Have you received an IRS notice?

Posted on by William A Olson, CPA

Here’s what to do. The full article from IRS.gov is copied below.

What to do if You Get a Notice from the IRS

IRS Summertime Tax Tip 2014-01, July 2, 2014

Each year the IRS mails millions of notices. Here’s what you should do if you receive a notice from the IRS:

  1. Don’t ignore it. You can respond to most IRS notices quickly and easily. And it’s important that you reply promptly.
  2. IRS notices usually deal with a specific issue about your tax return or tax account. For example, it may say the IRS has corrected an error on your tax return. Or it may ask you for more information.
  3. Read it carefully and follow the instructions about what you need to do.
  4. If it says that the IRS corrected your tax return, review the information in the notice and compare it to your tax return.If you agree, you don’t need to reply unless a payment is due.

    If you don’t agree, it’s important that you respond to the IRS. Write a letter that explains why you don’t agree. Make sure to include information and any documents you want the IRS to consider. Include the bottom tear-off portion of the notice with your letter. Mail your reply to the IRS at the address shown in the lower left part of the notice. Allow at least 30 days for a response from the IRS.

  5. You can handle most notices without calling or visiting the IRS. If you do have questions, call the phone number in the upper right corner of the notice. Make sure you have a copy of your tax return and the notice with you when you call.

  6. Keep copies of any notices you get from the IRS.
  7. Don’t fall for phone and phishing email scams that use the IRS as a lure. The IRS first contacts people about unpaid taxes by mail – not by phone. The IRS does not contact taxpayers by email, text or social media about their tax return or tax account.

For more on this topic visit IRS.gov. Click on ‘Responding to a Notice’ at the bottom left of the home page. Also see Publication 594, The IRS Collection Process. You can get it on IRS.gov or call 800-TAX-FORM (800-829-3676) to get it by mail.

Additional IRS Resources:

 

William A. Olson, CPA: Contact me at wolsoncpa.com

2014 Standard Mileage Rates (IRS)

Posted on by William A Olson, CPA

Here they are.

2014 Standard Mileage Rates

IR-2013-95, Dec. 6, 2013

WASHINGTON — The Internal Revenue Service today issued the 2014 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2014, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

  • 56 cents per mile for business miles driven
  • 23.5 cents per mile driven for medical or moving purposes
  • 14 cents per mile driven in service of charitable organizations

The business, medical, and moving expense rates decrease one-half cent from the 2013 rates.  The charitable rate is based on statute.

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle.  In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.

These and other requirements for a taxpayer to use a standard mileage rate to calculate the amount of a deductible business, moving, medical, or charitable expense are in Rev. Proc. 2010-51.  Notice 2013-80contains the standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan.

William A. Olson, CPA: Contact me at wolsoncpa.com

Mid year 2014 Tax Planning

Posted on by William A Olson, CPA

It is almost June 30th which means we are about half way through 2014. It is not too late or too early to do some tax planning to manage your tax liability.

Common strategies/suggestions for lowering your tax liability include:

  1. Income deferral (hold off on selling those stocks until 2015)
  2. Deduction acceleration (paying your winter tax bill early)
  3. Increasing your 401(k) deferral percentage
  4. Establishing an HSA with a high deductible health insurance plan

Additionally, this article from BusinessWest.com has some great ideas/suggestions… if you would like to discuss any of them with me and find out how they might apply to you, please contact my office.

THANKS!

Health Insurance Premium Tax Credit Calculator

Posted on by William A Olson, CPA

Under the Affordable Care Act, individuals and families at or below 400% of the poverty level will be eligible for Health Insurance Premium tax credits under the Affordable Care Act. For a family of four, 400% of the poverty level is approximately $94,200 so many families will qualify for this tax credit.

Click here for a link to calculate your potential tax credit, and if you have questions about your personal situation please feel free to contact me using the phone number or e-mail on this website.

New Method for Calculating the Home Office Deduction (Journal of Accountancy)

Posted on by William A Olson, CPA

Very simply, the new method available for tax years 2013 and after, allows you to calculate your home office deduction by multiplying the square footage of your home office by $5 (max = 300 square feet or $1,500). The qualifications for taking the home office deduction remain the same.

See the full article from the Journal of Accountancy below:

In Rev. Proc. 2013-13, issued in January, the IRS gave taxpayers an optional safe-harbor method to calculate a deduction for expenses of a business use of a residence under Sec. 280A, effective for tax years beginning in 2013.

Individual taxpayers who elect this method can determine the deduction by multiplying the allowable square footage by $5. The allowable square footage is the portion of the dwelling used in a qualified business use, up to 300 square feet; thus, the maximum safe-harbor deduction is $1,500. The safe harbor is elected on a timely filed original tax return (instead of on Form 8829, Expenses for Business Use of Your Home, which is used for the actual-expense method), and taxpayers are allowed to change their treatment from year to year. However, the election made for any tax year is irrevocable.

No depreciation is allowed for the years in which the safe harbor is elected, but it is permitted in years in which the actual-expense method is used. The revenue procedure gives detailed examples of how depreciation is calculated in a year after the safe-harbor method is used.

To use the safe-harbor method, taxpayers must continue to satisfy all the other requirements for a home office deduction, including that the space be used exclusively for the qualified business purpose and that an employee qualifies for the deduction only if the office is for the convenience of the taxpayer’s employer.

