Reminder for extension filers: Oct. 15 is just around the corner

Source: Tax Tip 2018-110: Reminder for extension filers: Oct. 15 is just around the corner

Monday, October 15, 2018, is the extension deadline for most taxpayers who requested an extra six months to file their 2017 tax return.

For taxpayers who have not yet filed, here are a few tips to keep in mind about the extension deadline and taxes:

  • Try IRS Free File or e-file. Taxpayers can still e-file returns for free using IRS Free File. The program is available only on IRS.gov. Filing electronically is the easiest, safest and most accurate way to file taxes.
  • Use direct deposit. For taxpayers getting a refund, the fastest way to get it is to combine direct deposit and e-file.
  • Use IRS online payment options. Taxpayers who owe taxes should consider using IRS Direct Pay. It’s a simple, quick and free way to pay from a checking or savings account. There are other online payment options.
  • Don’t overlook tax benefits. Taxpayers should be sure to claim all entitled tax credits and deductions. These may include income and savings credits and education credits.
  • Keep a copy of the tax return. Taxpayers should keep copies of tax returns and all supporting documents for at least three years. This will help when adjusting withholding, making estimated tax payments and filing next year’s return.
  • File by October 15. File on time to avoid a potential late filing penalty.
  • More time for the military. Military members and those serving in a combat zone generally get more time to file. Military members typically have until at least 180 days after leaving a combat zone to both file returns and pay any tax due.

 

 

IRS Tax Tip 2018-101: What taxpayers can do when a letter arrives this summer

Source: IRS Tax Tip 2018-101: What taxpayers can do when a letter arrives this summer

 

What taxpayers can do when a letter arrives this summer

Some taxpayers will receive a letter from the IRS this summer. Taxpayers should not panic and remember that they have fundamental rights when interacting with the agency.   Forward copies of any letters to your tax preparer and they can often help you navigate your options and requirements.

These rights are in the Taxpayer Bill of Rights. Among other things, these rights dictate that letters from the IRS must include:

  • Details about what the taxpayer owes, such as tax, interest and penalties.
  • An explanation about why the taxpayer owes the taxes.
  • Specific reasons about why the IRS may have denied a refund claim.

Taxpayers who receive a letter from the IRS can do some simple things when it arrives. Taxpayers should remember to:

  • Read the entire letter carefully. Most letters deal with a specific issue and provide specific instructions on what to do.
  • Compare it with the tax return. If a letter indicates a changed or corrected tax return, taxpayer should review the information and compare it with their original return.
  • Respond. Taxpayers should:
    • Respond to a letter with which they do not agree.
    • Mail a letter explaining why they disagree.
    • Mail their response to the address listed at the bottom of the letter.
    • Include information and documents for the IRS to consider.
    • Allow at least 30 days for a response.
  • Reply timely if necessary. If a taxpayer agrees with the information, there’s no need to contact the IRS. However, when a specific response date is in the letter, there are two main reasons a taxpayer should respond by that date:
    • To minimize additional interest and penalty charges.
    • To preserve appeal rights if the taxpayer doesn’t agree.
  • Pay. Taxpayers should pay as much as they can, even if they can’t pay the full amount they owe. They can pay online or apply for an Online Payment Agreement or Offer in Compromise.
  • Contact the IRS if necessary. For most letters, there’s no need to call the IRS or make an appointment at a taxpayer assistance center. If a call seems necessary, the taxpayer can call the phone number in the upper right-hand corner of the letter. They should have a copy of the tax return and letter on hand when calling.
  • Keep the letter. A taxpayer should keep copies of any IRS letters or notices received with their tax records.

Tax Preparation Costs and Fees

Source: Tax Preparation Costs and Fees

 

Tax Preparation Costs and Fees

The costs associated with professional tax preparation can be considerable, depending on how much assistance you need. However, using a tax preparation service does give you the advantage of having a tax professional point out the various tax credits and tax deductions you are eligible for. Additionally, you may even have the extra benefit of being able to deduct the tax preparation fees themselves.

The Cost of Tax Preparation

Recently, the National Society of Accountants (NSA) conducted a survey which showed that the average cost of professional tax preparation is $261. This is price that most tax preparers will charge for a 1040 Tax Form with itemized deductions (Schedule A) plus a state tax return.

On the other hand, the cost of getting a simple 1040 Form (without itemized deductions) prepared by a professional averages around $152.

The NSA survey also looked at the average costs of having a professional prepare various other types of tax forms, and found the following information:

  • The average cost for preparing a 1040 (Schedule C) Tax Form is $218
  • The average cost for preparing an 1120 Tax Form (C corporation) is $806
  • The average cost for preparing an 1120S Tax Form (S corporation) is $761
  • The average cost for preparing a 1065 Tax Form (partnership) is $590
  • The average cost for preparing a 1041 Tax Form (fiduciary) is $497
  • The average cost for preparing a 990 Tax Form (tax-exempt organization) is $667
  • The average cost for preparing a 940 Tax Form (Federal unemployment) is $63
  • The average cost for preparing a Schedule D (capital gains and losses) is $142
  • The average cost for preparing a Schedule E (supplemental income and loss) is $165
  • The average cost for preparing a Schedule F (farming) is $196

While the cost of tax preparation may not sound appealing, keep in mind that a professional tax preparer can often catch credits or deductions that you may have missed — saving you money that can pay for the cost of the tax preparation! Additionally, you should consider the time it would take to prepare your income tax return yourself. Just having to read through the instructions and understand all the IRS rules can take you hours! For a lot of people, this alone makes the cost of professional tax preparation worthwhile.

Finally, remember that certain taxpayers qualify to use the IRS Free File system. If your Adjusted Gross Income (AGI) is $58,000 or less, you can file your Federal income tax return using a participating Free File Alliance company. (See the IRS website for a list of approved companies.) Keep in mind, each participating company has its own requirements and not all taxpayers may be eligible for all companies.

