Courtesy of 401kcalculator.org
Over the past couple of years, tax fraud and identity theft have been on the rise. We have tried to warn everyone when a new scam comes up. We’ve covered many ways thieves have used to steal your money and/or your identity. There have been phone calls demanding money, the IRS has been hacked into, and most recently fraudulent tax returns have been filed. There is a way you can minimize the likelihood of someone filing a fraudulent tax return in your name. File early.
How are thieves able to pull this off?
Employers are required to file W-2 forms to their employee and the IRS each year. They must send the W-2 forms to the employees by January 31st but they don’t have to file them with the IRS until the end of February. That means there is one month where a tax return can be filed before the IRS gets the forms, they have no way of verifying that there is going to be a W-2 form to match it.
So if a thief has stolen a taxpayer’s identity, they use the that person’s name and social security number to make fake W-2 forms and file a fake tax return so they can steal large refunds. They start in January as soon as the IRS starts accepting tax returns. If the taxpayer waits until after the end of February to file their return, their tax return will be rejected because the tax return has already been filed n their name and social security number.
To correct this, the real tax payer has to mail their tax return to the fraud division of the IRS. They will receive a letter from the IRS and they must call the IRS to verify their identity. Then they will receive a PIN that they must use to file for the next three years. This process takes weeks sometimes months to complete which also delays refunds.
Again, the best way to avoid this particular scam, we suggest you file your tax return as early as possible.
If you haven’t heard, Soulence has moved locations. Our new address is 13961 S. Minuteman Drive, Suite 101. If you visited us at the previous office, then you shouldn’t have any problem finding us. We moved one building to the northeast and our entrance is now on the east side.
We have settled in well and really think that this was the right move to make. We have more space so that we can work more efficiently to bring you the service that you have come to expect from our employees.
Soulence is also currently conducting year-end tax reviews. If you are concerned about what your taxes may look like in the next year or if you just want to be prepared, a year-end tax review is a good way to go. We can look at everything that has happened for you and/or your business and decide if you need to make a purchase to help improve your taxes or if you simply need to pay into taxes.
We’ll work together to come up with a plan for next year’s taxes that will be best suited to you and/or or your company. If you have any questions or would like to schedule a year-end tax review, please contact us.
There is good and bad news on the IRS front. Congress slashed the IRS budget by $838 million dollars for 2016. The IRS has not seen this low of a budget since 2004. Between the budget cuts and the recently added responsibility to monitor the Affordable Care Act, it is causing a lot of problems for the IRS.
So what is the good news for tax payers? The good news is that this cut will reduce the IRS’ ability to audit and collect delinquent taxes. There will be fewer auditors and collections officers available. Less random audits (pull your name out of a hat type audits) and there will be more paper audits which generally just ask for proof of a specific item.
The bad news is that because there are fewer employees available, it will be more difficult to get through to the IRS for questions and information. Between 2010 and 2015 there was a 25% drop in answered phone calls. This will only get worse. When and if you do get through, they officer will be less likely to provide any information that you could have found on the IRS website. Also, correspondences with the IRS and Amended returns will also take longer to process.
Fortunately, Soulence Tax and Accounting is on your side. We often have the answers to your questions and can usually decipher a letter from the IRS. We are also experienced in navigating around the IRS website. Before you get too frustrated with the IRS, feel free to contact us.
We have blogged about several scams in the past, but it continues to be a problem. Here are four fraud items that you should be aware of.
This continues to be a big problem. We have had about six of our clients this year experience it. It is very frightening. You get a call from someone claiming to be from the IRS. They usually have a thick accent that sounds like they are from India or the Philippines. They say that you owe the IRS money (usually $1000 to $10,000). They tell you that if you do not pay while you are on the phone with them they will file a lawsuit, your driver’s license will be deactivated and that if you hang up before you pay, the police will show up in 20 minutes, arrest you and you will spend 5 years in Federal Prison. They will try to keep you on the line while you go get cash from your bank and then have you put it on a reloadable debit card. They are very intimidating and scary. If you get a call, write down the person’s name and badge number, hang up and call the IRS at 1-800-366-4474.
I personally got this one in my email the other day. The email comes with an attachment. It says the revenue service is going to organize tax inspections to determine whether you as a taxpayer have settled the correct amount of taxes. They ask you to open the attachment and fill out the form and return it to them or call them and give them the requested information over the phone. The form contains a request for personal information such as Social Security numbers and bank accounts. It comes from someone claiming to be a Tax Advisor. If you get this email or any email that asks you for information for the IRS, forward it to firstname.lastname@example.org.
IRS Information Breach
It was recently announced that between February and May of this year, the department of the IRS that holds taxpayers accounts for obtaining transcripts was hacked into. This means that if during that time you tried to go online and get copies of your tax return transcripts or account transcripts, your information was compromised. There are several reasons people go online to get these transcripts but the two most common are mortgage loans and college FASFA applications. If you feel that you may have been affected by this there is little you can do. Be sure to monitor your credit score and make sure no one opens accounts in your name. Also carefully monitor your bank accounts or even open new ones. We know of one person already that was affected by this . A tax return was filed with his name and Social Security number.