The deduction under the safe-harbor method cannot exceed the amount of gross income derived from the qualified business use of the home, minus business deductions unrelated to the qualified business use of the home. Unlike the limitation under the actual-expense method, however, a taxpayer cannot carry over any excess to another tax year; nor can there be any carryover from an actual-expense method year to a safe-harbor year. Taxpayers sharing a home (for example, roommates or spouses, regardless of filing status), if otherwise eligible, may each use the safe-harbor method, but not for qualified business use of the same portion of the home. The revenue procedure contains detailed rules for use of the home for part of the year. Taxpayers who have a qualified business use of more than one home for a tax year may use the safe harbor for only one home and must use the actual-expense method for the other home or homes.

The Employer Mandate in the Affordable Care Act Delayed until 2015

Posted on by William A Olson, CPA

A mandate in the Affordable Care Act, President Barack Obama‘s signature domestic law, will be put partially on hold until 2015.

The mandate requires companies with at least 50 or more full-time employees to provide healthcare coverage or face penalties up to $3000 per worker. Large employer groups have welcomed the delay, while others are concerned it will leave too many Americans without insurance.

See full article here.

Waiting for your refund? IRS slowly catching up (USA Today)

Posted on by William A Olson, CPA

The Internal Revenue service is catching up on processing tax returns in this delayed tax-filing season, but it’s still behind last year’s pace.

The IRS says it has processed 77.1 million tax returns through March 22, vs. 82 million from the same period last year. The average refund is $2,827 this year, down slightly from $2,860 last year.

The delay has a simple explanation — Congress — which didn’t agree on a number of tax rules until the very last minute. The IRS needed more time to update its computers and forms. As a result, it started processing returns about 10 days later than usual.

Nevertheless, they have been closing the gap. The IRS has processed 6% fewer tax returns vs. the same period last year, compared with a 13.1% gap March 1.

The IRS has accepted 72.5 million electronic returns this year, down from 75.1 million in the same period last year. So far, the government has made 57 million direct-deposit refunds totaling $171 billion. The average direct-deposit refund is $2,985, slightly below the $3,030 direct-deposit refund last year.

“It’s been an unusual season,” says Julie Miller, spokeswoman for Intuit TurboTax. “Consumer behavior has been pushed back a bit.” For example, delays in processing claims for Form 8863, the education tax credit, delayed more than 600,000 filers until mid-February. “People must be thinking that they’ll wait until the dust settles before they file,” Miller says.

Despite the delays, the number of those asking for extensions remains almost the same so far this year as the same period last year, Miller says.

But activity has been accelerating at TurboTax as the April 15 deadline draws near, Miller says. “There are millions of folks who have yet to file, and they will need to do so between now and two weeks from now. We’re anticipating a very busy two weeks.”

FULL ARTICLE HERE.

Mid Year Tax Planning Ideas

Posted on by William A Olson, CPA

From TaxSlayer.com… some of these are too late to do but will work for next year.

Although TaxSlayer.com can’t promise everyone a refund, we can say if you follow these 8 tips you should be on your way to a refund that should help you pay down your holiday debt!

  1. Charitable Donations– Take your gently worn goods to the Salvation Army or Goodwill.  Clean out your closet before the end of the year and receive a potential deduction that you will benefit from.  Now is also the time to start looking for all the cash donation receipts that you have received throughout the year.  Remember, the IRS needs you to substantiate every penny- so hold on to those receipts!
  2. Review your paycheck stub- Most people forget that they may have donated through their job or paid Union dues.  Always hold on to your last paycheck stub and review it for deductions.  If you have any questions on whether something is tax deductible or not use our helpful knowledge base.  We have hundreds of articles that can help.
  3. Child and Dependent care– Do you pay daycare expenses for a qualifying child that is under the age of 13 or had a dependent who was physically or mentally disabled and lived with you for more than half the year?  Did you pay for summer camp that specializes in soccer or computers?  If so, you need to start getting your receipts in order to claim the Child and Dependent care credit.
  4. IRA contributions– Normally, you have to claim your deductions by December 31, 2012 in order to take it on your tax return.  But if you qualify to deduct IRA contributions, you can make a contribution by April 16, 2013 and claim it on your 2012 tax return.  If you are in desperate circumstances this late deduction may be worth looking at in the near future.
  5. State taxes paid- If you were one of the ‘unlucky ones’ and owed state income taxes you may qualify to deduct that payment on your 2012 tax return.  If you owed your state income taxes and you paid them in 2012 you can deduct those as an itemized expense.  Review your check register and get your deduction this year!
  6. Alimony payments– Unfortunately, all relationships don’t work out.  If you and your former spouse have called it quits and you have to pay alimony don’t forget to write off those alimony payments.  Just look at it as the bright side to ending the relationship J.  And for the former spouse that is receiving alimony- your monthly payments are taxable and you must include them on your tax return.  One last point- child support isn’t eligible to be written off unless it is stated as an alimony payment in the divorce decree.
  7. Review your filing status– Most people don’t understand the power of choosing the correct filing status.  If you recently had a major life event such as getting married you can choose between Married Filing Joint versus Married Filing Separate.  In most cases, it will benefit most couples to file Married Filing Joint.  If you are unmarried and paid more than half the cost to keep up your home and have a qualifying dependent then choosing Head of Household versus Single will benefit you.  In addition, most people don’t know that they could claim a qualifying relative (such as a brother, sister, parent, or grandparent to name a few) that doesn’t live with them.  This could possibly change you from Single to Head of Household and/ or give you an extra deduction.  Check out our knowledge base for more information on filing status.
  8. Change your withholdings- Now is the time to look at your withholdings.  If you started working, received a raise, or took a pay cut these things could have an impact on your tax return for the upcoming year.  Go to your personnel department and look at your withholdings to make sure they are in line to meet your expectations for the New Year.  If they aren’t, complete another W-4 and submit it.