Time for a “Payroll Checkup”

As we all know, we have a new <income> tax plan – at least until 2026.  The new plan has many changes that will affect how we prepare for “tax time”.  Paying less tax should be a concern for everyone.  I just want to throw out there that some folks are not aware of the payroll taxes they contribute to like to social security and medicare.

In the year 2018, the employer’s portion of the FICA tax is 7.65% (the Social Security tax of 6.2% plus the Medicare tax of 1.45%) on each employee’s first $128,400 of salary and wages. On each employee’s salary and wages in excess of $128,400 the employer’s portion is the Medicare tax of 1.45%.  You, the employee, also pays 7.65% of the first $128,400.   In my humble opinion the percentages should be decreased and the amount of income taxed should be expanded.  As the owner of my small business I pay both portions so that’s 15.3% – just for employment taxes.

Quick reminder on the taxes we pay. . . before monies can be diverted to budgeting expenses like housing, food, transportation, health care, etc.

  • Sales tax
  • Individual Income tax
  • Employment tax (social insurance)
  • Property Tax
  • Corporate income tax
  • Other taxes

 

Itemizers_encouraged_to_check_withholding_in_light_of_TCJA_changes__05_18_2018_

In a news release, IRS has encouraged taxpayers who have typically itemized their deductions to use the withholding calculator on IRS’s website to perform a “payroll checkup,” noting that changes made by the Tax Cuts and Jobs Act (TCJA; P.L. 115-97 , 12/22/2017) may warrant an adjustment.

Changes made by the TCJA. The TCJA made a number of law changes, effective for tax years beginning after 2017 and before 2026, that affect the amount of itemized deductions that can be claimed and whether taxpayers choose to itemize or claim the standard deduction.

These changes include:
• nearly doubling standard deductions;
• limiting the deductions for state and local taxes;
•limiting the deduction for home mortgage interest in certain cases; and
•eliminating deductions for employee business expenses, tax preparation fees and investment expenses, including investment management fees, safe deposit box fees and investment expenses from pass-through entities.

In light of these changes, some individuals who formerly itemized may now find it more beneficial to take the standard deduction, which could affect how much a taxpayer needs to have their employer withhold from their pay. Also, even those who continue to itemize deductions should check their withholding because of TCJA changes. IRS warned that having too little tax withheld could result in an unexpected
tax bill or penalty at tax time in 2019, and also noted that taxpayers who have too much tax withheld may prefer to receive more in their paychecks instead of in the form of a tax refund.

IRS encourages payroll checkup. IRS is urging taxpayers to perform a “paycheck checkup” and to do so as early as possible so that if a withholding amount adjustment is necessary, there’s more time for withholding to take place evenly throughout the year. IRS cautioned that waiting means there are fewer pay periods to make the tax changes – which could have a bigger impact on each paycheck. Using the withholding calculator. When taxpayers use the withholding calculator (available at http://www.irs.gov/individuals/irs-withholding-calculator), they can indicate whether they are taking the standard deduction or itemizing their deductions. If they are itemizing, they’ll enter estimates of their deductions. The withholding calculator applies the new law to these amounts when figuring the user’s
withholding.

IRS encourages taxpayers to have their 2017 tax return when using the withholding calculator, as well as their most recent pay stubs. IRS also noted that if a taxpayer’s personal circumstances change during the year, they should re-calculate their withholding at that time.

Adjusting withholding. Employees who need to complete a new Form W-4, Employee’s Withholding Allowance Certificate, should submit it to their employers as soon as possible. Employees with a change in personal circumstances that reduce the number of withholding allowances must submit a new Form W-4 with corrected withholding allowances to their employer within 10 days of the change.

 

 

References: For withholding on wages, see FTC 2d/FIN ¶ H-4220 ; United States Tax Reporter ¶

IRS: Deadline extended through 4/18/18

 

Need more time to do your taxes?

Urgent Deadline Update: File by April 18. Taxpayers have an additional day to file returns and pay following system issues. If you need more time, you may request an automatic six-month extension to file your return when you make a payment using Direct Pay or Debit or Credit Card. Simply select “Extension” in the “Reason for Payment” box.

P.S. If you receive refunds at tax time (not a balance due to the IRS/State) then your return is not “DUE” on the  deadline of April 15-18. The week of the the 15th, extensions and returns with balances due take priority. At least in my office.

Taxes are on the mind. Next steps: Get organized, submit information, pay your tax prep fees/review your client copies, then we’ll e-file them on your behalf.

 

Tax season is in full swing in my office and I’m prepared for your documents, are you?  The IRS will begin accepting returns at the end of January, the 29th to be exact so if your going to be ready let’s get started.  The filing deadline is April 17th 2018.

 

As your Documents arrive store them in a safe place, altogether.  Think about your life last year.  Did you have 1 job, or change jobs multiple times. Did you withdraw money from your 401k or retirement plan, or make contributions separately from what is taken out of your paycheck.  Did you go to college or make payments to your student loans. Did you have a baby or get married. All of these items and then some can have an impact on the documents you are waiting on before you can file.   Please, wait for and have all documents before you submit.  You cannot use your last paycheck stubs to file.

 

When you submit your documents for preparation, plan on making an initial retainer payment of $50.00 using the Authorization-Form-Credit-Card-One-Time-Payment.  This pre payment will be deducted from the final balance due which is generally between $150 – $250.  We provide certain low income (generally  full time students aged 18-22) and elderly (65+) people with lower rates on a case by case bases.

 


 

The IRS is requesting updated Power of Attorney forms (2848).  Ill be adding this form to this years’ filing.

 

Yay, tax time!!!!