Most of the scams we see involve the IRS, but there is one going around the country involving corporations and LLCs. You receive a letter saying that you need to file your annual meeting minutes with the State. They tell you it is required and if you don’t you could be charged fines. They offer to file the meeting minutes for you for $250. This group goes from state to state creating an address in that state. The problem is that you are not required to file meeting minutes with the State. Some state require an update of who the offices and members are and some even require information updates about the assets of the business. If your state requires that, then they send you a form. If you get this letter ignore it and throw it away.
Just a reminder: The IRS does not call you. The IRS does not email you. If you get a phone call or email and you are not sure, call us and ask before you respond. At Soulence, we fell it is very important to do what we can to protect and educate our clients. We also fell it is important for all taxpayers to get this information, so please share it with everyone you know.
Photo provided by flickr.com
As the tax-filing deadline rapidly approaches, you may be considering filing an extension. The IRS allows one extension of up to six months. If you do not file your taxes within that six months, the extension is void and you receive penalties as if you never filed the extension.
Extensions extend the amount of time you have to file, but they do not extend the amount of time you have to pay fees you might owe. If you need more time to file your taxes and you think you will owe, you must pay what you think you will owe with the extension. There is a penalty and interest for not paying by April 15th. You’ll want to take the information you have, estimate the missing information, and then mail a check with the extension.
What if you don’t have the money to pay your tax bill? The IRS has an installment program. For a onetime enrollment fee of $120 ($52 if you set op direct deposit), you can break up your tax bill into payments spread out over 72 months, with a relatively modest interest rate of 3% annually. You can pay it off early. You can also pay with a credit card but the interest rates on a credit card are usually higher.
If you have your information ready then it is best to file on time. For more information or questions about your specific circumstances, feel free to contact Soulence Tax and Accounting.
Photo provided by Flickr.com
The vehicle expense is one that many people miss out on, which is unfortunate because it is a great tax saving deduction. If you think the deduction isn’t significant enough to really make a difference or feel that it is too much of a hassle to keep track of, you’d be suprized how much it can save you at tax time.
There are two different types of vehicle expense that can be claimed on a tax return:
- Actual—the cost of driving: repairs on the car, fuel, maintenance, etc.
- Mileage—the total miles the car is driven for work.
Each tax return is different, so deciding whether actual expense or mileage would be best depends on your or your company’s situation. Sometimes one is more helpful than the other.
If a vehicle is used for both business driving (say to meet a client) and for personal driving, it may be easiest to simply keep track of the miles the car is driven, rather than taking the actual expense. If actual expense is taken, you would still need to keep track of the miles on top of the expenses so that we could take out the percentage that you drove the car for business.
If the car is owned by a company and used solely for business purposes, actual expense may be a good option. You would need to keep track of the expenses listed above on the vehicle so you can have an accurate amount to deduct on your return.
Contact us at Soulence to see if the taking the vehicle expense is right for you.
Photo Courtesy of Flickr.com
As tax season has started, we have had many people with concerns over the “Shared Responsibility Payment” as well as the business owner’s responsibility to provide health insurance coverage to their employees.
Let’s start with the Shared Responsibility Payment. If you did not have health insurance for all or part of 2014, you are required to pay a fee for not having insurance. This fee is called the Shared Responsibility payment and goes into a fund to pay for the credit for those who qualify to get assistance with their insurance premiums. So far we have seen payments between $25 and $500. The fee is based on your income and how many months you were uninsured.
What about the responsibility for business owners to provide health insurance? For most small business owners, providing health insurance is not an issue. For 2015, companies with 100 or more full time employees must offer health insurance coverage to full timers or pay a tax. Full time employees are those employed at least 30 hours a week on average. Starting in 2016, firms with 50 or more full time employees will be subject to the tax. Also required coverage will be expanded to include dependents, including kids up to age 26.
The fines for non-compliance are stiff. For 2015, the fine is $2,084 times the number of full time employees less 80. Next year the fine will increase dramatically. There is also an unaffordable insurance tax. This is a fine that companies will receive if the insurance they offer requires the employee to pay a portion of the premium that exceeds 9.56% of his/her wages. Also, the employer must provide at least 60% of the cost of the coverage.
The good news is that most small businesses have fewer than 50 employees. However, if you feel a moral responsibility to help pay for your employees’ health insurance there is one very important thing to understand. Your employees can go on the exchange and get their own health insurance and often get a lower rate and a tax credit. If, as an employer, you want to pay for part or all of the insurance premium, you must be very careful how you do it. You cannot give the employee a health insurance reimbursement or allowance. The only way you can do it, is by increasing their pay. You can give them a bonus or increase their wages by the amount you want to contribute to their insurance. The normal withholding and other payroll expenses will apply. For tax purposes, it will not be considered pre-taxed and what they do with the money is technically up to them.
