total Tax Burden

Nothing is certain except death and taxes, but taxes can be far more complicated than death. The following article by Angelo Young of IBT makes it pretty clear for you.

As the April 15 tax filing deadline approaches, two groups have released data sets that can offer insight into which states are the most forgiving (or punishing) when it comes to consumption taxes and overall local tax burdens. Continue reading →

Communicating Your Child Care Business Policies

SHOULD YOU CREATE A POLICY HANDBOOK FOR YOUR CHILD CARE BUSINESS? ABSOLUTELY!

It is your responsibility to communicate your policies in your business. Clients will appreciate the information, and creates a basis of communication between you and the client. It establishes how you conduct your business, and gives parents an “inside look” of what to expect in your performance. It also lets them know what is expected of them. To learn more about what to include in your handbook, see Communicating Your Child Care Business Policies

Guilty? Innocent? What does the IRS think?

DO YOU KNOW WHAT YOU NEED TO BRING TO YOUR TAX INTERVIEW?

THIS TAX INTERVIEW CHECKLIST WORKS LIKE A CHARM

This is one of our most popular checklists. It is the one we give our clients when we set up their appointments. If your tax preparer hasn’t provided a checklist, you might find this helpful. Whatever your preference, there are checklists out there for you. If you like the look of this checklist, click HERE to download a PDF version.

Sacramento County Woman Sentenced to 3 years for Tax Evasion and Embezzlement Scheme

Sacramento –An Elk Grove Woman was sentenced to 3 years in state prison for grand theft with a white collar crime enhancement, forgery, and filing a false state income tax return, the Franchise Tax Board (FTB) announced.

Rosa Contreras, 45, was formerly employed as the office manager for a Sacramento County dermatologist. Between 2007 -2010, Contreras abused her position of trust and embezzled more than $182,000 through forged checks, which she then deposited into her personal bank accounts.
Contreras also failed to claim this illegal income on her state income tax returns for the same years. All income is subject to taxation including income from illegal sources.

Contreras was also ordered to pay restitution of more than $256,000 to her former employer representing the amount of the embezzlement plus fees, penalties, and interest.

Sacramento County Superior Court Judge Laurel D. White handed down the sentence Thursday, Jan. 2, in Department 8 of the Sacramento County Superior Court. Sacramento County Deputy District Attorney Ron Linthicum prosecuted the case.

Source: https://www.ftb.ca.gov/aboutFTB/Press/2014/release_02.shtml

Anyone who has knowledge of tax fraud may call the FTB informant hotline at 1-800-540-3453.

FTB’s criminal investigation program identifies and investigates cases of tax evasion and tax fraud to encourage compliance with California income tax laws and maintain the public trust.