 

 

2018 Tax Filing Season Begins Jan. 29, Tax Returns Due April 17; Help Available for Taxpayers

Source: IR-2018-1: 2018 Tax Filing Season Begins Jan. 29, Tax Returns Due April 17; Help Available for Taxpayers

 

2018 Tax Filing Season Begins Jan. 29, Tax Returns Due April 17; Help Available for Taxpayers

WASHINGTON ― The Internal Revenue Service announced today that the nation’s tax season will begin Monday, Jan. 29, 2018 and reminded taxpayers claiming certain tax credits that refunds won’t be available before late February.

The IRS will begin accepting tax returns on Jan. 29, with nearly 155 million individual tax returns expected to be filed in 2018. The nation’s tax deadline will be April 17 this year – so taxpayers will have two additional days to file beyond April 15.

Many software companies and tax professionals will be accepting tax returns before Jan. 29 and then will submit the returns when IRS systems open. Although the IRS will begin accepting both electronic and paper tax returns Jan. 29, paper returns will begin processing later in mid-February as system updates continue. The IRS strongly encourages people to file their tax returns electronically for faster refunds.

The IRS set the Jan. 29 opening date to ensure the security and readiness of key tax processing systems in advance of the opening and to assess the potential impact of tax legislation on 2017 tax returns.

The IRS reminds taxpayers that, by law, the IRS cannot issue refunds claiming the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC) before mid-February. While the IRS will process those returns when received, it cannot issue related refunds before mid-February. The IRS expects the earliest EITC/ACTC related refunds to be available in taxpayer bank accounts or on debit cards starting on Feb. 27, 2018, if they chose direct deposit and there are no other issues with the tax return.    The IRS also reminds taxpayers that they should keep copies of their prior-year tax returns for at least three years. Taxpayers who are using a tax software product for the first time will need their adjusted gross income from their 2016 tax return to file electronically. Taxpayers who are using the same tax software they used last year will not need to enter prior-year information to electronically sign their 2017 tax return. Using an electronic filing PIN is no longer an option. Taxpayers can visit IRS.gov/GetReady for more tips on preparing to file their 2017 tax return.

April 17 Filing Deadline  

The filing deadline to submit 2017 tax returns is Tuesday, April 17, 2018, rather than the traditional April 15 date. In 2018, April 15 falls on a Sunday, and this would usually move the filing deadline to the following Monday – April 16. However, Emancipation Day – a legal holiday in the District of Columbia – will be observed on that Monday, which pushes the nation’s filing deadline to Tuesday, April 17, 2017. Under the tax law, legal holidays in the District of Columbia affect the filing deadline across the nation.

The IRS also has been working with the tax industry and state revenue departments as part of the Security Summit initiative to continue strengthening processing systems to protect taxpayers from identity theft and refund fraud. The IRS and Summit partners continued to improve these safeguards to further protect taxpayers filing in 2018.

Refunds in 2018

Choosing e-file and direct deposit for refunds remains the fastest and safest way to file an accurate income tax return and receive a refund. The IRS expects more than four out of five tax returns will be prepared electronically using tax software.

The IRS still anticipates issuing more than nine out of 10 refunds in less than 21 days, but there are some important factors to keep in mind for taxpayers.

By law, the IRS cannot issue refunds on tax returns claiming the Earned Income Tax Credit or the Additional Child Tax Credit before mid-February. This applies to the entire refund — even the portion not associated with the EITC and ACTC.

The IRS expects the earliest EITC/ACTC related refunds to be available in taxpayer bank accounts or on debit cards starting on Feb. 27, 2018, if those taxpayers chose direct deposit and there are no other issues with the tax return. This additional period is due to several factors, including banking and financial systems needing time to process deposits.

After refunds leave the IRS, it takes additional time for them to be processed and for financial institutions to accept and deposit the refunds to bank accounts and products. The IRS reminds taxpayers many financial institutions do not process payments on weekends or holidays, which can affect when refunds reach taxpayers. For EITC and ACTC filers, the three-day holiday weekend involving Presidents’ Day may affect their refund timing.

The Where’s My Refund? ‎tool on IRS.gov and the IRS2Go phone app will be updated with projected deposit dates for early EITC and ACTC refund filers in late February. Taxpayers will not see a refund date on Where’s My Refund? ‎or through their software packages until then. The IRS, tax preparers and tax software will not have additional information on refund dates, so Where’s My Refund? remains the best way to check the status of a refund.

IRS Offers Help for Taxpayers

The IRS reminds taxpayers they have a variety of options to get help filing and preparing their tax return on IRS.gov, the official IRS website. Taxpayers can find answers to their tax questions and resolve tax issues online. The Let Us Help You page helps answer most tax questions, and the IRS Services Guide links to these and other IRS services.

Taxpayers can go to IRS.gov/account to securely access information about their federal tax account. They can view the amount they owe, pay online or set up an online payment agreement; access their tax records online; review the past 18 months of payment history; and view key tax return information for the current year as filed. Visit IRS.gov/secureaccess to review the required identity authentication process.

In addition, 70 percent of the nation’s taxpayers are eligible for IRS Free File. Commercial partners of the IRS offer free brand-name software to about 100 million individuals and families with incomes of $66,000 or less.

The online fillable forms provide electronic versions of IRS paper forms to all taxpayers regardless of income that can be prepared and filed by people comfortable with completing their own returns.

Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) offer free tax help to people who qualify. Go to IRS.gov and enter “free tax prep” in the search box to learn more and find a nearby VITA or TCE site, or download the IRS2Go smartphone app to find a free tax prep provider. If eligible, taxpayers can also locate help from a community volunteer. Go to IRS.gov and click on the Filing tab for more information.