This is just a brief summary of the employee health insurance issues. If you have questions about your particular situation, please feel free to call us at Soulence. We have the resources to assist you through this complicated Affordable Care Act maze.
Photo provided by flickr.com
Obamacare is about to collide with the US-Tax filing season, adding frustration for millions of taxpayers who are trying to figure out how to comply and figure their taxes. The 2014 tax season starts January 20 and because of Obamamcare we will all have more complicated calculations to complete.
The IRS has informed us that refunds will be slower this year. Due to extra work caused from the Affordable Care Act, budget cut backs and layoffs, refunds will take at least a week longer if you get it through direct deposit. Also, these things will make it more difficult to get help from the IRS. Wait times for calling the IRS will be longer and agents will not be able to answer many questions if they feel you can find on the IRS website yourself.
Another problem that is clogging up the system is one that the IRS has been working on for several years now – criminals who steal others refunds by identity theft. This is especially an issue early in the tax season, when criminals can file tax returns and get refunds before legitimate taxpayers even know what happened. In our experience working with people who have had their identity stolen this way, it appears that it happens most frequently with taxpayers that have filed extensions and waited until the last minute to file their taxes.
We are strongly encouraging people to file on time this year – even early to lower the possibility of getting their refunds stolen. We are also reminding taxpayers to remember that the IRS never contacts you by phone. If you get a phone call from someone claiming to be from the IRS, hang up and call the IRS.
At Soulence Tax and Accounting, we are ready to help you through this year’s complicated Obamacare laws and assist you in getting as big a refund as possible as quickly as possible.
One of the biggest changes in taxes for businesses this year has to do with how business owners can deduct equipment and furniture. Before 2014, if you had a piece of equipment that cost under about $200 and lasted less than 5 years, you could just deduct it as office expense or small equipment. If it was over about $200 and lasted 5 or more years, you needed to depreciate it over its useful life. There has also been Section 179 depreciation in which you can take the cost a piece of equipment all in one year.
Many business owners use Section 179 depreciation to be able to deduct equipment in the current year and take advantage of the deduction. But the past few years, congress has been threatening to reduce the amount of Section 179 that can be deducted in one year. So, in anticipation of that there is a new law. The new law says that you can expense a piece of equipment that costs under $500 all in one year if you do two things:
- You must have a company policy that says your company agrees to deduct equipment each year in this manner.
- There is a form you must file one time for the life of your business.
We are recommending that every business owner file the form this year with their tax return so that they are covered under the new law. It will require an additional signature, but we feel that to ensure that each business is compliant with the new law, and so that no one forgets in the future, this is a good time to take care of it. If you do expense equipment that costs under $500 without doing the above two requirements you could be subject up to a $5,000 penalty.
Another law change that has come from this same bill affects people with rental properties. In the past, the cost of many repairs and remodels had to be depreciated over 27 to 35 years. Under the new law, any repair (such as a new roof or carpet) can be deducted all in the year it is paid for as long as it is something that would be replaced at least twice over the life of the property. We are very excited about this change as it can mean larger deductions and tax savings for property owners.
Here at Soulence Tax and Accounting, we are ready and anxious to assist you in all your tax needs. Feel free to call or email us with your questions and concerns.
Photo provided by flickr.com
Christmas Surprise from the IRS
This week Congress gave us all a Christmas gift. The Senate finally passed the tax extender bill but only for 2014. Yes, it is retroactive to January 1, 2014 and it means it expires December 31, 2014 in two weeks. The bill now goes to President Obama, who is expected to sign it into law this week. Although it is a pretty last minute change, it is good news for your 2014 tax returns.
The bill includes:
- Above the line educator expense deduction
- Tuition and fees deduction
- Mortgage debt forgiveness
- Equalization of employer-provided commuter transit and parking benefits
- Deduction for mortgage interest premiums
- Deduction for state and local sales tax deduction
- Up to $100,000 distribution from IRA to charity
- Work opportunity tax credit
- Increased Sec 179 deduction
- Tax credit for residential energy efficiency improvement
Looking for Help with Health Insurance?
Also, this week we discovered the Guru of Health Insurance. He has been a client of ours for some time and we have a lot of respect for him. We invited him to our office this week to teach us a little more about Obamacare and to see if he could help our employees and us with health insurance. This man has read the entire Affordable Care Act from beginning to end. He has started helping our staff find affordable health insurance. Maneuvering through the exchange is very complicated to try and do yourself so if you are not happy with your health insurance situation, feel free to give our office a call and we will be happy to refer you to our Guru.
We wish all of you the happiest Holiday season and hope that it is filled with family, friends and great joy.