IR-2017-201: Get Ready for Taxes: What to Do Before the Tax Year Ends Dec. 31

Source: IR-2017-201: Get Ready for Taxes: What to Do Before the Tax Year Ends Dec. 31

 

Get Ready for Taxes: What to Do Before the Tax Year Ends Dec. 31

Editor’s Note: This is the sixth in a series of reminders to help taxpayers prepare for the upcoming tax filing season.                                                         

WASHINGTON – As tax filing season approaches, the Internal Revenue Service reminds taxpayers there are things they should do now to get ready for filing season.

For most taxpayers, Dec. 31 is the last day to take actions that will impact their 2017 tax returns. For example, charitable contributions are deductible in the year made. Donations charged to a credit card before the end of 2017 count for the 2017 tax year, even if the bill isn’t paid until 2018. Checks to a charity count for 2017 as long as they are mailed by the last day of the year.

Taxpayers who are over age 70 ½ are generally required to receive payments from their individual retirement accounts and workplace retirement plans by the end of 2017, though a special rule allows those who reached 70 ½ in 2017 to wait until April 1, 2018, to receive them.

Most workplace retirement account contributions should be made by the end of the year, but taxpayers can make 2017 IRA contributions until April 18, 2018. For 2018, the limit for a 401(k) is $18,500. For traditional and Roth IRAs, the limit is $6,500 if age 50 or older and up to $15,500 for a Simple IRA for age 50 or older. Check IRS.gov for more information about cost-of-living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2018.

Taxpayers should be careful not to count on getting a refund by a certain date, especially when making major purchases or paying other financial obligations. Taxpayers can take steps now to make sure the IRS can process their return next year.

Taxpayers who have moved should tell the US Postal Service, employers and the IRS. To notify the IRS, mail IRS Form 8822, Change of Address, to the address listed on the form’s instructions. For taxpayers who purchase health insurance through the Health Insurance Marketplace, they should also notify the Marketplace when they move out of the area covered by their current Marketplace plan.

For name changes due to marriage or divorce, notify the Social Security Administration so the new name will match IRS and SSA records. Also notify the SSA if a dependent’s name changed.  A mismatch between the name shown on your tax return and the SSA records can cause problems in the processing of a return and may even delay a refund.

Some refunds cannot be issued before mid-February. By law, the IRS cannot issue refunds before mid-February for tax returns that claim the Earned Income Tax Credit or the Additional Child Tax Credit. The IRS expects the earliest EITC/ACTC related refunds to be available in taxpayer bank accounts or on debit cards starting on Feb 27, 2018, if they chose direct deposit and there are no other issues with the tax return.

Some Individual Taxpayer Identification Numbers must be renewed. Any Individual Taxpayer Identification Number not used on a tax return at least once in the past three years will expire on December 31, 2017. Additionally, all ITINs issued before 2013 with middle digits of 70, 71, 72 or 80 (Example: 9XX-70-XXXX) will also expire at the end of the year. As a reminder, ITINs with middle digits 78 and 79 that expired in 2016 can also be renewed. Only taxpayers who need to file a U.S. federal tax return or are claiming a refund in 2018 must renew their expired ITINs. Affected ITIN holders can avoid delays by starting the renewal process now.

Those who fail to renew before filing a return could face a delayed refund and may be ineligible for some important tax credits. More information, including answers to frequently asked questions is available on IRS.gov/ITIN.

Keeping copies of tax returns is important. Taxpayers may need a copy of their 2016 tax return to make it easier to fill out a 2017 tax return. Some taxpayers using a software product for the first time may need to provide their 2016 Adjusted Gross Income, or AGI, to e-file their 2017 tax return.

Taxpayers who do not have a copy of their 2016 return and are existing users can log in to IRS.gov/account if they need their AGI. Otherwise the IRS will mail a Tax Return Transcript if requested online or by calling 800-908-9946. Plan ahead. Allow five to 10 days for delivery. Learn more about identification verification and electronically signing tax returns.

DIY: Do you have a nanny or babysitter? They might be considered a household employee for tax purposes and you might be responsible for paying employment taxes.

 

https://www.irs.gov/publications/p926

DSC03471.2.jpg

 

A client of mine recently had a baby.  Yay, Baby!!  With that bundle of joy comes additional tax responsibilities and implications… and sometimes credits and deductions.

 

She had two questions.  What is the nanny tax? And Is it simple to do it yourself or should you pay a professional payroll company? (Ultimately, my client decided to try it out herself before she hires a payroll service.  As with any business there are initial startup costs and then monthly bookkeeping and filings. Sometimes certain forms can be filed on a quarterly or annual basis. Record keeping and organization is imperative for “keeping the books” long term.)

 

 

Many years ago, nanny’s and day care providers were simply considered self employed and filed their income and expenses on the Schedule C (attached to the 1040). The family would pay cash or check and the nanny or sitter would account for it on their own returns.   However, now, the tax law states that if nanny’s are paid more than $2,000 a year they are considered employees and are subject to all of the regular employment taxes, unemployment insurance and workman’s comp. Thus creating additional paperwork and costs.

 

What is the nanny tax? And is it easy to DIY

This weird sounding tax is actually just basic employment and payroll taxes.  All employees and/or employers are required to pay social security taxes, Medicare taxes, and sometimes unemployment insurance.  The “employers” may or may not withhold and pay federal /state too.  You’ll save quite a bit of money doing it yourself and its not that difficult.  Although, it is work in a sense and it takes a bit of time.

Requirements:

  1. Be able to read and follow directions. Have some patience.
  2. Be organized: calculate hours worked, gross income and net income.
  3. Be tech savvy. Most of this stuff can be done online. It’s also handy to have a scanner/copier/ printer handy but it’s not required necessarily.
  4. Be able to follow due dates and pay on time (or you’ll be subject to fees and penalties).  Ex: for unemployment insurance,  you usually calculate January thru March and the money is due in April.

 

 

Startup

Go to irs.gov and search for form SS-4 (fss4), Employers federal ID number.  Fill it in and apply online, or download the pdf to a computer and fill it out by hand then mail it in. Im sure the agencies hate it, but I still do alot by hand and use my stamps.com account to mail it in.

Go to Colorado.gov/revenueonline and apply for a state wage withholding license (only if withholding state tax for your employee).

 

IRS’s publication 926  instructs household employers of their duties.  I’m going to use a combination of that publication and my own insight and experience to describe the process to do your own bookkeeping and payroll when you have certain employees.

 

The Numbers for Social Security and Medicare tax  Employer W-2 Filing Instructions & Information

The social security tax rate is 6.2% each for the employee and employer, unchanged from 2016. The social security wage base limit is $127,200.  The Medicare tax rate is 1.45% each for the employee and employer, unchanged from 2016. There is no wage base limit for Medicare tax. Social security and Medicare taxes apply to the wages of household employees you pay $2,000 or more in cash in 2017.

 

The process *not including responsibilities for withholding federal and state taxes for the employee*

Example. On February 13, 2017, Mary Brown hired Jane A. Oak (who is an unrelated individual over age 18) to care for her child and agreed to pay cash wages of $50 every Friday. Jane worked for the remainder of the year (a total of 46 weeks). Jane didn’t give Mary a Form W-4 to request income tax withholding. The following is the information Mary will need to complete Schedule H, Form W-2, and Form W-3. See the completed examples of Form W-2 and Form W-3 for 2017 at the end of this publication

 

Total cash wages paid to Jane                                      $2,300.00

($50 x 46 weeks)

 

Jane’s share of: Social security tax is $142.60             EE share

($2,300 x 6.2% (0.062))

 

Medicare tax is $33.35                                                     EE share

($2,300 x 1.45% (0.0145))

 

Mary’s share of:Social security tax is $142.60             ER share

($2,300 x 6.2% (0.062))

 

Medicare tax $33.35                                                         ER share

($2,300 x 1.45% (0.0145))

 

Amounts reported on Form W-2 and Form W-3:Annual reconciliation at tax time.  Additionally, the schedule K will be added to the individual 1040 and reconciled that way.  You may or may not be required to pay estimated quarterly tax payments to ensure you don’t owe more than $1000 at the end of the year.  Talk to your tax professional.

Box 1: Wages, tips                          $2,300.00

Box 3: Social security wages        $2,300.00

Box 4: Social security tax withheld $142.60

Box 5: Medicare wages and tips  $2,300.00

Box 6: Medicare tax withheld is     $33.35

 

The  social  security  tax  pays  for  old-age,  survivors,  and disability benefits for workers and their families. The Medicare tax pays for hospital insurance. Both you and your household employee may owe social  security  and  Medicare  taxes.  Your  share  is  7.65% (6.2% for social security tax and 1.45% for Medicare tax) of  the  employee’s  social  security  and  Medicare  wages. Your employee’s share is also 7.65% (6.2% for social security tax and 1.45% for Medicare tax). Continue reading “DIY: Do you have a nanny or babysitter? They might be considered a household employee for tax purposes and you might be responsible for paying employment taxes.”

How will the new tax plan affect you? Pull out your 2016 copy to see. If you need to prepare 2016 tax returns email Stephanie at stephanie@paulinestaxservices.com

The estimated date for the new tax plan, should the proposed bill be voted a law, should be around November 23, 2017 before thanksgiving.  I am excited, how about you?  Well,  you may or may not be thrilled depending on how it might impact you personally.  Pull out last years copy for revie, if you have no idea where it is now is a good time to look for it or request a new copy from your tax preparer.  I’ll lay down some basics and suggest the new numbers that you can insert into your own situation. It is some work, and yes, you have a tax professional but understanding how tax planning measures your life is priceless.  

 

  • Tax is calculated on income that has been adjusted for the inclusion of other items. (Taxable income, adjusted adjusted gross income).
  • Tax lingo is specific, so think, logical. Taxes are about reading. Lots of reading. which is why most folks pass the baton to the professional but think about it this way.  The tax professional reads all of the publications and instructions and updates.  The taxpayer (you) reads the 1040. It’s 2 pages.
  • Taxes are about math, lots of calculations.  Example: The tax professional (me) reads each publication for the equation, calculates based on data given, and then inserts answer onto appropriate forms.  The taxpayer (you) must keep a running tally of items you can deduct or need throughout the year and then pass that data on to the professional at the end of the year (tax season).  It’s different math, and different responsibilities but they work in conjunction.1040 EX of new tax plan.jpg

 

One major change I’ve noticed in the  proposed tax plan is the statuses have narrowed to Single or Married Filing Joint. No more Head of household, etc.  I read that there may be a new tax credit of $500 for taxpayers with non child dependents.

The current standard deductions given are shown on the left of the 1040 example in orange highlighter and the new numbers proposed are written in on the right.  Your itemized deductions on the Schedule A must be more than $12,000 (standard deduction) for a single person and more than $24,000 (standard deduction) for married people.

Currently every person listed on a return (including dependents) “gets” $4,050 “exemption” to deduct, but that may be eliminated.   Good news for some folks, though, the Alternative Minimum tax may be eliminated, too.  The Child Tax Credit might be increased.

– So far, known proposed items eliminated are the home office deduction as well as the deduction of prior years’ state and local taxes.

 

Proposed Tax Brackets 2018

Single                                                                                                     Married

$0 – 37,500 ish                                            12%                                  $0 – 75,000

$37,500  – 112,500 ish                               25%                                  $75,000 – 231,500 ish

$112,500 – $415,050 and up                    35%                                 $235,000 – 466,000 and up ish

 

That’s all for now but Ill try to keep you updated as November 23 approaches and then afterwards to prepare for the upcoming due date for tax returns.

 

 

“Tax time” is creepin. If you stay ready, you don’t have to get ready. Pauline’s Tax Service will be making some changes going forward for next year – Stay informed.

As the next couple of months cruise by there will be more information inserted on to my website to help prepare you for the upcoming tax due date of  April <15-18>, 2018

*There are going to be many changes this year, it seems, due to a new tax plan, although its not confirmed.  I’ll try to keep you updated with that too.

 

Pauline’s Tax Service, Ltd – By Stephanie

 

Over the last 2 or 3 years I have worked tirelessly to ensure the best possible service for this type of duty and for my clients, many of whom I inherited more than 11 years ago from my grandma, Pauline Parris.   This work was important to her, and it is to me too.  With that being said, there will most likely be many changes over the next 2 years as I’m trying to reconstruct and reorganize my business plan. Expansion is in our future.

In-office appointments are going to be limited.  The office address is going to remain the same for mail in’s, drop off’s, pick up’s and meeting’s.  The conference room will be available for those tough situations, but this means that some additional time & planning might be in order.  Documents can be submitted via mail, drop off, e-mail, fax, or uploaded to the client portal.  Limited in-office appointments will be available for 2018. Thanks in advance for any inconvenience. 

 

*Before you would like your returns started – make sure you have all of your documents AND other information included before you send it to Pauline’s Tax Service for preparation.  Some returns that include the earned income credit or 

 

Address:  12365 Huron St., Suite 1800 Westminster Co 80234

Phone:     720-893-3712 ext.105

Fax:          303-252-4664

Email for Stephanie

Secure Client Portal

 

 

Getting smart with: Taxes. Why though? Here’s 5 reasons.

Taxes are intimidating.  When tax time rolls around,

stressed lady

stress levels increase and people get hyped.  No one knows what to do and they are definitely not prepared.  Well, that’s not true. Some people out there actually have a clue, but the majority do not.  The more prepared we are at the end of the year, the lower the tax bill.

Why should the average Sally Sue have a basic understanding of income taxes?

  1. Most economic transactions have an income tax effect.  The most common example is the purchase of a home.  Mortgage interest will be deductible on the itemized deductions worksheet.  Another example is withdrawing money from a 401-k retirement account.  The tax burden in doing so could be steep.  Both of these items, for the most part, happen in life prior to discussing it with your tax adviser.  Therefor, you should have a clue whats best for you.  Then, at the end of the year your tax preparer can draft your forms for you easy peasy, because you will be in tune with your transactions for the year and come prepared to your appointment.  Back to the 401K example, if you take money out you will receive an annual tax form with the information. Don’t forget to take it to your appointment.  Along with your W2 and mortgage interest statement.

 

2.  The income tax law influences personal decisions of individuals.  Pretty self-explanatory. 

 

3.  A knowledge of the income tax law enables taxpayers to make decisions that  can reduce other costs. By having a clue one can enter into various transactions that can minimize income tax burden.  Likewise, one can avoid a transaction or defer until a time more beneficial in the future.

 

4.  Protects against an audit.  The IRS isn’t always right and sometimes you will have to state your case or your interpretation of things to justify items on your return if they question you.  It doesn’t mean your wrong it just means you have to be able to explain your rightful position.

 

5.  YOU know your financial affairs better than anyone.  Tax planning and forecasting starts with you, not your accountant, although, you should have a conversation with them for sure and keep them included.  It’s important that you are both on the same page.  Use the tax system to your advantage…free-money-clipart

 

5 Tax Tips To Starting a Business

Source: IRS Summertime Tax Tip 2017-18: Starting a Business This Summer? Here’s Five Tax Tips

 

Starting a Business?  Here’s Five Tax Tips

If you are interested in starting a business, be sure to visit IRS.gov. The IRS website has answers to questions on payroll and income taxes, credits and deductions plus more.

New business owners may find the following five IRS tax tips helpful:

  1. Business Structure.  An early choice to make is to decide on the type of structure for the business. The most common types are sole proprietor, partnership and corporation. The type of business chosen will determine which tax forms to file.
  2. Business Taxes. There are four general types of business taxes. They are income tax, self-employment tax, employment tax and excise tax. In most cases, the types of tax a business pays depends on the type of business structure set up. Taxpayers may need to make estimated tax payments. If so, use IRS Direct Pay to make them. It’s the fast, easy and secure way to pay from a checking or savings account.
  3. Employer Identification Number (EIN).  Generally, businesses may need to get an EIN for federal tax purposes. Search “EIN” on IRS.gov to find out if the number is necessary. If needed, it’s easy to apply for it online.
  4. Accounting Method. An accounting method is a set of rules used to determine when to report income and expenses. Taxpayers must use a consistent method. The two most common are the cash and accrual methods:
  5. Under the cash method, taxpayers normally report income and deduct expenses in the year that they receive or pay them.
  6. Under the accrual method, taxpayers generally report income and deduct expenses in the year that they earn or incur them. This is true even if they get the income or pay the expense in a later year.

Get all the basics of starting a business on IRS.gov at the Small Business and Self-Employed Tax Center

2017 Tax Rate Schedules: Have you adjusted your withholding’s? Calculate your estimated taxable income, and find your tax.

2017 Tax Rate Schedule

Around the middle of the year it is a good idea to ensure that by the end of the year you will have withheld your tax liability due. No more, no less.  It’s common to adjust your withholding’s during the year to reflect life events or just to put more money in your pocket at that time.  Time and time again it’s also common that you forget to adjust the withholding’s back to cover your tax liabilities.  Knowing what your tax due will be is half the battle, but equal parts importance to earning your wage and paying your bills. It should be part o2017 Tax Rate Schedulef your monthly budgeting.

 

There’s more to it obviously, but the Individual income tax formula  is as follows and can be used to estimate your taxable income to give you an idea what your up against and  give you time to gather your options to lower your taxable income in an effort to conserve AFTER TAX WEALTH.

 

Individual Income Tax Formula:

Income (broadly conceived) Add income together if you file married filing joint. Don’t forget distributions from 401k’s, retirement or taxable social security, investment income, and  net self-employment income or loss.

Less: Exclusions   Ill go into the list of exclusions later

= Gross Income

Less deductions

= Adjusted Gross Income

Less: [Itemized or standard deduction] and [exemptions] for every person on the tax form

= Taxable Income

 

To find the estimated tax for your bracket add

the tax + [the % over the amount]= Tax

 

 

 

 

 

Free Tax Return Preparation for Qualifying Taxpayers: VITA

Source: Free Tax Return Preparation for Qualifying Taxpayers

 

The Volunteer Income Tax Assistance (VITA) program offers free tax help to people who generally make $54,000 or less, persons with disabilities and limited English speaking taxpayers who need assistance in preparing their own tax returns. IRS-certified volunteers provide free basic income tax return preparation with electronic filing to qualified individuals.

In addition to VITA, the Tax Counseling for the Elderly (TCE) program offers free tax help for all taxpayers, particularly those who are 60 years of age and older, specializing in questions about pensions and retirement-related issues unique to seniors. The IRS-certified volunteers who provide tax counseling are often retired individuals associated with non-profit organizations that receive grants from the IRS.

Before going to a VITA or TCE site, see Publication 3676-B for services provided and check out the What to Bring page to ensure you have all the required documents and information our volunteers will need to help you. *Note: available services can vary at each site due to the availability of volunteers certified with the tax law expertise required for your return.

Some VITA sites offer CAA service to taxpayers along with their VITA program.

Find a VITA or TCE Site Near You

VITA and TCE sites are generally located at community and neighborhood centers, libraries, schools, shopping malls and other convenient locations across the country. To locate the nearest VITA or TCE site near you, use the VITA Locator Tool or call 800-906-9887.

When looking for a TCE site keep in mind that a majority of the TCE sites are operated by the AARP Foundation’s Tax Aide program. To locate the nearest AARP TCE Tax-Aide site between January and April use the AARP Site Locator Tool or call 888-227-7669.

At select tax sites, taxpayers also have an option to prepare their own basic federal and state tax return for free using Web-based tax preparation software with an IRS-certified volunteer to help guide you through the process. This option is only available at locations that list “Self-Prep” in the site listing.

What to Bring to your tax preparation appointment/What to send if your returns are prepared remotely.

What to Bring:

  • Proof of identification (photo ID)
  • Social Security cards for you, your spouse and dependents
  • An Individual Taxpayer Identification Number (ITIN) assignment letter may be substituted for you, your spouse and your dependents if you do not have a Social Security number
  • Proof of foreign status, if applying for an ITIN
  • Birth dates for you, your spouse and dependents on the tax return
  • Wage and earning statements (Form W-2, W-2G, 1099-R,1099-Misc) from all employers
  • Interest and dividend statements from banks (Forms 1099)
  • Health Insurance Exemption Certificate, if received
  • A copy of last year’s federal and state returns, if available
  • Proof of bank account routing and account numbers for direct deposit such as a blank check
  • To file taxes electronically on a married-filing-joint tax return, both spouses must be present to sign the required forms
  • Total paid for daycare provider and the daycare provider’s tax identifying number such as their Social Security number or business Employer Identification Number
  • Forms 1095-A, B and C, Health Coverage Statements
  • Copies of income transcripts from IRS and state, if applicable

IRS Summertime Tax Tip 2017-15: Helpful Tips to Know About Gambling Winnings and Losses

Source: IRS Summertime Tax Tip 2017-15: Helpful Tips to Know About Gambling Winnings and Losses

 

Helpful Tips to Know About Gambling Winnings and Losses

Taxpayers must report all gambling winnings as income. They must be able to itemize deductions to claim any gambling losses on their tax return.

Taxpayers who gamble may find these tax tips helpful:

  1. Gambling income. Income from gambling includes winnings from the lottery, horseracing and casinos. It also includes cash and non-cash prizes. Taxpayers must report the fair market value of non-cash prizes like cars and trips to the IRS.
  2. Payer tax form. The payer may issue a Form W-2G, Certain Gambling Winnings, to winning taxpayers based on the type of gambling, the amount they win and other factors. The payer also sends a copy of the form to the IRS. Taxpayers should also get a Form W-2G if the payer withholds income tax from their winnings.
  3. How to report winnings. Taxpayers must report all gambling winnings as income. They normally should report all gambling winnings for the year on their tax return as “Other Income.” This is true even if the taxpayer doesn’t get a Form W-2G.
  4. How to deduct losses. Taxpayers are able to deduct gambling losses on Schedule A, Itemized Deductions, but keep in mind, they can’t deduct gambling losses that are more than their winnings.
  5. Keep gambling receipts. Keep records of gambling wins and losses. This means gambling receipts, statements and tickets or by using a gambling log or diary.

See Publication 525, Taxable and Nontaxable Income, for rules on gambling and Publication 529, Miscellaneous Deductions, for more information on losses. Publication 529 also lists specific types of gambling records a taxpayer may want to keep. Download and view IRS publications on IRS.gov/forms at any time.

IRS Summertime Tax Tip 2017-13: Tips to Keep in Mind on Income Taxes and Selling a Home

Source: IRS Summertime Tax Tip 2017-13: Tips to Keep in Mind on Income Taxes and Selling a Home

 

Homeowners may qualify to exclude from their income all or part of any gain from the sale of their main home.

Below are tips to keep in mind when selling a home:

Ownership and Use. To claim the exclusion, the homeowner must meet the ownership and use tests. This means that during the five-year period ending on the date of the sale, the homeowner must have:

  • Owned the home for at least two years
  • Lived in the home as their main home for at least two years    Gain.  If there is a gain from the sale of their main home, the homeowner may be able to exclude up to $250,000 of the gain from income or $500,000 on a joint return in most cases. Homeowners who can exclude all of the gain do not need to report the sale on their tax return

Loss.  A main home that sells for lower than purchased is not deductible.

Reporting a Sale.  Reporting the sale of a home on a tax return is required if all or part of the gain is not excludable. A sale must also be reported on a tax return if the taxpayer chooses not to claim the exclusion or receives a Form 1099-S, Proceeds from Real Estate Transactions.

Possible Exceptions.  There are exceptions to the rules above for persons with a disability, certain members of the military, intelligence community and Peace Corps workers, among others. More information is available in Publication 523, Selling Your Home.

Worksheets.  Worksheets are included in Publication 523, Selling Your Home, to help you figure the:

  • Adjusted basis of the home sold
  • Gain (or loss) on the sale
  • Gain that can be excluded

Items to Keep In Mind:

  • Taxpayers who own more than one home can only exclude the gain on the sale of their main home. Taxes must paid on the gain from selling any other home.
  • Taxpayers who used the first-time homebuyer credit to purchase their home have special rules that apply to the sale. For more on those rules, see Publication 523. Use the First Time Homebuyer Credit Account Look-up to get account information such as the total amount of your credit or your repayment amount.
  • Work-related moving expenses might be deductible, see Publication 521, Moving Expenses.
  • Taxpayers moving after the sale of their home should update their address with the IRS and the U.S. Postal Service by filing Form 8822, Change of Address.
  • Taxpayers who purchased health coverage through the Health Insurance Marketplace should notify the Marketplace when moving out of the area covered by the current Marketplace plan.

Avoid scams. The IRS does not initiate contact using social media or text message. The first contact normally comes in the mail. Those wondering if they owe money to the IRS can view their tax account information on IRS.gov to find out.

Additional Resources:

I’m not going to stop filing my income tax returns… yet. But check out this documentary. I’m intrigued.

AMERICA — From Freedom To Fascism (Full Length Documentary)

 

 

The documentary America – From Freedom To Fascism can be viewed on youtube.com and has been viewed over 785,000 times.  The question, Aaron Russo, a well known producer and director, inquired about should be a top priority for every citizen of the United States.

 

The tax in question is solely the income tax on wages.  The following list (taken directly from the film) are the many types of taxes we maybe be required to pay depending on our wants and/or needs:

 Automobile Registration Tax | Building Permit Tax | Capital Gains Tax |  CDL License Tax |  Cigarette Tax |  Corporate Income Tax |  Dog License Tax |  Estate Tax |  Federal Unemployment Tax |  Fishing License Tax |  Food License Tax |  Fuel Permit Tax |  Gasoline Tax |  hunting License Tax |  Inheritance Tax |  IRS Interest and Penalties |  Liquor Tax |  Local Income Tax |  Luxury Tax |  Marriage License Tax |  Medicare Tax | Property Tax|  Parking Meters?|  Real Estate Tax |  Septic Permit Tax |  Service Charge Taxes |  Social Security Tax |  Road Usage Tax | Sales Tax | Recreational Vehicle Tax|  Road Toll Booth Taxes |   State Income Tax |  State Unemployment Tax |  Telephone Federal Excise Tax |  Telephone Federal Universal Service Fee Tax |  Telephone Federal, State and Local Surcharges Taxes |  Telephone Recurring and non Recurring Charges Tax |  Telephone State and Local Tax |  Telephone Usage Tax | Toll Bridge Tax | Toll Tunnel Tax |  Trailer Registration Tax |  Utility Tax |  Vehicle License Registration Tax |  Vehicle Sales Tax |  Watercraft Registration Tax |  Well Permit Tax |  Workers Compensations Tax | ….

And once you’ve paid all that, then there’s this: the Tax Rate Schedule for individuals.

(Picture taken from the text Concepts in Federal Taxation 2018 Edition)

2017 tax rate schedule

Keep in mind the term TAXABLE INCOME is imperative because it’s the base amount to determine what your tax will be according to the tax rate schedule.  It already accounts for most of those prior taxes listed above that you’ve paid and then some.

*Yes, there “credits and deductions” available to help lower that taxable income, but they will be covered in a different post.

Two concepts to notice with the tax rate schedule are:

  1.  There is the tax + the percentage over “the next dollar (S)” of income.
  2. You are either paying half (employee) or the full (self-employed) cost of your SOCIAL SECURITY TAX AND MEDICARE taxes throughout the year.

I had a client call me after I prepared her returns one time asking why she doesnt get a refund of boxes 4 and 6 on form W2.  Well ma’am, those are non-refundable taxes paid on your wages (employment taxes).  Box 2 is somewhat of a refundable tax meaning if you chose to withhold more than what’s due, you’ll get the difference back.

Social Security Rates
Old Age, Survivors, and Disability Insurance and Medical Health Insurance.
W2 boxes
Sample generic copy of form W2

 

AMERICA — From Freedom To Fascism (Full Length Documentary)

Corporate Fascism  is another film that I found fascinating.

 

There is so much more to discuss here, but this is just my intro into the topic of tax reform.  It’s a touchy subject, I know, but it should be on the minds of everyone who earns a living and spends their hard earned cash.  I encourage you to pull out last years copy of your W2’s and your 1040 (just 2 pages) and scrutinize it a little bit.  Know what your taxable income was last year. You have a tax adviser/preparer, yes, but it will benefit you to also have an understanding of this very important information.  You have a stake in you!

 

Currently, I try to use the Internal Revenue Code to my advantage to maximize after tax wealth; but that doesn’t mean that I don’t fantasize about what a world the less stress on the implications of income taxes would be like.  Anyway.  More to come.